The NAMA Wine Lake Blog Attack on the negotiation stance of Michael Noonan and Enda Kenny is bookish exercise which fails to address the realities of the current euro crisis. It makes no reasonable effort to look at the full Euro/ World context.
Interesting how so many Irish people are deluded about concessions won by Greece. Greece's partial default is a catastrophe. The minimum wage has been cut to €2.20 per hour. Pensions have been savagely cut. by 30%/40%. There have been massive hikes in direct and indirect taxation and charges for government services. 150000 public service workers will be fired. Greece is as dead as a dodo. It is kaput. Ireland would like a debt write down like Greece. But are we prepared for the for the massive cuts that will likely be a condition of any such write down in the future.
It is easy to criticize the negotiating stance of the government. Conditions in Europe are deteriorating and changing at such an alarming rate that there is a grave danger that the Euro crisis will pull down the world financial system. Greece is BANKRUPT. Spain is BANKRUPT in all but name. Portugal is BANKRUPT. Italy is next in line. The game is almost over. Even the UK has major problems.
Be warned: burning the bondholders is no panacea. It will raise borrowing rates for the peripheral economies-once bitten twice shy. PART of the pressure on bonds has come from the Greek partial default. There is NO silver bullet. There is a less than 50 50 chance that a Euro collapse will be averted. The Euro system is so weak that default by another country besides Greece AT PRESENT would likely be the coup de grace. AT PRESENT an Irish or Portuguese threat of default would likely be sufficient to topple the euro such is the hysteria it would engender in the markets. Opinion is Germany is hardening against the profligacy of the peripheral economies. That’s the reality. German elections are due in 2013. Merkel is now gearing up to face her own electorate.
If France decides to jettison austerity the bond markets will turn on the country.
Its time we faced up to the DEBT CRISIS. European countries in many cases are living way beyond their means. It can't continue. The game is up. AT THIS TIME it is best to keep our powder dry until we see how the crisis unfolds. It is certainly not a time for major bondholder burning by Ireland ( much as I wish it should happen). Nobody can with certainly foretell the likely consequences.. Now lets cross the Atlantic. Obama lectures Europe about its debt problems. Obama is on track to borrow $6.2Trillion One Term—More Than All Presidents from Washington through Clinton Combined. The US national debt is $15.78 Trillion. The US is approaching bankruptcy. It is borrowing cheaply- but for how long more. China has already warned the US. The US has a dysfunctional system of government which has failed to take the hard decisions to address the debt problem. The US government is borrowing 42 cents in every 100 cents it is borrowing. The West is swimming on a sea of debt.
If by chance the Euro crisis is sorted the markets will then target the dollar which is on borrowed time. It’s time to face reality. Ireland can do very little AT THIS TIME. The negotiating stance of Noonan and Kenny is correct..