Euro dis­play­ing re­silience, tran­quil­lity for a decade: Pa­trick

The Pak Banker - - Front Page -

ED­IN­BURGH

Mr Pa­trick Hono­han, Gov­er­nor of the Cen­tral Bank of Ire­land ad­dress­ing the David Hume In­sti­tute and the Scot­tish In­sti­tute for Re­search in Eco­nom­ics said how is it that the euro, hav­ing con­founded its crit­ics by dis­play­ing re­silience and tran­quil­lity for a decade, is sud­denly plunged by the global fi­nan­cial cri­sis into a se­vere struc­tural cri­sis.

The view from Ire­land, one of the economies most dam­aged in the cri­sis, al­lows us to see just how re­lease 1.0 of the euro was un­der­de­signed, and ro­bust only to mod­er­ate shocks. Also ev­i­dent from Ire­land is how the plau­si­bil­ity and cred­i­bil­ity gained from the out­set by the sys­tem re­sulted in mar­ket and of­fi­cial com­pla­cency that al­lowed im­bal­ances of in­debt­ed­ness to grow too large.

The debts reached such a point that, when a cri­sis of con­fi­dence hit, it was likely to have con­se­quences too large to be coped with by con­ven­tional tools. Now non­stan­dard mea­sures of mon­e­tary pol­icy and in­ter­gov­ern­men­tal lend- ing have been put in place, while the in­sti­tu­tional ar­chi­tec­ture of the euro area is be­ing rapidly over­hauled to­wards a fairly early re­lease date for euro 2.0.

Although it is said that Celts are prone to analysing and re-analysing the his­tor­i­cal an­tecedents of present woes; and although I can­not claim to be free of this vice, if vice it be, I will try not to rake over at any length the sorry story of how Ire­land's macroe­co­nomic per­for­mance be­came bogged- down in the first years of the new mil­len­nium. In­stead I want to speak more about how the euro is in­volved in this story, and how a way for­ward is be­ing mapped.

Scot­land and Ire­land in the cri­sis I know I will be un­der­stood in us­ing a bog as a metaphor when speak­ing to a Scot­tish au­di­ence. In­deed, I am aware that, although Ire­land prides it­self on the ex­tent and rich­ness of its bogs, raised and blan­ket, Scot­tish nat­u­ral­ists claim that you have to go to Caith­ness and Suther­land to find "ar­guably the finest blan­ket bogs on the planet".

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