Has Irish Sacrifice Been Rewarded?



Sinn Fein IRA expected to make significant gains in the Irish Republic’s General Election

The Irish Government has agreed to pay a higher interest rate on emergency loans than was extracted from Greece for that bailout. As the Irish Government only has its citizens’ money to pay the debt, the question is whether the pain will be worth it.


The Irish Government may just have accepted the inevitable when it agreed to the emergency loans package. A failure to accept the loans would have led rapidly to the implosion of the Euro Zone and economic melt down in the Irish Republic. Some argue, particularly other Euro Zone Members, that the price the Irish will be paying for generations to come is well worth all the pain. Their fear is that the cracks have once again been papered over and new cracks will emerge.

The money markets showed mixed reactions yesterday and this may be ominous because the loans should have shown early gains in all areas. Generally, a mixed and muted first day reaction gives way to a firm thumbs down during the following days and can lead to a panic in the following week.

As there will be an Irish General Election, perhaps as early as January, that the incumbent administration is likely to lose very badly, the real Irish situation may yet to be seen. Sinn Fein IRA are expected to do very well at the elections which could prove very damaging to Irish economic prospects. The treat of the Irish Republic defaulting on its loans remains. Sinn Fein IRA may seize the opportunity to damage the European Union deliberately because the cost to the Irish will not be much higher than the humiliating emergency loans at high interest rates. They make no secret of a desire to break Ireland out of the EU and destabilize Northern Ireland to create a new united Irish Republic, the Island of Ireland. Sinn Fein IRA links with ETA also threaten renewed terrorist action in Spain which is itself on the verge of economic assaults. Gerry Adams, who developed the IRA dual approach of ballot and bullet, has been rumored to have led a death and torture squad and been a one time IRA Chief of Staff, is due to stand for Irish President which also does not bode well for the future.

The Irish people are not happy. They feel, understandably, let down by their politicians and by the Eurocrats. That feeling is all the stronger because the Irish Republic has ridden on a bubble of high property prices, sustained by funding from Europe and by attracting inward investment through very low company taxes. EU funding has already started to be moved to the newly joined Central and Eastern European countries, presenting part of the current Irish difficulties. The price of the loans, or the alternative costs of full independence, will place heavy pressure on corporate tax rates. The result is that Ireland faces a bloody future which ever route her people take in the coming months. It is therefore understandable that the money markets did not show great pleasure at the emergency funding prospects. Muted reaction may just reflect a desire to see what happens during the next two months in Ireland.

In the Euro Zone the second boot has yet to fall on the floor. One reason advanced for a muted market reaction to Irish acceptance of emergency loans is that it does little to address defects in the Single Euro Currency. Greece may have received a bailout but civil unrest has followed. The Irish Republic may have accepted a bailout but civil unrest is building. The first two bailouts are therefore not a final solution for those two countries and it does nothing for the fortunes of Portugal and Spain. Portugal denies that it is seeking emergency funding, but then the Irish Republic took a similar PR position before bowing to the inevitable. Spain has both its own problems and major exposure in Portugal. A speculator is therefore likely to conclude that the richest pickings are yet to come. The European Commission is issuing upbeat statements for the European Union, but some will see that as a smoke screen to hide even greater problems lurking at the heart of Europe. The European Commission may be unable to get its auditors to approve its accounts, but that does not mean that it does not have a full appreciation of all of the horrors yet to emerge.

The wild card is the will and ability of Germany to fund the rest of Europe in a developing crisis. Arguably, Britain is free to take independent actions, refuse to make further loans to Euro Zone members, and could withdraw from the European Union. That may create a very bumpy road for Britain but at least it does not have to go down with a sinking EU ship. The story is different in Germany. The latest calculations show that there is inadequate prepared emergency funding to help both Portugal and Spain. If Italy becomes the next Euro Zone country to require emergency help, there is no money available. The price of external help may be the death of the Single Euro Currency. Germans are just beginning to realize that they could be bankrupted by the other Euro Zone members. This is not a pretty picture and indicates just how much is riding on the Irish bailout and the hope that Portugal can struggle on without emergency funding.

The real danger facing Europe is that the money markets will see each action as being too little too late. The domino effect in economics is always a strong danger. There is almost an inevitability that problems in Greece spread to Ireland, on to Portugal, on to Spain, then to Italy. As France is little better placed than Italy to withstand a heavy market assault, the only Euro Zone Member of any remaining substance is Germany and German economic specialists have already declared that it does not have the necessary funds. The German people well remember the 1920s and 1940s when Germany was bankrupt and life was grim. They thought those dark days were well behind then but now realize that the old dangers hover in the wings. Reunified and outwardly prosperous, Germans could over throw a political class which cares more for the European Projekt than for the interests of their people. The rise of Eurosceptics in Germany is a reminder than the European Projekt is really supported by a ruling elite and an army of self-serving Eurocrats. If Britain withdraws from the European Union it will create major problems by withdrawing the huge financial contribution Britons have been forced to make to the EU, but a German withdrawal from the Euro would be even more devastating.

Given the high stakes to be played for it is very difficult to call the outcome and that may be what is really holding back the markets.

For the Irish the real threat is that they may suffer huge pain for no return.

BSD Newsdesk

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