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By Philippe Legrain ADD COMMENTS

I spent a fantastic weekend in Kilkenny, at Kilkenomics, Ireland’s first economics (and comedy) festival. Despite (and because of) the crisis, it was a sell-out. Congrats to Richard Cook and David McWilliams for putting on a superb event, hopefully the first of many.

The Irish government now appears to be in talks with the EU about a possible bailout, but politicians don’t want to lose face by accepting help.

Despite the huge housing bubble and now bust, it needn’t have come to this, as I explain in Aftershock: Reshaping the World Economy After the Crisis.

The Irish government had very small debts going in to the crisis.

Its crucial mistake was guaranteeing the creditors of its bust banks.

Now it’s bust too.

An EU/IMF bailout without restructuring the banks’/government debt is not the solution.

Irish taxpayers would be bled dry to pay off investors who took a punt on lending to Irish banks.

Those creditors should take a haircut (or lose their shirts).

The way forward is debt restructuring/default, with either the EU/IMF providing a bridging loan until Ireland has eliminated its budget deficit.

Posted 15 Nov 2010 in Blog

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