Euro crisis: “everything those leaders have done, after large amounts of dithering, has ended up making the situation worse.”

That’s the BBC economics editor Stephanie Flanders quoted above, by the way.  Which brings me back to Thursday’s emergency summit called by European Council president, Herman Van Rompuy

“Our agenda will be the financial stability of the euro area as a whole and the future financing of the Greek programme,” said Mr Van Rompuy in a brief statement last night. [Friday 15th July]

Perhaps…  But Frau Bundeskanzlerin, who reportedly wasn’t as keen on the summit being called, has been playing down expectations today

A meeting of euro zone leaders on Thursday will not be the final step in the resolution of Greece’s debt crisis, German Chancellor Angela Merkel said today, damping expectations that European leaders will be able to draw a line under the turmoil at the July 21st summit.

“Those who want to take political responsibility, and that’s what the government wants and takes seriously, know that responsibly there won’t be one spectacular step” this week, she said at a joint news conference with Russian president Dmitry Medvedev in Hanover.

“It’s entirely about creating a controlled, composed process of gradual steps and measures.”

And as the BBC reports

German Chancellor Angela Merkel has played down the chances of Thursday’s emergency eurozone summit resolving Greece’s debt crisis.

She told a news conference that there would not be anything as “spectacular” as a restructuring of Greek debt.

The meeting will attempt to agree a second bail-out of Greece in a hope of calming financial markets and stop contagion spreading.

She said: “Thursday will help in this, but further steps will be needed.”

At the weekend Mrs Merkel indicated that she may not attend the meeting unless there was a likelihood of a concrete deal on a second Greek rescue.

Now that might not exactly contradict the stated intentions of the Euopean Council president, but when the approach of EU leaders to date has been characterised as “papering over and pretending”, or “subterfuge and muddling through”…

That’s when it hasn’t become so serious that “you have to lie”…

Back to BBC economics editor Stephanie Flanders,

Nearly everything that eurozone leaders have done in response to the euro crisis has been done in the name of preventing contagion.

But guess what. It’s already here. Because (nearly) everything those leaders have done, after large amounts of dithering, has ended up making the situation worse.

In the past 24 hours we have seen: Spanish and Italian bond yields head over 6%; the value of shares in three of Britain’s leading banks fall by 6-7% yesterday, as a result of European stress tests which they passed; and the gold price hit an all-time record of $1600 per ounce. (British bank shares have since gone back up again).

Phew. It makes you wonder where we’d be now, if Europe’s leaders had NOT been so focussed on limiting contagion.


Stephanie Flanders also picks up on comments by Jean-Claude Trichet, head of the European Central Bank, to explain the implications “if Jean-Claude Trichet makes good on his threat to stop accepting Greek debt as collateral”. And, possibly, even if he doesn’t.

And just to be clear, ECB losses will ultimately have to be borne by its shareholders – the European governments.

The amounts involved are not small, especially if you look beyond Greece. Greek total bank deposits are roughly equivalent to 80% of government debt. Portuguese bank deposits come to more than double the amount of government debt.

Add them all up, the bank deposits of the five periphery countries come to about 230% of German GDP. Is it really plausible that German – or Finnish – taxpayers would consent to taking on even a fraction of those liabilities? Implicitly, that is the question that European leaders need to consider in the run up to the summit.

In the event of a serious run on all Greek banks, there would be three possibilities: eurozone governments agree to guarantee all of those liabilities; or the ECB could cut off funding, forcing the collapse of the Greek financial system; or the eurozone could decide to allow or force Greece to get out of the euro.

As Bootle and May point out, all of these options are bad. But it’s not clear that Greece leaving the euro would be the worst, for Greece or for the rest of the eurozone.

None of this is to say that Greece is about to leave the euro. But you can now see how an apparently technical dispute with the ECB, over the nature of default, actually runs right to the heart of the problem.

Critics say that the ECB is forcing a crisis, by insisting that it will cut off funding for Greek banks in the event of a default. But the reality is the crisis is already here. What the ECB is doing, rather, is forcing governments to decide how it is going to be resolved.

The leaders who will meet in Brussels on Thursday still have the power to decide whether this crisis is going to end with much greater integration and burden-sharing between the governments of the eurozone – or a dramatic break-up. But they are increasingly losing control of the timing.

