It's been quite a day for Irish economics. Garret Fitzgerald finds proof in Ireland's austerity experience that we are pragmatic northern Europeans. Paul Krugman finds a belief in leprechauns and faeries at the Economic and Social Research Institute. And Minister for Justice Dermot Ahern unveils a new analysis of the country's problems, one that was clearly in the briefing for today's Cabinet meeting (held, appropriately enough, at a place that the government paid far too much for) --
Mr Ahern said the level of savings had gone up from around 4% to around 12%. He said what we need to do as a nation is to get the people who are saving their money to spend it in the economy.
In other words, Irish people are saving too much. In the 1930s, Keynes figured out why that's the case for governments to spend more. But instead the purpose of the meeting was more cuts. And with the huge overhang of bank bailouts still to be paid for, we wouldn't expect to people to behave any differently -- that money is coming from cuts to public services and higher taxes, so more savings are going to be needed.
Krugman points to an obsession of governments with confidence of "the markets". It seems to the governmment is struggling towards a needed focus on confidence of the citizens.