The Irish election campaign is being fought on depressingly traditional lines, some breast beating here, a few bribes there, and tactics all the way. Exciting enough if you like that sort of thing, but new politics, hardly. In the FT, Michael O’Sullivan, author of Ireland and the Global Question defines what he says is the real question which the politicians won’t face. Part One of the analysis seems to be agreed but part Two seems to be discussed only in the comment columns. Why is this so? Perhaps because like me, most people haven’t anything like enough knowledge to come to a view. So they’re forced to operate on instinct by giving the other guy a chance at governing.
What’s more, ideas for “a new Republic “ are easier to grasp on the surface but risk imposing overload on people who need to tackle the debt burden first. A single year’s’ “ people’s convention” as promised by most parties is too short a period for reforming the State, when the clash of interests begins.
From O’Sullivan’s article
In the bond markets, Ireland’s error has been to take bank liabilities on to its national balance sheet. By then connecting this with entry into Europe’s bail-out fund, the country has set out on a road to serfdom, in which the scale of indebtedness is now likely to smother growth and curb policy flexibility. This week’s election ought to be about how to turn off this road, not how long it should be. Yet Ireland’s national debate still focuses on how to fund debt, rather than how to end insolvency.
A wholesale restructuring of national debt is the only solution.
A better path would see a managed restructuring, so the debt burden no longer rests just with the Irish taxpayer. Such a restructuring could include moves like an extension on debt maturity, while restructured debt could be backed by a pool of eurozone assets, or the exchange of euro bonds for Irish debt. However it is done, the aim would be to reduce the burden to the point that the repayment of outstanding debt is no longer a market concern. A plan engineered in collaboration with the European Union could also involve other troubled states, like Greece.
All this seems unthinkable to Irish voters, and thus undoable to our politicians. This is in part because no advanced country has defaulted for a generation.