Ireland Isn't Greece

Wall Street Journal
Editorial
November 12, 2010

Hardly a day goes by without another piece of bad news coming out of Dublin. On Wednesday, 10-year government bond yields hit 8.6%, a record spread over German bonds. The cost of insuring against a default by the government has also soared to record levels, and the cost to Irish taxpayers of keeping the Irish banking system afloat keeps going up.

The latest round of recapitalizations, announced in September, drove Ireland's budget deficit to an astonishing 32% of GDP for the year, and nobody is convinced that's the end. Then, this week, European Commissioner Olli Rehn went to Dublin on a fact-finding mission and insisted that the Irish government had made "no request for assistance"—the same words we often heard before Greece was bailed out in the spring.

But Ireland is not Greece. Going into the 2008 financial panic, Greece had a sky-high debt burden, a stagnant economy and a serious structural deficit that the government had been hiding by fudging its statistics.

Ireland, by contrast, went into the crisis with a budget surplus, a debt-to-GDP ratio of some 27% and a strong record of recent growth that has left it one of the richest countries in the world. Ireland does have a serious problem with its banks, which are the source of its current and recent woes. A property boom and bust have left Ireland's biggest lenders with billions in bad loans on their books.

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