Tuesday, Apr 07, 2009
Silly sods - don't they realize all they need to do is print money?
BBC: Stephanomics on the emergency Irish budget
Why on Earth are they doing that? That would be a reasonable first reaction to the emergency Irish budget unveiled this afternoon.
In the teeth of the worst recession in decades, the government is raising taxes and cutting spending, for the second time in six months.
The G20 leaders may have endorsed a global effort to kick-start the global economy, but for Ireland, it's tightening all the way. What gives?
There are some lessons for the UK. The first lesson is that, if you're lurching further and further into debt, there comes a point when fiscal stimulus isn't very stimulating at all.
Posted by little professor @ 08:15 PM (1182 views) Add Comment
11 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. little professor said...
Main points of the emergency budget:
Freeze on public sector recruitment and promotion.
7.5% pension levy on all public sector workers
Offering early retirement at 50 to all public sector workers.
Benefits frozen - no annual increase this year.
Tightened eligibility criteria for certain benefits
Job seekers allowance cut by half
Child benefit to be means tested.
Early Childcare Supplement (€1000 per child) scrapped and replaced by an extra year at primary school
Capital spending cut from €7.3bn this year to €5.5bn by 2011
Using private pension funds to provide capital for infrastructure projects
Reduce tax relief on mortgage interest payments, and limit it to the first seven years of a mortgage
Abolish special tax rates for profits from residential development
Increase Capital Gains Tax to 25%, and reduce the thresholds
Income Levy doubled - new rates of 2%, 4% and 6% at salary levels of €15,028, €75,036 and €174,980 per annum
Health Levy doubled
Hike of 25c on a packet of 20 cigarettes
Hike of 5c on petrol
2. shining wit said...
The irish economy RIP....
I have family in Ireland and they are all looking very, very glum recently. They have all tried to ride the property bubble in the last 10 years and are only now waking up to the awful reality of the biggest bubble in modern irish history. I have several relatives that (according to family rumour) are basically bankrupt. One cousin has (sorrry had) a property portfolio that was supposed to be worth well over 1million euros and is now just waiting for the bailiffs.
The euro is killing the economy on it's own. Family and friends are driving up to 120 miles to the north to by van loads of shopping and jobs are at a record low and unemployment at a record high.
Several items of our regular trip to the supermarket are made in Ireland. Sheba, the expensive cat food, has risen from 35p a portion to 54p in just 6 months. Poor old tiddles is looking decidedly @rsy when he gets an inferior dinner of late.
3. Marvin said...
This is going to be painful and probably sacrificial suicide to some of these politicians, but surely scraping back capital to pay off your debt is the prudent thing to do. Our irresponsible rabble should be looking here for tips, because, if she sticks to the diet, and cuts out the fat (ie holds the banks to account) Ireland will become the envy of the rest of these isles, in a couple (5 maybe) of years. I fear the responsible action and admission of failure required by our politicians will be too much for them to stomach, driven as they are by greed, blinded by arrogance and hamstrung by incompetence, I think we are some way off something similar here, though the sooner we/they wake up to serving the country's interest instead of there own seedy agendas the better.
4. little professor said...
The additional 6% levy on those earning over 174k will drive so many high earners away. The 6% tax is applied to the whole amount, not just the portion of earnings above 174k. I'm normally one for taxing the rich until the pips squeak, but when the Irish can just hop over to Blighty it doesn't make much sense.
They said in the budget they couldn't raise alcohol rates because people would just go to NI to buy their booze.
5. shining wit said...
The irish economy relies so heavily on the Uk economy and the exchange rate is just killing any exports and the holiday trade from the UK.
Like the UK property market, I have been trying to tell some people over there what the possibilities were with regards to a massively inflated housing market. Just like here, virtually no-one wanted to listen.
I wonder what the idiot for a finance minister we have will do come 22nd?
6. inflation is eating my savings said...
shining wit- you should keep tiddles off the Sheba, it's fairly low grade stuff. Used to have a cat with IBD - sheba was the worse at causing flare-ups.
it all sounds pretty rough- why didn't they raise property taxes or something earlier to disincentivise (sp?) house buying (as they couldn't bump IRs.)
7. peter_2008 said...
6-12months down the line, UK will be on the same boat!
8. mark wadsworth said...
1. As a general rule, countries in the Eurozone can't just print money.
2. @ Inflation is eating, "Why didn't they just raise property taxes?". For the same reason that Labour didn't do the decent thing and replace a shed load of other taxes (starting with the hyper-regressive Council Tax and the jealousy surcharge Inheritance Tax), with Land Value Tax back in 1997 (when property prices and hence land values were relatively low). It's because the Irish government wanted a property price bubble - to create the illusion of wealth, exactly like Nulabour's 'economic miracle' in the UK.
LVT will never catch on because a) governments (Tories and Labour alike) want to have property bubbles and b) because people don't understand economics. For every extra £1 in LVT (which has no deadweight costs) we could cut other taxes (which have deadweight costs) by > £1, so people would end up slightly better off on an after-tax basis.
9. Bricor Mortis said...
Fair play to Ireland for facing up to the realities of their position.
10. japanese uncle said...
How many silly little 'property empires' went down and will be going down around the globe.
Anyway, artificially/forcefully creating inflation expectation may work for the moment, as 'everything will be dearer the later' sentiment will be driving consumption and the whole economy, but for how long. Goods with the price tag recently marked up by 20% may end up as dead stock and could be sold at far discounted price later. People with neither savings nor job but laden with negative equity and massive debt, are a 'economic deadweight' and of no use in driving the economy, and they are not in short supply in this land.
11. alan said...
@ Bricor Mortis,
The UK may soon be "facing up to the realities of their position".
If we keep going down the slippery slope we will be dependant on the IMF to sort us out. This is a little way off, yet. Our politicians still refuse to admit any failure and continue to bleed us dry.