For obvious reasons, small open economies are prone to extreme volatility in economic fortune, and hence in the margin of error in managing the budget: The lights can switch from green directly to red very quickly, as happened with the crash at the end of 2008. A soft landing was confidently expected after a sustained period of budget balance had left outstanding sovereign debt, relative to national income, lower than is currently the case. But the market appetite for lending to the Government evaporated, and the state had to seek emergency loans from the IMF for the first time in…

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