I understand the (party) political reasons which are prompting the government to seek a bailout that will be labelled a bailout for our banks, rather than for the State.
But I have a question. Which do people think the man on the Irish equivalent of the Clapham omnibus (the 46A?) is more likely to accept: An IMF-approved austerity programme whose stated aim is to help the State pay back the largely foreign creditors of Irish banks? Or an IMF-approved austerity programme whose stated aim is to make sure that the State is in a position to keep our schools, health care system and social welfare programmes running?
23 replies on “Public acceptance of bailouts”
Kevin.
A very well posited question.
We may not however be offered the State bailout, if the cost of refusal of the bank bailout is the destruction of the euro or other European economies.
Um. The exchequer is financed ’til summer, it’s the markets that are having conniptions over the prospect of some €300B bank debt defaulted on (and investors all turning up at the same credit default insurer’s offices, waving their betting slips).
What baffles me is the apparent u-turn of FF, having been the banks’ bitch for the last 2 years, suddenly growing a pair and declining to act to reduce out insolvent banks’ lending costs.
Perhaps they’ve actually done the math (for a change) and have finally realised that no level of cuts’n’taxes will result in an economy growing enough to pay any of these debts off ever.
Interestingly, the brits have gone sufficiently green around the gills (methinks at the CDO angle) to actually offer to print off a few more bob to cover the uk->ie credit.
Going by the political posturing, I’d say that the bond-hairdressers are not convincingly defeated by the bank-botherers ..
Maybe we get closer to the heart of the 2 trillion euro question : print or default ?
On what basis do you say “the exchequer is financed ’til summer”? The only source I’ve heard that from is Brian Lenihan, and everything he says is completely devoid of all value and meaning. Even if it were true, what happens in the summer?
Borrowing for specific productive purposes is good.
For anything else, it merely increases the cost of the funding problem and stretches it out in time.
This is a measure that will only pay off if some of what is borrowed, in excess of the interest to be actually paid back, is forgiven later. That makes sense as it generates profits for the lending institution now, when it is weakest. Frau Merkel gets to look good too.
When our gov’t decided to support the banks come hell or high water the decision to weaken education, healthcare, welfare, pensions was also decided. The ECB or IMF will not be micromanaging the Irish economy they will be looking at cash flow and whether it is negative or positive. In return for medium term loans our gov’t will then make adjustments to cash flow. No adjustments no loans.
It may be that public acceptability is beside the point – that the point in emphasising the banking side of the debacle is to strengthen the hand of the IMF over the EU in the bail-out.
While I would far rather we had no need for either, IMF looks like a better bet as a bailout partner than the EU, with much less scope for conflicts of interest, with much less interest in kicking our problems out into the future instread of resolving them, and with a much clearer focus on gettng us back on our feet quickly despite what that may mean for creditors getting their money back.
Don’t forget that the men and women on the 46A are the ones who repeatedly voted FF into power, who have repeatedly expressed their deep satisfaction with how things are run. It is elitism and maybe just pure snobbery to assume that we know better – this catastrophe was entirely of our own making and no one can stand outside, occupying a mythical moral high ground.
Listening to the Governor of the Central Bank on MI, his ‘expectation’ – and he was deliberate in his choice of wording – is that there will be a very large loan (a) to provide additional capital for the banks and (b) to finance existing programme commitments. Additionally, he expects that the IMF/EU will confirm that the curent approach to banking recapitalisation and fiscal correction have been broadly correct. The message is : no panic, it’ll be alright on the night.
As for the man or woman on the 46A, apart from the additional humiliation of having to take handouts from the ‘old enemy’ and this turn of events putting a final nail in the coffin of the ‘great country’ celtic tiger hubris, the notion that the bailout is primarily for the banks whilst further misery is simultaneously inflicted on the average citizen via the budget cuts and increased taxes can only add to the waves of bitter rage welling up in their throats. We’re a quiescent and pragmatic lot though, so civil disturbance may remain minimal, even in the wake of a savage budget. Worse, we have no political leaders worth a damn. Revenge will be taken at the ballot box.
@Kevin O’Rourke:
“Which do people think the man on the Irish equivalent of the Clapham omnibus (the 46A?) is more likely to accept ….”
It may not matter. I suspect (admittedly on little evidence) that many citizens would welcome either approach, provided that the IMF (or whoever: anyone other than the current government) revealed exactly how bad things are and stopped bullshitting. The government is wasting its time in constructing elaborate storylines about how it’s saving Europe from an assault on the euro and how its management of the economy was irreproachable with the only problem having been caused by the banks and the currency speculators. Citizens don’t care any more: they want the truth, and they know this shower wouldn’t recognise the truth if they got it on a plate with a side order of chips, a bunch of watercress and a pepper-and-cream sauce.
bjg
@Veronica.
re: Revenge will be taken at the ballot box.??
Donegal poll is still giving Fianna Fail 19%. That will not constitute the kind of revenge many would wish for. It makes one despair of the Irish.
