European financial meeting in Brussels this week to discuss the ongoing Irish debt crisis, which has plagued Ireland and threatened the wider European economy since Ireland spent 40 billion Euros to bail out distressed national banks in September. The network of European Union economies have struggled to recover from the recent series of debt crises, particularly in Greece, and the massive EU-led bailouts that have followed. Ireland's leaders are insisting they do not need outside financial assistance, but continental European representatives look to be preparing for the worst. Here's what's happening and what observers are saying about it.
- Will Ireland Let Europe Bail Them Out? The New York Times' James Kanter and Stephen Castle report, "Analysts and investors, as well as some European officials, say the government’s plan needs to be buttressed by a promise of outside funding to counter the jumpiness in the markets, which had pushed interest rates on Irish bonds to record highs last week before they fell back dramatically on Friday. ... The Irish situation was expected to top the agenda at the regular monthly meeting of European finance ministers on Tuesday and Wednesday, when Brian Lenihan, the Irish finance minister, is expected to present the details of a four-year budget plan. One E.U. official, speaking on condition of anonymity, said he expected the package to include 'radical' new austerity measures."
- The Irish Ponzi Scheme Economists Simon Johnson and Peter Boone warn, "Given the vulnerability of so many eurozone countries, it appears that Merkel does not understand the immediate implications of her plan. The Germans and other Europeans insist that they will provide new official financing to insolvent countries, thus keeping current bondholders whole, while simultaneously creating a new regime after 2013 under which all this debt could be easily restructured. But, as European Central Bank President Jean-Claude Trichet likes to point out, market participants are good at thinking backwards: if they can see where a Ponzi-type scheme ends, everything unravels."
- Reveal Euro's Big Challenge EconoBlogger Yves Smith points out, "One sees that the Euro interest rate that was far too low for Ireland, and sparked the property bubble there, has been far too high for Portugal, providing a decade-long example of failed austerity policies that no-one’s paid much attention to. Oh well, at least the Euro interest rate has been just right for Germany and France."
- Europe Pressuring Ireland to Accept Bailout The Wall Street Journal's Nicholas Hastings writes, "Ireland’s refusal to seek a debt bailout from the European Union has pushed up the dollar but left the euro mixed Monday. ... Ireland has come under pressure to seek assistance to help prevent yield spreads for euro-zone debtors like Spain and Portugal from widening further. Germany also is keen to get Ireland to tap the European Union’s new emergency loan program in an effort to help its own negotiations for a more permanent bail-out mechanism."
- This Is The Euro's Fault The Daily Mail's Mary Ellen Synon, a dedicated euro skeptic, makes her case. "So what went wrong? No one in Brussels will ever admit it, but it's the euro that ruined Ireland. Ireland joined the single currency in 1999. ... But after the Irish turned over their currency and their interest rates to the European Central Bank in Frankfurt, things began to change. The ECB insisted upon low interest rates for the eurozone to help the sluggish German economy. But what suited Germany was all wrong for Ireland, turning healthy growth into a debt-fuelled property mania."