Life after austerity
did Ireland succeed and Greece fail? A modern money approach
Description:... This project examines the imposition of austerity measures on two periphery countries in the Eurozone – Greece and Ireland – after the global financial crisis that erupted in 2007. Ireland was the first economy to both enter and exit the crisis. Greece is still reeling from it, 9 years later. This project offers a detailed analysis of the policy response and economic conditions in each country, and reveals that Ireland’s success is illusory. Even though Ireland exited the crisis in 2013, their ‘success’ was in part due to the relatively small size of fiscal contraction, the rebuilding of private sector savings, and the return to a net-exporting position. By contrast, Greece’s adjustment to austerity was much more severe, the private sector financial position never fully recovered, and the country remained in a net-importing position. Although Ireland faced difficulties adjusting with some recommendations by the IMF, the Greek crisis and rounds of austerity were far more severe and detrimental to their social welfare levels than Ireland. This project focuses on the flawed monetary arrangement and institutional design of the Eurozone focusing specifically on the differences between core and periphery countries under a stateless currency regime that has divorced fiscal and monetary institutions. Using the sectoral balances and the Parenteau model, we study public, private and foreign debt as well as the policy space available to give an insight into the two economies.
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