Photo: Library of Congress
The funny thing about Ireland is that for now the cash is now available to get through the crisis. The IMF/EU have offered it, and it’s up to Ireland to take it.What it really comes down to now is the budget: Ireland has to pass a severe austerity budget, and it’s not clear that Taoiseach Brian Cowen actually has the votes to do it. And though the opposition doesn’t have a great alternative (that we’ve heard) there’s political hay to be made by standing athwart the budget process.
In the US, it’s not inconceivable that we’d see a similar situation occur with the debt ceiling. As FDL notes, several incoming Tea Party members are vowing to hold firm on not raising the debt ceiling, which could ,eventually put the US into self-induced crisis.
We don’t think this is likely, but outside tail risk? Definitely. Robert Rubin recently warned of a bond market meltdown as the world watches in horror while the US Congress dithers on this issue.