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The European Context of Ireland’s Economic Crisis

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  • SEBASTIAN DELLEPIANE AVELLANEDA

    (University of Antwerp)

  • NIAMH HARDIMAN

    (University College Dublin)

Abstract

The current economic crisis has hit all European countries hard, but some are more severely affected than others. The problems manifest in European peripheral countries that are also members of the Eurozone, that is, Ireland, Spain, and Greece, have roots in domestic policy mistakes. However, the European context of these policy profiles also needs to be taken into account. The creation of the Euro initially yielded large credibility gains for the weaker economies, extending low interest rates across the Eurozone. But it also introduced a set of perverse incentives toward fiscal expansion which were supposed to be managed at domestic level. Weak European coordinating capacity meant there were few effective external disciplines on national decision making. The sanctions built into the Stability and Growth Pact proved more controversial and, therefore, less constraining than originally envisaged. The problems accumulating in the weaker economies made them particularly exposed to crisis when the downturn came. The crisis is not merely one of peripheral economies’ policy errors, but extends to the design of European decision making and the management of monetary union, and to the underlying structural differences in relative trade capabilities between Eurozone member states. These issues are explored with reference to the Irish case: the crisis of the Irish and other peripheral economies points to a number of unresolved difficulties at the heart of European politics.

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Bibliographic Info

Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 41 (2010)
Issue (Month): 4 ()
Pages: 473–500

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Handle: RePEc:eso:journl:v:41:y:2010:i:4:p:473-500

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References

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  1. Dyson, Kenneth (ed.), 2008. "The Euro at Ten: Europeanization, Power, and Convergence," OUP Catalogue, Oxford University Press, number 9780199208869.
  2. Miguel Almunia & Agustín S. Bénétrix & Barry Eichengreen & Kevin H. O'Rourke & Gisela Rua, 2009. "From Great Depression to Great Credit Crisis: Similarities, Differences and Lessons," The Institute for International Integration Studies Discussion Paper Series iiisdp303, IIIS.
  3. Jean Pisani-Ferry & André Sapir & Benedicta Marzinotto, 2010. "Two crises, two responses," Policy Briefs 392, Bruegel.
  4. Conefrey, Thomas & FitzGerald, John, 2010. "Managing Housing Bubbles in Regional Economies Under EMU: Ireland and Spain," Papers RB2010/2/1, Economic and Social Research Institute (ESRI).
  5. Niamh Hardiman, 2010. "Economic Crisis and Public Sector Reform: Lessons from Ireland," Working Papers 201013, Geary Institute, University College Dublin.
  6. Hallerberg, Mark & Strauch, Rolf & von Hagen, Jurgen, 2007. "The design of fiscal rules and forms of governance in European Union countries," European Journal of Political Economy, Elsevier, vol. 23(2), pages 338-359, June.
  7. repec:sae:niesru:v:211:y:2010:i:1:p:r27-r44 is not listed on IDEAS
  8. Kelly, Eilish & McGuinness, Seamus & O'Connell, Philip, 2009. "Benchmarking, Social Partnership and Higher Remuneration: Wage Settling Institutions and the Public-Private Sector Wage Gap in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 40(3), pages 339–370.
  9. Honohan, Patrick & Donovan, Donal & Gorecki, Paul & Mottiar, Rafique, 2010. "The Irish Banking Crisis: Regulatory and Financial Stability Policy," MPRA Paper 24896, University Library of Munich, Germany.
  10. Hall, Peter A. & Soskice, David (ed.), 2001. "Varieties of Capitalism: The Institutional Foundations of Comparative Advantage," OUP Catalogue, Oxford University Press, number 9780199247752.
  11. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973.
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  13. Jim O'Leary, 2010. "External Surveillance of Irish Fiscal Policy During the Boom," Economics, Finance and Accounting Department Working Paper Series n210-10.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  14. Dyson, Kenneth (ed.), 2002. "European States and the Euro: Europeanization, Variation, and Convergence," OUP Catalogue, Oxford University Press, number 9780199250257.
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Cited by:
  1. Sebastian Dellepiane & Niamh Hardiman, 2012. "Fiscal Politics In Time: Pathways to Fiscal Consolidation, 1980-2012," Working Papers 201228, Geary Institute, University College Dublin.
  2. Sebastian Dellepiane & Niamh Hardiman & Jon Las Heras, 2013. "Building on easy money:The political economy of housing bubbles in Ireland and Spain," Working Papers 201318, Geary Institute, University College Dublin.
  3. Sebastian Dellepiane & Niamh Hardiman, 2011. "Governing the Irish Economy: A Triple Crisis," Working Papers 201103, Geary Institute, University College Dublin.
  4. Sebastian Dellepiane & Niamh Hardiman, 2013. "The politics of fiscal effort in Spain and Ireland: Market credibility versus political legitimacy," Working Papers 201321, Geary Institute, University College Dublin.

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