Just default

To boil things down a bit the main reason we can't allow the bondholders to take the hit is because the Irish government spends too much. This can be dealt with in two ways:

1. Increase tax take - this can be achieved by creating employment and stimulating enterprise, cutting down the numbers on welfare while simultaneously increasing the numbers paying taxes.
2. Deeper austerity measures -if expenditure was at even 2004 levels, we would be breaking even. Its not that hard to get expenditure down to that region again.

Once we aren't counting on loans to prevent the country from collapsing, we can roll back the guarantee on a provisional basis, with an immediate emphasis on bank debt that was not originally sourced from the Irish state. Without cancelling it completely, we can reduce the majority of the burden and focus on the future of the nation again, not paying off the gambling debts of speculators.

So technically yes, we can default with few adverse effects, on those debts which weren't ours to begin with, which is something that makes the Irish situation unique as opposed to most other defaulting nations, as long as we have our house in order first.

dan_d wrote: »

Yes but is defaulting the same as closing a bank, the way they did in the US?

Not neccessarily, it might be difficult for the banks to secure loans on the international markets and hence it might be difficult for them to continue operations, but since many banks are experiencing austerity globally, they could be maintained in some form. One perspective might be that the level of mismanagement in these banks over the last decade should by rights end in their closure. Naturally we need to protect the deposits of Irish citizens and companies in every eventuality, but Irish banks still hold a great many assets in the form of outstanding performing mortgages, so that shouldn't be a huge issue.