Ireland is poised to be the first country to tap into the European Financial Stability Facility (EFSF). Self Evident has a good abstract of Ireland's demise:
Wake up and smell the Irish coffee
Why would Irish taxpayers cough up tens of billions of Euros to foreign banks? As this wonderful article from the Irish Times says:
Given the risk of national bankruptcy it entailed, what led the Government into this abject and unconditional surrender to the bank bondholders? I have been told that the Government’s reasoning runs as follows: “Europe will bail us out, just like they bailed out the Greeks. And does anyone expect the Greeks to repay?”
Hilarious. But that is only half of the story; it gets better.
Since May, the largest purchaser of Irish government bonds has been the ECB. In fact, they are now the single largest holder of Irish debt. But in mid-October, the ECB suddenly stopped buying.
At a European Union summit last month Germany won agreement to rewrite EU treaties to allow for a permanent scheme to deal with stricken euro-zone borrowers—including, it hopes, a mechanism for an orderly sovereign default. At that summit Jean-Claude Trichet, the head of the European Central Bank, warned EU leaders that talk of debt restructuring was likely to unsettle bond markets and drive up the borrowing costs of troubled euro-zone countries. So it proved.
In other words, the (French) head of the ECB warns Germany that their plan will “unsettle bond markets” and “drive up borrowing costs”. Immediately thereafter, the ECB halts all purchases of Irish bonds, causing Irish bond yields to skyrocket. Holy cow, Trichet is a seer! “So it proved.” Ha, ha.
Basically, the country of Ireland is just a toy for Eurozone technocrat games.
Although things seem to be spinning out of control. Irish bond yields are hitting new records daily, and starting this week, the carnage has been across the curve. Not only is the 10-year near 9%, but even the2-year is approaching 7%.
Oh, and Portugal is in trouble, too.