FT: No Irish Lazarus

The FT has a new editorial on Irish banking policy and it is perhaps surprisingly harsh. Text below:

Just shy of the second anniversary of the Lehman collapse, the Irish government last week issued its latest plan for Anglo Irish Bank. It reveals how little Dublin – and most other governments – have learnt from the crisis.

Back then, there were good reasons to offer taxpayer crutches to toppling banks. Contagion could bring the system to its knees. Panic made market valuation useless: even solid banks looked wobbly on a mark-to-market basis. It made sense to tide them over until the insolvent institutions could be distinguished from the illiquid.

Uncertainty is now receding. Unhappily, what is emerging in Ireland is how staggering bank losses are. It is time to let them fall where they should: on unsecured creditors once shareholders are wiped out. But Irish leaders are prolonging the uncertainty in the hope that zombie banks will, Lazarus-like, come back to life.

Dublin has poured €23bn into Anglo. The new plan – to split deposits from a “recovery” bank with loans not yet transferred to the government – looks like another round of three-card monty. It does not clarify the final size of the hole to be filled (S&P thinks it can reach €35bn), and continues to make citizens protect bondholders from their own folly.

Dublin fears that cutting loose Anglo’s bondholders will kill demand for Irish sovereign debt. The opposite is true, as record-high sovereign spreads show. Its huge fiscal deficits are manageable – just. It is the open-ended exposure to private liabilities across the banking system that drives up sovereign yields. Dublin must get its priorities right.

Irish depositors must be protected, but they fund less than half of the €776bn domestic banking balance sheet. Bondholders are owed €98bn, some of it guaranteed. Explicit state guarantees must be honoured. But the extension of a scheme to guarantee new debt issues to maturity forces taxpayers chained to a sinking ship to build lifeboats for exiting creditors.

The guarantee scheme should be cancelled for new issues, and sweeping resolution authority put in place immediately. It should apply to any bank that cannot refinance itself privately, and ensure that viable business continues while assets secure the claims of depositors and already-guaranteed creditors. Any shortfall thus crystallised should be put on the public balance sheet once and for all.

This will be painful. But investors who know the bleeding has stopped will soon prove that there is life after death.

Reading this, it strikes me as interesting how quickly we’ve gone from a situation where the government’s defenders were complaining about domestic malcontents and pointing to increasingly receptive audiences overseas to one where the exact same people are blaming the international press for our problems on the grounds that they don’t understand the situation as well as those who are living here.

207 replies on “FT: No Irish Lazarus”

No, Karl. your wrong. Dermot Ahern was just on the radio, saying that theres another article in the FT saying that to do this would cause chaos. Oh, and we made money on the guarantee.
Now, the only other article in the FT today is one by Wofgang Munchau. http://www.ft.com/cms/s/0/6af4e7ca-be99-11df-a755-00144feab49a.html
Readign that we see things like
“As long as you make sufficiently optimistic assumptions about future income growth, you can pay off any amount of debt. If you assume a post-reform Greece will miraculously turn into a Aegean tiger, or that Ireland will generate another housing price bubble, the present rate of indebtedness will be no big deal. It all rests on your assumptions about growth. In the summer, it looked as though the strategy might work, as the economic data came in better than expected. That was then.

As we saw last week, this strategy came badly unstuck in Ireland. The Irish government massively underestimated the scale of the problem in its banking sector. On my own back-of-the-envelope calculations, the cost of a financial sector bail-out may exceed 30 per cent of Irish gross domestic product, if you make realistic assumptions about bad debt write-offs and apply a conservative trajectory for future economic growth.

We know from economic history that countries enter into longish phases of stagnation after a financial crisis. Ireland suffered an extreme crisis. In the light of what we know, the safe assumption to make for Ireland – and Greece – is that there will not be much nominal growth in the next five years. If you make that assumption, you realise Greece will almost certainly not be in a position to repay its debts. While Ireland’s situation is marginally better, there are justified doubts about the country’s long-term solvency.”
“n Ireland, the cure would consist of nationalisation and wiping out the bondholders of Irish banks through bond-to-equity conversions. In Germany, it would be a recapitalisation of the banking sector – a polite way of saying closing down, or merging, many public-sector Landesbanken and Sparkassen, local savings banks. Mr Stark was absolutely right. The system is no longer working.”

Yer DoF types are all eyeing up the handy number with a bank or even running a central bank after their stint in Finance.

They simply will not countenance that the good gigs are gone and that even if there were any the last person anybody would hire is an ex DoF type.

Once the DoF realises that reality they may start to make policy like they should.

@ Brian

Well, my only access to the FT right now is via the Internet and it’s a bit hard to know what exactly is and isn’t in today’s paper.

If someone wants to point me to another article in today’s FT arguing against the editorial, I’d be happy to link to it.

The FT gets it partly right in my view. No argument on the urgent need for SRR. The failure to produce it is a major failure of government policy. But withdrawing the guarantee on new issues would be hugely risky — indeed quite mad. The thinking — also described in its earlier editorial — is that the resulting funding crisis would force debt-equity swaps to recapitalise the banks and presumably regain access to market funding. But if a bank is severely undercapitalised, then an effective SRR should be enough to bring about the debt-equity swap. This could happen reasonably smoothly without bringing the economy to its knees. Its is amazing how some commentators are willing to be so radical with someone else’s economy.

Michael Lewis gives a good overview here of what the bankers are currently up to:
It’s about high time Governor Honohan and Regulator Elderfield took note of what is happening in other juristictions ….

Iceland’s special investigation:
What brought down Iceland’s banks? This examines the revelations from the latest report from the Icelandic parliament, raising the possibility that the collapse of Iceland’s three largest banks is the result of “control fraud”

“Glitnir Bank announces that it has commenced legal action in the Supreme Court of the State of New York against Jon Asgeir Johannesson, formerly its principal shareholder, Larus Welding, previously Glitnir’s Chief Executive, Thorsteinn Jonsson, its former Chairman, and other former directors, shareholders and third parties associated with Johannesson, for fraudulently and unlawfully draining more than $2 billion out of the Bank.
Glitnir is also taking action against its former auditors PricewaterhouseCoopers (PwC), for facilitating and helping to conceal the fraudulent transactions engineered by Johannesson and his associates, which ultimately led to the Bank’s collapse in October 2008.”

@ Karl Whelan,

I think what has emerged last week most forcefully to both the international and domestic media, in relation to Ireland, is the following. Two years after the hit water mark of the financial collapse in late 2008, it is becoming obvious that the Irish finance minister and An Taoiseach’s public statements carry less and less weight. It is like a chilled food product on a shelf, which gradually approaches its sell by date. My own suspicion is that the current Irish government, have not paid nearly enough attention and respect to this dimension of the problem.

It is not simply a matter of keeping a bunch of bloggers on the Irish Economy in check. There is a very serious matter of their own credibility going through its natural phase-out process. That has progressed a great deal by now, and whatever good or otherwise the current government in Ireland can do, they will have to implement with a lot less influence than they did two years ago. It is understandable that the Fianna Fail coalition government would have missed this critical aspect. As Eamon Dunphy reiterated several times on his radio program yesterday, Bertie Ahern managed to win three successive elections in Ireland. I think there is an in-built belief in the current FF government, that they will go on winning elections for as long as they like. The fact simply has not dawned on them yet, that they are at the end of a road.

The political in Ireland mirrors almost perfectly the economic. For year after year in Ireland, many of us were lucky enough to expect a better job opportunity and improved standard of living was awaiting us, around the corner. It was only a matter of when our own boss was promoted to a better position, and we could fill the space vacated by our boss. That was a mindset I had definitely gotten into. It has been a challenging process of re-adjustment for me, in the past couple of years. For politicians in Ireland, I assume a similar upheaval awaits them. The challenge today, is to give a proper mandate to some group of people – who will know, that when they utter something in public about economic policy – it will at least carry some weight, both here and abroad. The international observers have made up their own minds at this stage, that the sitting parlimentary executive in Ireland has all but lost its mandate to rule. BOH.

“..and sweeping resolution authority put in place immediately.”

Can we not have a reality check here, please?

The Government does not retain sufficient sovereignty to devise or establish such a regime; that power resides entirely in the hands of the institutional EU – presumably informed by the deliberations of the BIS. The Irish banks are just the most egregious examples of dodgy banks dotted throughout the EZ. It will be some time before they muster the courage to devise and implement an EU-wide regime that will deal with all of these.

While I agree with the sentiment of the FT editorial and Munchau’s argument, both raise more questions than they answer:

The FT ed says on the one hand:
“Explicit state guarantees must be honoured.” and also “The guarantee scheme should be cancelled for new issues”. This presumably means that all Anglo debt including subordinated would be paid throughout Sept. At the end of Sept, Anglo would be immediately insolvent (as it could not raise more debt) and the costs to the tax payer enormous (ca. 70bn). I thought that that’s why Brian Lucey was arguing for a renegotiation of the guarantee so that subbies would not be paid this month.

Is this right? If so, the cost honouring the guarantee AND winding up Anglo would be enormous. Is the FT seriously suggesting that the amount would be manageable as it would bring some certainty to the bond markets.

As regards AIB. I presume it would be insolvent with the extension of the guarantee. Does anyone have any idea how much nationalisation would cost, assuming existing shareholders are wiped out?

@ Paul Hunt

there’s also some big legal questions which have never been fully answered by people with, you know, actual legal expertise. Specifically, if you tried to enforce a debt for equity swap with senior bondholders (mandatorily via resolution), would you not have to force depositors to get involved too, given they are the same ranking in the capital structure? They also seem to suggest letting a bank go close to hitting the wall as part of this process – is this actually realistic, given the risks that this would create for the entire financial system here, including a full on deposit run?

Basically whats suggested in the FT is either a highly dubious legal process, AND THEN letting one of our main systematically important banks go very close to bankruptcy.

@ Andrew

From Dizard’s article

“A European veto of further bond guarantees could be a blessing for the Irish state and the citizens. It would draw a line under the country’s most serious liability. Please, Mr Almunia. Do the right thing.”

Doesn’t this make it a third article in the paper on the same day, all disagreeing with government policy?


I agree. And since the Government will not – nor will be allowed to – trigger anything that looks or even smells like a default, we have to consider the EU patchwork quilt of constitutional and legal provisions governing property rights (Ireland, somewhat similarly to Germany, is at the extreme end in terms of protection) – because this is what is at issue here and the threat (in the US parlance) of ‘taking without due process’. I expect this whole thing is scaring the bejasus out of senior bods in the institutional EU.

The UK retained some sovereignty to cut and slice (and bend the rules) – and this may be informing the FT’s stance – but Ireland doesn’t.


perhaps you could answer some questions
*which senior bondholders would you burn?
*how much would this reduce the sovereign burden by?

I agree with every word of the FT article. It’s astonishing how we have boxed ourselves into this corner over a simple bank collapse.

The idea that a middle sized bank could threaten the solvency of the State is something that has become normal through custom, but pausing for a moment, it does beggar belief.

The only comparable example I can think of is Albania. We’re not heading in that direction (I hope), but it is a stark comparison.

I’d like to see us dump the guarantee, and let unguaranteed Anglo depositors take ownership of the lot. But I’m not sure what will be the outcome. In particular, there may be some substance in the government’s (doubtless exaggerated) claims that the other banks would promptly collapse alongside Anglo. Still though, propping them up could scarcely be more expensive than what we’re trying to do with Anglo at present.

@ KW

Dizard’s article refers only to subbies and pre 2008 seniors. If i was Lenny, I would be circulating this to my collegues. It knocks 7billion max off the tab but leaves north of 40billion on it.

Nationalising the system a la the editorial might knock another 20 billion max off the bill, but you would have to burn the 7bn put into BOI/AIB.

The net might be that the burden still stands at 30bn on 45billion. Slight problem with the legality and the political acceptability of it. Next up would be the Greeks & the Spanish. The political will of the German govt to write a check to bail out their feckless and irresponsible partners is low.

German workers who retire at 65+ are being asked to bail out the Greeks to retire at 53. Tha same workers will baulk at bailing out irish public servants who earn more than them in some cases.

Tull etc
sorry – was reading excellent theses… I think that this (burning whomever, in my view the subbies, the legacy seniors and at least showing hte fire to the others) wont happen. Nor will a SRR. Its now important, to me at least, to lay the foundations for people to not be able to say “well, sure, nobody gave an alternative”. People did.
Back to the theses…


Did we ever track down the reference legislation which says deposit holders and bondholders rate pari passu? I suspect that it is may be expressly provided for, but rather follows from the general legislation on winding up and the fact that both are unsecured (?) creditors in a winding up. If this is the relevant legislative basis, then this would preclude amending legislation which alters the way in which the “pot” in an insolvent company/bank is distributed between the various classes of creditors. It would not, however, stop the Government from intervening, outside the winding up process, to provide statutory compensation to deposit holders. In fact, even before September, 2008 and the guaranteed, deposit holders had an entitlement, outside the usual rules on a winding up, to recover 30k (and then 100k) from the Government via a statutory compensation scheme.

