All in a Day, a Guest Post by Ciaran O’Hagan

Ciaran O’Hagan is head of rates research at Société Générale in Paris

Risk aversion has picked up in Europe over the past weeks. The debate over the fiscal and banking outlooks in Ireland needs to be placed in this context. While Irish credit is under pressure, it is also against a backdrop that favours risk aversion.

The flavour of Wednesday’s press alone gives a good idea of the headwinds facing any country wanting to grow itself out quickly from public debt. 

The ECB’s chief economist, Mr Stark, is warning of a slowdown in growth,  Meanwhile the Bundesbank’s Weber is cautioning that the global financial crisis is not yet over and setbacks in financial markets cannot be ruled out.  Behind this talk is of course the cautioning of governments that they need to show long-term commitment towards fiscal consolidation, or else brave the consequences.

Unfortunately several governments are non-existent. Belgium’s mediators warn there will be no announcement in relation to a new government this week, and there is no quick progress in the Netherlands either. Italy’s finance minister affirmed that there’s no autumn emergency. In France, the unions are trying to complicate very necessary – if still modest – pension reforms.

Even what should just be simple procedure is becoming problematic. Comments from the ECB, as reported by government sources in Berlin, suggest ongoing frustration with the IMF over how to deal with the challenges posed by Greece. And Eurostat is reported as saying it is frustrated as it can’t get all the Greek documentation on debt that it wants.

Moreover in Brussels, we have the overriding impression of cacophony from the latest Ecofin and Eurogroup meetings. We had the spectacle of head of the Commission, Mr Barroso, calling on the governments to reform. That absence of reform leads to titles in the press Wednesday like “Europe is Acting as Though it Wants to be Left Behind” (the WSJ) and “Realisation has dawned that sovereign credits cannot survive unless banks are recapitalised (the FT).

Even in AAA land, we read titles like “German banks are in reality the Achilles’ heel of the European banking system” (FT). The Bundesbank’s Weber affirmed that higher capital requirements for banks won’t curb economic growth. However even Mr Weber would probably agree that without strong banks, there will be no robust recovery. Unfortunately Europe won’t allow banks fail, and yet at the same time, many governments treat them as taxable cash cows and excuses for a lame recovery.

Last but not least, Mr Lenihan, the Irish finance minister, extended the guarantee for deposits at domestic banks and laid out plans for the dénouement of Anglo. These were necessary actions. However they unfortunately raise the contingent liability for the Irish state still further.

All this is just in a day’s news. It provides an unfortunate backdrop for any country wanting to grow itself out of public debt quickly. Ireland’s growth rate is probably more elastic than most with respect to global prospects. Unfortunately fiscal consolidation elsewhere in Europe over 2011 and beyond faces strong headwinds. That is helping make investors ever more averse to taking on risk, even among sovereigns, traditionally regarded as among the strongest of all credits.

All of these developments are over the past day. And there will be more days like this. Ireland is particularly exposed to moves of risk aversion as it has the largest public budget deficit as a share of national income for three years now, and there is no sign of that changing. Indeed our latest forecasts for 2011 show a widening gap in fiscal performance between Ireland and its neighbours.

Moreover there is a strong gap between perceptions and reality. Many, both inside and outside Ireland, are under the impression that Ireland embarked on a programme of fiscal austerity these past two years. The international press repeated the same good tidings incessantly. That reflected a large well of sympathy towards Ireland’s predicaments. It is still there. But it can only be capitalised upon if the government goes some way towards delivering on promises of fiscal stringency.

The main challenges ahead now are more fiscal, less financial. The present and future governments of Ireland have considerable leeway in how they manage the process of fiscal consolidation. But on the banking side, there is increasingly less room for manoeuvre. The costs to the taxpayer of the domestic banking crisis have been more and more socialised by the policies of the present government. That unfortunately has made what were contingent liabilities certain liabilities for the taxpayer. Even lower grade bonds have been bought back, at prices below their redemption value, but at prices above what might have been considered market value (those higher prices can be justified by the need to attract investors into the buyback).

