POLITICAL RISK FACTORS STARTING TO BE HIGHLIGHTED
THIS ARTICLE APPEARED IN IRISH EXAMINER MARCH 20th 2015
The exodus of Irish government ministers overseas for St Patrick’s Day has attracted the usual criticism from expected quarters. I saw one suggestion on social media that our Ministers are overseas enjoying themselves, spending our money. Figures have been bandied about in relation to how much these overseas trips have cost over the years, and they are significant. While the figures are not surprisingly very large, those who use them as a stick with which to beat the Government are guilty of that age old condition of ‘knowing the price of everything and the value of nothing’. St Patrick’s Day gives Ireland unbelievable international profile and it would be remiss of us not to exploit that to the largest extent possible and use the opportunity provided to market the country aggressively wherever we get the opportunity.
If a cost-benefit analysis of these annual trips were to be conducted, I strongly suspect it would show a very healthy positive balance. It is truly astounding the global profile that a tiny country like Ireland manages to attain at this time of year. The fact that the Taoiseach and other officials can get such easy access to the White House is quite amazing and does make us the envy of large US corporations and many countries around the world. Is it any wonder that one third of US foreign investment into Europe last year ended up in Ireland? This is an astounding statistic, but one which has a very beneficial impact on the economy and on Irish society. The annual trip to the White house and to other locations around the US undoubtedly plays no small part in this incredible success. Long may the annual exodus continue, and the predictable begrudgers should be treated with the disdain they deserve.
To coincide with the national feast day, Goldman Sachs in London produced its latest update on the Irish economy. In general it makes for a pretty upbeat assessment of our economic progress and prospects, but for the first time in such reports, political risks are now starting to be highlighted. Goldman Sachs is worried about Sinn Fein, not that this will upset Sinn Fein too much given the issues surrounding some of the activities of that investment bank in recent times, not least in Greece.
Specifically, Goldman is comparing the policies of Sinn Fein to those of Syriza in Greece and Podemas in Spain. Both of those parties have utterly rejected austerity and Syriza now has the unenviable task of actually doing something about it. Most evidence to date would suggest that it is not turning out terribly well, although it does need to be given more time.
Sinn Fein, along with a lot of like-minded Independents has taken a similar stance against austerity and has benefited enormously at the electoral booth and in the opinion polls. With just over a year at most to the general election, the policy implications of electoral success for Sinn Fein and/or the myriad of left-wing independents are starting to be taken more seriously. So they should!
With all of the key economic indicators now moving very compellingly in the right direction, one wonder if the anti-austerity politicians will be deprived of oxygen over the coming year? The parties of government can justifiably claim that the policies of fiscal consolidation that they inherited in 2011, having been put in place by the late Brian Lenihan, are now starting to work and have not destroyed the Irish economy as its detractors predicted. Obviously a lot of pain has been imposed on a lot of people and many public services have been seriously deprived of funding with a consequent deterioration in the quality of those services. Be that as it may, it was always essential for Ireland to move in the direction of living within its means again, because even without the costs of the banking debacle, Ireland still had a very precarious fiscal situation due to the politically motivated expansion of public expenditure and the erosion of the tax base from 2000 onwards. Trying to restore order was always going to be painful and difficult, but we are now starting to emerge at the other side. Goldman Sachs is correct in pointing out that to change tack now could be very dangerous for the economy and it would most certainly risk putting us back into an even deeper hole than the one from which we have just emerged.