Title:
How a Promise to Guarantee Bad Debts Came to Haunt
Ireland
Description: This is
a VOA Special English Economics Report.
See text below
Text:
On December first, Ireland's Prime Minister Brian
Cowen announced measures to cut the biggest budget
deficit in Europe. He said: "Today we've come to
announce a four-year plan, between now and two
thousand fourteen. It's to bring certainty for our
people. It's to ensure they have hope for the
future." The plan aims to cut spending and raise
taxes by twenty billion dollars. These austerity
measures are a step toward getting aid from the
European Union and the International Monetary Fund.
But Mr. Cowen's government could fall before the
next budget is passed. The government asked for help
after weeks of saying it did not need any. The EU
and the IMF are expected to provide about one
hundred fifteen billion dollars -- or about half of
Ireland's economy. Ireland got into trouble by
guaranteeing the debts of its banks during the world
financial crisis two years ago. That promise has now
cost over sixty billion dollars. Roisin O'Sullivan
is an economics professor at Smith College in
Massachusetts and a former economist at the Central
Bank of Ireland. She says all deposits were
guaranteed. Investors who had bought bonds in the
banks also received the government guarantee. She
says Irish bankers and banking supervisors had too
close of a relationship. Ireland was known as the
"Celtic Tiger" in the nineteen nineties. Its
educated, English-speaking workers and low taxes
appealed to foreign companies. Its economy grew
quickly.But foreign investment and low interest
rates raised prices to levels that could not be
supported. Bad property loans hit hard at Ireland's
main banks. Unemployment is over thirteen percent.
Ireland's bank bailout and government spending have
expanded the deficit to more than thirty percent of
gross domestic product. This is ten times the EU
limit for a deficit in relation to the size of an
economy, as measured by GDP.But John James at Pace
University in New York State says there is little
the European Union can do. Germany and France want
to give the European Commission more power over
national budgets. For now, rescues by the European
Central Bank and other lenders are the only answer
in a debt crisis. EU officials want to complete the
Irish aid plan quickly. They want to be ready in
case of more bad news from economies like Greece,
Portugal and Spain. For VOA Special English I'm Alex
Villarreal.
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Hi. I
personally reviewed this video and found it appropriate for
the news section of English Global Group. This
is a Voice of America video which covers an interesting
topic in Special English. I would appreciate some feedback from both
students and teachers about this video. You can comment in
the window below using any of a number of different services
including Facebook, Yahoo, AOL, and Hotmail.
