Fasten your seatbelts

Wall Street Journal (possibly $ req’d) –

Things are clearly starting to look up,” says Alan McQuaid, chief economist at Bloxham, Ireland’s biggest independent stockbroker. “Assuming the euro-zone debt issue doesn’t turn into a full-blown crisis, Ireland should be roaring back up over the next 12 months, led by a strong export performance.”

So it’s New York Times versus Wall Street Journal, then.

At one level, they’re not that different.  The NYT article notes the high cost of austerity measures.  The WSJ looks forward and says that with the weak euro — a side benefit of the Eurozone debt crisis — Ireland could have a strong export-led recovery.  Perhaps.  Let’s add a few cautionary notes to the WSJ’s scenario.

First, it comments on the impressiveness of running a trade surplus despite austerity.   But it’s just as easy to argue that Ireland is running a trade surplus because of austerity — indeed, in the old IMF days before Uncle Dominique came along, the point of an austerity program was to run a trade surplus, which was achieved by compressing domestic spending.  And that’s certainly what Ireland has done.

Second, here’s what the IMF had to say about our export-led growth prospects –

The improved global outlook will help, but to a limited extent. With some reversal in the earlier loss of competitiveness and improvements in the global economy, exports will lead the recovery. But spillovers to the domestic economy will be limited because of exports’ heavy reliance on imports, their tendency to employ capital-intensive processes, and the sizeable repatriation of profits generated by multinational exporters.

Of course, we should learn from the crisis not to put excessive stock in any one prognosticator, but this is what the Fund said right after being given the most optimistic spin by our Department of Finance.

Finally, the WSJ takes the un-Krugman like view that Ireland is not being penalized by the bond markets by as much as Portugal and Spain.  That argument will continue.  My two drachmas worth is that we can only have the sighs of relief when (1) the budget deficit actually starts to come down — it still hasn’t and (2) we’re sure that some combination of the obligations from the blanket bank guarantee and the Anglo funding doesn’t go pear-shaped later this year.

Incidentally, the photo with the WSJ  article is of a Ryanair jet.

UPDATE: The New York Times gets 4 perspectives on whether fiscal cuts can work, with a heavy focus on Ireland.  And the new revenue figures for the 1st 6 months show one consequence of austerity: there is absolutely no buoyancy in income tax or VAT.