Irish bank executives have spent the last year perfecting the art of debt denial, but their crowns may be slipping somewhat if recent comments from Labour leader Eamon Gilmore and Ictu chief executive David Begg on the financial crisis are anything to go by.
If we are very lucky, Ireland will post a deficit this year, as a percentage of GDP, of 12%, by far the worst in the eurozone and one of the worst in the continent of Europe. If you include Nama, the ratio of overall gross public debt to GDP will surpass 110% next year, just shy of the kind of levels normally present in Italy and Greece.
The government has begged the European Commission for five years to fix this situation through a combination of tax increases and spending reductions. Many believe five years in itself will act as a curb on a full-blooded recovery in Ireland. But now Gilmore and Begg want to fix the imbalance between spending and revenues over seven years, perhaps even longer.
The Gilmore/Begg pitch is that sharp and harsh medicine, administered over too short a period, could deflate the economy even further and worsen the government's public finance position. While one can have a degree of sympathy with the superficial idea of only gradually administering fiscal pain, the evidence suggests this would be the worst of all approaches.
In fact, the evidence from 1987, the last time Ireland was forced to deeply cut public spending, tells an entirely different story. According to a mountain of academic literature, sharp and short-term cuts in public spending can expand the economy, even in high-debt countries.
The reason is to do with expectations among the public, the biggest drivers of economic growth. If a government is seen as getting on top of a sprawling deficit, it gains credibility, the interest rate it pays gets lowered, confidence rises, the threat of higher taxes reduces and aggregate demand is stimulated.
These assertions are of course contradicted by other evidence and it is moot whether cutting public spending in a severe downturn can ever really be expansionary.
But there is not a shred of evidence that taking the scenic route to addressing the gap between spending and taxation is ever going to stimulate the economy.