Does Ireland have a case for an EU bailout?

Daithinski

Just to put the cat among the pigeons...:P

Is Ireland entitled to a bailout from the EU for our imploding economy?

It could be argued that our membership of the EU has been a major part in our Celtic "Bubble".

They EU pumped money into Ireland with numerous grants (not sure how much in money terms) maybe this influx of cash could have been managed better so as not to overheat our economy.

When the EU set the ECB rate low at a time when our economy was overheating and needed a raise rather than a cut, this drove inflation and in particular house prices soaring.

Their decisions on ECB rate was for the greater good of Europe as a whole who were not "booming" (due to EU grants and availability of cheap loans).

These two factors fueled the bubble and in turn the collapse of our economy.

We are now seeing the impact for these mistakes in our current economic situation. Was the EU grant aid mismanaged ie introduced to quickly into the economy? Should we now pay the price for problems at least in part created by the ECB's low interest rate?

Other EU countries are in recession also but we are at least twice as badly off as these countries.

Would it be reasonable to expect the EU to give Ireland a dig out due to the circumstances laid out above?

Or did the EU just give us enough rope for our incompetent politicians to hang the Irish Public with?

ionix5891

why should the give us a cent? we said NO to them not too long ago

mike65

Rofles, the EU has bailed this state out to the tune of 30 Billion euro since 1973. Just be glad they aren't asking for it all back.

gandalf

LOL no, we in the form of the current government have gotten ourselves into this mess we should stand on our own two feet and get ourselves out of it!!

Fratton Fred

Who in the eu has got any money to fund a bailout? It's everydog for himself at the moment.

mick.fr

Ireland actually received more than 50 billion euro from the EU, mainly to improve transportation, infrastructure etc.

The Celtic Tiger (Dead already alright) is not exactly due to the EU (Although it is linked with the infrastructure improvements), but more the work of an Irish genius, in place in government in the 80ties that approached the US and promised them tax paradise for any US company that would set up operations here. This was back to Reagan's time.
This is how it all started, Intel was one of the very first if I am not mistaken.

And No! Bertie Ahern, has not created the Celtic Tiger, and neither created thousands of jobs for Irish people since the 70ties like I have heard too many times on the radio when he resigned...

jhegarty

How much can we sell lisbon 2 for ?

Lemming

jhegarty wrote: »

How much can we sell lisbon 2 for ?

More than the worth of a bank's share price I'm sure.

bk

It is possible that the EU could help Ireland out, but not for the reasons you give, but because it would damage the Euro if a Euro country went bankrupt.

However it would come with strings attached, probably a big cull in both wages and numbers in the civil and public service and big increase in the Corporate Tax rate.

ionix5891

bk wrote: »

It is possible that the EU could help Ireland out, but not for the reasons you give, but because it would damage the Euro if a Euro country went bankrupt.

However it would come with strings attached, probably a big cull in both wages and numbers in the civil and public service and big increase in the Corporate Tax rate.

it could be easier to eject us from euro?

SkepticOne

ionix5891 wrote: »

it could be easier to eject us from euro?

Also a bad precedent with other countries in difficulty, imo.

bk

ionix5891 wrote: »

it could be easier to eject us from euro?

That would be just as damaging to the euros reputation as leaving us go bankrupt.

It would be like the US expelling a state from the dollar.

No it would be much more preferable to loan us more money and force the changes I mentioned above. With the changes mentioned above we could get the budget back in balance fairly quickly and would be able to pay back the EU over a few years. Far less damage done to the euros reputation then any alternative.

thebman

The funny thing is they probably will bail us out in the end (strings or no strings) and the people that are against the EU will take the money (secretly delighted) and then spit in their face again and say we want out :rolleyes:

Its not in the EU's interest to allow us to go under really. Just depends on whether its more cost effective to let us kill ourselves or save us.

Also it is entirely our own governments fault we are in this mess. They could have introduced plenty of measures to keep everything in control, they preferred to ride the boom knowing it would eventually explode and we'd be fooked. It is hard to make a case that they should be helped by anyone TBH. Crucification's too good for them!

Fratton Fred

thanks for all the sweeties, we ate them all and made ourselves sick, so could you please pay our health bill.:D

mick.fr

thebman wrote: »

Also it is entirely our own governments fault we are in this mess. They could have introduced plenty of measures to keep everything in control, they preferred to ride the boom knowing it would eventually explode and we'd be fooked. It is hard to make a case that they should be helped by anyone TBH. Crucification's too good for them!

