Is there an easy way out of Ireland’s debt crisis?

Interesting to watch Enda Kenny talk at Davos today. He seemed relaxed and reasonable, and indeed at one point one of the other speakers noted that others who were in the throws of a debt crisis needed to follow Ireland’s example (of being ‘good little boys’? – Ed). Though Denmark’s new PM Helle Thorning-Schmidt, was keen to point out that what’s currently missing is any convincing plan for growth.

In the Dail at leaders questions on Tuesday, when accused of choosing to do things the hard way by Gerry Adams (as he himself had been once asked in Castlereagh), the Taoiseach asked Mr Adams if he thought there was a easy way. It’s worth watching the uncut exchange (courtesy of Sinn Fein):

YouTube video

The Taoiseach makes it clear that he’s looking for flexibility in repayment rather than a write down, saying that Ireland cannot afford to break solemn promises undertaken by the previous government, however unwise the guarantee of the ill starred Anglo Irish Bank may have been.

In today’s Irish Times, Leo Varadkar further noted:

…defaulting would bring us into sharp conflict with the ECB and other EU member states, at a time when we need them most. We need their support to restructure the €30 billion in promissory notes. These promissory notes are an appalling, unjust and expensive sovereign commitment foisted on us by the last government. Restructuring these €30 billion in promissory notes is a much bigger prize than imposing haircuts on the remaining rump of senior bondholders. It would not be wise to take such a big risk now, for so little potential benefit.

The whip hand, as Colm McCarthy noted on Sunday lies not with the Taoiseach but with the ECB; who to be fair have been slightly preoccupied with saving (for now) the Italian and Spanish economies.

There are limits even to the prodigious soft power of nations like Ireland when faced with a systemic crisis of the scale of the Eurozone. Even the Spanish and Italians only have a breathing space in which to enact painful structural reforms. To be fair to the Taoiseach, it doesn’t seem like there is an easy way.


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