IRELAND MUST RESTRUCTURE its debts and force creditors to take a hit if the country is to climb out of recession, a leading global economist has claimed.Economics professor Nouriel Roubini has warned that our current levels of debt are “unsustainable” and the Government policy of guaranteeing banking losses will eventually leave Ireland bankrupt.
Writing for Project Syndicate, he added that loans meant to tide countries over until they can return to the money markets, such as last year’s €85billion IMF/EU bailout, are “bound to fail” in the case of the so-called PIIGS – Portugal, Ireland, Italy, Greece, and Spain.
Roubini – dubbed ‘Doctor Doom’ after correctly predicting the economic crash in the US – said Ireland must instead restructure its debts. This could either mean “rescheduling” them – ie, delaying payback and reducing interest rates – or more drastic measures, such as forcing bondholders in our banks to accept shares in lieu of repayment.
In article, co-written with economic historian Stephen Mihm, he concludes:
Europe cannot afford to continue throwing money at the problem and praying that growth and time will bring salvation… The creditors and bondholders who lent the money in the first place must carry their share of the burden—for the sake of the PIIGS, the EU, and their own bottom lines.
The New York-based economist also warned this month that the ECB could force Ireland into a ‘double-dip’ recession if it goes ahead with plans to raise base interest rates.