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IM:
Belgium had a debt of 115.5% to gdp in 1996 and 73,3% in 2007. So there is real example not that far away.
That was the growth phase of the business cycle. What's being demanded of Ireland is to cut the deficit now in the middle of a recession.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Feb 4th, 2011 at 12:42:13 PM EST
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That is of course nutty. Austerity now is a mad proposal. But I think a lot of the irish deficit is cyclical and would go away on a upturn. The remaining deficit can be closed. The irish are rather undertaxed - especially income tax and yes corporate tax.

So why should be impossible to balance the budget in five years or so?  

by IM on Fri Feb 4th, 2011 at 01:13:47 PM EST
[ Parent ]
Austerity now is a mad proposal.

"Austerity Now" is the Brussels Consensus, though it might well be a remake of a famous Coppola movie from the 70s, starring Marlon Brando.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Fri Feb 4th, 2011 at 05:04:35 PM EST
[ Parent ]
"Austerity Now!" is the demand that the ECB and IMF are making.

If the ECB and IMF were not demanding Austerity Now!, then we wouldn't be having this discussion, because Ireland would be perfectly able to repay the debt in due time. But Austerity Now! is what is being demanded, and what will cause Ireland to default. Well, better to default now, and let the people who are demanding Austerity Now! eat the losses, than first crash the Irish economy and then default, leaving the Irish public in a smoking crater and the people who are demanding Austerity Now! still eating very nearly the same losses.

Defaulting is a zero-sum game. Not defaulting is a negative-sum game.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 5th, 2011 at 01:59:33 AM EST
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