Morgan Kelly: Burden of Irish Debt Could Yet Eclipse Greece

Morgan Kelly has published a downbeat assessment of Ireland’s prospects for debt stabilisation in today’s Irish Times. As part of this, he provides a very powerful indictment of the Irish bank loan guarantee and Anglo bailout.

33 replies on “Morgan Kelly: Burden of Irish Debt Could Yet Eclipse Greece”

Not news to our readers, but it is the IT.

He indicates that TPTB are allowing the regulators their way. I am not so sure. Their aim is to keep them away from the most toxic stuff while using them as Morgan analyses. Linking what Morgan says about lending, soon we will not be able to borrow from real lenders, then the regulators can be let go. Until then we are pristine, repentant sinners who seek salvation! Praise the Lord!

Yes, we may end up worse than Greece, but we have further to fall. So we may be able to stay the course, ending up still wealthier than the Greeks per capita. Ain’t optimism grand?

After our real sources of real lending are exhausted there will be widespread printing of money, over German howls of course! The point being that even the Germans will see that deflation is the greater enemy and that hyperinflation is unlikely across the EZ.

Until we have a change of culture regarding corruption in high places, with prison sentences, the wealth is very shaky indeed, what little that will remain.

He hs correct, he focuses on GNP not GDP as a correct measure of the national capability to pay off nationalised debts. GDP is now recovering but GNP is still dropping.

The man takes no prisoners!
Won’t wear the green jersey.
The Roy keane of economics!

Re. Pat Donnelly’s comments about “widespread printing of money” and “German howls”.

It’s clear that German politicians are sick of the peripheral eurozone states that, due to greed, recklessness, corruption and sheer ignorance, have caused so much trouble. The German public, I suspect, holds stronger views, and would see printing of money to bail out the miscreants as unacceptable. Support for right-wing anti-euro politicians would increase and Germany’s politicians would be unable to hold their current position. Then, the agreed 750bn bailout pot that I’m sure our government is taking a keen interest in, would surely be in jeopardy!

@al:you’re setting up a false opposition between being patriotic and being honest. Someone who stuck his neck out early on seems to me to have a very large green jersey on. The idea that you are doing the country a favour by dissembling is bunk: do you really think you can con the vast numbers of people trading in markets worldwide?
As Richard Feynman put in in the report on the Challenger disaster Nature cannot be fooled.

@ Kevin d
Your right. You exposed my trickery and helped everyone else.
I just thought people wouldn’t get my Lacoon analogy….

@ Al

i got ya dude, dont worry…and for the purposes of disclosure, i am an proud green jersey wearer. Not everything is as crystal clear-cut as Morgan suggests, and explaining the postives of the Irish economic story is not as pointless as Kevin D would make out. Green jersey wearers are not simply dissembling the facts on the ground, and to suggest such is unfair and incorrect.

What Morgan Kelly basically said was that given the current trend in Irish Finances it is not a matter of if Ireland is going to default it is when. There is no green jersey sentimentalism in this it just a statement of economic fact. The government was never in a position to underwrite all the disastrous financial decisions made by Seanie and his pals. If the American Government had underwrote Lehman’s dead debt we now be saying the saying the thing about the USA. Anglos, INBS, AIB and Bank of Ireland loans to developers are largely DEAD. Also a lot of its mortgage debt and associated business debt is in Peril.
It dosn’t matter if we transfer this debt to Pat Cobly, get an army of lawyers and Mullingar full of accountants to chase it. Dress it up in NAMA colours with pretty bows and get the German minister of finance to sing it praises it is still dead. Get real

“We … will soon face a choice between national bankruptcy and admitting the bank guarantee was a mistake”
There is really little else to say – the guarantee of the bondholders was a mistake – the guarantee of depositors to a reasonable limit was probably essential.
We have to face the music sooner or later – preferably sooner. We gave a guarantee which was like the emporer’s clothes – illusory – since there was never any way we could have honoured even a fraction of it. We all knew that, but now it looks like the bluff will be called.

We can pay it off faster than Greece. We probably will, but only after a general recovery. The faster the Euro devalues, the better.

Perhaps we can take advantage of the occasion to revamp the Green Jersey? In Australia we call it a Guernsey. Our national colours are Green and Gold. The National flower is the Wattle which has fragrant golden blossom and pumps nitrogen into the soil, enabling many other flora to grow.

Start up an enterprize looking for minerals? Sampling streams would be a start. We use termite mounds here among other methods.

@ Pat Donnelly


What struck me earlier reading this is the criticism again of the Germans and the personal comment about Commissioner Olli Rehn.

The cheek of them to intrude in our affairs.

We are due the money; after all we converted those barbarians to Christianity!

<i<Last week Olli Rehn, the EU’s monetary affairs commissioner, said he was “examining whether Dublin should adopt new austerity measures and will conclude my review within three weeks”. Rehn is an EU insider. A chronic student whose formal education concluded 14 years ago at age 34, he served briefly in the Finnish parliament in the early 1990s. Since then he has been an unelected EU functionary.

Rehn got a PhD from Oxford University in 1996, which makes him look a plonker compared with the best and brightest in the Oireachtas.

He had in fact various jobs before 1996 including as a newspaper columnist — maybe Kiberd does not regard that as a real job.

