Political sniping at home and abroad has forced us to a European bailout, believes Sarah Slevin
Can one country bring down an entire monetary union? If Herman Van Rompuy is to be believed, we gave it our best effort. Not only that, but the President of the European Council asserts that a failure by Ireland to take a bailout would have precipitated the downfall of the European Union as a whole. Mr. Van Rompuy may be merely playing the doom merchant, but it illustrates just how grave our situation appears.
Not that long ago, European counterparts were praising our efforts to control our banking and sovereign debts. However, tension has been building steadily over the past few weeks. The result was a serious liquidity crisis. In essence, our banks had no money. The problem was exacerbated when the German Chancellor, Angela Merkel, announced a plan to make bondholders liable for sovereign debts, spooking the markets further.
This is where we find ourselves. The IMF have set up camp in the Department of Finance. Our problems alone take up no less than 6 pages in the latest issue of The Economist, one of the most respected international financial magazines. We take pride of place on the front cover of that same magazine, as ‘Good Ship Europe’ is shown sailing into apparent oblivion, guided by an Irish flag. The Financial Times peruses the possibility of Ireland becoming “a ward of the ECB”.
Certain observers contend that a bailout was unavoidable. Whether avoidable or not, something triggered, and aggravated, a rapid economic meltdown in Europe, with Ireland at its core. Greek Prime Minister George Papandreou described Angela Merkel’s recent announcement as a ‘self-fulfilling prophecy’. While not renowned for their fiscal responsibility of late, the Greeks believed that Merkel’s comments incited the crisis.
Without doubt, the foundations for disaster were laid on home soil. Described as “an unhealthy boom” by The Washington Post, we inflated a property bubble through tax breaks and negligent financial regulation. Our government were undeniably at the heart of this. However, for opposition parties to claim that all would have been different had they presided over the Celtic Tiger is nothing more than retrospective nonsense.
Every government wants to be popular, and will prolong success to further political ends. A virulent bubble like the one we experienced during the last decade was inevitable. Our actions over recent weeks have been significant. It’s not often that a by-election in Donegal South-West makes international news, however it represents nicely the turmoil in our political system. It may sound facetious, but a football team characterised by constant bickering between the players is never going to win anything.
Repeated calls for a general election, quarrelling and opposition for its own sake sent a message to the markets that we were defeated. International factors had a role to play in the fiasco. Merkel’s recommendations, while logical, were awfully timed. Many commentators believe the Greek bailout was a disaster, as they will never really be able to repay their debts. This, combined with a rushed support mechanism for the euro zone countries reveals a poorly handled debt crisis. European actions seem to have forced the hand of jittery markets.
Where now for our battered economy? According to The Economist it’s not as hopeless as it appears. They believe us likely to return to growth before our Mediterranean neighbours, due to our adaptable workforce and attractiveness to foreign investors. Little solace it is while the IMF take the reins of the exchequer. Nonetheless, we should remember this is not Armageddon. The UK went to the IMF in 1976, and came out the other side.
It seems true that Chancellor Merkel fulfilled a prophecy for us. Maybe that illustrates the problem, however. We haven’t been writing prophecies of our own, we’ve been too busy looking for divine intervention. The day will come when we’ll control our own destiny again. In the meantime though, the IMF don’t do prophesising.