Perhaps understandably, my comments on the Irish situation Guy Rundle mentioned in an article I re-posted were somewhat lost in the plethora of discussion about WikiLeaks. So it’s worth giving the Irish situation a post of its own.
Paul Krugman writes:
Before the bank bust, Ireland had little public debt. But with taxpayers suddenly on the hook for gigantic bank losses, even as revenues plunged, the nation’s creditworthiness was put in doubt. So Ireland tried to reassure the markets with a harsh program of spending cuts.
Step back for a minute and think about that. These debts were incurred, not to pay for public programs, but by private wheeler-dealers seeking nothing but their own profit. Yet ordinary Irish citizens are now bearing the burden of those debts.
Or to be more accurate, they’re bearing a burden much larger than the debt — because those spending cuts have caused a severe recession so that in addition to taking on the banks’ debts, the Irish are suffering from plunging incomes and high unemployment.
Some commentators might write off the large majority of public sentiment in Ireland at the moment for telling the EU and IMF to get stuffed – unified under the slogan “default” – as populist. But it’s there, and you can’t gainsay that. Meanwhile the “serious people” Krugman references explain sagely that Argentina is still regarded with disfavour by “markets”, who, of course, remain un-satiated by the Irish deal, which includes taking 17.5 billion Euro out of the nation’s public pension fund to put in the bank bailout pot, and the chances of the government’s latest round of austerity measures passing the legislature are slipping.
So, Ireland goes from little public debt to a position where 20% of state income will now go off to pay off a “package” from the EU and the IMF which protects private interests.
As one Irish writer at the Graudian observed, something’s weird when “bondholder” enters common pub parlance.