Now Anglo Irish is seeking approval from government to launch yet another buyback of subordinated debt. Banks that buy back debt at a discount to face value create a capital gain that can used to bolster capital ratios. All Irish banks are then strongly incentivised to buy back debt at a discount while still under guarantee. However the interests of the banks and of the taxpayer are not necessarily identical. All these buy backs help socialise the ultimate liability for the taxpayer. Once a bond is bought back, it cannot be watered down anymore and the new funding is probably under guarantee or somehow securitised.

After the expiry of the CIFS guarantees on the 29 September, there may only be a few billion of domestic banking bonds left in the hands of investors that is not somehow securitised or subject to further guarantees. Maybe even less than that.

For bonds still outstanding at the end of the month, there is quite a range of possibilities, ranging between full and zero redemption for this debt. The easiest option of course for any government is to do nothing and muddle through. However some governments (notably the USA and the Netherlands) have seen their credit worthiness reinforced, not weakened, by allowing holders of bank debt largely bear losses (if admittedly in quite different circumstances).

The “muddle through”, do nothing, option is more attractive if the government has a rosy view of future growth prospects. If however it is fearful that growth will be anaemic over the coming years, with little to no inflation, then there is all the more urgency to take action now in order to safeguard the integrity of the signature of the state.

There is no denying that such action is hard to undertake, and involves risk. Moreover some action that was available to foreign governments is not as easy to implement in Ireland. The Irish Constitution provides an unusually strong defence of property rights. I have no doubt however that a government would have the necessary leeway if the public understands that its purpose is to allow wider sharing of losses at banks.

There is, however, no escaping repayment on the vast bulk of the bank debt clocked up on behalf of the Irish taxpayer without impinging on the sovereign signature. That puts an ever greater onus on the government to limit the growth of public debt ex-banks, if risk premia on sovereign are to be contained. Our initial projections for 2011 see several eurozone governments with general government budget deficits in the 6-8% area as a percent of GDP. Ireland, more than ever, is standing out from the pack.  

Measures of Ireland’s sovereign credit worthiness have been strong up until now, both in terms of “ability to pay” and “willingness to pay”. “Ability to pay” criteria are mainly based on some notions of wealth, income and national debt as well as contingent liabilities (those are mainly pensions and banking risks). “Willingness to pay” benefits from a history of stable and responsible government, and a strong respect for procedure and the rule of law.

Access to ready cash is also elevated for Ireland. The NTMA could go well into 2011 without raising a single cent on international markets, and government wouldn’t run out of cash. That is unusual among sovereigns. However this is also very much a double edged sword. It buys the country time to get its affairs in order. But it also gives governments the opportunity to just dig a deeper hole for itself. Indeed it is unfortunate that the discipline of market did not prevent a build-up in public debt over the past two years, in part because the government was so cash rich.

In this context, we can safely exclude any repeat of the Greek crisis for Ireland. Pasok, as soon as it came to power, started begging for solidarity from the EU, in the belief that would ease repayments. It eventually did, but in an extraordinarily disruptive way that took the Greek authorities by surprise. I can’t imagine the present or future Irish governments ever doing likewise, having seen the fate that befell Greece.   

Somewhat for the same reasons, I can’t see Ireland wanting to seek help from the EFSF (the European Financial Stability Facility). Like for Greece, it would mean the death of the local bond market, along with the nosey oversight of the “Troika” (EU, ECB, IMF). The loss of reputation would be severe, and getting back to normality after a few years could prove very costly indeed.

Irish government credit, despite all the challenges ahead of it, is still not attractive to sell. There will be no Greek-like crisis in Ireland, given that Ireland is not going to run out of cash anytime soon. Any investor that wants to “short” Irish government bonds (i.e. sell a bond in the expectation that its price will go down) will probably have to hold that position for quite a while indeed. But that would prove very expensive, as the differential between yields on Irish bonds and AAA bonds or swaps is already quite wide.

