Many will have heard Alan Ahearne on Morning Ireland explain why we should try to work our way out of the crisis by ‘sticking to the plan’. He clearly believes that the Eurozone will survive in its present form and that the costs of Ireland defaulting and/or unilaterally leaving the currency union would far outweigh the benefits.
In their recent ESRI publication, John FitzGerald and Ide Kearney set out in some detail why they believe the Irish debt problem is manageable and why we should should stick to the plan. This was already posted by Philip Lane and has been discussed here.
Nouriel Roubini, on the other hand, believes that ‘sticking to the plan’ has no chance of working in Greece, so it should organize an orderly default and re-introduce the drachma. Some of the arguments he makes are compelling and many of them apply with some force to Ireland, especially the difficulty of restoring competitiveness and growth through a deflationary internal devaluation.
We need to evaluate the prospects for the Eurozone and our place in it.