The FT on the crisis

The FT has a very forthright editorial here.

114 replies on “The FT on the crisis”

Forthright it is.

Europe hasn’t really addressed or figured out this question yet. Meanwhile, due to abysmally poor positioning, we are getting a sense of what it must feel like to live life within the confines of an experimental glass jar – while others adjust the environmental conditions based on often dubious notions of what makes the beings in the glass jar tick.

Kevin: I had come on to the site to link to the exact same article.

I think this sentence

“ECB annoyance at lending in the last resort – that is to say, at doing its job – has played a part in the eurozone’s ganging up on Dublin.”

is likely to reverberate around Europe for the next few days.

Another, and will not be the last, sacrifice to “trickle down economics”.

As for the rest, it is either feigned or real incompetence, driving down the Euro. Economic warfare has real consequences. For those who did not realize it was a war, it must be very confusing, generating powerful emotions with no intellectual restraint or target, other than those close to hand.

Bet the FT never goes there!

I think it’s up for discussion whether continued ECB lending to Irish banks meets the LOLR principle of lending freely against good collateral but at punitive rates.

Meredity Whitney seems to know something about the European banks that is being glossed over with pretend testing. She “would not invest in the European Banks in a million years”. This is not exclusively and Irish problem though we have been exemplary in the race to insolvency and Lehihan’s solution has, as we all know, squandered our sovereignty. Why did the government not bring this lady in to knock heads together instead of listening to Alan Ahern?

She peaks about the European banks at 3.55 seconds!

Doesn’t this issue lead right back to the fateful Sept 29, 2008 meeting in Government Buildings when all the principal parties there had a self-interest to protect; some wealth — others reputation.?

There was also likely a shock factor and what a difference an input from someone with the contrarian view of Morgan Kelly could have had or an outsider like Matthew Elderfield.

After 2 years of state protection of bank debtors (Denmark was the only other country that guaranteed bank debts), there isn’t likely the energy or stomach among Irish ministers for a fight on restructuring.

So much could have been done in the first few months after the collapse of Lehman Brothers when the financial world was in turmoil.

Now, the ECB would fear that giving way on restructuring, there would be a big problem if they had to consider Spain, before the recovery becomes entrenched.

Of course hurlers on the ditch can advocate burning bondholders and hide in the bushes when it’s not a cost-free choice.

Angela Merkel was criticised in recent times for dare asking about the interest of taxpayers.

Political leaders (including the Opposition) should push for a restructuring even though it may only be a marker for the future.

Greece will be in a stronger position to agree a restructuring when its public finances are reset and the Eurozone’s recovery is more entrenched ditto for Ireland.

After a restructuring, we would continue to pay a high premium for our debt.

The true state of the Irish banks should have been ascertained by Dec 2008 — not relying on consultants like PwC asking questions. It took 2 years to get to that point.

We missed the boat and now it looks like we are on the slow boat to China.

The New York Times says in an editorial today: “While a financial rescue for Ireland could help calm European financial turmoil, the reprieve, at best, will be only temporary unless it addresses the core of Ireland’s financial woes: the need to reduce the burden of debt it took over from its banks.”

We Irish, having become accustomed to slightly disguised hostility in the British media should be able to analyse anything that comes out of the Telegraph, FT and Economist with a jaundiced eye. What has changed with the downturn in the Britsh economy this time round is we are now in good company in that all members of the Euro zone are getting the Irish treatment. For a more balanced and accurate view I would look to publications in Europe proper. A lot of US comment is simply copied from British publications but there are many US economists capable of doing their own analysis.

@Mickey Hickey

I’ve read a fair bit of the Tele, FT and Economist over the years, and I’ve marked plenty of disguised and undisguised hostility towards us from time to time. (Wow, the Economist used to be a real shower.) But I can’t discern any ill will towards us in this editorial. It also seems basically fair and accurate – too generous in places – and there isn’t even the usual anti-euro drone. Some of the German coverage is a good deal more peppery and ill-informed. It also goes without saying that if you never want to read a hard word about yourself from abroad, you should avoid cratering your financial system while carrying billions of euros of foreigners’ pension savings. But it surely does help that most people know they’re not really that far behind us.

@ Mickey Hickey

“We Irish, having become accustomed to slightly disguised hostility in the British media should be able to analyse anything that comes out of the Telegraph, FT and Economist with a jaundiced eye.”

This sort of chippy prejudice was one of the driving forces that got us into the Euro in the first place.

