Journo Soups Up Article Shock!


The front-page lead in yesterday’s Sunday Independent consisted of a souped-up summary by a journalist of an article I wrote for the same edition. The souped-up version has got some coverage today on Alphaville, Bloomberg etc. Here’s the full version:

64 replies on “Journo Soups Up Article Shock!”

The Sunday Independent. Need we say more. I am sure next week they will blame republicans for it alongside an article slamming Cowen, praising Lenihan, smashing Kenny and Gilmore all juxtaposed alongside some titillating front page foto of a random beauty.

Where else but the Sindo – a paper blog rather than a newspaper.

@ Colm

don’t worry – i only sent out your full article to internal and external counterparts this morning! I thought the full context was more of a “its grim but its what we have to do” kinda tone.

I would add to the reasons that the markets are so nervous. The more we see the government in action, the less faith I have in their economic or fiscal competence.

10 year bonds go above 7%, so what will we talk about? Carpooling!

Being measured though just gets you ignored by almost everybody. Getting it exaggerated by a journalist means it gets attention and you can’t be fingered personally for being unpatriotic, wreckless, unclubbable etc.

Don’t complain too loudly.


“The task of re-capitalising the two main banks — Allied Irish and Bank of Ireland — will be completed shortly, at substantial cost to the taxpayer.”

Do you consider it necessary that we have two “main banks”. We get along okay with one national airline. What is your view on winding down AIB in the same way as Anglo or INBS. As you say it is set to cost us substantially and in light of AIB’s abandonment of its UK sale, we are on the hook for €7bn of further injections into that bank which some believe is insolvent.

Why two “main banks”? And does it matter if a main bank is Santander or a Deutsche Bank?

@Richard Tol

You seem to have an innate dislike of the Green Party and your default option is to attack them whenever you can. Why mention ‘carpooling’ when you could just as easily mention ‘blasphemy law’ or any other number of nonsensical recent government initiatives that are identifiable with FF.

The GP have not been impressive in government in my opinion but I also don’t like to see them being used as easy targets either. You seem to always highlight GP weakness over FF and your constant harping on about John Gormley seems overdone to me.


You advance 5 reasons why the EFSF treatment room should be avoided:

1. A bailout would not be a soft option.

I agree, but it is unlikely the Troika (EC/ECB/IMF) would impose a more severe fiscal adjustment programme than the Commission officials have already indicated and which Commissior Rehn is likely to confirm.

On that count Ireland wouldn’t be any worse off. And having Ireland and its dodgy banks within the EFSF might encourage the EU to confront the dodgy loans and investments buried throughout the EZ banking system.

2. The rate of interest would be expensive.

Yes, but it is unlikely it would exceed the numbers we’re seeing at the moment – and, once set, it would be known. We wouldn’t have to continually run the gauntlet of the bond market every time the NTMA entered.

3. There is a risk of obstrusive intervention in Irish economic policy.

Given the dysfunctionality of much of the public sector (which I expect you observed during your work on An Bord Snip Nua), of the semi-states (which I expect you are now observing in your work with An Bord Strip) and of much of the private sheltered sectors (which depend on the state for much of their revenue) and the burdens these impose on the wealth-generating sectors (and on the most vulnerable in society) – and the inability of the Government (or its likely successor) to tackle this – I think we should welcome some obtrusive intervention. (Richard’s car-pooling reference is apposite.)

4. The low corporate tax regime might go.

As I’ve commented elsewhere, tax competition is fine, but the current regime is being exploited with excessive innovation – and generating little net benefit and not a little reputational damage via, for example, the ‘double Irish’ – to deprive other jurisdictions of legitimate tax revenue. It is over due a review.

5. There would be even more reputational damage.

This is akin to suggesting that a person who has done harm to himself and others will damage his reputation even more if he checks himself in for some secure care. Ireland needs some time and space to recover from this trauma and to repair its political and economic governance. It won’t do this continuously running the gauntlet of the bond market and with a government more intent on preserving the future political viability of the governing factions than on doing what’s right for the country.

