Monday, May 14, 2012

Euronews report on Irish austerity to bail out private bank bondholders

This is a good report from Euronews, Bailout brings deficit of trust to Ireland 05/11/2012, that describes a key aspect of Angienomics austerity in Ireland, the fact that the government agreed to assume the debt to bondholders of private Irish banks that were facing bankruptcy as the Irish version of the housing bubble ended. As Paul Krugman has repeatedly pointed out, the alternative was the one applied by Iceland, which was to put the banks into government receivership according to the established procedures, let the stockholders and bondholders take their losses, and reorganize the banks on a sound basis.

The text with the video reads:

Across Ireland empty buildings stand testament to the legacy of the Celtic tiger. A legacy which included a spectacular economic boom and a bust which led to an EU-IMF bailout based on tough austerity measures.

But is that bailout working? That question could soon be answered by the Irish people in a referendum on the EU Fiscal Treaty. How will that vote go? Like its banks and government, the Irish people have a deficit - but this time it is one of trust.
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