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Oh no, it’s started already.

Following my blog yesterday on the dangers of austerity packages, Ireland’s actions are coming home to roost. Ireland had been praised in some quarters for its savage austerity measures which have led to rising unemployment. But it has just been announced that the Irish Republic saw shrinkage of its economy by 1.2% in the second quarter.

The fact that government’s can fly in the face of standard economic theory, and be praised for it, and see a resultant decline in growth would not be a surprise to the average A Level student. I suppose now that the economy is shrinking the government will take further measures to cut jobs and welfare and so it will go on and on like water slipping down the plughole.

When I was a kid there was a joke that Ireland was the richest country in the world, because its capital was always Dublin. Well, it’s not very funny at the moment.

On top of this is news from Europe, shown by the purchasing managers index (PMI) produced by Markit. This gives a signal that the recovery in both manufacturing and service industries in the EU is starting to slow. Markit’s index for the eurozone as a whole gave an index reading of 53.8, given that anything over 50 shows growth.

This was the lowest reading in seven months and compares with a figure of 56.2 in August. On the surface this is still in positive territory. However, when we look at the “non-core” composite index, excluding France and Germany, the figure was 49.4.

According to Markit’s chief economist, Chris Williamson, “Ireland had been doing well, but is slipping back, and Greece’s recession is deepening.” He went on to say that Spain and Italy may be running out of steam and “are also at risk of falling into a double dip recession.”

He added “this will make budget deficit targets even harder to hit” due to falling tax revenue and higher welfare payments. Well, it’s obvious isn’t it? Isn’t it?

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Posted in economic growth, European Union, eurozone

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