@ Jagdip Sing

I am not so sure we get along fine with one national airline. Aer Lingus is a good analogy for the way the rest of the economy has been run. It suffers from union problems and it is limping along running down its reserves its unions still do not want to grasp reality and it too is weighted down with festering pension problems.

AIB and BoI should be forced to merge into one bank since their are many synergies. We already own AIB and 36% of BoI. Since the threshold of loans going into NAMA has been raised from 5 to 20 million how are AIB and BoI properly recapitalised? Surely, this new threshold sees a proportion of the problem loans being left on their books requiring further provisioning for write downs? And, no it does not matter in the slightest whether it is Santander or Deutche Bank or Bank of Canada or the Chinese Agricultural Bank but why would European banks not put their money into Asia rather than a poison dwarf like Ireland?

I am not saying there are not opportunities in Ireland there are especially if you are plugged into NAMA but dealing with the many state and quango’s here is enough to drain the lifeblood from any business. Look at what happened to Airtricity eventually they had to raise the white flag.

Why are you using the taxpayer as a shield to protect the shadow banking sector ?
Is it a delicate Industry to be sheltered and nurtured so that it can reach its full potential of full spectrum dominance.
What great technological leap will we get from this international socialism ?

Not sure about the panic on hos the article was reported. The original; was bead enough;

“The priority is to reduce sharply the projected amount of fresh borrowing for 2011 and hope that the bond market re-entry goes well.”

So, not to reduce the actual amount of fresh borrowing, and then fingers crossed?

But then, Colm, you did give us the deathless “we will eliminate the budget deficit by 2011”. Plus ca change.

Can anyone explain why the government have not insisted on the pay of employees of Bof I AIB, Anglo, EBS etc being reduced in line with the reduction in public service pay. Surely this would make some contribution to the cost of the bailout. It would also be equitable.
Also, is there not a case to say that the pay of all bank employees, particularly those at the top, should be brought into line with equivalent rates in the public service?

Additionally, I expect that the pension funds of these institutions are in trouble and therefore if the government reduce the pensions of former public servants is there not a case for also reducing the pensions of former bank employees?

“If the Budget fails to convince markets of our financial independence the game is truly up”

Does anyone else see a contradiction here?


Why do we assume that anybody will agree to a bailout? Either EU or IMF.

If I were a German citizen, under no circumstances or indeed interest rate would I lend to the Irish government until their salaies and all public sector salaries were significantly below the German ones.

These I believe are the necessary preliminaries to even asking for a bailout.



The current ‘official’ narrative re the IMF/EFSF seems to revolve around the metaphor of a video game with lots of obstacles/monsters to be avoided and that if you fail to successfully deal with each one in turn the EFSF monster gets you and “game over” flashes on the screen, proving the player to be some sort of sad loser (e.g. “the game is up” phrase in the original article). Easy to comprehend but far too simplistic and not one that provides a good match with reality.

We are already in a position where the basic financial parameters of the budget are being wholly dictated by others, and yet will shortly also be subject to the week-by-week assessment of the bond markets. This is a sort of ‘worst of both worlds’ scenario. The head of the EFSF has said that rates would be similar to what Greece is paying, so when the article says that ‘rates would be expensive’ is true, the fact that rates would likely be cheaper than what we would otherwise pay is more true and more relevant.

The bond markets also see that the government has proven itself unwilling and unable to make the significant reforms needed in the public sector and protected private sectors (e.g. Croke Park deal). 2+ years into the crisis the fact that a proposal to end ‘bank time’ to cash non-existent paper checks is being ‘resisted’ shows just how operationally weak and devoid of purpose and vision the government has become, and has failed to move the argument along to the point where real change and reform is being executed.

The conditionality imposed by access to IMF/EFSF funding is more likely to be a force to implement necessary change, rather than micromanagement of the details. At a minimum an analysis of what has/is happening in Greece is needed – at a high level it seems that the changes are ones that needed to happen, and that the external force was needed to overcome internal resistance and weak government.

