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Why does what works in Ireland not seem to work in Spain?
Dialogue with the Alter Ego on the varying success of austerity, drafted and published on July 24, 2012

Question by Alter Ego of Noah denkt™ (AE): Yesterday’s miserable quarterly results from the Spanish economy
have generated another dramatic fall in the Ibex as well as an additional rise in the already unsustainable level of
interest rates for the Spanish bonds. Why doesn’t
Spain seem to be able to turn the corner on its bad economic
performance when
Ireland which applied very much the same austerity recipes as Spain did managed to return to
the markets way earlier than anticipated?
Answer by Noah denkt™ (Nd): The answer to this question may be twofold: First, it seems to us as if Ireland found
a better mix in their austerity measures notably by keeping their corporate income tax down. But the main reason
why Ireland has been able to come back to the markets so soon after having received its own bail-out is that
public resistance to austerity was way less pronounced there
than it continues be in Southern European countries
like Spain, Italy or Greece. In other words, the swift success of the Irish reform measures has a lot to do with the
lesser degree of hostility that the Irish public has towards free-market ideas and concepts.

AE: But how does the latter impact the performance of a national economy?
Nd: Well, if people do a better job in embracing change and the challenge of independence then they waist less
energy on fighting the new austerity but rather try to make the best of it instead. That in turn makes it easier for
others to invest their resources in the respective economy. And so it is this sense of openness and pro-
activeness which is at the heart of the Irish turnaround story.

AE: In other words, you are saying that the Spanish public is inherently too left-wing for austerity to be successful
Nd: Clearly, austerity has a bigger battle on its hands in countries like Spain or Italy
where the influence of the
feudal past is more present than elsewhere.

AE: You continue to be optimistic then that austerity will finally work, even in the difficult economies of the South?
Nd: The question here is whether it will be given enough time to work. Right now, the odds are not very much in
favor of that though.

AE: So what’s the way out here?
Nd: The way out here probably is that the more prosperous Euro countries in the North will have to do more to
allay the fears of change that are so prevalent in the South?

AE: And how do they do that?
Nd: By showing compassion and by being consistent in their message to these countries.

AE: In other words, they will have to make more funds available and press for a mentality change at the same
Nd: Yes.

AE: How can this work if leniency is contradicting the message of discipline that the North is trying to send at the
same time?    
Nd: Don’t forget that the Northern message is first and foremost about hope. Discipline is only a side effect to that
hope. Without that hope however, no discipline will be able to produce any meaningful result.

AE: So, it is hope against all odds that the North is trying to sell here?
Nd: Well, there are times when you do have to be hopeful even if the odds are overwhelmingly staked up against

AE: And this is not an irrational or even suicidal thing to do?
Nd: No, because there is no acceptable reason without hope. Because reason without hope is what is truly

AE: Are we then talking about a metaphysical Blaise Pascal-like concept of hope here?
Nd: You could call it that.
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austerity in Ireland versus austerity in Spain, Irish austerity versus Spanish
austerity, success of austerity politics, success and failure of austerity politics,
public sentiment and austerity, public resistance to austerity, opposition to
austerity, varying results of austerity politics, future of the Euro