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11A060
Irish Spring?
by Jim Davies, 3/1/2011
I've struggled to understand quite why Ireland is in the mess of its short life (the Republic was founded in 1922) but after last weekend, its future will follow a fresh course. Perhaps as a result, all Europe too will experience a significant change. Correct me if you know better, but I believe the mess arose when Irish banks, during the early years of this Century, made lavish and ill-secured loans at home and abroad, and when the dominoes fell everywhere after the US housing bubble burst, those banks became insolvent. At that point - late in 2008 - the Irish government made its fatal error; unlike that in Iceland but just like the one here, it committed the Irish people to bail out those bankers. To do so it was obliged (though quite how that obligation arose is where I'm foggiest, and it does seem high-order folly) to accept a loan from bigger EU governments, which at $85B is so big as to seem impossible for Irish taxpayers to pay off. Accordingly, the party running the government (Fianna Fail) was soundly defeated in last week's election. If Ireland had been a zero government society none of that would have happened. Banks would have known they could assume no tax-funded safety net, so would have made loans only to credit-worthy borrowers - in their own interests. Money would be in the form of gold, not fiat paper. If any misjudged and became insolvent, they would fail and their remains be picked up by creditors. Those with deposits in them would have been hurt, but that would have resulted from their having undertaken a known risk.
The bad news is that the renegotiation might succeed, but at the cost of a big change to the Irish tax structure; since the 1990s, the government has had a very low rate of corporate tax, which has strongly attracted companies to set up headquarters in the country and, of course, provide good jobs to its 4.5 million population. This has been the mainspring of its enonomic "miracle" (though there's nothing supernatural; prosperity always follows low tax, and maximum prosperity results from zero tax) and if that were sacrificed to the Euro and its bankers, a new tragedy would descend on the longsuffering Irish. It has also been a great annoyance and rebuke to all other European governments with higher corporate tax rates, for they are foregoing those advantages; instead of following Ireland's example, they are about to do their utmost to force Ireland to follow theirs, as a condition of restructuring the big loan. If they succeed, everyone will lose. No predictions, but I certainly hope that a deadlock is reached, and that Ireland quits the EMU. A universal or widespread form of money is very fine and desirable, for it simplifies international trade with all the benefits that brings - but the Euro is not free-market money, like gold would be. Like the Punt, it is a managed, manipulated currency and that ultimately means it is controlled by governments, as is the US dollar. And it has no intrinsic value whatever.
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The new government - an alliance
between two centrist parties - has promised to renegotiate that
burdensome EU loan, while the governments of Germany and France
have indicated they will not play. Should Ireland default, it
would certainly have to withdraw from the Euro zone and return to
its old currency called the Punt, and that in turn would possibly
trigger a 