Again, if the basis for the “pari passu” argument is found in the general rules governing a winding up, there would not appear to be any legal (as opposed to economic) constraint on Parliament introducing a new bank resolution scheme which would allow un-guaranteed bondholders to have their interests in a hopelessly insolvent bank extinguished at nominal or nil compensation.

To summarise, whereas genuine legal difficulty would arise if an attempt were made to renege on guaranteed debt, the legal (as opposed to economic) challenges in wiping out un-guaranteed are not insurmountable.

As ever, I express no view on whether from an economic viewpoint it would make any sense to incur the wrath of the bond market in circumstances where the proportion of un-guaranteed debt is relatively small.

@Brian Lucey,

You, of all people, do not deserve to be getting it in the neck, but I think you will have to accept that the only alternative at this stage involves Ireland throwing itself into the arms of the Troika. You hinted as much in the final para of your recent IT op-ed piece, but seemed to retreat when pressed.

The reality is that the institutional and political EU is even more determined to prevent this than the Government. This is the can of worms on which every ruse will be employed to keep the lid. The political timescales largely coincide – the Govt. is looking at 18 months, Pres. Sarkozy wants the lid kept on until he’s safely esconced for a second term in the Elysee after May 2012, Angela Merkel is aiming for after Sep. 2013.

In the meantime the institutional EU will be beavering away to keep things under control and preparing the basis for resolution when their politcial masters finally build up the intestinal fortitude to confront the problem.

This is going to be along haul and Ireland will suffer more than most. The only thing the Govt. can do is to tackle the excessive costs, inefficiencies and anti-competitive practices that are suppressing the resilience of the domestic economy – a resilience which JtO doggedly and rightly tries to highlight here.

But what chance is there of that?

Important to remember that the Irish state & ECB hold a significant portion of Anglo debt, further complicating any restructuring process.

“Dublin fears that cutting loose Anglo’s bondholders will kill demand for Irish sovereign debt. The opposite is true, as record-high sovereign spreads show.”

This is just stating what was obvious to most people from the beginning of this crisis. Unfortunately it was all too easy for the bankers to panic Dof and the government into these guarantees using scaremongering arguments like Eoin’s “risks that this would create for the entire financial system here, including a full on deposit run? ”
Post the guarantee the argument then became “dubious legality”. Check and mate!
The absence of any clause in the gurantees excluding any institution who were not upfront about their precise exposure (similar to the way which e.g. my car insurance would be rendered invalid by lies or lack of disclosure) still astounds me given the amounts of money involved, and the legal expertise available in dfrafting the legislation.

Eoin says,

there’s also some big legal questions which have never been fully answered by people with, you know, actual legal expertise. Specifically, if you tried to enforce a debt for equity swap with senior bondholders (mandatorily via resolution), would you not have to force depositors to get involved too, given they are the same ranking in the capital structure?

We don’t know any longer, if the markets are becoming turbulent because Ireland/EU will not allow the debt holders access to St. Stephen’s Green to recover as much as they can, and secure whatever physical assets are attached to loan aggreements etc. In conversation, the opposite has always been assumed. I.e. That the bondholders do not want a debt for equity swap agreement. We cannot ask any bondholders unfortunately, to find out which is the case. At this stage, it is my suspicion that many bondholders are facing the problem of lack of clarity in statements about their own finances. Which would lead me to believe, at some stage, those same bondholders of Anglo etc, will want to convert their pieces of paper into something meaningful. Are NAMA IOU’s good enough in that case? Or could it be the case, that NAMA assets will be sold back to Anglo Irish bank again, in a cleaned-up state, in order to form part of some debt-for-equity swap with its bondholders? That would remove the same assets from the NAMA balance sheet, and bring some form of clarity, to the financial statements of Irish bank bondholders.

I think when the assets of the Irish banks moved from Anglo Irish bank to NAMA, it has created some degree of turbulence in the markets, because it is not very clear any more, what the bondholders have claim to. If there is a question mark over the value of NAMA bonds, which replace the Anglo loans, then you could understand the problem. Is that what is really happening? Is there really a question mark over the NAMA bonds, and the entire EU guarantee in place on those same bonds? You see, I don’t understand the current turbulence in the markets – as the NAMA process works its way through the Anglo loans. If the NAMA process was working properly, then we would not witness the current rise in interest rates for borrowing. If anything, we should see the opposite. Something doesn’t feel right to me. BOH.


I think that the most important part in the article is as follows:

Dublin fears that cutting loose Anglo’s bondholders will kill demand for Irish sovereign debt. The opposite is true, as record-high sovereign spreads show. Its huge fiscal deficits are manageable – just. It is the open-ended exposure to private liabilities across the banking system that drives up sovereign yields. Dublin must get its priorities right”

This highlights the very poor understanding of the key issues that is pervading the policy decision makers in Ireland and also outlines the constant fallacy and spin we are hearing from Irish government circles about their “least worst approach”

@Paul Hunt:
“The reality is that the institutional and political EU is even more determined to prevent this than the Government.”

I have no reason to disbelieve you, but on what do you base that assertion? I’m not challenging it, but I am curious about the source of your certainty.


Doesn’t it all come down to the following statement by Wofgang Munchau?

“It all rests on your assumptions about growth.”

Isn’t that the core of the matter?

If growth turns out to be as weak as the pessimists predict in coming years, then that is an argument in favour of the FT point of view and against the government point of view. But, if growth turns out to be reasonably strong in coming years, then that is an argument against the FT point of view and in favour of the government point of view.

Only time will tell which is correct. As of now, no one knows how strong the growth will be in coming years. That includes me. It is foolish to base important decisions on assumptions about growth that may turn out to be wrong. Why should we base policy decisions on the most pessimistic assumptions about growth? Or indeed on the most optimistic assumptions about growth? We should wait six months or a year and see how the growth is turning out post-global recession. This time last year, most forecasters predicted that growth would be minus 3pc in 2010. Now the same forecasters are predicting that it will be plus 1pc in 2010. Why should be we base important decisions on these same forecasters’ predictions for 2011, 2012, 2013, 2014 and 2015. If they got it wrong for 2010, why should we assume they are getting it correct for later years?

While it is by no means certain that they will not simply prove a temporary improvement, there are enough economic statistics currently coming out to keep hope alive that the most pessimistic forecasts for growth may not prove accurate. Just in the past few days we’ve had: (a) on Friday, CSO published figures showing manufacturing output up 23.4pc in latest 3 months compared with 2009 Q4 (b) today, CSO published figures showing new car sales in August up 125pc on August 2009 (c) today, the construction PMI for August showed that the fall in output in that sector is now very near an end. As I say, these figures aren’t conclusive. But, they are enough to keep hope alive that growth may be greater in coming years than some people think. In any other country they’d be interpreted in that way.

@ AMcGrath

despite the government guarantees/support mechanisms for the banks, there is still a daily debate in every newspaper and radio station in the country, and no doubt in every pub and corner shop, about whether our money is safe in the Irish banks, and where people should put their money in case the banks get into further trouble. I routinely get asked by friends and family on my opinions on this. This is despite a very large acknowledgement from every serious commentator or expert that the Irish state will not let the likes of AIB or BOI go bankrupt, and that the EU will not let it happen either. What do you think would happen if it became state policy to let one of these banks go to the wall in an attempt to inflict losses on bondholders? This is exactly what happened with Anglo, even though everyone’s deposits were still always going to have an underlying state guarantee. Its not scaremongering if its based in fact, and a quasi game of Russian roulette with bondholders via liquidation threats is not a credible solution for either AIB or BOI.

The most realistic option for transmitting losses onto bondholders is via a legal (resolution) method, but i am skeptical of the legality of this, definitely for guaranteed bondholders, and even for unguaranteed paper. No one has been able to convince me otherwise, indeed no one has been able to put together any sort of structured legal argument as to how it could work in practise, despite my suggestions that more legal expertise be brought into the considerations (Gadge’s excellent input notwithstanding). When you throw in Paul Hunt’s reference to an EU wish to not default on senior bank debt, and ED’s noting of either Irish or ECB holdings of Irish bank debt, and the outlook for bondholder loss-sharing is minimised at best, and declared null-n-void in most scenarios.

At a certain point market mechanics trump promises no matter how serious.
If an entity’s behaviour is immoral, reckless, irrational or geopolitically reckless then that entity may be banished from the market.
Even if an entity is not banished, if laws are set in conflict with market mechanics then a certain amount of chaos and destruction ensues.

– Ireland has battled, and continues to battle, the market forces.
– Ireland’s taxpayers have fought a moral fight in terms of seeking to protect foreign pensions.
– Ireland’s taxpayers have fought a moral fight in terms of seeking to protect the European financial system.
– Ireland’s taxpayers have fought a moral fight in terms of doing their utmost to honour their promise to honour contingent debt which has grossly exceeded the worst case scenario.

Sentiment is key. If we need to revise the guarantee then it must be done now while sentiment is on our side.

It is very difficult to restructure one aspect of the main guarantee while trying to preserve the credibility of the ELGs. However, if the cancerous part of the financial system cannot be amputated then the whole may be lost in any event. Perhaps, only surgery can protect the ELG scheme.

So far we have done everything right. One of the most difficult and risky steps is now facing us. Let’s all hope the Minister for Finance and the Government can pull this off.

@ Paul Hunt,

Brian Luceys last paragraph in the IT article was not a hint. It was a recommendation that democratic principles on which this country is based be abolished.

When pressed in the 387 thread BL was not forthcoming about who this unelected foreign power would be.

The fact that none of the 39 or 40 commenators on the IT article website picked up on the significance of the last paragraph can politely be described as dissappointing. Or perhaps those commentators who did question the last paragraph were censored by the moderators on the IT website. We may never know.

There can be no doubt that if Ireland did renege on some or all of our foreign borrowings / bondholders AND handed over the keys of the country to some unelected foreign entity that they would seek revenge, they would be free to rape Ireland as they wished.

While Ireland has many problems, it is still a more favourable alternative to the politics / corruption of some other juristictions. If one want to complain about inefficiency / and civil service mismanagement then you need to look outside Ireland, have a look at Brazil for example.

Brian Lucey has my admiration for sticking his neck out, not easily done in such a small country. But his last paragraph in the IT article was a recommendation too far.

““The only thing the Govt. can do is to tackle the excessive costs, inefficiencies and anti-competitive practices that are suppressing the resilience of the domestic economy”.
We and our children, and children yet unborn have been committed to spend half of their lives working to pay off someone elses debt, and all you can say is “Go on home folks and stop wasting your money.” That sounds like a banksters argument.

@BJ Goggin,

“By their deeds shall ye know them.”

I think there is enough evidence out there to indicate that the institutional and politcial EU is as keen to kick this can down the road as ou own government is. And on this board I find the arguments of Tull and Ciaran O’Hagan convincing.

Yes, it is still only a contention, but I have seen no evidence to refute it. And I think it would be unwise to proceed as if it weren’t true.

Sporthog (etc)
I deliberatly didnt comment or rise to the bait in that debate as I wanted to focus us on bonds. Its a more political debate. But, lets be clear, I have never made any secret of my eurofederalist view, over 20 years.
As for “rape the country”, c’mon…much of that going on in Core Europe is there?

“It was a recommendation that democratic principles on which this country is based be abolished. […] There can be no doubt that if Ireland did renege on some or all of our foreign borrowings / bondholders AND handed over the keys of the country to some unelected foreign entity that they would seek revenge, they would be free to rape Ireland as they wished.”

So if we do what the markets want, we’ll be upholding democratic principles (and perhaps independence and so on), whereas if we let a supranational political institution run things we’ll be less democratic and independent?


agreed re: “constant fallacy and spin”.

Agree with AMcGrath’s key point as well re: surprising absence of a clause that the uarantees would be rendered invalid by lies or lack of disclosure, considering the amount of money involved, and the legal expertise presumably available.

It seems reckless the government made these guarantees without requiring bank directors and top executives to provide full disclosure regarding any potential negative circumstances.

In a small equity investment (e.g. less than €100k from a State or independent professional investor) such guarantees are normally required and form part of the boiler-plate text. They must be accompanied by a disclosure letter advising upfront of known liabilities and risks.

Why weren’t all the banks’ directors and executives asked to provide full disclosure, with the risk of severe penalties for incomplete or false disclosure (including civil or criminal prosecution or personal liability)?

Is there any way under FOI to discover

* whether such guarantees/warranties of full disclosure were discussed before the guarantees were given?

* who was responsible for the legal language on that fateful night, and did they have experience with basic contract law?

* why weren’t these guarantees structured differently to require accountability in the event of lies, obstruction, obfuscation or otherwise less than full disclosure?

