Even if this is ‘worse than 2008’, the recovery can be a lot quicker

IS THIS worse than the last economic crisis? It definitely happened faster, and in some ways is already deeper. But what really killed us last time was the dire pace of recovery. We don’t have to repeat the mistakes that deepened the crisis from 2008 to 2012.

But, to be clear, the Irish economy is bleeding out. Jobs, profits, business transactions of every description are in freefall. The Government has temporarily banned most of the normal economic activity that funds Ireland’s prosperity betting that this gamble will contain a potentially devastating public health crisis.

What was hoped as a short period of suspended animation has become prolonged, and even open ended. We don’t know when or if Covid-19 will be brought under control by medical science. Meanwhile, the damage inflicted on the economy risks becoming permanent.

In a strange way it doesn’t quite feel like that. Rubbish is not piling up uncollected in the streets. There are no physical dole queues. There hasn’t even been enough time or enough traffic to create potholes. Partly that is a function of the accelerated pace of this crash, largely it is because the State is picking up so much of the slack.

With the tax base crumbling that means the Exchequer faces a shortfall of €30bn this year – an enormous sum even at the ultra cheap interest rates now available. We are borrowing to maintain one of the highest standards of living in the world, rather than simply to keep the lights on.

It doesn’t feel like a sustainable proposition and so ‘worse than 2008’ has become the mood music from the talks to form a new government.

This crash has definitely been faster than 2008. The lockdown has shredded more jobs in eight weeks than the great financial crisis did in its worst four years.

It’s happening so fast that thousands of business and hundreds of thousands of households have probably not yet even realised how dire their situations have become.

That echoes not so much households in 2008, but the then government, which in the era of “sound fundamentals” and “turned corners” seemed determined at every opportunity to underplay just how bad things really were.

Back then, failing to accept the magnitude of the crisis led to strategically inept policy responses – which included bailing out the useless Anglo Irish Bank alongside the economically useful AIB and Bank of Ireland, and the disastrous failure to plug at least some of the construction collapse with taxpayer supported infrastructure projects.

Irish political leaders’ Celtic Tiger hubris had also managed to alienate Europe’s power elite, who noticeably failed to rush to support us when that crisis was at its worst.

If the aspiring government parties really are more clear headed this time around it should be a strength.

More importantly they’ll have access to money and are diplomatically ensconced in the EU mainstream – which helps ensure funds will keep coming. The question is what to do with it?

Last time around, the Exchequer was used to keep the lights on and to bail out the banks – in the belief lenders were key to economic stability. In fact, rescued banks hoarded cash until the recovery was in full swing. Jobs, not banks, lifted us out of the mire from 2012. So this time a relentless focus on work should be the first, not the final, part of managing the recovery.

This time a relentless focus on work should be the first part of managing recovery