Irish taxpayers now working for Goldman Sachs, BNP Paraibas et. al...

I had held off on posting about Ireland because I read some pieces that suggested the final deal was going to involve Irish banks' bondholders taking some losses.  From RTE news, I read that:

The Minister [for finance, Brian Lenihan] also said that subordinated bondholders would be dealt with aggressively but said the European partners had ruled out making senior bondholders pay as it would have a spill over effect on the euro.

See also the Financial Times.  The IMF favored senior bondholders taking some losses, but the Europeans wouldn't accept it, and the Irish government caved.

What I was going to say was that the Irish problem is essentially about the fact that the Irish government decided, at the beginning of the crisis, to guarantee all of Irish banks' debts.  What they should now do is repudiate that guarantee...if not explicitly, than by refusing any bailout that doesn't, effectively, involve a partial writedown.  If they don't, it's likely the next Irish government will repudiate, if they can find a legal mechanism for doing so (and my guess is that they'll find *something*).  The current plan is basically asking all Irish citizens to tithe themselves for years to ensure that those who unwisely lent to Irish banks fueling the Irish real estate bubble, suffer no loss.  A real political winner if I ever heard of one.  Sinn Fein --- that's the party that was formerly the political wing of the Irish Republican Army---has already won a byelection, in Donegal, presumably over voter anger at the economic and debt situation.  Moreover, the plan will likely be contractionary in a Keynsian sense, making it still more onerous for Irish firms and workers to produce the surplus to render to the bondholders.

About two thirds of the Irish deficit is payments to uphold this guarantee of bank debt; the Irish deficit is not primarily a matter of excessive government spending otherwise.

More on Ireland and Europe from Ken Rogoff

...and on Ireland from Barry Eichengreen.  No accident, I suspect, that this blast was originally published in German at Handelsblatt.