Bailout of Ireland

Ireland will be getting €85b to cover their debt, in exchange for austerity measures on top of what they've already implemented, and have yet to improve the country's financial standing.

Discuss.

I've said it before and I'll say it again. Spending yourself to bankruptcy good policy does not make. Regardless if it's a welfare state or economic stimulus.

And this is relevant because the US is following the exact same road.

"Allah may guide their bullets, but Jesus helps those who aim down the sights."

On the contrary! Ireland had very little debt of its own, until several banks failed and their debt was assumed by the state. Then they realized that they couldn't handle said debt, took on austerity measures in order to attract investment, which only served to butcher the economy, after which investors were scared off.

You're getting them mixed up with Greece. Ireland did not do much spending on anything prior to 2008; it was the private sector that did it.

edited 26th Nov '10 9:47:52 AM by EnglishIvy

Regardless of source, dragging a country heavily into debt is not good policy. Ireland, Greece, Spain, the UK, Portugal, Iceland and more all have one thing in common in regards to their sudden austerity measures and bankruptcies: They all assumed a crapload of debt they could not afford.

Sound familiar with recent Congressional budgets in the US? Sound familiar with situations in Texas, California, Michigan, New York and Colorado?

It's all the same problem. One way or another they are assuming unsustainable levels of debt. Many times it's through spending, sometimes like Ireland it's just bad policy towards things like banking debt.

"Allah may guide their bullets, but Jesus helps those who aim down the sights."

I agree, though perhaps not for entirely the same reasons. I've always thought that large levels of debt are generally bad. I know that goes against the current economic grain, but I can't see how high interest payments constantly chipping away at the national strongbox, and putting all our eggs in the banking sector, can be a good system.

Surely spending within ones means would ultimately leave the government with more money?

EDIT: Thats not a Captain Obvious statement by the way; the argument is that you need to spend every penny you can get to keep the economy grinding on. But this seems like appalling planning to me, not to mention unsustainable.

edited 26th Nov '10 11:17:40 AM by GameChainsaw

The term "Great Man" is disturbingly interchangeable with "mass murderer" in history books.

Relevant to what? Why would it be relevant if America wasn't doing the same thing?

...

OK, here's what happened.

In 1971, we joined the EU. Since we were a poor country, we qualified for a shitload of subsidies and aid money. The governments put invested all that in education and infrastructure, and also reduced corporate tax to the lowest level in all of Europe.

Due to the low tax and well-educated, English-speaking workforce, American multinational companies set up operations in Ireland and hired local people. Times were good. This was around the turn of the millennium.

However, during the 2000s, a lot of people decided to invest in property. Builders did a roaring trade, and there was so much building going on that everybody decided they absolutely had to invest in property, because that was the way forward. This whole thing was predicated on the idea that property prices would only ever go up. Due to all this building, construction accounted for about 24% of our GNP by 2006.

There was also significant money to be made in land rezoning. The way I understand rezoning, a developer would buy a patch of, say, farmland, have the local TD redesignate it as housing land, and sell it to the builders for a profit. Since housing land is worth more than farmland, the developer increases the value of his property without doing anything to change it, and thus garners wealth for not providing any good or service.

To pay for all this rampant investment, people needed money. Because everybody was suddenly employed by those American multinationals, the country was awash with cash, so the banks figured everybody would be able to pay back their loans. Bankers were given impressive bonuses based on the number of loans they approved (hey, more loans mean more interest), and so were approving every loan application that came across the table, no matter how impossible it was for the applicant to actually pay it back.

Meanwhile, the middle classes suddenly came down with a severe case of keeping up with the Joneses, and felt the need to constantly one-up each other with things like houses, new cars, Christmas decorations, crazy stag and hen nights weekends, elaborate weddings, Communions, and Confirmations, five holidays a year, all sorts of new clothes, all-organic food, etc, etc. This, too, was paid for with money borrowed from the banks.

Also, the politicians of all parties were tacitly complicit in this, as they quietly encouraged the construction and property bubbles to grow and grow, partly because they were investing themselves, and partly because the builders and developers made generous donations.

The government also invested in all kinds of fancy vanity projects while never putting anything away in case of the inevitable recession. Big mistake.

Then, in late 2008, the house of cards all came crashing down. In America, all the people who had gotten sub-prime mortgages suddenly defaulted, causing the banks over there to lose a massive chunk of their money and thus making them unable to lend money to legitimate customers.

