Ryan: Save Anglo or Leave the Euro

Following on from yesterday’s post on misleading hyperbole about Greece choosing to leave the euro or being expelled from it, it was truly depressing to hear an Irish minister today raise the prospect of Ireland having to leave the Euro.

On RTE’s Saturday View program, Minister Eamon Ryan said the following in relation to Anglo Irish Bank:

It would be so nice if we could say we’ll let it go and that will be the end of that. The reality is … and that’s kind of Fine Gael’s position and what Labour seems to be saying. There are .. That means that we have to go and effectively say to the European Central Bank, who has a lot of money in deposit in Anglo, and say sorry we can’t pay you back. Now the European Central Bank, it hasn’t allowed a bank fail across Europe. So we would probably then have to leave the Euro. Now the risk of that, in terms of the tens of thousands of jobs that could leave this country because they’d say well Ireland is a riskier country to do business in, we don’t really want to do business there. That is what you’re talking about. So, it’s not easy, it’s not palatable but that’s the choice you’re faced with.

When RTE political reporter Brian Dowling then discussed the idea that there were alternative options to take, Minister Ryan confronted him saying “Do you think we should leave the Euro?”

I think that these are extremely unfortunate statements for an Irish government minister to make.

The facts are as follows.

1. Whatever happens with Anglo, Ireland will not be leaving the euro. Minister Ryan’s assertions that we would essentially be expelled from the Euro if an Irish bank failed to pay back the ECB are groundless. This is not just my opinion. An ECB legal working paper summarises this issue as follows: “while perhaps feasible through indirect means, a Member State’s expulsion from the EU or EMU, would be legally next to impossible.”

2. The ECB has always been aware that it could lose money from making loans to a bank that is then unable to pay it back. This is why its loans to banks are all collateralised, based on a well-developed list of eligible collateral. This list does not include development loans. While it is still possible for the ECB to lose money on its loans to a failing bank (if the collateral turns out not to be worth the value of the loan) there has never been any rule that such an event would result in the country the bank resided in having to leave the euro.

3. There are, in any case, options for dealing with Anglo’s insolvency that could save the taxpayer money without going as far as failing to repay its ECB loans. For instance, Anglo could be declared insolvent and its subordinated bondholders fail to be repaid, while the Irish government could choose to pay back other more senior creditors. There are serious issues to discuss here. The prospect of leaving the Euro is not one of them.

The bottom line here is that Minister Ryan’s statements about leaving the Euro are without foundation. However, it is perfectly possible that they could form the basis for unfounded speculation that Ireland is somehow on the verge of leaving the Euro. I would urge Minister Ryan to issue a clarifying statement correcting these assertions as soon as possible.

As we await perhaps the most momentous set of financial decisions ever taken by an Irish government, the consistent evidence that senior Ministers do not understand the banking situation is extremely worrying.

44 replies on “Ryan: Save Anglo or Leave the Euro”

It is clear from the statements that the Minister has no idea of the capital structure of a bank and no idea of Eurpean treaties. If a FF TD or Minister said this he would be accused of being economical with the truth.

its either extremely misleading politics, or a deep dangerous misunderstanding of almost everything.
Minister Ryan – can you tell us please, exactly what is the putative mechanisim for us having to leave the euro?
A default on repos would leave either the EcB or the CBI with a large hole in their reserves. It would not cause an immediate expulsion from the euro, a plague of frogs and locusts, or more global warming.
I suspect that amongst other things, Eamon doesnt (or want to ) understand what a repo is and what it is not, how the ECB works, what liquidity crises are and how they differ from capital ones, what the role is of the ECB funding window, etc.

@Karl Whelan

From Minister Ryan, this is not only depressing – extremely worring – it leaves any citizen with an ounce of nous on the verge of absolute and utter despair. Minister Ryan’s assertion is not only untrue, but reckless in the extreme, considering the fragility of the present financial/governance crisis. You are correct to seek a clarification – doubt you see one before Tuesday, if ever.