You are absolutely right. IMHO the key (but not the only) driver of Irish CDS and sovereign spreads is not the Anglo pit but the global growth outlook. Sovereign credit risk rises as markets fret about double dips and eases when we get some good economic news out of the US and/or China.

That’s all because can-kicking will only work (and WILL work, for a while) while growth is positive.

But we are only one recession away from a sovereign default.

And, unles the cycle is infinitely extended, with each kick of the can, we get closer to the next cyclical downturn and closer to the default. Keep kicking the can lads, it can only end one way.

One of the problems is that government growth predictions are being based on the most optimistic scenarios. I agree with you that we shouldn’t base on the most pessimistic either, but we should at least keep them in mind. Better to be wrong on the downside and have spare cash than the opposite.

It is going to be difficult to come up with a benchmark growth figure based on past performance. The bubble started, in my view, earlier than most give it credit (I reckon 2002 at the latest) and was significant from early on – so there is a range of past growth figures that must be considered suspect in establishing a benchmark.

Under current policies, the likelihood of a lift-off like in the ‘nineties is also unlikely, though the unemployment and underemployment rates suggest large capacity available for it to happen. It is possible, but it would take a concerted effort from government to make it happen. There is little evidence of that.

Isn’t it funny that despite all the ‘financial engineering’, all the ‘clever’ strategies, all the movement of stuff into good and bad banks, the guarantees, the promissory notes, the off balance sheet accounting, the attempts to rewrite the law and redefine business practices to facilitate NAMA, all the new frauds to cover up the original fraud……………………….the core issue remains….debt…… except now that the professionals have earned their fees, the numbers are even bigger and the shuffling means the taxpayer has been thoroughly stitched up and left with the bill.

As JTO says…
Doesn’t it all come down to the following statement by Wofgang Munchau?

“It all rests on your assumptions about growth.”

Isn’t that the core of the matter?

“So far we have done everything right”

Have you also taken leave of your senses – or did you forget to include the “smiley”?


absolutely spot on. One could venture further that the correlation between the Irish sovereign CDS spread, the BOI share price, the Chinese PMI & the US equity market is 1.

@ AMcG
I mean we need to grow the economy and create jobs.

Pretty uncontroversial point I would have thought.

“What do you think would happen if it became state policy to let one of these banks go to the wall in an attempt to inflict losses on bondholders?”

A kind of loaded question? The state policy should be to let capitalism take it’s normal course. Speculators sometimes win – and sometimes lose. We gamble in the hope of winning. The fear of losing ensures we study form beform betting. Bondholders are big boys and hopefully know their business, and should be aware that there are risks. A guarantee is just insane.
As for a run on banks – by your logic that should have already happened as soon as it became clear that we don’t have the funds to support the guarantees.


‘While the suicide numbers hit record levels, parents weep at airports, waving goodbye to another generation off to far-flung places to start a new life. Around 460,000 people are looking for work, doctors’ surgeries are inundated with over-stressed customers, and we have not had one credible policy idea or plan to get us out of this mess. There is a vacuum and paralysis at the heart of the leadership of this country, in the place it is needed most. The hidden misery behind every statistic is a shameful indictment of how recklessly the economy has been managed.’

Paul Sommerville in realist mode ………..


I think you are being a little unfair on the other posters as well as the moderator in the 387 comments thread.

Lucey’s last paragraph was referred to by:

myself on Sep 3rd 3.55pm
Tull on Sep 3rd 4.02pm
Eoin on Sep 3rd 5.00pm
Myself on Sep 3rd 6.13pm
Myself on Sep 4th 7.53pm

In fairness to Brian Lucey he made a brief reply on Sep 3rd 4.41pm.

I am surprised that Professor Lucey now claims a Euro Federalist political motivation. The impression I had was that he was advocating torching senior debt in Anglo without consultation with Europe. (There’s no point in consulting if you’ve decided a policy in advance).

In my view the consequences of this policy would be to be kicked out of the Euro and a return to our own currency which would make us more dependent on trade with the UK (the opposite to a Euro Federalist position).

Who is questioning that we need to grow the economy and create jobs? What I question is that this is “the only thing the government can do”. Paul seemed to me to be suggesting that the bank bailouts debate is essentially over and all we can do is look after other housekeeping costs, and just grin and bear the bailout costs.

@Zhou en Lai

‘… so far we have done everything right’.

Absolutely Zhou. Nothing Left!

Now where did I put me Flann O’Brien …… when things go wrong and will not come right ……..

It is good to see that someone agrees. I raised this issue on this board over a year ago, and apart from Karl assuring me that the guarantee included no such clause, there was absolute silence on the subject. This also astonishes me. For me the absence can’t be considered an oversight, since it would be instinctive to protect oneself from possible fraud. Did our government and civil service conspire to put in place a charter for fraudsters?


I think we need to maintain a sense of proportion. The debate on the banks isn’t over – not by a long chalk. The Government, directly or indirectly, is piling up nominal debt in the form of promissory notes and NAMA bonds. The ICB has provided considerable support and the ECB is continuing to provide enormous liquidity support by allowing these bonds to be repo’ed at a cost much less than the Government’s cost of funds.

Eventually bank debt both in Ireland and throughout the EZ and sovereign debt in some others in the periphery will have to be restructured in a co-ordinated EU-wide process. But we are a long way from this. A lot of institutional and political ducks will have to brought into line. The only debt that is bearing down on Ireland at the moment is the additions to sovereign debt arising from the structural deficit.

That is why we need to focus on removing any restraints on the resilience of the domestic economy as we will have to work through this irrespective of what is happening with the banks.

It gives me no pleasure that this is all both tragic and brutal – and totally unnecessary, but this time it really is TINA.

have to agree that speculating on growth for five years out is a risky and dubious method of sorting out the current problems. Surely a more cautious forecast would command more respect.
On AIB, now that we know that Santander want all of the good assets of the Bank would’nt it have been preferable if the Government negotiated with them to take over the entirety. It must be possible to make them take some dubious (Irish) assets in return for the prized ones and end up with a credible lender able to kick start the economy

@ JtO,

The latest year-on-year growth figures show a 4.2% decline in GNP (the only real measure of Irish growth).

It the absence of any reliable forecasting, therefore, the prudent path would be to extrapolate forward on this basis.

Based on this logic, by 2012, we should be planting potatoes in the median strips of our rapidly emptying out motorways and by 2020 we should be burning archived copies of the Green Party’s programme for govt to distill poitín out at the croft….

There is a third article about the Irish banking crisis in today’s (Monday’s) FT. It is by John Dizard and is on page 15 in the FTFM supplement.
Subject matter, Anglo bonds.
Worth reading

@ John Martin,

With respect, I think you have mis read that post.

“The fact that none of the 39 or 40 commenators on the IT article website picked up on the significance of the last paragraph can politely be described as dissappointing”

My comment about the 39 – 40 commentators was directed at the Irish Times website, not the 387 thread on here.

With respect to this site, I am aware that you and others picked up this point and pushed for clarity, and in fairness to BL, he did clarify somewhat. But as Paul Hunt mentioned above he appeared reluctant to do so.

I had to drop out of the 387 thread due to other commitments, by the time I was free the thread had run its natural course.

Don’t think the govt will be reading this article somehow. This is obviously what they talk about at the “think in”

chrisandrewstd Quote of day “Economists are like one eyed javelin throwers.They are not going to be very accurate but they will keep the crowd entertained”

Better to have one eye than be completely blind!!!

Meanwhile, back in bank land, my political views having been discussed, any further advances on how we save ourselves/the banks/either/none of the above?

@Brian Lucey

(a) 1789

(b) 1759

(c) either of the above and let’s go out in a blaze of glory and avoid the devastating embarrassment of …

(d) 2016 without a pot to p1ss in that we can call our own.

Every single economic financial prediction, reason and logic given by the current administration has been overthrown by circumstance. I am actually amazed that they are still there.

If they were in any private sector job the company they were in would have been bankrupted or NAMAed.

If they were in the public sector in any other country other than Ireland or North Korea they would have fired for gross incompetance. In China they would could facing a much more unpredictable future than a gold plated pension and a career in teaching or the law.

I don’t think we are ever going to change in this country and will spiral down to Portuguese or below living standards unless we can change the major psychological problem we have with accountability.

“Meanwhile, back in bank land, my political views having been discussed, any further advances on how we save ourselves…”

I made a suggestion above but nobody seems to be buying, Get Santander to take over AIB and we end up with a functioning bank system a prequisite for any economic recovery. They are reporting today a tier 1 of 8.6 in 2011 – well within Basle 111.

Only a short few months ago Minister Lenihan and numerous other worthies assured the public categorically that the excess borrowing to keep NAMA and the banks in business would be understood by international observes as separable from the deficit and government debt. An ocean of waffle later and it is clear that that particular fiction has been well and truly holed. What new shibboleth will emerge from the FF think-in one wonders?

Put it this way if you were traveling on airline which never ran on time, charged you three times for the flight at the last minute unless you were earning over €100,000 a year, never landed in the correct destination and complained that you were “talking the airline down” if you complained. The aircrew get paid 3 times that of any other airline. We travel on that airline every day.

Brian Lenihans apparent response has been to promise more cuts in the budget. I know elements in the market will welcome this but what’s the overall view?

My own personal feeling is that some sort of re negotiation / debt restructuring will have to take place.

You can’t burn the international markets while still relying on them to fund the 20 Billion gap between what we take in and spend on ourselves.

Trust is a central part of any capitalist financial system. Perhaps if we were to make a commitment that the money borrowed will be paid back but not at 6%+, but 3.5%. It would be a default on the interest rate but not the principle sum of the money borrowed.

But I am into Eoins area here, would it be a runner Eoin?

i’m sure the bogwater economists in de party will be preparing a nixon style pr push against lionel barber

@ Garry

I Totally agree with you and have since the start of this strange episode in Irelands history.

But, as for…“It all rests on your assumptions about growth.” I disagree, It rests on integrity. This government made decision after decision, to try and save their own hides, they stuffed the place with their ‘yes’ men. They have no integrity, zilch. Any decisions they took were short term ones, solely for themselves. NAMA is a much bigger disaster than Anglo and it implications go far beyond the financial implications.

It is funny, the way Lenihan called on people to be “patriotic” the reason for that was, he knew that he was being totally “unpatriotic” and it bothered him. I have met these situations in my work numerous times.

it had to unravel and it has, big time! NAMA must still be put into an early grave no matter what. That should be the first job of the EU and IMF.

Well it’s not very productive, but I guess we really don’t have a choice about cutting another €3bn off the deficit. Apart from our commitments in the Common Economic Policy, we simply have to keep pushing to close the gap between income and expenditure. Increased taxation should be part of it too, but it won’t cover the necessary gap.

It’s not about economics really, we’re into the realm of finance -and whatever is good for the nation’s economy is a bit moot when we have such dramatic short-term funding requirements.

Although I have no idea where the €3bn will come from. I think the pensioners shouldn’t get the free TV licence -but I suspect that won’t do it 🙂

Frankly, cutting alone won’t solve anything, and it’s clear that we must do something to try and cheaply give an impetus to growth. Even a small amount of growth would do much to reduce our liquidity problem. The calls in recent days by industry leaders for a stimulus to non-wage competitiveness is welcome and should not go unheard.

Regulatory reforms to boost our competitiveness should be kicked to the top of the political agenda to maximise the output from our already overburdened resources. If we’re going to pay for ourselves we have to put all those unemployed back to work, and we have to do it in a way that won’t cost an arm and a leg.

Fixing the budget through cuts alone is not feasible. We have to get the hole created by unemployment down too.


It would not a bad idea to engineer a sale to Santander but I fear the state would have to provide some guarantees to the Botins to take it away.

In answer to BL question, under current rules, we will not be allowed default on sovereigns and senior bank debt, we will default on other state obligations -wages and transfers- first. The economy will remain in a period of sluggish growth for a decade until we pay down the debt relative to GDP. One cyclical downturn will push us into the arms of the IMF. At which point the issue of restructuring will be reopened.

Prof Lucey misses the point that the political party with the most nationalist outlook has cost us our independance.

“Prof Lucey misses the point that the political party with the most nationalist outlook has cost us our independance.”
errr, no not really, I kinda did notice that. Thanks tho, for reminding me to stop being so namby-pamby and say what I really mean.

@tull mcadoo

“under current rules, we will not be allowed default on sovereigns and senior bank debt, we will default on other state obligations -wages and transfers- first”

Which rules are you referring to?

Apart from the various FT articles today, Morgan Stanley also published a note “Ireland; Mastering the Challanges Ahead”;

“Key conclusion: Ireland is facing major challenges.
But, if there is one economy in the euro area that should
be able to meet such challenges, it is the Irish economy.
This is because Ireland is fundamentally different from
other peripherals because it is a fully deregulated, fully
liberalised, flexible market economy. Hence, it should be
able to adjust to the new post-crisis world more swiftly.”


