Ireland’s deepening troubles raise doubts about the wisdom of the stringent fiscal austerity measures that the former Celtic Tiger and other European countries have put in place, which effectively hamper consumers and take cash out of the economy.
At the same time, Ireland’s gloomy prospects mean the government may have to make even deeper cuts this winter to reduce its budget deficit, which is expected to surpass 25% of GDP this year, the biggest in the 16-nation euro area by that measure. The possible doubling in the deficit—now about 12% of GDP—is due largely to the cost of bailing out troubled banks.
News that Ireland’s GDP fell 1.2 per cent in the second quarter added to the anxiety, as did rumours of a default by Allied Irish Banks. It should be stressed there has been nothing to suggest the latter is anything other than market scuttlebutt.
The markets are confused by Allied Irish Banks (AIB, known as AIB) and Anglo Irish Bank (‘AIB’ known as Anglo)?
Jesus lads, even a name change, just for the next day or so?