For Ireland to stay afloat, we must make sure the euro survives

DEEP divisions are at the heart of prevailing paralysis in the eurozone.

Cracks can no longer be papered over. Europe lacks leadership. Procrastination, indecision and inertia from the top table of prime ministers and presidents have allowed markets to dominate muppets.

When Spain and Italy accompanied peripheral states of Greece, Portugal and Ireland, in requiring centralised support to finance their sovereign bonds, it was clear that the euro was unravelling. This presented a stark choice — construct a federal fiscal union or allow the break-up of the single currency. Solutions are well-established. These are neither palatable nor acceptable to paymaster states. At the heart of the problem lie 91 European banks. Recent stress tests maintain that they need €2.5 billion of recapitalisation. Markets believe, when adjustment is made for sovereign bond liabilities, that €112bn is actually required. This black hole is central to sharp declines on stock exchanges last week, where 20% was wiped off their value. Paranoia now grips the interbank lending market, with banks placing deposits with central banks and federal reserves, rather than each other. These were precisely conditions that led to the credit crunch and Lehman’s collapse in 2008. When denial becomes the central tenet of policy, expect disaster.