Sunday 24 September 2017

Stephen Kinsella: We wanted reform but lacked guts, now troika makes our tough calls

The reform agenda is being driven by troika members, including Ajai Chopra of the IMF, who are not tied to a web of vested interests
The reform agenda is being driven by troika members, including Ajai Chopra of the IMF, who are not tied to a web of vested interests

WRITING this column sometimes gets me into trouble. One of the articles that has most engaged and enraged readers began with the idea that, far from imposing austerity on Ireland, the troika actually helps to relieve it by loaning us money at a low rate when no one else would and by encouraging reforms no one in the Irish political system has the stomach for.

I disagree with the troika's assessment on burning bondholders. I would have roasted them. But, when we applied for a package of assistance measures in 2010, the total benefit of reduced payments on the outstanding bondholders relative to the cost to Ireland's reputation of not honouring contracts for debt was too low, and it is easy to see how the troika pushed Ireland into supporting bust banks and private bondholders in exchange for a managed path of reductions in government expenditure and increases in taxes.

The alternative was an outright sovereign default of a nation without its own currency, and (of course) within the eurozone. The troika has been spectacularly poor at explaining this tradeoff to the public, and I berated them for this.

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