Any Other Business | 20 November 2010

Caught between EU politicking and market sharks, the Irish deserve sympathy not scorn

My sympathies are with the Irish as they find themselves being shoved towards an EU bailout which they regard as a loss of hard-won sovereignty — and it’s pointless to go on scoffing at their earlier eagerness to enjoy the low euro interest rates and fountains of Brussels subsidy that fuelled the grotesque real-estate boom which ended in spectacular bust. Unlike the Greeks, the Irish accepted the need for severe austerity measures without rioting or recrimination. But their tiny economy, one fifteenth the size of Britain’s, is now a pawn in a double game. On one hand, EU leaders want to impose a bailout to prove that they can, to prevent ‘contagion’ — which is code for holding the euro intact at least until the next crisis — and, in passing, to undermine Ireland’s fiscal competitiveness by forcing an increase in its ultra-low corporation tax rate. On the other, bond traders know that the market in Irish government paper is so narrow that they can drive it down at will, making the situation look much worse than it is (Irish ministers say they don’t need to borrow more until next summer), and offering a killing for short-sellers. It can only end badly — but after the debacle, I predict, the Irish will still command more international respect than the incoherent, self-serving EU powers-that-be and their ill-conceived currency.

Poly’s pot?



If urgent injections of liquidity are what’s needed to boost economic recovery, there’s a less dangerous alternative to the inflationary mechanism called quantitative easing: selling old stuff we don’t want to rich foreigners. There have been two win-win examples this past week, both playing to the east-west theme I like to explore in this column. The first is the £53 million sale of an 18th-century Chinese vase that was catalogued alongside assorted Dinky toys and teddy bears at an auction house in Ruislip.