“Looking for a circuit-breaker. The government continues to
be supporting other banks as well. It announced on September
7, as widely expected, an extension of its guarantee scheme
for short-term bank liabilities from September 29 to December
31, 2010. Not much has changed since we described the
vicious circle (not just in Ireland) of sovereign and banking
crises mutually reinforcing each other because governments
need to backstop banks, while banks hold large amounts of
exposure to the government (starting with the NAMA bonds).
As we have argued before, only restructuring and
recapitalisation of the banking system can act as a
circuit-breaker for this potential spiral. We
see the announcement of a resolution proposal for Anglo Irish
as one first small but significant step towards this goal.”


“At the sovereign level, Ireland’s funding and liquidity position
remains robust. However, guarantees extended to the
banking sector have led to a non-trivial increase in sovereign
default risk, especially given that bank risk is likely to be
highly correlated with the business cycle.
Nonetheless, we think that the current implied level of
sovereign default – a one in three chance over the next five
years – is too high; we recommend positioning for an
improvement in sentiment through the bank debt, based on
the view of our bank credit analysts.
We also think that there is an asymmetry in the pricing of
senior bank versus sovereign CDS; here, we think the
sovereign is the better exposure, given the recent tightening
of bank versus sovereign spreads.”

“It would not a bad idea to engineer a sale to Santander but I fear the state would have to provide some guarantees to the Botins to take it away.”
If a sale could be engineered to Santander then we would no longer have to provide State guarantees and with BOI indicating they want out of the guarantees, a major liability of the State would be eliminated. Sure they would require guarantees but such would entail less State exposure and would help with the sovereign debt pile.

In the Morgan Stanley piece submitted by P O’Grady Walshe the following struck me as reinforcing the idea for resolving a major portion of the banking system-“Not much has changed since we described the
vicious circle (not just in Ireland) of sovereign and banking
crises mutually reinforcing each other because governments
need to backstop banks, while banks hold large amounts of
exposure to the government (starting with the NAMA bonds).
As we have argued before, only restructuring and
recapitalisation of the banking system can act as a
circuit-breaker for this potential spiral. We
see the announcement of a resolution proposal for Anglo Irish
as one first small but significant step towards this goal.”

@ Sporthog

a restructure can take any number of forms (interest holidays, debt extentions, nominal haircuts), but its not really the interest cost that is the problem – the entire stock of government debt is probably out at an average coupon of 4.5% (albeit rising with each issuance). So, an interest holiday or reduction would only have a limited effect. But thats kinda the problem, our interest servicing costs are actually relatively ok, its the outlook for additional debt being put on the books that is spooking investors. They see the possibility of us running chunky deficits for much of the next decade as the real problem. As people have suggested above, the outlook for growth is more of an issue here than the bank bailouts, they have just added an admittedly huge negative thread to the story. But even without a banking crisis, we’d still be running 60bn+ or so in deficits in the 4 years from 2009-2012. The problem is not our current levels of debt, its the negative growth, and so deficit, outlook for where our debt levels will ultimately be in 5 years time. A restructure today would do nothing if we just racked up some more debt tomorrow. A balanced budget tomorrow would see our bond yields collapse however.


IMHO the key (but not the only) driver of Irish CDS and sovereign spreads is not the Anglo pit but the global growth outlook. Sovereign credit risk rises as markets fret about double dips and eases when we get some good economic news out of the US and/or China.

JTO again:

Yes, you are quite correct, the global growth outlook is critical, principally through its effect on Ireland’s growth outlook. In connection with the latter, one of the factors influencing bond markets in recent weeks has been much media comment to the effect that recent economic statistics have showed growth in Ireland petering out.

Wolfgang Munchau (in the quote posted by Brian Lucey) was probably referring to this when he said: “In the summer, it looked as though the strategy might work, as the economic data came in better than expected. That was then.”

I take “That was then” to mean that (in his opinion) the economic statistics have got worse just recently. However, it is very debatable as to whether or not they do show that. As is usually the case, the economic data paints a mixed picture.

Some recent statistics point to a slowing down in growth. These are:

number on live register (rose in May, June, July, August)
retail sales (fell in July after rising in Q1 and Q2)

However, others point to an acceleration in growth. These are:

manufacturing output (surged to all-time high in July)
new car sales (up 125pc y-o- in August)
number of redundancies (fell in August to lowest since 2007)
number of ppsn numbers issued (first y-o-y increase in August since 2007)
merchandise exports (similar trend to manufacturing output)
construction PMI (published today – highest value since 2007)
tourism numbers since the ash cloud problem went away
agricultural incomes (recovering strongly on back of good weather and favourable price movements)

As of now, it is not possible to tell which set of statistics is providing the more accurate indicator. There is a particular question mark over the seasonality of the live register figures, which will only be resolved at the end of the year. This was discussed on previous threads. If it turns out that growth in Ireland didn’t slow down at all in Q3, then questions will need to be asked as to why so many media commentators and economists wrote that it did (with predictable effect on bond markets). Of course, if it turns out that they were correct, they will be totally exonerated.

What is really needed is for some competent body to calculate a composite index from all the individual statistics that are published each month, similar to what is done in the US.

@ Eoin,

Thanks for the information. The expenditure side you refer to has been mentioned many times before, its the elephant in the room so to speak.

Short of us finding a major hydrocarbon reserve and giving it away, closing 20B is a tall order, apart from the 1B capital chop, any idea where the chips will fall for December? I’d love to be a fly on the wall in Galway right now.


I would say Lenny’s statement that 3bn in cuts is a minimum sent a few backbenchers to the bar early. A few more of these statesmen will probably take the course of principled opposition to savage cuts.

Lions in their constituencies, mice in the Dail

I see Minister Martin forcasting 1% GDP growth for 2010. Does this imply GNP falling and would the new proposed cuts (additional) have an impact


All we get from from present lot is ‘wealth destruction’ – where and when in past two yrs have we seen policies on “real” wealth creation? In previous thread John The (eternal) Optimist provided breakdown on ‘manufacturing’ – you know – making stuff and selling it on/exporting etc


@John the Optimist

I no longer believe that you are slouching with da laptop on a couch down in Mount Street ……… (-;


If the markets are demanding limited or partial restructuring and for bondholders to take more pain then shouldn’t we give it to them? Is it such a bad thing to be forced into this position despite our genuine best efforts? This is not Argentina/FG-style default at the first chance. Is “talking up the economy” really a good idea?

While i would not generally be a fan of giving infantile-esque markets everything they want, your point is essentially correct. Eoin and other TINA advocates have consistently refused to acknowledge the market signals that suggest a growing perception that the original guarantee, while applauded at the time, has come to be seen as incredible. And, therefore, is infecting the sovereign. On this line of reasoning we improve the sovereign rating by solving the incredibility of the original guarantee. We are not argentina, nor are we greece. We have fought the good fight but have been overwhelemed. Markets understand that, even if the majority on this site do not.

@the loan arranger
Tull, is that you?


Is “talking up the economy” really a good idea?

JTO again:

No, bad idea.

As is “taking it down”.

What is really needed is intelligent statistics-based analysis, with a view to making as accurate forecasts as possible, of the type that occurs in most other countries. One’s view should be determined by what the statistics show, not by what one would like them to be.

@ Bond Eoin Bond

‘……the outlook for growth is more of an issue here than the bank bailouts, they have just added an admittedly huge negative thread to the story’

Yes, but isn’t is all part of the same thread ? Our banks’ love affair with property has always been the biggest drag on economic development. Why has our domestic economy remained so weak over the decades since independence ?

Fiscal correction can probably be shoved through without riots, but the negative impact on final demand, asset values, and Irish bank balance sheets may well undo any good that is produced.

@ Zhou

there is no way the markets will accept a debt restructuring (quite outside the entire refusal of the EU to accept it) when our debt/gdp is 80% and we pay both our working and retired civil servants so handsomely. I’m not at all claiming its the civil servants fault, simply that such a large amount of money will be pointed at by the markets.

@ Sporthog

i said on here a few weeks ago that Lenny needed to cut up with a budget that found cuts in excess of the 3bn previously earmarked. As Loan Arranger noted, he indicated just such a possibility today. Increasing it, somehow, to 3.5 or even 4bn would be a massive statement of intent to the market.

Lads, give the markets what they allegedly fear and default. Result- massive cuts in public expenditure and massive deleceraging of the banking system. We have to continue on the current road until Europe changes tack. We wiu not be allowed default on our debts until we restruture the public finances. The German govt is not going to stand over a transferring wealth from their taxpayers to ours short of serious pain. Tull

What do you think of the argument that the market believes the guarantee to be incredible and is, therefore, affecting the sovereign?

I suggested the Monty Python dead parrot sketch as a useful metaphor. In response to your suggestion that neither markets nor the EU would ‘accept’ our default, I am reminded that The Pythons told us that nobody accepted the Spanish Inquiistion. (Slightly paraphrased of course)

Dr. Constantin Gurdgiev speaks openly about his own Situation!

….The numbers are frightening. Frightening to the point of getting me worried about even my own family ability to endure this crisis.

Nama and banks rescues alone will add some €110,000-120,000 to our family debt pile through state-accumulated liabilities. Property and assets collapses in the end will contribute another loss of €300,000 to our net worth. The benefits of free education and children-related allowances will be gone, implying a life-time loss of roughly €120,000 for our family. At current yields, the debt accumulated through the deeply flawed banks recapitalizations and Nama, plus egregious current spending deficits will impose an annual interest bill of €12,000-15,000 on our family by 2014. Interest on the state debt alone will cost us every year the same as our children’s education.

American philosopher and writer, Ayn Rand once said that: “It only stands to reason that where there’s sacrifice, there’s someone collecting the sacrificial offerings. Where there’s service, there is someone being served. The man who speaks to you of sacrifice is speaking of slaves and masters, and intends to be the master.” Recall Minister Lenihan’s statements about the need for ‘patriotism’ in his two Budget 2009 speeches. With the events transpiring around us today, Rand’s words are now no longer a catchy turn of a phrase…..

He continues…

….the sacrifices and patriotism of our politicians’ speeches has turned the people of this country into serfs to the vested interests of Social Partnership and banks’ elites. They speak of a sacrifice, intending to be the masters. My family, and millions of other ordinary people around this country are now just meaningless pawns in their game for survival.





Simpleton, I think he is referring to our masters not accepting default not the markets. If not he should be. What u and the defaulters never address is why a default wd be accepted by our creditors at this stage. If not acceptable what do you think wd happen?


It seems the market is rejecting a lack of a debt restructuring, and in particular is rejecting the cost of the banking rescue. If we were to cap the cost of the banking bailout, by whatever means, then would the market really hold it against us in terms of sovereign debt?

We have taken the medicine, we have lead by example and we can credibly claim we will continue down this path. However, it now appears that mathematics rather than individuals will be the primary arbiter of whether we survive.

A man with a terminal illness will eventually opt for last resrt high risk surgery which may save his life as the consequence of inaction are certain. The risk of death becomes no risk at all.

There is also a wider context insofar as the EU needs to face up to restructuring. Restructuring or withdrawing a guarantee given at gunpoint and which lacks ultimate credibility may be politically, morally and financially acceptable.

It may be enough to let the guarantee lapse and to lash out a special resolution scheme at the same time. Let’s hope so. However, if that won’t suffice then we will need to take more definite action. We will probably require the assistance and co-operation of our European colleagues to make this stick. However, it is clear there are political and economic positives for them too.

It is not in our interest, or in our EU neighbours’ interest, for us to take anyone by surprise. However, when Standard & Poors, the bond markets and the FT (twice) all signal the cost of the bank bailout is the problem then it will hardly take anybody by surprise if we address this.

I’ve lost count of the number of times you and Eoin have fialed to answer my question: if the guarantee has come to be seen by the markets as part of the problem, what should we do about it? Your failure to answer the question, or even to deny its premise, is illuminating


I think many of our retired civil servants are more willing to contribute to the cause than the unions would have us believe. I have spoken to two retired teachers recently who think it is not only inevitable but also necessary that their pensions will be cut.

I have never denied that the sovereign is contaminated by the guarantee or by a no creditor left behind policy. That said, having socialised the Anglo losses they are not going to go away. Unilateral default will not make a bad situation better. There is no European wide political will to restruture.

“I don’t think we are ever going to change in this country and will spiral down to Portuguese or below living standards unless we can change the major psychological problem we have with accountability.”

What care we?

