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the case for stimulus in ireland, spain & greece


dancl2000

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Joined
Sep 17, 2011
Messages
517
unemployment has just hit 25% in spain, ireland is not far from 15% and greece is .. probably has bigger problems than ireland and spain combined

if we assume for a moment that a push to balance budgets (or austerity) is good policy but bad politics on the basis
- long term budget deficits imply unsustainable debt and a debased currency, inflation, economic collapse
- austerity as a means to balance the budget is hugely unpopular because it means unemployment and adjustments to living standards

unemployment and abrupt lowering of living standards means crime, social unrest, dissatisfaction, and climates in which extremist parties can emerge. we're already seeing this in some european countries as far right and far left parties grow in popularity, the conditions in which fascism rose as a political force during the 30s. This has a far greater social cohesion cost than that of an unbalanced budget.

Therefore, lets not allow bad politics to destroy good policy. Why dont we provide some stimulus to take the edge of the austerity measures. The goal of the stimulus should be to create employment, not to prop up living standards. Stimulus has to be funded by EU (EIB) as funding not possible from national budgets because countries that need the stimulus are simply not in a position to do that. The EIB can get the cash to do this from ECB quantitive easing, some people wont like this but the reality is that euro liquidity is being destroyed by an ongoing deleveraging. A certain amount of quantitive easing is possible to the extent of the difference between money in circulation now compared to 2006. The stimulus should be conditional on some measures such that the country cannot get itself back into another situation that requires a similar stimulus program.

In ireland's case, the obvious place for a stimulus package is construction as that sector is under-utilised at the moment due to over provision of homes, office space in the boom years. Rather than let the skills in our construction sector emmigrate or move to a different sector, find some useful construction project that will be employment intensive. The goal is to get people back to work, not to get people currently working to switch jobs so the stimulus project shouldnt be competing for workers with non-stimulus projects.

Example projects:
This could be new rail links, public facilities, better water or sewage infrastructure, it doesnt matter as long as it's something that's genuinely needed, that would be done anyway if the govt had the money to do itself.

Which countries / sectors to receive stimulus:
- Countries with unemployment over 12%
- Target labour intensive sectors with the most unemployment

How to fund:
- materials, land; purchased by EIB
- labour; part EIB, part by state (at least to the value of the unemployment benefit saved because people are back to work)
- stimulus to be repaid over life of the created infrastructure by the users of that infrastructure (this insures it's a useful project)

Goals
- reduce unemployment below 10%
- reduce social unrest and dissatisfaction
- do not prevent any necessary adjustment to living standards (slowing rate of adjustment is ok however)

What do we think ?
 
D

Dylan2010

So basically Ancient Egypt collapsed because they didnt build enough Pyramids....who knew!
 

Analyzer

Well-known member
Joined
Feb 14, 2011
Messages
46,201
Default. And Euro exit. Exit from the EU also (because it is now an ongoing economic union of decay an ineptitude).

That would solve the problem.
 

Dan_Murphy

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Joined
Feb 22, 2010
Messages
3,811
- stimulus to be repaid over life of the created infrastructure by the users of that infrastructure (this insures it's a useful project)
But you cannot do that, that'll take money out of the economy!!!
 
R

Ramps

Why dont we provide some stimulus to take the edge of the austerity measures.

Why don't you take up smoking cigars to take the edge off your withdrawal from cigarette smoking?
 

Fides

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Joined
Apr 6, 2010
Messages
4,442
Default. And Euro exit. Exit from the EU also (because it is now an ongoing economic union of decay an ineptitude).

That would solve the problem.
It would create a few new ones.Exiting the Euro and EU won't stop us spending more than our income. Defaulting would mean no one would be too keen to lend us money to bridge the deficit. The new Irish punt would devalue pushing up the price of imports (particularly fuel) while making exports more competitive....

