Ireland was given an €85 billion bailout to help the country and its banks to move forward (Euobserver 2010, p. 12). This bailout loan was given at an interest rate of 5.8%. It should be known that this bailout was given based on specific conditions. Although 17.5 billion Euros were to come from the country’s sources like domestic cash resources, it will play a big role in restoring its economy. The main aim of this financial aid was to return Ireland’s economy to sustainable growth levels. Also, it was to ensure that the country had a good and properly functioning banking system. This is because every country needs an effective banking system for sustainability. The country needed money to refinance and that is why this bailout was necessary. 10 billion Euros were given for the country’s recapitalization (Fitzgerald 2010, p. 15).
It should be known that this bailout was given because it provided funds at cheaper rates than those that could have been offered in the market. Wholesomely, the country was given the bailout to meet its obligations. This bailout was needed for the country to show that it had the firepower to deal with any concerns from the market. This is as far as the banking difficulties are concerned. There was an argument that this bailout was necessary for the country to have more self-discipline and this is agreeable (Stepek 2010, p. 21). This is because governments are supposed to spend within their means. The bailout was the best deal that the country could get at that particular time because other options were not feasible. It should be known that the Eurozone economy is interlinked and this bailout was necessary to avoid a crisis.
Fiscal policy in Ireland
There are various implications of the future fiscal policy in Ireland. Therefore, this means that the government has to come up with various fiscal policies for implementation. As much as it confirmed that there is a confidence to restore financial stability, there are various implications that need to be evaluated. The bailout has reignited the debate about the future of the euro. This is because there is a need to save the common currency for long term sustainability (Wyplosz 2010, p. 18). The country needs to come out with good policies to avoid any default because these loan needs to be paid. Ireland should commit itself to prudent fiscal policy for long term sustainability. Ireland is seeking to kick start its economic growth and this means that it has to come up with good fiscal policies that will restore confidence in the market.
For instance, there is a need to create more jobs and correct the banking sector. Fiscal policies should be aimed at ensuring that the country has sustainable interest rates that can encourage people to borrow. This is aimed at making credit more affordable in the economy (Global insolvency 2010, p. 26). The government will have to re-evaluate the level of budget cuts as time goes by. From a broad perspective, the government will be forced to come up with sufficient austerity measures because this is necessary. It should be known that this bailout will ultimately force the government to commit itself to good fiscal policymaking. Budget cutting measures are necessary for the country to finance the bailout of various financial institutions. Ireland is a rich country and there are no possibilities that it can default in any case.
Ireland’s economic policy response to the crisis
If Ireland had its currency under a flexible exchange rate regime, it could have embarked on several economic policy responses to this crisis in a broadway. For instance, the government could have regulated its banks for long term sustainability. It should be known that the euro can not work without a single economic policy. In this case, the government could have come up with a floating exchange rate (Chapin 2010, p. 18). Fiscal transfers could have been used to ensure that the country has regained the competitiveness that it needs for sustainability. As much as its currency could have been a better bet, it would have been necessary for the country to have stabilization policies to restore growth. The terms of bailout loans are very restrictive and that is why it would have been beneficial if the country had its currency.
This could be beneficial because the country has to give up other aspects that come with the common currency. The only problem could be seen in funding and the government has to come up with austerity measures that will help the economy. As far as this crisis is concerned, it would be beneficial for Ireland to have its currency because it has to repay the bailout loan. Ireland needs to have its currency because other countries like Britain that have their currencies have been able to stabilize their systems without any problem (Williamson 2010, p. 25). As much as Ireland’s problems are their own making, they can not come up with a concrete solution because they don’t have a say on what revolves around the euro. The country needs to work out a free-floating currency for long term sustainability.
Chapin, A., 2010. The CEO Poll: EU bailout of Ireland necessary. Web.
Euobserver., 2010. The EU-IMF humiliates Ireland. Web.
Fitzgerald, R., 2010. After the bailout: A return to pounds and pence? Web.
Global insolvency., 2010. Ireland Opens Door to Massive EU Bailout. Web.
Stepek, J., 2010. Ireland accepts a bail-out – who’ll be next? Web.
Williamson, D, K., 2010. Why Is the World Bailing Out Ireland? Web.
Wyplosz, C., 2010. The European debt crisis: Worrisome delusions. Web.