WASHINGTON, Oct 20: The International Monetary Fund said on Saturday that austerity measures are not to blame for the sluggish Irish economy, amid complaints the Fund misjudged the impact of such measures.
“The pace of consolidation under the programme has struck an appropriate balance and continues to do so for the period ahead, enabling Ireland to make steady progress in reducing fiscal imbalances while protecting the still fragile economic recovery,” Ajai Chopra, deputy director in the IMF’s European Department, said in a statement.
“With overburdened bank, household and SME balance sheets, and weak growth in trading partners, a number of factors besides fiscal consolidation have been a drag on growth in Ireland,” he said.
The IMF recently admitted that it had underestimated in Greece how much the “fiscal consolidation,” or austerity measures, in its bailout plan would force the economy into recession. At issue was a revision of its “fiscal multiplier,” which the IMF uses to estimate the impact of various actions, like spending cuts, on the economy.
The admission that it got it wrong in Greece has been taken up by other countries undergoing IMF-EU bailouts, with countries arguing for easier adjustment terms to cope with slower-than-expected growth.
But Chopra argued that “in the current discussion of the impact of fiscal adjustment on growth, it is important to note that no single fiscal multiplier is applicable to all countries and circumstances.—AFP