And Andrew Lilico is back at the Telegraph blog, explaining his alternative scenario

…the organising concept of the European Community has, since the outset, been “ever closer union”. Solving the eurozone crisis by deepening those ties further is a natural extension of what already exists. “Solving” the eurozone crisis by ending the European Union and so moving away from a form of politico-economic governance the core eurozone countries have become used to for 60 years is, in core EU member state terms, what is truly “unthinkable”.

If it comes down to this: some form of even deeper political union amongst the core six Members of the EU, plus some hangers-on; or the end of the European Union or any similar scenario in which the political organisation of the core six members becomes separated. If saving the euro actually seems feasible by some form of even deeper political union (which is by no means obvious), I believe we can be confident that it will be deeper political union, not eurozone collapse, that will be truly inevitable.

To repeat myself [Again?! – Ed].  For supporters of the “European Project”, the longer-term options are stark.

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  • Drumlins Rock

    What about Ireland, no-one talks about Ireland anymore, but it is the one that matters, not just to us up here but to the whole UK, if Greece falls can they survive? doubtful I would presume, therefore the British Banks will take a massive hit from an Irish Default, the government own British banks, Ireland’s main trading partner, so don’t think default is an easy option, do you think the UK will just say the slate is clean lets start trading again? they certainly didn’t with Iceland. Can the UK take the hit on the chin?

    Be realistic, Europe isn’t rescuing Greece, Portugal, or Ireland, maybe not even Spain or Italy, but they are buying time to shore up the rest of the pack, and to a lesser extent the UK, remember even Belgium is shaky and as a country probably wouldn’t survive a default. The best they can do tomorrow is push things on a bit more till September, but the day will come, the only thing is where the line of retreat is and will they be able to hold it.

  • “She told a news conference that there would not be anything as “spectacular” as a restructuring of Greek debt.”

    The news which has come out of Germany in the last couple of days is very interesting. The opposition parties have stated that they will support the Government if it takes the strongest possible measures to resolve the Greek debt crisis, including, partial debt forgiveness.

    Some form of debt forgiveness is is probably now essential to avoid Greek default.

    Expect a “u” turn from Merkel’s Government soon.

  • Pete Baker


    How any individual countries will react is for later consideration at this stage. Particularly potential ‘hangers-on’.

    For now, the focus is on the wider existential crisis.

    And what the core partners in the European Project will do.

    They’re the ones driving the bus.

  • Mick Fealty

    Ireland is a beesting in the wider picture of things Ireland Portugal and Greece barely add up to Italy or Spain.

    And the US knows it

  • BTW it’s spelt “Bundeskanzlerin”.

  • Pete Baker

    Doh! Thanks Smithborough. Corrected.

  • wee buns

    ”Though the crisis is being presented as an economic one — with breathless financial commentators following every move of the bond markets, as if it were somehow a living being — it is nothing of the sort. It is political through and through.”

    ”Had the Greeks accepted the sort of deal the Irish accepted — where the government buys the private sector’s bad assets, i.e. the banks, through nationalisation, and sells off the public sector’s good assets through privatisation — there would be no Greek financial crisis.”

    ”Yet the problem for Papandreou and the EU is that the Greeks failed to live up to the stereotype. They were neither passive like the Irish, nor aleatoric and ad hoc (but effective) like the Icelandics. Submission had been averted and crisis brought on because their resistance has been disciplined and relentless.”

  • Pete Baker

    wee buns

    From your link

    This is the real story of the Greek, and European, financial crisis, because it is clearly the process that is driving the crisis — the insistent refusal of the Greek people to liquidate their social life and their shared assets to serve the global financial markets.

    The article is partly right in that there is an existential, and democratic, problem at the heart of the current crisis.

    But it’s too narrowly focused on Greece and too intent bigging up the left-wing protests there – despite the actual parliament voting through the austerity measures, including privatisation.

    There are nationalistic interests in play across Europe.

  • wee buns

    Yes Pete and nationalistic interests are like Cinderella’s Sisters trying to force big feet into the glass slipper.

    Of course the article emphasizes left wing protest and looking at the bright streets surrounding Dublin, Derry and Galway, with its global chain stores — Starbucks coffee, H & M, Marks and firkin Spencers — you can see why so many people are keen to stay with the smooth euro-vision of the central parties.

    But those streets lead into other streets, where there is less in the windows, and loose tiles beneath the feet, and the red flags are still flying there.

