IRELAND may need to call in International Monetary Fund (IMF) assistance if bank losses rise any further or the economy deteriorates beyond current forecasts, Barclays, one of Europe's largest banks, has said.Full article HERE.
In one of the bluntest assessments yet of the Irish economy and banking crisis, the company said assistance from the EU or IMF was not needed -- "at least not yet''.
The report also suggested the Government should seek to do a "deal'' with bondholders at Anglo Irish Bank.
The bank said Ireland had a comfortable position, having raised most of the money it needs this year, but that the country wasn't completely safe.
"Should further unexpected financial sector losses or macro-economic conditions deteriorate... the Government may need to seek outside help."
The bank said a credit line from the IMF could "provide a suitable funding vehicle should this be required by the Irish Government''.
Now is this really a surprise? Ireland, like Greece, owes its debt in a currency it does not control. And like Greece, it has experienced a massive credit bubble these past ten years. EU driven austerity has a deflationary effect on an economy. It reverses the prior feedback loop of increasing credit, a feedback loop that hit a wall anyway, and accelerates a new feedback loop of credit and demand destruction.
I'm not suggesting that Keynesian stimulus spending is the answer. What I am saying is that austerity alone, while unavoidable in the long run, will not re-create the same conditions that existed prior to the financial crisis. It may even foster overshoot to the downside. Is Ireland ready for the consequences?