Austerity fails to save Ireland [Update on Greece]
Tue Nov 16, 2010 at 10:00:05 AM PST
Ireland did everything right, according to the bankers of the world. They slashed wages, services, and public employment. After two years of sacrifice what do they have to show for it?
Wages have fallen and unemployment is around 13%. That much was expected. What wasn't expected is that the markets would punish the nation for crushing the domestic economy because of the austerity measures.
"We do not really see how Ireland is going to be able to ’hold on’ without EFSF help," one euro zone source with knowledge of the talks said.
"Obviously since this implies a pretty tough programme for the government and to some extent a loss of sovereignty, they want to think twice..." the source said.
In other words, things are going to get even harder for Ireland. What will Ireland get in return? The ability to go even deeper into debt.
gjohnsit's diary :: ::
Pressure is being put on the Irish government. They are literally on the clock to accept more draconian restrictions.
An increasingly isolated Irish government was coming under mounting pressure tonight to seek an EU or International Monetary Fund bailout within 24 hours amid fears that contagion from its crippled banking sector might spread through the weaker eurozone countries.
The fear is that the sovereign debt crisis, which has already taken down the Greek government, will spread from Ireland and cripple Portugal.
In fact, Portugal is already on the ropes.
Contagion has already pushed Portugal to the brink, pushing yields on 10-year bonds to the danger level above 6.5pc. Finance minister Fernado Teixeira dos Santos said the country was at the mercy of global forces and may be forced to call for help.
After Portugal there is only Spain and Italy, large countries in which bailouts simply won't work. At that point we are looking at a collapse of the Euro in its present form. Some are drawing parallels to the Great Depression.
"Does the ECB understand the concept of contagion?" asked Jacques Cailloux, chief Europe economist at RBS. Three EMU countries have already been shut out of the capital markets, and footloose foreign creditors hold €2 trillion of debt securities issued by Spain, Portugal, Ireland and Greece.