It’s a tad confusing as to why the $113bn loan to Ireland is seen as such a bold step. The Irish government has forking out 5.8 per cent interest. According to our maths, that means the average household in Ireland is having to pay around $4,300 a year in interest payments.

That strikes us as quite a lot of money.

Ireland has a double problem with this loan. At 5.8 per cent interest, the cost of repayment is simply huge. The yield on UK ten-year government bonds was 3.35 per cent last night. So presumably the UK government can make a healthy profit, borrowing at less than 3.5 per cent, and lending out at just under 6 per cent.

But is the debt really affordable at that level? To put the Irish bailout into perspective, Ireland’s GDP in 2009 was around $227bn. In other words, the loan is for around half of its GDP. When you consider that the Irish government’s total debt was around 65 per cent of GDP at the end of 2009, it just goes to show what happens when you let a housing market boom beyond any sense, and have a banking sector that dishes out money sure in the knowledge the money is safe because it is backed by property.

Meanwhile, the Eurozone crisis is pushing down on the euro. Well, let’s face it, one would be surprised if it didn’t. Last night there were 1.3242 euros to the dollar. Back in September the euro was more expensive than that. In other words, this is what has happened. The Fed has unleashed a massive bout of quantitative easing, and the dollar is now marginally more expensive today than it was three months ago.

It just goes to show that if there is one evil that is worse than printing money faster than Ben’s helicopters can drop it, then that has to be not printing money. Maybe if the European Central Bank had engaged in QE of its own, then the Greek contagion wouldn’t have spread even as far as the securitised Parthenon, let alone to the rest of Greece and beyond.

On the other hand, maybe QE disguises the truth.

Take average compensation for employees in the private sector since, say, 1993. Since then, compensation for Germany has risen by 28 per cent. In France compensation has risen by 50 per cent; Belgium by 57 per cent; Italy by 62 per cent; Spain by 85 per cent; the US by 85 per cent; Ireland by 86 per cent; the UK by 92 per cent; and Portugal by 204 per cent.

In fairness, Germany’s growth in productivity was quite low, whereas the US, the UK, Portugal and Ireland all enjoyed faster growth in productivity. Although, worryingly, Spain didn’t. But even allowing for productivity growth, the fact is, this differential was nowhere great enough to justify the higher wage inflation in any of the countries mentioned.

So what can we conclude?

Ireland, Spain and co. are now being forced to grapple with the horrendous problem of repaying debt, while letting wages fall so that their economies are competitive with Germany.

The UK and the US, thanks to the voodoo called quantitative easing, are not being forced to do this.


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