David McWilliams, in this week’s Sunday Business Post column, says a Greek sovereign default is imminent. As I noted here last week, both he and MIT economist, Simon Johnson, said the EU bailout plan would not fix Greece’s woes. Last week, Daniel Gros wrote something similar in the Financial Times. Confidence in Greece is just not high.
So where does little Ireland fit in to all of this? Our main problem is that if Greece defaults, bond markets, speculators, hedge funds and God knows who else will look for the next weakest country to pick off. Spain has huge problems and Ireland is borrowing €500 a week just to pay the bills. McWilliams suggests that, instead of trying to outwit the market, Ireland should acknowledge the inevitable and essentially go in to voluntary receivership since the involuntary route will be forced on us sooner or later.
Meanwhile, for a country in desperate need of cash, weren’t we very good to bail out the Greeks to the tune of €480 million last week? And where did we get that money? We borrowed it, of course. As McWilliams says:
Unfortunately, that buyer of Greek bonds is our government using borrowed money to buy Greek bonds when even the Greek public is selling.
How mad is that?
Here’s another question: How much of the €480 mil will we see if the Greeks default? If we need a bailout, will the Greeks/Spanish/Portuguese be able to help? Probably not. The Germans are going to be pretty peeved if we are the fifth or sixth country coming cap in hand. Maybe we should go in to administration now.