Business writers are already pouring cold water on Europe's $100-billion-plus
bailout of Ireland. On Sunday, the European Union and the International
Monetary Fund agreed
to inject funds into the island nation to
stabilize its economy and prop up its banks. The EU hopes to prevent a
repeat of Greek's debt crisis, which weakened the euro. Will the bailout
work? Here's what skeptics are saying:
- The Austerity Plan Is Terrible, writes Joe Weisenthal at Business Insider:
is a lousy way to get to deficit reductions. Remember, austerity is
what Ireland has been trying for years. Suddenly it will work now, and
get the deficit to 3% of GDP? Please. [Also] it's still fundamentally
based on this idea of preventing panic by promising support as
necessary. And yet already Portuguese CDS are wider. This idea gets nobody excited.
- The Bailout Is Way Too Small, writes Felix Salmon
at Reuters: "By all accounts it’s going to be less than €100 billion —
probably in the €80 billion to €90 billion range — and that sum has to
cover the country’s entire borrowing needs for the next three years." He
cites the New York Times explaining that "15 billion euros was likely
to go to backstop the banks [and] 60 billion euros would go to Ireland’s
annual budget deficit." This just isn't enough money, argues Salmon:
leaves a few billion euros left over for one-off expenses and
emergencies — but I worry that Ireland’s banks are going to need a lot
more than €15 billion. The banking system is on its knees and it has
roughly half a trillion euros in assets. The black hole in commercial
real-estate alone — over and above the €50 billion or so that the Irish
government has already shelled out — is estimated at somewhere in the €20 billion to €25 billion range and that’s before you even start thinking about residential mortgages:
- The European Central Bank and the IMF Are Inept, writes Dean Baker at The Guardian:
a firefighter or medical team make a rescue, the person is usually
better-off as a result. This is less clear when the rescuer is the
European Central Bank (ECB) or the IMF...
The failure of the ECB or IMF to take steps to rein in the bubble before
the crisis has not made these international financial institutions shy
about using a heavy hand in imposing conditions now. The plan is to
impose stiff austerity, requiring much of Ireland's workforce to suffer
unemployment for years to come as a result of the failure of their
bankers and the ECB.
While it is often claimed that these
institutions are not political, only the braindead could still believe
this. The decision to make Ireland's workers, along with workers in
Spain, Portugal, Latvia and elsewhere, pay for the recklessness of their
country's bankers is entirely a political one. There is no economic
imperative that says that workers must pay; this is a political decision
being imposed by the ECB and IMF.
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