Financial decisions are better the less emotion is involved in making them.

@Mickey Hickey, anonym

That anti-Irish tone in the Economist was coming from Ruth Dudley Edwards who is an Irish Unionist.

Mary Ellen Synon also wrote for the Economist at one stage — she who mistook for a bomb a package posted to her at her own request during the furore over a Sunday Independent article of hers where she chose the Special Olympics as the appropriate moment to declare to the world that not all lives are equal.

While Dudley Edwards is a typically cranky Mail journo, she has solid academic qualifications. Why anyone would recuit a third rate ideologue like Synon on the other hand is beyond me.

Media keep using the word bailout giving the impression that we’re getting something for free and that these IMF/EU lads have only our best interests at heart. Very annoying.

In case you didnt hear him: The Guv’nor…


The Telegraph’s views of ireland are not the product of a single journalist, rather it is a traditional stance over a much longer period.

But that is merely a distraction in the current climate. We have bigger worries than some petty newspaper in London.

So : we are getting a loan (or are we? sounds like we may be getting some sort of europromissory notes? ) for Xb at 5%. So….this comes to the state (us). Then they give it to the banks, nationalising them. Which we could have done in 2009 but enough of that.
Now: who pays the interest? The banks? Hardly able to do so. Us? See above. Devil, meet Mr Detail

ECB as lender of last resort? Here’s an exchange from a press conference with the ECB President in April 2010 when the Greece crisis was taking off

Press: I think that the mystery behind this whole IMF debate is that Europe has one weak point, namely it has no lender of last resort. I would like your comments on whether you believe that Europe can do without such a lender of last resort in the future because the governments also say they are not lenders of last resort. So who will be responsible in the end?

Jean-Claude Trichet: As regards the lender of last resort function, I am not sure I follow you, because we have a central bank in the euro area, which is the ECB, as the captain of the team, and the members of the team. And together we have all the functions, and we are fulfilling all the functions of a central bank in any other economy. In any case it is a very vast economy. So I do not see your point.

So why is “the captain of the team” not “fulfilling all the functions ofa central bank in any other economy”?

We can’t devalue or print our way out of a mess thanks to the Euro. But we do have a gigantic European Central Bank to at least help with liquidity. Isn’t it time to see the advantage of being in the Euro?

@Adrian Kelleher:
Ruth Dudley Edwards may have solid academic qualifications: the trouble is that they are in History, not Economics or Finance.

The problem with the Torygraph is that they are utterly phobic about the Euro, and anything they say about Ireland has to be viewed through that particualr lens.

@Brian Lucey

Suppose we decide AIB is insolvent and close it down, even burning the ECB. But suppose TSB and the Credit Unions are fundamentally solvent.

If there were a run on TSB/Credit Unions after closing AIB, would the ECB be obliged as lender of last resort to provide liquidity to TSB/Credit Unions?

Dunno. TSB is a bank so probably. Credit unions…? Not banks. Probably P Honohans call. Someone check. People are scared, small savers. If Credit Unions etc called into q serious issue.

It is great to see the line about the ECB doing its job.

It seems to me that the ECB is politicised and is worried that if it gets burnt on its loans to Irish banks that this will go down badly with German politicians and their electorate.

The Irish mess is tiny compared to the Eurozone economy and it is disgraceful to see EZ monetary policy being dictated by German politics.

Germans have benefited greatly from the Euro, both by providing increased market access for their exports to the EZ and by giving them an artifically low FX rate. Its time the stopped cribbing about the consequences of monetary union.

For me the final para says it all:
“Europe does not yet seem willing to give up a diabolical bargain that has core states lend to peripheral ones so that they can support their banks, all to save financial institutions in the core from losses. This game of bail-outs on the sly cannot be sustained for much longer.”

Ireland is not in a position to force these core country losses to be confronted; and insofar as there is any hint of pressing this nuclear button by Ireland, the Government will use it to extract a form of words that will give it some cover with irish voters.

@Paul Hunt

I hope too that the “any hint of pressing the nuclear button” will extract some concessions on the overall terms of the deal and not just make like easy for the govt.

Am I getting a sense (or just projecting it) that this bail out will be futile. We have made this mistake already, and now it is being made again by Europe. Replace Anglo, AIB and BoI with Greece, Ireland, Portugal, Spain and this ‘bailout’ starts to look like a government guarantee with perhaps predictably similar outcomes. Until the core issue, debt, is tackled the crises will not end.

