Sean O'Grady: With the rescue Eire's troubles really begin

The trouble with being rescued, as the Irish may discover, is that the people from the European Union or the International Monetary Fund who fly in to run your economy have no more a monopoly on wisdom than the "Useless gobshites" who have recently been relieved of that duty. (That description, by the way, of the Taoiseach and his colleagues comes from a recent front page of the Irish Daily Star, and has not been bettered).

The IMF in particular has a poor track record in imposing "solutions" that make matters worse, even though harsh medicine is always expected. Though such judgements are difficult to hand down in the field of economics, the IMF's prescriptions after the East Asian crisis in 1997, the last big trauma before our current travails, were especially short on wisdom, and sowed the seeds for the current crisis. Then, as now, some smaller nations became insolvent and had to be bailed out. Then as now the contagion spread. And, in return for a bailout, the IMF squeezed the life out of the entire region, prescribing public spending cuts, interest rate rises and the usual round of privatisations.

Yet all the IMF did in 1997 and 1998 was to induce a second round of trouble. The contagion spread to Russia, and, in turn, to Long-Term Capital Management, a hedge fund, which had to be rescued by a consortium of Wall Street banks backed by the US Fed. The world was lucky that this was the last domino to fall.

Mercifully, the IMF does not seem to want to repeat that error in Europe. The more lasting damage from the IMF's mistakes in Asia was caused by the lesson that China learned – the need to build up huge trade surpluses and colossal reserves so the IMF would never be needed. When these "global imbalances" were lent back to the West they fuelled the Noughties bubble and, thus, framed the credit crunch and recession we have recently crawled out of.

Then again, older readers may recall the IMF's brief period of suzerainty over the British economy after the sterling crisis of 1976. The IMF asked Britain to do what it ought to have done in any case – to live within its means and stop inflating the currency. The episode wasn't that painful. But it did mark a low point in our fortunes and was no end of a lesson – as one must hope it will be for Ireland.