Margaret Thatcher's chief economic adviser has warned that Ireland is heading for a slump on a par with the recession that followed the Thatcher boom years in Britain. Writing in today's Business This Week , Prof Patrick Minford says Ireland's membership of the single currency renders the State 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 State joined the singe 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.
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.
