![Sample our Politics & International Relations journals, sign in here to start your FREE access for 14 days]({"type":"image" , "src" : "/sda/5947/TOC-Subject-Sample-2021-Politics-International-Relations.jpg"})
Abstract
The demise of the Celtic Tiger economy is one of the most dramatic reversals of fortune in recent economic history. The catastrophic failure of the banking system and the deterioration of the domestic economy have left an indelible mark on society and precipitated a remarkable general election in 2011 (O'Leary, Citation2012, Irish Political Studies, 27(2), pp. 326–340). It has also raised many important questions. Why was it not anticipated? Why was Ireland so badly affected? And what political and economic reforms are necessary to prevent it from happening again? This research note contributes to the debate over the first question, namely the failure to anticipate the crisis, by analysing the International Monetary Fund's (IMF) annual surveillance reports of the Irish economy. The findings indicate that the IMF correctly identified many of the threats that were often ignored domestically, but that the quality of its consultations deteriorated in later years.
Notes
A recent study was also published on the external surveillance (EU, IMF and OECD) of Irish fiscal policy during the boom. See O'Leary Citation(2010). Several recent studies have also investigated the consequences of the economic crisis for political reform (Hardiman, Citation2010a, Citationb), and the broader European context of the economic crisis (Dellepiane & Hardiman, Citation2010).
For a more comprehensive analysis of the crisis, see Chari and Bernhagen Citation(2011) and Bernhagen and Chari Citation(2011).
The authority to conduct surveillance is derived from Article IV of the IMF's Articles of Agreement.
According to Fratzscher and Reynaud (Citation2011: 406), following a favourable report from the IMF, ‘Sovereign spreads of countries with large political influence systematically fall by up to 50 basis points more than that of other countries’.
The use of language in reports and in summing-up discussions is highly choreographed. For example, when Executive Board discussions are summarised, code words (with specific numerical values) are used to reflect the degree of consensus among directors (e.g. ‘several directors’ meaning supported by fewer than six directors). See Chelsky Citation(2008).
O'Leary (2010) also notes that the IMF generally failed to signal magnitude of the problem, even though the diagnosis was generally correct.
The IMF was downsized in 2008 because of its own overdependence on the revenue generated from its lending operations, which had dried-up because there was no major financial crisis for several years before 2008. This led to delays in the consultations with Luxembourg and Ireland.
In private, however, governments make more detailed responses to the surveillance reports, through their representative at the IMF, justifying their policy actions and sometimes disagreeing with the Fund's view. Such official responses are noted in the minutes of Executive Board meetings and remain classified for 10 years.
In the time period analysed, the findings from the IMF's Article IV consultations were reported consistently in the main Irish newspapers. For the most part, the discussion and analysis was confined to the business pages of the major Irish newspapers, but in some years the reports stimulated discussion on the front page, editorial and opinion pages.