The Sovereign Debt Crisis and the New Boundaries of the Irish State

Abstract

The full force of the sovereign debt crisis has been affecting Ireland for almost three years now, although it took most of that period for it to become starkly evident that it was the sovereign’s own credit which was impaired, and not merely that of the national banking system or even of certain banks within it. The budgetary adjustments required by the collapse in government revenues as a result of the spectacular contraction of the economy (which were merely confirmed by the Memorandum of Understanding between the Government of Ireland, the European Commission and the International Monetary Fund of November 2010) have required a far-reaching assessment of the structure of the public service, the services which it will provide in future and the terms and conditions of public servants. However, it is not merely budgetary constraints that are in play here. The failures in the policy-making and regulatory systems, which made a substantial contribution to property bubble and the ensuing collapse of the Irish banking system, have caused many to cast a critical eye on traditional ways of doing business in the political system and the public service. The strains imposed on the political and administrative systems by the necessary budgetary adjustments and by complying with the commitments undertaken as part of the “bailout” have also raised similar questions. The experience of the last two years has therefore led to calls for radical reform, from a constitutional level, right down to that of public service management. The new government, elected in February 2011 is committed to make many of these changes, starting with significant amendments to the Constitution; its ability to deliver a full programme of such reform remains in question, just as the viability of the macro-economic strategy that the bailout requires. Many of the changes envisaged in the way public services are defined, funded, organised, managed and provided are all the more radical in that they mark a sharp break, in practice, if not in theory, from the social partnership model which was in the ascendant during the boom years and which fell apart in the ensuing bust.