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So a default of the banks alone will not achieve much. It has to be default of the irish government.
The Irish banks got 100 billion or from the ECB and quite substantial sums from the Irish government.
That replaces short term lending and deposits, not bonds which are long-term liabilities.
The once existing long-term bondholders continue to be long-term bondholders. Or have traded the bonds with other private bondholders since the ECB is not known to be buying bank bonds (at least, nobody is screaming bloody murder if they're doing it: they just complain about buying government bonds). Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
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