are saying they would rather get themselves out of the financial hole they’re in than accept money from international financial bodies.
Baptism Of Eire
Independence: Ireland is in deep economic trouble but, despite pressure from its European cousins, it is reluctant to accept a bailout. The unyielding Irish stubbornness is both refreshing and prudent.
The roaring Celtic tiger has now become a scrawny and battered Gaelic alley cat. After years of strong growth, its economy contracted 2.2% in fiscal 2008, 8.3% in 2009 and 1.1% in 2010. Unemployment has doubled to 13.6%.
The Irish real estate market, which boomed just a few years ago, has turned. Government debt as a share of GDP is 70.3%. The country’s credit rating, downgraded from its AAA perch in the spring, has fallen as low as AA- (Standard & Poor’s) and A+ (Fitch).
Given the accumulation of poor numbers, it’s no surprise that a Bloomberg poll found last week that more than half of global investors believe Ireland is on its way to default.
Portugal, Spain, Germany and the European Central Bank are pressing Dublin to take a bailout. But Ireland, which has never accepted a bailout from the International Monetary Fund, says no.
And it’s just not government officials. The private sector, as represented by John Montgomery, who works in a Dublin soft drink plant to support his family, doesn’t like the idea of being bailed out.
“I’d be a patriot like everybody else,” Montgomery told Bloomberg last week. “There is something out there that is spooking people, and they just need to tell us what the problem is. The country is ready to do whatever needs to be done.”
Ireland’s independent streak is also exhibited in James Geoghegan, a nurse, who said, “We are a sovereign country, and we would hope that our political leaders and masters would have been able to get us out of this mess.”
Both men reckon they’ve lost income, as much as 25% for Montgomery, to the raw economic conditions. But like many of their countrymen, they simply don’t want to give up the sovereignty they would lose to a bailout.
And it’s more than blind obstinacy. By entangling itself with the IMF or EU, Ireland’s economic and monetary policies would be guided by outside forces that have a record of giving bad advice.
Ireland is no victim. It created its own problems. The government spent far too much during the growth years, and now is in a hole.
Should that same government be trusted to fix itself?
Of course. Better to give it a chance than to socialize its previous mistakes and increase the moral hazard of giving a government further incentive to make poor decisions for which it knows it won’t be held responsible.
In refusing a bailout and embracing responsibility, Ireland will set a healthy example that other nations should follow.