Memo to markets: SF is not Syriza and Ireland is not Greece

A Sinn Féin-Fianna Fáil coalition looks the most obvious and workable solution at this juncture. It seems clear that Sinn Féin as the party that gained most votes cannot and should not be prevented from entering government.

The process of government formation will commence over the coming days, and while the manifestos of those involved will give guidance on what any programme for government might look like, all parties will have to realise that compromises will have to be made and that not all of the promises made to the electorate will be delivered upon.

Given how unforgiving the Irish electorate has shown itself to be, that will be a political challenge for Sinn Féin in particular.

There has been some strong reaction to the possibility of Sinn Féin in government, but I think it is important to bear in mind that this is not Syriza back in 2014. It took over a Greek economy in deep crisis and made some pretty mad policy suggestions which, luckily for Greece, it did not get to implement in the main.

Sinn Féin and whoever accompanies the party would be taking over an economy that is growing quite strongly, which is close to full employment, and has a modest budget surplus.

However, Ireland still has a dangerously high level of government debt. Careful management of the public finances is essential.

In its manifesto, Sinn Fein committed to an additional €12bn in day-to-day spending on public services and social welfare, and a further €10bn in additional capital expenditure, with housing accounting for the bulk of it.

Some of this will be funded through a tax-raising package of €3.8bn.

Fianna Fáil promised increased resources of over €9.7bn, with €7.9bn allocated to additional expenditure measures. It promised to ease the tax burden at a cost of over €1.8bn. The two parties are both committed to lots of extra spending.

The key message delivered by the electorate at the weekend is that housing and health must get priority, with childcare and insurance costs also important.

Sorting three of these problems will involve spending lots of money. It is essential that the money is spent wisely, with a focus on outputs rather than just inputs.

I assume that Sinn Féin is sensible enough to realise that to achieve success in its social objectives, it will require a vibrant economy to generate the necessary resources.

It should not send out a message that Ireland is set to become a lot less friendly to those businesses and individuals who generate the wealth and the employment that keep the economy functioning and which generate the resources that fund public services.

For a small open economy that is so dependent on external investment and jobs, to threaten this by sending out a message that Ireland is set to become a high-tax and high-spending economy, where people and businesses who do well are punished, would not further the cause of fixing the glaring deficiencies in housing and public services.

I have observed considerable nervousness over the past couple of days, but I think the fears are somewhat exaggerated and premature.

I hope that I am proved correct.