The inevitable has happened as Ireland becomes the second nation in six months to fall apart financially to the point that it has needed the assistance of the Eurozone. There are dozens of questions swirling around Europe today and nobody seems to have reached a real consensus on what happens next or even whether there are reasons to think that these actions will improve the situation in the short or even long run. The Irish situation is actually much more threatening than what happened in Greece and there are more implications as far as what brought Ireland to this point.
The Eurozone nations knew they were going to have to come to Ireland’s rescue months ago but the Irish had to ask and there has been deep reluctance to take that final humiliating step. It all but guarantees that this government will fall as the voters are not at all pleased with what has been described as Ireland’s loss of financial sovereignty. The money is coming from the Germans, Swedes and even the British. It is not an insubstantial sum – somewhere between 80 and 100 billion euro. The Irish had hoped to negotiate a deal in which the Irish kept most of the control over their budget but that doesn’t appear to be the case. For all intents and purposes, the Irish are being treated like the Greeks and any other third world nation that can’t manage its own economy – nice platitudes to the contrary. There have been all kinds of rhetoric about “a brother in need” but there is also recognition that Ireland badly mismanaged its venture into rapid growth.
The bigger issue now is whether this will be enough to keep the other states that are teetering on the brink from sliding over it. Portugal has been quick to assert that they will be ok but very few believe them. The fact is that rescuing Portugal has been anticipated all along and there is money to do this. The nation that carries the future of Europe is Spain. They are not in good shape as the property collapse has hardly been addressed and unemployment has been consistently above 20%. If the same bail out is needed for Spain the sense is that the Eurozone will need to pony up more than five or six times what they dug up for Ireland and that would cripple the system.
Courtesy Chris Kuehl, Armada Corporate Intelligence and member of the BIIA board of directors
BIIA Newsletter November II – 2010 Issue