Over here, that resulted in a weakening of the fortunes of the multinationals that everybody was working for. At the same time, property prices peaked, as people found themselves unable to afford any houses and stopped buying. The entire construction sector collapsed, and since that made up 24% of GNP, the entire economy was hurt.

With the country reeling, all those construction companies found themselves unable to pay back loans or debts. Their employees lost their jobs, and were unable to pay back private loans. Banks lost the same kind of money as those in America did, which destroyed small and medium businesses. Meanwhile, the big companies and the American multinationals found themselves without a cash stream with which to do business in Ireland, and began to pull out.

In desperation, the government tried dumping a massive pile of money borrowed from the EU into the banks in 2009. This failed.

After that, they tried to do what Sweden and Finland did in the 90s when they faced a similar crisis, and set up an organisation called NAMA to buy up all those bad loans in order to improve the banks' credit ratings and capital, and thus allow them to get lending again. So far, nothing much has happened on that front, due to everyone but Fianna Fáil thinking it's a bloody bad idea.

Just in the last week, the government has managed to wrangle €77 billion from the EU in exchange for a severe four-year austerity plan, during which they will raise the money and try to pay Brussels back. Measures already announced include reducing social welfare and minimum wage, reintroducing third-level fees, reducing minimum taxable income, reducing the salaries of all new civil and public servants (existing servants' salaries are protected), and increasing VAT.

They have also taken a majority stake in Anglo-Irish Bank, Allied Irish Bank, and Bank of Ireland, the three biggest banks in the country, and the ones who were most responsible for buggering up the economy. This means that the burden of paying back the debts has been shifted off the developers who got us into this mess and on to the taxpayers, only some of whom contributed.

Basically, we're all doomed.

edited 26th Nov '10 11:31:26 AM by VampireBuddha

Ukrainian Red Cross

I'd like to hear some more about this from tropes in Ireland. I know we have some. I haven't heard very much about this situation, what little I have heard leads me to be thankful my mother emigrated. Ireland actually does appear to have been as batshit insane as my mother described.

EDIT: Ninja'd by an actual Irish person. So, it appears to have been a garden variety property bubble in a developing nation. Well, that shit sucks but I remember a similar thing happening in SE Asia in The '90s. Although that was exacerbated by rampant foreign currency loans without hedging.

EDIT THE 2ND: I see something similar happening here in Australia before too long. We have an unchecked property bubble going on as well. In this case, it's caused by the opposite - ballooning land prices due to the government refusing to zone more housing land.

edited 26th Nov '10 11:35:19 AM by TibetanFox

When did your mother emigrate?

EDIT: Yeah, that's pretty much what happened. We got too much money too fast, and now we're paying for it.

edited 26th Nov '10 11:36:38 AM by VampireBuddha

Ukrainian Red Cross

The '70s. For extra added fun, she initially emigrated to England, just when  ^{the IRA}

decided it was going to fuck with her life yet again by blowing up people in London.

As a result, she was constantly stereotyped as a terrorist and "Irish Scum" the moment she opened her mouth.

Eventually, she decided things just weren't going to ever get any less stupid and took a 10 pound boat for Australia instead. The only thing she regrets about the decision was giving in to the demands of the Big, Screwed-Up Family to help bring some of the relatives over. Since that kinda ruined the best part of being in Australia - being on the other side of the planet from all the madness.

So they did do that. I stand corrected.

But the main cause was still the bank failures. They were a lot more disciplined than Greece was.

Blind Final Fantasy 6 Let's Play

It's not too difficult to be more disciplined financially than Greece was.

Yes, let us mock Greece.

Dumbo

Well Greece was pretty corrupt. They cooperated with American financial firms to fake 10s of billions of dollars in budget numbers while racking up 100s of billions in debt nobody knew about under the capitalist regime for 10 years. It fell apart when the socialists got to power and nobody was paying off the financial firms anymore so the gig was up.

Only thing worse than rampant spending is doing it when you really don't have the money, it seems.

Proud member of the IAA What's the point of being grown up if you can't act childish?

A preview of Ireland's upcoming austerity program. Among the tax hikes is an increase in the sales tax, but no increase in the corporate tax.

They seem to be really intent on keeping the corporate tax at 12.5%.

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