Ireland Rescue Is Not Game Changer

Mohamed El-Erian, Financial Times November 29, 2010

Ireland Rescue Is Not Game Changer

The new liquidity package does little to deal with Ireland’s debt overhang, or to reduce the embedded cost of its debt. Instead it aims to introduce stability into market conditions, which in turn should allow the Irish government to implement its recently announced austerity package.

Europe tried to strike a delicate balance this weekend. It granted emergency loans to boost liquidity, an approach that has visibly lost traction in containing the dislocations in the continent’s periphery. But it also moved towards a more durable approach to tackles solvency problems, although one that involves greater risk of collateral damage.
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