Exception

While official denials continue to emanate from Dublin about a bailout for the Irish economy, the working assumption of everyone else appears to be that it will happen.  Professor Morgan Kelly provides an insight into why while a former IMF economist, Simon Johnston, advices them to do it now rather than later.

However, Coffee House blog reveals some of the possible detail of the bail-out.  The bail-out may not be restricted to the credit facility available to Eurozone countries but also involve access to the emergency funding mechanism that all EU members potentially contribute through.  This would involve a potential £6bn loan bill for the UK with it appearing the Treasury consider Ireland an exception to the previous rule:

"It's thought that any bailout to Ireland will be made from the European Financial Stability Facility Fund – a eurozone mechanism from which we're exempt – but there's also talk (£) of deploying the EU's emergency fund, which could make us liable for a loan of up to £6 billion. Whereas Treasury officials were keen to keep a solution to the Greek crisis within the eurozone, they are now telling the papers that, "This is not like Greece. [Ireland] are close trading partners."

It also sums up the difficulty of such decisions:

"It rather sums up the peculiar situation facing Europe, including the UK. Failure to act means that the contagion from Ireland could spread. But action carries with it clear costs, both fiscal and presentational. It's true to say that few domestic voters will relish the idea of propping up ailing economies elsewhere, particularly at a time of gruel and restraint at home. And what kind of precedent is being set should other countries, such as Portugal and Spain, go the way of Ireland themselves? A few years ago, the Celtic Tiger was a proud, growling beast. Now we must grapple with the consequences of its death."