Little surprise then that few investors have short positions on Irish government bonds, in all probability. It is no secret that hedge funds have not been actively trading sovereign debt in Europe for some time. Trading volumes generally have dropped off, and prices for sovereign debt have become unfortunately very sticky.  There are sizeable holders of Irish debt, with the ESCB (Eurosystem) now probably the largest (from IMF reports on Greek debt holdings, I’d guess the ESCB now holds some EUR15bn+ of Irish government debt – compare to a total outstanding of some EUR90bn).

In these conditions, the yield Ireland pays over AAA governments is a function of global risk appetite (outside the control of Ireland), along with any news that substantially impacts the creditworthiness of Ireland. That consists mainly of the expected path of the growth of public debt in the years to come. Other factors, like the prospects for growth, play a role, but they are very much second fiddle, as slow moving.

If the present or future governments want to get the cost of borrowing down, it has to control the growth of public debt. The easiest way of doing so very quickly would be to find measures with a sizeable long term impact, but little upfront cost, and hopefully, a weak burden in terms of disincentives. The mere announcement of such measures – if perceived as credible and likely to be retained by the next government – would almost certainly help narrow yield spreads. Measures might include: 

– the introduction of property taxes and local government charges, on a par with the rest of Europe;

– legislated future increases in retirement ages;

– the taxation of pensions and pensioner benefits (already extraordinarily generous in some respects compared to the rest of Europe);

– the introduction of fiscal oversight or rules (Germany now has a constitutional balanced budget rule, and the UK is setting up the Office for Budget Responsibility);

– smoother budget processes and transparency (Ireland is among the last of the eurozone countries to present the upcoming year’s budget, with an unusual focus on “budget day”);

– legislative developments, such as bank resolution legislation and clarifications around property rights.

As for more orthodox belt tightening, it is difficult to ascertain what impact a billion more or less on the 2011 budget deficit would have on investor sentiment. Probably a reduction of several billion in the deficit is needed, just to prevent Ireland from sticking out among eurozone members in 2011 as having the largest current budget deficit. Yet the focus of investors as a whole (along with the ECB, the IMF and the rating agencies) is very much on the likely path for public debt over the coming years. So long term measures like those above could prove very valuable indeed in helping restore confidence in the ability of the State to meet its obligations. And certainly the government would get more kudos from voluntarily engaging in such measures right now, rather than being obliged to in extremis at a certain point. All easier written than done, of course!

31 replies on “All in a Day, a Guest Post by Ciaran O’Hagan”


That seems to be the point of this post, a review of how the ability to borrow more now stands.

One of the best things about repudiation, partial, based on those who pumped in funds into “Ireland of the bubbles”, is that borrowing would no longer be possible.

Radical? Have to balance the budget. Have to start to think carefully, not just borrow at a whim to buy off voters…….

Reality is: that this is coming anyway!

Bob tells us about the exchange rates. Making money in a market was never so easy ….
Bob went short real estate in NY in 2003 or so…. We all underestimate how long the high jinks can go on.

Please, friends and adversaries, get rid of your pieces of paper and keep what you own close by. Ireland is one of the worst markets for this. You know the options…..

Provinces in Malaysia are now issuing 25% of civil servants pay in gold and silver coin ….. Strangely the reports do not say they are being hoarded.

Many thanks, Ciaran. Your infrequent posts add much to an increased understanding and appreciation of the issues. As always the economics is crystal clear – though I think you will admit that your list of necessary and feasible measures is merely a taster for the extent of reform that is required – but the politics is well nigh impossible for a clearly exhausted Government (and an even more battered ‘permanent government’). (Karl Whelan’s latest post may be summed up as ‘rabbits blinking in the headlights’.)

