Irish Eyes Are Smiling After EU Bank Bailout Deal

A blog about business and economics.
June 29 2012 10:21 AM

Irish Eyes Are Smiling After EU Bank Bailout Deal

147356143
German Chancellor Angela Merkel, left, speaks with Irish Prime Minister Enda Kenny during the a European Council meeting on Thursday in Brussels.

Pool photo by Guido Bergmann/Bundesregierung/Getty Images.

You've probably heard about "austerity" budgeting in Ireland, but the Irish government has actually been spending tons of money to prop up its banking sector. The austerity's been for everyone else. And that's why Irish Finance Minister Michael Noonan is smiling brightly after a European Union summit agreement he calls "game changing" for his country.

For the eurozone as a whole, I don't really think this is much of a game changer, but it's a huge deal for Ireland.

Advertisement

Here's the basic issue. In the United States you can have a situation where a particular region has a huge property bubble. It happened to Texas in the go-go Dallas days, for example. Then the bubble collapses. A lot of people lose their jobs, a lot of people are stuck with bad debts, and a lot of banks fail. But the costs of the bank failures are covered by the FDIC, which has a nationwide funding base. In Europe that's not how it works. When the Irish property bubble collapsed, people lost jobs and were saddled with debts and the Irish state wound up bearing the price of the banking collapse.

The European Union agreed last night to partially change that and let a continent-wide bailout fund do direct bank bailouts. That'll take a bunch of bank debt off Ireland's books and let them ease off the fiscal austerity. Meanwhile, the European Central Bank is supposed to create some new level of eurozone-wide banking supervision.

None of this is what I would have been focusing on, and it leaves tons of problems remaining, but it's definitely great news for Ireland, which was really getting crushed by these bank debts but otherwise has a mostly good reputation and now may be able to wriggle its way out of austerity town relatively quickly.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

History

The Self-Made Man

The story of America’s most pliable, pernicious, irrepressible myth.

Does Your Child Have Sluggish Cognitive Tempo? Or Is That Just a Disorder Made Up to Scare You?

Mitt Romney May Be Weighing a 2016 Run. That Would Be a Big Mistake.

Amazing Photos From Hong Kong’s Umbrella Revolution

Rehtaeh Parsons Was the Most Famous Victim in Canada. Now, Journalists Can’t Even Say Her Name.

Television

See Me

Transparent is the fall’s only great new show.

Doublex

Lena Dunham, the Book

More shtick than honesty in Not That Kind of Girl.

What a Juicy New Book About Diane Sawyer and Katie Couric Fails to Tell Us About the TV News Business

Rehtaeh Parsons Was the Most Famous Victim in Canada. Now, Journalists Can’t Even Say Her Name.

  News & Politics
Damned Spot
Sept. 30 2014 9:00 AM Now Stare. Don’t Stop. The perfect political wife’s loving gaze in campaign ads.
  Business
Moneybox
Sept. 30 2014 10:44 AM Bull---- Market America is overlooking a plentiful renewable resource: animal manure.
  Life
Atlas Obscura
Sept. 30 2014 10:10 AM A Lovable Murderer and Heroic Villain: The Story of Australia's Most Iconic Outlaw
  Double X
Doublex
Sept. 29 2014 11:43 PM Lena Dunham, the Book More shtick than honesty in Not That Kind of Girl.
  Slate Plus
Slate Fare
Sept. 29 2014 8:45 AM Slate Isn’t Too Liberal. But… What readers said about the magazine’s bias and balance.
  Arts
Brow Beat
Sept. 30 2014 10:48 AM One of Last Year’s Best Animated Shorts Is Finally Online for Free
  Technology
Future Tense
Sept. 30 2014 7:36 AM Almost Humane What sci-fi can teach us about our treatment of prisoners of war.
  Health & Science
Bad Astronomy
Sept. 30 2014 7:30 AM What Lurks Beneath The Methane Lakes of Titan?
  Sports
Sports Nut
Sept. 28 2014 8:30 PM NFL Players Die Young. Or Maybe They Live Long Lives. Why it’s so hard to pin down the effects of football on players’ lives.