Enda Kenny was on the radio this morning, talking about his recent head-patting encounter with Nicolas Sarkozy. He says the new fiscal compact won’t cause any more austerity than we already have, which came as a great relief to me, and no doubt to the millions of adoring citizens hanging on his every word.
Thank God, they all breathed. No more poverty.
Well, not quite. Unfortunately, in addition to politicians, we’re also afflicted with the sort of annoying know-alls who actually look at the facts and tell us the truth. Not a comfortable place for a politician.
Such an irritating know-all is Brian Lucey, professor of finance at the School of Business, Trinity College Dublin. I’m only guessing here, but I think it’s safe to presume that Brian knows more than Enda about economics, and Brian is not the slightest bit optimistic about the fiscal compact. I base this assumption on the simple fact that Enda has no qualifications at all, and never gained experience in anything useful, apart from being a primary teacher. This is the guy you want out there batting for you against Sarkozy and Merkel, and he’s telling you everyting will be all right.
Leaving that aside, let’s see what this troublemaker Lucey is saying. According to him,
The basic issue that the compact addresses is that all signatory powers must have a binding rule on how much government debt they are allowed to have, and if this is too much (defined as more than 60% of GDP) they will have to reduce it at a rate of 5% of the balance per annum, and to maintain a balanced or surplus budget. This is not sensible economics. It rules out any countercyclical government spending at least until the 60% balance is reached.
What does this mean?
Well, according to Lucey, it means that Ireland would face up to 20 years of austerity followed by an indefinite period of being unable to borrow regardless of fire flood or famine.
But you know, at the end of it all, this Lucey fellow is just another academic. Isn’t that right? These are just the ravings of somebody who studied the subject in great depth, and you can’t trust guys who know what they’re talking about.
What you can trust is a soundbite slipped to an unqualified politician by a spin merchant five minutes before going on air. After all, as we know, a politician would never put you wrong. Isn’t that true?