What does Ireland have that Greece does not? Aside, of course, from rain and good beer. That is the question many western governments might do well to ask themselves, particularly in places such as London, Lisbon and Madrid.
In recent days Europe has been convulsed by the fiscal woes gripping Greece. But while Athens burns, there is an equally fascinating tale on the other side of Europe which has got less attention: namely the fact that Ireland has not been convulsed by political and fiscal disarray.
After all, this time last year there was widespread speculation in the capital markets that Ireland would be one of the first of Europe’s more indebted nations to suffer fiscal shock. Its banks were a mess. It had just experienced a crazy property boom and bust. It was piling up public sector debt.
Yet, thus far, Ireland has confounded the market doomsters by embarking on a draconian programme to tackle the debt, which includes large public sector pay cuts, and resolve the bad loan problems at its banks.
While pledging to cut public sector spending by 7.5 per cent of gross domestic product this year alone has not spared Ireland all market pain – last week its bonds were trading at a spread of 3 percentage points over bunds – it has prevented the country from being labelled a full-blown basket case.
Hence the fact that it was Portugal and Spain, not Ireland, hogging the headlines last week.
Why? Part of the explanation lies in Ireland’s underlying economic situation, which is not as bad as that of Greece or Portugal. Net debt to GDP, for example, in Ireland is projected to be about 50 per cent next year, half the level of Greece. But numbers alone do not tell the whole tale. There are two other, less tangible factors that appear to have played a role in the Irish story – and which are also influencing the way international investors look at government bond risk.
One of these is the issue of political infrastructure or, more specifically, whether a country has the decision-making machinery in place to cut debt. The second is a question that financiers rarely worried about before: namely, social cohesion, and whether a government is able to impose tough choices on a society without sparking political instability, social turmoil or worse.
Greece does not fare well on either of these counts, it would seem. As George Papandreou, Greek prime minister – who is, perhaps appropriately, a former academic sociologist – likes to explain, in recent years the country has been a “clientilist state”.
看来，希腊在这两个方面做得都不好。正如希腊总理乔治•帕潘德里欧(George Papandreou)——也许合适的是，他以前是一名学术社会学家——喜欢解释的，近年来，希腊已成为一个“侍从主义国家”（clientilist state，公权占有者伺候其主要庇护者、从事权钱交易的“寻租型国家”——译者注）。
Corruption has been rife, the rule of law patchy and political infrastructure is fairly weak. Social cohesion between rich and poor, or between different political parties, is flimsy. This, after all, is a country with a long tradition of violent protest. It thus remains an open question whether the hapless Mr Papandreou can knit the country to pull together to share pain.
Ireland, however, feels very different. The previous, hated, British colonial rule has left the country with a well embedded legal and political infrastructure. The country’s small size makes it easier to manage. While Ireland has a history of bloody civil war, it appears to be facing the current woes with surprisingly high levels of social cohesion.
In a sense, the crisis is being treated like a horrific new year’s day hangover: everyone knows that Ireland wildly overindulged during the credit boom, they also know that purging – if not repentance – is needed. So the nation is collectively lying on the sofa, groaning.
Such cohesion may not last in Ireland. As public pay cuts bite, and some bankers are seen to be enjoying fat pay-outs, political tensions are rising. But the intriguing question for other western governments is whether they are heading for an outcome that is more “Irish” or “Greek”?
Could the next British prime minister, for example, appeal to the “Dunkirk” spirit of UK voters and ask them all to embrace shared pain in the face of a new fiscal war? Could this be replicated in Lisbon, Madrid or Rome? For the moment, the answers remain dangerously unclear; the bond markets are watching – and waiting.