And its economic performance is much better

This week, European policy makers have agreed to refinance nearly 70 billion euros of Irish debt. By subscribing to this assistance, the Ireland shall not default on its debt. Irish citizens will therefore pay the losses of the banks of their countries, because it is they, not direct expenditures of the State who have set fire to the powder.

By claiming to avoid a default on the ordinary citizen, on him does not service. In the aftermath of a long period of excess, an economy which seeks to repay all its debts faces a long hangover. To clear the money, she is forced to cut its domestic demand, trim on education and long-term investment, plunging the country into unemployment and stagnation for years. Often, the most effective solution is to renegotiate with creditors a debt rescheduling or partial cancellation (which is, in both cases, to reduce the value of their assets). The imprudent lenders are punished, which encourages them to pay more attention in the future. Sometimes, lenders prefer themselves this option, calculating that a State that keeps political and budgetary margin of manoeuvre will be more inclined to repay.

It can quickly get back to a sovereign default. Iceland, for example, chose not to repay a portion of foreign debts incurred by their banks. A sustainable financial markets banishment then predicted in this country. He borrowed today at about 5, or roughly at the same rate as the Spain, and two times less expensive than the Ireland. And its economic performance is much better.

But in Europe, despite the timid advanced this weekend, the sovereign default remains a taboo. First justification: the Irish failure would weaken the European banks which have lent to the Ireland. Transparent data, the risk of contagion is difficult to estimate, particularly in German banks, which have addressed the crisis with few reservations. But whatever the extent, if this is the reason for the rescue, the invocations to European solidarity are hypocritical: you can really pay to Irish citizens of German lenders recklessness If the German financial stability is a real problem, it must be set to its source by Bank recapitalisations, not by the deflation of the Greek and Irish economies. It will be more effective and more legitimate.

Second bad justification to the taboo of the defect, it is the risk that a sovereign default Vienna undermine the prestige of the euro. Here, it is the symbol of the single currency which appears to be the issue. It is true that a sovereign bankruptcy in euro area would lower the single currency. For those who believe the overvalued euro, this adjustment is desirable. And international investors are not stupid: they will continue to lend to creditworthy States. By contrast, in accepting, crisis after crisis, to be unconditionally the sponge of the banking excesses, the European Union dig the grave of his credibility and encourages unbridled speculation.

Europe is at the crossroads. Either she gives, again, the German sovereign bankruptcy phobia and banking lobbies threats. In this case, it will require the lowest Union Member States to pay their debts, in blood and tears. Either Europe gives to the overburdened States a "fresh start" to the Icelandic, while putting too fragile continental banks under guardianship. Europe long simply adore the totem of the euro, substitute for a genuine political project. Banks have taken advantage of this mythology for the automatic processing of their claims in sovereign debt. Symbols and the sacrificial sacrifices is a hypocrisy which lasted enough. Time of pragmatism has arrived.