An IMF-approved austerity programme whose stated aim is to help the State pay back the largely foreign creditors of Irish banks? Or an IMF-approved austerity programme whose stated aim is to make sure that the State is in a position to keep our schools, health care system and social welfare programmes running?
Option 2 is bollocks… The IMF dont give a toss about our schools and hospitals, unless they can be leveraged to help recover debt.
They regard the fraud committed by the bank executives and government in much the same way they regard an African despot who wasted loans building palaces. Its vanity, stupidity, most likely its treason but all that matters is you’ve spent the money, how are you going to pay it back?
its not that difficult.
The man on the 46a felt like a loser. He bought a car and now spends hours stuck on the M50.
@ Joseph Ryan
19% for FF in Donegal is a disaster for the party. Imagine what the share would be in Dublin if they can only manage 19% in Donegal. 5% ?
If welfare and wages can be cut 20%, then the ordinary punter will expect the bond holders to take at least a similar “haircut”.
@ Joseph Ryan,
People can only vote for who’s put in front of them and local loyalties etc. influence their choices, as well as such things as individual quality of candidates. Now taking the Donegal line-up, I don’t know any of the people offering themselves but the media impression is that the FF guy is intelligent; the SF candidate is a very sharp and personable young man; the LP candidate may be a fine individual but perhaps not the best suited to a national political platform (not that that’s ever been a deterrent to candidacy in any of our main political parties!) and the FG man would probably make a fine TD. People are entitled to make their choices on their merits. That’s democracy and why secret ballots were invented. It’s plain wrong to patronise or villify the electorate for whatever way they choose to cast their vote. As the late Frank Cluskey once remarked to a journalist who asked him why he hadn’t been relected in Dublin South Central: “Because enough people didn’t vote for me!”
But it’s all a side show and seems to me more of an ego-tripping contest among political parties and their respective leaders than having anything to do with the real issues facing the country. In the order of national priorities, this by-election is small beer.
@seafoid.
Hopefully 5% or less in Dublin. I am hoping for seismic change. That Fianna Fail will go the way of the old Irish parliamentary party. Does it appear that FF voters are going direct to Sinn Fein? Delusions die hard in the “the republican party”.
@Garry – “Option 2 is bollocks”
I thought the IMF might consider privatising them!
Yeahbut, if they are going to
– attempt to stay in office
– attempt to negotiate of funding rate
its option 1
option 2 reminds everyone of their general rather than bank specific cockups. Option 1 gives a discussion point in negotiations.
@ Philip Lane
A few obscenities have made their way onto the comments section of this website over the past few days and this is very unwelcome and unfortunate (as I’m sure you would agree).
Can they be filtered out?
They debase the informative and lively discussions that this website facilitates.
I would have thought the latter.
Though an IMF/EU “bailout” is not necessary to close the deficit gap.
Read some comments in Sweden:
When the Irish have Swedish level of taxation then Sweden might start discussing helping Ireland out.
If the Irish want Irish services to work, the Swedes think the Irish should pay for it. So it might be fair to say that the Swedish public is against a bailout.
@ Joseph Ryan
I am hoping for the same thing. I think it will be very hard for FF to have
any economic credibility in front of the voters for the next decade and beyond.
B. Lenihan is quoted in the Irish Times as follows
“The job of Government is to protect the taxpayer and that is what we have been doing and what we are now doing,”
http://www.irishtimes.com/newspaper/breaking/2010/1118/breaking1.html
And that ultimately is what FF will be judged against.
I have nothing against paying higher taxes but I want something from it. I want Sweden’s healthcare system for one thing. I want schools that aren’t run by superstitious paedophiles (or paedophile enablers). I want proper regulation of banks.
Instead my higher taxes seem to be going to banks. And I wouldn’t even be hugely upset if bank employee compensation (salary and anything else) was capped around €200k. Numerous talks about over-compensation reducing employee effectiveness exist (here’s one: http://www.ted.com/talks/dan_pink_on_motivation.html ) and we need bank employees to do a better job. And since they’re sucking on the public teat then I want them consuming less.
I also want the banks changed so that they’re not too big to fail. That’s how capitalism is supposed to work – if a company does a bad job it loses customers and ceases to trade. If it does a good job it keeps trading. If banks are growing too big to fail than they aren’t governed by the market. So either they should be run by the state as non-profit entities serving the public good or they should be limited in size so that they can fail if they do a bad job. One model or the other. It can’t be make huge profits and enrich investors when times are good and milk the taxpayer when times are bad.
Simpleton,
the men on women on the 46A have never repeadtedly voted for anyone. The route runs through the constituencies of Dun Laoghaire, Dublin south and South east, prior to its recent extension to Dublin Central (which does not count). It is classic swing territory. Since 1973, this territory has favoured FGin ’73, FF in 77, FG in 1981-82, PD in 1987, Lab in 2002, PD& FF in ’97, GP & FF in 2002 & 2007. If it was a stock market investor it would have been long Asia in 1998, up to its goolies in TMT in 2000, short cyclicals in 2003, long China plays now.
These people are classic momentum junkies but boy are they angry now . They fully intend to vote for E Gilmore in the next election. Based on past experience we know how that will end.