In an interview with Today FM’s Matt Cooper on Thursday evening ,the Daily Telegraph’s International Business editor Ambrose Evans-Pritchard spoke in detail about the current woes facing the Irish economy. Central to his analysis were two noteworthy points. Firstly, according to Mr. Evans-Pritchard, Ireland is the only, yes only, economy in the world adopting contractionary fiscal policy measures. Secondly, Ireland is in dire need of two policy measures; a devaluation of its currency and quantitative easing, neither of which can be adopted given our participation in the EMU. One must pose the question therefore, are we not better off out of the Euro than in it?
This issue is being debated throughout Europe. In early 2005, cracks in the Euro were beginning to emerge as rural areas in the north of Italy began to only except Lira in exchange for goods and services. Not too much to worry about. However, in recent times the problems have become larger and more frequent. In a recent blogpost, Mr. Evans-Pritchard claims that the Germans are giving up on the Euro. Ex-Bundesbank Chief Karl Otto Pohl has recently stated that both Ireland and Greece are in danger of defaulting on their sovereign debts and may be forced out of the Euro. Even worse, former German Foreign Minister Mr Fischer now thinks the monetary union is beyond saving!
So, should we stay or should we go? For now, its a definate stay! An exit from the EMU would force interest rates to soar, our credit rating would likely fall further and speculative attacks on the currency could ensue. A cocktail for further disaster, hardly the thing we need right now!