Also I might add, the Euro system is not particularly at fault here, its the tinkering with it afterwards that is the problem. If the system is left almost as is, but losses imposed, I think the same problems will not occur again and the system will have got through puberty.

I can’t believe Batt O’Keefe said this in public last night:

“We’ve got to play poker over the next couple of days to see what cards these people have to play, what exactly they have in mind. We would like to see the colour of their money”

Can anyone from the government reading this blog ask him to please shut up.

So it’s
a) Restructure.
b) Give us a big pile of cash at 1/2%. Or
c) Kick the can down the road and be back here again in 2 yesrs to do it all over again.

All the while the government appears to be spending most of its time and energy playing word games.

Is there a person on this island fooled by the symantics, moreover is their a person on this island not offended by it?

@Adrian Kelleher:
“Why anyone would recuit a third rate ideologue like Synon on the other hand is beyond me.”

Perhaps Rupert Pennant-Rea might be able to advise.


@ Cormac Lucey Says:

Power without responsibility is the perogative of the harlot. And of central banks?

Maybe still better in the longrun than Irish poltroons directly in charge of monetary policy.

We have one rep in 22 on the governing council; maybe he should have been asked about the restructuring which Rehn has spoken about?

BTW, what do the ex-PDs think of the ‘slump coalition’?

@ Joseph

Batt must have mistook Dromoland Castle for a pub in Ballincollig.

@ Michael Hennigan
“there isn’t likely the energy or stomach among Irish ministers for a fight on restructuring”.

I watched Brian Cowen give the 5pm speech on Tuesday and his body language said a lot. The cabinet is knackered and lacking in confidence and probably not in any state to negotiate. They have spent the last 2 years lurching from one crisis to another and it shows.


I’m afraid I don’t share your hope. Given a choice between minimising the damage to the future tenuous political viability of the governing faction and minimising economic pain over the next few years when this faction will not be in power, which option do you think they will choose? In fact the more severe the pain, the greater is the likelihood they will recover politcially and only be out for one term of government.

Ireland was a candidate for IMF protection from day one at end Sep 2008. Despite all the intervening talk about nationalisation, bank resolution schemes, burning bondholders, etc. it was only relevant in the context of the full protection from the bond market that the IMF would provide. For goodness sake it was established to deal with situations like the one Ireland presented.

But neither the Government nor the EU could or would countenance this. That is why we are where we are.

“Angela Merkel was criticised in recent times for dare asking about the interest of taxpayers. Political leaders (including the Opposition) should push for a restructuring even though it may only be a marker for the future.”

That puts all of the guff about sovereignty loss into perspective. If Angela Merkel can’t talk about burden sharing without the markets going ballistic, how much sovereignty does any Euro government actually have in dealing with the markets?

One FT story today begins: As Dublin tackled toxic assets and capital bases, new problems arose; The Irish have always been known for their sense of humour. It is good to know Brian Lenihan, Ireland’s finance minister, has not lost his.

In the country’s latest battle to avoid a strong-arm bail-out of by the European Union and the International Monetary Fund, Mr Lenihan on Wednesday said Ireland’s banks had “no funding difficulties”.

The facts tell a different story….

WSJ NEWS ALERT: Honohan Sees Loan in ‘Tens of Billions’ for Ireland

– – no such thing as bad publicity?

It is interesting that Honohan said it wasn’t a ‘bailout’ while Cowen is using ‘facility’ and Roche ‘arrangement.’

They might as well get used of the toxic word.

Is FT Eurosceptic or not? Euro up today. Irish bond yields down.

Do you not think that is mainly because PH has said he thinks Ireland will accept the EU/IMF bailout


You are right. I thought Lenihan looked awful on television, worn out. I haven’t agreed with Lenihan but through it all he portrayed an image that he knew what he was doing (even if he didn’t know).

Interesting article by John Plender in yesterday’s FT

The EZ is in uncharted territory with an outdated financial ideology that is of little use in a deepening crisis. The austerity trend with its accompanying rhetoric looks like a big obstacle to the ECB tackling the big elephant in the room- the debts of core EZ banks .

The Irish times had a real ochón is ochón editorial today

but this is much bigger than a local gombeen-type problem.

From the FT:
“Saving the banking system, however, is not the same as bailing out extant institutions; nor should taxpayers give up even more of their blood to the walking dead.”

