David McWilliams (Irish economist) has an article in which he all but said Ireland needs to leave the Euro to be able survive the recession. Although I’m somewhat disheartened by the disbelief in the mere mention of leaving the Euro (in the articles comments) I’m glad we’re on the same page. Although we may not have to actually leave of our own free will, as of this moment there is a very high chance that we be flung from the Euro as the economic pariahs of the EU.
Events have moved fast since the announcing of the closing of Dell in Limerick and now Anglo Irish Bank (the third largest bank in the country) has been nationalised. It seemed when the government began having a look into the institution to give it a €1.5Billion bailout package it found something much worse, something that €1.5Billion couldn’t fix.
No big deal some may say, and in the whole scheme of things across the world this is now becoming the norm. But here is the issue, in taking on this bank, the state has now taken on it’s liabilities. All €30Billion of them. This is now thrown on top of a €40Billion national dept. Overnight (literally as the takeover order was given Thursday night) the national dept of the country has nearly doubled, and this is a dept which our country of 4 million does not have the resources to pay.
And on top of this there is at least another of the banks that are likely to follow Anglo Irish in the space of a few months. The debts being taken on are far greater than the entire state is capable of paying, the Irish government has followed Iceland into this grey abyss. Instead of letting the bank fail the government has caused the state to fail.
So what might happen, there are a few possibilities.
- We get a bailed out by the ECB and other EU countries.
- We get kicked out of the Euro.
- We go to the IMF for help (either in or out of the Euro).
In the first case Europe may try to use us as an example of the stability and power of the Euro and bail us out. But it would effectively mean that the EU owns Ireland and would expect the country to tow the line in future EU issues. Effectively the country would lose it’s indepenedence.
The second case the EU decides to toss us out of the Euro, Ireland reverts to the Punt and begins massive currency devaluation, following exactly in Icelands footsteps.
And in the third case of IMF involvement we could expect the selling off of all government assets, raised taxes, and removing 30-50% of civil servants (without any redundancy pay). In short whichever of the above options is taken people across the country must realise we are all Icelandic now as in we are all truely fucked.
Republic Tigers 
I don’t think the ECB could help.
Article 21 of its Statute, on pdf page 266 here:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2006:321E:0001:0331:EN:pdf
states:
“Article 21
Operations with public entities
21.1. In accordance with Article 101 of this Treaty, overdrafts or any other type of credit facility with the ECB or with the national central banks in favour of Community institutions or bodies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the ECB or national central banks of debt instruments.”
That seems to rule out the ECB extending any type of credit facility in favour of the Irish government.
There is Article 100 TEC, on pdf page 83:
“Article 100
1. Without prejudice to any other procedures provided for in this Treaty, the Council, acting by a qualified majority on a proposal from the Commission, may decide upon the measures appropriate to the economic situation, in particular if severe difficulties arise in the supply of certain products.
2. Where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council, acting by a qualified majority on a proposal from the Commission, may grant, under certain conditions, Community financial assistance to the Member State concerned. The President of the Council shall inform the European Parliament of the decision taken.”
However I doubt that the EU has anything like sufficient spare funds to prevent a default by the government of Ireland, or any other member state.
So I think it might come down to the Irish government borrowing money from the governments of other EU or eurozone member states, but completely outside the scope of the EU treaties, even if the loans were arranged through an EU meeting.
If they wanted to they can bend the rules, the EU has not been know as one for following it’s own rules. However your point about them not having money in the kitty is spot on. And as a follow on from that point it makes sense to assume that the other EU member states are also strapped for cash.
Which means we won’t be getting loans, which means we will be leaving (thrown out of) the Euro. Probably within the next 6 months. Oh and AIB is going to follow Anglo into nationalisation, with a very high chance of Bank of Ireland and at least another small bank (EBS, PTSB?).
At this point I don’t think it’s going to be an issue of where is safe to keep your money, we’re well past that point. I think it will be an issue of our money won’t be able to buy the things we need (remember we import a huge portion of our food). So better start planting the garden with a few veggies cause we’ll be running short this summer onwards.