The corporate tax issue is also one subject to gross oversimplification. The article carefully uses the word ‘regime’ rather than ‘rate’, though many are likely to interpret this as rate. There is no evidence at all that the EU intends to enforce specific corporate tax rates on individual countries. There is plenty of evidence that the EU Commission will propose a CCCTB and that there will be changes in how companies will apportion income and profit to different countries, to be taxed at rates each country chooses. This is also likely to be ‘optional’ but in practice the relationship between countries that opt out (e.g. UK & Ireland) and those that go ahead with a CCCTB is a big grey area right now. The real point here is that this is going to happen anyway, and is not tied to IMF/EFSF intervention. Rules that prevent gross distortions like the ‘double Irish’ and ‘Dutch sandwich’ are likely to occur under pressure from US government and others, but there will be little loss of revenue to the Irish government as a result. It would be no bad thing if low corporate tax rates in Ireland were tied to payroll spend and goods and services purchased by foreign companies benefiting from the low rates.

Overall the hyping up of the scary monster IMF/EFSF metaphor makes it more difficult to discuss about how it could or should be used as a tool to our advantage to help get from A to B. Sadly, efficiently getting from A to B, however, is not a prime political consideration at this time.


Rumour that Prof Krugman (link below) might run for Sinn Fein in Clare, and implement the €7.5 billion stimulus programme. Rumour that Prof Stiglitz getting a taste for the place, and considering running for Labour in South Kerry – access to the Heely-Rae particularity looks like a clincher.

‘So what should we be doing? First, governments should be spending while the private sector won’t, so that debtors can pay down their debts without perpetuating a global slump. Second, governments should be promoting widespread debt relief: reducing obligations to levels the debtors can handle is the fastest way to eliminate that debt overhang.
But the moralizers will have none of it. They denounce deficit spending, declaring that you can’t solve debt problems with more debt. They denounce debt relief, calling it a reward for the undeserving.
And if you point out that their arguments don’t add up, they fly into a rage. Try to explain that when debtors spend less, the economy will be depressed unless somebody else spends more, and they call you a socialist. Try to explain why mortgage relief is better for America than foreclosing on homes that must be sold at a huge loss, and they start ranting like Mr. Santelli. No question about it: the moralizers are filled with a passionate intensity.
And those who should know better lack all conviction.’

Some hand all_in with the bond_market this lot have left us to play with! Toss out the tired textbooks – this place ‘also’ needs productive stimulus to complement pragmatic realism in the ‘how’ of deficit reduction.

@ Jos Ryan,

At last, somebody joins the dots. If the Govt want to restructure the Irish debt burden it must first haircut all other liabilities, salaries, pensions, transfer payments etc. Having got the primary surplus in or close to balance it is in a better position to go to other creditors.

@ Tom Dunne,

all valid points. There will also be significant redundancies in the middle ranks of the banks. Today’s HSE package is a harbiner of things to come.

@David O’Donnell.
re:But the moralizers will have none of it.-re debt relief.

There should be no problem in offering debt relief to a hard pressed homeowner. Offering debt relief to somebody who is well connected and enjoys weekend trips to sunny Morocco is a different matter.
In Ireland, with its clientelist, corrupt political system debt relief would end up being given to those who were well connected.

On the general principle of stimulating the economy, it could be done in Ireland or indeed any country. Simply take more taxes from the better off and redistribute it in the form of workfare on public projects.
The difficulty seems to be that the low taxes agenda of the past 30 years have brainwashed people into believing the increasing taxes is morally wrong!!!.

Sorry. I could also have referred to last night’s “This week in politics” in which three politicians demonstrated their complete lack of understanding of economics.

“At last, somebody joins the dots. ”
I take deception to that.

Oh, and you forgot taxes. Never forget taxes.

