tommy271
Forumer storico
Ireland has shown what happens when you grasp the fiscal nettle, slashing public wages by 13pc – to applause from EU elites – without offsetting monetary and exchange stimulus. Irish bonds have spiked even higher to a post-EMU record 6.38pc. This was triggered by two client notes: Barclays said Ireland may need the IMF's help; Citigroup's Willem Buiter said Ireland "may not be able to make whole" creditors of both sovereign debt and the bank. Dr Buiter has also said a default by Greece is "a high probability event".
Two years into its purge, Ireland has a budget deficit near 20pc of GDP. It is 12pc if you strip out the bank rescues, but the reason why the bad debts of Anglo Irish keep spiralling upwards is that the economy keeps spiralling downwards. House prices have fallen 35pc. Nominal GDP has contracted 19pc.
"Ireland's debt is ballooning, while its capacity to pay has collapsed," said Simon Johnson, ex-chief economist at the IMF. He said the country has made a Faustian pact with Europe, able to draw ECB loans worth 75pc of GDP so long as Irish taxpayers shield European creditors.
In any case, the IMF itself has become the problem, operating as an arm of EU ideology under Dominique Strauss-Kahn. It
offers no remedy since it acquiesces in the EU's ban on debt-restructuring.
In Greece it backs a policy that will leave the country with public debt of 150pc of GDP after its ordeal – allowing French and German creditors to shift a big chunk of Greek risk to Asian taxpayers through the IMF, and to EU taxpayers through the eurozone rescue.
Mr Strauss-Kahn committed up to €250bn of IMF money for Europe's rescue without prior approval from the IMF Board, to
the fury of Asian directors. He has promulgated an insidious doctrine that sovereign defaults are "Unnecessary, Undesirable, and Unlikely".
Let us be honest, the Fund has become a font of incoherence, an engine of moral hazard. In August, it abolished its credit ceiling and created a new tool to rush fresh debt to states that need more debt like a hole in the head.
Simon Johnson says the solution for EMU's orphans is debt reduction along the lines of "Brady Bonds" in Latin America in the 1980s, forcing creditors to share pain in an orderly fashion and giving debtors a way out of the morass.
In fairness to EU policymakers, perhaps the problem really is so big that if they let Greece, Portugal, or Ireland restructure debt they risk instant contagion to Spain, and from there to Italy. Perhaps they really have no choice. If so, monetary union has created a monster.
(Telegraph.co.uk)
Two years into its purge, Ireland has a budget deficit near 20pc of GDP. It is 12pc if you strip out the bank rescues, but the reason why the bad debts of Anglo Irish keep spiralling upwards is that the economy keeps spiralling downwards. House prices have fallen 35pc. Nominal GDP has contracted 19pc.
"Ireland's debt is ballooning, while its capacity to pay has collapsed," said Simon Johnson, ex-chief economist at the IMF. He said the country has made a Faustian pact with Europe, able to draw ECB loans worth 75pc of GDP so long as Irish taxpayers shield European creditors.
In any case, the IMF itself has become the problem, operating as an arm of EU ideology under Dominique Strauss-Kahn. It
offers no remedy since it acquiesces in the EU's ban on debt-restructuring.
In Greece it backs a policy that will leave the country with public debt of 150pc of GDP after its ordeal – allowing French and German creditors to shift a big chunk of Greek risk to Asian taxpayers through the IMF, and to EU taxpayers through the eurozone rescue.
Mr Strauss-Kahn committed up to €250bn of IMF money for Europe's rescue without prior approval from the IMF Board, to
the fury of Asian directors. He has promulgated an insidious doctrine that sovereign defaults are "Unnecessary, Undesirable, and Unlikely".
Let us be honest, the Fund has become a font of incoherence, an engine of moral hazard. In August, it abolished its credit ceiling and created a new tool to rush fresh debt to states that need more debt like a hole in the head.
Simon Johnson says the solution for EMU's orphans is debt reduction along the lines of "Brady Bonds" in Latin America in the 1980s, forcing creditors to share pain in an orderly fashion and giving debtors a way out of the morass.
In fairness to EU policymakers, perhaps the problem really is so big that if they let Greece, Portugal, or Ireland restructure debt they risk instant contagion to Spain, and from there to Italy. Perhaps they really have no choice. If so, monetary union has created a monster.
(Telegraph.co.uk)
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