Thursday, 13 October 2011

Second Republicans versus Banana Republicans

Tom McDonnell: The latest Dublin Review of Books is out and this time we have a contribution from the always cogent Michael O'Sullivan. It's well worth checking out and can be read here.

He asks two questions.
How do we deal with the acute social problems that arise from our economic depression?
How do we change our behaviour so that the next ten to twenty years are more stable and hopefully more prosperous?

Michael argues that we need to become more strategic in our thinking and in our policymaking in the context of 'global megatrends' and the global question. He laments our 'cognitive failures' to date in this regard and suggests learning from other small open economies like Switzerland, the Nordic countries, Chile, Israel, New Zealand and Singapore.

He also makes an excellent suggestion about the need to prepare strategically for the Greek write down:

"If it has not already been set up, a working group should be established between the EU, IMF, ECB technical staff (this group may even include contributions from the BIS and OECD) and Irish officials to plan for the implications of a Greek debt restructuring on Ireland. Moreover, the group should also work to manoeuvre Ireland away from the financial periphery by proposing ways by which to elongate the maturity and lower the yield on the promissory note debt tied to Anglo-Irish bank (a leveraged EFSF may be one avenue toward funding this). Ultimately this may involve a “hit” to the balance sheet of the ECB, though the long term cost to Europe of the Irish economy should be reduced as our debt burden becomes more sustainable."

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