According to the following story, Iceland has done better than Ireland because: (1) it allowed the banks to fail (no bailouts); and (2) it sharply devalued its currency.
I am pretty sure Austrians would applaud (1), but what about (2)? Is devaluation (ie. inflation) justifed here?
Extracts from the article:
"...The economies of the two "over-banked" countries have both contracted by around 11pc of GDP, but Iceland has achieved it with inflation that devalues debt, while Ireland has done it under an EMU deflation regime that raises the burden of debt.
This has led to vastly different debt dynamics as they enter Year III of the drama. Iceland's budget deficit will be 6.3pc this year, and soon in surplus: Ireland's will be 12pc (32pc with bank bail-outs) and not much better next year.
The pain has been distributed very differently. Irish unemployment has reached 14.1pc, and is still rising. Iceland's peaked at 9.7pc and has since fallen to 7.3pc.
... Iceland's president, Olafur Grimsson, irritated EU officials last month when he said his country was recovering faster because it had refused to bail out creditors – mostly foreigners.
"The difference is that in Iceland we allowed the banks to fail. These were private banks and we didn't pump money into them in order to keep them going; the state should not shoulder the responsibility," he said."
RTWT:
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8187476/Iceland-offers-risky-temptation-for-Ireland-as-recession-ends.html
Surely it isn't but (1) is good enough. See if brit and dutch forces invade military-less Iceland to extract their pound of flesh.
Ireland's government expenditures began to outstrip revenues in 2007. Link.
The "devaluation" was by letting the currency's value float, instead of fixing it, which is closer to a free market than the stated alternative.
That's more Austrian than otherwise.
It needs to be noted that Ireland was actually a relatively free market economy, and it's the entry into the socialist European Union that brought it down. The government was forced to start providing social(ist) services that are the "minimum standard" for that empire, and we can see the results.
Irelands entry into the European Currency is what brought it down. The European Central Bank set the interest rate too low for what suited Ireland which created easy money for banks to lend creating a property bubble. Irish banks borrowed from German Banks and other European Banks.
Ireland only became a relatively free market economy in the 90's when they were already a member of the European Union(Not that I am in favor). During the bubble they threw money at problems instead of fixing them thus growing the size of the state. They where not forced into providing socialist policies they did thus on their own!
The European Union originally was just a market with free movement of goods and services but its the nature of government to grow.