The Irish government is certainly putting up a good fight, gritting its teeth and describing reports that it may approach the European Financial Stability Fund for up to 80bn euros as ‘fiction’.
The British taxpayer will certainly hope for a happy ending: thanks to Alistair Darling’s deal back in May, the UK is liable for 13.6% of the 'community facility' that contributes to the fund, meaning we could be shelling out 7bn euros to prop our neighbours up.
Ireland’s finance minister Brian Lenihan heads to Brussels on Tuesday for face-to-face negotiations with his EU oppos, seeking an alternative solution to the mess. Much of Europe fears that if a solution isn’t found quickly then they’ll have another Greece on their hands. And that little mishap ended with a 110bn-euro bail-out and the dropping of several unappealing foreign objects into the EU’s metaphorical ouzo.
Investors have already rushed to sell Irish debts in recent weeks – sparking fears that a lack of help could mean a run on other countries, including Spain and Portugal. And that’s why Europe is so keen on giving Ireland a bail-out it doesn’t feel it needs – the euro zone has its own credibility to think about.
The good news for the beleaguered British purse is that the Celtic Tiger still remains intent on biting the hand that’s trying to feed it. And you can’t blame them. Yes the international community will be on hand with a load of cash, but they’d definitely want something in return.
For Ireland that would probably mean partially surrendering sovereignty over its budget, and being forced to abandon its low rate of corporation tax (12.5%), which the Irish government believes to be crucial to its recovery. Many other European countries would certainly be keen on that – US companies would be far more likely to invest in them should Ireland suddenly became so much less enticing.
And you can’t blame the politicians for wishing to resist the humiliation. Irish sovereignity is a source of great national pride, as was its meteoric rise to fiscal strength on the back of its booming property market and enticing financial services environment.
Yet for all its bullishness you can’t help thinking that Ireland has little choice but to give in eventually. It has suffered the worst recession of any major economy, government debt sits at more than €100bn, its unemployment rate is almost twice as high as Britain, and it has a record deficit equivalent to 32% of its GDP. ‘Things are happening day-by-day,’ said justice minister Dermot Ahern. We can imagine one of these days turning very black.
The Celtic Tiger has walked itself into the zoo; how long before it's wearing a collar?
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