  • Greenflag

    @ Drumlins Rock,

    ‘they are buying time to shore up the rest of the pack,’

    Indeed and Mr Sarcozcy is looking for re-election as French President which he needs to win to hold on to his italian fashion model wife 😉

    One of the reasons why the Italian bond rates have risen these past few days is because since the time that Greek , Irish and Portuguese bonds were seen as default prone – investors removed themselves from those markets and pumped the monies into Italy on the grounds that Italy was at lesser risk of default . What’s not so well known is that Italian gold holdings are the fourth largest in the world at more than 2,500 tonnes or more than 8 times those of the UK and about 70% of those of Germany .

    As long as the gold bubble doesn’t burst Italy’s foreign reserves look okay but it’s slow growth economy and debt accumulation is in current circumstances causing much anxiety on the bond markets.

    Thursday will be no high noon with a definitive outcome but will probably be another rathcheting up uncertainty and anyway the real ‘high noon’ for the world economy is taking place in Washington DC for now . Anybody holding on to stocks right now could be in for another disappearing equity event 🙁

  • Pete Baker

    “and the red flags are still flying there”

    Oh dear…

    Fine, wee buns, but that is just one element of the problems facing the European Project.

    And that’s why a narrow focus on that particular issue is mostly irrelevant in a wider consideration of the current existential crisis.

  • DC

    Greenflag – high noon was coming, but Obama has secured another 4 trillion, so that’s that put off for a while.

    The politicians have yet to come clean that they are in the pockets of the banks and are shit scared to confront them head on by enquiring into the personal wealth of key financiers who pocketed alot of money during the good times, but stood back during the crash demanding these personal profits remain in their bank accounts because they had ‘earned’ them.

    All an illusion, the wealth they had pocketed was grossly inflated – pumped up firstly by using fractional reserve banking, amplified further using credit structuring, which all collapsed around 07/08. Enter the taxpayers and the publicly funded bailouts.

    The assets of these financiers that live and move around wealthy western nations should be frozen and a proportion taken back off them and returned to the banks that are in debt.

    That’s why Europe is dithering it hasn’t addressed the problem of where too much credit came from in order for it all to go toxic in the end – plus the old magic of calling on the taxpayers is wearing off and cannot be abracadabra’ed any more. The natural economies across Europe just aren’t growing enough to fund further borrowing either.

    So where to look, where to go for answers, where to go for more money – who really caused the problem?

  • DC

    Oh and Pete, before you lecture me about not addressing this ‘existential crisis’ – are you able to hazard a guess at just how much personal wealth these financiers hold?

    If not, then you don’t know whether there is in fact enough money there to cover recapitalisation out of their frozen assets.

    It was mentioned somewhere that if the bankers had paid themselves 10% less in bonuses over the years and returned this to their banks at the time of cheap and easy credit that there wouldn’t have been a need for Gordon Brown to borrow a trillion pounds and bail them out.

    This trillion is now to be paid back via increased taxation on the general public and of course public spending cuts.

  • Alias

    “if Jean-Claude Trichet makes good on his threat to stop accepting Greek debt as collateral”

    Which shows the level of unreality in play here. The ECB has exposed its shareholders (the member states) to Greek debt to the tune of 190 billion. The ECB has 80 billion in reserves, so that loss (or even half of it) will wipe out the ECB’s reserves, leaving it in need of a bail-out. The ECB, with a leverage ratio of 25, is insanely overleveraged. To put that in perspective, no insolvent Irish bank had a leverage ratio over above 19, and a safe leverage ratio is regarded as 5. In reality, the ECB is already fatally insolvent since it is holding ‘assets’ (junk collateral and junk ‘promissary’ notes) that do not have anything remotely approximating the value that the ECB has attached to them as book value. A reduction of just 4% in the book value would wipe out its reserves. Given the worthless ‘assets’ that it holds as collateral from the Irish eurosystem lenders, a reduction of book value of 80% is closer to the market value. That in itself is sufficient to wipe out the reserves of the ECB, making it insolvent. So, in reality, it is insolvent. Hence there is no way that the ECB will get tough with Greece. It must continue to fund Greece because the minute it defaults, then that is the minute that the books have to be rebalanced and Euroland ends.

  • aquifer

    “everything those leaders have done, after large amounts of dithering, has ended up making the situation worse.”

    done, and in the case of Bundeskanzlerin loos Kannon, said.

    Ironic that someone out of East Germany could bring down capitalism in Western Europe.

    She only needed to keep stumm and let the central bankers see off the speculators, but she just kept on spouting those hard cop platitudes.

    Maybe she hopes the currency speculators will all buy Porches when this is over..