The ideal Ireland that we would have, the Ireland that we dreamed of, would be the home of a people who valued material wealth only as a basis for right living, of a people who, satisfied with frugal comfort, devoted their leisure to the things of the spirit – a land whose countryside would be bright with cosy homesteads, whose fields and villages would be joyous with the sounds of industry, with the romping of sturdy children, the contest of athletic youths and the laughter of happy maidens, whose firesides would be forums for the wisdom of serene old age. The home, in short, of a people living the life that God desires that men should live. With the tidings that make such an Ireland possible, St. Patrick came to our ancestors fifteen hundred years ago promising happiness here no less than happiness hereafter. It was the pursuit of such an Ireland that later made our country worthy to be called the island of saints and scholars. It was the idea of such an Ireland – happy, vigorous, spiritual – that fired the imagination of our poets; that made successive generations of patriotic men give their lives to win religious and political liberty; and that will urge men in our own and future generations to die, if need be, so that these liberties may be preserved. One hundred years ago, the Young Irelanders, by holding up the vision of such an Ireland before the people, inspired and moved them spiritually as our people had hardly been moved since the Golden Age of Irish civilisation. Fifty years later, the founders of the Gaelic League similarly inspired and moved the people of their day. So, later, did the leaders of the Irish Volunteers. We of this time, if we have the will and active enthusiasm, have the opportunity to inspire and move our generation in like manner. We can do so by keeping this thought of a noble future for our country constantly before our eyes, ever seeking in action to bring that future into being, and ever remembering that it is for our nation as a whole that future must be sought.

The first time it was deliberate; the second time it may be accidental — but perhaps FF has been hatching a cunning plot to return us to Eamon’s Ireland?

Mind you, Eamon does make the Young Irelanders, the Gaelic League and the Irish Volunteers seem like a lot of loons ….


@ Simpleton

of course the bank guarantee is part of the problem, but so are a load of failed banks. There’s no easy answers or silver bullets here. Basically we either default on a large amount of our financial systems obligations via a near implosion of the banking sector (absent the guarantee), obligations which given the systematic problems underlying them many foreign investors believe to be “our” collective problem, or we hope that by using the public balance sheet to support the financial system, we can hopefully come out the other side battered and bruised but still in one piece. At some stage if things get worse, we may have to discuss restructuring of our debt, but that will not happen for another 3 or 4 years probably. At the very least Europe expects us to work as hard as we can to pay back our debts, they simply will not accept us reneging on them at the first suggestion that we’re not even willing to try (80% debt/gdp, lots of big public sector pay and pensions left untackled). The situation may be tough and difficult to stomach, but it is by no means beyond repair. As people have alluded to on here, the political will may be what is lacking, rather than the resources or options.

@ Zhou

im skeptical that they are willing to give up their pay and pensions, especially having seen the scenes outside the Dail by the Grey Brigade (who granted are public and private) at the merest suggestion the medical card system be reformed. But hopefully you are right.


I agree there are no silver bullets but there are some that are at least legally workable and can be put to the market without giving rise to the added complications of a legal morass. We need to have an elegant proposal ready if and when it is needed. Now is certainly a time for sounding out the key players and putting the finishing touches to the special resolution scheme (I am assuming this exists in some form be it draft of final).

Imagine if the FT were not commenting on us. We could still think that the proponents of restructuring were all deluded. It’s nice to remember that just because we are lead by baboons we are not all monkeys.
Conor Lenihan’s denial of scientific truth is as the same as his brothers denial of economic truth.
Honestly people…….!
If Darwin saw Fianna Fail he would doubt evolution too.


A Resolution Scheme for a failed bank is sorely needed and its incredible that the minister seems to have ruled one out. Perhaps it would be too hard to cog the British legislation. However, that deals with the future issue of AIB or BOI redux. The issue of Anglo is done and dusted, we are going to be wearing that 35billion loss and it smaller 5bn cousin in Nationwide.

I think your own logic trips you up. You rightly identify lots of deep seated problems. hence no easy solutions. We can all agree there. You identify lots of failed banks, about which we need to do something. All agreed. But you cannot go on to argue, as you seem to do, that ‘therefore’ we can do nothing about the guarantee. I think that’s called a non sequitur.


Not correct, Darwin would just conclude that sometimes evolution led up blind alleys. Ther have to be some examples of species that ended up in failure.

@ Zhou

for the record, i dont have all that much issue persoanlly with hitting ung’teed Anglo seniors for losses. If you still own that stuff at this stage, well you cant say you didnt see it coming. However, that said, we at least need to accept the following:
1. the EU, particularly Germany, will have major issues with this. Given that we are still on semi life support from them, this seems like an important issue to deal with
2. the amount saved is a comparatively small amount (5-6bn ung’teed debt left after Sep 29, and you’re not going to be giving these guys zero)
3. the amount saved vs the costs to our funding (incl the banks)?
4. how does it get enacted legally if we want to avoid an immediate liquidation rather than a more drawnout and considered wind down
5. if we saved 5bn (way more than we actually can), how much good will it really do if we run up that much of a deficit between now and Xmas?

Honestly, if you’re asking me what we should do, it’d be much more along the lines of getting the deficit in order and then looking for a restructure. Its far easier to threaten people with a default if you dont have to borrow off them tomorrow again.

@P O’Grady Walsh
MS said: “Ireland is fundamentally different”
Oh here we go again… look what our fundamental differents did to us the last time…

“What is really needed is for some competent body to calculate a composite index from all the individual statistics that are published each month, similar to what is done in the US.”
Absolutely. We need to know, as a random list,
– what every house/commercial property/piece of land sold for
– LTVs by granual sale (i.e. by type of property)
– a granular makeup of ‘industry’ and ‘services’ – it is ridiculous that we cannot tell hairdressers from IT exporters. We have no way of figuring out the size of the ‘knowledge economy’. We don’t know what’s in it, even if we did, we don’t know how each bit is doing. How can we be expected to see if policy is working? (Though I suspect this is the reason we don’t get the info).
– we need to see where departmental spend is really going. At the moment, if you want to find out how much the quangos cost, for example, you have to look at the individual accounts for 800 of them – some of it is NDP money, so is in the capital spend, some is ongoing so is in the current spend of some departments. The whole accounting system of the government is a shambles.
– every month we hear of some new jolly claim our elected representatives get (ones that are barred to lesser mortals as allowable expenses). This week it is all-in think-ins at 5* hotels. I’d like to go on a brain storming session myself and claim it against tax… I’m still wondering how I could go through a 750 euro mobile phone every 18 months
– we need to see a break-down of the sorts of products that are imported into the country and the value of that produce – the first step in building indigenous exporters must surely be to build local companies that can supply an alternative to some imports (whether they be goods or services).
– The last incomes breakdown from the revenue commissioners was 2007…
– and on and on… and, as you say, timely. In this day and age, what are we doing producing only quarterly figures?

“Lads, give the markets what they allegedly fear and default. Result- massive cuts in public expenditure and massive deleceraging of the banking system. We have to continue on the current road until Europe changes tack.”
I’m afraid so. I am not sure we need banks (local banks that is). But the Pandora’s box of the guarantee means that now we are married to the banking system, we aren’t likely to get away with defaulting on it without funding for the deficit drying up. Closing the fiscal gap must be, as it always should have been, front and centre. The choice was the banks or the economy. That choice was made two years ago…

“Perhaps if we were to make a commitment that the money borrowed will be paid back but not at 6%+, but 3.5%.”
Yup. That is why I reckon we should promissory note the bondholders out of it and stick the lot on repo red. It is no more of a gamble than anything else that has been tried. If the ECB want to play hardball on not letting the banks fail, let them subsidise the action. That’d be 1% funding all the way and we could close down the NTMA. Using the current interest payments (what, 4 bn a year?) to repay the more expensive debt in the market without the burden of interest would reduce the duration of the impact of the state’s excessive debt on the economy.

But we will probably have to wait for the ECB to realise that we aren’t going to be able to repay both capital and interest and to come up with the scheme all by themselves. Then we can say “magnifique, wunderbar, you guys, you’re just great”…

Hogan, I agree with you. Pretty soon the ECB will own the majority of the national debt…NAMA 1 & 2, sovereign & bank. In addition, he will own a good deal of Greek & other periphs. By then, our primary surplus will be smaller. It puts the debtors in a stronger possie.

I think you are too optimistic. How long will Greece last with interest rates around 11% on sovereign debt, and the ensuing private sector credit contraction underway? As they sink we sink too, because we are all part of the same ship now. We might even sink faster as our problems are far more complicated and could lead to more bank runs that sink us quickly. I’d guess sometime in 2011 it becomes clear that restructuring is needed. They will then restructure more than one country quickly because we all know it can’t be done singly within europe.

@ Paul

Greece isnt paying 11% interest on any of its debt – that the point, once the market yields on its existing debt went that high, it knew it couldnt issue. Its borrowing off the EU/IMF at around 5% i think. I think there will be an eventual restructure of Greek debt, or just a general default by them, but it wont come until either (a) they are close to a budget surplus or (b) the EZ economy is far more solid and stable, at which point the EU/ECB may countenance a restructure. But thats 3 or 4 years away at least.

One quote I found interesting on the Freefall programme was that in 2006 American debt was 300% of GDP whereas Ireland’s was 700%. Is that correct?

@ John

if you include all the foreign banks operating here it might be true (Depfa, Germany’s bigger and equally as ugly version of Anglo, probably had a balance sheet around 150% of our GDP by itself). But if you deduct them, which most people do when comparing, then our number is far lower (anyone remember the exact figure?).


Yes – watched Freefall. Worth a little comparison with Greece …….. link below – fabulous read [via Barry Ritholt on Big Picture … a really must read – and particularly for Edgar if he is still around …….]


How can the polictial system move on and take realistic decisions if the leader throughout, as in Freefall tonight, remains in abject DENIAL.

@ David O D

Michael Lewis wrote that piece on Greece – probably the finest economics journalist in the world right now. If you have not read his recent book, The Big Short, then shame on you sir, truely magnificent book.

@All and BL

Thought we had a Minister for Science & Technology? Maybe the Minister for Education has got a good deal on textbooks from Texas? Or has he joined the Tea Party?


Be hittin Amazon.com …. on the .. er… CREDIT (ouch) card …….

If Lewis is as good in the book as he is here – I’m really lookin forward to reading it …. ta for the tip ……….

According to Davy in 2009:
The six Irish owned banks had liabilities to the value of 575 bn or 309% of GDP. But that is the wrong side of the balance sheet. The quote was about indebtedness. We know from Mr. Neary (no sniggering at the back there) that bank assets exceeded liabilities by 100 bn at the time of the guarantee.

So about 600 bn in loans (allowing for other sorts of stuff?).
That’s just the six Irish based banks.

What about Haven? Smart? BoSI? KBC? ACC? Ulster bank? etc?

Then there is the amount that has been issued in covered bonds, about 47 bn?

Then there is the corporate debt binge – not all of which was bought/sold domestically.

Then there is government debt and government guaranteed debt – GGD of about 46 bn in 2007.

IIRC, GDP was about 187 bn in 2007, so 700% would be 1,309,000,000,000 which looks a little big. Even in GNP terms it was 1,047,000,000,000 which still looks too big.


Don’t forget that 20% or so of Irish banks’ loan books are overseas i.e lending to people who are not Irish citizens or lending to the overseas operations of Irish business.
Some of the German Landesbank overseas operations are included in the 1.3trillion. Depfa was Ireland’s biggest balance sheet & the DOF/CB managed to persuade the Germans that it was their responsibility. The mandarins did manage to dodge some bullets.

@the loan arranger
I haven’t fogotten that, what I wonder about is the composition of it. My impression is that most of it, bar some residential lending (in particular BoI – a wave to BoI Reading who gave me my first mortgage in England) is to Irish, eh, awntrupinners… Quinlan, Treasury and the like or other ‘investments’ – Stuyvesant Town etc.

I agree with you about Depfa (and the various Landesbanken SIVs); how many ISTCs are there in the IFSC?

One thing that seems to have been forgotten is that these loans were secured on property.
This is not a true bubble in that what is left still has some value. It’s more a burst balloon than a burst bubble.
We can reduce the deflation by plugging the hole with cheap Euro credit and working like we’ve never worked before to regrow our economy and reignite demand for some of these houses.
If we get rid of the Lenihan baboonery we can turn this around.

Is there any limit to the amount of statistical misinformation churned out by leading economists in this country? Before the site organisers get too worked up, I should point out that I’m not referring to economists on this site. This thread has links to articles by two leading economists in Ireland. David O’Donnell gave a link to an article by Paul Sommerville. George R. Baumann gave a link to a speech/article by Constantin Gurgdiev. Here they are again for those wishing to read them:



I’m sure that most people in Ireland, reading these articles, will swallow whole everything the two economists say and be horrified. Me, I follow a different line. Based on years of observation that regard for statistical accuracy among some Irish economists is far less than among those of a more genuinely scientific bent, such as rocket scientists, nuclear physicists, and racing and football tipsters, I always check the figures out at source. They invariably turn out to be false. The following are just a few snippets of the statistical misinformation contained in the two articles. They are not directly related to this thread, but it is others who have linked to them and I’m just correcting the misinformation contained in them. Of course, there is an indirect link to this thread in that it highlights how wildly inaccurate many leading economists in Ireland currently are in their analyses, and what total disregard they have for statistical accuracy.


