Economic and Fiscal Policy since 1997: What Caused the Crisis and How Should It Be Rectified?

Abstract

In this paper I propose to examine the background to the current crisis which involves both a contraction in the economy due in part to the global crisis, and a collapse in the tax base due to the disappearance of property related taxes. I will argue that key tenets of neo-liberal economic policy that failed are a feature of both the international and domestic aspects of the crisis. The policy approaches to rising house prices and euro membership in the late 1990s were inadequate and contributed to the crisis. Also the success of the moderate pay combined with tax reductions strategy in the 1990s was incorrectly perceived as the "low tax model" being a driver of sustainable growth for the economy. The focus of fiscal policy for 2010 and the future will also be addressed.