Jan 21, 2009

The newest banana republic

The Financial Times called Ireland a banana republic and in doing so led us into the honoured halls of banana republicanism. We join such countries as El Salvador, Belize, Nicaragua, Honduras, Zimbabwe, and Guatemala.

It's true if you think about it. The hallmarks of a banana republic are large wealth inequities, poor infrastructure, poor schools, a "backward" economy, low capital spending, a reliance on foreign capital and money printing, budget deficits, and a weakening currency. Let's just see how many of those boxes Ireland ticks...

1. Poor infrastructure
2. Backward economy
3. Poor schools
4. Reliance on foreign capital
5. Budget deficits
6. Weakening currency
7. Poor health system

Bet the EU is regretting letting us into the euro now. What a corrupt little country we are. Fintan O'Toole states it best.

There were two possible conclusions that any rational investor could have drawn. One was that cooking the books is illegal, but that the authorities were rushing to protect a well-got banker with strong connections to the ruling party. The other was that naked deception is perfectly legal in Ireland and that you can’t trust any accounts published here. It is not easy to say which conclusion is more damaging, but either way the consequences were bound to be disastrous.

And they were. The Independent newspaper of London reported: “Analysts were also stunned that the practice was not illegal in Ireland.” The Financial Times called Ireland a banana republic. The description in 2005 by the New York Times of Dublin as “the Wild West of European finance” was widely revived. Whatever shred of credibility the Irish banking system still had was torn apart. The nationalisation of Anglo Irish, with a potential doubling of the national debt, became inevitable.

We have to understand that the “reputational damage” that has caused this crisis is not merely to the banks – it is to our entire system of governance. Once the Government locked itself in, apparently by accident, to the message that FitzPatrick broke no laws, our legal system became, from the point of view of international investors, a joke.

We are an international joke. We are lucky that the EU doesn't just kick us out of the euro. Despite the idiotic mumbling of some, it would be suicidal to leave the euro. Might as well write the country off.

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