The entire strategy – if it could be graced with that name – is based on postponing the quantification of the banking system losses and avoiding recourse to the ‘Troika’ – EC/ECB/IMF. (We have had to rely on the good offices of Eoin to get a hint of what the Anglo split might look like: (see below)

Liabilities = c.56bn deposits (23bn cust, 26bn centr bks, 7bn interbank – assume all stay)
Assets = c.15bn NAMA bonds (36 x 0.45%), ARB bonds of 31bn, promissory note of 10bn

Liabilities = Fbk 31bn, Seniors 14bn, subs 2.5bn
Assets = c.37bn in loans with MV 31bn, 7bn in interbank loans, 8bn in promissory note”)

The fear of being forced into the arms of the Troika is the only thing maintaining backbench discipline, but political exhaustion is diminishing its efficacy and it is an entirely inadequate basis on which to contemplate tackling and implementing any of the measures you outline – not to mention the more deep-seated reforms required. Any alternative government will be composed of parties with strongly opposing views on these measures and the further reforms required, so this provides no salvation.

I acknowledge the cogent points you make about Greece’s experience, but I would contend that it is down to an unwillingness on the part of the governments of core EZ countries to allow losses to be imposed on their banks and pension funds that invested in Greece without due diligence. In addition, it appears that the IMF is making good progress on the internal reform programme (which, in many respects, resembles the measures you outline).

No resolution will emerge until the core EZ governments accept the need to impose some losses from investments in periphery on their banks and pension funds. Ireland’s current government is, and any alternative will be, incapable of implementing the internal reforms required. It is for these reasons I believe Ireland should opt for the Troika.

Unfortunately, it will be ‘muddle’ through with fingers crossed that the US recovery will take hold.

Much private wealth remains in Ireland and a property tax would be useful in tapping into this without impacting the job creation side.

It strikes me that an air of reality prevails in Ireland about the challenges ahead.

A small number of the 216 members of the Oireachtas can competently speak on economic issues.

The Labour Party in government will be reluctant to alienate the unions; Fine Gael will try and avoid imposing a property tax.

Oh for the days when the goose could be plucked without any hissing!

Ireland’ system of slow-motion government and the lingering death of Anglo Irish Bank:

Despite the crash, there isn’t a constituency for change among the political class and the vested interests from the trade union congress ICTU on the left to the business group IBEC on the right are prisoners of  conservative vested interests, afraid change would impact the benefits from existing closed shops and insider cronyism.

@ Pat Donnelly

Provinces in Malaysia are now issuing 25% of civil servants pay in gold…

Dinar coins which have been issued by the state of Kelantan, are not legal tender.

This is an Islamic issue rather than lack of faith in the ringitt.

The flavour of Wednesday’s press alone gives a good idea of the headwinds facing any country wanting to grow itself out quickly from public debt.

The important word is grow.

Without serious growth Ireland is screwed.

Not the NAMA/FF/Anglo growth where paper is moved around till favoured people are released from their debt obligations and consultancy fees are earned by cronies.

Real growth, where stuff is produced here and sold around the globe.

Thanks and great contribution Ciaran.

I think the point on budget policy is well made.
The idea of a reveal all budget day with only rumors and kite flying leading up to it serves no one.
What is needed is multi-year budgets with detailed explanation of what will be done. Down to the individual cuts and tax increases to allow people to plan and give confidence to the markets than we have a plan.
Unfortunately I think politics gets in the way of what is sensible financial planning.

The government also needs to recognize that growth is unlikely to be as optimistic as the budget planning had hopped. The global economy isn’t rebounding with great vigor and we will need to adjust our planning to account for this.

While we have got plenty of positive coverage for the tough austerity measures taken so far, and deservedly so IMO, the underlying reality is that all this has barely reduced the deficit.
And Ireland will still have the largest deficit in Europe by quite some margin for a few years.

