Sunday, 26 July 2009

EU con: Ireland to be bailed out by Germany

The Germans were not keen on relinquishing their highly regarded Deutsche Mark for the Euro in the '90s, for fear that should any member states be reckless with their economies, Germany's economy would be forced to bail them out. So the Maastricht Treaty was designed to reassure German taxpayers that bailouts between member states would be illegal and that each member state had to be fully responsible for their own fiscal policies - including debts they incurred.

At the time, the German economy was strong, Ireland's economy beginning to boom, EU states generally growing and nobody seemed to foresee the possibility of future economic busts - despite the huge disparity between the social and economic fabric of the member states.

Ireland's current spending shortfall this year is €26bn while its spending requirement is €60bn, which means that it must borrow approximately €400m per week to keep the public sector going. Ireland's debt servicing costs are already the most expensive in Europe because the markets regard it as risky. Ireland is in a bit of a hole.

In October, it faces its second referendum on the same Lisbon Treaty with bogus guarantees and the EU and Brian Lenihan are trying to convince them that should their economy crash, their only hope would be bailouts from the EU.

Firstly, Ireland can slash its public sector and save itself a ton of money - so giving the markets confidence in its handling of the economy. That would have the effect of easing the cost of its credit and reducing the likelihood of its economy crashing.

Secondly, 70% of Germans are against bailing out the Irish and indeed, under EU law, it would be illegal for them to do so.

So, the Irish are being conned into believing:
  • that the 'guarantees' they were promised will be delivered (they won't);
  • that their only hope out of their financial crisis is to keep borrowing (it isn't);
  • that the EU will bail them out should their economy fail (it can't and it won't).
And we all have to pay for the privilege of delivering this fiction to them, to persuade them to sign up to a treaty that none of the people of the member states wants!

Merkel, who faces an election this year, is latching onto a line from Article 100 of the Maastricht Treaty which permits a bailout for a member state in the case of "natural disasters" or "exceptional occurrences beyond its control." She says this allows some "interpretive room for manoeuvre." Update: Der Spiegel gives the low-down on Germany's economy.

The Irish aren't stupid but people do crazy things when scared - which is precisely what the EU intended. We have a duty to tear the veil from their eyes, in any way we can.

I suggest we get busy blogging - and flooding their newspapers with comments.



Steve Halden said...

It was easy to run the euro currency during boom times.

Now a recession has come the euro currency is coming under strain.

If the euro is going to fail, then it is during a recession that it will burst appart.

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