Irish Bail-Out
It is beginning to look as if the combined power of the EU, the ECB and the IMF has proved too much for the Irish government to resist and that it will have to accept a loan and not wait on chance. Ireland may see this as a loss of sovereignty, but, as previously argued by this Blog, Ireland along with all the others in the Eurozone gave up their economic sovereignty when they joined. It has taken the crisis to make that fact clear.
Britain did not join the Euro, but has to chip in because Ireland is so close to home. Osborne has spotted that an implosion in Ireland would affect us in the U.K because our economy is networked close to that of Ireland, so we too are potentially exposed. It is not just Portugal, Spain and Italy in the firing line. What is also very important is that Ireland has been the very model of cutting on a scale we have not yet begun to imagine.
The borrowing figures for October by the government in mainland Britain to balance its books, though in line with market expectations, drives home the scale of the figures and the gigantic task ahead, not only to cut the deficit, but also to pay off the accumulated debt. Ireland’s experience demonstrates that a robust plan to deal with the deficit/debt challenge may not be sufficient if the money markets decide the bills are just too big. We are in dangerous waters.
This leads me to think that courageous though the Coalition’s programme is, it may not be radical enough to convert us to a bulldog economy and break out of the stricture that one way or another has been around us, sometimes looser, sometimes tighter since the second, perhaps even the first, world war. This may be the time when we really do need to think out of the box. The box is the accepted model of the Welfare State, including both the NHS and education and the effect of taxation. Watch this space.