Stop Projecting Your Euro Neurosis, Revisited

Will Hutton, in today's Observer, utterly nails the Irish issue, rightly pointing out how the British narrative of Ireland's financial meltdown is a caricature, determined wholly by Britain's own issues, rather than the reality of what has happened in Ireland over the last decade:

But in Britain the vast inflation of Ireland's public sector wage bill, the fecklessness of its bankers who allowed lending to balloon to four times Irish GDP, largely on the expectation of never-ending property price increases, and the grubby corruption of its political elite are all pushed to one side. Voices on right and left insist that what is happening in Ireland is the fault of the EU and the euro. If Irish interest rates could have been a fraction higher, they argue, like those in Britain, Ireland would not have had a property and credit boom.

The British narrative ignores Ireland's insane public sector pay bill, the fact that the economy had become addictively dependent on the construction industry and rising property prices, reckless bankers, and corruption, cowardice, and a lack of imagination among the governing parties and the opposition which lacked the nerve to challenge them on economic grounds. It blames everything on Ireland's membership of the Euro and sees the events of the last week as a grand Franco-German plan to take over Ireland.

Nonsense, of course, not least because Ireland's no prize nowadays and because given her debt, Britain could quite easily wind up in as bad a situation:

A second financial crisis would confront Britain with Irish-style dilemmas despite the independence of the pound. We have proportionally more bank lending in relation to our GDP than even the Irish, some £7 trillion or five times GDP.

Yes, Britain has worse debt levels than Ireland does, and it managed this without being 'trapped' in a catch-all interest zone, which is how the Eurozone keeps being scorned as. The Euro, as Hutton points out, isn't the problem here. It might, however, be part of the solution.