Jeremy Hobson: France and Germany want to change European Union rules to make it easier to deal with Europe’s debt crisis. That’s the headline out of a meeting today in Strasbourg France, where leaders are digesting not-so-great news from all over Europe. Portugal just had its credit rating downgraded to junk this morning. Germany couldn’t find enough buyers yesterday for $8 billion worth of debt.
And Ireland — whose banks had to be bailed out last year — says it needs more money from the rest of Europe to cover the costs of that bailout.
For more, we’re joined now by Austin Hughes, chief economist at KBC Bank in Ireland. He’s with us from Dublin. Good morning.
Austin Hughes: Good morning.
Hobson: So I thought that Ireland was on the right track, getting its finances in order. Why are you in trouble again?
Hughes: Well Ireland is in trouble because the euro area is in trouble at the moment. The Irish economy itself has had a tough 2011, but there are signs of progress. But the reality is, we’re a small economy; we’re being buffeted by what’s happening across the global economy at the moment — and in Europe in particular.
There’s not much point being a good performer if you’re in a very bad class, and Europe really is in a very bad class at the moment.
Hobson: How do the people on the streets of Dublin feel about all this? Do they fell that now they’re being hurt by the other countries in Europe, or do they feel some responsibility themselves?
Hughes: There’s a strange reaction in Dublin at the moment. I think the first, and most important, sense, is that the difficulties we’ve had for the last couple of years aren’t uniquely Irish, or aren’t a particular product of errors in the Irish economy.
So there’s a sense here — there’s an old proverb that “a trouble shared may be a trouble halved” and in that regard I think what people are saying here is that, while they know things are going to be difficult for the next year or two, there’s a sense that because it’s a broader problem across Europe, that it may be actually easier to get resolution.
Hobson: Well as you look at the other countries in Europe that are now going through the same thing that Ireland has already been through — let’s say Italy, for instance — what advice would you have for them?
Hughes: I think the Irish economy is very different to the Italian economy because it’s very small; it’s very much focused on exports; and it’s very flexible. Italy is an all together different case — Italian economy has changed very, very slowly. So I suppose the one word of advice would be “flexibility.” You have to be prepared to change in the world economy that we live in today.
Hobson: Austin Hughes, chief economist at KBC Bank in Ireland. Thanks so much for talking with us.
Hughes: You’re very welcome.