Erin Go Bankrupt

May 23, 2011 11:45am

DUBLIN — The public focus of President Obama’s first presidential visit to Ireland is standard smiley fare: he and the prime minister reaffirmed the US-Irish relationship, and the president took in a visit to the small town of Monegall, where his maternal great-great-great grandfather was born.

But behind the delighted squeals of the crowd is an economic catastrophe that the president and the world will have to address.

In the wake of Ireland’s financial collapse, the European Union and the International Monetary Fund gave Ireland a $121 billion loan in November. On Friday, the IMF warned that despite that bailout, Ireland’s financial situation may worsen still.

"For policy matters that are under their control, the Irish authorities have been decisive and are doing all they can to get ahead of their problems," Ajai Chopra, IMF mission chief to Ireland, said last week. "But we do need to recognize that they may not be sufficient."

The IMF said that the EU needed a new “comprehensive plan” for Ireland and other struggling European countries.

Ireland’s debt accounted for roughly a quarter of its economy. Then the nation was hit by severe housing and credit crises. The debt is now larger than its economy. (Earlier this year, Michael Lewis wrote a great story about the Irish economic crisis  that I highly recommend.)

In their public remarks at Farmleigh House in Dublin this morning, Irish Prime Minister Kenny said he had explained to President Obama “the seriousness of which Ireland and its new government — thereby myself and the presence here of the Oireachtas — are dealing with the issues that affect our country — the banks and the economic situation and our seriousness of intent in dealing with our budget deficit; also in conjunction with the conditions of the IMF bailout, dealing with the situation there.  And we expressed appreciation for the general support of America in that regard.”

President Obama said he was “glad to see that progress is being made in stabilizing the economic situation here.  I know it’s a hard road, but it’s one that the Irish people are more than up to the task in achieving.”

Amidst the severe austerity measures the government has had to impose – reducing health benefits, cutting pensions, laying off workers — Irish eyes are not smiling. Unemployment here is around 15%.

"It's a tough, tough slog," Michael Collins, the Irish ambassador to the U.S., told USA Today.   "Everybody has had to take a share of pain."

Economists warn that there is a lesson here for the U.S., with its skyrocketing deficits and a daunting national debt. 

- Jake Tapper




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