So for all our talk of being past the worst we still have several very tough budgets to get through. And in some ways the later budgets will be harder as more of the easier cuts/taxes are enacted we will be left with far more difficult options that are harder for the public to stomach.

IMO the government banking policy has been crisis driven from start to finish. We have jumped into decisions without thinking through the consequences. The latest announcement looks like it has been put together at the last minute.

The idea that senior bondholders should not suffer losses has been a mistake.
Regardless of whether people think that this is fair distribution of losses I think the reality sinking in is that Ireland may not be able to afford it.

My views on seniors are well known. Whats depressing is the continual evidence that they are, quite literally, making up policy on the hoof.

Each time I observe the term ‘growth’ – in respect of the aggregate economic sort – in a commentary piece – I begin to have grave misgivings about the nature of the commentator’s grasp of what this actually means.

That is, plenty of accessible credit, at reasonable rates (you can repay borrowings), plenty of accessible fossil fuel (especially the liquid sort and its chemical offspring), a gently expanding population, with accompanying increases in paid employments, surplus cash to spend and access to credit (I did mention this!).

So what is the current reality then, and what are the consequences that will flow?

Note: I am assuming that commentators hold the paradigm of Permagrowth (annual, incremental increase in aggregate economic activity), together with the process of ‘cyclicality’ (sic) from trend line. The notion of a permanenant change away from Permagrowth is considered most improbable. That is, a permanent Regression of aggregate economic activity to a previous, lower level, is not entertained.

1. Credit and FF availability are significantly constrained. The former is obvious, the latter is not so easy to grasp. You need to understand the economic impact of the Export-land Model of Fossil Fuel Production, Use and Depletion.

2. Paid employment opportunities – in western developed economies – are significantly constrained and show no signs of betterment. Of concern is that the cohorts of job seekers is still increasing. Just because a person is not on the un-employment register, it should not be assumed that they would not want to work. Perhaps there is no paid employment opportunities available for them. This is a very contentious matter.

3. The commentators may, or may not know, nor understand the significant differences between a traditional, pre-1970 Production Consumption [PC] economy and the parasitic, post-1970 Finance, Insurance and Real Estate [FIRE] economy. This latter is failing – it is a Ponzi scheme constructed on the paradigm of an annual, incremental increase in debt – a completely unsustainable exponential process – since real, aggregate economic growth has to be based on real finite resources, not virtual financial resources. Hence our current economic and financial predicament.

Conclusion: I have formed the opinion that our western developed economies (UK, US and parts of EU) must Regress economically. I believe in the logical arguments of mathematics and the immutable laws of chemistry and physics. If you start here your not likely to stray too far from real reality as opposed to the virtual sort I encounter in some commentaries.

Brian P

Many thanks for the post Ciaran, nice to get the European view of the situation to provide some perspective

@Michael H,

“Unfortunately, it will be ‘muddle’ through…”

Do you think there is a widespread and deep-seated masochistic resignation to losing another decade like the GUBU decade from ’77 to ’87?

We should all know the routine: Make an appointment with the Troika – “My name is Ireland and I’m a creditoholic. The local supply has dried up and I’m doing my best to curtail my consumption of the foreign stuff. But this unquenchable thirst is paralysing me. I can’t beat this on my own. I need help.”

Great post Ciaran, and thanks a million Karl for your great blog. For us Spaniards, looking at how the Irish economy is doing is very important, as we are in the same boat (or worse, as we never have the guts to try to clean up the banks’ B/S and now we face a “japanization” of our financial system for a number of years). Also my wife is Irish -a Kilkenny catwoman- and therefore I have an extra interest on Irish subjects.

Well, let’s get to the point:

What would you guys do if you had UT2 Anglo bonds? I guess there’s only a few sub bondholders left, and the options look like i) ARB does nothing and keeps paying, ii) they call on another tender at, say 35 cents (bonds are now ca. 25 cents) or iii) they do outright default.

