EDITORIAL - From Celtic Tiger to mangy cat

Sometime soon, the Government and the private sector and, perhaps, trade unions will resume talks on the so-called Partnership for Progress agreement, with the aim of bringing some level of predictability to economic policy formulation and implementation.

The Opposition, unfortunately, is unlikely to be at the table. They will claim an inability to trust the Government and give as evidence Prime Minister Bruce Golding's approach towards establishing the commission of inquiry into the Christopher Coke extradition.

That's a pity! For we, as do many Jamaicans, believe there is need for a set of principals around which the country should build consensus so as to avoid the extreme policy lurches that tend to accompany every change of administration.

While we welcome the reactivation of the talks, which were stalled because of the private sector's anger over the Government's behaviour in the Coke matter, it is important, we believe, that the parties place before the public the framework that will inform and guide the negotiations.

When these on-and-off discussions began nearly a decade ago, Ireland was the model for consensus-building and economic advancement that was held up by the private-sector proponents of the process.

Mangy cat economy

Then, the Celtic Tiger was roaring at growth rates upwards of six per cent a year. Ireland was the poster child for transition from economic laggard to glitzy development.

These days, the Irish economy is something akin to a mangy alley cat. In a way, its public finances display many of the characteristics of Jamaica's - but worse.

This year, for example, Ireland's public-sector deficit will close at 32 per cent of the gross domestic product and Prime Minister Brian Cowen's government has announced a correction of €15 billion - spending cuts and taxes - to bring the deficit to Eurozone requirements of three per cent in 2014. Ireland's public debt, downgraded by all the rating agencies, is nearly equal to its annual output of goods and services and it is now among five Eurozone nations - Portugal, Italy, Ireland, Greece and Spain - with very dodgy fiscal situations. Ireland's unemployment is heading towards 14 per cent of the workforce and there are signs of an uptick in outward migration, though not at the level in the past when the Irish poured out of their country to escape privation.

That is not where the resemblance with Jamaica ends.

Bad banking methods

In the wake of a banking collapse, the Government had declared a guarantee of deposits, in the manner of the People's National Party administration of the late 1990s meltdown of bank and insurance companies. Indeed, the Irish have established their version of Jamaica's FINSAC, the National Asset Management Agency, a type of bad bank into which the Government has shovelled the toxic assets of impaired banks.

It is estimated that the bank bailout will cost Irish taxpayers in the region of €70 billion which, like the proposed spending cuts, will be twice the original estimate. That has a familiar ring. A major part of the reason for the Irish collapse is the implosion of a housing bubble, coinciding with the global financial crisis. Housing values rose 250 per cent in the decade up to 2008, but are now 50 per cent below the values of two years ago. Banks loaned to marginal borrowers on this mirage of wealth.

The Jamaican negotiators should take a hard look at what went wrong in Ireland to avoid the pitfalls.

The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.