The Irish banks are the big drag on the Irish government at the moment. They are receiving funding from the ECB at 1% but the ECB is understandably very nervous about an open-ended commitment to a banking system in need of massive amounts of funding to ride out the property bust.
In order to allow the Irish government to save some measure of “face”, look for Europe to come up with some sort of funding vehicle specifically for Irish banks so that the government can claim it did not take a bailout.
That would give all sides a short-term victory but it will not solve the problems that continue to metastasize within Europe. Look no further than Greece which failed to live up to its deficit goals and is now looking to extend the terms of its bailout. There are no happy endings to this European fairy tale.