Let's be serious here, if it was this governement's fault Ireland is in the situation it is in today, we would be aware.
Ireland in fairness is not that bad compared to many other countries.
Things are raugh alright, there is long queues in post offices to get welfare benefits paid in cash, but there is a lot of worse in Europe, take Spain for example. Close to 20% unemployment now if I am not mistaken...

Now things can always be improved, and people are free to run for elections themselves if they think they can do better. But let's not spread false information about other's people fault's, it is too easy.

Zynks

The Euro is rather new and there still is a learning curve for all. Most euroland countries had previously control of their interest rates as a means to control inflation - and bubbles.

As mentioned above, as properties spiralled out of control, the Irish government didn't have their traditional tool to slow down the market, and low interest rates kept things going even further out of control.

Yes, it can be said that the low rates were probably the biggest issue....BUT, a more responsible country would have taken measures to help slow down things a bit, reduce speculation, monitor irresponsible lending practices, clamp down on the estate agency market clowns, and so on.

The EU, the Euro, the grants and the monetary policy could have been a very positive thing for our country if we had had a competence administration.

Think with me, what do we really have to show for the 30 or 50 billion we got other than personal and state debts?

Maybe we have more argumentation to go to Brussels with a white flag and ask them to babysit our government than to pull out of the EU.

This country grew a lot as a result of foreign investment, which only exists because of the corporate tax policies and the free transit of goods and services.

Out of the EU, the only difference between Ireland and Iceland would be one letter and nothing else....

thebman

mick.fr wrote: »

Let's be serious here, if it was this governement's fault Ireland is in the situation it is in today, we would be aware.
Ireland in fairness is not that bad compared to many other countries.
Things are raugh alright, there is long queues in post offices to get welfare benefits paid in cash, but there is a lot of worse in Europe, take Spain for example. Close to 20% unemployment now if I am not mistaken...

Now things can always be improved, and people are free to run for elections themselves if they think they can do better. But let's not spread false information about other's people fault's, it is too easy.

We are aware, anyone not aware needs to start reading. Doesn't take a genius to work it out.

Your saying the people running the country for the past 10 years aren't responsible for the situation the country is in. That's an irresponsible statement TBH.

The only people supporting FF are the people in FF or people that have something to gain by their time in power not coming to an end IMO.

ardmacha

The mess in this country is mainly our own fault and would be much worse but for the EU. We do have one problem which might warrant EU aid. That of depreciating Sterling. a problem which arises because of our membership of the Euro. Spain does not have a neighbouring EU country whose currency has depreciated.

Zynks

ardmacha wrote: »

The mess in this country is mainly our own fault and would be much worse but for the EU. We do have one problem which might warrant EU aid. That of depreciating Sterling. a problem which arises because of our membership of the Euro. Spain does not have a neighbouring EU country whose currency has depreciated.

Geographical neighbouhood means nothing IMO. The sterling is an issue, but because we are overdepndent on the UK as a trading partner. This could change as the euro in the UK becomes more likely as their problems deepen. There are analysts predicting the UK economy is on route to desintegration.

I am totally pro-EU, but EU membership is part of our problem. Interest rates were far too low for Ireland for many years. Of course, if we had a competent government they could have tackled inflation and property bubble by other means, but not such luck.

Having said that, now the EU is what's likely to keep us for a much deeper fall, but it also means that the recovery will be slower.

See, one problem we have is that the Dail may be formed by politicians most of the time with no real clue on finance (and other issues), but our system seems to determine that one of them has to run the countries finances. If the Taoiseach could pick an expert, whether elected or not, maybe we would have a better chance.

thebigcheese22

If there's any professional economists here, can they answer if it would be beneficial for Ireland to leave the euro?

Besides the obvious political fallout, would it give us more control to deal with this crisis or is it actually saving us from bankruptcy atm?
I really am interested in an answer.



Its just I'm sick of that Iceland, Ireland and 6 months joke! :mad:

nesf

Zynks wrote: »

Geographical neighbouhood means nothing IMO. The sterling is an issue, but because we are overdepndent on the UK as a trading partner.

