PIIGS stuffing
It sounds like George has buckled and that we're now in for £7bn of the Irish bail-out:
“Ireland is our closest neighbour. And it's in Britain's national interest that the Irish economy is successful and we have a stable banking system. Britain stands ready to support Ireland.”Did he have a choice?
In the circs, probably not.
Take a look at the handy chart above. It's taken from last week's IMF report on the UK economy, and it shows UK banks' exposure (aka loans) to Ireland along with their exposure to three of the other PIIGS. As we can see, they are in for well over £100bn to the Emerald Isle, and getting on for £300bn to the group as a whole (ex Italy).
In theory of course, we should be able to say to the banks, that's your problem mate - you lent the money on all those housing estates in the peat bogs, now you can reap the rewards.
But in practice, we're stuffed. Post-Crock, we rediscovered the fact that taxpayers have to protect retail bank depositors here at home. And that means guaranteeing retail banks. Which as things stand, means guaranteeing all UK banks.
But let's hope George is at least insisting on some pretty tough conditions - no backsliding on spending cuts and close IMF monitoring.
We've only got to look at Greece to understand what could lie ahead in Ireland. Their existing government is going down, and its successors will look for every opportunity to backtrack and obfuscate. We must not accept that.
Who's next?
Well, as the chart shows, UK banks have chunky exposure to Spain, and if you're going to do Spain you might as well chuck in Portugal. We Northern Europeans will soon be on the hook for the whole lot.
It doesn't bear thinking about, but here's a small suggestion - when it comes to the crunch (ie outright default) HMG should do a debt for villas swap. Hard-pressed UK taxpayers could then be offered cheap villa holidays in the sun to take their minds off their 70% tax rates.
Apart from that, Tyler can see no light in the Euro-gloom.
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