Varadkar tells World Economic Forum: There’s a slowdown coming

Dunno why he had to go to Switzerland to say this, personally. Presumably the World Economic Forum has its own economists, who can figure out that the Irish economic outlook, given global trends, is pretty perilous:

Speaking to Bloomberg at the World Economic Forum in Davos, Switzerland today, Varadkar said his own sense is that the Eurozone “will not go into recession”, though he added he expects “there will be a slowdown”.

The Tánaiste said that economic forecasts are as accurate as weather forecasts, stating that one has to be very careful about making them.

“So I don’t think we’re facing into recession, not as rapid growth as you might have hoped for, certainly,” he said.

Varadkar said nothing can be taken for granted in the current economic landscape.

The European Union has fiscal levers and some of the rules around the Stability Growth Pact are being extended, he added.

While the Tánaiste was keen to stress that Ireland’s economy is doing well, he acknowledged that housing remains a problem.

I do think we have a problem in the world, and it’s not just in Ireland,” he said.

The problems that people face in San Francisco and Seattle are similar to those problems faced by people in Dublin, he said, saying “there is a global element to our housing crisis”.

Ireland’s economy “doing well” is, of course, relatively meaningless in the context of a global environment where fuel and energy prices are hitting record highs, with the knock on impacts that has on transport and logistics and electricity and food. And that’s before we take into account the very real prospect of global food shortages this year, prompted by Russia’s effective decision to hold Ukrainian grain exports hostage in the black sea.

As inflation rises, interest rates, too, will rise. That means that homeowners already paying higher costs for everything will soon see inflation hitting their mortgage payments. And the Irish state, you might remember, remains relatively stretched financially, in part because of a dubious decision to effectively shutter its own economy for eighteen months under Covid.

It wouldn’t take a whole pile, in other words, to tip us into proper recession.

The line about the housing crisis being a global problem, by the way, is true enough. But what’s interesting in Ireland is our complete unwillingness to contemplate measures being taken elsewhere. Canadian Prime Minister Justin Trudeau, for example, is not exactly anybody’s idea of a populist conservative, but earlier this year he proposed a law which would ban foreign buyers from buying up residential property in Canada. In Ireland, by contrast, foreign-based funds are now some of the largest holders of residential property. And, as prices keep increasing, so does the value of those investments and the incentive to make more of them. So, even as we build homes, they fall more and more into the hands of rich investors. Trudeau can recognise that problem and move to address it without worrying that doing so might be xenophobic – so why can’t we?

The World Economic Forum, incidentally, has become a sort of corruption of itself. As ideas go, it wasn’t ever a bad one: An annual get-together to look at the economic problems across the world and devise and divine the most effective strategies to mitigate them. It’s supposed to be a sort of crowd-sourcing event for policymakers. What’s happened, though, is that increasingly instead of being a venue for varied and competing economic strategies to test themselves against each other, it’s become an event that does little more than to try to buttress and reinforce liberal globalism. So how shocking is it, then, that when the world adopts broadly the same economic strategy, that the world ends up with the same problems? Ireland and California both having a housing crisis isn’t necessarily evidence that the housing crisis is something politicians cannot avoid. It might be evidence that it’s something that Irish and Californian politicians are causing.

Varadkar’s line about Ireland and California having the same housing problems would be more convincing if it wasn’t delivered at Davos, which seems to exist to ensure that Ireland and California adopt the same policies, and live with the same failures.

The resulting problem for Irish politicians is that they are now so tied into international norms on economic policy that it’s becoming ever more difficult to differentiate the country on the economic stage. Last year, we abandoned our own corporate tax policy, for example. Our fiscal limits are decided (and, to be fair, not stringently) in Frankfurt and Brussels. We’re so tied into the “global model” that at this point, the WEF is really just a chance for our politicians to report the impacts of global policy in Ireland.

So, if there is a recession, there isn’t much we can do about it. After all, Leo will be on Prime Time, telling us to remember that there’s a recession in California as well.


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