The EU Summit on Thursday had some positive outcomes for Ireland. Is this enough for the debt hit Emerald Isle? Probably not. Here are 5 reasons why Ireland should also have some “private sector involvement” of its own.
The interest rates in the bailout program were lowered. In addition, the struggle around raising its competitive interest rate ended: France let go. Ireland’s Prime Minister, Enda Kenny, reached high levels of popularity. He can be even more popular with a default:
- We have a precedent: The European leaders and even the European Central Bank agreed on restructuring Greece’s debt. While they stressed that this is an isolated case due to the “exceptional situation” in Greece, they also said no default. In any case, the line has been crossed, and the sky didn’t fall. Ireland followed Greece with the bailout. It can follow Greece with a default.
- Unsustainable debt: Indeed, Greece is extreme, but the situation in Ireland doesn’t provide hope either. It will be very difficult for the country to grow enough to manage to sustain its debt. Some even see the bankruptcy coming. This will eventually be understood by everybody.
- It’s the banks: The big difference from Greece is that the debt crisis originated in the Irish banks, not the Irish government. The government made the fatal mistake to pick up the tab for the banks, and now the Irish taxpayer indirectly pays the foreign banks that lent irresponsibly lent money to the banks. Doesn’t Ireland deserve some debt relief if Greece got one on its government’s debt?
- Keeping up with the plan: Even though the mountain of debt is unsustainable, the Irish government managed to live up to the terms of the bailout program. This is better than Greece, that missed its targets over and over again. Yet again, the question rises: doesn’t Ireland deserve some relief?
- The markets say so: Moody’s has already “granted” a junk status to Ireland. In the response to the EU summit, it also mentioned that other countries could follow. And you don’t need rating agencies to see it: Irish bonds are at sky high levels. Returning to market funding isn’t seen in the horizon. When it became clear that Greece cannot return to the markets, a second program was crafted, including the private sector. There is no reason why at the current market conditions, Ireland won’t default.