Economics 11/05/2010: How to do fiscal austerity...

An interesting example for Ireland?

Two weeks ago, Eurostat confirmed that Bulgaria's deficit stood at 3.9% of GDP. A crisis was, therefore, unfolding in the Black Sea nation. The Bulgarian government decided to act and on the 5th of May it acted to drop public sector spending by 20% to reduce its budgetary deficit. The Government adopted an update to its 2010 budget in which spending on the part of State organisations, ministries and other public institutions is to be reduced by 20%. Flat cut across the board, with separate budgetary entities deciding on how the cuts should fall.

Clearly Bulgarians have not heard of the Croke Park 'deal' that, according to the Irish government, will help to stabilize Irish deficit (per my estimates, around 7% of GDP by the end of 2014, should all Croke Park-agreed provisions remain in place).

I will be blogging later today on the latest Exchequer results - which, recall, were received well by the banks' /stock brokerages' economists, cheering the fact that 'Exchequer revenue is now on target', without actually asking themselves the more important question: what is this target implying in terms of our solvency.