You are so right Joseph Ryan re the German taxpayers and our presumption that they will
bail us out . Let us not forget the 2009 speech of former German Ambassador Christian Pauls
re Ireland “junior ministers earn more than the German Chancellor” and that “20 per cent of the
population are public servants”.
The german taxpayer has already had to bail out Hypo Bank to the tune of €210 bn to cover bad assets mainly made up of portfolios from its IFSC based Depfa bank unit. This was fairly under reported in Germany when it happened late last year.
What we are witnessing now is a desperate attempt by a failed state sector to protect its lifestyle from
an IMF and or EU (German) bail out which will insist on a rational wages for our
state sector and a state structure proportionate to our population size . What they dont
get is that no matter how much they cut everything and everyone else the Bond market is not going to lend to them again, because it wont be enough . Look at the figures for education
80% salaries 20% everything else . They will only cut within the 20% . It wont add up to enough
to satisfy either of our ” saviours ”

Colm McCarthy,

You seem to suggest that a Currency Union has a Divine right to exist.

That somehow all of its created debt should be paid.

Allow me differ.

A currency union only exists by the will of those who wish it to exist.

Let us accept for a moment that the purpose of a currency union is, at its birth, the destruction of all previous currency before union.

One cannot disagree with that.

But what is currency. Is it not simply the manner in which we conduct our “economic” selves?

I as Citizen have no doubt of this. You may think other.

You may think that there is a duty to currency.

I think not. I think it just manner.

You may think that there is a duty to the debt created.

You may say that debts must be paid.

That Colm, is a moral position.

Your moral philosophy is your own as is mine.

The only question I have is.

In what “currency” should the “debt” be repaid?

In blood? Is that currency?

In babies thrown from the temple of Aztec priests? Is that currency?

I think you know there be monsters here.

So let us not disagree.

Let us agree that there is a difference between currency and money.

The only way out of this is that the “ECB”, whatever that is, prints money.

If the ECB fails to print “money” it may run out of “currency”.

Here’s a hint Colm.

Why don’t we start with the ECB printing €250,000,000,000 to bail out Germany and France?

They can start with buying NAMA, Anglo and INBS.

Or maybe I’m missing something?

Maybe I’m just another stupid fffukr.

Our sovereignty and reputation were lost back in September 2008. So all that is left to debate is whether it’s our political system or the IMF/EU that are best capable to sorting it out. On balance I’d say the latter.


While you’re thinking about the philosophy of money I offer you some distraction.


I see there’s another souped-up headline in the FT this morning. I really do wish they would stop talking our economy down! All these sensationalist headlines and articles based on little or no facts from irresponsible sections of the media such as the FT etc. etc.

Oh, the article is based on facts. Oh, we are banjaxed then.


hair cutting and taxes did not fit in the same sentence. Spending is 55% of GDP. That is real spending not the makey-uppey 50bn number with 17bn of taxes included in calc. We are already at Scandinavian levels without the services…why? Also we don’t do armies and a lot of us have private pensions.

Taxes are at 38% of GNP-again with the appropriate adjustment.

If the IMF were doing the adjusting it would be 13bn off spending and 2bn on taxes.


Maybe the converse is also true – some economists are politically illiterate. I can see the benefits to the nation of having Noel Dempsey, Dermot Ahern and Mary Harney emerge from the back of a ’98 Nissan Micra on the Six-One news in the run-up to this budget.

@David O’Donnell

“But the moralizers will have none of it. They denounce deficit spending, declaring that you can’t solve debt problems with more debt. They denounce debt relief, calling it a reward for the undeserving. And if you point out that their arguments don’t add up, they fly into a rage.”

Is your suggestion David that we should have an expansionary budget? and when the bond markets shut us out we should refuse to accept the help of the EU/IMF if they demand cuts? and when we run out of euros we should issu our own scrip? and when 70% of the nation are unemployed we should start a coffin-ship building programme?

It must drive you mad that people don’t see the merits of an expansionary budget at this time.


“Why don’t we start with the ECB printing €250,000,000,000 to bail out Germany and France?
They can start with buying NAMA, Anglo and INBS.”

Haven’t the ECB already done this by allowing Irish banks to repay their bondholders and depositors with money deposited by the ECB, and by allowing NAMA bonds to be used for repo to give Irish banks cash to pay their creditors? Did you miss that?

