Bruno Waterfield
Telegraph
21 Nov 2010
Ireland has finally been forced to take an economic bail-out from the European Union in a deal designed to save the euro.
After a humiliating week of denying it needed help, the Dublin government succumbed to pressure from other euro zone countries and asked for a “very big” loan.
G7 and euro zone finance ministers including George Osborne, the Chancellor, held emergency telephone conference talks on a combined EU-IMF rescue package of up to £77 [$123] billion.
British taxpayers now face paying a bill of at least £7 billion as under a deal signed by the last Labour government, British taxpayers are liable to share in the cost of any EU bail-out.
On Monday Irish and euro zone governments will be watching the markets after Greece, which received a £94 [$150.2] billion bail-out in April, warned that the EU’s debt crisis was not finished yet.
Portugal has already warned that there is a “high risk” it might need economic help. If investors are unconvinced by the Irish rescue package, the euro could come under pressure while the cost of borrowing for the Dublin government could rise.
Wolfgang Schaeuble, the German finance minister, said that the deal was necessary to preserve the euro’s future.
“We are not just defending a member state but our common currency,” he said.
“Ireland has to meet strict conditions, and these will be negotiated in the coming days, so that it is not just providing financing but about ensuring that the problems are solved.”…
…Negotiations have been tense as the EU and IMF impose tough conditions to force Ireland to cut public expenditure by £13 [$20.8] billion and to increase taxation on the vast majority of people. Ireland’s last three budgets have already cut spending by £12 [$19.1] billion.
Trade unions are warning of “civil unrest” on scale not seen for decades as leaks of the spending plan reveal that there will be sharp tax rises for the low paid and middle class families in order to increase state revenue.
Eamon Devoy, general secretary of the Technical Engineering and Electrical Union, said: “I think there is going to be huge civil unrest. When the draconian measures being proposed are heaped on top of cuts already implemented, life in Ireland will be unbearable.”
The complete article is at the Telegraph.
Related: The horrible truth starts to dawn on Europe’s leaders:
…[EU President Herman Van Rompuy] is admitting that the gamble of launching a premature and dysfunctional currency without a central treasury, or debt union, or economic government, to back it up – and before the economies, legal systems, wage bargaining practices, productivity growth, and interest rate sensitivity, of North and South Europe had come anywhere near sustainable convergence – may now backfire horribly.
Jacques Delors and fellow fathers of EMU were told by Commission economists in the early 1990s that this reckless adventure could not work as constructed, and would lead to a traumatic crisis. They shrugged off the warnings.
They were told too that currency unions do not eliminate risk: they merely switch it from currency risk to default risk. For that reason it was all the more important to have a workable mechanism for sovereign defaults and bondholder haircuts in place from the beginning, with clear rules to establish the proper pricing of that risk.
But no, the EU masters would hear none of it. There could be no defaults, and no preparations were made or even permitted for such an entirely predictable outcome. Political faith alone was enough….
Also, by Daniel Hannan, Guilty Men: When are supporters of the euro going to apologise?
Would you trust an economic forecaster who had recently said this?
The euro, despite the foolish assumption of many commentators that it should be judged according to its external level with the dollar, has already provided great internal stability to the eurozone
Or this?
The euro has done more to enforce budgetary discipline in the rest of Europe than any number of exhortations from the IMF or the OECD. If we remain outside the euro, we will simply continue to subside into a position of relative poverty and inefficiency compared to our more prosperous European neighbours.
Alarmingly, the author of those lines is Nick Clegg, now our Deputy Prime Minister….
Update: From Business Insider, IRELAND: Here’s What We Know Right Now
