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Double Dip?

Ireland's economic meltdown: what the world says

“The folly of cuts,” says the Guardian; the drop is “unexpected” says WSJ; “the first to face a double dip,” says Telegraph.

THE WORLD’S MEDIA are not mincing their words this morning in covering the news that Ireland’s economy has slipped into decline once more; many of the papers are blunt in their appraisal of the barren economic landscape.

The decline makes Ireland “the first country since the great recession to face a double-dip downturn,” says the Daily Telegraph, saying the CSO’s figures “renew concerns that fiscal austerity without other forms of relief risks tipping the economy into a self-reinforcing spiral.”

The paper quotes a founder of the ECB, Otmar Issing, who says that while it would be “suicide” for any country to leave the Euro, it could well happen anyway “in such a disastrous situation that extreme parties get a majority” – perhaps a further instruction to the beleaguered Fianna Fáil government to avoid an election if at all possible.

The Guardian puts a more British spin on Ireland’s troubles, instead leading with the warning of Ed Balls, currently seeking the leadership of the Labour Party there, that the Irish figures “are a stark warning to governments across Europe including our own. [Austerity] is not a credible economic strategy, because lower growth and fewer people in work and paying taxes ultimately leads to a bigger deficit.”

The British coalition, it says, had lauded its Irish counterpart for the head-on tackling of the budget deficit – but that support hardly seems helpful while the yield on government debt continues to rise, and rise, and rise.

Ireland’s economy “battered” – NYT

The New York Times is bloody in its assessment – its headline leading with the word ‘battered’, and its first paragraph unequivocally citing Ireland’s economy as “ailing”.

It also raised the daunting prospect that the Irish economy, hamstrung by a real estate market that has slumped 50 percent and banks that are barely lending, may not soon recover…

As the government is largely liable for the country’s worst-performing loans, a stagnating economy means more real estate loans going bad that the government must cover.

The Wall Street Journal remarks that the euro lost 0.3% of its value yesterday on the back of the Irish news, and follows a similar them to the Guardian in remarking that austerity, though well intentioned, may have done more harm than good.

“Ireland’s deepening troubles raise doubts about the wisdom of the stringent fiscal austerity measures that the former Celtic Tiger and other European countries have put in place,” it says, “which effectively hamper consumers and take cash out of the economy.”

It also notes, uniquely in the world’s press, that the widening gap between the performances of Ireland and Greece and that of Germany means it will gradually become harder for the European Central Bank to set monetary policy for the bloc at large – and elsewhere features a profile on Lenihan’s ongoing struggle with pancreatic cancer as well as his campaign to rescue the country’s financial sector.

The WSJ’s ‘The Source’ blog coyly notes that it’s beginning to feel like the ailing European economies are taking turns to reveal bad news. “If it’s Thursday, it must be Ireland’s turn. That’s what it’s starting to feel like: investors taking pot shots at one after the other of the euro zone’s ‘peripheral’ economies.

“One day it’s Greece. The next it’s Portugal. Then Ireland. Then maybe Spain or Italy. And back to Greece, Portugal, Ireland… A daisy chain of disaster and desperation.”

The Financial Times (subscription needed) notes that the cost of Irish Credit Default Swaps – essentially a type of insurance against default – took a massive rise yesterday as the struggling economy raised fears that the cost of the banking bailout would leave the country unable to function, and elsewhere discusses the likelihood of the government allowing Anglo to default in an attempt to stop it having to do so itself.

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