“… the benefits to the nation of having Noel Dempsey, Dermot Ahern and Mary Harney emerge from the back of a ‘98 Nissan Micra …”

With the greatest of respect, let me confess that it is a little difficult to imagine how Noel Dempsey, Dermot Ahern and Mary Harney could get into the back of a ‘98 Nissan Micra before emerging therefrom.


Sure. That would be a nice image. It would cut the budget deficit by approximately 0.00%. Spending cabinet time on such trivia neatly signals to the bond market that our dear leaders are clueless.

Hmm. Let’s think. What would we rather have? Cheaper transport for government ministers? Or lower borrowing costs?

The 10-year rate is 7.186 now.

@Bryan G,

Many thanks for adding so much substance to the case I am making. I think this ‘Monte Carlo or bust’ approach is dangerous. We can reduce the probability of the ‘bust’ outcome, but, irrespective of what the Government or the EC/ECB will do, bond investors will make their own assessment.

What we can do – and should do – is to tackle the gross inefficiencies and deadweight costs in various sectors that are damaging, and will damage, the economy’s resilience to adapt to the necessary fiscal adjustment. As you note, the EC has set the fiscal parameters; the ECB will continue to shore up the domestic banking system. For the foreseeable future this will remain unchanged – EFSF or no EFSF. Despite being labelled Irish Economy, I sometimes despair of the excessive focus on this blog on fiscal and banking matters and on potentially irrelevant policy initiatives.

If one wants to see an indication of the sectors whose inefficiencies are gumming up the economy it’s worth while having a look at the CPI Detailed Sub-indices and examining the changes by item and category since Sep. 2008. It might take a bit of effort, but it’s enlightening.,+Detailed+Sub+Indices+and+Statistic&path=../Database/Eirestat

(When looking at the breakdown of energy price movements it is interesting, despite the incidence of non-fuel costs in the electricity and gas supply chains, to look at the movements in oil prices compared to those for electricity and gas.)

Prices that do not respond to changes in demand and cost conditions exhibit evidence of the abuse of market power, inadequate competition or ineffective regulation – or some mix of all three.

In addition, looking at Eurostat data we can see that Finland and Luxembourg (within the EZ) and Norway, Switzerland and Denmark (outside the EZ) have been able to organise their economies to cope with price levels well above the EZ average. All the others within the EZ are close to the average for the EZ – except Ireland’s (which remains almost 20% above the EZ average).

That’s where the focus should be and what the IMF would go after. Can you expect a Government, hanging on by its fingernails, to go after these influential price gougers?

@Richard T & Tim M,

I don’t think it’s a question of economically illiterate politicians or politically illiterate economists. I don’t want to see a Dail filled with economists – Platonic philosopher-kings? or, as Dr. Ed Walsh would have it – philosopher tycoons.

I would like to see the Dail filled with TDs representing the mix of society with a background in the widest range of skills, trades, professions and interests and being able to demand that policy initiatives are supported by evidence, that counter-arguments (and subsequent rebuttals) are presented and then being able to make decisions on the basis of the evidence presented – free from the tyranny of the whips.

This is what democracy is about – and it’s what we’ve lost.

@ Joseph Ryan

“The difficulty seems to be that the low taxes agenda of the past 30 years have brainwashed people into believing the increasing taxes is morally wrong!!!.”

The ideology failed. The heads haven’t yet got around to understanding that the game has changed and the ideological framework is no longer appropriate. It’s the same in the UK with the central london housing crisis. Spend 30 years in a thatcherite experiment running down investment in social housing . It’s not rocket science that there are now no homes for the urban poor.

@ Joseph/Seafoid

no problem with increased taxes, provided they are spent well and on useful projects. You want to build a metro (reasonably costed and justified)? Fine, tax me. You want to create a job creation and training organisation? Fine, but try not to make it corrupt and unccountable like Fas ok? Want to build some world class hospitals? Absolutely, but please sort out the insane bureaucracy and pay levels that we currently see in the HSE! People in the private sector wont agree to tax hikes unless they know its not just gonna be pished down the drain again.


