Daily View: Ireland's debt and the euro

The Irish debt crisis has highlighted the problems of eurozone membership - a country cannot devalue its currency in order to deal with debt nor can it set its own interest rates. Commentators ponder whether the euro will survive.

Conservative MP John Redwood suggests in his blog that Ireland's bail-out will only work if underlying problems are solved:

"[M]any EU states spend too much and collect too little in tax revenue. They need faster growth to make bringing these two figures into balance easier. Will they get faster growth from the policy mix favoured by the EU and IMF? The inability to devalue within the Euro removes one of the normal ways heavily indebted and less competitive states sort out their problems. Euro states have to do it by cutting wages and cutting public spending, which is tough and difficult to do in democracy."

In the New Statesman Paul Mason points to another problem with the euro:

"The eurozone comprises a currency and a central bank without a government. But a currency is only as sound as the public finances of the state that issues it. In the eurozone, fiscal discipline was supposed to be enforced through treaty obligations and common oversight. But it was not. This is the systemic flaw, previously hidden behind what the journalist Gillian Tett has called 'social silence', that was exposed by the global crisis."

James Meek in the London Review of Books blog argues that the loan could bring on a new stage in the privatisation of government by the financial system:

"What is being presented as a loan by the British government to the Irish government is, in fact, a loan by the British government to the remnants of Ireland's commercial banks, which are melting down. And the reason the British government is lending to the Irish banking system is because British commercial banks lent so much money to Ireland in the boom years. British banks hold less than £10 billion worth of Irish government bonds. But they hold something like £130 billion worth of other Irish debt - property loans, business loans."

In the Financial Times Neil Hume calls the argument that the UK is helping out Ireland due to a sense of community "risible", pointing to the fact that Ireland is the UK's biggest trading partner.

Finally, chief executive officer of the Centre for Economic and Business Research
Douglas McWilliams said on the Today programme that he predicts the euro only has a 20% chance of survival, saying it has fundamental problems:

"It's going to be quite hard. There are lots of challenges. First of all they haven't managed to harmonise inflation; secondly they haven't managed to harmonise borrowing. And thirdly they've got this problem in some countries of property price inflation, property price boom and bust."

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