  • Greenflag


    ‘The assets of these financiers that live and move around wealthy western nations should be frozen and a proportion taken back off them and returned to the banks that are in debt”

    Where there is law there is injustice . These ‘financiers ‘ have the law on their side and particularly in the USA and EU have mostly ensured that the deregulatory framework around which they built their ‘looted ‘winnings was couched in the right legalese to hinder or prevent or stymie any future attempt at criminalisation. It would be ‘conspiratorial’ to believe that this was done deliberately by a particular group of financiers . The reality is that it resulted from the normal protective instincts of predators who can see the prospect of much prey in front of them and who want to ensure that when the ‘prey’ is taken that it cannot be prised back from them by any conventional notions of ‘justice’. Which is why the American government has not gone after these people in law as ‘conviction’ under law was unlikely . As to enacting new law and implementing it retroactively there is no precedent for such in any democracy and it would take a totalitarian dictatorship of the right or left to implement . Then there is also the statute of limitations which is 5 years for purported crimes in this area . Not that the USA is alone in ‘struggling’ with bringing these people to face charges . Just look at Ireland and you can look and see the Gardai taking years before still not unravelling what Fitzpatrick & Co and others were up to.

    While I share your wish to see justice done I’m also aware that the entire electoral edifice in the USA is built on the support given to candidates of all parties by the ‘financiers’. As you can see from the hobbled ‘budget deficit ‘ agreement rushed through to avoid another meltdown which would hurtle the USA and world economies into an even more chaotic period of uncertainty than what has been experienced these past few years. Neither the Eurozone nor the USA would survive such an extended period without some kind of political implosion, breakup or revolution imo.

    As to European ‘dithering’ I take your point -heres an extract from Bloomberg this morning which reenforces your comment re ‘growth’ in these economies . I was surprised by the Italian GDP figure comparison.

    ‘a program that guarantees the debt of all the countries now at risk (Greece, Ireland, Portugal, Spain and Italy) isn’t feasible. Even if Germany, France and the others wished to offer a blanket guarantee, the amounts involved (approaching 3 trillion euros or about $4.2 trillion) would compromise their credit ratings. With Italy and Spain in play, a full guarantee isn’t an option.

    Finally, any rescue must be accompanied by steps to restore growth, because debts stand no chance of being repaid without economic expansion. Aside from Ireland, the other four at-risk countries face chronic problems. Italy’s per capita gross domestic product is lower today than it was 12 years ago. If these countries don’t start growing again, even a large haircut on the existing debt won’t prevent the problems from re-emerging in a decade.

    Europe is in a mess because its leaders have ignored these constraints. This is why the many plans they have drawn up in the past two years have failed to convince markets.’

    And the above extract was not penned by our friend Alias but by a Professor Francesco Giavazzi (Economics )at Bocconi University in Milan. and Anil K Kashyap Professor of economics and finance at the University of Chicago Booth School of Business.

    the full article for those interested

  • Greenflag

    @ acquifer ,

    ‘Ironic that someone out of East Germany could bring down capitalism in Western Europe.’

    The law of unintended consequences raising it’s baleful historical scales once again although you may be somewhat premature in your forecast . More a case of the triumph of ‘authoritarian capitalism ‘ of the East over the ‘anarchic capitalism ‘ of the West . But as the man said it ain’t over till it’s over- as any USA women’s soccer team supporter could tell you last Sunday 😉

  • Greenflag

    @Alias ,

    Your prediction for Thursday’s high noon now that kanlerin Merkel seems to be backtracking on the ‘solution’ – A voluntary Greek withdrawal from the Eurozone ?

    Excellent post BTW .apart from your last sentence which in theory is correct but which in real life won’t be allowed to happen -the consequences for the world economy would be more than unsettling and even catastrophic .