You miss-read me! We have but one game of cards to play – deficit reduction it is – how much, how long, and most importantly HOW. On its own, imho, and the ‘unimaginative how’ that I expect, and the forces whistling around the periphery of the EZ (have we reached 8 yet?) – we are already headed for EFSF – which nobody wants, least of all ECB. So we need to imaginatively strengthen our hand (p1ss poor an all as it is) on the stimulus side – we are not without resources at the mo [44 billion if for a little while; now if we could only do a 50 billion deal with China for the next five years] – so it makes sense to slap a skelp of this on the table to give a potential boost to productive activity …[whadda we got to lose?].. question is do we have the imagination to come up with it?_and the balls to implement it?_whatever it is.

For example, we need something on the scale, if possibly not content, of the following: In California today they vote on legalising Mary_Joanna – we should get in first: The Minister announces it today in the Dail; must prepare for the rundown of CAP etc The finest Greenest most ecofriendly site on the planet ….. all land to be taxed at 10% of the price of an acre of prime Irish Mary_Jo [TM] – those who do not produce will be forced to sell thus opening up the land market in Ireland; Mary-Jo to be taxed at 20% and all transactions overseas to be conducted via the Revenue’s online ordering system which automatically calculates VAT for each country of destination, validates any medical notation, and reimburses each month to the relevant authority overseas. The country goes on a three day week – where did 5 get its validity? Tourists flock in to witness the miracle and to smoke in pubs(cigarettes remain banned), Irish agricultural produce acquires a distinct flavour and global market (the neu limerick smoked ham is apparently divine), we are praised at the United Nations for bringing sense to all the nonsense, and OH – the bondmarkets will be absolutely thrilled …. just a thought.


“Haven’t the ECB already done this”

No they haven’t.

What they have done is a bookkeeping entry.

They have transferred debt/money created by banks to the Citizen.

I say Citizen and not Sovereign because it is by the effort of the Citizen, paid for from the existing money supply, that the insolvent banks are made whole.

Some may think that acceptable.

I do not.

So, either print money to bail out Germany and France or wipe out the bondholders.

Is there a reason why the debate on stimulus doesn’t include the option of utilising the national pension reserve fund? If a stimulus is required, but we can’t raise the money on the bond markets, a cash reserve that we have now could be used to get the economy back on track, and then we can pay back into it once the deficit is reduced.

Let’s just default and get this over with. The sooner the better at this point.

Our leadership is incompetent and corrupt. Our institutions, public and private, are pathologically inept and/or obsequious. This country has show itself incapable of running its own affairs, and is going to eventually default if left to its own devices. So let’s just get it over with.

Hopefully upon defaulting we will get some competent people from Europe to manage the country—preferably from Germany. People who will make the necessary decisions. I think that is the best option for Ireland at this point. We can’t go on like this anymore.


Let’s make it a 2003 Toyota Corolla then with a mismatched side panel after a 2008 crash.


Maybe your 0.00% calculation leaves out the second order effects of a coefficient of leadership. The bond markets are not the immediate issue now anyway as that horse has bolted for the next while and quoting 7+ figures is irrelevant. The focus is firmly on the politics of the next budget and all round fair haircuts will be the order of the day. The aforesaid politicians stepping out of the aforesaid car to make an announcement that they are to take up Fintan O’Toole’s suggestion of a new €100k salary would do wonders for acceptance within the wider population for the inevitable budgetary axe.

@Paul Hunt
I agree with all you said about truly representative and evidence-based politicians and that is the long-term hope when we come out the other side of this current situation. While energy prices are an issue to be dealt with, they are not the main issue. This is rents and mortgages in my book.

Politicians now play to two audiences: the Irish electorate and international financers. It is impossible to keep both happy.

I would think, though, that the average Irish voter knows that abolishing ministerial cars would not quite save 15 billion euro. It is rather poor populism.

Effective populism would be to put some bankers and regulators behind bars.

The point on taxes is to continue your theme. There are plenty of pips to squeeze both on the spending side and the tax side before we could reasonably look to play the ‘get out of debt free’ card. “Like spending cuts, dislike taxes” isn’t going to wash any more than “Like taxes, dislike spending cuts” or the FF fave “Dislike anything that makes us more unpopular”.


