“There were very few of us in the boom who suggested what was going on was nonsense. If you’re against consensus in Ireland, the first phase is ridicule, then it’s violent opposition, and the third phase is universal truth – where everyone pretends they agreed with you all along,” [David] McWilliams says, with a smile.
He has two radical, populist solutions: let the banks go bust, and leave the euro. Individuals’ deposits could be guaranteed while corporate bondholders would lose out, but the markets would not panic, he believes – rather, they would regard the Irish economy with renewed interest, because money once earmarked to bail out the banks could be invested in the recovery. Saving Anglo Irish Bank “is the economics of Stalingrad”, he says. “Throwing all your resources at a symbolic entity signals to the rest of the world that you are a fanatic.”
McWilliams also argues that Ireland’s attachment to the euro, and the EU, is born of the establishment’s traditional desire to eschew the British, who are still Ireland’s biggest trading partner. If Ireland left the euro and returned to the Irish pound, its currency would take a hammering. Let it, says McWilliams: if it fell by 40%, suddenly Ireland’s wages would be 40% less than its rivals. Investment would flood into Ireland; exports would be super-competitive.
More orthodox voices on the right and left will not countenance either letting Irish banks die or leaving the euro. “You can’t let a bank that is half your GDP collapse in the middle of your economy. It pulls the entire economy down with it,” says a government economist. [John] FitzGerald adds: “If the Irish central bank had to go out and borrow tens of billions to replace the euros in the banking system, there is no way they could raise it. There would be a dramatic fall in the currency, a dramatic rise in interest rates, and a complete collapse in the economy. Leaving the euro would be lunatic.”
Of FitzGerald’s predictions that the Irish economy will return to business as usual next year, McWilliams says: “That’s horseshit. The establishment view is what we need is more of the same. The most important thing about crises is it gives you permission to change.”