EU pushing Ireland down wrong track
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A woman walks past the Bank of Ireland in Dublin, Ireland, Nov. 20, 2010. Talks are underway in Dublin between the Irish government and delegations from the European Union, the International Monetary Fund (IMF) and the European Central Bank on a possible tens of billions of euros aid package for the debt-stricken country. [Xinhua] |
As another one of the so-called "PIIGS" countries (Portugal, Ireland, Italy, Spain and Greece) is being led to the slaughterhouse, it is worth asking whether all the carnage advocated by the European authorities is really necessary. Ireland is in its third year of recession and income per person has already declined by more than 20 percent since 2007. Unemployment has more than tripled from 4.3 percent at the end of 2006 to 13.9 percent today.
The baseline projection from the International Monetary Fund (IMF) is that debt will stabilize at close to 100 percent of GDP by 2014, but even that depends on the volatile and sometimes contradictory sentiments of the "bond vigilantes" who don't always seem to know what they want. One day the bond markets are happy because the government is cutting the budget and laying off workers, the next day they re-learn their national income accounting and realize that this will shrink the economy and make the deficit and debt burden bigger relative to GDP.
Unfortunately the European authorities do know what they want: they want to squeeze Ireland, they want more fiscal tightening and they want to shrink the size of the government. And they want it now, even if it means that Ireland will sink further into recession.
So it is understandable that the Irish government would resist an agreement with these authorities – which include the European Commission, the European Central Bank (ECB), and the IMF. The European Financial Stability Facility was set up in May with the proviso that contractionary conditions would be attached to any "bailout".
Is there an alternative? Yes – in fact there are many. It is perfectly feasible for the European authorities to help Ireland recover from its recession without subjecting the economy – and the people – to further punishment.
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