In my view, another tender is the most probable scenario -it makes sense for the bank- …

I would appreciate any comment. Tx a million

Uuups!.. Makes no difference really at this point, but it is a LT2, not a UT2 what I’m talking about.

Thanks again.

@ Paul Hunt


Saving face can be a potent factor and it can be too late when a government decides to put on the hairshirt.

Mrs. Thatcher used to call Denis Healey, the hire-purchase chancellor, for calling in the IMF!

There is likely still some fat to cut from the system and it’s striking that there has been little evidence of a community spirit from those who can afford it.

There was a very unusual situation in respect of the Commission on Taxation, which incurred €13,000 in costs per meeting — not counting catering costs. The total was more than €500,000 and two members, Brendan Hayes of the trade union SIPTU and Feargal O’Rourke (son of Mary O’Rourke and first cousin of Brian Lenihan) of PricewaterhouseCoopers, did not accept fees.

A Trinity economist collected over €46,000. It was not clear if any was offset against his main salary.

Minister for Health Mary Harney in Sept 2009 referred to the price differential on flu vaccines at a conference in Dublin, pointing out that GPs in Ireland get paid €38.95 to administer the seasonal flu vaccine to patients. In the UK GPs get paid £7.51 (€8.30) for doing the same job.

Has much changed since 1859?

“The scene was sickening and all the Irish were there, most of them vying with each other in eagerness to plunder the public purse,” William Ewart Gladstone, British Chancellor of the Exchequer, wrote in an 1859 letter to his wife concerning a House of Commons debate, on the cancellation of a subsidy for the mail steam-packet service between Galway, Ireland and Newfoundland. Gladstone was facing a budget deficit of £5m.

What better illustrates the resistance to change in Ireland than tribunal lawyers becoming multi-euro millionaires, sometimes chasing up small value bribes paid to politicians and after a tribunal on planning corruption sitting since 1997, and a devastating property crash, the land rezoning system remains unreformed?

To cap it all, tribunal lawyers investigating corruption, who were paid an extra €1m due to a typing error won’t have to pay back the extra sum.

The Irish Independent reported in Feb 2009: ” The Department of An Taoiseach says the tribunal had saved €1m elsewhere by paying other staff less in salaries and fees.”

Soap opera or Gilbert and Sullivan?

@Paul Hunt
As an emigrant (since returned) from the GUBU years, and a friend/relative/family member of many other emigrants from the GUBU years, I think that the answer to your question is “Yes”, there is a widespread and deep seated resignation – in the govt and opposition – to losing another decade.

The changes required to avoid this are too radical for the parties to contemplate.

Besides we’re now – what – three years in to the Irish crisis (which started in 2007, really) and the Croke Park deal ink is still wet, AIB is still limping, and the DAA is putting its prices up. GUBU

@Brian Woods

Well said. Don’t forget the other element of the neoliberal model that is unsustainable- 58% of all income growth in the US between the 1976 and 2007 went to the top 1% of the population. The top 0.01% or 15000 households had 1.7% of all income in 1976 and 6.04% by 2007. By 2004 the top 1% of wealthholders in the US held 42% of all financial and real assets, the most unequal distribution since the 20s. The top quintile held 93% of such assets.

Michael H
Yes indeed!

Not all readers will be aware that the phrase “legal tender” has a specific meaning common to all jurisdictions. Arrived at after centuries. Proffer more than a certain number of copper coins in EZ and they can be refused. About 50, or so. Details vary from jurisdiction to… S0o, the coins are being accepted!

They are therefore a parallel currency! Malaysia had Mahathir Mohomad an economist, who advocated the gold standard. His ideas are being tried therefore. The national government presumably desires to keep face and is allowing the experiment in two provinces. When it goes awry, they can step in. After a whi;le if it still works, the proportion will increase from 25%.

