Dean Baker: Ireland Should 'Do an Argentina'

[marmar]

via CommonDreams:




Published on Monday, November 22, 2010 by The Guardian/UK

Ireland Should 'Do an Argentina'
The Irish people expected to pay in austerity cuts for their banks' sins have another option. Reject the ECB and IMF, ditch the euro

by Dean Baker


When a firefighter or medical team make a rescue, the person is usually better-off as a result. This is less clear when the rescuer is the European Central Bank (ECB) or the IMF.

Ireland is currently experiencing a 14.1% unemployment rate. As a result of bailout conditions that will require more cuts in government spending and tax increases, the unemployment rate is almost certain to go higher. The Irish people are likely to wonder what their economy would look like if they had not been rescued.

The pain being inflicted on Ireland by the ECB/IMF is completely unnecessary. If the ECB committed itself to make loans available to Ireland at low interest rates, a mechanism entirely within its power, then Ireland would have no serious budget problem. Its huge projected deficits stem primarily from the combination of high interest costs on its debt, and the result of operating at levels of economic output that are well below full employment – both outcomes that can be pinned largely on the ECB.

It is worth remembering that Ireland's government was a model of fiscal probity prior to the economic meltdown. It had run large budget surpluses for the 5 years prior to the onset of the crisis. Ireland's problem was certainly not out of control government spending; it was a reckless banking system that fueled an enormous housing bubble. The economic wizards at the ECB and the IMF either couldn't see the bubble or didn't think it was worth mentioning. ...........(more)

The complete piece is at: http://www.commondreams.org/view/2010/11/22-2

[thereismore]

1. People are paying for the recklessness of the bankers all over the world. Goldman Sachs is laughing.