“Irish bailout is gambling with British taxpayers’ money”
22 Nov, 2010 14:54
Debt-stricken Ireland will receive a massive bailout of over $1 billion from the European Union and International Monetary Fund. The decision has not been welcomed by British taxpayers and economic experts.
The bailout of Ireland is the second emergency rescue package organized by the eurozone, after similar measures were taken for Greece, and it is likely not to be the last one either.Britain is currently justifying this measure to its taxpayers by explaining that Ireland is a major trading partner, but Sam Bowman, head of research at the Adam Smith Institute in London, says the bailout is approximately as smart as giving money to your bankrupt neighbor and hoping that he will spend some of it in your shop.“It just doesn’t make economic sense to bail out Ireland in this way,” he said.The Irish are just as doubtful about the bailout as the British are, Bowman said.“The general Irish public do not want this bailout. They think it’s bad for the country, because really what it is is a bailout for the Irish banks and the Irish government, rather than the Irish taxpayer,” he said.“I think really what we need to do is to look at the problems and look at the root problems, and the let the Irish banks wind down while addressing the root problems in the UK. Because giving this money to Ireland really is a massive gamble with the British taxpayers’ money.”With Portugal and Spain already lined up for the next bailout, Sam Bowman thinks the eurozone’s days are numbered.“I can’t see the euro surviving this decade, certainly not the next ten years, probably not the next one or two years, in fact. Bailing out Ireland will kick the can down the road. Maybe Ireland won’t bring down the euro, but probably Portugal, Spain and even Italy will.”With the euro’s collapse being a question of time, Bowman said, there is a choice between doing it in an orderly way or waiting for it to happen naturally, with the fall of some major European economies.“What we need to do is to help Ireland out of the eurozone, help them re-establish their own currency which can float, so that they can devalue that and be competitive on the world markets, and that will get Ireland moving again and be good for the British countries.”In fact, Bowman said, most countries in the Euro zone would be better off if they returned to their own currencies.“Maybe some of the core European countries, like Germany and France, might be able to continue with the euro, but the peripheral countries, like Ireland, Greece, Spain, Portugal – these are countries that need their own currencies, and they need to be able to have flexible currencies so that they don’t enter into massive bubbles the way that the Irish economy has been suffering or had been suffering over the past ten years.”“I think it’s time that Ireland leaves the euro, and Britain should do what it can to help Ireland, but not at the expense of the British taxpayers,” Bowman concluded.According to British conservative MP Douglas Carswell, the bailout means that Ireland is only furthering its debt. The monetary union of Europe is a political delusion, he says, which hampers economic development.“I don’t think it’s just Ireland that’s in trouble; there are other, bigger countries in the euro zone that are in trouble, but whatever the markets do short-term, the fundamental problem is this: you cannot have a common set of interests and a common monetary policy across disparate economies,” Carswell said.“If you try and do that, you are putting political delusion ahead of economic reality, and millions of Europeans are paying the price,” he said. “We thought what we had was a currency union, and we thought it would be to our economic advantage. On the contrary, it turns out that that currency union and the common monetary policy has actually damaged economies that don’t get the interest rate and the economic policy that they need.”“Worse, it creates a debt union, which in effect means that the 27 member states have a common bank account. And as would probably happen if you shared your bank account with your 27 neighboring houses in the street where you live, you would probably find that one or two members spent more that they should. That’s exactly what happened in Europe,” Carswell added.
Dionyssis Kefalakos, editor-in-chief of the New Europe newspaper, says the bailout was the only way out for Greece. However, after Ireland, wealthier European states are not going to be willing to bail out any more failing economies, he adds.