I totally agree. I have been writing for a long time that Ireland should not bail out their banks. They simply cannot afford to. Tell the EU and British banks to go pound sand. Kelly is right, it will mean serious budget cuts; but like Iceland when it rejected baking its banks, it will mean a quick recession and then growth can start again. The Irish have a very different national character than Greece; and once things get righted, the markets would soon be willing to take Irish debt. Russia and Argentina other countries have defaulted and within a few years were back in the capital markets. Ireland could be too.
I am very seriously thinking of going to Ireland this summer to just talk to local people and see for myself what is going on. Ireland sounds a lot better than the Texas heat in August.
Kicking the Can to the End of the Road
European leaders will continue to try to kick the can down the road. I would not be surprised to see no real “crisis” this year. But there is an Endgame. And I think it involves voters and not just leaders. The guy in the street can see that bailing out countries is really just a back-door way to bail out banks on the backs of taxpayers and the currency. If it were just Greece, maybe. But it is Portugal and Spain. Especially Spain. Spain is too big to save. I love Spain; it is one of the most beautiful and gracious of countries. But there are real problems. The banks have maybe – maybe – written down their housing-related losses 10%. It should be more like 40%, which would make most Spanish banks insolvent, so they won’t write them down. Unemployment is over 20% and rising. Like Ireland, they allowed their housing market to get away from them. They believed that someone was going to buy all those homes they were building. And now they are teetering on recession and likely to fall back soon, which makes collecting taxes and cutting spending more difficult. With each new data point this year, Spanish debt costs will rise.
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