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The dream has ended.

And the nightmare has truly begun.

I was looking for a place for a comment based on a post by Yves Smith while you were posting this diary and while dojero was posting the Geither and Strauss-Kahn diary. I ended up posting the comment in today's Salon before I discovered these two new diaries, both of which are on the same topic. I cross-posted the comment on Geither and Strauss-Kahn and, at the risk of being totally ridiculous, will cross-post it here, as it adds to the excellent collection of sources you have assembeled:

Doing anything effective to increase employment, especially high wage employment, would be counter to the interests of the banks. This is something Geithner will not allow, even in Ireland, as this post by Yves Smith demonstrates:
Geithner Blocked IMF Deal to Haircut Irish Debt

(Yves first quotes Keynes on the intent and effect of the Treaty of Versailles on the German economy, particularly, the requirement that Germany export over a third of its annual coal production!)

Now what, pray tell, does this have to do with Ireland, and Geithner? Geithner is as doctrinaire and short-sighted a defender of bankers' privileges as the Allied Powers were of their rights to make Germany pay for the costly and bloody Great War.

We had noted that the Irish could have stared down the EU and held out for a bailout of its banks only, and were mystified at the quick capitulation.  Consider this section of a very instructive op-ed by Ireland's highly respected economist Morgan Kelly in the Irish Times (hat tip reader disgruntled observer):

   On November 16th, European finance ministers urged [finance minister Brian] Lenihan to accept a bailout to stop the panic spreading to Spain and Portugal, but he refused, arguing that the Irish government was funded until the following summer. Although attacked by the Irish media for this seemingly delusional behaviour, Lenihan, for once, was doing precisely the right thing. Behind Lenihan's refusal lay the thinly veiled threat that, unless given suitably generous terms, Ireland could hold happily its breath for long enough that Spain and Portugal, who needed to borrow every month, would drown....

    Ireland's Last Stand began less shambolically than you might expect. The IMF, which believes that lenders should pay for their stupidity before it has to reach into its pocket, presented the Irish with a plan to haircut €30 billion of unguaranteed bonds by two-thirds on average. Lenihan was overjoyed, according to a source who was there, telling the IMF team: "You are Ireland's salvation."

    The deal was torpedoed from an unexpected direction. At a conference call with the G7 finance ministers, the haircut was vetoed by US treasury secretary Timothy Geithner who, as his payment of $13 billion from government-owned AIG to Goldman Sachs showed, believes that bankers take priority over taxpayers. The only one to speak up for the Irish was UK chancellor George Osborne, but Geithner, as always, got his way. An instructive, if painful, lesson in the extent of US soft power, and in who our friends really are.



An appropriate response by the Irish Government would be to give US debts a 95% haircut as a tribute to Timmy.

 

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 7th, 2011 at 04:12:20 PM EST

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