Prof. Philip Lane writes on the Irish Crisis in this new paper (ht Geary Blog). All EC4024 and EC6012 students should download and read it carefully. Money quote (pg. 32):
"While the creation of the European Financial Stability Facility (EFSF) has facilitated the funding of the IMF/EU programme for Ireland, the size of the penalty premium built into the interest cost is arguably too stiff for a fund that is built on the principles of solidarity and common financial interests among members of the euro area, since it is sufficiently high to non-trivially increase the risk that the sovereign will ultimately run into repayment difficulties. "