As far as I remember (and it's been well over a year since I looked at the stats so my memory's a bit patchy about this) we have steadily been replacing the UK with Euro countries since we adopted the Euro. There has also been interesting changes in import demand elasticity in the Eurozone between countries. In layman's terms normally when a country is in a downturn they import less (part of this is driven by exchange rates where a country in a downturn's currency tends to devalue making imports more expensive), when we joined the Euro it turned out that the normal relationship changed as we didn't have currency fluctuations and the amount we exported to Germany increased relative to our relative economic conditions (i.e. we now export more to Germany when it is doing badly than we did before the Euro came in, this shields our export industries to an extent from economic conditions in export markets within the Eurozone).

Time Magazine

thebigcheese22 wrote: »

If there's any professional economists here, can they answer if it would be beneficial for Ireland to leave the euro?

Besides the obvious political fallout, would it give us more control to deal with this crisis or is it actually saving us from bankruptcy atm?
I really am interested in an answer.

Its just I'm sick of that Iceland, Ireland and 6 months joke! :mad:

It would not be beneficial, no.

Simplistically, there would be advantages and disadvantages. The advantage is that we could devalue the currency to stimulate exports, and that'd be grand.

The major disadvantage is that we'd be screwed like Iceland have been by currency speculators. Iceland got ravaged because it was so small. Currencies as strong as the pound are feeling the pull, the European Monetary Union is big enough to alleviate these risks. The punt would be raped, and we'd be far worse off.

http://www.irisheconomy.ie/?p=356
http://www.irishtimes.com/newspaper/finance/2009/0131/1232923378749.html

Actually, there's an excellent comment on the irisheconomy.ie blog cited above:

Dr. Siedschlag wrote:

An independent monetary policy for a small and open economy like Ireland in a free capital mobility environment would be more a liability rather than a benefit. It would make a currency crisis more likley. One of the biggest benefits of EMU membership for Ireland has been the insulation from speculative attacks on the currency. Furthermore, while a devaluation would restore competitiveness quickly, this relief would be only temporary. Higher import prices would lead to demands for higher wages. To restore competitiveness we need to bring wages in line with productivity. High wages can be only sustained by high productivity.

thebigcheese22

The Economist wrote: »

It would not be beneficial, no.

Simplistically, there would be advantages and disadvantages. The advantage is that we could devalue the currency to stimulate exports, and that'd be grand.

The major disadvantage is that we'd be screwed like Iceland have been by currency speculators. Iceland got ravaged because it was so small. Currencies as strong as the pound are feeling the pull, the European Monetary Union is big enough to alleviate these risks. The punt would be raped, and we'd be far worse off.

http://www.irisheconomy.ie/?p=356
http://www.irishtimes.com/newspaper/finance/2009/0131/1232923378749.html

Actually, there's an excellent comment on the irisheconomy.ie blog cited above:

Right thanks for that Economist, really informative
I've only started doing economics in college so I find the whole pulling out of the euro argument fairly interesting

strathspey

It just surprises me at the conceit of the irish mindset. Lets remember that Europe owes Ireland nothing and if we're really honest, Europe doesn't even need Ireland, but my God, does Ireland need Europe!

dan719

thebigcheese22 wrote: »

If there's any professional economists here, can they answer if it would be beneficial for Ireland to leave the euro?

Besides the obvious political fallout, would it give us more control to deal with this crisis or is it actually saving us from bankruptcy atm?
I really am interested in an answer.



Its just I'm sick of that Iceland, Ireland and 6 months joke! :mad:

This is a very lazy response to this, in that it is an answer to this question framed in terms of leaving the euro and tieing yet again to the GBP.(Asked as part of an exam). Also, it is important to note, especially to those advocating a devalutaion as a solution to our problems. Ireland hs not had independent monetary policy in over 200 years, what we have had is an unimaginative and lazy attitude to what was essentially 'one armed monetary policy' and is now 'no armed monetary policy'.

Just to clarify I am not a professional economist but a student of economics.

