With gangrene, you can treat and be lucky or you can cut and be sure.  I have been saying (but not yet blogging) for some time that debt is like gangrene. This is true for Ireland and the Eurozone and everywhere.

Gangrene is a symptom that becomes a problem in its own right. When you are even moderately healthy the bugs and virii and detritus that cause gangrene don’t cost you or your immune system a moments thought.

But when you are in a long period of physical stress (climbing Mt Everest or getting so fat that your circulation fades) then the slightest problem can set off a chain that becomes a gangrenous infection.

Economically, the EU is betting on treatment but the gangrene is spreading. At home, we are entirely committed to treatment in the hope that someone else will carry us down the mountain of our debt.

Personally, I have always believed in cutting as the treatment for economic gangrene for three simple but massive reasons. Economic gangrene accelerates away from the capacity of the ‘doctors’ to treat it very rapidly.  Cutting enforces economic discipline (removes the temptation to ‘moral hazard’) which strengthens the economic ‘immune system’. The biggest and best reason for cutting is that, unlike in the human case, the economic body can always regrow the limb and the smaller and quicker the cut the sooner and stronger the regrowth.

“When you realise you have it you have to cut your leg off in order to survive, it is contaminating all the spreads and distorting all the risk assessment measures. It is also threatening the stability of the entire financial system.” Angel Gurria, OECD Secretary General

The real problem with gangrene is that it is extremely hard, medically and economically, to spot the moment when the scope for ‘cutting to be sure’ passes away and the patient is set on the road to passing away also. We are, rapidly approaching that moment.

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