More on Ireland from the FT

There is a long analysis piece by David Gardner and John Murray Brown: you can read it here.

Wolfgang Munchau is gloomy about Ireland in this article.

29 replies on “More on Ireland from the FT”

“The fundamental problem with the Irish government’s approach was the decision to dump almost the entire adjustment burden on to the taxpayer, rather than to accept or negotiate a partial default.” And… “Brian Lenihan, the Irish finance minister, might wish to ponder whether his monumentally unfair taxpayer bail-out is what will ultimately “bring down Ireland”.

The EU and Mr. Rehn ipso facto cobbling together legislation long after the stability and growth pact was reduced to aspirational montage, shows that he too is in denial mode.

Ireland can easily end up being the catalyst for the denouement of the Eurozone. It appears he wants to gamble by trying to turn collective responsibility for failure, into Irish tax payer responsibility. The buck has to stop in Brussels, Berlin and Paris too as they are the design engineers and when the black box is examined it is to their door the blame will come, just as much as our own.

There was systemic regulatory failure in Ireland but there was systemic design failure built into the non functioning arrangements of the EZ and it is disingenuous to expect Irelands tax payers to face the firing squad alone. Rather, than letting Greece become Ireland and Ireland become Portugal etc. they need to get ahead of the game. It is cowardly and stupid to set up emergency funding and then hope against reality that it will not be used.

If you google a particular FT article by its title, it comes up without the paywall…
Title: “Ireland’s taxpayers have shouldered too much”

Munchau pretends not to understand why governments do not allow defaults but dump them on taxpayers! Huh!

No need to ask me, I have said it often enough what is going on. The McWilliams article shows that we who espoused dumping the banks were correct in several aspects.

Control of books and records is so important now. People may not accept a billion euro enquiry into the matter. Without consequences for the guilty. So evidence may disappear. Maybe an airliner can fly into Anglo HQ? Worked for insider traders in the USA! WTC 7 was the SEC investigation Branch…. It mislaid the “airliner” destined for it. But still fell into its own footprint.

Nothing new in the articles, except that it is now in print that the Irish Government made mistake after mistake. Things are getting worse, as predicted.

Somehow, having FT or any MSM rag recognize the quandry may validate it, for TPTB, but I doubt it. They need to get rid of those books and records, pronto. Lots of transfers of an irregular nature. After all CJH had a make believe bank, but Bertie had a real one: Anglo-Irish!

All the leaks from the EZ are to pummel the euro.

It will work, but the apparent pressure on Ireland is overdone. When it suits them, this will reduce, but in fact the situation will not have gotten any better at all.

I see the emigration workshops are well attended. Anyone over 45 has no place in the economy unmless they are well placed already. They cannot enter Australia directly, but the back door is via New Zealand. NZ population is not increasing. Their citizens may enter and work in Australia freely. They are our biggest country of origin.

The disease was the boom and over easy credit. Whatever the government does now, will merely get in the way of resolution, NAMA and Anglo being examples. Governments lie about their abilities and get away with it in a boom but in deflationary times, confidence means that they withdraw from “management” of the economy altogether. Less social welfare etc etc. The Tea party movement is part of this idea.

Decades of loss and poor confidence await those idiots who hope this is merely a recession. Given the prognosis, I fail to see the point in continuing to be the messenger.

Wolfgang Münchau writes: In the case of Ireland, where the crisis is one of the biggest ever recorded, a real worst-case scenario would include stagnation for up to a decade, mass emigration, further falls in house prices, a significant fall in tax revenues, more austerity in response, and the further banking problems that would result from such a toxic mix. I am not predicting this scenario, but it is at least as plausible as Dublin’s naively optimistic V-shape-recovery assumptions.

I didn’t buy in to the cheerleading of ‘green shoots’ in the spring of 2009 as a harbinger of a V-shaped recovery in the developed world or Ireland.

However, we have to be cautious about some of the scary scenarios as few in business would bother to invest if we face a decade of stagnation.

That may happen of course if the well–off on the left and right continue to resist reform.

Stagnation for a professional couple earning €300 to €500k may not seem very scary after all.

@ Pat Donnelly

No need to ask me, I have said it often enough what is going on. The McWilliams article shows that we who espoused dumping the banks were correct in several aspects.

As I’ve said elsewhere, the decision to guarantee bank debt in the September 2008 State guarantee was a disastrous one; it was 13 months after the ECB had introduced emergency funding measures for Eurozone banks.

It’s not clear if the people making this decision on Sept 29, 2008, considered its implications.

Insolvent banks like Anglo and INBS were recapitalised when absent the guarantee, most of the debt could have been cut in an examinership type process; it also closed off options for the rest of the banks.

