Dean Baker, guardian.co.uk, Monday 22 November 2010
What the people of Ireland and every country must realise is that if they agree
to play by the bankers’ rules, they will lose…
Ireland is currently experiencing a 14.1% unemployment rate. As a result of bailout conditions that will require more cuts in government spending and tax increases, the unemployment rate is almost certain to go higher. The Irish people are likely to wonder what their economy would look like if they had not been rescued.
…even a relatively small country like Ireland has options. Specifically, they could drop out of the euro and default on their debt. This is hardly a first best option, but if the alternative is an indefinite stint of double-digit unemployment, then leaving the euro and default look much more attractive.
The ECB and the IMF will insist that this is the road to disaster, but their credibility on this point is near zero…
Ireland should study the lessons of Argentina. Breaking from the euro would have consequences, but it is becoming increasingly likely that the pain from the break is less than the pain of staying in. Furthermore, simply raising the issue is likely to make the ECB and IMF take a more moderate position.