Early in the euro crisis, Jean-Claude Trichet knew what the Greeks had to do: “Greece has a role model and the role model is Ireland,” he told the European Parliament in March 2010.... The funny/sad thing is that the Irish have been proclaimed a success story not once but twice — last fall, a year and a half after Trichet’s triumphalism, Merkel declared Ireland an “outstanding example” and Sarkozy declared the country “almost out of the crisis”. But once again they were premature. The most interesting and depressing thing about the latest IMF report is the cold water it throws on claims about the success of “internal devaluation”, the attempt to regain competitiveness with a fixed exchange rate. Last fall there was much trumpeting of a big fall in Irish unit labor costs due to rising productivity; this report more or less concedes (Figure 2) that this was a statistical illusion, reflecting the fact that very capital-intensive industries, especially pharma, had weathered the crisis better than labor-intensive sectors. Meanwhile, the real thing — slight wage decline in Ireland while wages rise in Germany — has been proceeding at a relatively glacial pace. And the promised payoff in increased market share is still invisible. Again, this is in a country that has done everything it was supposed to do. So even if the mainstream parties hold on in Greece today, what chance is there that the current strategy will work?