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Ireland has been pointed to as an example of austerity working, but that's becoming less and less the conclusion that may be drawn. I think his point about this being a private debt problem, rather than a public spending issue, is quite astute.Europeís crisis
The fiscal treaty will not solve. The Spanish and Irish crises stem from too much cross-border private sector borrowing and lending. Irelandís financial crisis didnít destroy our nationís wealth; it just revealed how much wealth had already been destroyed by reckless lending, borrowing and speculation.Irelandís
Prescribing government deficit reductions to fix these private capital imbalances is like prescribing chemotherapy for heart disease. Todayís large fiscal deficits are a result of, not the cause of,andSpainís crises. Both countriesí public debt ratios were actually lower than Germanyís in 2008 Ė but private debts exploded.
As always, this doesn't mean the public deficit should be ignored, but we should delay action on that front until the economy recovers. Then hold our politicians accountable for using a strong economy to cut back on public deficits.