Ireland's future depends on breaking free from bailout. His analysis of the economic problems besetting Ireland is fundamentally sound. However some of his prescriptions leave much to be desired.
He states:
National survival requires that Ireland walk away from the bailout. This in turn requires the Government to do two things: disengage from the banks, and bring its budget into balance immediately..So as part of his solution to our economic problems he is suggesting that
government should eradicate the budget deficit of €18.5 billion at the stroke of a pen? This suggestion is both impractical and nonsensical.It would be impossible to attain this target in the short term.
Unemployment would hit one million within a few weeks as the economy collapsed. Several hundred thousand people would default on their mortgages. Thousands on social welfare would would go without.
All grand in theory. Sadly not practical. No economy could survive a shock of those proportions. The economy is barely turning over at present after Brian Lenihan’s last budget. Try bringing in a budget 3 or 4 times more severe than the last and visualise the impact. Interestingly the national media has failed to pick up on Morgan Kellys 19 billion euro deficit proposal. This is part of the soft underbelly of the Kelly plan. His proposal is thus fatally holed under the water. There is a tendency in the media to assume that because Professor Kelly forecast the economic crash, that his economic prescriptions hold water. In fact they are deeply flawed.
Professor Kelly has failed to spell out how he would cut the deficit by €18.5 billion at the stroke of a pen. Can we have a media discussion of this proposal please? He has failed to outline IN DETAIL the consequences for the economy of such a decision.
His proposals on disengagement from the banks are fraught with difficulties and could lead to a total collapse.
He is of course correct to state that by 2014 the national debt will become unsustainable unless the EU changes its attitude to Ireland.
The EU will eventually be forced by the economic realities to restructure the bank element of the sovereign debt. This must be cut by 30% and the repayment period lengthened to 25 years with EU APPROVAL. The government must increase its efforts to bring this about.
Kelly has not got the answer. He is correct in his analysis of the problem. However his "solution" is even worse than the appalling bailout. He argues that we can just walk away from the bailout. What would fund services?
So in summary he argues that
- we should wipe out the deficit of €18.5 billion in one fell swoop. This would wipe out all economic activity and is a stupid suggestion
- He further argues that we must walk away from the bailout. This would mean that the state could not fund health and education services and social welfare. He has of course given no indication of where alternative funding would come from.
We are all aware that the debt burden will become unsustainable. The difficulty is to engineer a workable solution.
Before the property crash Morgan Kelly was unfairly criticised for his analysis. He correctly forecast the property crash.
Now however the country has gone to the opposite extreme. Professor Kelly is now God. He can say or do no wrong. Well in this case he has not put forward a workable solution. It is time for people to use their critical faculties and wake up.
The Kelly Kamikaze approach would finally polish off the patient.
Link to Irish Times article: Ireland's future depends on breaking free from bailout
