Tuesday, November 16, 2010

Irish Bailout Could Cost as Much as $50 Billion

Nouriel Roubini's strength is knowledge at the central bank level. He is as wired in as they get. Today at Roubini Global Economics, he has two comments on Ireland that should be noted. First he writes:
The EU will likely bail out Ireland to prevent contagion to the rest of the eurozone via a combination of the European Financial Stability Fund and IMF loans, an approach that would not provide a permanent solution to Ireland’s sovereign distress problems, with the risk of moral hazard being a further disadvantage.
In a second comment, he estimates how high the cost of an Irish bail out could be:
Ireland’s bank bailout costs could top €50 billion, under a severe scenario.
That's a lot of bacon for a baby PIIG, as Tyler Cowen puts it:
...everything happening with Ireland is simply a shadow play for Spain-to-come.
The big question remains, how will the EU pay for such bailouts? The larger the numbers get, the more that money printing appears to be the only option the EU has, if they seriously want to play rich uncle to the PIIGS.

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