“Countries that have yet to put in place special insolvency regimes – Ireland included – must do so without delay. ”

“Paradoxically, Ireland’s reliance on wholesale funding may make it easier to force losses on creditors”

That all this has been evident for more than two years is depressing beyond belief. The spoof and bluster crowd have won this one and damned us and our children. One might hope that they have damned themselves, but I suspect the ladder to the balloon has been pulled up.

May they die screaming.

@Rory O’F,

When one observes a barrister presenting a case with skill, passion and intensity one needs to bear in mind that, but for a simple twist of fate, he or she could be presenting a diametrically opposed case with equal skill, passion and intensity.

Not bothered by ideological slants in magazines at this stage myself now that EU/IMF are here. Too late. More serious issue in my opinion is the below scenario.

This line in the FT is particularly worrying:

“Preparations must now be made for dealing with a run on banks by depositors or wholesale lenders.”

The implications of any run on retail deposits would be frightening in all sectors and I am more than disconcerted to see the FT flag it as a probability with some weight. The desertion of large institutional depositors from the banks is one thing (which the ECB has been covering/hiding for some time), but if that trickles down to retail depositors the country and citizenry are really duffed.

Like many on this board, I’m not a supporter of how the Government has handled this crisis; either through its actions or inactions. However, I had always assumed that the general approach – i.e. keeping bondholders whole, reaching a 3% deficit – was part of some behind the scenes deal with the EU. Specifially, if the Irish Government kept the show on the road, Europe would keep the State in liquidity.

It seems, however, that the rules of the game have changed and there is some merit in exploring why. Because of the tendency for FF to shout “Lehman” at every opportunity, there has been a lack of discussion on the international factors behind our current crisis. We do need to discuss this aspect and to use it to stand up for ourselves. This is not in anyway to detract from the “homegrown” aspect of our crisis or that the State – through its political and regulatory system – has failed us greatly.

What’s becoming increasingly worrying is that the EU officials seems about as competetent as some of our own politicians in addressing this crisis. Ireland has the double misfortune of not only being worst hit by this recession but also first hit which means that we will be the first to try and fail with some of the policies prescribed by the EU.

It’s also clear that the NAMA process has exposed the problems in our banks in a way that has not happened in other countries. I find it hard to believe that some of the Spanish and perhaps German banks are not that far behind our own in terms of solvency and bad debt issues. However, the perception is that the Irish Banks are almost alone in their problems. Granted, they are certainly worse then their European peers but it would be helpful if there was more transperancy from other member States which would go some way towards encouraging a more realistic and sensible approach to the problem.

Apologies: OT

@bjg, John Sheehan

Now that’s interesting — knew about the affair and saw Pennant-Rea’s name on Wikipedia re. The Economist but never connected the two. It’s really an excellent newspaper; I used to read it regularly and would rank it next to the Guardian and FT as best in the world. It’s sad to think that despite all the wit and erudition, talentless and vindictive little people like Synon can get their say in as well. They must have brass necks to sound as high-minded as they often do.

Apparently Synon wrote a defense of the KKK of all things in the Sunday Independent in 1995. The article was titled Klannish Nature of our Emigrants and is quoted here:

“…Yankees lie about the purpose and activities of the Klan,just as they lie about all the finest Southern things.The lie stretches across the Atlantic…

The Klan fought against the oppression of innocence and when Nathan Bedford Forrest determined that the end of Negro and Yankee brutality had been accomplished, he disbanded the Klan”

Well I do declaeah! Forrest was nothing short of a maniac. Talented and self-made he was also cold, dangerous, brutal and ruthless. Maybe Synon meant to go dog whistling but she wolf whistled by mistake.

@Rory O’Farrell:
“I haven’t agreed with Lenihan but through it all he portrayed an image that he knew what he was doing (even if he didn’t know).”

It has struck me that barristers and teachers (and perhaps others) have precisely the wrong training and experience for being in government. The barrister, like the PR person, is paid to present an ostensibly plausible case to a (supposedly) representative group of citizens and to sound authoritative while doing so. However, the barrister is not concerned with the truth or falsity of that story and is required to destroy, rather than to listen to, any alternative story. I suggest therefore that we need a constitutional amendment to ban barristers (and PR practitioners) from the legislature.

The teacher has a similar weakness, but with a different cause: the need (at least for the poorer practitioners) to maintain authority by pretending to have complete knowledge and great wisdom. So teachers too should be banned.