Decades of loss and poor confidence await those idiots who hope this is merely a recession. Given the prognosis, I fail to see the point in continuing to be the messenger.

Exuberance is always followed by over-pessimism.

We should be cautious about the shroud-waving. I don’t believe in Herbert Hoover style messages of confidence but those facing into their second or third year of unemployment, shouldn’t be left with the impression that they have just a grim choice between bleak options.

Made a mess of that last paragraph above should have read…

Rather, than letting Ireland become Greece and Portugal become Ireland. I am referring to the order in which countries are going to have to get in the queue for emergency funding. The EU needs to get ahead of the game. It is cowardly and stupid to set up emergency funding and then hope against reality that it will not be used.

“This is something that can be managed out, and there’s a political elite determined to manage it,”

I know central bankers are required to be gnomic, but what is the Governor driving at here?

This line really jumps out for me from the Wolfgang Munchau article:

The EFSF will offer finance when others do not. It will be useful WHEN markets seize up.

p.s. Can someone explain how I can get itallics on a comment?

Don’t think that Muchau is gloomy, more realistic and angry (as we should all be) at the the “no bondholder left behind strategy”. Poorer public services and condemning a generation to debt servitude to pay for the gambling bills of megalomaniac bankers. Not a good deal.

Munchau’s concern for the Irish taxpayer is touching. It seems as if there’s been stream of like-minded opinion in the international media in recent weeks advising Ireland to engage in a default experiment of one kind or another and implying that the Irish authorities, including the Minister for Finance and the Governor of the Central Bank, are a bunch of risk averse lily-livered wusses because they don’t go along with this default idea and thus obviously don’t give a hoot about inflicting pain on their own taxpayers. Of course such commentators are accountable to no-one except their editors, and their bosses in turn. The current Minister of Finance, and whoever succeeds him in that role, his advisors and government and parliamentary colleagues are accountable and have a strong vested interest in doing what is in the best interests of this country – and its taxpayers – in the long run. I may not like them;I may not agree with everything they’re doing; I may think they’ve made a few cock=ups along the way of trying to get out of this mess. But when it comes down to it, I reckon I’ll stick with their view on the default game.

(Celtic Phoenix: (several) HTML tags work here. Use <i> for titles, foreign words et al; but use <em> for emphasis!)

@Veronica +1

Other threads have identified that the max that can be got from legislating against Anglo subbies and unguaranteed seniors is in low single figure billions. Okay there was a time when I thought 3bn was a lot of money but nowadays, with a budget deficit of 19bn per annum, it seems small beer.

Maybe we could have acted sooner and got a bit more out of seniors but we are where we are and foreign correspondents suggesting that the government is putting the interests of international bondholders above that of Irish taxpayers is unfair and disingenuous.

Gardner & Brown

Patrick Honohan, governor of the central bank, is clear that it can. “This is something that can be managed out, and there’s a political elite determined to manage it,” he says.

Pity Honohan didn’t elaborate more. It’s a telling comment. Bank bail-out to proceed irrespective of the wishes and anxieties of the citizens. At times, the government reacts as if the citizens were truculent employees; too stupid to divine the cunning behind the ostensible national bankruptcy plan. Indeed, only an elite could have continued with the current destructive policies, beginning with the terrible armour-clad guarantee. In Ireland no amount of evidence can trump a government policy once adopted. And, by the way, one of the key drivers of Smart Economy success is flexibility – by the citizens, but not their government. If one took time to pair Smart Economy exhortations against government practices, what would result? Farce.

@ Veronica
Or maybe its just that Muenchau knows more about the financial markets than a minister with zero training in the field.

I don’t think Brian Lenihan is malicious in what he is doing. I just think he is way out of his depth, he can’t accept he made a mistake two years ago, and he refuses to heed the advice of economists who know better than him (instead referring to the consensus the he is wrong as a ‘cosy cartel’).

@ Brian Woods
€3bn is still a lot of money. It makes me think of the end of Brewsters Millions when the accountant is annoyed that Brewster would blow what is to most people a years salary.


Thanks, I’m having great fun with the emphasis. Maybe this site should accept LaTex scripts 🙂


That is touching. But how big an economic and financial mess would have convinced you that the present government and its departmental support was way out of its depth?

In reference to the Honohan remark, I must say I’m surprised to find our current govt referred to as a “political elite”.

There I was, labouring under the impression that the politicians in Ireland were a pack of total ****ers and instead I find that the head of our Central Bank regards them as an elite.

If they’re the elite, who are the political dregs? For heaven’s sake, who?

