According to the Central Bank of Ireland, the cost of bailing out the Irish banks from the cost of their reckless business decisions has increased by another $34 billion, on top of approximately $65 billion already spent. This news coincided with Fitch announcing another downgrade on Irish government debt. The current bill Irish taxpayers are being forced to swallow for covering the cost of the follies of the bankers is now a staggering seventy billion euros, or more than $100 billion dollars.
Hank Calenti, responsible for bank credit research at Societe Generale, said it will take another twenty years for the Irish people to pay off the money borrowed by Dublin to cover the cost of the decision by the Irish government to guarantee all the financial obligations of the private banks in the country. This means that every man, woman and child currently living in the Irish Republic is responsible for more than $20,000 in loan repayments to save their banking elite from the cost of their mistakes. Instead, it is the Irish people who will cover the losses, without any vote or input on the matter. Thus, in the wake of the global financial and economic crisis of 2008, this is what passes for Western democracy.
Having published numerous blogs over the past year on the evolving sovereign debt crisis with the EU, I want to put these events into perspective. First point, the crisis continues to escalate, despite the several supposedly decisive (and costly ) measures enacted by European policymakers. Witness the bailout of Greece, and now the bailout of Ireland, along with the countless statements from EU political actors that these massive bailouts will prevent this crisis from getting worse. The reaction of the bond markets to the Irish bailout deal is a clear wet blanket being thrown at the EU.
Next point, given the disastrous track record of the European political class, it is highly unlikely they will prevent the next debt domino from falling, namely Portugal. After that, Spain, with a vastly larger economy than Greece, Ireland or Portugal is almost certain to be the next country in need of a bailout. However, it is unlikely that Europe will be able to cobble up the resources required for a bailout of Spain.
I therefore believe that the European debt crisis is now irreversible, and the only question is how severe the consequences will be. And a final point; the United States, which has only remained afloat due to its ability to borrow cheaply, has virtually all the same vulnerabilities as the struggling countries within the EU. Once the sovereign debt crisis strikes the U.S. with full fury, all bets are off.
