At first reading in today’s FT my take seems to be politicians saying ‘enough is enough’. It would seem to be a case of saying ‘we cannot pay our bills’ and ‘we have cut our services enough – if not too much’. Detroit is no longer capable of honouring its bond commitments, paying pensions and paying to run the minimum services required in the municipality. And it has always been easy in the past to make commitments which have to be met out of future revenue raising activities. But this seems to have come unstuck.
In Ireland we have maintained that we will pay back all our debt – by taking the pain (the AUSTERITY). Seems like this has left us with over 450,000 out of work, reduced (and failing) social services and, for now, some very generous pension commitments (all of which were contracted in previous times). And the view from government (support by EU) has been – we must pay our way. And not surprisingly, EU (Germany in particular) would like us to continue to pay our way. All against a threat that whatever support/ relief we have obtained might come under pressure were we not to play ball.
Will be interesting to see how Detroit is bailed out in the US. Obviously while there are some similarities there are many differences.