“Experience is the name everyone gives to their mistakes”
Oscar Wilde
Two remarkable events unfolded during the month of February. One cleared the front pages all over the world. The other one barely got a mention - outside of its home country that is. Both have the ability to derail the economic recovery currently unfolding.
The first one is not surprisingly the uprising in the Middle East and North Africa. The other one is perhaps less obvious; I am referring to the Irish elections.
A new dawn in Ireland?
Let’s begin in Ireland where the electorate has finally had its say on the banking fiasco, which has taken the country to the brink. Fianna Fáil, having been at the helm of Irish politics for the past 14 years, was severely punished by the voters in last Friday’s elections and had its number of seats cut by 58 to 20 (its worst result ever). Fine Gael gained 25 seats to 76, making it twice as big as the second biggest party in the Dáil (the lower house and principal chamber of parliament), yet not with enough votes to secure outright majority in the 166 seat parliament. This leaves the Labour Party – usually only the third largest party in Ireland – in a strong position with 37 seats, a gain of 17. According to Irish media reports, Fine Gael and the Labour Party are already in advanced talks to form a coalition government.
How Ireland ended up in this mess is not the objective of this letter. For that I suggest you turn to Michael Lewis (author of Liar’s Poker), who has recently produced a blinder of an article about Ireland’s predicaments, which you can find here. It comes strongly recommended. What I want to focus on instead is how the Irish may decide to challenge the EU leadership and the effect that may have on financial markets.
Now, the Irish are not like the Greeks. One should not expect to see them on the barricades just because they have been robbed of any chance of prosperity for at least a generation. The Irish vote with their feet instead. Following more than a decade of net immigration, the tide has turned and Ireland is again losing tens of thousands of people every year – mostly the young and the well-educated - which is a rot that must…
