|LIVING WITHIN MEANS KEEPS US STRONG: CANADA A PERFECT EXAMPLE TO REST OF WORLD OF FISCAL RECTITUDE|
Aruba, December 24, 2013 - Live within your means.
Householders know that is the key to keeping a family solvent in this shifting world of economic uncertainty. Slowly but surely some nations are realizing it, too.
Like Ireland. The poster child for excessive borrowing in the late 1990s and early 2000s, the country’s economy folded in the wake of the global financial crisis of 2008. It was declared technically, if not practically, bankrupt. Too much money had been put on the domestic never-never for the national good and the once-famed Celtic tiger became the toothless terror. Banks collapsed, housing prices plummeted, jobless numbers soared and emigration reached numbers not seen since the end of the Second World War. Central Bank of Ireland Governor Patrick Honohan described his country’s predicament as “one of the most expensive banking crises in world history.” Appeals followed to both the European Union and the International Monetary Fund for a massive injection of bailout funds.
As Ireland choked on its debt, these two institutions performed a financial version of the Heimlich manoeuvre and saved the patient from itself. That was a shaming for the Irish people but necessary. Still, it showed at least one country was aware of the simple reality that to survive it must borrow less, reduce spending, cut overhead, turn away from deficit budgeting and drive structural economic change.
It took close to $100 billion to rebuild the Irish economy in concert with reining in sovereign debt through bond market borrowing, but it worked.
The debt is being repaid while Ireland is looking to the future. Sure, there is still double-digit unemployment, but with the economy suspected to have grown by 2% in 2013 and likely to increase again by 2.7% in 2014, it has turned the corner. The combined EU/IMF “program of support” comes to an end on Dec. 31, leaving Ireland to live in a new age of self-sufficiency and solvency. Why won’t more countries do the same? Across the rest of the EU there is financial wreckage everywhere with Greece, Portugal and Spain the standout laggards in economic performance.
All have runaway unemployment and unaffordable state worker pension schemes that will doom a whole generation to a jobless future. Only Germany, with its strong manufacturing base, looks sound.
The EU’s mendicant members could do worse than look across the pond to Canada as a nation committed to fiscal rectitude and a stellar example (at least at the national level) of this simple truth: No government in history has ever achieved prosperity by simply raising taxes.