The Irish bailout: Europe’s reckoning begins

Europe’s challenge is no longer just economic. It’s also social and political. Cherished values and ideals are under assault. The euro, intended to nurture unity, has bred discord, as countries assign blame and argue over sharing costs. The social contract is being rewritten, with government benefits and protections being cut. In Ireland, the governing coalition seems doomed; one minority party has withdrawn its support.

The rescue of Ireland, as with Greece before, represents a gamble that Europe can arrest growing doubts and win the patience of bondholders and voters: persuading the investors not to continue dumping bonds (those of Ireland and other countries) in panic, which raises interest rates and could precipitate a self-fulfilling financial collapse; and persuading ordinary citizens to tolerate austerity (higher unemployment, lower social benefits, heavier taxes) without resorting to paralyzing street protests or ineffectual parliamentary coalitions. Whether the gamble will succeed is unclear, as are the potentially chaotic consequences if it doesn’t.