“It is impossible to keep both happy.”

I disagree. As Ciaran O’Hagan frequently points out, taxpayers and bond investors are on the same side.

The Government has consitutional legitimacy, but it’s popular legitimacy has long evaporated. Tactically it has opted for ‘Monte Carlo or bust’, but is seeking to shore up its support – or to do least damage to its support – in specific constituencies. Given the short-term objective it has set itself – ensuring the NTMA can re-enter the market – it would give itself (and the country) a far better chance of success if it were to seize emergency economic powers, reduce every price and fee within its control by, say, 15%, encourage Colm and his colleagues to finish up their state asset report, restructure and privatise the semi-states, resource and empower the Competition Authority to track down the price-gougers (with 10% fines on turnover – similar to DG COMP – for the offenders), restructure, regulate and privatise the water industry, re-design the Croke Park deal, reduce welfare payments and the minimum wage to match the increase in real purchasing power driven by the price reductions and impose a property tax.

The insiders and vested interests would squeal, but senisble voters would approve – and see the benefits (as would the bond investors).

Your politics and economics will be proven wrong Colm.

The only public economist who is making any sense at the moment is the one person who has worked in financial markets;

“The spin – written by people who have never worked a day in the financial markets – was that the markets would be impressed by our government’s toughness. But, of course, the opposite happened. The financial markets took one look at the budget plan and concluded that it would push the Irish economy over the edge”

Minister for Finance Brian Lenihan said the report showed that Nama is functioning well, with transparency and sound governance. So no need to post any further comments on NAMA report – move along, nothing to see here etc.

Still don’t see why they set the returns on their National Solidarity bond at a rate which makes them less attractive than bank deposits. Surely an untapped source of funds in there – especially when the rates are now at 7.3%

If that’s your attitude, why not just say let them sink and burn the depositors. Then we wouldn’t have to have a solidarity bond.

There was always an adequate deposit insurance scheme – but in the case of Anglo I suspect I would have little sympathy with those particular depositors, as they were unlikley to represent the man in the street.

The laws of arithmetic will ensure that some sort of restructuring and external intervention will occur. Entering into the Croke Park agreement and promising no compulsory redundancies and no pay cuts till 2014 must be viewed by the bond markets as totally insane. Not good to have insane people at the tiller.

Anyway time for the insiders to get out their Langenscheidts and prepare to meet their new masters. They may find that some phrases (e.g. “we demand our bank time or else”) don’t translate very well into German…

@Bryan G,

I agree that the way things are going some sort of restructuring and external intervention seems inevitable. That’s why I contested some of the assertions in Colm McCarthy’s piece in the Sindo. It is not enough to focus on fiscal adjustment; it is vitally necessary, but, in my view, it is simply not sufficient to convince sceptical bond investors.

The EC is setting the parameters for the programme of fiscal adjustment that the Government is seeking to implement; the ECB is continuing to shore up the domestic banking system. That’s two out of three, but the third one is crucial. To have any chance of staying formally outside of the EFSF, the Government would need to start implementing, at the same time, the kind of microeconomic structural reforms that the IMF would recommend were it to be involved. I have outlined some of these in my previous comment in response to an assertion by Richard Tol.

The failure to pursue the reforms that are required to facilitate recovery of the economy in response to severe fiscal adjustment is a serious deficiency – and risks ending up with the outcome the Government is desperate to avoid, but what is even more serious is the lack of democratic legitimacy and the medium-term commitment to a programme of governance. This, perhaps, is spooking bond investors even more. And what is even worse, Ireland is being used by some bond market players as a battering ram to test the EU’s resolve.

Voters are being expected to accept a programme of severe fiscal adjustment the composition of which is being decided by an administration which is a mutation of the previous administrations that oversawand facilitated this debacle – and which is constitutionally prohibited from seeing this programme through. The Government might have some vestige of credibility – and chance of success – if it were to accompany this with a thorough-going programme of structural reform. But it isn’t.

