What If Ireland was Declared Bankrupt

Well if all the workers in the education and health services had their salaries cut by half,...that shouldn`t effect the quality of the health or education services.That is the solution as these workers cannot blackmail the government.There is nowhere for them to emigrate to anymore.
 
According to The Irish Times Irelands education spend in 2007 was the fourth lowest of 30 OECD countries. At least we now have the chance to top one international list. Why dont we struggle and toil with the goal of bringing that fourth place up (or down ) to first (or last). Surely a noble goal. The American Chamber of Commerce in Ireland disagree but who are they to pass comment??
 
That placing can be misleading.For example in 2007 the government had much more tax revenue than 2009 or will have in 2011.So education spend as a % of total government spend would rise dramatically as total government spend falls.Then the education budget would come under the spotlight as being too generous and would be cut.The model of educating our people so we can attract inward investment or let them emigrate to get good jobs abroad doesn`t stand up to scrutiny anymore.We need a leaner meaner education system.
 
will . it's not possible if a country is getting lost or it going to bankrupt because of the politicians who hold ,..
 
effect on the euro

all the talk of doom and default may have a good side affect, a fall in the value of the euro, this is what ireland needs more than anything, i think the ecb will have to allow it fall for the benefit of all countries. there was an interesting article in the economist on the euro, and the fact that more changes happened in a few weeks in europe than happened over the the previous decade. I think the solution is to allow the euro to fall by at least 30% and to allow countries like ireland to repay debts over the very long term.
 
joe sod said:
all the talk of doom and default may have a good side affect, a fall in the value of the euro, this is what ireland needs more than anything, i think the ecb will have to allow it fall for the benefit of all countries. there was an interesting article in the economist on the euro, and the fact that more changes happened in a few weeks in europe than happened over the the previous decade. I think the solution is to allow the euro to fall by at least 30% and to allow countries like ireland to repay debts over the very long term.
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Any gain in exports from a weaker € would be offset by an increase in import costs, especially oil. Too much credit of Germany's recovery is being given to the weaker €. I'm not trying to dismiss the fact that a weaker € is having a positive effect on German exports. But the main fact is that Germany still produces things that the rest of the world wants in large quantities, i.e. cars, electrical appliances and industrial engineering expertise. And all of these are seeing increased demand in especially China. Add to that the fact that Germany is actively reducing public and private debt levels and saving more, and you have the recipe for recovery, not by merely devaluing the currency.
 
Chris said:
Any gain in exports from a weaker € would be offset by an increase in import costs, especially oil. Too much credit of Germany's recovery is being given to the weaker €. I'm not trying to dismiss the fact that a weaker € is having a positive effect on German exports. But the main fact is that Germany still produces things that the rest of the world wants in large quantities, i.e. cars, electrical appliances and industrial engineering expertise. And all of these are seeing increased demand in especially China. Add to that the fact that Germany is actively reducing public and private debt levels and saving more, and you have the recipe for recovery, not by merely devaluing the currency.
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but europe isnt just germany and the european economy isnt just about germany, whether the ecb likes it or not they will have to allow the euro to fall significantly and allow inflation to rise, of course prices wont rise in the weak countries like ireland because the economies are too weak, but in the strong ones. Therefore the weaker countries will regain competiveness. Either way they dont have much choice .
 
joe sod said:
...a fall in the value of the euro, this is what ireland needs more than anything...I think the solution is to allow the euro to fall by at least 30%...
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By value you mean the exchange rate. The primary test of an exchange rate is that it balances imports and exports. At Eurozone level that is broadly happening which is not surprising given the freely floating nature of the currency. Even Ireland with its peculiar sterling/dollar exposure is not having an issue with its Balance of Trade.

So the euro exchange rate is not an issue when considered from the point of view of what it is meant to achieve - a BoT neutrality. But could it be manipulated to reduce real government debt?

It is conceptually possible to visualise all prices being increased by 30% and all incomes being increased by 30% with the exchange rate reduced by 30%, no change to real output i.e. no "competitiveness" factor. This new exchange rate would also strike a BoT neutrality. But the nominal economy would be 30% higher and so the Debt/GDP ratio would be equivalently lower.

This would of course incur massive and unfair wealth transfers from those with nominal savings to those with nominal debts. Leaving this aspect aside the practical problem is how does one manipulate a 30% devaluation of a freely floating exchange rate when BoT considerations do not require it?

