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The ECB bailed out the Irish to save the European banking system, and ultimately the Euro, that was exposed to Irish bad debt via loans made to Irish banks by o
by alphadevx 12y ago
The ECB bailed out the Irish to save the European banking system, and ultimately the Euro, that was exposed to Irish bad debt via loans made to Irish banks by other European banks. The bailout was in the form of loans at a punitive interest rate, even the IMF (also part of the bailout program), seemed kind in comparison.
Ultimately the ECB eased up when it become clear that Ireland was doing a sterling job of turning itself around, making heavy cuts and reforms in the process, but the growing impression I have of the EU is that the rules are for the little countries, when you look for example at the debt problems and flouting of the European Fiscal Compact by Italy and France presently.
The lack of solidarity throughout this financial crisis has been telling, and will leave lasting resentments (just ask your Greek, Irish, or Portuguese friends).
- zurn 12y agoWell, Ireland took a bad deal from the ECB, nationalizing the bank imposion and imposing punishing austerity measures (executed with sterling enthusiasm as you say) instead of doing something like Iceland. It's more Ireland bailing out the ECB, courtesy of hapless and/or corrupt political leadership. Even the traditionally right-wing IMF turned around a while ago and has been consistently calling out Europe's austerity enthusiasm as damaging. See eg. http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/03/an-amazing-mea-culpa-from-the-imfs-chief-economist-on-austerity/ http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/03/a... Some in the austerity movement have since been parading Ireland as an example of the success of their receipe for some reason. But: http://www.nytimes.com/2014/01/11/opinion/irelands-rebound-is-european-blarney.html http://www.nytimes.com/2014/01/11/opinion/irelands-rebound-i...
- alphadevx 12y agoI agree with you on the treatment of Ireland, and the subsequent criticism of the country over corporate tax issues, often implying that the country was implicit in this, was rubbing salt in the wounds. Those tax structures were in place long before the crisis. I'm torn on whether Iceland's approach was better however (for them), time will tell.
- innguest 12y agoYou have to admit it was at least more fair, as Iceland punished those that are really to blame (bankers) instead of the innocent (citizens). Whether it was "better" or "worse" is a discussion I'll leave to the consequentialists.
- alphadevx 12y agoThink about what default means: someone lent you money, and you never gave it back. Now think about that it terms of fairness. Sure the bankers lent money and never got it back, but who gave the money to the banks in the first place? Lots of private individuals were hurt: http://en.wikipedia.org/wiki/Icesave_dispute http://en.wikipedia.org/wiki/Icesave_dispute No clear-cut good/bad guys in this mess, lots of moral hazard.
- innguest 12y agoI'm confused. If someone lends me counterfeit money, I don't have to give it back. Banks don't lend real money, they act with the government to legally leverage their deposits and lend out leveraged money. This money is created in the books and did not come from production in the real economy. If private individuals' deposits were hurt then all the more reason to arrest the bankers. The moral hazard comes from government guarantees like FDIC that discourage banks from investing prudently.