It is a solution but not a problem free one.
 

dancl2000

Well-known member
Joined
Sep 17, 2011
Messages
517
Why don't you take up smoking cigars to take the edge off your withdrawal from cigarette smoking?
well a better analogy would be using nicorette patches to get off cigarettes..

and also giving up smoking isnt going to have negative effects, but sucking too much money out of the economy too quickly can; the high unemployment, loss of skills in construction as people emmigrate, retrain
 

dancl2000

Well-known member
Joined
Sep 17, 2011
Messages
517
But you cannot do that, that'll take money out of the economy!!!
right, instead of taking a lot of money out of the economy in a short period and absorb all the problems that come with that, we accept that we need to balance the budget but in a way that doesnt let unemployment get out of control.

so yeah the stimulus would be much less than the change needed to balance the budget, and gets paid back over a much longer period
 

Watcher2

Well-known member
Joined
May 2, 2010
Messages
34,144
Default. And Euro exit. Exit from the EU also (because it is now an ongoing economic union of decay an ineptitude).

That would solve the problem.
Ireland is also an ongoing entity of decay and ineptitude. We are even worse than the EU. We should defauklt but stay in EU and euro because we absolutely could not function on our own. Default is a must though.
 
Joined
Jun 9, 2007
Messages
19,084
Stimulus would have to be EU-wide, and massive. Stimulus is not going to be particularly effective if the main export targets aren't buying.

Leaving the Euro is not a serious option, as silly as monetary union was. The time to consider the disadvantages of the single currency to Ireland (and indeed to the entire Eurozone) was in 1992. You're in now. You can leave, but just don't pretend that the consequences are going to be anything but catastrophic in the short-to-medium-term. Which is what some of us were warning before you did join....
 

dancl2000

Well-known member
Joined
Sep 17, 2011
Messages
517
Stimulus would have to be EU-wide, and massive. Stimulus is not going to be particularly effective if the main export targets aren't buying.
not really. it doesnt have to be massive. the stimulus can be much less than what has been spent to bail out banks for example.

in ireland unemployment is at 15% or 450,000 people.. so the economy needs to create 150,000 jobs to get to 10% unemployment. that's not going to be achievable by stimulus, but we can still create a lot of jobs

take some project, metro north, costed at 2.5bn during the good times. tender prices are down 30% so that is now 1.7bn. the project creates 4000 direct construction jobs.

lets say the entire project is sourced in ireland, 1.7bn injected into the economy and 4000 direct jobs. the 1.7bn gets spent paying contractors, quarries, etc all of whom pay their employees, all of whom spend their salaries in their local community etc. the money multiplier effect means around eur6bn circulates in the economy after an injection of 1.7bn.

I dont know what that extra 6bn circulating in the economy means for jobs, but it's probably realistic to expect at least as many indirect as direct jobs. so 8000 people off unemployment and we have a metro.

8000 jobs isnt a huge number when we have an unemployment rate of 440,000. however for those 8000 people it'll be a pretty big deal. plus the skills of our construction sector dont disappear.

Also where's the downside, Ireland sticks to the austerity targets, the project doesnt show up in our national budget because it's not paid for out of our national budget. the funding is low interest and paid back via the metro receipts over a long period of time

All we have to do is talk the EIB into it's new mandate.
 

patfitzbally

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Joined
Dec 11, 2011
Messages
1,023
there are some dim people in this island.even the dogs on the street know the massively overpaid over cosseted public sector is the terminal cancer of ireland.if you dont accept that fact then just wait a couple of years until it all goes completely bust.the young emigrants will be sending you food parcels
 

ManUnited

Well-known member
Joined
Nov 16, 2009
Messages
5,221
unemployment has just hit 25% in spain, ireland is not far from 15% and greece is .. probably has bigger problems than ireland and spain combined

if we assume for a moment that a push to balance budgets (or austerity) is good policy but bad politics on the basis
- long term budget deficits imply unsustainable debt and a debased currency, inflation, economic collapse
- austerity as a means to balance the budget is hugely unpopular because it means unemployment and adjustments to living standards

unemployment and abrupt lowering of living standards means crime, social unrest, dissatisfaction, and climates in which extremist parties can emerge. we're already seeing this in some european countries as far right and far left parties grow in popularity, the conditions in which fascism rose as a political force during the 30s. This has a far greater social cohesion cost than that of an unbalanced budget.

