Ireland Avoids Bankruptcy By Taking Loan From EU
Ireland gave in today and took a loan from the EU to stave off banking problems caused by its banking sector. One can guess Ireland will not be the last country doing this.
It was only a few years ago that Ireland was a bell weather country in Europe. It had an economy that was growing incredibly strongly and the good times were afoot. Now, it is a bell weather country for another reason. It is the first of the so called PIIGS to rollover and request financial help from the bailout fund set up by the EU for member countries.
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The PIIGS are coming home to eat. These countries, Portugal, Italy, Ireland, Greece and Spain, have long been viewed as having major economic problems. Greece was obviously the first to go, but that was hardly a surprise as they weren’t so much a country as a chaotic gathering of interests when it came to their government and economy.
The fall of Ireland is something all together different. Ireland is a highly organized and strong economy. So, what is the problem? The banking system. It jumped into the collateral markets when things were going good. When things turned bad, the Irish banks had massive toxic holdings that were taking them under. The government has nationalized one bank and pumped money into others in an effort to stop the bleeding. Alas, the banks are in worse shape than the government is in good shape and the country faces a dire economic situation.
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Ireland will be taping into “only” a 140 billion dollar credit line as needed to remedy its problem. One shouldn’t criticize the country too much. The rest of the PIIGS are in just as bad of shape if not worse. In fact, the UK had to pass major austerity programs to rescue itself and the USA is facing major upheaval if it doesn’t change its ways soon.
They say the Great Recession is over, but it hardly seems like it. Governments have been privatizing private debt so fast that now the governments are in serious problems. Much of Europe will need bailouts. Things are not much better in the States. Towns and cities are failing right and left. California is hanging by a thread. All and all, it isn’t looking like 2011 will be much better than 2012.
Hold on for the wild ride.