As noted by the Finance Minister in September 2009, and reported by you in the Sunday Independent of Sept 6th 2009 – “I can give direction to NAMA to have a valuation reconsidered”. Add in Alan Dukes, a silent Taoiseach, and others – and no accoutability whatsoever anywhere – and I have lost faith with any expectation of the political class to relate the story as it is to Irish citizens. What is left but the hope that a few backbenchers will gather the courage to cross the floor of The Dail on Monday or Tuesday or Wenesday?

Tuesday, March 30, 2010. The Day the Music Died.

Wednesday, March 31, 2010. Nothing (almost certainly) Happens.

Thursday, April 1, 2010. A Nation of Sold Serfs Chained by Bought Fools.

Friday April 2, 2010: Minor point: in which country do I seek political asylum?

“he hope that a few backbenchers will gather the courage to cross the floor of The Dail ”
not going to happen. Whips are too strong.

@Brian Lucey

……… I’ve trained meself to explore all options ………… it is the only one I can think of right now to call a halt to the madness … and get a saner more pragmatic agenda ….. on the whips – I 99% agree with you. I hold the slender hope on the 1% til Tuesday.

I was listening to the radio when he said it, and my normally stoic jaw hit the floor. He has gone way down the ladder in my estimation of him.
He should be challenged in every interview into the future until he defends or withdraws his claim.
What’s next? Al qaeda want to destroy Anglo, therefore we should save it.?
Good night.

@ Karl

What you’ve wrote above would make a great first page to another letter. Im not trying to be funny, it’s just not only are my prayers for a snap election not working, Im dangerously close to loosing my sanity. Also who else has a chance of changing anything in the next 3/4 days?

This whole mess is like watching a super car crash.

What a bunch of pussies!

The EU is in charge, the idiots milking the system in the Dail are a freak show for 80% at any rate.

Who cares how they let themselves and the voters down? Eventually, they will be replaced and their replacements will not matter either.

The power is in Brussels. Ministerial minders are no longer functioning at full efficiency and it shows. They have lost confidence in the pollies. This will take time but they are becoming extinct.

The voters need to wise up. It will help if they take their medicine. A decade or two of poverty will really help them understand representative democracy. And that greed has consequences. If they look less stupid, fewer bankers will pump in poisonous capital into a bubble. Or maybe not.

“Ryan: Save Anglo or Leave the Euro”

😆 😆 😆 😆 😆 😆 😆 😆 😆 😆 😆
😆 😆 😆 😆 😆 😆 😆 😆 😆 😆 😆
😆 😆 😆 😆 😆 😆 😆 😆 😆 😆 😆

So this idiot wants to waste €20,000,000,000 of the Treasury because he “believes” Ireland will be “kicked out” of the EZ if Ireland doesn’t pay protection.

Have Fianna Fail got all of the Green children hostage?

Just how stupid are these people?

Light bulbs anyone?

Actually any light at all would do.

How about the Green Party insist that light shine on Anglo Irish Bank rather that insisting that €20,000,000,000 of the Treasury be incinerated.

OK I’m sorry. I shouldn’t expect anything from these idiots other than an absolute understanding of CO2 and Watermelons.

@Karl Whelan

Didn’t you give the Green Party a big talking to about NAMA etc. last year (I recall seeing the slides you used being posted here on IE)?

Did anything at all sink in? I doubt it. Why should we think they would understand problems around the Euro, what to do with Anglo, etc.

If the people who are allegedly running the country (ministers) have this level of understanding then what hope is there? And as we all know, Ryan isn’t the only culprit.

@Brian Lucey – “not going to happen. Whips are too strong”

Operas not being over? Fat ladies singing? Many years ago, I told a friend of mine that a certain horse wouldn’t win the Gold Cup at 100-1 and it duly did. It is said that a week is a long time in politics. We certainly look as if we are in for an interesting one this coming week.

It became clear last week on the Vincent Browne show that most people don’t know what a billion is. There was a slightly shaky consensus (Phil Hogan and VB himself included in this) that a billion = 100 million.

Are Brian Lenihan and Brian Cowen party to this view? It could explain a lot.

As for Ryan, this seems to me to be a clear case of “give me your pocket money or the kitten gets it”.