This is not an issue of lack of faith in the Ringgit, as you know, Michael. This may be a slow adoption of the gold/silver standard that is in fact still the legal regime in the USA. It is ignored in practice, as a result of presidential decree. Likewise with the wars in Somalia, Afghanistan Iraq and elsewhere. They are merely fiat dictat and not legislated for as provided by the USA Constitution.

China has told its subjects, not really citizens in fact, to save gold and silver too. It is not merely Malay, nor Islamic.

I would be taking the coins out of Malaya if their value suggested it. If it is legal, which it probably is. Tourism may magnify!

Effectively, while this experiment is in operation, the currency is no longer fiat.

@Michael & Hugh,

I’m compelled to agree with your observations. Following on from these, since no government anywhere will willingly invite administration by the IMF or any other multinational institution, we are probably facing a white-knuckle ride until either Ireland is forced into the arms of the Troika or international pressures ease. And the institutional EU will probably do all it can to avoid the former outcome as it would prise open a can of worms on which it is struggling to keep the lid. The Government, of course, knows this and is well-skilled at exploiting the scope it provides for kicking the can down the road.

The institutional EU has moved too far without the informed consent of the EU’s citizens and it is now hostage to the interests of voters in the core EZ countries. The Irish Government seems determined that Ireland should take the pain to avoid exposing governments in these countries to the wrath of their voters – irrespective of the costs to Ireland’s economy or its citizens.

This combination of can-kicking while enduring economic pain may be politically astute but it is economically disastrous.

Yes, this always happens before a depression! Certain persons know what is coming and exacerbate it!

Yes! We seem to agree on this and we are not alone.

The benefit is that the absence of the western scourge of FRB will now allow development in the rest of the world. For a while….

The development of certain countries, going for gold, may suggest that they are sick of FRB. Imagine the increase in wealth they will experience, when the fiat currencies collapse! Admittedly, while the USA, those naughty boys and girls, who doa ll the dying for us, hold so many weapons, that may not happen, but it might get very nasty? Economic war can degenerate very quickly?

Georg R. Baumann

That is endemic in Ireland at a certain level. It will not disappear of its own accord and as it is useful, to others outside of Ireland, the IFSC for example, Shannon Airport for another, it will resist every attempt; as heads roll, they will be replaced easily, with counter attacks likely.


A day in the life of Paddy Ivan’taStitch ………. Good post Ciaran …..

There is neither appetite for, nor experience of, the type of radical changes in Irish poitical economy called for here ……….. by either the present Gov or the salivating Gov in waiting. Expertise is available. A strong national gov ‘might’, and I stress, might – be capable of a more equitable management of this National Emergency ………… and based on some lessons from the madness of past decade …….. when powerful interest groups oppose change, and change is essential to survival of an entity, the radical dictatorial transformation is the only option ………

At EU level Ireland is now perceived as a potentially dangerous catalyst with the potential to set off further domino effects at EU level ……….. and EU call the shots to a large extent ………… the fall guys an gals are Irish citizen/serfs ………. bent to within a foot of the floor with the weight of socialised debt …….. ‘kick the debt can down the road into the next admin and screw the supine serfs’ is the ‘strategy’ (sic) of yesterday, today, and tomorrow ………

@Paul Hunt

Set up the Troika Party ………….. cannot do worse for the serfs than the present lot …………. Anglo Irish is not ‘the most distressed Irish institution’ – the most distressed Irish Institution over the past 10 yrs and up to the present day, is the Political System which has failed in its primary democratic duty of care for the Irish Citizenry …….

GO. National Gov or Troika …

Many thanks for all these considered responses. On the whole, they all add up to quite some worry, especially when you think, “Is minic an fhírinne searbh.” And there is plenty more of bad news to come down the line.
On the other hand, it is all too easy to extrapolate tomorrow as an extension of today. It’s the classic forecasting error. There are real policy choices now to be made, both good and bad ones. I’d don’t see any inevitability about falling into the clutches of the Troika, or other apoplectic scenarios. With better government, and more hard-headed policies, it is still possible to find a road back to prosperity. And hopefully our debates here probably give some food for thought to the policymakers.

