This bail-out blackmail must be stopped
Taxpayers cannot be expected to pay for all the banks’ bad debts.
By Jeremy Warner
19 Nov 2010
In a slip of the tongue two years ago, Gordon Brown claimed to have “saved the world” by galvanising his fellow leaders into a collective bail-out of the banking system. As is now ever more apparent, all he did was administer a little bit of roadside pain relief. The underlying injuries still fester.
What’s happening in Ireland right now is not, at root, a sovereign debt crisis, but another banking crisis. The reason it has spilled over into a problem of national solvency is that it has overwhelmed the country’s capacity to afford further bail-outs.
By the same token, the reason European policymakers are trying to force a rescue package on a reluctant Brian Cowen, the Irish prime minister, is not because Ireland has run out of money: in fact, its debt is fully funded until the middle of next year. It is because they fear Ireland’s banking crisis will become their own, as bad loans to Irish banks trigger a wave of insolvencies across Europe.