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Ireland: A metaphor for market-blinkers

Phil Walter | Getty Images Sport | Getty Images

Great news last week. Ireland completed a remarkable comeback and became the first of the European bailout countries to exit the program. An amazing achievement given everything that has been thrown at the republic. Genuinely well done!

OK, enough of the back-slapping. As we clear away the party poppers in Dublin and Brussels, perhaps someone should remember that the crisis that enveloped Ireland and a great swathe of western Europe is still very much with us and is only beaten in the danger ratings by one other factor - stunning complacency.

(Read more: 'Sense of achievement' as Ireland leaves bailout)

It's heretical to say so but the truth is that many of the key ingredients that got us into the crisis in Europe are not only still with us but are getting worse not better. Higher unemployment in 2013 than in 2008, zero growth in many cases and the small matter of bigger and growing debt piles now than at the onset of the crisis. Barely any country is running a government surplus and debt-to-gross domestic product levels from Italy to Ireland, from Britain to Greece are huge and growing.

Look at Ireland. Despite Enda Kenny and Michael Noonan quite correctly warning that Ireland had a long way to go after its bailout exit, the markets are pricing the country's 10-year debt at only 3.5 percent. US 10-year debt trades at 2.85 percent or thereabouts. Not much of a spread, eh? Let me remind you that at the peak of the crisis Irish paper was trading at over 14 percent.

So the markets are pretty much saying there is nothing to see here. No risk left on the table as far as Ireland is concerned even though the Dublin politicians are a tad more cautious.

Again, things are undoubtedly moving in the right direction but the scale of the current crisis cannot possibly justify such low sovereign yields. Ireland still has a budget deficit over 7 percent, a debt-to-GDP ratio of 125 percent, unemployment at 12.5 percent and the not-insubstantial problem of an exodus of young workers, the latter point creating more headaches for a country of only four and half million people.

(Read more: Ireland is picking up Europe's bar tab: Ganley)

The problem of complacency across markets and in Brussels is terrifying. It was always inevitable that after five years of perpetual crisis, the appetite for "shock and awe" on the policy front would evaporate. That much was always going to happen but to see market valuations from bonds to equities fully discounting a happy ending to the worse debt crisis in many a generation long before the corner has been turned is astounding.

Let's just hope that in 2014, the tiny improvement in fundamentals picks up pace and the reality of the underlying economy begins to match the bullishness of markets that have been enchanted by Mario Draghi and his peers. I for one fear we will have a lot longer wait.

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