There are three options:
1. Accompany the programme of fiscal adjustment with deep-seated structural reforms;
2. Call an immediate general election and let the people decide;
3. Plead for mercy from the EU.

The Government seems determined to avoid all three; after hubris comes nemesis.


I completely agree with this analysis. There is no hope with the current government – at this point it is just sad and pathetic – a couple of deals with the likes of Lowry and Healy-Rae to keep the show on the road a few weeks longer. FF/Greens are like the last drinkers in the pub who just won’t leave despite all the barmen loudly shouting “Time, gentlemen, please”.

The markets can hardly be inspired by what will replace them. No doubt their expectation is that after hubris will come janus – one head gazing to the right and the other to the left. Merkel will play a great nemesis. 7.44 seems about right for now.

@Bryan G,

It seems we have formed a ‘Club of 2’. What puzzles me is that the analysis and options we have outlined on this thread – and which, I think, should be emerging as self-evident to most sentient beings – are not being communicated by the opinion-formers in the economic sphere – many of whom contribute to this board.

It may be that influence is being exterted behind the scenes as Richard Tol pointed out on another thread in relation to the ESRI’s concerns about fiscal, banking and property market issues in the run-up to the bust:

“we were, however, aware of some of the risks and constantly warned the relevant people — most of that was in private and, in public, in coded language.”

So it may be that one line is being spun for the masses and another is being inserted in the shell-like of the powers that be. It is measure of the extreme and baleful executive dominance being exercised by government – and the restrictions that the libel laws impose on freedom of expression – that it is impossible to have open and frank debate about key economic policy and regulatory issues and for legislators to make decisions based on thoroughly tested evidence.

These are major contributors to the mess we’re in.

From that item:
“The cost of insuring Irish sovereign debt against default rose to an all-time high yesterday as credit default swaps on AIB’s subordinated debt signalled a 63 per cent probability of default within five years.”

Anybody know who owns this stuff and how much of it is there – and how much belongs to the the lenders and how much is “naked”?


I can think of a number or reasons for these yields, but I suspect none coincides with yours.

There seems to be this idea that the bond market has a single mind, but it is made up of numerous participants, all with their own perceptions and assessments. For example, some may doubt the ability of the government to implement the programme of fiscal adjustment and are pricing in a default; others, who may have looked more closely, fear that the adjustments will kill the economy if the deep-seated inefficiencies and deadweight costs are not stripped out; still more may be beginning to price risk more accurately (it would have been better if some had priced risk more accurately before they flung money at the Greeks and Irish banks, but better late than never); others may be pricing in the future debt restructuring which Chancellor Merkel seems keen on and also using Iish sovs to test the EU’s resolve; and there may be some doing a bit of shorting.


The opinion-formers are largely restricting themselves to CFO-style discussions of financial parameters and constraints. This is necessary, but not sufficient. They do not seem interested in discussing the public service restructuring and reform needed in any detail, or of bringing attention to nonsensical government policies of action or inaction as the case may be. I would say this is driven by the issues of conflict of interest and incentive (specifically lack thereof). Artificially limiting public pronouncements to the purely financial sphere, and not tackling specific department/semi-state practices, policies and inefficiencies as being part of the problem, is a much softer option than saying what needs to be said. Maybe it gets said in private, but there does appear to be a good deal of self-censorship going on.

I think there is also a general tolerance of mediocrity in leadership and operational effectiveness because a government of solicitors and teachers, and a big portion of the commentariat of journalists, academics and ex-politicians have never experienced anything else – i.e. they have not worked in large successful private companies and have not seen how complex problems are tackled in that environment, how to deal with strong external challenges (e.g. competition), how to implement organizational change, how to put in place incentive schemes that align everyone’s interest, and to understand from experience what approaches worked and what approaches failed. The involvement of people that have grown companies and created value and jobs is largely missing from government policy creation, public administration operations, and mainstream media commentary, and this is a big loss.

@Bryan G,

Agree completely, but I’m afraid our agreeing won’t move things on one jot. Meanwhile those who enjoy some measure of power, profits and prestige are straining every sinew to retain them while the economy goes to hell in a handbasket.

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