The combination of tightening financial conditions in the eurozone, ongoing concern about the possible collapse of the euro, and the short-term negative effects of necessary fiscal and structural reforms will push the euro area back into recession in 2012. This was the view of one of Ireland’s leading economists and influential thinkers, Dr Alan Ahearne, and the grim message he imparted to attendees at Shannon Chamber’s annual President’s lunch, held in Dromoland Castle Hotel, Co Clare last Friday.
Addressing an assembly of Chamber members and guests, which included Sean Flannery, the European Vice-President Technical and General Manager of GECAS, key sponsor of the event, Dr Ahearne said: “Europe is muddling through the euro crisis, with no definite comprehensive solution on the table and no ECB big bazooka.
“The euro needs a new architecture, which involves stricter surveillance of national fiscal and economic policies and a proper centralised framework to resolve crises,” he added.
Dr Ahearne’s one ray of hope for Ireland is that we could prove more resilient than most.
“Much of the hard work has already been done here. Three-quarters of the budgetary adjustments have been made, the banks have been restructured, and we are seeing significant improvements in our cost competitiveness.
“However, we won’t escape unscathed,” he warned.
Dr Ahearne was responding to Shannon Chamber President Damian Gleeson, who questioned how the recent Leaders’ Summit will affect Ireland’s economic and monetary policy.
At a time when international growth and investment are sluggish, and the national economic ‘cake’ is much smaller than during the boom years, Mr Gleeson also expressed his concern for sustainable regional development in Ireland.
“What can the western regions do to meet the challenges ahead?” he asked.
“How can Ireland achieve economic balance between the East and West coast communities, given these current conditions?” he questioned.
In responding, Dr Ahearne, who has been, and continues to be, at the very centre of Irish and global economic policy, had his audience enthralled. An economics lecturer at NUI Galway, a member of the Commission, or Board, of the Central Bank of Ireland, and a Research Fellow at Bruegel, the influential Brussels-based think tank, Dr Ahearne left his audience with food for thought.
