December 2013 - Deleveraging and new development models
The recovery of the world economy is expected to strengthen in 2014-2015, thanks to ongoing expansionary monetary policies and less restrictive fiscal policies. However, this recovery would be a very slow one, as the global environment is still dominated by major problems that need to be overcome. On one hand, the long period of public and private deleveraging in developed countries is still far from over. On the other hand, emerging market economies are beginning a new step in their development process marked by structural challenges.
Ireland: End of the bailout program - Now what?
Ireland has been hit hardly by the crisis and had to call on international aid. Indeed, not only was its economy highly dependent on external financing, but more importantly, the country had experienced a real estate bubble burst, leading to the virtual collapse of its banking system. And with an oversized banking system, the country found itself on the edge of a cliff.
The international bailout program, which ended last December, is considered as a success. Ireland should be the first eurozone country under an aid plan to come out on top: the real estate bubble has been deflated, the banking system has been restructured, activity has stabilised, and the sovereign has successfully access to debt markets.
Nonetheless, the country combines some of Spain's and Italy's difficulties. As a result, significant adjustments still await. Activity is still well below its pre-crisis level, public finances show high debt and deficit levels, the country's net international investment position is still very deteriorated, and households are still struggling with high debt, which they are having more and more trouble repaying.
All told, the country has pulled ahead of the group of countries under program (Greece, Portugal), but it is still far away from the core countries of the euro zone: it now ranks among the countries in an intermediate situation, together with Spain and Italy.