Eichengreen on the Irish bailout

Leading economist and economic historian Barry Eichengreen penned a scathing op-ed on the Irish bailout today in a leading German paper (English version here). It pains me to say this. I’m probably the most pro-euro economist on my side of the Atlantic. Not because I think the euro area is the perfect monetary union, but ...

By , a professor at Indiana University’s Hamilton Lugar School of Global and International Studies.

Leading economist and economic historian Barry Eichengreen penned a scathing op-ed on the Irish bailout today in a leading German paper (English version here).

Leading economist and economic historian Barry Eichengreen penned a scathing op-ed on the Irish bailout today in a leading German paper (English version here).

It pains me to say this. I’m probably the most pro-euro economist on my side of the Atlantic. Not because I think the euro area is the perfect monetary union, but because I have always thought that a Europe of scores of national currencies would be even less stable. I’m also a believer in the larger European project. But given this abject failure of European and German leadership, I am going to have to rethink my position.

The Irish “program” solves exactly nothing – it simply kicks the can down the road. A public debt that will now top out at around 130 per cent of GDP has not been reduced by a single cent. The interest payments that the Irish sovereign will have to make have not been reduced by a single cent, given the rate of 5.8% on the international loan. After a couple of years, not just interest but also principal is supposed to begin to be repaid. Ireland will be transferring nearly 10 per cent of its national income as reparations to the bondholders, year after painful year.

He also has some interesting things to say on friction between the EU and the IMF on the joint loan package. The whole piece is well worth a read.

David Bosco is a professor at Indiana University’s Hamilton Lugar School of Global and International Studies. He is the author of The Poseidon Project: The Struggle to Govern the World’s Oceans. Twitter: @multilateralist

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