David Gardner draws my attention to this Letter from Dublin by Kevin O’Rourke, one of Ireland’s most distinguished economists. It might be the best single thing I’ve read on the Irish crisis. Analytically astute, and moving too. Just how profound a blow this has been comes through. It is not just an economic and political crisis, but a full-blown constitutional crisis. And the European Union has made it all so much worse than it needed to be.
[W]e are about to have a general election, and if Brussels thinks that this deal is not going to be the big issue in that election, then they are even more out of touch than we already think they are. It is no longer even certain that the budget will be passed in December. Brussels may not have a Plan B, but they had better prepare one nonetheless.
Irish citizens may bring down the bailout of foreign bank creditors by voting at the ballot box, but if they do not, they will bring about a default of some kind by voting with their feet. We now face a negative spiral in which austerity causes emigration, which increases the burden of the debt, which ultimately leads to more austerity. We need a game-changer to break the cycle, but what might it be? Since the fundamental problem is that Ireland is insolvent, the smart thing to do is to tackle our debt burden head-on, but the Europeans have vetoed this.