Sommerville writes: “parents weeping at airports, waving goodbye to another generation off to far-flung places”

Gurgdiev writes: ” By my evaluation 200,000 have left Ireland in the last 24 months”


The CSO estimates net emigration of 7,800 in the year from April 2008 to April 2009. This is the definitive figure. The figure for the year from April 2009 to April 2010 is not out yet, but should be out soon. However, the QNHS figures are out up to February 2010. These have proved reliable indicators in the past. They indicate net emigration of around 40,000 in the year from February 2009 to February 2010.

So, net emigration in the last 24 months is of the order of 50,000, not the 200,000 claimed by Gurgdiev. Moreover, virtually all of this was foreign nationals, mainly Poles, returning home. The CSO figures show virtually no net emigration in the last 24 months among Irish nationals. Sommerville and Gurgdiev have simply elevated the return of about 50,000 (about 10pc of the total in Ireland in 2008) foreign nationals to their own countries into a new Flight of the Earls and 1950s-level emigration.


Sommerville writes: “suicide numbers have hit record levels”


This is indeed true, but only if we ignore the increase in population, which is totally unscientific. Even after the increase in 2009, the suicide rate is well down on the record level it hit in 1998. Thus, in 1998, at the height of the Celtic Tiger, there were 514 suicides in Ireland. And, in 2009, in the depths of the global recession, there were 527 suicides in Ireland. Thus, in number terms the previous record has been broken. But, after we take the increase in population into account, the suicide rate is well down on its 1998 peak.


number of suicides: 514
population: 3,703.1 thousand
suicide rate: 13.880 per 100,000 population


number of suicides: 527
population: 4,459.3 thousand
suicide rate: 11.818 per 100,000 population

Hey, why let facts get in the way of a good dose of hysteria-mongering?

For the record, the suicide rate in Ireland continues to be much lower than in other northern European counties like France, Belgium, Germany, Austria, Nordic countries, eastern Europe countries, although higher than in Mediterraenean countries (these have the lowest suicide rates in the EU, probably weather-related).


Sommerville write: “there are around 460,000 unemployed and looking for work”

Gurgdiev writes: “we have around 700,000 surplus workers”


The most recent QNHS survey puts the number of unemployed at 275,000, not 460,000 or 700,000. This is the definitive figure. The 460,000 figure is from the live register, which includes lots of categories of persons not counted as unemployed in other countries, mainly those on short-time etc. Moreover, 275,000 exaggerates the figure for the shortfall in jobs. Unemployment is never zero in any country. At the peak of booms, when shop windows are plastered with notices begging for workers to fill vacancies, unemployment still hovers around 5pc. A 5pc unemployment rate in Ireland would be full employment (as it was up to 2007) and, if ever achieved, would trigger massive net immigration (as it did up to 2007). A 5pc unemployment rate in Ireland equates to 105,000 unemployed, roughly the 2007 figure. So, the shortfall of jobs in Ireland currently, as compared with 2007 levels (when there was massive net immigration), is 170,000, not 460,000 or 700,000. The current unemployment rate in Ireland, around 13pc, is 3pc higher than the EU and US averages. However, the US figure is an under-estimate. Finfacts estimates that, if calculated on the same basis as in Ireland, the US unemployment rate would be 16pc. The employment rate in Ireland is approximately the same as in other EU countries, while the number of hours worked is higher.

@Brian Lucey

All this on and Conor lenihan launching a book denying evolution.

JTO again:

Actually, he’s pulled out after a media campaign against it.

Shows how backward he was to agree to it in the first place. Imagine, in this day and age, a government minister actually believing that the Dublin 4 media would tolerate freedom of spech or diversity of opinion.

“One thing that seems to have been forgotten is that these loans were secured on property.”
Em, it depends on your definitions of property. Much of it was secured on airy promises or mezzanine shareholdings in inflated tax schemes. Then we have the vast amounts gambled on shares…

But I agree with you main point. It is fixable. Somebody needs to start fixing it, though…

@Robert agree about integrity.

But even assuming integrity, if youre to take the “we are where we are” argument and look at the current approach… I think government strategy can only work if there is serious sustained global economic growth for the next decade. (my guess is enough to mean Irelands GDP doubles in that timeframe so growth of more than 7%)

Thats me trying to be objective. If that happened, our debts would look to be going in the right direction in a couple of years and then start to look more manageable.

The ‘burn the bondholders’ are trying to get the debt manageable by repudiating as much as possible of it up front. I agree with them also but would point out that those in charge have been very effective at reducing the scope for any such action by this or any future government.

I disagree with JTO on most things and Im sure JTO will have a different number (and in all fairness he will probably have spent more time and expertise in arriving at it)

But at least theres a recognition that glowbal growth is needed in order to make this work.

Its very hard to put a figure on it because Ireland’s economy will continue to shrink without global growth. Global growth is needed and then our share of this growth has to be captured. and some allowance has to be made for productive borrowing as well as the looting that is ongoing plus the borrowing to bail out the cronys. Which brings us back to integrity.

I’m not saying such growth is going to happen or is likely, I dont know….just that that is what is needed.


You are flattering but wrong if you think that I have any more insight into what Ireland’s future growth rate will be than you do. I’m sure that your guess is every bit as good as mine

I totally agree with your statement: “I think government strategy can only work if there is serious sustained global economic growth for the next decade.”

But, why shouldn’t there be? There has been every decade since World War 2. Global growth is driven by scientific and technological advance, not by economic theories or banks. I see no sign that scientific and technological advance is drying up. This scientific and technological advance results in (a) the continual invention of new products to satisfy human needs/wants/desires, many of which are unforeseen until their invention (in recent years: videos, mobile phones, computers, internet, new medicines etc etc) (b) the continual improvement of production methods that allows the same number of people to produce more and more of these products. Of course, it goes without saying that Ireland needs to be competitive in order to get a good share of whatever scientific and technological advance throws up in the next decade. However, the IDA and other organisations have a very good record in this in recent decades.

So, global growth is the natural order of things. It is interrupted briefly every decade or so by recessions, but invariably resumes. It is only ever interrupted for prolonged periods by wars or when lunatics temporarily take over the asylum.

With regard to 7pc growth rate, it would be great to achieve that, but it seems on the high side. But, I don’t see that such a high figure is necessary to bring Ireland’s public debt/GDP down. A much lower figure would do it. But, if 7pc was achieved, so much the better.


Now hold on just a minute, Mr Optimist! Dr Gudgieriev talked about the number of people leaving the country, whereas you talk about net emigration.

As you well know, they are not the same thing. You’re figure takes into account those entering the country and leaving, while his does not.

You also persist in talking about GDP, when you know full well that for income per capita purposes, we should be using GNP and for tax (and budget purposes) we should use GNP + 0.125*(GDP-GDP), which we could call “Gross Revenue Income Taxable in Ireland” (GRITI).

This is not to be confused with Net Income Taxable in Ireland (NITI) which also takes into account depreciation, but that would really be getting into the NITI GRITI…

…buh-bum tschiiiing!


“Honestly, if you’re asking me what we should do, it’d be much more along the lines of getting the deficit in order and then looking for a restructure. Its far easier to threaten people with a default if you dont have to borrow off them tomorrow again.”

Once again, you’ve produced some wheat among the chaff. Our Government probably has the shortest time horizon (up to 18 months) of all the players in this game. The institutional and political EU is probably looking at the 3 to 4 years you indicate. The focus in that period is on achieving longer-term fiscal sustainability throughout the EZ, but particulary in the southern and western periphery.

The sovereign bond market, in so far as it has a collective view, doesn’t want to force default – though there is money to made by some players when a gap opens between reality and the political fiction and one player’s loss is a profitable opportunity for another. It mainly wants to establish how strong is the resolve of the institutional and political EU to shore up the Euro system. In April and May of this year it went for Greece and forced the EU to respond – with the IMF on board. In the Irish case all they want to know is precisely how much bank debt is going to be imposed on the sovereign and how solid is the Government’s commitment to restore fiscal stability. If we don’t give them this we will remain as their battering ram of choice – as Greece was earlier in the year – to force the institutional and political EU to respond.

The NTMA, prudently, has provided a six-month shield (apart from some limited forays to roll-over short-term paper), but these questions must be answered latest by the end of the year. If these questions are answered convincingly (and, ideally, accompanied by a report from the State Asset Review Group indicating what state assets should be sold and providing a range around what might be realisable) the heat will be off.

However, in terms of fiscal adjustment, I would counsel against excessive reliance on expenditure cuts. Even though overpayment, underperformance and inefficiencies may exist, the State’s share of the economy was not excessive in Ireland; the bigger problem was how this expenditure was being financed. There is now a once in a life-time chance to shift taxation from productive labour (a good) to land and property (sources of rent) and to GHG emissions (a bad). And there is a chance to root out excessive costs, inefficiencies and anti-competitive practices.

The problem is that, while Sarkozy, Merkel and other EU leaders may be looking at the prospect of re-election in 2 – 3 year’s time, this Government is focused on minimising an inevitable electoral rout. Therefore we’re into soft option, ‘don’t rock the boat and don’t upset anyone we don’t have to’ territory.

It’s a dismal prospect.


Re: http://www.irisheconomy.ie/index.php/2010/09/13/ft-no-irish-lazarus/#comment-73061

1. Re agreement with Germany – this is required for any reduction fo the guarantee but not for letting it lapse.

2. €5b – €6b is a lot. It is the straw that is bending the camels back. Presumably this is long dated senior debt and undated subordinated debt? The elephant in the room is who owns this debt? If they are really so powerful and influential one would have thought they would have piped up with a few threats by now.

3. The cost to our funding should improve, not disimprove. The costs we really need to avoid are a run on bank deposits and other guaranteed debt.

4. This is difficult but not insurmountable. A resolution scheme needs to be flagged in concert with or following on from something to reasssure depositors. This appears to be what the FT is recommending when it says it is important to protect Irish depositors.

5. A €5bn saving will still be worth a wopping €5bn as long as it does not cause an increase in our deficit. It does not appear that it will cause an increase in borrowing costs. The argument that we will suffer through defaulting on ourselves is somewhat nebulous when limited to this hypothetical €5bn.

@ Eoin,

“Honestly, if you’re asking me what we should do, it’d be much more along the lines of getting the deficit in order and then looking for a restructure. Its far easier to threaten people with a default if you dont have to borrow off them tomorrow again.”

But here again you betray your bondholder loyalties. For, it is equally true that it is much easier to ask Irish citizens to accept austerity if they see that those capitalists who took unsecure risks are asked to pay for their own losses.


Welcome back. We’ve missed your erudite observations, but, I’m afraid, I’m with Eoin on this one. The game isn’t worth the candle when so many instituitonal and political ducks would have to be lined up at the EU level. Ireland is no longer sovereign, repeat no longer sovereign, in these matters. In addition, there is more than €15 bn state equity locked up in the semi-states that the international capital market would be more than willing to finance. Don’t sweat the small stuff when it could lead to self-immolation and there are far bigger amounts that may be realised – and where the State exercises almost unfettered sovereignty over how they may be realised.

@JTO whats important is we get more than our fair share of whatever growth happens. But there is a minimium growth that must happen in order to pay for the debts and looting that have been facilitated and instigated by those dictating policy. Right from Cowens ignorant boast that no cheques was too big for the bankers through Anglos many frauds through the consultants stealing a living from the taxpayer via NAMA, the culture has been set.

Care to put a figure on this? Mine is the country needs to double in size to keep feeding the tapeworm.

I’ve been spending some time is Asia the last 2 years because of my work and I identify with Dr Gudgieriev’s blog. It is clear to me a lot of countries have shrugged and moved on from the events of 2008, largely because it didnt affect them as much.

Same as we shrugged when a similar crash happened to some Asian economies in the nineties. Those that crashed then had the benefit of the dot com/consumer/real estate/credit bubbles in the US/west to help their recovery.

Im pointing out we need something similar, its working for my business but I dont think my business is typical.

Dr Gudgieriev is back from a country which believes itself to be on the up, misses the vibe there, and has taken a fresh look at the shennagians in Ireland. Where the focus is on rewarding well connected failures at general expense. Which is the road to poverty.


You mean the kleptocracy is over? Shame.

John McHale Says:
September 13th, 2010 at 10:27 am

“But withdrawing the guarantee on new issues would be hugely risky — indeed quite mad. ”

Your comments only make sense if the banks are to survive in similar size to hitherto. No chance of that. The FT seem to be talking sense, which is worrying.

The whole point is that Ireland has broken its favourite toy: the banks. So broken, they cannot be fixed.

Reckless lending? Ever heard of it? I touched on it before, but I assume you refuse to read my contributions? The punishment is to cancel the loan. No right of refund whatever. What else id the appropriate action if someone lends a sum to an alcoholic addicted gambler, secured upon the family house? All things are possible. The Irish Constitution guarantees limited rights but to citizens, now read to include EU natural persons. A bank is not a natural person.

