"Osborne considers billions in Irish loans"
This morning's FT (£) leads with the news that George Osborne is considering "billions of pounds in British loans to help bail out Ireland". The Chancellor travelled to Brussels last night amid expectation that Britain would make a contribution to an EU and IMF support package. I had thought the maximum amount Britain would pay would be £6bn if all of a £51bn EU facility for Ireland was drawn down. The Mail mentions an exposure of £12bn, however. That must be at the very high end of unlikely possibilities.
The sense of alarm was heightened when the EU President, Herman Van Rompuy, said "we must all work together in order to survive with the eurozone, because if we do not survive with the eurozone, we will not survive with the European Union." If the €uro fails, he is probably right, the whole EU project will be tested to its limits.
But it is not just the European project that is at stake here. If Ireland and its banking sector fail all European economies will be affected, including London's banks. Nonetheless, the TaxPayers' Alliance has questioned a bailout. The TPA's Matt Sinclair said that "British taxpayers don’t want to see their money poured into a black hole trying to bail out that failed project though, particularly with money so tight here at home... The Government need to reject this deal or they will be betraying the interests of British taxpayers." On his blog Douglas Carswell has said that "Britain should do all it can to support our friends and neighbours. Not by bailing the Euro out, but by helping countries out of the Euro."
Ireland should leave the €uro. So should Greece, Spain and Portugal. On the €uro William Hague and other Eurosceptics have been 100% vindicated. One EU-wide interest rate has been dangerously inappropriate for economies at different stages of the economic cycle. Just as the British economy started to recover in 1992 Ireland will start to recover if it leaves the €uro straightjacket and sets an Irish interest rate, for the Irish economy. I cannot be as implacable as the TPA, however. Osborne should try to persuade Ireland to leave the €uro but if he cannot, a bailout might be necessary to stop the Irish contagion affecting the whole European continent. We are not in ideal world scenarios here.
PS Brilliant column by Simon Heffer in The Telegraph warning of an economic "dark age" in Europe.