> Yeah it wasn't pretty. Ireland was not allowed to default on its loans which was what they should have done.
The situation is more complicated than that (IANAL or etc.) The majority of people in Ireland, and the Irish government, had no desire for any kind of sovereign default, and the majority of the Irish bank debt had already been (foolishly) covered by the Irish state on its own initiative. There was still a significant residuum of subordinated bank debt which the Irish taxpayer was forced to bail out as part of the Troika package, though. (Allegedly this was mainly Timmy Geithner's doing, by the way.) The irony is that come 2016 the EU is now trying to prevent the Italian government from bailing out sub debtors in the Italian banks.
The other irony is that TFEU really doesn't prohibit member state IMF access or sovereign defaults at all. In fact it's basically set up to make sovereign default the only safety valve in the Euro area; it was generally understood as specifically prohibiting any form of EU or ECB "bailout" of EU sovereigns. It was only after the fact, when Greece and Ireland were headed for trouble, that the EU member state governments decided that they didn't like the idea of member state defaults after all, and began to interpose themselves between the IMF and those countries. It was only then that the Euro really became a fiscal/monetary/financial rat-trap with no adjustment mechanisms for struggling countries.
The situation is more complicated than that (IANAL or etc.) The majority of people in Ireland, and the Irish government, had no desire for any kind of sovereign default, and the majority of the Irish bank debt had already been (foolishly) covered by the Irish state on its own initiative. There was still a significant residuum of subordinated bank debt which the Irish taxpayer was forced to bail out as part of the Troika package, though. (Allegedly this was mainly Timmy Geithner's doing, by the way.) The irony is that come 2016 the EU is now trying to prevent the Italian government from bailing out sub debtors in the Italian banks.
The other irony is that TFEU really doesn't prohibit member state IMF access or sovereign defaults at all. In fact it's basically set up to make sovereign default the only safety valve in the Euro area; it was generally understood as specifically prohibiting any form of EU or ECB "bailout" of EU sovereigns. It was only after the fact, when Greece and Ireland were headed for trouble, that the EU member state governments decided that they didn't like the idea of member state defaults after all, and began to interpose themselves between the IMF and those countries. It was only then that the Euro really became a fiscal/monetary/financial rat-trap with no adjustment mechanisms for struggling countries.