The Bailout Nation culture has reached such a sad state of affairs that bailouts are now being forced on recipients that don’t even want them. At least that’s how it seems, now that Ireland apparently is willing to negotiate an aid package.
It’s like Bailout Nation on steroids. I don’t see how this can possibly be a good thing.
The Irish have been resisting an aid package for some time now, and the Irish, recall, stepped out to handle their own problems long, long before Greece and the PIIGS were even on anybody’s problem-child radar. They never passed the hat around to begin with, but now not only is a hat being shoved in their hands, it’s being filled with money at the same time.
This is, ostensibly, to “shore up” confidence in Ireland’s solvency; which is supremely ironic when you consider that the very act of accepting outside aid in order to pay off ones’ debts would seem to be the very definition of insolvent (“not able to meet debts.”)
But the Europeans aren’t very concerned about semantics and irony right now. They’re concerned, very concerned — again — about a general meltdown of the sovereign picture among several nations. This concern is coming back to light because nothing was actually done to address the issue last year, and not much seems to be getting done about it now.
From the Journal:
Ireland, at least, is taking the overspending problem seriously. It would be in much better shape if not for that open-ended guarantee to bank creditors. Repeating Ireland’s mistake on a continental scale won’t save the euro, and could harm it. This week, German Chancellor Angela Merkel said that “if the euro fails, then Europe fails.” But the euro is a currency union, not a debt union—at least it wasn’t until last May.
Mrs. Merkel has it backwards. If the euro zone, in violation of the treaty that created it, effectively assumes the debts of all its members, it would do more damage to the credibility of the currency bloc than a haircut for its lenders. If Ireland, like Greece, cannot pay its debts, it needs to restructure them, and the sooner the better.
Good advice. Too bad nobody nowhere took it. It would be better, but that hasn’t been the MO on either side of the Atlantic. It’s all been about bailing out the guilty parties, on the rationale that not to do so would create, well, the Great Depression II. So we get moral hazard taken to the highest levels; we get extend-and-pretend taken to the point where the EU is forcing a bailing on the Irish, ensuring that the bad-debt remains bad, only it’s hanging around the neck of the entire European populace and not the creditors, where it belongs.