A man gets a call from his doctor, who asks whether he wants to hear the good or the bad news first: "The good news is that you have 24 hours to live." "Jeez, doc, what's the bad news?" "I should have called you 24 hours ago." The doc, in the case of the critically ill Irish economy, is not the financial media that have been reporting that it is only a matter of time before an EU bailout. Irish ministers called these reports "dangerous fiction". Brian Cowen, the prime minister, let it be known that he was furious. The cabinet stuck to the line yesterday that they can get through on financial aspirins until next June. But media reports are not the problem, and certainly not the reason why the credibility of ministerial statements on this issue is now so low.
The doc is the European Central Bank, which has already spent €90bn keeping Irish financial institutions afloat. The ECB vice-president, Vitor Constâncio, clearly wants Ireland to use the fund set up after the Greek collapse, the European Financial Stability Facility (EFSF), sooner rather than later. The governor of the Bank of Spain piled more pressure on Ireland yesterday. Nor was he a disinterested spectator. Though Ireland is out of the bond markets and does not have to go back until it runs out of cash next year, Spain and Portugal both need those markets to fund their debts. While Greece and Ireland are the first victims of the sovereign debt crisis in the eurozone, the deeper fear of the ECB is that an economy the size of Spain or Italy will follow. That would really test their ability to underwrite banking failure.