Those modest measures would have saved us from over half of the present government; a ban on solicitors would have removed many of the rest.


You have to accept that the bubble here was near twice as big as elsewhere that had a bubble. Where other prices doubled in ten years, ours went up four times.

In addition the Irish banks were borrowing very short, reliant, like Northern Rock, on interbank borrowings. It was pretty clear from the time Northern Rock collapsed that they were bust.

Finally, Ireland is dependent on variable rate mortgages. That just isn’t the case across large parts of the rest of Europe.

While there are similar problems in Spain, there are a number of mitigating factors. Not least of these is that the weather is nice. Would you buy an excess apartment in the costa del Sol or the costa del Roscommon?

@Paul Hunt:
“When one observes a barrister presenting a case with skill, passion and intensity ….”

Great minds ….


Can anyone tell where, in all the discussion of defaults, do savings with the Irish Post Office stand? Are small savers in Savings Certificates and Savings Bonds equally at risk with Irish government bonds? If so, shouldn’t the public be alerted to this?

The UK Guardian has an interesting take on the theme of the FT’s editorial:

And in the context of the big loan that seems to be on its way, I wouldn’t be surprised if the Government put up its equity investment in the semi-states as part of the collateral to take them off the privatisation agenda and to prevent scrutiny of the gouging of ordinary citizens that’s going on.


I’m not for a minute minimising the scale of our problem or suggesting that others are as bad as us. My point is that we have been first into this mess and are following an EU-led policy that has not caught up with the scale of our problems. It will catch up eventually as other countries begin to encounter the same issues we have (albeit on a lesser scale) but in the intereim we are likely to be stuck with a mechanism that defers the problem rather than addresses it.

And yes, I’ll take the Costa over Roscommon any day! articles are only available to registered users and subscribers.

Kind of sums the whole financial crisis up, really.

@ Justin

“Am I getting a sense (or just projecting it) that this bail out will be futile. We have made this mistake already, and now it is being made again by Europe. Replace Anglo, AIB and BoI with Greece, Ireland, Portugal, Spain and this ‘bailout’ starts to look like a government guarantee with perhaps predictably similar outcomes. Until the core issue, debt, is tackled the crises will not end. ”

Hi Justin,

I was just meandering the same thoughts today and to paraphrase MK (I think) re the money used for Anglo Bailout that it we might as well just burn it at the top of Grafton Street, I am wondering should we not just take the money from Europe and run (i.e. burn some of their money)because as you rightly point out debt is the problem and debt that cannot be paid must surely be forgiven at the end of this crisis. My point being if we do not take the money there are plenty others in Europe who will when their turn comes around and sooner or later there will be none left

From FT editorial –
“Doing so would be an insult to the Irish people (whose incomes will be mortgaged to pay the loan back) and a gratuitous one at that: it defies logic to claim that adding to Dublin’s debt will seduce markets back to Irish sovereign bonds.”

I had made the same observation on another thread. The bigger problem is the aggregate level of public and private sector debt. This policy effectively removes possible areas to deleverage (via loss sharing with bank bondholders) by increasing public debt.

P L Malone

“Can anyone tell where, in all the discussion of defaults, do savings with the Irish Post Office stand? Are small savers in Savings Certificates and Savings Bonds equally at risk with Irish government bonds? If so, shouldn’t the public be alerted to this?”

Their money is as safe as houses.

It will be even more so when the government confiscate it to “invest” in government debt.

Just like your private pension fund.


No-one is confiscating anyone’s private pension fund. If you don’t want your private pension fund to invest in Government bonds, simply move your pension to an equities only or even a nice cash fund.

Following Honohans comments this morning, it is quite clear that the Irish and/or the EU authorities are definitely following the US Fed/Treasury strategy of overcapitalising the banking system in late 2008 in order to shore up confidence amongst investors, and Honohan used it as an explicit example in the interview with RTE. Honohan repeatedly stressed that the banks do not require additional capital and the ultimate cost to the state will not be above that which has already been stated by the government, but that the market, understandably, was lacking confidence in the Irish banking system.

Reading into this, he is clearly stating that these measures are designed to show that there is huge amounts of capital available for investors in the banks, but that ultimately the authorities do not believe these funds will ever be required. It seems like these measures will be “contingent” (so undrawn?) in nature, and this is about boosting confidence and not recapitalisation.

This should be seen as bullish for equity and subordinated debt holders, as it seems to imply that the worst case scenario of a near term wipe-out has been removed.

