IRELAND has experienced more austerity than most during its troubled history. Its 2011 budget was no potato famine, but tough nonetheless. Social welfare payments were cut by an average of four per cent – the first cuts since 1924 – and public sector pay was slashed by between five and ten per cent. Last month, the number of people claiming jobless benefits hit a record high.
So it is hurting, but is it working? The short answer is yes, at least as far as its creditors are concerned. The yield on its 10-year bonds was 8.65 per cent yesterday, much lower than fellow bailout countries Portugal and Greece (11.65 per cent and 23 per cent respectively).
In dollar terms Irish bonds with a maturity of more than a year have returned 17.4 per cent since 17 June – the best returns of any sovereign. Despite the “cuts equals recession” mantra, the IMF expects the economy to eke out growth of 0.4 per cent this year and 1.5 per cent next – hardly firing on all cylinders but growth nonetheless.
The ECB is “very impressed” with its deficit reduction performance so far. Unlike Greece, there is no emergency conference call for Ireland every time it is due another tranche of aid.
Instead of constant talk of a Plan B, Ireland’s finance minister wants to make a budgetary adjustment of €4bn (£3.5bn) in 2012, compared to the planned €3.6bn, despite being confident of meeting the terms of its bailout. Economic sovereignty – highly valued by the Irish – should be restored in 2015.
There is room for improvement. Capping capital spending at just 3.6 per cent of GDP was a silly move, especially for a nation full of construction companies. Nor can Ireland stare smugly at Greece: its exit from the Eurozone would surely see the emerald isle come back into focus.
Still, Ireland has taken the medicine and is getting better. If only Greece could do the same.