It’s very hard to work out what the politicians in Ireland and elsewhere thought they were doing signing the Irish bail out deal this weekend.

I note George Osborne said:

There is a loan going from Britain to Ireland of just over £3bn. Of course, Britain is also part of the EU and part of the IMF, so we stand behind their loans as well. It is in Britain's national interest. It is money we fully expect to get back, and we think it will help Ireland get on a fully stable path back to growth.

The man, as ever, shows himself to be a fool. Ireland isn’t going to grow. This agreement is, for Ireland, the equivalent of the reparations deal for Germany in the Treaty of Versailles: the imposition of a burden on its people they didn’t not create and will never be able to afford.

Iris people, crippled by mortgage burdens they will never be personally be able to repay because even bankruptcy does not wise such debt in Ireland will flee the country to avoid personal liability — and in the process reduce its capacity to pay internationally.

The interest rate — at 6% — is way beyond what Ireland can afford — and the 4.4$ its economic recovery plan assumes.

The total liability with interest added is beyond any prospect of this small state ever repaying.

So there are three possible outcomes.

The first is Ireland reneges on the debt.

The second is Osborne is proven to be charlatan, an economic imbecile or a liar.

The third is both options one and two happen.

But there’s no joke in this. For all practical purposes this deal consigns Ireland to the wilderness for generations. It will have no choice but renege then. And at that time — and let’s hope it is soon — the realisation will dawn that the countries ravaged by bank debt will need the equivalent of a Marshall plan to finance their recovery — and that this is the only thing the then debtor nations of the world will be able to do to secure their own economic well being. This occurred to the US about three years after Keynes made clear the necessity for such action at the close of WW2. I hope it happens sooner now because without a massive spending of the surpluses China and Germany have then the prospects for the world economy and the smaller bailed out states in particular is bleak. And that’s bad for Germany and China too. The Communist Party in China can only secure its position by guaranteeing well being — and it can’t do that if much of the West is laid low by debt repayment burdens.

And yes, that’s how integrated the world is. Ireland's misery is China's peoples’ problem.