Writing in Business This Week, Professor Patrick Minford, once Margaret Thatcher's top economic guru, warns that Ireland is heading for a slump on a par with the recession that followed the Thatcher boom years in Britain. Professor Minford says Ireland's membership of the single currency leaves the country unable to take action to ensure a soft landing for the booming economy.
The Republic's economy would have grown strongly, regardless of whether the country had joined the single currency or not, he says. By participating in the euro, Ireland chose higher inflation - currently running at 6.2 per cent - and ceded control over its business cycle, according to Prof Minford, who holds the chair of applied economics at Cardiff Business School.
Ireland is "enjoying" a huge boom that would never have been permitted under a floating pound, when interest rates would have already risen to 7 per cent or above, he says.
National agreements and high levels of immigration have kept the lid on inflation in the Republic in the past, but will not do so in the future, he argues. When the crash comes it will be through a collapse in the national agreement, Prof Minford predicts. "The ensuing slump will be far worse than it would have been had the boom been kept under control. Higher inflation and reinforced boom-and-slump is an unattractive recipe for UK citizens and businesses. That's the lesson of Ireland and the euro," he says.
Patrick Minford is of course on the euro-sceptic side of the euro debate, and the outcome of Ireland's dance with the wolves of inflation is being keenly watched by commentators on both sides. Should there be a decisive outcome in one direction or the other, it will have an impact on the euro debate which will perhaps be out of proportion to its real relevance - the Irish experience in the last five years is so unique that it's hard to see what lessons can be gained from it.
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