  • tuatha

    The level of delusion which Rumpy & Tricky claim (they can’t be so stupid, ergo they are lying) wouldn’t even be funny in a (the) french farce which is the eurozone.
    So far the three options are –
    a) the ECB (read Germany – French banks being by orders of magnitude the largest creditors) buys worthless Greek gov bonds, knowing that they’ll never be redeemed, and even the interest won’t be paid except via more borrowings…from Germany.
    b) the ECB lends FFS Greece to buy its own bonds… this is too stupid to even be wrong enough to criticise
    c) the maturity date is extended, yea even unto the 3rd Millenium so that… sorry.. does not compute.
    There is a 4th option – renogotiate the Lisbon Treaty to make it explicit that we all have a bar-code branded on our foreheads – I’m sure our governing class would have no problem advocating a YES vote.
    Can we just go back to basics here, rather than angels/pins pontificating?
    All money is fiat, it does NOT exist, try goiong into a bank and asking to exchange your euro, or dollar or Martian gzonk, for something of real, intrinsic value – suggestions might include food, land, resources, firewood etc. The banks can’t exchange those things, only other people credulous enough to believe in the fiat paper.
    Therefore the staggering numbers of zeroes on the various national debts, NAMA, bonds and similar used toilet paper were conjured from fresh air and can safely return thence without disturbing the rising of the sun or the singing of the morning chorus of our feathered friends – to quote “they spinneth not, neither do they sow”
    All countries assess the value of their real resources, land, mineral, intellectual capital, education levels and divide by the population.
    End of problem, collapse of numerous Stout Parties.
    Or, to put it another way, EAT the RICH.

  • DC

    In reality, the ECB is already fatally insolvent since it is holding ‘assets’

    How’s the Fed doing?

    Across the UK the public should be enquiring into just how the one trillion was spent in order to work out where the money has gone and on which banks – then the CEOs and other such individuals in the employ of these banks can be identified.

  • wee buns

    Pete it’s a broad or as narrow as one cares to see it. The fact that no European government (even this sorry shower) at this juncture could confidently invite it’s electorate to a referendum on issues of EU unionism and expect a positive outcome – a ‘democracy problem’ wins understatement-of-the-day prize.

  • Alias

    Greenie, there won’t be any change in the current policy of EU policy of Pretend & Extend. They will continue to loan Greece the funds required to meet its repayments on the funds already loaned to Greece, thereby extending the debt in order to continue pretending that the borrower can repay it and lender has not lost it.

    Why would Greece exit the eurozone when it would still be bound by the requirements of EMU and ERM 2? Why would it be expelled when that would destabalise the Great Project of creating a single european state and would not stablise the euro? True, the EMU killed Greece’s exports and it did the same for Irish exports. Irish exports are less than half the level in real terms than they were before we joined the EMU, and greece, but when do eurogombeens put the national interest ahead of the EU’s interest? EMU killed the competiveness of Greek exports, and left that country depent upon cheap credit from the ECB.

    Now that the import of cheap credit has turned into the export of hard-earned taxes, Greece’s population might want to reclaim their redundant national interest but is too late to reverse out of that one way street.

  • Greenflag

    @ Alias,

    An apt description of the current quandary i.e ‘Pretend and Extend’. So the world’s economic future will be determined by the Pretenders and Extenders on both sides of the Atlantic .Our elected Emperors reveal their nakedness with every passing day as they cower before ratings agencies and the international bond markets ;(

    It’s taken a while for people to get the message that ‘trickle down economics ‘ was a recipe for social disintegration and a slow fuse for class war and political upheaval . But how long will it take the ECB to admit that Greece cannot reverse itself out of this crisis over any short term period . Markets don’t wait for years to pass judgement .

    I await Thursday’s ‘result’ with interest and wonder whether Obama’s call to the French and German leaders will have had any impact.

  • Alias

    It’s an apt term but I can’t take the credit for it. And dyslexia kicked in again: the policy is properly referred to as Extend & Pretend.

    Now, as a rule, I ignore your frequent attempts to take the focus of the recklessness of the EU as the cause of its own financial woes and to either mitigate it by placing it in a broader global context or to blame either The Fed or capitalism generally or both but in this case, the banking policy of Extend & Pretend is also applicable in the US. 150 of the US’s top banks have 5% or more of their assets in non-performing loans.

    However, I wouldn’t be unduly worried about that because no major US bank has a leverage ratio above 10. The leverage ratio is critical because the higher it is, the greater the risk to the bank’s solvency when its assets are written down. A write-off of 5% does not threaten the viability of any US bank, so even if all of the non-performing loans were written off, none of the 150 top banks would collapse.

    Contrast that situation with the dire state of the EU’s banks. The Central Bank of Sweden has a leverage ratio of 5. The Central Bank of the EU has a leverage ratio of 25 (just under it by a fraction). Here are the leverage ratios of the EU’s top banks as of September 2008: Deutsche Bank, 52; UBS, 53.4; BNP Paribas, 28.5; Dexia, 36.8; Barclays, 37.8.

