'A Tale of Two Europes," is what the international finance nerds are calling "it" -- speculating on how long it will be before the inevitable split occurs and the EU divides against itself.

"It" being the increasing evidence that all current economic strategies being pursued by the EU -- such as higher interest rates and the protection of the banks by paying back all of their debts -- are based on what is favour-able to strong economies like Germany, and to hell with peripheral countries like Ireland which deserve what they get for their stupidity.

But the more the contagion spreads -- the more countries that find themselves forced to take a "bailout" to pay off foreign banks -- the more likely it is that the central powers will have to acknowledge that austerity without debt forgiveness won't work. Either that or sit back and watch the collapse of the European economy.

And like continent, like country -- in Ireland we have a similar split between those who are collapsing under a mountain of unsustainable mortgage debt and those who aren't. The compassion of one for the other is less than the empathy between Germany and Greece. And just as stupid.

The anti-debt-forgiveness brigade is using pretty much the same argument in relation to those in negative equity who are having problems paying their mortgages as the EU has been -- with similarly catastrophic consequences -- to countries indebted to their banks. (Both neglected to account for the domino effect.)

Tough, has been the general response. You borrowed and spent, and now you have to pay back. So what if it was our banks and economic policies (introduced for our benefit) that lent you the cash? We aren't taking any responsibility. So just shut up and put up, ja?

Or, as Nobel-winning economist Joseph Stiglitz more eloquently put it: "In effect, the International Monetary Fund (IMF) and European Central Bank (ECB) are asking ordinary Irish workers and citizens to bear the burden of mistakes that were made by international financial markets. But it is important to recognise that these mistakes are at least partly attributable to following deregulation and liberalisation policies that were advocated by the IMF and ECB and that these policies provided significant benefits to the financial sector."

Some months ago I quoted Arthur Schopenhauer's maxim: "All truth passes through three stages. First it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."

I wrote this in relation to the "serious people" who consistently advocated a full pay-off of banking debt by Irish citizens, yet refused to even countenance a discussion of debt write-offs for Irish families in negative equity who are unable to finance their massive mortgages.

"Impossible, inequitable and unfair," was the general reaction. "Moral hazard" screamed the smug.

Meanwhile, behind the scenes the "impossible" was already happening as banks started to do what banks have always done -- negotiate, re-negotiate, restructure. And in doing so, allowing people to sell up and make a fresh start.

Last week, in this newspaper, it was reported that thousands of struggling homeowners could be in line for debt forgiveness after a Dublin couple had more than €200,000 of their mortgage debt written off by their lender.

Anecdotally, there have been many other tales of banks having to concede some sort of co-responsibility with the borrower. But, shhhh, they can't make it public, otherwise the pious economic dimwits who roar that they're not paying for their neighbours' stupidity -- despite having benefited massively from all that Stamp Duty and increased public revenue -- will stage a revolt, and so far they've been more or less in the majority ... but not for long.

Last week this newspaper reported that "losing [the] family home is now the biggest fear for a staggering 41 per cent". And this is before the next two or three interest rate rises we've been promised and before the new "frontloading" budget ordered by the Troika. Leading to more businesses closing, jobs lost, etc ...

So, if it's 41 per cent now you can be damn sure it'll be way over the 50 per cent mark by next January, and there's nothing like being in the same bloody awful circumstances to bring out a warm feeling of empathy between people.

Yet many banks still prefer to toe the Government line, refuse to admit what's biting them on their balance sheets, and backload the loans by agreeing to interest-only loans/moratoriums etc, which just ensures the borrower is locked -- like Ireland -- in a never-ending spiral of debt.

But in either circumstance to mention the word "default" would scare the markets, say the "geniuses". Oh yeah, like they're not running screaming from our current approach? How much lower than junk status can we go?

So, more and more families are going to find themselves with two options. Stay in Ireland and spend the rest of their life in dire poverty, servicing a debt they know they will never pay off, in a country denuded of adequate public services. Or, hand back the keys and reluctantly flee the country, hoping to start afresh somewhere else -- never mind the fact that you're 43 with a family of four.

Tough, say the anti-debt-forgiveness crowd. No-one forced you to take out a huge mortgage on an overpriced house. If you get a discount, can I have a refund on the fiver I lost on the 3.30 at Aintree last week?

In answer, let me quote Irish economist Karl Deeter, who recently said: "I think debt forgiveness is generally a terrible idea, and have only become an advocate as I watched a system evolve whereby investors have been insulated from taking loss at the expense of largely innocent bystanders [taxpayers]. In chasing the crisis down this rabbit hole we have perhaps avoided creating zombie banks, but we are creating zombie households in their wake."

He continued: "The idea that this is a 'punishment to the prudent' [debt forgiveness] is a mistake. If so, then where is the 'prudent rage' against people receiving taxpayer-funded Mortgage Interest Supplement, which is paid to more than 18,000 households, while on the same street another person slaves to make their payments?

"Or the 'prudent backlash' by people who stayed out of the market entirely, against taxpayer money spent on rent supplement, which allows a person around the corner to enjoy a similar property for free?"

"Zombie households" are a disaster for our economy. And that's without even considering the human cost of wasted lives.

Minister Noonan wants us to spend to try to improve the economy -- but so many households, after paying their crippling taxes and mortgages, aren't in a position to do so.

Why can't they hand back the house and start over? We need their taxes and their spending power -- it's daft to destroy them. The markets know this. Forced austerity combined with crippling debt is very bad for business. That's why we're considered junk.

And now that the EU has belatedly realised that perhaps Ireland's debt crisis is also Europe's problem, similarly those who have ardently refused to accept any responsibility for their neighbours' negative equity/mortgage plight will have to cop on also and concede that 'A Tale of Two Irelands' is a house divided against itself.

And we all know how that ends.

Originally published in