Irish Default

There is an interesting column in the Irish Times this morning, which contains some eye-opening remarks as to how their election is being viewed by members of the French and German press, but even more interestingly concludes with these remarks about what is effectively the printing of rogue euros:

The elephant in the room is default. It was reported on Wednesday that since the last week of January, Irish banks have issued €18.35 billion worth of government-guaranteed debt.

This suggests that the banks may effectively be issuing sovereign paper with the approval of the Government, the Central Bank and the ECB. In other words, the banks have effectively increased Ireland’s public debt by about 11.5 per cent of GDP in the last few weeks.

Since they are unlikely to be able to repay this debt any time soon, a future government will have to. To appreciate just how extraordinary this is, €18.35 billion of government-guaranteed debt is more than half the entire tax revenue for 2010 at €31 billion.

The full article by Elaine Byrne, is well worth reading, it is linked from here and it is temptingly titled "Ireland the laboratory for addressing Europe's ills" but leaves the impression with the reader, which is exactly the opposite of that optimistic heading, namely that the EU, viewed in the light of Ireland's experiences, is now so thoroughly corrupted that it is beyond saving!

Those who cannot spare the time to follow the link should note this other brief extract from the article regarding the Irish corporate tax rate:

The rate is increasingly looked upon as a political prize in return for the ECB bailout and a precondition for any revision of interest rates. If Ireland does not accede to German demands for a reformed monetary union or endorse Merkel’s austerity plans, why should the Italians, Spanish or anyone else? The future of Ireland is now linked to the future of the euro zone.