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"I wonder why US and UK publications publish this topic over and over."

"Ireland and Greece are tiny countries. Their problems are totally blown out of proportion."

I think you answered your own question, I bet if you asked a number of Americans which had the larger population of Ireland or Germany, a significant number would not know or would even guess Ireland. I also bet if you asked a number of Americans which had the larger population of Ireland or Massachusetts, a large majority would say Ireland, even residents of Massachusetts.

> I also bet if you asked a number of Americans which had the larger population of Ireland or Massachusetts, a large majority would say Ireland

I’ll take that bet.

To save other people Googling, populations and GDP per capita (2009, USD) of the economies under discussion. All from Google apart from GSP (gross state product) per capita of Massachusetts, which is from Wikipedia.

  Ireland:        4,450,446 (51,049)
  Massachusetts:  6,593,587 (49,875)
  Germany:       81,879,976 (40,873)
  UK:            61,838,154 (35,165)
  Greece:        11,283,293 (29,240)

The figure for GDP per capita in Ireland seems pretty high.

Bailout is EUR 85bn which comes out to about 25,233 USD per capita.

That high GDP # is the real estate bubble about to burst. Unfortunately most of my erstwhile countrymen (including the bankers) thought it meant spending power. I find it painful to read about, honestly.

That's because Ireland has low corporation tax (12.5%) so multinational companies export their profits there and artificially inflate the GDP.

Agreed; isn't this why this discussion should use GNP? Or would that miss some other relevant detail?

That may change however:

http://www.belfasttelegraph.co.uk/news/local-national/republ...

"Ireland's low corporate tax level of 12.5% should be doubled to 25% as part of a common rate across Europe, a cross-party group of MEPs have said."

The GDP per capita is inflated in both the US and Ireland.

In Germany the GDP is similar in the West and lower in the former East, which will need many more years to reach the level of the former West Germany.

I bet if you asked a number of Americans which had the larger population of Ireland or Germany, a significant number would not know or would even guess Ireland.

This may be true of the average US citizen. Probably much less true of readers of thestreet.com or any US publication about economics. And certainly not true of folks reading economic publications in the UK, who are well aware of the relative sizes of Ireland and Germany.

Spain, on the other hand, has fifty million people, and is being talked about as possibly the next domino to fall. If that happens, it's much more serious than Greece or Ireland.

PS. Ireland and Massachusetts are roughly the same size; I think anyone can be forgiven for not knowing which is larger.

I understand your argument that "it makes everyone aware that changes in economic policy are needed. ", however isn't the Euro basically a straightjacket preventing each individual country from setting its own monetary policy?

For example, the Central Bank of Ireland can't set its own interest rates, and basically needs to follow whatever Germany decides. Or Greece can't devalue its currency to attract more capital, etc.

I'm far from the expert but this has been my understanding so far.

Yes. Good thing too, because monetarism worked very badly and led to continual economic instability prior to the ERM. Multiple currencies are an expensive inconvenience and an impediment to trade. Comversion fees are also a stealth tax.

How did we ever make it to 2010AD?

It's not impossible, just expensive and annoying for business or frequent travelers. When I was younger European currencies used to go up and down like yo-yos.

Through numerous wars, periods of famine, and economic hardships?

I didn't get the feeling that the parent to your post was suggesting that the EuroZone was the only way to possibly survive.

> isn't the Euro basically a straightjacket preventing each individual country from setting its own monetary policy?

It's generally a Good Thing for the people in the Eurozone that their governments can't impoverish them by printing money.

These countries are facing cuts to government spending and wages while increasing taxes. This causes debt to be more of a burden. Devaluing the currency would make paying for these things easier. Devaluing too much would cause problems as well.

So your advocating stealing from those who are responsible (savers) and giving money to those who are reckless (debtors). Also, when inflation happens it normally hurts the middle class and lower class much more than upper do the lower classes not owning assets - stock/land etc.

People who hold cash != savers.

Plenty of people with significant equity in their home still have negative cash positions for most of their lives regardless of the amount of money they save. On the other hand people that short stock can have significant cash holdings without saving anything.

To the extent that home has intrinsic value, the homeowner is saving. To the extent it gains value against the dollar it transfers wealth from non-homeowners. In fact this is the express goal of the current Fed policy.

Ireland faces a situation of genuine societal collapse. The unemployment, lack of social services, etc. affect everyone regardless of who is a saver or not. I'm advocating that in a dire situation the best course of action be taken. In Ireland's case that would be devaluing the currency. There is too much public debt and raising taxes, lowering pay are not viable solutions.

The monetary policy, yes. But taxes are different for example.

Ireland has a GDP of around 160 Billion.

Yeah this problem can easily be resolved by looking at Irelands GDP. After all, if Irelands economy collapses the UK won't be affected. Each individual Irish citizen only spends about £4k a year on British products & services.

And hey, if the UK economy is severely affected then that won't affect the rest of Europe!

Small population, small landmass, small GDP, the worlds second largest software exporter.

Do you honestly believe GDP is a real indication of a countries ability to affect the economy of those it is surrounded by and nothing else should be considered?

There is zero chance that Germany will go back to the Mark.

The Germans have a history of spending silly money on contingency plans for things that will never happen. Oh wait, they don't.

Grow up, look at the bigger picture and face facts.

/rant

You can grow up yourself.

Not the whole economy of Ireland is affected. It is just parts - banks, real estate, etc.. The companies are still there and their products and services are still valuable. When the EU keeps the banks from collapsing, makes credit available, then Ireland is still alive.

To keep a tiny country like Ireland with 6 million people running should not be difficult for an EU of 500+ million people.

The real parts of Ireland consisted of US companies tax havening there to avoid paying tax on their sales in the UK and Germany. And a housing boom that meant that more new houses were built than the country actually has people for!

The traditional solution for Ireland will still work - every body between the ages of 20-40 simply leave the country. With EU passports they can work in other countries even if the US doesn't decide to let them all move there this time.

500 million people majority of which (except UK, Germany, France - to name only the big ones) are already living off EU welfare?

> The Germans have a history of spending silly money on contingency plans for things that will never happen. Oh wait, they don't.

The German General Staff had and has contingency plans for everything. The General Staff was Prussia's / Germany's secret weapon for two centuries, until it was copied by other nations.

But that's just the German army, I don't know about the civilians.

I think you should read about LTM and what it wrought. Look what Lehman's collapse did. When everyone is over leveraged then it doesn't take much to get a crisis rolling. If Ireland and Greece aren't propped up then Deutche Bank will suffer. It was German and French banks that lent to Greece and Ireland. Do you really think DB would survive if their Irish and Greek bond holdings become worthless?

The largest amount of Irish debt is actually held by the UK who aren't a member of the euro...

Yet, it is still true that DB holds a lot of Greek and Irish debt. If Ireland and Greece fail to pay this back then there will be severe problems for Germany even though they are small countries.

So what? The task is to keep the banks alive. Much of the rest of Ireland is still there. There are still people, buildings, companies, services, machines, ...

The problem is that, early in the crisis, the Irish government took the bank debts onto its own books.

So it's now in a situation where defaulting on the loans is no longer a matter of a large private institution failing (which is bad enough) but a sovereign government (and Eurozone member) repudiating its obligations.