So here\’s the success that is being claimed:
\”We don\’t see a problem for sterling at present levels. We have cut costs right through the economy with an internal devaluation of 15pc or 16pc and we are now highly competitive. We can take it,\” he said.
That\’s what they\’ve had to do. Internal devaluation. Here\’s some of the costs of that:
The outburst comes a day after Irish unions reached a provisional deal with the government for a further round of public sector pay cuts averaging 5.5pc, rising to 10pc for higher earners such as doctors. This follows 14pc pay cuts already in force.
The trade unions say internal consumption has collapsed by 26pc, and investment has fallen to the lowest level in recorded Irish history. Under-employment has reached 23pc despite emigration to Canada, Australia, the US and Britain.
Irish home prices have crashed by roughly 50pc. Lenders have been disguising the damage, stretching out mortgage repayments rather the foreclosing on bad loans and crystallising losses.
That hurts: 25% pay cuts, mass unemployment, halved house prices: but of course, nominal mortgages haven\’t been reduced.
This internal devaluation stuff is pretty brutal. Rather shows up the merits of having your own currency so you can just have an external devaluation instead really, doesn\’t it?
You know, like all the economics textbooks insist?