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Policy

Ireland's Deputy PM: 'You Cannot Get an Economy to Recover Just by Doing Austerity Measures or Budget Discipline.'

A Q&A with Ireland’s Deputy Prime Minister Eamon Gilmore.

(AP Photo/Yves Logghe) ()

photo of Catherine Hollander
March 19, 2013

Ireland’s Prime Minister Enda Kenny and Deputy Prime Minister Eamon Gilmore are in Washington this week. On Tuesday, they will meet with President Obama and attend the annual St. Patrick’s Day luncheon on Capitol Hill.

National Journal sat down with Gilmore on Monday to discuss the lessons of the Irish economic experience and what he hopes to accomplish during this visit to the United States. The deputy prime minister's trip has already included stops in New Orleans and Atlanta. He declined to attend festivities in Savannah, Ga., which were set to include a “men’s-only” dinner, telling the Irish Times he didn't believe in segregation by gender.

Edited excerpts from the conversation with National Journal follow:

 

NJ: In January, you said you hoped Ireland could be a “winner” for Europe and a model there. Could you elaborate on the lessons the Irish experience holds for the European Union, from an economic perspective?

GILMORE: I’m much more confident than I was even in January that we will be fully back in the financial markets for our state’s funding, that we will be out of the [bailout] program in which we were placed in 2010, the program with the [International Monetary Fund] and the [European Central Bank] and the European Union, we will be out of that by the end of this year.

This will be the third successive year that we have seen some growth in the Irish economy. It’s small growth, but against a backdrop of recession in Europe, it is significant, and we’re confident that that growth will increase over the next couple of years.

The last half-year figures for 2012 showed that the numbers in employment in Ireland had increased for the first time since 2012, and that’s really where our main focus now is: building on what we’ve already done, the budgetary adjustments that we have done, the work that we have done to bring stability to the banking system, the work that we have done in renegotiating the terms of the original bailout that was done.

We now have to build on that by getting employment, increasing trade, increasing investment. And that’s really what we’re doing in the U.S. this week, talking to investors and potential investors and political leaders and business leaders about the opportunities that Ireland holds for investment.

NJ: The U.S. and the E.U. are in the process of negotiating a trade agreement. Could you give me a sense of how much the topic will be discussed during the meeting with President Obama tomorrow, and how hard you think the Obama administration is pushing for a new agreement?

GILMORE: Well, first of all, one of the areas that was identified in 2011 at the European Union-U.S. summit was the potential for a trade agreement between the United States and the European Union. There was a high-level group established to look at that, and its latest report in February this year is very positive. And President Obama in his State of the Union address gave his political commitment to progressing a trade and investment partnership with the European Union, and that’s something that we welcome. Ireland holds the presidency of the European Union in the early part of this year, and we have committed to progressing the E.U.-U.S. trade and investment partnership or trade agreement during the course of that presidency.

What now needs to happen is the European Council, the European Union Council of Ministers need to agree [on] a mandate to commence the negotiations. There will be a meeting of European Union trade ministers in April, and we are hopeful that a mandate can be given soon to commence discussions on a trade agreement.

It also has to be acknowledged that, of course, concluding a trade agreement is always challenging and, you know, I expect that once we get into the detail of negotiations, there will be issues and there will be difficulties, I think that’s to be expected, in particular sectors and with respect to some of the regulatory regime. But that’s the challenge and I think that we should face into it.

NJ: Let's talk about the controversy over the Cyprus bailout. What advice would you have as a country that has also received a bailout, and what do you make of the situation as it’s developing there?

GILMORE: First of all, I think the two situations are not entirely comparable because the scale of the banking problem in Cyprus is far greater than it was in Ireland. And that’s not to minimize Ireland’s banking difficulty; when it occurred, it was very large. So we’re not comparing like with like. Secondly, I welcome the fact that agreement was reached by the euro group last week on Cyprus, and I think what needs to happen now is we need to see that worked through.

NJ: How do you mean “worked through”? I know one of the concerns folks here have is the possibility that people who have deposits in other troubled European countries might be worried that they could also see haircuts on those deposits.

GILMORE: I think you have to take each of these sets of circumstances separately. And I think if you look at what has happened in Europe over the past number of years, the arrangements that have been made for individual countries and the problems of individual countries have been tailor-made for those countries. A particular solution was required for Greece, so a particular solution was designed and devised for Greece. A different approach was taken in the case of Ireland, a different approach taken in the case of Spain, and I think a different approach taken now in the case of Cyprus.

So I think what it demonstrates is rather than that there is some kind of a knock-on effect from the decision, I think it actually demonstrates the reverse. It demonstrates that what Europe agrees is specific to the country that it applies to.

NJ: There’s an ongoing debate in the U.S. over how much austerity is too much and how to get our own fiscal house in order. Ireland has been held up recently as a model of austerity. What is your advice to U.S. policymakers on that front?

GILMORE: I think that’s the wrong debate. No economy flies on one wing. You cannot get an economy to recover just by doing austerity measures or budget discipline. You also have to have measures that encourage growth and job creation and I think what policymakers have to do is to get the balance right.

And in Europe and in Ireland, I think that we are getting that balance right now. Clearly, we have to get deficits down. 

But we also have to ensure that the economy grows and that the right policy decisions are made to encourage growth and investment. And some of that has to do with improving competitiveness, some of it has to do with investment in research and innovation, and some of it has to do with interventions, which are particularly aimed at ensuring that people who are long-term unemployed get opportunities to get back into the workforce, and that means interventions that enhance their skills, retrain, education, and so on.

So it’s a mix of all of those measures. And in the modern kind of global economy in which we now all operate that’s the way it has to go. You can’t solve the economic difficulties of the 21st century by reaching back for some template from the 1930s.

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