It will take more than a change from Fianna Fail to Fine Gael to sort this one out.


“As we await perhaps the most momentous set of financial decisions ever taken by an Irish government, the consistent evidence that senior Ministers do not understand the banking situation is extremely worrying.”

Next week the MoF will have the unenviable task of explaining why the rest of a sinking economy will have to be penalised further to provide the zombie banks with sufficient momentum to keep shuffling forward. The only way this may be sold is TINA – as the sky will fall in if it isn’t done. Minister Ryan, who is understood to be closely engaged on these matters with Minister Lenihan, is simply firing the first shots in this campaign of spin and disinformation.

It’s not the economy; it’s political survival.

Just out of interest, who are the bondholders of Anglo that we are so worried about?
I believe Prime Time suggested many of them were our friendly Credit Unions. If so, what were these staid organisations doing investing in a hyper bank? If so, it is possible to see the contagion from a collapse of Anglo going through all our banking organisations.

@ paul hunt

‘It’s not the economy; it’s political survival’

You have it in one again. Maybe the Minister was just repeating what (he thought) the MoF had said in a Cabinet meeting (or the corridor). Uncharted waters icebergs and all that.

@ Danny Haskins

I was worried about the foolish goings on of the Credit Unions last year and wrote to the Irish League of Credit Unions last May. Maybe they were told by the government that it would be patriotic to invest in Anglo?

This is an excerpt from what I wrote back then;

“I am very worried about the direction the Irish League of Crdit Unions is leading the movement.”

This government and unfortunately our economy is in dire straits and it is not at all unlikely, that the government will be unable to honour its committments, that is, to repay government debt in the not too distant future.

Let us not get all sentimental and start talking about green jersey’s, doing its bit for the country, being patriotic etc. this is the language of hubris of the League being led up the proverbial garden path. Being patriotic and being idiotic is only the difference of a very thin line or the difference between listening to or ignoring the government begging bowl attitude! Although, what it is looking like, to observers, is that it is the League begging the government to come and destroy our 14bn wealth! This is like a rabbit coming to play with a stoat there will only be one outcome. Destruction of savings!

The Credit Unions need to invest in assets which are prudential and which are safe. That means assets and bonds outside of Ireland. Investing in Canadian or German Bundes Bank bonds. It has to invest where “strength” is, not where “weakness” is rife. The aim, in the current climate, is not to get as much interest as possible, it is to actually preserve wealth accumulated to date.”

Unfortunately , Danny nobody listens in this country!

Excellent post.

Germany has raised the idea of treaty changes to allow a member state (presumably Germany) to be able to leave. As you have stated it is not just nearly legally impossible to leave, it is totally impossible without treaty changes.

Minister Ryan’s argument follows the government’s tried and tested practice of threatening all sorts of plague on all our houses if we disagree with its banking policy, before it was Iceland, now it is the euro.

This continuous misleading by government is surely a resigning matter.

Could there be another collective letter like the one that was published against NAMA?
I’m not an economist so am unable to articulate what should happen with Anglo but I know we simply can’t afford to keep going the wat were going.
Economists were proven right on NAMA – the govt would ignore you now at their peril.
They’ll no doubt wheel out the usual raft of arrogant goons to defend their position so would probably need a euro lawyer on it too to bolster the position.

I don’t understand Eamon Ryan’s reasoning. The bank can’t trade its way back to solvency. Most of its deposits I read are from the ECB and associated central banks. Could someone please explain to me why winding down Anglo over ten years at a notional cost of 2bn per year is considered a worse option than front loading it with 10bn (which will probably be the cumulative amount shoved in by the government soon). No one expects property prices to return to their heady levels but surely an orderly wind down is a better option as there is the possibility of some uplift over a ten year period.

While I am at it, I can’t fathom the argument that ‘ordinary’ shareholders in Anglo should get nothing and carry all the risk (still no assessor appointed) while preference shareholder and senior debt holders are made much more comfortable. Mr Dukes mentioned on Prime Time that some preference shareholders had been settled for 40c on the euro. There are a great many holders of ordinary shares who can only fantasize about such accommodation.

