Ireland, two days ago, showed the world a 4-year austerity plan, which includes unprecedented cuts in government services, a boost in income taxes (about 2 percent higher) and property taxes (said to be about €200 per house), and a cut in the minimum wage. And after all that, international observers say it is probably not enough.
Ireland got to this point because of its decision to keep its banks standing two years ago. That commitment has turned out to be more costly than anyone planned on at that time, so now the government has to conserve its cash to prove that it will be able to meet its other obligations.
The Irish government has spent more than $100 billion on its giant banks so far, and it may all have been for nothing. The austerity budget, necessary only because of the bank bailout, is a worse blow to the economy than the failure of the banks would have been. Worse, the banks may have to be wound down in the end anyway. According to reports, the government has started looking for buyers for some of the banks it now owns, a move that was not part of its original plan, but so far, there are no interested buyers.