The Irish Fiscal Crisis

Abstract

This paper considers the origins and characteristics of the current economic crisis in Ireland. In particular, it examines how fiscal policy contributed to the crisis rather than preventing it. The paper gives details of the major fiscal tightening that is under way. By 2014 the authorities will have implemented a package of ex ante cuts equivalent to one-fifth of GDP. The costs of this package, together with the more permanent effects of the recession on potential output, are discussed and the legacy effects of the crisis for government indebtedness are analysed.Fiscal policy, debt sustainability, Ireland