Colm McCarthy makes some important political points in today’s Sunday Independent. He points out, quite correctly, that the ECB’s policy of favouring an Irish sovereign default later over a private banking default now (and it is important to be clear that this is exactly their position, whether or not they publicly admit it) is going to make it very difficult, if not impossible, to get public buy-in for the further austerity measures coming down the line; and is also virtually certain to lead to increasing anti-EU sentiment here (and in the rest of the periphery as well).
But it’s worse than that. By confusing fiscal and banking crises in the public mind, the ECB is also fuelling anti-EU sentiment in the core, since core taxpayers understandably resent the notion that they should subsidize feckless peripheral taxpayers. By contrast, greater honesty about the fact that we have a Europe-wide banking crisis would make taxpayers everywhere realise that they have common interests, and a common enemy, namely an out-of-control financial sector. In such a scenario, ‘Europe’ might be seen by ordinary voters as having something positive to contribute, since cross-border banking requires cross-border regulation. Right now, however, ‘Europe’ is seen as a big part of the problem, in the case of the ECB correctly so.
Like Colm says, it really is a slow motion train wreck.