So a default of the Irish banks would hit

a) The Irish state

The Irish state already took this hit a couple of years ago, when it took leave of its senses and issued a blanket guarantee of all Irish private bank debt. This is about the Irish state saying "yeah, about that guarantee? Go suck on it."

b) The ECB.

I am not sure you are in a  strong position with the threat: I will just default and hit myself and my own central bank.

A rather important subplot in this story is that the ECB is behaving more like a hedge fund than like Ireland's central bank. Even if it were true that most of the debt would hit the ECB and EFSF, that wouldn't be that bad an outcome, all things considered.

- Jake

Friends come and go. Enemies accumulate.