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What is necessary, if it is necessary, is a new deal about the interest rate. But that is not the same as a default on sovereign debt engineered to hit only foreigners.
And am not sure why you want to argue about german economic policies 2008-2010: Clearly fiscal expansion, reaching their height in the first half of 2010. Is that really in doubt anymore?
This whole Ireland is insolvent meme is nonsense. There have be quite a number of countries with a public debt around 100% of gdp.
This whole Ireland is insolvent meme is nonsense.
Perhaps you should be arguing this point with the bond raiders, who seem unusually keen to assure everyone otherwise.
And if you swear fealty to "the markets", how do you think they will react to a default?
In the case of Ireland, if you think Ireland is solvent, then it is in fact being subjected to an irrational run (withdrawal of short-term liquidity). The proper response in that case is for the Central Bank to provide liquidity at a reasonable non-market rate.
Instead of that the Central Bank tells the Irish government to call in the IMF.
Also, when the European Council tries to organise a collective fiscal facility, Germany screams "no bail-out clause!". When the ECB tries to buy sovereign bonds in the secondary market, the (German) Chief Economist and the Bundesbank chair wrongly claim that is forbidden by treaty (the treaty forbids buying at issue, which is bad enough already). The European Commission, Council, Ecofin and Central Bank are all such neoliberal market-worshippers that they actually take the market's assessment of Ireland's solvency at face value.
The Irish "rescue package" entails, under any plausible scenarios, including the ones put together by the Ecofin, an actual increase in the Irish debt burden, while at the same time demanding IMF-style "conditionalities". Some "rescue". No wonder the Irish government didn't want to be "rescued" and had to be forced.
Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
What's happening is that the Irish sovereign is being funded at 5.7 % when it should be funded at 0.0 %.
The fact that the ECB has finally woken up and started doing its job w.r.t. the private Irish banks (a decade late and a billion short) does not excuse the fact that the ECB still isn't doing its job and printing money on demand for the Irish government.
Austerity can only be implemented in the shadow of a concentration camp.
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