@ JohnTheOptimist

There is little doubt that global growth will continue and the dip in 2008/09 was the first since 1945.

However, economic stagnation in Japan with 35% of its workforce as temps earning less than the Irish minimum wage and middle income stagnation in the US, suggests that growth in developed economies maybe below trend for many years.

Besides ageing costs, public debt is a problem for many developed countries as is globalisation.

The US real GDP grew at a 3.4% annual rate in the period 1960-2007.

From 1980 real median income stagnated and the rise in the average home size was funded by equity release from rising property values and debt.

Some economists say the ‘new normal’ US trend rate will be about 2.5% in the next 10 years.

The interesting evolving pattern of development in emerging economies and developing economies led by China is the rise in both trade and investment, bypassing the rich countries.

There is still a lot of catch-up; China’s population is 55% rural; India’s is at 73%.

As for Ireland as happened with computers and electronics, the dependence on pharmaceuticals/ medical devices, accounting for more than half of merchandise exports is a vulnerability as is the dependence on US firms in general.

All the big US firms in the pharma sector are located in Ireland but overall, the FDI sector has stalled as a job creation engine with employment back to 1998 levels.

Intel’s Paul Ottellini said last July that it would costs $4.5bn to open a new semiconductor plant in the US – – more than $1bn more than overseas; the Sunday Business Post reported last Sunday that 500 jobs are at risk because of the possible decommissioning of one of the older plants in Leixlip.

So a decision to expand in Ireland is not a simple decision because of the huge investment required.

Besides debt, Irish unemployment is likely to be a drag on growth for many years.

“sorry the GRITI equation should of course be

GNP + 0.125*(GDP-GNP)”
I think your original formula was more accurate…


Dr Gudgieriev is back from a country which believes itself to be on the up.

JTO again:

I totally agree that Russia is on the up.

It is the largest country in the world, and lots of natural resources. About time it was on the up. Marxism up to 1990 and corruption since 1990 have held it back. What’s amazing, given its natural advanatges, is how far behind it currently is. According to last week’s World Economic Forum report, GDP per capita in Ireland in 2009 was $51,356, in Russia $8,694. Lop off 15 to 20pc for GNP in Ireland, and Ireland is still about 5 times as rich as Russia. So, there is plenty of scope for Russia to come up. And. of course, it is good for Ireland (and other Western countries, if it does so, since a rich Russia would be an excellent new market to export goods and services to). However, my post wasn’t about Russia. It was about Gurgdiev wildly exaggerating the level of emigration from Ireland. That is indisputable.

@ JohnTheOptimist

In general, Constantin’s comemnts are not alarmist.

Harry Truman’s comment: “It’s a recession when your neighbour loses his job; it’s a depression when you lose yours. “ comes to mind.

As I said elsewhere, the comfortable cannot understand the misery in their midst.

Constantin’s estimate of emigration seems on the high side; where are the developed countries which will absorb large-scale Irish immigration?


“where are the developed countries which will absorb large-scale Irish immigration?”

Germany 2009 growth 2.2% q-on-q for Q2. Zeit, dass die Paddies mal ein bissel Deutsch lernen, was?

As far as I can see the FT have proposed an alternative approach that allows losses to be imposed on bondholders. This approach would not require a revocation of the guarantee.

It appears to me that they are suggesting

1 Pass a resolution scheme – basically copy the UK one I presume

(Does our membership of the eurozone complicate this?)

2 Stop guaranteeing new bond issues while simultaneously continuing to guarantee all deposits

3 Any bank that can’t fund itself is put into the scheme wherein the bank is quickly, and in an orderly manner, recapitalised.

The resolution mechanism would, I presume, wipe out equity holders and subbies and then seek to impose losses on senior debt and depositors.

Surely all senior debt and depositors (whether guaranteed or not) would be forced to accept their share of losses on a parri passu basis.

The guarantee implies that the state would need to make whole any losses thereby suffered by depositors or guaranteed bondholders.

My, admittedly long winded point, is that it appears to me that we would only be able to wipe out all of the unguaranteed debt in circumstances where we also wiped out all depositors and all guaranteed debt (clearly reimbursing the later two out of state funds). If we proceeded otherwise, we would be prejudicing the interests of unguaranteed senior debt holders. They are entitled to their seniority in the capital structure. We cant make deposits or guaranteed debt senior to existing debt just by guaranteeing it.

@ Ribbit/Michael H

as JtO has suggested, its seems highly likely that most of the absolute emmigration from these shores are not Irish people emmigrating to the usual haunts of the US and UK, but simply Eastern European (or indeed Western European) nationals who lived and worked here during our boom. This is not to say it is unfortunate that they may have been forced to leave here after working hard for so many years, but given that they are likely returning home to be greeted by friends and family, and will be bringing back to their home countries much needed skills and capital, it is hardly the tragedy that CG would imply it to be.

My point is the FT plan appears to be premised on an overestimation of the proportion of senior debt that is not guaranteed.

Involuntary emigration is a tragedy, no matter whether you are Polish or Irish. Your comment is a disgrace.

@ Eoin,

Agreed. CSO figures tell us that 2009 emigration was 50% EU-12, and that is likely to be continuing in 2010.

I can’t imagine anyone with childhood memories of swimming in the Vistula in 30 degree summer splendour will much miss the rainy 14 degree “summers” they spent in Roscommon on the building sites…

This level of net emigration is probably also not a bad thing, if it helps deflate prices a bit. At present, we are in a wage / price deflation situation of around 1.2% annualised and that is a good thing.

I also don’t think sending young lads over to Hamburg to pack boxes into the back of a truck will do them any harm. It will teach our Celtic Tom Kittens some badly needed modesty (and some not-so-badly-needed German curse words).

My only point was that Constantin didn’t just make up the numbers, as JtO seems to be suggesting.

@ Simpleton,

Ah, com’on off it! We’ve low cost criss-crossing Europe like honey bees in a field of magnolias.

What’s so tragic about moving for work? Americans have been hitching up the wagon for centuries!

It’s the racially profiled degree of tragedy that bothers me, not the emigration. I’m an immigrant myself so I do have some knowledge. I dunno about donning green shirts: you lads need to think about the black ones you are wearing.

@ Eoin

From the mid 1980s, the US and UK economies starting growing rapidly, increasing in the opportunities for Irish immigrants. Besides, the Irish were favoured with special visa allocations in the US thanks to politicans named O’Neill, Kennedy and Donnelly.

Now, apart from Australia, demand in favoured markets isn’t there and who wants to come to Asia to earn a few hundred euros a month?

@ simpleton

my comment is a disgrace? Way to keep things in perspective. Unemployment is an unfortunate fact of life, and hence the reason why we are trying to increase social mobility. That they could go home to their home countries, to their friends and familes, to economies that for the most part dodged the crisis and are very much “looking up” at the moment, should not be seen as a tragedy. I highly doubt they either want or need your pity.

@ Simpleton

Actually grey with (if I do say so myself, tasteful) ivory stripes. The suit is black though….

I wouldn’t condescend to extend my feelings one way or the other. It’s the racial relatavism that is a disgrace: Polish emigration OK, Irish emigration something to worry about. Think about it. Please.


Oh Dear! The Ayn-eenRandite recovery groups, due to unquestionable demand, resume on the dirt tracks around Merrion Square at ‘darkness at noon’ everyday. Objectivism how are ya! Unsubstantiated reports that the Mairteen-feldsteeeen group alternates between UCD and TCD …… These Randites were, and remain, the cheerleaders for global financial de-regulation that got us all into this mess – a dangerous ideology suited to maintaining elites and in no way can it be termed a philosophy, let alone a science. Stuff and nonsense – certain junior Minister take note!

@ simpleton

i dont necessarily think that Irish people being forced out of the US are victims of a “tragedy” either (even though they are actually being forcibly removed, so ill admit to some circumstances being potentially so), but no doubt i have some deeply held raciall hatred for my fellow Irish too. The point is where you’re coming from and where you’re going to – leaving your home vs returning there.

Ride much? Tall horse is it?

I’ve worked in a number of different countries, emigrated from three (one forcible, two if you count Ireland in the ‘eighties, three if you count the UK changing tax law 😀 ). I’ve worked in a half dozen countries for extended periods – none were welcoming to immigrants, some rabidly not so. One of the great changes of the EU is the freedom to move without fuss (a freedom we’ve enjoyed with the UK for many years).

However, there is still a problem. While I can’t see a demographic makeup of the immigrants on the popmig figures, the evidence of the demographic profile of the country is pretty stark – young people are leaving. It matter little where they are from if we are swapping working age for dependents (i.e. of those who are already here and have retained work so are bringing their families over).


I agree with you. It is a sign of failure that many people who entered this country during the boom are no longer able to find work here. This is irrespective of whether or not they are from the CEE, Irish returning from Boston, from the UK of GB&NI or wherever. Irish society will be poorer for their passing.

I think the point here is about the productive use of labour and capital. I have no problem with labour mobility – Ireland is now just a regional economy within a much bigger economic entity (and the experiences and skills gained are valuable). And demand for labour will ebb and flow with business cycles.

What I think is annoying people is that scarce capital is being used to plugs self-created holes in the banks which aren’t even providing credit and is locked up unproductively in semi-states, while potentially productive labour which could be combined usefully with this capital is being forced to leave.

I suppose if every one with a brain leaves, we can continue to be lead by someone who was not hungover.

@ Cearbhall

…but EUR/USD goes through the roof as well, and equities are higher again – lot of people reckon the Fed is starting to warm up the printing press again…

@ Cearbhall/Michael

goldmans just had a big economic teleconference with their clients, from the wjs…

“The U.S. Federal Reserve could announce a new program of asset purchases to support a weak economy as early as November, according to Goldman Sachs Group Inc.

“We don’t expect this at the Sept. 21 meeting, but in November or December there’s certainly a possibility that it will be announced,” Jan Hatzius, chief economist at the bank, said Tuesday. He added the Fed is likely to buy U.S. Treasurys worth around $1.0 trillion to kick-start the economy.

To fight the financial crisis in 2008 and 2009, the Fed bought $1.7 trillion in mainly mortgage-backed securities, a move that helped to keep mortgage and other long-term borrowing rates low. That program ended in March. But with the recovery slowing, the Fed said Aug. 10 that it would reinvest the proceeds of mortgage bonds into U.S. Treasurys to prevent its portfolio of securities from shrinking. The question now is whether the central bank will start a new program of asset purchases that would increase the size of its $2.0 trillion balance sheet further.

Goldman Sachs expects this to happen soon given the weakness in the U.S. economy as a result of lower business inventory accumulation and a fading fiscal stimulus. The bank expects the U.S. unemployment rate to creep back up to 10% by early 2011 from 9.6% in August and to stay around that level for most of the year.

U.S. inflation is predicted to continue slowing to 0.5% by the end of next year from around 1.0% currently. That would be well below the Fed’s informal target of between 1.5% and 2.0%.

The upcoming meetings of the Fed’s policy-setting committee this year are Sept. 21, Nov. 2-3 and Dec. 14.”

If one man epitomizes the populist view of Wall Street and corporate America, it is Mr. Stone, whose new film, “Wall Street: Money Never Sleeps” opens next week.
Oliver Stone, the film director, was sitting across from me over a late lunch in the Grill Room of the Four Seasons restaurant in Midtown Manhattan last week.
“You know, half the people in this place could be prosecuted.”

Thanks, Eoin. This is interesting. The mid-term elections are on Tues. 2nd Nov. There’s no doubt that more QE is needed, but how quickly will Helicopter Ben ride to the rescue?

@ Paul Hunt

well lets hope that unemployment rate really doesn’t stick around 10% for 2011. I’d guess that unemployment and the electibility of some psycho like Sarah Palin have a correlation factor equal to 1.


“But here again you betray your bondholder loyalties. For, it is equally true that it is much easier to ask Irish citizens to accept austerity if they see that those capitalists who took unsecure risks are asked to pay for their own losses.”

Your understanding of bond markets is quaint & endearing. The bonds are owned by savers in core Europe, US & the Far East. Why should they accept a reduction of principal without some quid pro quo?

Think of it as the relationship between a money lender and a client. If you do not pay the bond holder he breaks your legs. Except in this case he refuses to lend you more money. Then you cannot afford to pay PS wages, transfers and pensions.

I know one statistic does not mean anything but US is beginning to look fairly strong http://www.rte.ie/business/2010/0914/usa.html
While we have been here debating default/not and austerity or not the rest of the world is beginning to see a recovery.
Unfortunately with the 12.5% rate now coming into doubt our strategy of capitalizing on that recovery through multinational exports is not going to cut it for long. (The doubt is enough to influence long-term investment decisions)
There is a new global sino-centric (not even sure it’s a word) dynamic which FF are not capable of grasping. (It’s not all China – it’s just that it provides an impetus to kickstart growth elsewhere)
After the fianna fail think in I really cannot see a way out of this for us at all. Even JTO’s optimism must have taken a dent.
Our one-trick minister for finance, Marguis de Lenihan dangles his sword over the weary populace and sadistically asks them to guess how deep he’s going to cut. Our Minister for foreign affairs cries like a spoilt brat when a mere interviewer deigns to ask him questions and our Taoiseach….well Carlsberg don’t do Taoisigh but if they did…..
For all the really intelligent debate from really well informed people on this blog you can’t but think that we really are adrift on the ship of fools.
What can you do but jump?
Thank you FF – I will tell my children about you.