“Economists were proven right on NAMA – the govt would ignore you now at their peril.”
I 100% agree, apart from the last three words…

Alan Dukes says closing Anglo would cost the taxpayer more than €20bn.

Anglo chief executive Mike Aynsley says the bank needs at least €9bn to survive to become a conventional business lender.

A financially illiterate minister, Eamon Ryan, says the choice is saving Anglo or exiting the euro.

This is a typical routine in Ireland where information is delivered piecemeal without a credible challenge and the post guarantee situation and information on the collateral given to the ECB remains unclear.

Hmmmm – talking of Greens wanting to leave something… just looking at a story about a Green councillor resigning and threatening to set up a mass movement of disaffected Greens. I suppose they could call themselves the ‘Groans’.

@Michael Hennigan

I don’t understand much official reasoning at all. There doesn’t seem to be a lot of joined up thinking about. The bank must kept open because it is too costly to wind down – over ten years losses to the tax payer would be greater than the cash stuffing it currently requires (would they be significantly greater?). Yet, the ‘success’ of NAMA is predicated on property prices rising over the same period – this was the justification for dismissing a fire sale of assets. Using the latter assumption, surely the better option is to trickle money into the bank and wind it down.

As each day goes by, the politicization of key financial decisions becomes more obvious and worrying. The scale of professional fees envisaged is grotesque. Those among the financial and legal elite that have been badly affected by the property collapse must be glad of this potential bailout. The OECD in several reports drew attention to professional fees here as particularly uncompetitive but who listened in government.

Hi all
Is there a good link as to why closing Anglo costs more than running it. Why does it cost €20b to €30b to close? I’d like to see some actual figures not just waffle.

If you close Anglo presumably you have to pay back all the liability holders 100% and then get what you can for the assets. The bad ones have gone to Nama so what’s left should be good! Could these not be sold to another financial institution at a discount. Admittedly we haven’t seen a balance sheet for a while.

@ The Alchemist,

Let me see if I can help.

Aynsley & Dukes want €9bn post NAMA to re-capitalise Anglo.

Aynsley & Dukes claim that a ten year wind-down of post NAMA Anglo would cost €20bn.

Post NAMA Anglo will be split in to Good Anglo and Bad Anglo.

Bad Anglo won’t operate as a bank so won’t require minimum capital. Bad Anglo WILL make further losses (we get to pay).

Good Anglo will get most of the €9bn.

Good Anglo will have assets (of say) €40bn.

The only way this “plan” makes sense is if Good Anglo makes €11bn+ over the 10 years.

It won’t.

But even if it could what’s the point.

Shut up shop (personally I’d take it out and shot it in the head) and use the €9bn to establish a bank with a completely clean balance sheet, no legacy legal issues, no contractual commitments to 1800 staff. Etc etc etc.

Good Anglo / Bad Anglo is a bogus plan.

We are being taken for a ride AGAIN.

“Is there a good link as to why closing Anglo costs more than running it. Why does it cost €20b to €30b to close? I’d like to see some actual figures not just waffle.”
Well they called a plumber in and asked how much it would take to replumb the financial system around the blockage at Anglo and he sucked in air through his teeth in that “really expensive” way. Then they asked him how about clearing the blockage and he tried to tell them it was the design and the other toilets would just block somewhere else, INBS, AIB or BoI for example. But they didn’t want to know. They’ve been holding it in for ages and they need to go soon.

I’d like to see some figures too, but the last ones we have for Anglo are:
Anglo Irish Asset Finance PLC interim period ending March 2009 (UK operation).
The interim results for the six months ending in March 2009, a document that must be treated with the greatest of suspicion.
The final results for 2008, a period that ended in September of 2008…

So, over a year after they were nationalised and a year and a half after their last audited trading period, we are still waiting to find out what we directly spent 4 bn on, what it looks like we will spend another 9-11 bn on this year, and what permanently increased the cost of debt to the state (500 mn? 1 bn this year?).

This is all before the magic of NAMA and the likely losses we will make there, the increased cost of funding for the state and the limitation all this will place on the ability of the state to fund genuine investment, not to mention what the likely raid on the NPRF will do to future pension provision.

