Ireland Must Leave The Euro

As The Government Unveils Its Economic Stability Plan, Economist Richard Douthwaite Has Said Irish Politicians Must Face Four Essential Truths Or Else Face Ruin.


By Jason Walsh
November 24, 2010
Courtesy Of "The News Whip"


Writing in Construct Ireland magazine, the Green-inclined Douthwaite says the country must leave the euro.

Speaking to Newswhip.ie this afternoon, Douthwaite said the eurozone and European Central Bank (ECB) are harming Ireland.

“Unless the eurozone is restructured I don’t think it’s going to be possible to make it work,” he says. “It’s not just in Ireland where there’s been a collapse. It’s worse in Ireland but it’s common in all eurozone countries.”

Douthwaite says government policy since the crash has been misguided: ”I don’t think the government has made it worse, it has just hoped the situation would improve itself. It failed to do so.

“The money supply depends on people borrowing and with the building sector gone there was nobody to pick up the torch. It was quite clear that unless borrowing continued things would get tough. Essentially nothing turned up.”

Douthwaite says the way out is to switch to a “non-debt–based currency” as the ECB does not want to face up to the problem.

“There isn’t going to be the energy to produce growth so we need a different way of putting money into circulation,” he says. “The eurozone doesn’t recognise this; it’s still blaming Ireland, which is a symptom not a cause.

“A non-debt-based currency could be spent into circulation or given into circulation. There have been proposals for governments to spend money into circulation, to take over the money issue, taking the right to create money away from the banks and doing it itself. That could work but it makes the state very dominant. Alternatively the money creation role could be shared,” he toldNewswhip.ie.

Douthwaite, who writes regularly for the magazine, has been a long-time critic of government policy. In March 2008 he wrote there was a strong risk of Irish banks collapsing. In July 2006he warned that house prices could fall by 50 per cent and asserted that banks would only have themselves to blame.

Douthwaite’s four propositions are reproduced below:

— Ireland has to pay interest on the loans being negotiated at a rate which exceeds the rate at which the economy grows over the next few years. This will make the country’s situation worse, not better.

— Any grant or loan to Ireland will only buy time for the eurozone to come up with a cure for the whole sick system. Ireland should not be asked to bear more than its proportionate share of the cost of gaining this time which is for the benefit of every euro user.

— The ECB bears a large share of the responsibility for the regulatory failure which led to the property bubble.

— There is a Plan B. Ireland doesn’t have to take anything that is offered. It can leave the euro quickly and easily.

His full article can be read on Construct Ireland’s web site.