vicduggan

One thing about the 2015 budget is for sure: the planned €2bn spending cuts and tax hikes will be watered down for reasons both economic and political.

Ever since the Troika left late last year, the government has been making noises about easing the burden of austerity on Irish families. There is also a sense that now Ireland has ‘regained its sovereignty’, and that the economic emergency can be considered over, people are not willing to wear the hair-shirt any longer. This is precisely the message the governing parties have taken from the drubbing they received in the recent local and European elections.
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We are a nation obsessed with the price of bricks and mortar. During the heady days of the Celtic Tiger, people would marvel that they were ‘earning’ more through the increase in the value of their home than in their wages. Having peaked in 2007, prices cratered and many of the same people, mortgaged to the hilt, were acutely aware of just how deep a ‘negative equity’ hole they were in.

The run-up in prices in the decade to 2007 was a textbook ‘bubble’, fuelled by a toxic mix of easy credit, frantic speculation and suspended belief. When the bubble burst, prices more than halved and the number of homes being bought and sold – along with the credit to finance them – dried up.
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Remember the ‘good old days’? When budgets were giveaways, not hairshirts? When politicians ratcheted up the bidding to cut our taxes come election time? Sure, we didn’t need those billions from Stamp Duty. And, wasn’t income tax too high anyway? Yes, remember the good old days the next time you hear someone wax lyrical about why ‘we are where we are’.

So, where are we now then? The economy is still half banjaxed, even if it has been on the mend of late, but no sooner had the Troika rolled out of Terminal 2 than it was like déjà vu all over again. At a time when they’re still planning to make a billion or more in spending cuts at the next budget, government Ministers were hitting the airwaves with variations on the same tax cutting mantra. ‘Middle Ireland’ needs a break, apparently. Well, who doesn’t?
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Writing this time last year, I looked forward with trepidation to 2013 as another ‘year of living dangerously’. Risks abounded. Every silver lining presaged a cloud. The path ahead was strewn with banana skins and danger lurked around every corner. It’s not for nothing they call economics the dismal science!

Confounded by years and years of growth falling short of forecasts, of the recovery on the horizon being just another mirage, economists can be forgiven maybe for feeling that stagnation was the new normal.

But, could this time be different? Continue reading →