Not so much in Ireland:
Despite its strenuous efforts, Ireland has been thrust into the same ignominious category as Portugal, Italy, Greece and Spain. It now pays a hefty three percentage points more than Germany on its benchmark bonds, in part because investors fear that the austerity program, by retarding growth and so far failing to reduce borrowing, will make it harder for Dublin to pay its bills rather than easier.
via In Ireland, a Picture of the Cost of Austerity – NYTimes.com.
Compare that to Iceland:
Unlike other disaster economies around the European periphery – economies that are trying to rehabilitate themselves through austerity and deflation — Iceland built up so much debt and found itself in such dire straits that orthodoxy was out of the question. Instead, Iceland devalued its currency massively and imposed capital controls. And a strange thing has happened: although Iceland is generally considered to have experienced the worst financial crisis in history, its punishment has actually been substantially less than that of other nations.’
We paid 100% to investors who would have (and probably should have) been wiped out. Iceland paid 0% and devalued its currency. The difference now is that Iceland is covering much more quickly than Ireland and pays lower interest on bonds. Cui Bono? Investors. Who suffers? The working poor and the unemployed. Sort of a win-win for the conservative chattering classes. Don’t listen to them.
