Brussels' Plan A is junk and that's great news for us
Debt relief is clearly on the cards for Greece -- and this will enable Ireland to get a much better deal with the help of the IMF, writes Colm McCarthy
THE slow-motion failure of the European policy response to the banking and sovereign debt crises accelerated during last week. The collapse in Spanish and Italian bond prices on Monday brought both countries close to the point reached by Greece in May of last year, by Ireland in October and by Portugal in recent months. That is the point where the interest rate required by the markets exceeds what can realistically be sustained and the countries can no longer borrow.
They will then be unable to fund the roll-over of maturing debt, never mind ongoing budget deficits, without resort to non-market sources of funds. These are, for EU members, the EU institutions and also the International Monetary Fund, of which most countries in the world are members.
So Greece, Ireland and Portugal have had to withdraw from the markets and rely on these bodies to provide them with multi-year finance. There has also been deposit flight from the banks in all three countries, most notably in Ireland, and disappearing bank liquidity has had to be replaced by the European Central Bank.