I know you don’t do politics, but I would probably be more sanguine than most about the US. Obama is trying to do a bit more fiscal stimulus, but the only tool that will work politically – and probably economically – is QE. I suspect Bernanke is worried about deflation, but he can’t muscle in too soon or the Republicans will rip him for being partisan.

And I think Palin would be a gift to Obama. It looks like a repeat of the ’90s. Clinton lost the Houses in ’94 and cruised to victory in ’96. Palin is ripping the GOP apart into no-nothing libertarians and the more pragmatic residue of the recent neo-con hegemony.


I think we’re seeing the first hints of the new fiscal governance regime that will be imposed by the institutional EU. The days of Ireland doing solo runs on the wing are long gone. We need to behave as a well-governed, efficient small regional economy – fully integrated into the EU political and economic entity – and get behind the German thrust into the Far East.

An allegedly ‘hung-over’ government won’t get us far along this path – and the alternatives don’t seem that inspiring either.


I don’t understand why you see the retail sales figure from the US as negative for Ireland.

For months lots of economists have been claiming that the US had allready or was about to enter a double-dip. Indeed, if you scan back through the various threads on this site over the past few months, you’ll see plenty of predictions to that effect being made here. The figure for retail sales that you linked to, while it doesn’t eliminate this possibility, runs counter to these claims and is consistent with growth in the US continuing at a moderate pace.

How exactly is the fact that US consumers are spending more bad for Ireland?

@ Paul Hunt

i dont do politics, but i did have Palin to be the Republican VP nominee at 60/1 back in 2008. 🙂

I think you’re probably right, she’s too crazy even for the US electorate to put into power, even one in the throes of a prolonged recession, but she could easily be a king-maker for someone only marginally less potty.

@Paul Hunt

I really don’t share your view that Obama will cruise to victory in 2012.

If the Republicans pick a half-decent candidate (not Palin), Obama is toast.

While it may be heresy to say it it on an economics website, in the US people are still interested in a lot more than economics. In the US ‘its not the economy, stupid’, otherwise Gore would have won easily in 2000. The US is still very spiritual and religious. I went to a Baptistist Church in Charleston, South Carolina a couple of Sundays ago. Packed to the rafters, as were the hundreds of other churches in the city. That no longer happens in continental Europe. A culture war is raging in the US between those who wish to keep the country true to its Christian-Judaeo heritage, and those who want to dismantle that heritage. Echoes of Ireland. All the indications are that the former are growing in strength. That, more than economics, will determine the future path of US politics. Europeans don’t grasp this, because the culture war in Europe ended some time ago in victory for those who wanted to and then succeeded in dismantling Europe’s Christian-Judaeo heritage. The predictably disastrous results from this have now created a situation in the US in which the worst insult that one candidate can throw at another is to say that ‘he/she wishes to europeanise America’.

However, the incumbent in the US still has a big advantage. They usually get reelected. So, Obama might scrape through, especially if the Republicans choose Palin. Regardless, even if Obama wins, he will be the last left-liberal Democratic president for decades, and socially conservative Republicans are similarily likely to dominate the Senate and House of Representatives for a long time to come.


We’re deviating a long way from the ‘Irish Lazarus’ post that kicked off this thread, but the resilience of the US economy has global import and probably impacts proportionately more on the future fortunes of the Irish economy than on those of other EU member-states.

The US is exceptional, for all sorts of reasons, and people everywhere project on to it the image and vision that they desire. But, since becoming a global superpower, the extent and nature of its international engagement has gone through periods of isolationism, of significant and effective engagement in multinational institutions, of misguided confrontations with the perceived agents of communism and of the neo-con projection of US economic and military might.

The Obama presidency is struggling to deal with the immense damage caused by the failure of the neo-con project. The fear is that the US will turn inward. The Tea Party faction is comprised of heavy funding from some of the super-wealthy elite, rabid sections of the media that reject the legitimacy of a Democratic Party president, some useful idiots from academia and know-nothing anti-government and isolationist fanatics. Obama will have to craft a narrative that brings the ideals of the Founding Fathers alive to US citizens in today’s scary world.

It will be damn close run thing. His success or failure will impact on the well-being of millions around the globe.

Tom O Conner from the community platform has done some figures on the Exchequer balance for this year so far compared to last year on progressive-economy.ie

His summery is

• The government’s fiscal plan has failed. The exchequer figures in August misled the public: there was an Exchequer balance in Aug of €12 billion, actually almost 1 billion more than Aug 2009 if we subtract Anglo and NPRF from the 09 figures. These don’t occur in 2010. Comparing like with like, the Exchequer deficit has widened by almost €1 billion
• The EB at the end of 2010 – and there is no Anglo or NPRF spending – will be €22 billion. The corresponding figure (without Anglo and NPRF) for last year was €18 billion. We are €4 billion worse off after the cuts.
• So, after €4 billion in cuts, €3 billion in current and €1 billion in capital for this year and all the hardship, we will finish up €4 billion worse off than last year.

Are his numbers correct?

Is it true to say that current deficit for this year (excluding last years anglo and NPRF costs) are looking worse this year than last even after all the cuts we endured last year?

“The US is still very spiritual and religious.”

Sounds great: like Ballymena with nukes.





One would hope that is not directly quoting Mr. Ross… not knowing the name of the company you are buying might be considered a Cardinal sin..

That was actually quoting him live on air! Think it was probably aimed at a US audience, so perhaps give him the benefit of the doubt. An “educational building society” probably sounds like a school construction company to Americans!

If Wilbur gets EBS and cuts capital repayments as he is suggesting then the others are going to come under pressure to do likewise. What impactwould this have on the big 2

Sounds like a whiff of badly needed pragmatic US capitalism. Of course he (and the other consortium members) will probably look for a discount on the buy price to finance this customer-friendly largesse – and still be quids in – but it could put them out of the running. This sort of customer-focused, market-moving rationality is frowned on in Ireland – particularly when the financial health of the much-beloved ‘Big 2’ remains a cause for concern.

@ Eoin

Why not. He can’t lose, the government will bail him out if he loses.

And he may be well placed now to cherrypick the NAMA GOOD stuff for a song.

I reckon he’ll be more interested in the NAMA bad stuff. Sell the loans to him and let’s see how many of the borrowers really have no money…


These guys don’t win them all, but they don’t play to be bailed out. If he gets his chance, he probably won’t lose as there are some rich pickings to be had. But it could be a win-win even if he feasts a bit, as he could help to shake up the retail bank market. The only problem for him – and I’ve seen it frequently in the past – is that, just because Ireland is a republic, has a constitution, an independent judiciary, a legislature and an executive, he might think that things operate here as they do in the US. Operating an MNC export/import platform almost in an enclave is very different from engaging in the banking and real estate business in Ireland. If he hangs around he’ll discover the downsides of Irish dysfunctionality that is so charmingly attired.

Hmmm, not quite the done deal Ross initially suggested…


@ hoganmahew

But you’ll never really know, because NAMA legislation prevents any disclosure of who the buyers will be, or what they pay.

Stubbs Gazette?

I agree with you, though.

There is no commercial confidence required for our busted banks –
– who are the borrowers?
– what were the loans bought at?
– what assets have been repossessed?
– what are those assets on sale for?
– what are the loan writedowns?
– what loans are on sale and for how much?

Whether NAMA makes a profit or a loss, it is our money – once NAMA makes a profit above the costs of the banking recapitalisations plus interest, they can stop telling…

Yes, I know that. At the moment it is. It doesn’t mean it always will be. It doesn’t mean that it can’t publish the information itself.

Brady Bonds For the Eurozone
Simon Johnson and Peter Boone

“Ireland’s banks financed their rapid growth by borrowing from other European banks, so the health of Europe’s financial system has become entwined with the survival of these insolvent banks. It is no surprise that the ECB is now Ireland’s largest creditor – through buying up its government bonds. In the latest data (through the end of August), despite being two-thirds the size, Ireland received more ECB financing than Greece – totaling 75% of Irish GNP and growing rapidly.”

… nite …

@Eamonn Moran

His figures are wrong.

The deficit (after excluding Anglo and NPRF ) was under 200 million higher in Jan-Aug 2010 than in Jan-Aug 2009, not the 1 billion higher that he claims. To get his full year estimate, he then casually throws in the assumption that it will be 3 billion higher in Sep-Dec 2010 than in Sep-Dec 2009. Naturally, he gives no evidence whatever as to why there should be such a dramatic deterioration in the final 4 months of 2010, despite the fact that the fall in the tax take has been progressively lessening as the year has gone on

We can see it better by looking at the average monthly figures.

In Jan-Aug 2010, the deficit was on average 25 million monthly higher than in the same period in 2009, not the 125 million monthly higher that he claims. He then casually assumes that, in Sep-Dec 2010, it will be 750 million monthly higher than in the same period in 2009. So, for his full year forecast to come true, the average monthly y-o-y increase in the deficit needs to go from 25 million in the first 8 months of 2010 to to 750 million in the final 4 months of 2010, ie the monthly increase as compared with 2009 needs to be 30 times as large in Sep to Dec as it was in Jan to Aug.

One day an Irish economist will use accurate figures in his/her forecast. But, I don’t expect to be around to see it.


Many thanks. I noticed the numbers were a bit skew-whiff, but confidently expected you would be on the case – and you didn’t disappoint.

But please don’t damn all economists. This ‘analysis’ is supportive of the polemic being advanced by the ‘progressive-left’ and, because of this, it may not have registered on the radar of those with no axe to grind.

We don’t even know precisely where we are now, not to mind what’ll happen in 6 to 12 months time. There are huge uncertainties because the economy has taken such a huge jolt. The normal interactions that support economic activity either are not, or may not be, functioning properly and some are clogged up such as bank credit.

I agree that the private sector economy has huge resilience, but it is being suppressed and retarded in all sorts of ways. The Government has no option but to progress with the fiscal adjustment (which is what the progressive-left is really attacking), but it is politically hamstrung in terms of the composition of this adjustment. It could combine some expenditure cuts with a shift of taxes from enterprise and labour to land, property and ‘bads’ – and increase the take, but it nurtures the hope that it won’t be annihilated at the next election and doesn’t want to upset too many people. And it doesn’t want to go near land and property as that could overturn the entire NAMA and bank resolution applecart.

The ‘progressive-left’ is probably right in asserting that how the Government is going about fiscal adjustment is damaging the economy, but they would be the first to oppose any rational composition of fiscal adjustment (and other reforms in the state and semi-state sectors) that would minimise the damage and enhance the performance of the economy.

@Paul Hunt

But please don’t damn all economists.

JTO again:

Point taken.

Naturally, I exclude you from my criticism. I notice that, even where I don’t always agree with your conclusions, you are always very strong on statistical precision. I am too, I hope.

Alas, this is not true of lots of economists in Ireland, particularily the media ones, where statistical precision is always sacrificed in favour of sensationalist headines.

@ John the Optimist

Thanks for going to the trouble of clarifying John.

However I have to say the fact that the current deficit is actually on track to be bigger this year, than last year ( all be it by a much smaller amount than Tom O Conner had outlined) is awful news.

The reasoning behind the cuts and health levy last year was that it was going to bring our current deficit down. We promised the EU to get it down to 5 billion by 2014. If this is not actually happening wont the bond markets react badly when the final year figure comes out in Jan? Or will the government attempt to fudge the figures using the Anglo and NPRF numbers?

All the Projections the government have made regarding our ability to get the deficit under control show a steady decrease toward 3% of GDP (5 billion) by 2014.

An increase this year may focus minds in the ECB who seem to be enforcing this austerity charge.

Forgot to mention that the comments above exclude all the big ticket one/some time current expenditures such as anglo etc. that we had last year and expect more of this year.

@Eamonn Moran

ECB IS the New Dept of Finance … finance goes federal (as distinct from viral), and in our case – perhaps both inescapable and about time ………?

Well the illusion that everyone needs a “job” and a “career” may need to be explored. Ireland will be very rich in having more ……. time, to spend than most europeans.

This is not a liability! It is an opportunity. Devise a better way to govern ourselves for a start. From each …. ? Do we really need identical communities every where? what about a bit of diversity?

The bond markets only matter if we have over government. We are accustomed to have it, but doing away with it may be worthwhile? Remember what happened when the Roman empire shrank after 525 or so, in the west? Maybe De Valera’s dream is now feasible?

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