DUBLIN—With doubts swirling about the solvency of the Irish state in early September, Finance Minister Brian Lenihan summoned a dozen senior government and bank officials to a conference room nicknamed the “torture chamber,” a nod to its history as a venue for painful meetings.
For two years, Ireland had poured money on a raging banking crisis, to no avail. Each estimate of the rising price of rescuing Ireland’s banks turned out too low. Mr. Lenihan needed to halt the drip-drip of bad news that was leading his country to ruin. “I want a final figure ASAP,” he told the group.
Two weeks later, the estimate came in: Up to €50 billion—nearly $50,000 for every household in the Emerald Isle.
But now, investors are betting the bill could be higher still and could reignite Europe’s sovereign-debt crisis. The unpopular government is bracing for collapse, and on Tuesday, Irish government bonds continued a week-long slide to a fresh record low. The debt is judged as risky as Greece’s was this spring just before that nation begged for a European Union bailout.
Mr. Lenihan, racing to ease those fears, proposed Thursday shrinking the country’s 2011 budget by €6 billion. Proportionally, that’s as if the U.S. suddenly eliminated the Defense Department.
Ireland’s troubles are Europe’s. The 16 euro-zone countries have agreed to guarantee up to €440 billion in loans if any among them is unable to borrow from private markets.
The calculus here is whether the Eurozone is prepared to cut us off and run the the risk of contagion.
On this point, the chances of said event have recently increased significantly. My preferred solution is and has been all along for some form of forced or negotiated default, which leads to a planned withdrawal. On the other hand, if we’re just forced out, then that’s good too. Both options are preferable to staying in. On the negative side, Europhilia is so deeply ingrained among large sections of the Irish dependent class - farmers, public servants, the Big 4 and other similar lackies of the failed state - that they will be prepared to do almost anything to protect their costly, and in some cases, downright traitorous, benefits.
Hopefully, the breakup of the Eurozone can be accomplished without a war.
OK I understand that the rescue fund is going through the German courts, etc, i.e it by no means an ‘established fund’. However, I expect it to be (but for how long it will last is another question but the question is about years here, imo). Therefore, I fail to see why we will not be allowed to avail of it in late January of next year and therefore we will (as we ain’t going to raise anything on the markets).
Just to add that an approx 25% cut in public sector pay will be required. All other state spending to be cut drastically. Increases in all taxes also. I’m still undecided whether they’ll leave CT alone for a couple/few years as increasing that will simply make matters a lot worse (on the other hand thay want an end to the low CT/lack of transfer pricing rules in this tax haven).