Monday, 24 January 2011

Ireland going for broke

So, my post last week stating that the Irish government would be lucky to reach the weekend seems to have, more or less, come to pass.

Prime Minister Brian Cowen has resigned as leader of his party, Fianna Fail, but intends to stay on as Prime Minister. However the Greens have pulled out of the coalition leaving Biffo without the majority he needs to rule. Despite this Biffo is determined to stay on running the country for another six weeks or so. Why? Well, the stated reason is the need to pass the Finance Bill, this being the legislation underlying Ireland's bailout loan of €70bn approx from various sources, including the EU, the IMF and the UK. (The Greens are happy help get this law on the books before they dissolve parliament.)

Biffo's real problem is that he has already spent €10bn of the bailout loan, despite not having got the Finance Bill enacted. And if the Finance Bill doesn't get passed then the Irish government risks more or less instant bankruptcy.

Ironically Ireland helped bailout Greece in early 2010 with a €1bn hand out, for which they are receiving 5.5%. Meanwhile they are now borrowing their own bailout money at closer to 6.0% - that's not clever!

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