By Daniel Gross
Take Ireland. The island nation’s desire to seek a bailout had nothing to do with runaway public-sector spending. Rather, it had everything to do with its private-sector banks running amok. Ireland’s banks lent way too much indiscriminately, and borrowed from bond investors around the world. Come the housing bust, rather than let bank bondholders suffer the way bondholders of privately held industrial companies would, Ireland’s taxpayers stepped up and assumed the debts. This massive transfer of wealth from Ireland’s taxpayers to bondholders around the world swelled the public debt to the point where Ireland needed a bailout. In exchange for taking cash from the European Central Bank, the International Monetary Fund and the European Union, Ireland agreed to get its deficit under control by slashing spending, raising taxes and generally inflicting misery on its own citizens. The theory: The bond markets would reward Ireland for taking such action and enable it to borrow more cheaply in the future.
That hasn’t happened. Ireland has stuck to its commitments, by and large. The country’s voters even heartily expressed their desire to stay in Europe in an election a few weeks ago. But the yields on its debts haven’t come down. Far from it. So Ireland has taken the bitter medicine, gone out of its way to appease bondholders — and the reaction is to be treated like a country in danger of defaulting.
- Are Enda and Michael capable of negotiating their way out of a wet paper bag? (namawinelake.wordpress.com)
- Ireland, Greece, the Euro (and Cork) (stephenkinsella.net)
- Old media failure in Ireland as €1.5bn is paid by the State to bondholders in a single day (namawinelake.wordpress.com)