Ireland is under what has become relentless pressure to take a bailout from the EU’s trillion-dollar facility, which used to help Greece in its time of need. There have been two arguments made by proponents of the emergency loans to either Ireland or its banks. The first is that the nation will need the money no matter what austerity programs it can put into place. The second is that Ireland should be a “good sport” and take money to support the euro against attacks in the capital markets based on concerns of possible defaults by it and Portugal.
Prime Minister Brian Cowen has agreed to talk about the matter at a meeting of the region’s finance ministers, but talk is all he has promised.
Ireland’s large banks have gotten to the point at which they may go under, so one option is that aid would go to these financial firms and not to Ireland itself. But, the nation may have little choice. The yield on its 10-year government notes is nearly 8.2%. That means its borrowing costs may be so high that it cannot cover debt service over the next several years.
Ireland could decide not to succumb to the pressure to take aid because it believes it has already bought itself time. Irish officials have said the country can be self-supporting at least until the middle of next year. It may gamble that the fury over European sovereign debt may die down by then. A similar uproar died in the middle of this year as the credit situation in Greece was solved and Spain and Portugal did not have to turn to their neighbors’ financial support.
The politicians in Ireland know that once they take money from the EU, the country will lose a great deal of its independence. It will be audited and probed just like Greece. Its financial fortunes will, to some large extent, no longer be its own. Germany, which has financial leverage in the region because of its GDP, may be able to dictate how bailouts of eurozone nations are conducted. Ireland may be force to accept the rules and regulations of other nations and that may go on for years.
Ireland could hold out until mid-2011 to see if it can find its own solutions to its own problems. It may feel that it is not responsible for the value of the euro and that its long-term independence is worth a risky decision.
Douglas A. McIntyre