Therefore, lets not allow bad politics to destroy good policy. Why dont we provide some stimulus to take the edge of the austerity measures. The goal of the stimulus should be to create employment, not to prop up living standards. Stimulus has to be funded by EU (EIB) as funding not possible from national budgets because countries that need the stimulus are simply not in a position to do that. The EIB can get the cash to do this from ECB quantitive easing, some people wont like this but the reality is that euro liquidity is being destroyed by an ongoing deleveraging. A certain amount of quantitive easing is possible to the extent of the difference between money in circulation now compared to 2006. The stimulus should be conditional on some measures such that the country cannot get itself back into another situation that requires a similar stimulus program.

In ireland's case, the obvious place for a stimulus package is construction as that sector is under-utilised at the moment due to over provision of homes, office space in the boom years. Rather than let the skills in our construction sector emmigrate or move to a different sector, find some useful construction project that will be employment intensive. The goal is to get people back to work, not to get people currently working to switch jobs so the stimulus project shouldnt be competing for workers with non-stimulus projects.

Example projects:
This could be new rail links, public facilities, better water or sewage infrastructure, it doesnt matter as long as it's something that's genuinely needed, that would be done anyway if the govt had the money to do itself.

Which countries / sectors to receive stimulus:
- Countries with unemployment over 12%
- Target labour intensive sectors with the most unemployment

How to fund:
- materials, land; purchased by EIB
- labour; part EIB, part by state (at least to the value of the unemployment benefit saved because people are back to work)
- stimulus to be repaid over life of the created infrastructure by the users of that infrastructure (this insures it's a useful project)

Goals
- reduce unemployment below 10%
- reduce social unrest and dissatisfaction
- do not prevent any necessary adjustment to living standards (slowing rate of adjustment is ok however)

What do we think ?
What happens when the stimulus programs are finished?
 

Pat Gill

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Joined
Jun 16, 2011
Messages
5,301
Website
www.energyco-ops.ie
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Pat_Gill
What happens when the stimulus programs are finished?
If the stimulus projects are chosen correctly they will have stimulated the economy back to life and restored some confidence.

If the projects are instead simply chosen as pork for political gain then we will have added to our national debt.

Which I presume is why the OP suggested it be an EU programme with the EU deciding on the projects.
 

ManUnited

Well-known member
Joined
Nov 16, 2009
Messages
5,221
If the stimulus projects are chosen correctly they will have stimulated the economy back to life and restored some confidence.

If the projects are instead simply chosen as pork for political gain then we will have added to our national debt.

Which I presume is why the OP suggested it be an EU programme with the EU deciding on the projects.
That's the theory Pat but look what happened last time the stimulus stopped coming.The boom economy can't be stimulated back into life.The parts of it that relied on the boom have ceased to exist.The construction industry will just become addicted to the stimulus money and when it stops will have to go cold turkey again.
 

True Republican

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Joined
Apr 3, 2008
Messages
4,067
How has Obamas stimulus package worked in America, normally stimulus programmes are money p**sed down the toilet to appease various vested interests like trade unions etc.
 

oggy

Well-known member
Joined
Oct 28, 2009
Messages
8,958
Go to an open air concert of Rolling Stones or some big group and its a great show. After the show its clean up time and all the shiitt is removed. The ground is scarred and only time will bring it back to "normal". Thats where we are . Our problem is a bit bigger in that we had a few big shows and the clean up is taking a lot longer.

Of course what is really happening is simple economics, unprecedented inflation is being cured with unprecedented deflation. Words like austerity, stimulas etc etc are just the tools used in the deflation process
 

dancl2000

Well-known member
Joined
Sep 17, 2011
Messages
517
What happens when the stimulus programs are finished?
the stimulus is intended to attenuate the worst effects of adjustment to a balanced budget, aka unemployment. once the budget is balanced the economy is in better shape and the govt is in more of a position to finance infrastructure spend itself so stimulus is not needed. in addition once the budget is balanced we can expect more private sector investment, further reducing the need for stimulus.
 
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