By Simon Johnson
Ireland will get a package of support from the EU and the IMF. Will the money and the accompanying policy changes be enough to stabilize the situation in Ireland or more broadly around Europe? Does it prevent Ireland from restructuring its debt – or move the Irish (and other parts of the European periphery) further in that direction?
And who gains from the delay and mismanagement we continue to see at the highest European levels?
This is complicated economic chess within Ireland, across Europe, and at the international level. In my Bloomberg column this morning, I suggest we look several moves ahead, recognizing the underlying political dynamic:
There is a much more general or global phenomenon in which powerful people cooperate to build an economic model that provides growth based on a great deal of debt. When the crisis comes, those who control the state try to save their favorite oligarchs, but there aren’t enough resources to go around
Here is the present problem: It’s not just the Irish elite that is under pressure and struggling to sort out who should be saved. It’s also the European bankers who funded them.
If the Europeans continue to fight among themselves, regarding who bears what losses – and who has to face what kind of public accountability – which other countries gain on the global stage?
Who has the ready money available to recapitalize the International Monetary Fund, if needed? And it will be needed if Spain comes under serious pressure.
Who understands the strategic concept that piles of “reserve currency” can give you great political leverage? It is hard to find such thinking among today’s generation of American politicians.
And who is already playing international economic chess at the highest level?
For my full assessment, please follow this link: http://www.bloomberg.com/news/2010-11-19/ireland-crisis-might-give-china-break-it-seeks-simon-johnson.html