Back in 2010 Ireland and Greece were both on the verge of financial meltdown and were only saved from ruin by the intervention of the EU and the International Monetary Fund.
The Irish response to the EU-IMF bailout was to stick by the terms of the deal and implement the reforms contained in the troika programme. The Greeks responded with violent street protests, political turmoil and foot-dragging on many of the agreed reforms.
Now, almost five years later, Greece is again teetering on the brink of disaster, while Ireland is in rapid economic recovery mode with unemployment falling, the economy growing faster than any other country in the EU and borrowing costs lower than those of the US.
All the evidence suggests that Ireland’s way rather than Greece’s way was the correct recipe for dealing with the largely self-inflicted wounds both countries had to cope with as a result of long overindulgence in populist politics. Yet in the face of all the evidence it appears, going by a succession of opinion polls, that about half of the Irish electorate would have preferred its leaders to have followed the Greek path.
The latest phase of the Greek tragedy and how it ultimately plays out may lead to a more sober assessment by Irish voters of the respective paths taken by the two countries. It may do something to correct the misleading but widely believed political narrative which portrays Ireland as having suffered unnecessary hardship as a result of timid political leaders following EU rules by contrast with their defiant Greek counterparts.
Tax system
The reality is that the Irish political class, for all its faults, acted far more wisely in the long-term interests of its people than its Greek equivalent. It helps of course that this country has a highly efficient tax system and an honest public service.
“Ireland had to deal with broken banks but banks can be fixed. Greece has a broken state and that is a far, far bigger problem,” said one of the key EU officials sent to Athens to try to reform their system a few years ago.
There was an instructive Dáil debate during the week on a motion from the technical group calling for an international debt conference to deal with the problems of Greece.
In response, Minister for Finance Michael Noonan calmly and methodically set out the facts of the recovery, pointing out for a start that Ireland’s net debt had been cut to 90 per cent as a percentage of gross domestic product (GDP) and is moving quickly towards the EU average.
He also addressed one of the central misconceptions in political debate which is that Ireland’s debt is largely due to the bank bailout. That is simply not the case. The bulk of the country’s debt is due to the gap between Government spending and the revenue raised from tax.
Noonan pointed out that between 2008 and 2014 the State borrowed €100 billion to fund welfare payments, pay public servants and keep the health service going. What was widely described as EU-imposed austerity was actually the means to avoid austerity.
The EU-IMF bailout gave the last government and the current one the resources to ensure that welfare payments were broadly maintained and that far deeper pay cuts were not imposed on public servants.
With an election due to take place in the next year or so, the challenge facing all of the political parties and groupings will be to get their version of events accepted by the electorate.
The good news on the economy has prompted a greater level of solidarity between the Coalition parties as both of them realise that they have much to gain by presenting a united front and attempting to maximise the political impact of the improving economy.
In the past Labour was too often tempted to point up its differences with its partner as a way of trying to increase its profile. Strategists in both parties have come to realise that if one of them goes up in the polls, so too does the other; the opposite is also true.
“Our only chance is to hang together and that is what we are going to do,” said one senior Labour figure who pointed out that both parties were now polling at the lower end of their normal range. “We just need to move that to the higher end of our range with Fine Gael on 30 per cent or so and Labour on 12 or 13 per cent and we will have a real chance of a second term.”
Real dilemma
Sinn Féin and the array of small parties and Independents have thrived on denouncing austerity, so it will be interesting to see how the recovery affects their ability to attract support.
Fianna Fáil has a real dilemma. It must take the blame for running the country into an unsustainable boom, but it can also claim credit for initiating the policies which paved the way for the recovery.
Unlike their counterparts in Greece, who proved incapable of dealing with the mess they had created, Fianna Fáil did what was needed in 2009 and 2010 to pull the country back from the brink.
The pain inflicted by those policies led to the collapse in party support at the last election. Now that they are coming to fruition, the party has to decide whether its future lies in laying claim to them or joining the “anti-austerity” chorus of Opposition.