I like consistency, which is one reason why I find the ‘to wind down or not to wind down’ debate seriously troubling. On the one hand, there is the ‘official’ position that Anglo cannot be wound down due to Armageddon consequences, but on the other there is another ‘official’ position promoted with equal earnestness by a group of official wizards promising a couple of hundred thousand jobs between now and 2020. The government has a contradictory hand in both stories.

If the job wizards are to be believed, an orderly wind down of Anglo will be more affordable over time than the current ‘let’s all try the life of a pauper’ for half a generation. Hence, in terms of predictions from the industrial development crystal ball, a wind up would make much more sense in my opinion. Of course, the cynic in me says its all more blather about jobs and innovation, not to be taken seriously by anyone past tying mittens to their sleeves. Popular blather nonetheless as it is politically convenient.

I hope I have made my niggle clear. If the economy will ‘confidently’ roar ahead in five years time, why save Anglo with a galactic wodge of cash now? This is the contradiction that puzzles me.

The liabilities consist of
deposits : whats left of them, can be sold at near par. No loss
interbank borrowings ex central bank : presumably whats left there is small, apart from round-robin lending from other irish banks
senior bonds : apparently have to be repaid in full, some 10b
subbies : small beer now, about 2b mostly guaranteed (12b so far now)
repos: the big one , some 30b plus “secured” on the loans advanced. This is where te losses will arise. Even after NAMA some repos will be secured on the residual. The value of the assets on book is almost certain to be in excess of the realisable value if the company is sold. The imponderable is how much will remain repod and how much the value is of the repoed assets.
Post NAMA the 30 loans will be matched by 10b senior, 2b subbies and some deposits. So long as 18b deposits remain (eg from the NTMA, frinstance….) theres no excess of liabilities over assets.
the closedown scenario involves careful matching of the maturity of the assets remaining with the liabilities. I cannot for the life of me see how 20/27/30/35/65b, all figures alleged to be the cost of closure, can arise from the structure of the balance sheet as it stands.

@Karl, Colm and other
A major problem is one of communication.

Ignoring for a moment the nuttiness about having to leave the Euro, Ryan, Lenihan, Dukes, et al have a clear field when they wish to talk about Anglo and the other banks because no-one with access to any numbers is putting clear summaries into the public domain.

Without something visual (a couple of stacked column chart for instance) it is too easy to keep throwing numbers around until Sean Public is totally bemused. Only isolation of the vagueness will achieve anything, and visual comms is about the only way that’ll be achieved on any public scale.

As Ronan L and others have shown elsewhere, widely available tools from Google, IBM and others make visual representation of even time variant data reasonably easy and very accessible.

Now, all we need is some data. Even if Ryan, Dukes, Lenihan et al are all right, at least the electorate could understand why.

@Hugh Sheedy
I think, being honest, that the figures and ranges of action that I, Karl, Ronan, Constantin and a host of others have beeing bandying about have generally proven to be more correct than that of the government in the banking crisis.
We have the public data, and a long baseline of similar events to backinfer. And we dont have reputational or political skin in the game.
Who would you trust to analyse a banking system : Karl Whelan or Eamonn Ryan?

“Anglo has assets, monies that it has lent out. These loans are in the main to speculative property developers and are carried on the books at €66 billion. This book value is a wild overestimate, in my opinion, of the real value of these loans.
In reality these loans are probably worth no more than €30-€35 billion.”
http://www.irishtimes.com/newspaper/opinion/2009/0615/1224248848649.html, June 15 2009

Anybody want to suggest that the discount to be revealed this week will be much less than 50% for anglo’s toxic waste?

Lehmans! Iceland! Greece! Forced out of the Euro!
This is just another phase in a campaign of violent intimidation. It’s a terror campaign waged by the government against its own population. They have relentlessly and brutally bullyed the public. They have done this to protect megadevelopers and bank investors and to escape their responsibility for the banking catastrophe. History will judge them harshly.

Interesting article here:


Anglo/Quinn/WHPR/Establishment/DDDA/WHPR/Anglo/Quinn. It’s the golden institutional circle.

