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The European Context of Ireland’s Economic Crisis


    (University of Antwerp)


    (University College Dublin)

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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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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  1. Reinhart, Carmen, 2009. "The Second Great Contraction," MPRA Paper 21485, University Library of Munich, Germany.
  2. Niamh Hardiman, 2010. "Economic Crisis and Public Sector Reform: Lessons from Ireland," Working Papers 201013, Geary Institute, University College Dublin.
  3. Kelly, Elish & McGuinness, Seamus & O'Connell, Philip J., 2008. "Benchmarking, Social Partnership and Higher Remuneration: Wage Settling Institutions and the Public-Private Sector Wage Gap in Ireland," Papers WP270, Economic and Social Research Institute (ESRI).
  4. Almunia, Miguel & Bénétrix, Agustín & Eichengreen, Barry & O'Rourke, Kevin Hjortshøj & Rua, Gisela, 2009. "From Great Depression to Great Credit Crisis: Similarities, Differences and Lessons," CEPR Discussion Papers 7564, C.E.P.R. Discussion Papers.
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  6. Jean Pisani-Ferry & André Sapir & Benedicta Marzinotto, 2010. "Two crises, two responses," Policy Briefs 392, Bruegel.
  7. Hall, Peter A. & Soskice, David (ed.), 2001. "Varieties of Capitalism: The Institutional Foundations of Comparative Advantage," OUP Catalogue, Oxford University Press, number 9780199247752, July.
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  9. Hallerberg, Mark & Strauch, Rolf & Hagen, Jürgen von, 2006. "The design of fiscal rules and forms of governance in European Union countries," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 150, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  10. 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.
  11. Dyson, Kenneth (ed.), 2008. "The Euro at Ten: Europeanization, Power, and Convergence," OUP Catalogue, Oxford University Press, number 9780199208869, July.
  12. Dyson, Kenneth (ed.), 2002. "European States and the Euro: Europeanization, Variation, and Convergence," OUP Catalogue, Oxford University Press, number 9780199250257, July.
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