While Bloomberg gave some flash comments, the fleshed out versions are more important (and i don’t think most people have heard them, especially outside of Ireland). Amongst them:

“The purpose of the amount to be advanced or made available to be borrowed, is to show that Ireland has sufficient firepower to deal with any concerns of the market, so we’re talking about a very substantial amount…tens of billions”.

“It’s true that the banks need additional confidence…the huge sums of money put in by the government to support the banks have not generated sufficient confidence yet, the money is enough objectively but the confidence isn’t there”.

“With the market uncertainty generally high for the last four or five months, effectively since the end of April, it is desirable that banks have more capital, that’s government capital ownership funds, available to show to the market that this is beyond question”

“The best way to think about this, is we are talking about contingent funding, the capital is probably not required at all, but it can be made available in the form of contingent capital funding, it can be shown but not used”.

On whether there is a requirement for additional capital/will be more bank losses beyond the Irish government’s “final cost” figures released in September : “Not really if you are talking about net losses, and if you are talking about what the ultimate overall cost to the taxpayer will be. This is money which is supposed to go in as capital, in other words goes in as a buffer, and then comes out again when it is not needed. The Americans did this in the Autumn 2008, they told their banks, listen we know you don’t think you need capital, but we think the market thinks you need capital, so you have to accept additional capital…and a lot of this was repaid very promptly in that case”.


I agree that is what they doing. However 5% or more interest rate on €80-€100 billion is a hefty bill for ‘contingency capital’.

@ Enda

i assume there’ll be two prices – facility fee if left undrawn, and actual rate if drawn down? How does IMF funding usually work?

@P L Malone

In the event there were to be a default of the irish state on its obligations, whether the unlimited bank guarantee, bank bondholder guarantee, retail deposit guarantee or the guarantee on sovereign bonds it has issued it turns into a political decision.

Even if Europe and Ireland managed to screw the situation up monumentally from here, of all those guarantees, the retail deposit one is the least likely to go for very obvious reasons. You default on foreigners who can neither vote for you nor lynch you.


Not sure Eoin. Has the IMF ever done something similar i.e. Take part is rescuing a bank system rather than fiscal (assuming Lenihan is right when saying they are not looking for a soverign bailout)

(Sorry double post)

Contingency fund.

Has the contingency not already occurred?

Institutions will not be back until credit ratings improve. Will the inter-bank market all of a sudden open to Irish banks?

I’d say that a large part of the fund will be drawn down in short order and the ECB and Central Bank of Ireland will get (some) of their money back.

@ Bond. Eoin Bond

Do you think such an arrangement will be with the Irish banks and the ECB/IMF or with the Irish Government and the ECB/IMF?

As in who is liable if housing market deteriorates much further, banks utilise the funds and are unable to pay back?

I find it incredible the ECB would even entertain the idea that the Irish sovereign issues and bank issues are separate…

“ articles are only available to registered users and subscribers.”

In Google news search the title of the article. Then click on the link. You now have access.

For those (like the FT) who say that it is the ECB’s job to be the lender of last resort to Ireland, I would just politely point out the difference between lending and giving the money away. People on this board seem to expect the ECB to come in magically and wipe away Irish insolvency, rather than lend money that it will get back. Maybe it will happen, but it shouldn’t. All this while the Irish pocket a corporate income tax in behaviour that is about as anti-social and beggar-thy-neighbour as you can get.

My sense is the deal will have to be with the sovereign which has it available to shore up the banks. But does it mean the NTMA will remain out of the market for the duration? Or is there an expectation that everything will quieten down and it’ll be able to waltz in in the spring with a big, long-dated syndicated issue?

Merkel has been saying explicitly no guarantee after 2013 again, but implicit guarantee for all loans up to that date.

Those who know more about this than me have said this years plan is what is important. 4 years out it does not really matter if you get to 3% debt / GDP. However I think we can anticipate a difficult funding environment after 2013, impossible perhaps. In such a position we would need to be balanced budget – in cash terms (ouch).

If the IMF / EU are worth their salt they will be cognisant of this. Any IMF/EU loan to the Irish banks contingent or not, will actually be a loan to the state, forcing the above and so any deal I believe will also include extended facilities for the state to borrow beyond 2013.

If not, someone put the popcorn on for 2013.

Justin Collery

Is this not really the final nail in the coffin?

Everyone gets paid. The bondholders, the ECB and the Irish Central Bank.

