Today’s data point of the day goes to Ireland via this story and graphic in the Washington Post in which the magnitude of the nation’s budget deficit (as a percent of GDP) is learned.
One day after requesting a bailout worth more than $100 billion, financially troubled Ireland plunged deeper into a political crisis that could complicate a rescue deal with the International Monetary Fund and European Union.
In Dublin, Prime Minister Brian Cowen, under fire for mishandling the crisis, said he would step down early next year. But he resisted calls to tender his resignation immediately, vowing late Monday to remain in office and push through an austerity budget next month that is considered essential to clinching the rescue deal.
Cutting government spending will probably be a cornerstone of the deal. And it remains unclear whether Cowen, whose coalition has a slim majority in parliament, can still muster the votes needed to pass the budget. He called on parliament to show political courage when legislation is presented Dec. 7.
“We are focused on an issue of great national importance,” Cowen told reporters in Dublin. “And the biggest statement that can be made in this country at this time is to pass this budget.”
In thinking about how a nation might extricate itself from such a dilemma, the recent wisdom of Jeremy Grantham is recalled when he talked about the problems facing the U.S. Federal Reserve in trying to resuscitate the U.S. economy after more than a decade of burst asset bubbles. Grantham said, “Well, I wouldn’t start from there”.