Ireland Inc. has begun to resemble a giant pyramid scheme even more than usual recently. The Sunday Tribune reports that “AIB, the country’s largest bank, has revealed for the first time it has hugely increased its take-up of Irish government debt” Is it just me, or does anyone else consider it more than a little strange that a nation state should now rely on a bank that it bailed out to provide it with funds?

We all know by now that the credit crunch caused a liquidity crisis at Irish banks. When the international markets effectively shut off funding, they turned to the ECB for their expensive short-term funding facility, and ultimately, to the Irish government for a recapitalisation bailout. The state itself could usually rely on foreign buyers to purchase government bonds to fund national budget deficits. Well, now it seems that the state is feeling the pinch of liquidity drying up on international markets as foreign buyers either turn up their noses or charge a huge risk premium to buy Irish government bonds. How much longer will it be until the whole desperate State of affairs buckles under its own weight?