As for being an unelected EU functionary, maybe we would get betetr policymaking by for example electing central bankers.

I am certain Ireland is less corrupt. But a similar situation could arise were a Madoff character to be found lurking within the IFSC. But we know it is so well run, that could never happen ……..

By the way, anyone ever met the “Irish nun” called Sorcha Faal? She and her sisters have a hot line to Russia and according to one commentator, is a USN Intelligence Captain ………

@Pat Donnelly – “By the way, anyone ever met the “Irish nun” called Sorcha Faal?”

Is she the one who gives out the leaflets about how bankers are running the world and we are all just little debt slaves?

The bank loan guarantee is indeed indictable. The further bailouts required also indicate they were an insuficient measure even in the narrowest possible terms; securing the banking system. Further, the reposne to the bailout of Greece’s creditors demostrates a lack of credibility in financial markets, spposedly the motivatio for boh bailouts an guarantees.

The lack of credibility is hardly surprising. Unsustainable debts are ‘remedied’ by guarantees for the creditors, Europe’s banks, by increasing the sovereign’s debt and preventing it from increasing the revenue streams that might help service it.

It’s past time that the creditors took their medicine. The existence of the guarantee, and its imminent expiry can be used at adomestic and European level to administer it. 25 cents on the Euro might be enough.

Thanks! The problem with corruption is also well demonstrated in Haiti. The biggest and most vicious gang are the “law”. No one else gets a look in. Ireland is a long way from that, but the social cohesion preventing that is fraying all the time, as examples of foul habits by TPTB rot the body politic.

MK is correct. It could. But the government is committed to a low tax regime. So they will shoot at the messsenger, as hard as they can. They still do not want to recognize what he has cogently, and many posters on this wonderful site too, said.

That is extreme extend and pretend and suggests a log jam of massive proportions in fiscal policy that will cause what MK warns of!

Michael Burke
No one wants to damage Ireland and reputation is important, but Ireland is its people only! They will only put up with so much, though the Famine experience shows that they can be cowed extremely effectively.

Do we have to watch as matters get much worse? FG seems to be asleep, wanting to gain through FF implosion. Perhaps they are right? The policy vaccuum is partly down to the opposition in the Dail.

The Annual Report on the Euro Area 2009, produced by the European Commission is worth reproducing below (See Page 54).

It outlines the extent of public intervention of the banking sector as a percent of GDP for each member state. When looked at comparatively, Irelands bailout is massive – 231.8 percent. The Euro area average is 25.4 percent.

Euro-area public interventions in the banking sector (as % of GDP) – approved

* Austria 32.0
* Belgium 92.0
* Cyprus 0.0
* Finland 27.7
* France 18.1
* Germany 24.4
* Greece 11.4
* Ireland 231.8
* Italy 1.3
* Lux 20.2
* Malta 0.0
* Netherlands 52.0
* Portugal 12.5
* Slovakia 0.0
* Slovenia 32.8
* Spain 12.1
* Euro area 25.4
* EU 27 31.2

@Aidan R: Good post! Of course most of the amount comes from the debt guarantee (Table 2.1 on page 46 or page 54 depending on which numbering you prefer). Perhaps this shows the importance of winding down the guarantee as quickly and fully as possible. Unfortunately, state ownership complicates the implicit guarantee which applies to Anglo-Irish.

This is my first time looking at this blog. I believe that the reaction by the Dept of Finance and Martin Mansergh to Morgan Kelly’s article provides a glimpse of the appalling vista that most of our public just haven’t yet twigged. Our establishment is utterly utterly irretrievably corrupted, and largely ignorant of that fact (as well as of everything else). To hear the term “prophet of doom” being wheeled out yet again after all that’s happened is so depressing. And I’m a capitalist businessman. I’ll get involved in these discussions when I have time, but can some one of you please enlighten me as to what TPTB means? Thanks.

Liked the Bill Bonner piece – especially this comment on Argentina echoing Morgan Kelly comments to some extent on Uruguay:
“Compared with the bailouts, the Argentines’ failed fix looks more and more like a success.”

– Bill seems to belong to the more old-fashioned (Austrian?) school who believes that the pain we are suffering is part of the solution and not the problem – see also Peter Schiff on this. If we keep trying to fix things through government bailouts , all we are doing is adding our problems of today on to the next generation, who will have their own problems. It is not so much a “kick the can down the road”, than a “roll the snowball down the road” because of the cumulative effect.
Now the snowball has just got too big to push any further, and bank debt has been converted to sovereign debt, and the government kitties are already raided.
The collapse of the banking system here may or may not have happened without the guarantee – but it would have been a short sharp shock compared with what lies ahead.

That is my read too. But that would require honest leaders of courage and who were well advised.

So maybe after the next election? Or the one after that?

Just posted the same link over on the TARP thread – I was staggered by the perverse logic of this for example:

“I think it is obviously true that one has to try and deal with some of the narrative that has been allowed to be formed which i think doesn’t reflect a comprehensive or balanced commentary of where we are at,” said Mr Cowen.

“Really implicit in some of the argumentation is the idea that it would be better for Ireland to default. But we simply don’t accept that at all and I think all of the implications from other countries where that happens greatly undermines, not just in terms of financial credibility but also the ability to retain confidence at home,” he added.

Which MK article did Brian Cowen read?

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