….What are the implications for Ireland? Closing a budget gap in excess of 10 per cent of GDP will require outside help in the absence of a national currency. There is the question of who to ask and who is more likely to respond positively – the EU, the IMF or both. But there is no question that political compromise and the prospects for economic stability will be enhanced by temporary outside help.
California’s budget as a share of GDP is considerably smaller than Ireland’s. On the other hand, Ireland’s corporatist labor market institutions should give it an advantage in wage adjustment (though last weekend’s mass demonstrations in Dublin raise questions about whether what is true in principle is also true in practice). Still, the comparison is suggestive. It points to what European policy makers should be thinking about…. Link to full article