    So how did the EU’s banks reach such insanely high leverage ratios? Simple. The EC controls the leverage ratio in the EU, and it issued the European Capital Requirements Directive (which is instant EU law) that allowed those banks to massively overleverage. Why did the European Commission do that? Because its ecomomic policy was boost the economy of the EU by flooding its consumers with credit credit that they would then use to buy goods and services with the EU. To support that economic policy, the monetary policy of the ECB was expansionist, and the expansion in the supply of money was to come from the EU’s banks borrowing large amounts of money and lending it cheaply to whomever wanted to borrow it at the negative interest (policy) rate set by the ECB.

    That is why the EU is now bankrupt. The EU bankrupted its member states.

  • DC

    Alias – then who indebted the Amercian state and also blew one trillion worth of public funds in Britain?

    It’s a banking crisis / debt crisis – aided and abetted by global financial services – simply being in the EU for some member states just makes it harder as there are less tactics to play with when trying to plan a way to get out of debt.

  • Alias

    DC, I refer you to the leverage ratios. It’s primarily an EU problem. Us banks are solvent, whereas EU banks are massive collapses waiting to happen.

  • Alias

    Incidentally, look at the balance sheets too: Deutsche Bank’s balance sheet is almost twice the size of JP Morgan and Bank of America combined. Ouch…

  • DC


    Irish banks are insolvent and technically bankrupt, but they are more in diffs because Ireland’s property market was less developed than America’s simply because America has been a wealthier nation for longer and has a more established economy and its property market has had more cycles than Ireland. Same in Germany – it wouldn’t really be possible to replicate Ireland’s situation in Germany because it has been wealthier for longer and the majority of its available property has already been bought up and done so in more stable periods of that country’s economic history. Hence the reason why people rent more in Germany, because property has already been bought up and is therefore cheaper to rent than try to buy. Also, culturally, the Germans prefer to drive nice cars and pay out big sums for them and rent instead than do property buying; but I think you get my drift re property cycles.

    Deutsche bank got into difficulties because it was giving out NINJA mortgages in sub-prime areas of America on the basis that the returns on the properties it had on its books would keep on rising via cheap and easy credit, but the credit structuring all collapsed and down she went State side.

    Also the EU has taken on former communist countries and these economies are less developed than America as well so the potential to blow it all on new build properties or redeveloped areas was all the more tempting.

    Had America subsumed Mexico for instance and integrated with it in the 90s I would imagine it would be in the same spot of bother.

    I think it is still a financial services / banking / debt crisis, rather than a political one which is why political responses are falling short of the mark – the only way to solve this is to raid the accounts of those that got personally wealthy as a result of being in the employ of corporate financial services over say 2002-08. Take a proportion of their wealth out of their personal accounts. A bit like the Child Support Agency does when going after non-resident parents – they look at the wages earned over the years or year and then the CSA decides how much of a cut it is going to take on behalf of the single parent or mother.

    But you are right in that leveraging is part of the problem – fractional reserve banking plus the collapse of credit structuring.

    What was needed was a deflate but this would have caused a depression – these banks should never have been rescued nor kept alive but were kept afloat thanks to taxpayer recapitalisation at the behest of CEOs of financial services, national & supranational governments. Probably because the scumbags i.e. lower middle classes would have got into power whenever the cash machines stopped working and done away with Blair and Brown’s pension – and many many others besides, mine and yours too 🙂

  • wee buns

    Our crisis- Petty in the extreme, given 3.7 million mainly women and children starving to death in Somalia.

  • Greenflag

    @ Alias,

    You can’t ignore the global context even if the overleveraging of the Eurozone banks were also to blame for the present mess .In Ireland’s case the ‘closeness’ of the USA in the cultural and financial services sense can’t be ignored or avoided . When the previous Irish Government looked for advice as to what to do in the midst of crisis they paid good money to Merril Lynch some 7 million dollars and then ignored their advice re the blanket ‘guarantee’ to all Anglo Irish depositors – ie. the friends of FF .

    I believe the Germans among others were very upset at that ‘guarantee’ as it set a marker for future events . ‘

    In 2007 general government debt in Ireland was 25% of GDP which was the lowest in the EU outside of Luxembourg and Slovenia . France was at 63%, Germany 64% , Italy 105%, Greece , 110%. Portugal 70% , Spain 35% and Finland 30% . By 2010 Ireland was at 100% with Greece at 140% and Italy at 120% .

    The rise in general government debt both as an absolute and as a percentage in the case of Ireland has been the highest of all the EU countries in the EU over that period exceeding that of Greece and Italy .

    (Source -Eurostat as commented in the WSJ 20/7/2011 in article by a Sudeep Reddy.