The bailout of Ireland this week may help to learn a few lessons. First, that some ill-thought comments by the German Chancellor may precipitate a crisis of sovereign debt in a matter of days. Second, that the “markets” obstinately remain a mystifying force in the eyes of the media. Journalists get lyrical when markets “turn their attention to a country” or “remain alert about that country”. In fact such invisible hand is nothing but a bunch of traders and hedge funders speculating with debts and derivatives. Bringing sovereign debt down is part of their job, not a sign of crisis of the Euro or else.
After the crisis of Greece in May and now the rescue of Ireland, the big question now remains: for who long will the taxpayers will subsidise the bankers’ recklessness? And the second question is who is next? A snapshot of the candidates may help place the bets
- Ireland: big debt of private banks partially fuelled by housing boom and turned into a liability to taxpayers
- Portugal: big government debt without housing boom
- United Kingdom: very big debt, both of private banks and government partially fuelled by housing boom and turned into a liability to taxpayers
- Spain: small government debt, private banks allowed to get away with liabilities of the housing boom
The currency, Euro or Sterling pound is notoriously absent from these factors of instability. Let the race begin.