@Hugh Sheehy,

I’m pleased that someone else has latched on to this strange assertion. Of course we need to be careful as the Governor may have been quoted out of context or misquoted. But my reading is that the ‘political elite’ to which he refers is the higher levels of the ‘permanent government’ (acting as ventriloquists for whichever set of politicians occupy ministerial positions) and the top ranks of the European Commission, the ECB and the ‘permanent government’ in the major EZ economies (acting in a similar capacity for their, temporary, politcial masters).

We need to remember that the latter (or the politcial and institutional EU as I describe them) is probably even more keen to keep Ireland out of the arms of the EFSF and away from the tender mercies of the IMF than is the former.

Rory & Gekko,

I’m sorry, but I find this ‘out of his depth’ cut cheap and overused when it comes to the current Minister for Finance. I think I’d be with most of the country ( as per the latest IT opinion poll) that views his likely replacements in that office with more than a little trepidation and I’m neither a member nor a supporter of his party, whom I would dearly like to see out of government. But such are the conundrums of the times we are living in.

In my understanding of democracy, we don’t leave the management of our affairs to the ‘experts’ in any particular field . Experts contribute options and analysis that inform policy decisions. Politicians do not have to be experts in their own right. Their decisions are guided by expert opinion but there are a whole range of factors – such as public acceptability and the broader public interest – that they must take into account and that may not be in accord with what might otherwise appear to be the best technical solution to a particular problem. It may be helpful sometimes if politicians have some professional expertise. Then again, an overweening regard for their own professional expertise in a particular area may be very unhelpful, since they are unlikely to listen to expert advice if they happen to think they know it all already. Experts usually make for lousy politicians.

As well as personal integrity and the courage to do the right thing rather than what is likely to make them popular with vocal interest groups and even ‘the experts’, politicians also need to have the intellectual capacity to get on top of their brief.

Yes there is a political elite trying to guess there way out. They have spent the last two years trying to guess their way out and the guesses are not getting any better.


your viewpoint is refreshing to read and I find myself agreeing with some of it. fair play for speaking up with an opinion that is contrary to much of the consensus on this blog. if nothing else it is good to hear another take on things.

@ Veronica

At least his likely replacements will be able to understand the advice they are given.

No, the minister doesn’t need to be an expert (and I consider the role closer to an accountant than an economist anyway), but 2 years, 3 budgets, and €50bn later he hasn’t shown himself to be a gifted amateur.

I think Brian Lenihan is on top of his brief at this point – however is brief is largely to act as country manager for Ireland Inc. with all the main decisions and parameter setting for the solution done back at company HQ in Brussels. The two Brians were not on top of their briefs when it really mattered (2007 and 2008 ) since they pushed strong pro-cyclical policies and then took sweeping decisions at a crisis point that were unnecessarily broad and that severely limited the options available in the future. At this point it is door/horse/bolted etc.

Since Sept 2008 things seem to have gone in slow-motion, with an ever worsening stream of bad news drip fed to the country. The fact that a crisis point was allowed to build up at the end of Sept 2010, full 2 years later, is testament to poor management skills. It is common enough in the corporate world for a manager to let things slide and then take highly visible actions at a crisis point, and to be seen as a ‘hero’. However the good managers never let the crisis hit in the first place. It should have been possible to put realistic expected and worse-case costs on the bail-outs by mid-2009 or so, take the hit then, and move forward after that. The expiration point of the 2-year guarantee was known, well, for 2 years, yet important decisions were left unmade and there was an information vacuum right up until a few hours before the deadline – a classic sign of not being in control of the situation.

Nothing has really changed over the last few months – the stones were thrown into the water long ago and the ripples are coming ashore over time – the fact that there is any surprise about these ripples hitting the shore or their size reflects very poorly on those managing the situation.

While I can understand the perception that Lenihan has been a better MoF than most others might have been, I’m strongly inclined to believe that he’s a beneficiary of the proven phenomenon where people trust assertively and confidently delivered bad advice from someone with a history of giving bad advice in preference to hesitantly delivered good advice from someone with a history of giving good advice.

Lenihan comes across (also to me) as honest, intelligent and not obviously venial. Unfortunately, his results have not been good. I have a bias to believe the empirical evidence of bad performance over my superficial impressions of pleasantness.

As for the rest of them, did anyone else find the spectacle of one of our less impressive ministers decrying the hiring of “unqualified people” into teaching positions to be a supremely ironic moment?

Again, if this lot is a political elite, who on earth are the tyros? Now I appreciate that FF is a really slick patronage and electoral organisation, but the job of a govt is to run the country properly.

@ Bryan G

We progress and mature by fault, and hopefully Lenihan has learned from his experience.

Unfortunately this must be the most expensive finance course in history 🙁

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