The entire shortfall in the financial system is simply transferred to the State.

Typo in the above

In such a position we would need to be balanced budget – in cash terms (ouch).

should read

In such a position we would need to have a balanced budget – in cash terms (ouch). i.e. fund bond repayments from current income as they come due. This would be the case until such a time as the markets believed the debt level was sustainable and the banks were support and no more surprises

@ ED

EU/IMF to either the Irish state, or perhaps, more interestingly, to the CBI (if collateralised). Will NOT be direct to the Irish banks, more likely some sort of ringfenced fund with contingent conditionality (ie if capital of irish bank goes below X%….).

@ All

anyone know what actually happens if we decide to go with this, ie does the Dail have to vote on it???

Bond. Eoin Bond

I have no idea what the technicalities are but it would be, imo, impossible not to have a debate and vote in the Dail.

Seems we are all sharing in the joy of the moment!

Money can be created out of nothing = fiat currency.

The ECB has been doing this more and more it seems. It should all be sorted out soon, two decades should be fine!

I am immensely sad to see this mess and the fact that so many simply do not know their economic history. When banks lose deposits what happens? Where is this going to end? The US had a closed Congress meeting two years ago. No one knows what they were discussing…. This is all happening in slow motion. At least no one can say it came as a surprise? With luck, it will be relatively painless. If not there will be more wasted human years.

Just remember that this is a problem of some people needing more help than others. And Fear!

Thanks for the reference to the Oirish Times editorial. Note that they didn’t cast the entire responsibility on our politicians alone:

It is the incompetence of the governments we ourselves elected that has so deeply compromised our capacity to make our own decisions.

Perhaps all democracies are ultimately doomed to self-destruct because of voter irrationality and voter ignorance. As Joseph Schumpeter famously wrote:

Thus the typical citizen drops down to a lower level of mental performance as soon as he enters the political field. He argues and analyzes in a way which he would readily recognize as infantile within the sphere of his real interests. He becomes a primitive again. (Joseph A. Schumpeter, Capitalism, Socialism, and Democracy).

Interestingly, lapsed Austrianist Bryan Caplan in his classic The Myth of the Rational Voter – Why Democracies Choose Bad Policiespoints out that on economic issues women and the less educated are somewhat more prone to vote unthinkingly than educated males. Wimmin and Dublin North?

Perhaps winding the suffrage clock back about 150 years might help but it’s probably too late in the day even for that.

Germania locuta est; Hibernia finita est (Germany has spoken; Ireland is finished)

Does anyone feel that corporation tax issue has been a smokescreen/redherring to make us think that we had got a good deal from the EU when in fact the real issue has been that the taxpayer rather the bondholder (ECB) will bear the cost?

From the Grauniad

“Historian Diarmuid Ferriter captured the mood of the nation last night on TV3 when he said balefully it was shameful that Irish heroes had died for this, the Celtic Carrion.”

Pure bilge. Did Pearse and co die for the Magdalene Laundries and clerical child abuse? Or for Ireland’s level of class based mortality inequalities ?

Poor old Diarmuid Ferriter, his beloved FF have brought us to the pass. The irony is that the party that conceives itself as the epitome of nationhood has mortgaged our sovereignty.

Paddy Orwell

“Does anyone feel that corporation tax issue has been a smokescreen/redherring to make us think that we had got a good deal from the EU when in fact the real issue has been that the taxpayer rather the bondholder (ECB) will bear the cost?”

Absolutely. That is all it is.

Corporation Tax will not be touched.

The deficit of the entire financial system is about to be transferred to the State.

It’s worth noting that Fine Gale, Labour and Sinn Fein are all in agreement that this should be the case.

There is literally no one in the Dáil that will stand against it.

@tull mcadoo – “The irony is that the party that conceives itself as the epitome of nationhood has mortgaged our sovereignty.”

From this day henceforth they shall be known as Fianna Bail.

@ Anonym
There is a lot in the British right wing press that caters to my own prejudices. My comment was a result of some commenters here according great importance to the FT article as if it was the gospel according to St. George. The FT has been denigrating European banks since Britain itself experienced bank failures.

I agree the European press makes chippier comments about Ireland the difference is that on balance the Germans and French are well disposed to Ireland and the Irish. Many of them are capable of seeing the irresponsibility of our gov’t and are not aware of our propensity to vote for cute hoors and hence believe we are innocent victims.

