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Global economic downturn makes Ireland’s Bailout Agreement targets even more unlikely to be achieved.

The global economy is in a dangerous new phase according to the International Monetary Fund (IMF). In its World Economic Outlook published September 20, 2011, the IMF states that global activity has weakened and become more uneven, confidence has fallen sharply recently, and downside risks are growing. This slowdown will make it even more unlikely that Ireland’s Bailout Agreement targets will be achieved. 
The World Economic Outlook’s main conclusions include:

  •  Global growth forecast to moderate to 4% in 2011 and 2012
  • Advanced economies facing anaemic growth of only 1.6% in 2011
  • Multiple shocks combined with insufficient rebalancing stalling recovery 

These forecasts are in line with what Social Justice Ireland has been pointing out for some time. They will result in failure to achieve the Bailout Agreement’s targets on a range of fronts. In its meeting with the IMF/ECB/EC troika on July 11, 2011 Social Justice Ireland pointed out that to date the Bailout Agreement:
Conditions are being honoured and benchmarks on a wide range of issues are being met by the Irish Government and Ireland’s citizens.
·         Benchmarks on banks and fiscal issues set out in the Memorandum of Understanding are being met.
However, the promised outcomes are not materialising:
o   Economic growth is not reaching the forecast targets.
o   Jobs are not being created on the scale required.
o   Unemployment is not falling at the rate envisaged.
o   Finance is not available on the scale required for small and medium enterprises.
o   Essential services are being reduced to such an extent that the health and wellbeing of citizens is being put at risk.
o   The Community and Voluntary sector, often the place of last resort for many vulnerable people, has seen a huge increase in demand for its services. At the same time its funding has been reduced dramatically.
o   In reality the Bailout Agreement is dispossessing poor and vulnerable people of their meagre resources to re-pay those banks, financial institutions and others, who gambled recklessly, invested unwisely, were paid premium interest rates to do so but lost their gamble.
Ireland is now facing a situation which raises questions in a range of areas.

  • The likely level of economic growth will be nowhere near what is required to provide the jobs needed to provide the income to meet the Bailout Agreement’s targets. 
  • Those who are poor and/or vulnerable are bearing an inordinate part of the burden of restructuring. 
  • The unchallenged assumption that the economy should have priority over all else means that our social infrastructure is being attacked without any regard to the long term consequences of these actions.
  • Government has made no assessment of what the long term impacts of the cuts to services and service reductions will mean for Ireland in ten years’ time.
  • What is the vision of Ireland’s future underpinning Government’s decision-making and how are Government initiatives contributing towards reaching that destination?
  • Without a major rebalancing in Government’s approach the process of poor people being dispossessed seems set to continue as their resources (financial and services) are appropriated to fully re-pay those who knowingly took risks, gambled their resources and lost.

According to the IMF global economic recovery is slowing with world growth projected to be 4% in both 2011 and 2012, down from over 5% in 2010.
And even this lowered projection counts on a lot going well.
The IMF had foreseen a slowdown this year after strong growth in 2010 as fiscal stimulus packages in response to the crisis wound down. But a barrage of economic shocks in 2011 combined with other factors to produce a worse than anticipated outcome.
The IMF report says strong and coordinated action is necessary to avert a decade of lost growth in the advanced economies. It concludes that strong policies are urgently needed to improve the outlook and to reduce the risks.  Only if governments move decisively on fiscal policy, financial repairs, and external rebalancing, can we hope for stronger and more robust recovery according to the IMF

The IMF Full Document can be accessed below.

Social Justice Irelands Presentaion to IMF/ECB/EU Troika can be accessed here

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PDF icon IMF World Economic Outlook7.68 MB