Bread, Circuses and Conspiracy Theories


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I’m not disposed towards conspiracy theories – the world is, after all, a wide world. So, no, I do think the antics in Fianna Fail are a well-planned ruse to take our attention away from the crisis coming down the line. Still . . . .

The Citigroup’s global head of credit believes Ireland is heading into a ‘new, deeper recession‘. Why? Because of the ‘austerity demanded by the IMF/EU bail-out‘:

‘I fear you’re [Ireland] only just entering a new recession that will probably be deeper than the one you’ve just been through, as a result of all the fiscal tightening,” he said. .’

I’m dubious – if only because, according to the EU, Ireland will remain in a domestic-demand recession until 2012. This refers to the economy excluding net exports. You can’t enter what you haven’t left. As to whether the economy as a whole will re-enter recession, again, I’m dubious if only because multi-national exports will keep Ireland in statistical growth – though without much benefit to the domestic economy.

However, the point here is that, whatever about the vagaries of GDP measurements, there is a well-founded belief that austerity itself will depress the Irish economy. Warnings of more recession comes from another analyst, explaining why interest rates remain high on existing Irish debt:

“Things have not dramatically changed over the last month or so. Ireland still has a huge mountain to climb to reduce the deficit and there is a real fear that the huge squeeze will push the economy deeper into a severe recession,” said Ben May, European economist at Capital Economics. “The insurance markets are pricing in a big possibility of a government default and we have no reason to believe that they are overstating those risks,” he said.’

It’s not just Ireland. The Portugese Central Bank is projecting a double-dip recession. While Portugal experienced growth this year, the austerity measures are expected to force the economy downwards. So why aren’t these austerity measures taking pressure of Portuguese bonds?

‘Investor concerns over Portugal’s ability to meet its debt commitments have been partly fuelled by fears that the country’s austere deficit-reduction programme will severely damage growth and reduce tax revenue, aggravating the country’s debt difficulties.’

In Spain, the signals are a little more mixed. The Government is upbeat about achieving both growth and deficit-reduction (so was the Irish Government earlier last year, with data to justify it). But, again, some analysts believe that stagnation, if not a full-scale fall-back into recession, is on the cards. Why? Guess.

Returning to Ireland, all this is set out against the backdrop of the EU dismissing the targets laid out in the Government’s 4-Year plan – growth targets, jobs targets, and deficit targets.

But we don’t get this type of news and analysis. We get a combination of ‘we have to stick to our austerity guns’; or we get a lot of happy-clappy commentary (‘hey, its not so bad, indigenous industrial production is up . . . a bit’).

Or we just get bread and circuses, Fianna Fail and Micheál Martin’s failed resignation bid. No, I don’t think it is a vast conspiracy to divert attention away from our economic woes.

Still . . .

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