The cost of failing to grasp the nettle

There is a growing perception that bail outs organised by the EU are in effect kicking the can down the road. For example Portugal and Ireland are to be granted an extra seven years to pay back their emergency bailout loans.

In its latest report reviewing the Irish bail-out, the IMF criticised the "inadequate progress" of Irish banks.

There is particular concern that the Banks are failing to address non-performing loans and tackling home repossessions.

The IMF also expressed concern that Irish banks are still losing money even before putting cash aside to cover those bad loans.

As states such as Greece, Ireland and latterly Cyprus edged closer to the precipice there was a general sense of relief that defaults had been avoided and therefore the crisis was past.

As with all things in life there is also an element of wishful thinking, in the case of Cyprus the extent of the problem was not fully recognised.

Latest analysis prepared by the country’s creditor’s forecasts that the cost of the bailout has increased to 23 billion Euros compared with the original costs which was put at 17.5 billion. This begs the question how many other countries have under-estimated the scale of their economic problems.

It is an incontrovertible truth that unless the period of grace is used to good effect then the problem will have merely been parked and will come back to haunt.