Dan719 wrote:

Today the Euro is an established currency with all monetary policy directed by the ECB(headed by Jean Claude Trichet) at Brussels. The ECB has the sole mandate of maintaining price stability and this leads to what is described as a conservative or monetarist policy of interest rates.(Has this been abandoned recently with the advent of the global recession). In recent years the ECB has been criticised by some Irish critics for maintaining low interest rates which contributed to the property bubble(and eventual collapse which devastated public revenues-20% of forecast revenue was dependent on 96,000 houses being built AND sold every year). It is important for us to remember that as a small economic region on the periphery of Europe our influence over the ECB is basically nill. (One of the main reasons for the formation of the ECB was to remove monetary policy from political influence)
Should we leave the Eurozone? Although the question is framed in terms of the Lisbon Treaty and it’s second rejection, it is important to remember the Lisbon Treaty says nothing on the euro(along with European armies, abortion or other emotive issues). Conversely it is also important to remember that the rejection of the Lisbon treat does not reveal a broad consensus on the euro put forward by Irish people. Most likely it says very little about Irish people’s view on the E.U as a whole but rather was founded in the high level of dissatisfaction found amongst the population with the incumbent ruling party, since this dissatisfaction has only increased recently, it is likely that the recently announced ‘take two’ will also fail.
The Eurozone has been of huge benefit to the Republic of Ireland. On a micro level both consumers and businesses have benefited from a decrease in transaction costs, an increase in certainty of price as well as increase in access to foreign (eurozone) markets.
On a macro-level the euro has led to the creation of a large, deep pool of capital(currently debatable due to the Credit Crunch), insulated the member currencies against so called speculative attack and as mentioned above removed monetary policy from the political realm. Specifically in relation to Ireland it has further increased our attractiveness for Foreign Direct Investment in particular from the U.S.A. For these reasons the idea of leaving the eurozone is rarely put forward.

Were we to do so, it is assumed that rather then assume control of our currency we would again tie to sterling. A huge argument against a small open economy ‘going it alone’ is Iceland, which has seen it’s currency collapse, and the government nearly bankrupt in the face of global upheaval in the credit markets. Currently interest rates are almost 20% to attempt to protect the Krona from further devaluation. Assuming that we would tie to sterling (rather then perhaps the dollar?) we would again cease to have any control over the direction of monetary policy and would be at the mercy of the Bank of Engalnd as opposed to the ECB. Not only would we not gain any ‘independence’ but rather be exposed to the whims of what has recently been exposed as an arm of the British government, lowering interest rates ad hoc to appease the large number of struggling house owning Labour voters.
We would also lose any of the micro benefits of a single common currency. In short we should not abandon the Euro in favour of tieing to the sterling. Such a move would be folly, particularly at a time of such uncertainty in the world economy.

ionix5891

strathspey wrote: »

It just surprises me at the conceit of the irish mindset. Lets remember that Europe owes Ireland nothing and if we're really honest, Europe doesn't even need Ireland, but my God, does Ireland need Europe!

will find out at the next Lisbon treaty if the sheeple agree or disagree with the above

nesf

dan719 wrote: »

On a micro level both consumers and businesses have benefited from a decrease in transaction costs, an increase in certainty of price as well as increase in access to foreign (eurozone) markets.

A small point but since you're studying economics...

I think you're incorrect in arguing that the Euro has increased our access to foreign markets, we've no more access to them that we had before the Euro. Currency risk has been removed and that has effected the amount we can export to these countries (see my above post on import elasticities) but this isn't a question of access to the market per se.

Zynks

ionix5891 wrote: »

will find out at the next Lisbon treaty if the sheeple agree or disagree with the above

The only indication that we got from the last referendum was that people didn't understand what it was about and that many didn't like the government. Do you really think the results of Lisbon II will be an indication of people's recognition of the importance of the EU for this country?

ionix5891

Zynks wrote: »

The only indication that we got from the last referendum was that people didn't understand what it was about and that many didn't like the government. Do you really think the results of Lisbon II will be an indication of people's recognition of the importance of the EU for this country?

it would be an indication of how little or how much people are aware of whats going on around them (on economic and political levels) and whether their hate for current government would condemn Ireland to be the black sheep of EU (or worse?)

limklad

mike65 wrote: »

Rofles, the EU has bailed this state out to the tune of 30 Billion euro since 1973. Just be glad they aren't asking for it all back.

Did you take inflation into account when you added up the Grants they gave us?

limklad

thebman wrote: »

Also it is entirely our own governments fault we are in this mess. They could have introduced plenty of measures to keep everything in control, they preferred to ride the boom knowing it would eventually explode and we'd be fooked. It is hard to make a case that they should be helped by anyone TBH. Crucification's too good for them!

They were oblivious to the idea of Recession and Bust, they listen to people like Gorden Brown "No more boom or bust" and live in a world of their own. and then degraded those who were warning us of recession as doom sayers.