New York Times sums up the Mad EU Demands


Ireland, Under New Management

Published: March 1, 2011

Irish voters had every right to be angry at the catastrophic mismanagement of their economy. But the drubbing they administered to Fianna Fail, the longtime ruling party, by itself won’t undo the damage that came from years of lax government oversight and disastrous policy choices.

The new government being put together under Enda Kenny and his center-right Fine Gael party must restore faith in government by fairly apportioning economic sacrifices, aggressively regulating lenders and ending cozy ties between politicians and bankers. Even then Ireland will have no chance unless it also gets more enlightened help from its European partners.

Mr. Kenny is rightly seeking to renegotiate the terms of last year’s $112 billion bailout package. European Union leaders demanded deflationary tax increases and spending cuts that make it impossible for Ireland to grow its way out of debt and ruinous interest rates that will deepen those arrears. Funds that cost donors less than 3 percent must be paid back at close to 6 percent.

Ireland’s “Celtic Tiger” boom of the late 1990s was no mirage. Today’s problems began after Ireland started using the euro in 2002 and low interest rates and extremely lax bank regulation ignited a speculative housing bubble. When that burst in 2008, Ireland recklessly guaranteed the full liabilities of its six largest banks with public money. Those liabilities turned out to be far more than the government had or could raise, eventually forcing it into the European bailout. Now most of that borrowed money is going just to keep those banks afloat.

Meanwhile, Ireland’s people have paid a terrible price. Unemployment, under 5 percent in 2007, is more than 13 percent and rising. As in the bad-old days Ireland thought it had left behind, growing numbers of young people are moving abroad in search of work.

On Friday, Mr. Kenny is scheduled to meet Germany’s chancellor, Angela Merkel, and France’s president, Nicolas Sarkozy. The next week, he attends a special euro-zone summit meeting, which will try to thrash out a grand bargain for restoring financial stability to the currency. That ambitious goal may not yet be in reach. Renegotiating Ireland’s onerous bailout terms is. Irish voters have spoken clearly. European leaders should respond wisely. It is in no country’s interest to lock Ireland into long-term economic ruin.