How Do You Say "Buggered" In Irish?

Whatever it is, I'll bet that word is on the tip of the tongue of most Irishmen today as their country staggers on the brink a financial disaster that just won't go away.

Ireland recently relented and accepted an E.U. bailout but on terms that might make the IMF look like the Sally Anns.   According to Der Spiegel, the bailout is shifting the crushing burden of the rash profligacy of Ireland's banks from the speculators onto the backs of the Irish people.

The EU has failed to make the foreign bondholders take a hit on the losses from toxic real estate loans. In particular, the ECB insisted that the interests of the German, British and French banks would continue to be protected. Instead, Irish taxpayers are being asked to pay the bill: at a hefty interest rate of 5.8 percent, to ensure the foreign creditors will get their money back rather than face any losses.

That may be something German banks welcome, but it is a disaster for Ireland. And many economists now predicts that it is just a question of time before the country defaults. " This 'bailout' will sink the Republic,"   warns economist David McWilliams in the Belfast Telegraph. "  It is the EU giving us enough rope to hang ourselves in the hope that we don't hang all of them."

If Ireland fully exhausts the EU bailout then it will double the national debt to €175 billion by 2014, he calculates, and the interest on that would come to €8.5 billion a year -- more than even the thriftiest of governments could afford.

To make sure that the state does not drown in its debts, the annual rate of growth has to be significantly higher than the interest due on the national debt, McWilliams argues. If the Irish economy does not grow by 8-10 percent, then the country will end in a debt-deflationary spiral. And even the most optimistic government projections are just below 4 percent.

Barry Eichengreen, a professor of economics at the University of California, Berkeley, makes a similar argument. It would be neither politically nor economically sustainable to force Ireland to pay 10 percent of its national income as reparations to bondholders, he wrote recently in German business daily Handelsblatt, " as anyone who remembers Germany's own experience with World War I reparations should know."   It would be more sensible to have a debt restructuring and offer the bondholders 20 cents on the euro, he argues. 

[Trinity College economics professor Kevin] O'Rourke's prognosis is as foreboding as that of his colleagues. " We now face a negative spiral in which austerity causes emigration, which increases the burden of the debt, which ultimately leads to more austerity,"   he writes. He recommends as a way out the path pursued by Iceland. In a referendum, the voters rejected a proposal to pay back their banks' international creditors. Ireland, O'Rourke argues, needs a "  radical change."

And so ends the once vaunted Celtic Tiger.   The average Irish household is predicted to be 7,500 Euros poorer annually by 2012 due to government austerity.   The initial bailout adds another 17,000 Euros per capita to the national debt.   But the bondholders, the European banks that colluded with the Irish banks in the recklessness that brought Ireland to its knees - they'll be safe.