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Thursday, November 18, 2010

Endgame

Despite the fact that Ireland has yet to formally ask for an EU/IMF bailout, to rescue its banks from collapse, it has in all but form accepted that it will ask for a bailout and that it will need that money within days.

Bloomberg report that the Irish central bank Governor, Patrick Honohan, said during an interview with RTW today that he expects Ireland to ask for a bailout.

"It is my expectation that will happen, absolutely."

He went on to estimate that the interest rate on the loan would be around 5%.

There may well of course be other costs (the real reason why Ireland has been so reluctant to ask for a bailout), such as the demand by the EU that Ireland raise its corporation tax rates (currently the lowest in Europe) from 12.5%.

The Germans are, in particular, furious that Ireland has such a low rate. The Germans view this as a major distortion in the EU, sucking investment away from Germany.

Others might argue that as a sovereign country, Ireland has the right to set its taxation policy in whatever way it wishes. However, as we know, the EU's prime objective is financial and political hegemony (even if that is impractical). Supporters of the EU most certainly want countries within the EU to lose their right to set their own taxes.

It is therefore a "blessing" to those who support further EU integration that the financial crisis in Ireland can be used to push for greater hegemony, and to crush Ireland's sovereign status.

ECB President, Jean-Claude Trichet, is expected to speak on the issue later today.

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