Weekend Economists Ask: "What Were They Thinking?" March 16-18, 2012

[Ghost Dog]

10. When Irish Eyes Are Hopeful

... Two years ago, Ireland received a $67.5 billion bailout package from European governments and the International Monetary Fund. Ireland’s banking system has stabilized for the most part, but the country is still coping with a budget deficit clocking about 10 percent of gross domestic product and the government is likely to cut its 1.3 percent growth forecast for 2012. On top of that, Kenny’s government will soon hold a Yes-No referendum on the European Union’s new fiscal treaty, which mandates tight deficit rules. If Ireland votes No, the country would be cut off from any additional support from the euro zone’s bailout fund—a worrisome scenario because the economy may yet need more financial help.

Burton took a break from the St. Patrick’s Day festivities at a Midtown Manhattan restaurant to discuss Ireland’s crucial referendum vote and the outlook for the economy. Here are the edited excerpts:

When will your government schedule the referendum on the fiscal treaty, and are you confident voters will sign off on this?

There have been two major polls showing support. But I should caution that referenda in Ireland are very difficult to call. People understand this is a big issue and will contemplate the vote seriously. As for the timing, it will be late May or early June—or late June or early July. We need to have this vote by October. (Ireland’s school-entrance exams are held in mid-June.)

If voters say No, what are your thoughts on Ireland remaining in the euro over the long term?

A Yes vote will secure Ireland’s future in the euro zone. The EU has had an enormous positive impact on Ireland. As for the debt treaty, we are already doing a lot of heavy lifting (on fiscal policy). The IMF and other regulators check our revenue returns on a daily and weekly basis. At the end of every quarter, a team arrives and goes over our books in great detail...

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