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‘For the foreseeable future, mainstream Europe will be chill on debts… lack of money will not be a constraint.’ Photograph iStock
Over the past few weeks, you may have noticed submissions from various sources warning about Government spending, calling for a reduction of Ireland’s debt/GDP ratio. Expect more of this as we approach budget day. The underlying fear is that if the State’s overall debt position rises too high, the financial markets will withdraw their consent and we will face a national debt crisis. This type of thinking is common, particularly from the older generations who have seen Ireland suffer from at least two debt crises, one in the 1980s, the other following the 2008 housing crisis. But the world has changed, and it is unlikely to go back.
In fact, the policy reaction to the pandemic – proto-helicopter money with pay checks going to people who are at home watching Netflix in the afternoon, massive expansion of welfare spending across every metric and a huge increase in the Government deficit – could come from a policy folder entitled “Lessons learned from the stupid reaction to the 2008 crisis”.
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