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.

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!

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.

“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?

The best comment at the bottom of that article.

Memo to Ireland: the glass isn’t half full. The glass is leaking.

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.

@ anonym

Thanks for that

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

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?

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.

@veronica

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.

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.

@Veronica
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.