Greek tragedy may provide us with a window
Different stories are emerging over the Greek bailout with various strategies being proposed by the ECB, Germany and other European States.
Added to the mix is the warning from rating agencies that certain proposals on involving the private sector in the extension of the Greek aid package would result in a downgrade to junk of Greek Government debt.
The result of this "kicking the can further down the road" is to delay the inevitable restructuring of Greek debt.
A further extension of its programme doesn't solve the fact the Greek economy has too much debt.
Instead of focusing on whether or not Ireland would follow the Greeks, we should focus on what the Government should do to prepare for the inevitable Greek restructuring.
The lack of co-ordinated action within Europe means an opportunity may present itself for the Irish Government to propose a plan to Europe. This plan would need to include an extension of the current programme allowing the State to fund itself past the end of 2012.
Support for the domestic banks would need to be formalised with the provision of term funding as rumoured prior to the bailout announcement in March.
The final factor would be to achieve a reduction in the interest rate charged on the package.
The reduction in the budget deficit will still have to be achieved in coming years, but Ireland's ability to achieve this under a broader IMF/EC/ECB package including the term funding for the banks will become more realistic to the markets.
The provision of an extended and large facility from the IMF and Europe would, in a perverse way, make accessing markets in the future easier.
As once the market sees Ireland has no need for funding and is working towards its deficit targets, markets would open up.
The provision of term ECB funding for the domestic banks would make it easier for the banks to move back to normality, providing credit to the economy and helping to improve the growth prospects of the economy.
Instead of focusing on whether Ireland will default on its obligations if Greece does, it would be better to discuss what opportunities such an event would give the Government to restructure the current deal in Ireland's and Europe's favour without a default.