The first tactic would be to lower interest rates. But there is no further to go with this tactic and it has been matched by our competitors. The remaining tactic would be massive dumping of euros by the ECB on the international markets. This too could result in competitor CBs matching the tactic and everything going into a hyper inflationary spiral. Finally, no matter what tactic is used, the transition to the new paradigm would be slow and extremely painful because of structural frictions.
 
joe sod said:
but europe isnt just germany and the european economy isnt just about germany, whether the ecb likes it or not they will have to allow the euro to fall significantly and allow inflation to rise, of course prices wont rise in the weak countries like ireland because the economies are too weak, but in the strong ones. Therefore the weaker countries will regain competiveness. Either way they dont have much choice .
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That wasn't my point. My point is that even a weaker € is no guarantee that production will increase. In Germany's case it is the fact that they are producing stuff the rest of the world is willing to pay a premium for, while at the same time the public and state are trying to reduce debt levels and expenses.
There are two ways for a central bank to promote a weaker currency: lower interest rates and increasing money supply. Now the ECB has done and is doing both of these just like most other central banks in the world. But they haven't been doing it to the same extent as e.g. the Fed or BoE, which is why even now the € is relatively strong compared to them. But irrespective of the actions of the ECB, it is the market that decides the value of the currency. In the last 2 weeks Japan dumped a load of yen onto the market to decrease its value against the dollar. This resulted in a sudden rise in the USDYEN rate, but within days it is back to where it was.
Inflation is always and everywhere a monetary phenomenon created by governments and central banks. If the ECB creates more inflation then it will hit Ireland as much as it will hit other countries.
You can also take a for granted that Germany will resist any inflationary policies of the extent you are suggesting. And without Germany the € is pretty much a basket case.
 
"You can also take a for granted that Germany will resist any inflationary policies of the extent you are suggesting. And without Germany the € is pretty much a basket case."

if the euro became a basket case it would suit ireland to some extent, also germany cannot easily leave it, it would be devastating for the german economy also as it exports so much to other european countries and it woud have to wave goodbye to the money owed to it by ireland, greece etc. Germany may not want a weaker euro and inflation etc but maybe thats what it will get.
 
Was there any comments on this? I agree they would be helpful
 
joe sod said:
if the euro became a basket case it would suit ireland to some extent, also germany cannot easily leave it, it would be devastating for the german economy also as it exports so much to other european countries and it woud have to wave goodbye to the money owed to it by ireland, greece etc. Germany may not want a weaker euro and inflation etc but maybe thats what it will get.
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Currency valuations are a direct reflection of economic activity and monetary policy. Compared to other western countries the ECB has been relatively tame in its policies. If Germany's economic strength cannot outpace the weakness of the weaker members then yes, there will be very little Germany can do to avoid a weaker currency.
I think you are overly pessimistic as to the consequences of Germany leaving the Euro. Yes in the short run it would be quite a difficult time, and those exposed to bad debt, i.e. PIIGS bonds will have to rightly take the consequences. However, the country would greatly benefit from much cheaper imports. There is always more than just the effect that immediately hits the eye.
 
Slim said:
Can we please discuss this further? If Ireland 'defaults' or the IMF/EU steps in, what will happen to:

1) deposits in Anglo or INBS, BoI and AIB
2) deposits in An Post (certs & bonds)
3) deposits in NIB, Ulster & other non Irish banks, e.g Rabo. Nationwide, Investec
4) public service pay & jobs?

Slim
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I'd like to know the answer to this also.
I don't know whether it's scaremongering, but people are beginning to talk about withdrawing any money they have in deposit accounts, as it's only secured until the end of Dec 2010!
I wouldn't have a penny to my name if it all went the way of the IMF!
 
I don't see an answer to your direct question Slim, I also would like to know should I take my few bob out of the bank.
 
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Presumably if the IMF cut salaries by 40%, the affected individuals would have no choice but to default on their debts.

Such a scenario could be horrific - People defending their property with baseball bats and being lauded by the public for doing so.
 
Hand it all back ...

Actually lads, here's a thought: With the way we've totally screwed up our economy, what if we hand over the 26 counties to the British for a few years, let 'em sort out the mess. Then a few years on we can start the whole saga again to get the lot back, all 32 ... maybe 31, Leitrim's sh**e, they can hold on to it ... then after another 50 years, once we've screwed it all up again through our collective greed and ignorance we can just start the cycle again ... what d'ya think ... might be a winner?
 
interesting point.......I raised a similar sentiment with friends only yesterday....
re staple ourselves to the mainland for a decade or two and offer the naysayers and gaelgoirs etc bed and board on the islands along with the bankers.
 
sunrock you are absolutely right.This is why Bertie Ahern and many other fianna fail politicians dont have bank accounts.
 
Nobody seems to be able to give a definitive answer to what would happen to deposits in the event of Irish default - thats a question Id like Brian Lenihan to address. When my account in INBS matures in a couple of weeks,its heading for a RABO direct account, regardless of the extension of bank guarantee in Ireland. Am I wrong to think Irish bank guarantee will be worthless if state defaults? If state defaults will EU basically pick up the tab?
 
sunnygirl said:
Nobody seems to be able to give a definitive answer to what would happen to deposits in the event of Irish default - thats a question Id like Brian Lenihan to address. When my account in INBS matures in a couple of weeks,its heading for a RABO direct account, regardless of the extension of bank guarantee in Ireland. Am I wrong to think Irish bank guarantee will be worthless if state defaults? If state defaults will EU basically pick up the tab?
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The guarantee is worthless as it is, because the state could not possibly pay out all deposits even in a small bank. That is exactly why Irish banks cannot get money on the open market and are forced to borrow short term from the ECB.
 
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