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Ireland and Greece: A Tale of Two Fiscal Adjustments

In: Managing Risks in the European Periphery Debt Crisis

Author

Listed:
  • Jeffrey D. Anderson
  • Jessica Stallings

Abstract

Three years into Europe’s crisis, and with worrisome output contractions ongoing in Italy, Spain and Portugal, the different experiences of Ireland and Greece offer useful lessons. A more tempered fiscal consolidation has helped Ireland succeed in restarting the growth needed to underpin debt sustainability and renew bond issuance. Few doubt, as a result, that Ireland’s official creditors will be repaid in full and on time. With a much larger initial debt and little saved from the strong growth registered before 2008, the far harsher fiscal adjustment required of Greece has had a much more negative effect on GDP. This has elevated debt ratios and reinforced doubts about creditworthiness despite fiscal adjustment and principal reductions from private creditors of unprecedented magnitudes. Applying the Irish example in Greece to help restart growth would require some additional funding. The final cost, however, would be much less than might eventually be needed if output continues to fall and doubts about debt sustainability remain entrenched.

Suggested Citation

  • Jeffrey D. Anderson & Jessica Stallings, 2015. "Ireland and Greece: A Tale of Two Fiscal Adjustments," Palgrave Macmillan Books, in: George Christodoulakis (ed.), Managing Risks in the European Periphery Debt Crisis, chapter 3, pages 55-77, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-30495-7_3
    DOI: 10.1057/9781137304957_3
    as

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