Inquiring minds are reading The Telegraph about Ireland’s bogus austerity program:
It has not been a pleasant few days to be an Irishman. The Irish Government’s gamble in guaranteeing 100 per cent of all banking deposits, seen as a cheap way to avoid bank runs during the start of the financial crisis, committed it to enormous bailouts of any banks that ultimately did fail. This resulted in the Irish state having to bail out the property development bank Anglo Irish Bank last week. It was confirmed that worst-case scenario bill for bailing out the Irish banks will be over €50bn — roughly €25,000 for every taxpayer in the country. To compound this, the “bad bank” set up to purchase toxic property development assets is likely to cost at least another €50bn. Although this is said to be a once-off bailout, it is likely that further injections of public money will be required in the years to come. Ireland has tried to spend its way out of a banking crisis — a mistake which may ultimately cause the collapse of the state’s finances.
Many in Britain have held Ireland up as a model of austerity because of cuts to expenditure made last year, but this misunderstands the true extent of Ireland’s difficulties. Ireland’s structural deficit of 12 percent — the worst in the EU — means that for every three euros the Irish Revenue brings in, five euros are spent by the government. Although some cuts have been made, Ireland’s government is still the most profligate borrower in the EU. The consensus that some banks are “too big to fail” has ruined Ireland’s finances, and failure to make savage cuts in government spending may doom them. Bond markets agree: the Irish Minister for Finance is literally a laughing stock among bond investors. It hardly seems as if things can get worse for Ireland, but unless there is a swift change in the government’s thinking, things will. Ireland’s addiction to spending funded by borrowing will cripple it. Like all addictions, the only cure is immediate abstention — a slow weaning-off will not work if the global economy continues to stagnate. The Irish government should end all non-essential expenditures immediately.
It is a long dark ride the world is on at the moment.
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