While Ireland is dealing with its own version of the subprime crisis and housing market collapse, the European Central Bank is weighing in on a solution. The fear for the ECB and European community is that Ireland’s insolvency may lead to a collapse that could destabilize the entire eurozone. Accordingly, in a preventative effort, the ECB is pressing Ireland to accept a bailout.
Brian Cowen, Ireland’s Prime Minister, claims that the country is able to meet its debt repayments and a bailout is not needed. A point at issue for Ireland is that receiving the funds will likely threaten what it considers to be its main economic engine, a low tax rate. At 12.5% Ireland’s capital tax rate is the lowest in the developed world and has attracted numerous multinational corporations which have in turn spurred job growth.
Should Ireland be forced to accept bailout funds against the will of its government and citizens or should the rest of the European Union sit idly by and allow the consequences to further destabilize an already weakened monetary system?
Ireland is a member of the European Union. Ireland benefits from this by the relatively easy movement of goods, services, people and labor among all member nations of the EU. Although Ireland has an interest in keeping its tax rate low, if Ireland’s financial situtaion is threatening the rest of the eurozone, then the European Central Bank should be able to step in. Many times EU law will trump a particular nation’s law. This is indicitave that a nation cannot conveniently choose when it wants to be “part” of the EU and abide by its laws or deny its financial bail out plan, if it will affect other EU members.