When Countries Don’t Want Bailouts
And No One Can Be Bothered To Care
What would happen if a country didn’t want a bailout, and didn’t need one until mid-2011 at absolute earliest, but other countries wail against it, pounding upon its doors, shouting night and day for it to take the bailout anyway?
Well, we’d get the current situation with Ireland.
As I write these words, the European Union, and in particular, Spain and Portugal, are beating on Ireland’s doors screaming for Ireland to accept an EU bond bailout package that would, among other rumors, force Ireland to raise its domestic taxation, removing one of the few economic advantages it has left after having inflicted deep, deep cuts on its domestic spending, and even the pay in its public sector, in the course of shouldering, up front and without hiding anything, the full cost of the domestic bank bailout. This openness and forthrightness is being openly punished in vicious fashion.
See, the problem isn’t that Ireland needs the bailout. It doesn’t. Spain and Portugal need Ireland to take the bailout so that the market will calm down and stop bothering them.
Usually, as with the United States’ TARP program, it’s the public that is outraged at bailouts. Yet like with some banks in the TARP program, the higher powers insist that bailout money be taken.
It’s not that Ireland wants the bailout, unless it is absolutely necessary; it is not. It’s that the European Union, spurred by German government chatter about “haircuts” (that is, shaving off principal owed to bondholders in a debt restructuring) are far more desirable than the taxpayer being (potentially) on the hook for billions of dollars on end. So, the bondholders taking the German government seriously have been dumping bonds and getting out of the business of selling any bonds to weakened governments at all… such as Ireland. More to the point, this threatens to completely shut the doors on Spain and Portugal being able to borrow a single dime.
So, to preserve the ability of Spain and Portugal to borrow money, and for the stability of the Eurozone, Ireland must accept “charity” with strings attached that it does not want.
What an amazing world we live in. It’s like we can’t stop these bailouts even when a country doesn’t want or need one…