Friday, 11 March 2011

Ireland's nuclear button

There is a popular theory going around that Ireland has some form of nuclear button at hand in the event of negotiations with EU partners on our debt problems and their assistance don't go as we had planned.

The hypothesis is that if they don't give us what we want we will default and German banks, or the German economy will be at threat.

Just a quick reality check here. While the sums involved are indeed extremely large and will be fatal to the Irish economy, they are a fatal threat to neither the German banks involved nor the German economy. What they would be is a severe financial irritant.

What those debts are, under potential default, is a massive political concern for Angela Merkel and the German electorate. Irish default would be enough to be extremely annoying politically the very people we are trying to get something out of.

So the more we talk about such a possibility, the more trenchant the German government is likely to become as they attempt to send the message to their voters that they (Germans) won't be picking up the tab. That strikes me as completely counterproductive from an Irish perspective.

1 comment:

Fungus FitzJuggler III said...

Yes, but!

They have no need to threaten to default, the Germans and English are fully aware of the consequences. While we get more funds from these sources than we send to them, we just smile and agree with their posturing for their political concerns. Once their well is dry and the cash flow becomes negative, then the default weapon is cocked and primed.
Irisheconomy have accepted but not posted any of my comments either.

They seem to be very politically correct now, anodyne even.