I thought I would hoist this comment by Gary O’Callaghan onto the front page:
Karl observes in his article that Ireland’s citizens must be feeling foolish today: “After being reassured time and again that all depositors and senior bond creditors of … Anglo Irish Bank must be saved in the name of European financial stability, they find out that Europe’s leaders now believe hair-cutting depositors is fine and fair and doesn’t cause contagion.”
In a related dynamic, there appears to have been a subtle turn by many commentators (including on this site) from the “serves them right” school of economics. That School, most righteously established by LBS, argued that Irish taxpayers should carry the can for bank losses because they “should have” sought better supervision on banks. Many from the same School now appear to argue that depositors (creditors) “should have” been more careful in the Cypriot case and deserve to suffer for their stupidity. Serves ‘em right!
Of course, there is a practical limit on the burden that Cypriot taxpayers can bear in this case but such considerations never bothered the LBS School before. Do they now grant that Irish taxpayers were not fully “to blame” (and that burden-sharing from bondholders was warranted)?
Would they now agree with Karl that “the moral grounds for a retrospective compensation deal for Ireland have increased substantially with this new development?”
The problem with theorizing from morals, of course, is that the ground can shift (and come back to meet you).
I am tempted to add that if we ask “cui bono”, there may be less inconsistency here than at first glance meets the eye.