Translated material
Ireland: default is better than European aid
Of course, the Irish do not deserve the fate that awaits them due to the fact that Brian Cowen's government at one time thoughtlessly promised to provide government guarantees for almost all the obligations of Irish banks. The rescue of the banking sector was too costly for the country and threatened to repeat the Greek debt crisis, which undermined the stability of the euro in May of this year. Ireland became the second eurozone country after Greece to seek external financial support, and will now have to introduce a regime of tough and prolonged fiscal austerity. These are the dire consequences that will result from the EU and IMF assistance to the country, the preliminary conditions of which were announced on Sunday, unless the political situation in Ireland worsens in the coming weeks and the government reverses its appeal.
The decision to provide assistance (in the form of a loan of 80-90 billion euros), which the Irish stubbornly refused on November 15, is the final blow to the economy, which more than doubled in 1996-2006. The collapse of the real estate bubble at the height of the global financial crisis in 2008 triggered a deep economic downturn. National banks were on the verge of collapse due to large-scale investments in the construction sector. Over the past six months, credit institutions have suffered from massive withdrawals of deposits and have increasingly turned to the ECB for funds. Irish bond yields were near record highs and Brussels officials were desperate to prevent the crisis from spreading to Portugal and Spain.
Due to concerns about the banking sector, Ireland's borrowing costs rose sharply and the government was forced to seek external assistance. Although the country's available funds would be sufficient until mid-2011. In fact, the situation that most threatened the financial position of German and British banks, which had been lending heavily to their Irish counterparts in recent years. This explains the EU's insistence on supporting Ireland.
Over the past two years, Ireland has already taken a number of measures to reduce its budget deficit. And in October she announced that the new draft budget (its discussion is scheduled for December 7) provides for a further reduction in government spending and changes in taxation. It is significant and sad that external assistance was required after two years of spending cuts - the measures taken failed to restore confidence in the markets, and the cost of saving the financial industry during this time increased significantly.
Unfortunately, this outcome was not the only possible one. Against. It was probably worth trying to avoid it. Now the population of Ireland will suffer (from budget cuts), and the bankers will continue to make profits. The additional debt burden will be unsustainable for the country and will increase the likelihood of default in the future. Even if the Irish decided to tighten their belts for many years to ensure that the government paid off all debts, it is difficult to imagine that the Irish economy could grow at an acceptable rate with the euro as its national currency. The country has reached a dead end. There are no simple solutions at this stage - it's too late. Still, it would be preferable for Ireland to write off some of its debts and restructure the rest without protecting creditors from losses. The decision to turn to the EU for help does not promise any benefits, but could result in further suffering for Ireland and increases the risk of the crisis spreading to other countries.