The Irish fall-out
Suddenly everything is in play. Or so it seems. What only recently was discussed at the margins is now in the full glare.
Irish sovereignty. What have the Irish - so proud of their independence - given away? Will this rescue stem uncertainty and give the eurozone time to recover? What lies beyond a bail-out if it doesn't work? How many bail-outs can Europe sustain before it is overwhelmed? Should the UK have demanded some concession from the EU in return for supporting the bail-out?
Ireland feels stung, bruised, humiliated. The papers have written of a "nation's outrage". The Irish Finance Minister, Brian Lenihan, has been forced to deny that the forthcoming budget will be "dictated by the IMF and Europe". The 7 December budget, he said, "will be our own budget, nobody else's budget".
Nobody in Ireland is sure any longer. Some people are afraid of "foreign officials" essentially running the economy. Days of speculation lie ahead, for the terms of the bail-out won't be finalised by the end of the month.
What the bail-out has done is to unleash further political uncertainty. The Green Party, in the ruling coalition, wants an early election. The poll could come down to the question: "Who runs Ireland?" The Greens will support the budget, although two independent MPs have indicated they oppose it.
If the hurriedly-arranged bail-out was intended to calm the markets it may not have succeeded. The consensus seems to be that the sovereign debt crisis has a way to run. A comment from Jeremy Batstone-Carr of the stockbrokers Charles Stanley seems to sum up the sentiment. "Now Ireland has fallen," he wrote, "we suspect that the markets will quickly turn their attention to the other embattled peripheral countries, particularly Spain and Portugal".
Portugal is in better shape than Ireland. Its deficit is manageable. It has no property bubble or insolvent banks, but it is finding it difficult to meet its own targets of reducing its deficit and will struggle if the costs of borrowing remain high.
The Spanish said today there was "absolutely no" need for a bail-out and they may yet turn out to be the key country in all this. While the current mechanism could manage a Portuguese bail-out, Spain is an altogether different matter and would test the survivability of the eurozone if down the road it needed rescuing.
Even as the Irish signed up for a rescue fresh doubts were emerging as to whether the Greek bail-out was working. An EU/IMF team is assessing whether Greece qualifies for another tranche of funding. This comes just after Greece announced that public debt was worse than had been revealed. It now seems certain that the country will overshoot its deficit-cutting target.
Now the suspicion in Athens is that pressure is being applied on the government to unveil another round of austerity cuts. Ministers have conceded the talks are "difficult". The expectation is that the public sector will be squeezed further. The government knows that it is already walking a tightrope with the public, many of whom bitterly resent wage cuts and pension reforms.
And here lies the danger for the eurozone. In a monetary union countries in debt have few options. Either they have to go for tough austerity and/or a bail-out.
But what would happen if the people of a country were to refuse to accept further austerity measures? Much of this has yet to play out. I have just been in Portugal. There will be a general strike this week, but the wage cuts and VAT increases kick in in the New Year.
And all the time the gap between what are called the peripheral economies and Germany widens. The only way to correct those imbalances is deflation and that, of course, impacts on growth.
Many of these issues have yet to resolve themselves.
And the Irish crisis has stirred up the Eurosceptics in Britain. They want to know why the British government hasn't used the situation to try to reclaim some powers or to refashion the EU in some way in exchange for helping Ireland. The government, because of investments by UK banks in Ireland, will insist there is national self-interest in help a close neighbour. It has no interest in starting a fight in Brussels, but the Eurosceptics are more vocal than in the early months of the coalition.
And that's what the Irish bail-out has done - put in play some of the big questions.
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