WE WOKE YESTERDAY morning to the sight of the stock markets and the euro under downward pressure. Goldman Sachs is warning of a ‘lost decade’ and analysts at the Bank of America are warning that a possible break-up of the common currency will lead to the next Great Depression.

Wherever you turn there is very strong language describing the difficulties that we all face. Losing a decade as Goldman describes is not encouraging – we only exist on this planet for on average seven to eight decades. Losing one of those through the folly of our leaders and bankers would significantly increase the cost that we all have already paid.

Let’s hope that we are already three and a half years into that lost decade rather than at the beginning. For three and a half years now we have bounced from perceived solution to perceived solution without really getting any nearer solving the problem. Banks have been repeatedly recapitalised, many European countries have seen massive austerity packages and yet we still fail to see a light at the end of the tunnel. The difficulties that we face are spreading like the virus that they are as we now face financial, sovereign and constitutional crises.

The EU summit that concluded last week was the latest attempt at a solution but to many observers this descended into farce after David Cameron withdrew his support for the treaty.

It’s strange for me to reconcile his decision being an Englishman living in Ireland, a country which depends on the common currency. But I think that he made the right decision. If we could turn back time I’m sure that the Irish people would probably have made the same decision. I see entry into the euro as the catalyst for the problems that Ireland now face, lured in by many of the EU monies available, cheap credit very quickly became too readily available and we gorged on it. The developers – granted – more than most but we all had our fair share and there was nobody in tune enough to control the mounting debt levels.

If you were you David Cameron though and faced with that decision on Friday, would you have reacted differently? I don’t think anybody could.

The UK signing the EU treaty would have been like entering a partnership with Anglo Irish

Let’s look at the facts. Staying out of the common currency has pretty much ensured that the UK will face a less damaging recession than the rest of us. You (as Cameron) are now being asked to hand over more financial and fiscal policy to a governing organisation that has not done particularly well (and which many would say has failed spectacularly). They have continually failed to stem the crisis and rather than passing over more control, the sensible thing would be to wrest some control back.

It would be like entering a partnership with Anglo Irish or giving me the keys to the Exchequer and asking me to give them back after a day’s trading on the markets. Both would be foolish in the extreme, probably far more than that.

Unfortunately, the eurozone sovereigns remain under pressure after the lack of decisive action last week. We are warned again that after the latest raft of stress tests that some banks face another huge shortfall and quite rightly the markets continue to shun government debt and the euro. Many of the strategies proposed so far have been flawed. Banks were encouraged to buy sovereign debt to shore up their risk and bolster their capital adequacy. As their values have dropped it has done the opposite. Credibility is at an all-time low in the market and nothing is picking it off the floor. The EU now faces a possible S&P downgrade.

We continue to face very difficult decisions. There has to be pain, of that there is no doubt, the depth of the difficulties that we face means that there is no pain-free exit from this situation. The Budget here was not received well and understandably so. We are all being hit in the pocket and in support functions that we all rely on to survive but the cuts quite simply had to be made. The question is whether or not they made the cuts in the right places. Saving lives by retaining funding in the health sector or moving a roundabout in Galway ten metres to the side? I know which one I’d choose.

I’m not in favour of the ‘lost decade’ forecast by Goldman Sachs. Each time the banks are recapitalised I only see it as papering over the cracks until the next stress test. Rest assured that the bankers will not face this lost decade. They will party through the most difficult times feasting on the uncertainty and volatility in the market place. It is what they do.