Beggar (all) Thy Neighbours

The Irish government’s extraordinary move to guarantee all investments in Irish banks has infuriated Willem Buiter. First of all, he says, it’s illegal under EU rules. And secondly,

Financial crises may not be the best time to make friends and influence people, but the Irish guarantee is the most ‘in-your-face’ beggar-thy-neighbour provocation since medieval armies catapulted bubonic-plague-ridden corpses into the cities they were besieging. Between the attempt to favour Irish shareholders at the expense of foreign shareholders and the poaching of UK sterling deposits (and indeed euro deposits anywhere else in the euro area) through subsidy-fuelled interest rate offers, Ireland should not be surprised to encounter limited support and solidarity in the EU the next time the country is up against it, for whatever issue…

Er, actually the Irish government is already ‘up against it’ in relation to Europe, because of that little local difficulty it had with ratifying the Lisbon Treaty. It will be interesting to see how this plays out. Personally, I’m not sure I’d put money into anything ‘guaranteed’ by a Fianna Fail-led government. One delicious twist in all this is that the EU Commissioner who will have to examine the latest Fianna Fail wheeze is Charlie McCreevy, a grizzled old Fianna Fail hack. How will he square this particular barbed circle? Stay tuned.