A very informative post, just regarding the credibility of announcing things like a property tax, pension taxes, etc., in my view these wouldn’t be credible as they couldn’t be implemented in Ireland without a government falling.

@ Ciaran


‘With better government, and more hard-headed policies, it is still possible to find a road back to prosperity’

As Michael H puts it, however in his doggedly empirical way:

‘Despite the crash, there isn’t a constituency for change among the political class and the vested interests from the trade union congress ICTU on the left to the business group IBEC on the right are prisoners of conservative vested interests, afraid change would impact the benefits from existing closed shops and insider cronyism’

“Is minic an fhírinne searbh.” Vraiment.

– the introduction of property taxes and local government charges, on a par with the rest of Europe;

– legislated future increases in retirement ages;

– the taxation of pensions and pensioner benefits (already extraordinarily generous in some respects compared to the rest of Europe);

I agree with Ciaran Daly that this is not credible.We have all paid property taxes up front in the form of stamp duty and hitting pensioners is a soft option that would likely create a new political/financial crisis.

Ciaran O’ Hagan says:

I’d don’t see any inevitability about falling into the clutches of the Troika, or other apoplectic scenarios. With better government, and more hard-headed policies, it is still possible to find a road back to prosperity.

Just some quick thoughts. I suppose I am most interested in the long view of matters. What I see on the ground here in Ireland is a population who are looking for a radical break from their past. That is no doubt a healthy aspiration. Many, many of the people on the island of Ireland do not look back at our national history, with much degree or pride, fondness or approval. The last decade of the Celtic Tiger was only the icing on the cake for a lot of people. There is a huge sector of the population in Ireland today, who would welcome Troika or whatever else is coming down the track also. They just want to get it over and done with – and get back to their lives. People often make the mistake in Ireland that people are only reacting to recent history, recent turmoil, ebbs and flows to use the words of An Taoiseach, Brian Cowen. But with or without the bond markets, I believe we would still see pressures for much social change in Ireland. With or without the Celtic Tiger, we would see it anyhow.

The biggest danger I see at the moment in Ireland, is that the encumbant Fianna Fail government hangs around for too long. And that society in Ireland becomes radicalised, to move over to the far left. I can quite easily see that happening in the next decade, and I am preparing myself in my small existence to live in that kind of Ireland as best I can. I don’t take away from the idea that Ireland is harmonize-ing itself to European norms. That is all very nice. We have a minister for finance who can speak in French. That’s cool. But I believe the next decade in Ireland will be more about the fellows, who cannot even speak good English. Not to mind the people who can speak French and English as well as minister Brian Lenehan can. I think there are a whole raft of deals which need to be struck in Ireland in the next decade, which have been bubbling away underneath the surface for 50-100 years. Not to mind stuff, which only relates to adjustments post-Celtic Tiger abuses. I wish it was only the last 10 years of abuses in Ireland that have to be acknowledged. The problems is wider and deeper than that. BOH.

“We have all paid property taxes up front in the form of stamp duty”

You pay VRT and VAT when you purchase a new car. You pay motor tax annually and you pay duties on the fuel you use in the car.

The argument that you can only tax something once doesn’t really add up.

I had tortuously typed a longish post on an iTouch some days ago but lost my connection and could not post it. I am not going to write it again but I would like to thank Ciaran O’Hagan for his post.

@podubhlain: “We have all paid property taxes up front in the form of stamp duty”

Toronto has done it the other way round – property tax first, now stamp duty! (“Land Transfer Tax”)

I’ve no objection to a property tax as long as it actually pays for services and also that it is proportionate to land use rather than a flat assessment of real estate value – a 300,000 euro apartment should be assessed at a lower rate than a 300,000 suburban semi-d which requires more roads/sewerage connections etc per hectare of urban form.

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