Is it possible Sean Quinn’s purchase of the Anglo CFDs was an organised effort to support the share price? He is a huge customer of the bank so it is hard to see it as hostile. Was it really just a gamble? What would it mean if it was a share support scheme?

Maybe someone should explain to Minister Ryan the environmental benefits of turning out the lights in Anglo’s offices, permanently.

@ yoganmayhew
‘I’d like to see some figures too……………..over a year after they (Anglo)were nationalised and a year and a half after their last audited trading period, we are still waiting to find out what we directly spent 4 bn on…’

@Robert Browne
‘This is like a rabbit coming to play with a stoat there will only be one outcome. Destruction of savings!………………
The Credit Unions need to invest in assets which are prudential and which are safe. That means assets and bonds outside of Ireland’

@ Alchemist
‘ As each day goes by, the politicization of key financial decisions becomes more obvious and worrying’

The state is the ultimate guarantor of property rights, on which the world of finance, and business, as well as much else, depends. How ‘economic options’ are structured and presented politically is part of statecraft.
It follows that key financial decisions are always political, even where the politics take the apparent form of ‘globalisation’ and ‘less state intervention’.

Our banks got high at Greenspan’s party and fell out the windows. Anglo went out off the top floor, but the others took quite tumble too. Insofar as the Credit Unions represent the mainstream, it seems likely that they were at the same party. Who wants to be Cinderella ? If so, the damage is probably done, and more ambulances will be needed.

It is frustrating to (many but not all) economists, but the political imperative is again trumping the economic one. In the narrow sense, statecraft means keeping out the cameras and pouring on fire retardant until the present government are out of office. Let the other crowd sort it out.

At a wider level, the institutional imperative is to block any examination of the central role played by prominent financial and related services professionals, including senior public servants, in the debacle. The pecking order must preserved while things get back to normal.

I guess huge fees will have to be paid for the retrospective completion of paperwork which someone else was handsomely paid for neglecting. Backfilling of that sort will at least endure that the emperor doesn’t emerge totally naked. Cooking the books is indefensible in the public arena, so secrecy is the watchword.

Agree with Hugh Sheehey. Joe Public needs a one pager with visuals showing what it might actually cost to wind up Anglo. I read the SBP, this forum most days and I’m none the wiser as to where the truth lies – which just goes to show how effective FF propoganda is. Exactly the same strategy with NAMA and it’s worked to date – muddy the waters, keep it vague, TINA TINA for weeks on end and then a fait accompli with no accountability.

I don’t mean in any way to suggest that I doubt the figures you and the other reputable economists have been putting out into the public space, nor that they’re righter than anything the politicians are saying, nor they’re being presented in a manner that makes sense to people used to dealing with such things. You are on the side of the angels and I’m trying to be there too.

What I was hoping and trying to say was that the “man in the street” needs to be able to see very clear summaries of the data, not to have to read long paragraphs or interpret tables of numbers. Even in business things like colored pie-charts have a place. We need to see more simpler summaries of the data……graphical representations of the hole we’re in to make it less easy for politicos to dance around the data.

The EU is making the decisions on what NAMA can do, what the government can do with banks and not the financially illiterate gombeens “in power”.

That they are allowed to speak reflects badly on TPTB.

If the Germans want to leave, they will jeopardize the EU, not just the Euro. That is unlikely, since they did not need one Panzer, this time! All the gas bagging on the euro is designed to rapidly devalue the fiat currency as the member states are assuming the debts of their bankrupt banking system. By all means, please help!

A relative of mine is flying to Ireland to look at buying property there. They are premature, given that the euro has much further to fall, against value such as gold, $Au etc, (I like the Au not AUD!) Puns galore. The housing stock will also fall further. I will consider following them in three years time, but most likely in 7 years or so.

Keep it up! Devalue faster!

By the way, why has no one spoken up for the bond holders who stuffed Ireland’s goose?

If they did, what would they say? Whom would they buy? What institutions would they have brought into law? How could they depress asset values so as to be able to buy cheaply when their bonds are redeemed? What stories would they plant in the MSM in order to do this?

Will we lick their boots when they have done this?

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