Anyhow it is a new game, now that we are in bed with the IMF. Everyone feels relieved that they are bailing out the banks and not the sovereign state. Will FF retain the Donegal seat and prolong the agony for a few more months as a result of fine distinctions being made between banks and state.

“From this day henceforth they shall be known as Fianna Bail.”

We just need to pronounce the second word of Fianna Fail as an English word.


@Bond. Eoin Bond

Amazed to read that the MoF is taking legal advice as to whether a debate in the Dáil is required. Cameron has already committed to having a debate in the UK about giving us the money, and the MoF want to find out from a lawyer if we should have a debate about talking it. Amazed.



If we are to ban from government people who spend their time pontificating about things they know nothing about, then said ban would also exclude the vast majority of people who post to online forums!

This is Ireland. Such a ban would exclude a huge majority of the populace.

“If we are to ban from government people who spend their time pontificating about things they know nothing about, then said ban would also exclude the vast majority of people who post to online forums!”

But most of us are amateurs: these people are professional bullshitters.

“This is Ireland. Such a ban would exclude a huge majority of the populace.”

And the problem is?


The Dáil debates have an air of Toytown or the end of the Irish Parliament in 1801 about them. I don’t get the feeling that anyone there really understood, perhaps until now , how the rules of real power and real money actually work. It’s one thing taking the loans when the economy is booming but the big boys have ways of managing their interests when things take a turn for the worse and it all goes way over FF’s head. Not that FG would have been much better.

I was in Bombay when the city was attacked by the Lashkar e Taiba and over 50 people were killed and the story went global. It was a very similar story with the local police. They were expecting a disturbance from local criminals when they got the call from the main railway station and they turned up on the scene with their sticks expecting to use the usual words on the usual gangsters. And the Pakistanis just opened fire and killed the chief of police on the spot.

There is so much to learn from this, if people are willing to learn.

Someone on, of all places, posted this yesterday

“We have the makings of a good bank, and we, the taxpayers, own a majority of the components .

Money is walking out of BoI and AIB for the reasons Constitutionus gave, but also because people know in their gut that they both can’t survive. One might, but how can you know which one? Either way, the smart response is trust neither.

So why not let one go – my choice would be AIB. Sell it off to a foreign buyer, if one can be found, if necessary insuring its loan book to an extent. It’ll cost, but not more than it’s currently costing, and it should be spread over a longer period. If, as is fairly likely, no buyer is found, shut it down. Transfer the assets and liabilities into Bank of Ireland, and liberate a few billion of money it’s currently intended to commit by way of capital injection into AIB. There may well be bits of the loan book that’ll have to go a Nama-style route, but so what.

At a stroke, you’ve slashed the administration costs of the Irish banking system. You reduce the amount of new capital required (that has to be soaked from taxpayers or the NPRF). Even if it didn’t reduce the amount of capital needed, at least that money would now be committed to a plausibly solvent entity, in which depositors, retail, commercial and wholesale, could place their trust.

P1ssing money away on a selection of bad banks that are getting worse by the day makes no sense whatsoever. We need a good bank, and one could be carved out of those already under effective state control.

Most likely a lot of the 15,000 or so employees of AIB would lose their jobs. Well, that would merely be an acceleration of the inevitable. And as for competition? If there’s anything still around to compete for in a few years time, that’s an improvement on the current prognosis, and we can have the luxury of addressing that problem then.

I can’t understand why, over the last few years, the statement-of -the-bleedin’-obvious that “Ireland needs a healthy banking system” has automatically been assumed to mean that the existing entities should be supported, and at any cost up to and including national bankruptcy.”

They and the FT both make fair points.

This article by Patriick Jenkins, Sharlene Goff, and John Murray Brown in yesterdays FT is scarier and could start a rush
According to that the bank run is already ongoing – only a matter of time before the queues start to form.

At the same time there has been an outflow of customer deposits. There has been no high-street run on a bank, as happened at the UK’s Northern Rock three years ago, thanks to the government guarantee on retail deposits, but corporate customers have quietly pulled their funds from Irish banks in recent months.

“You don’t see people queueing around the block but it seems there’s a silent run on corporate deposits,” says Hank Calenti, credit analyst at Société Générale.

Bank of Ireland admitted last week that it had lost €10bn of corporate deposits – around 12 per cent of its deposit base – in a matter of weeks following September’s credit rating downgrades. On Wednesday, Irish Life & Permanent confirmed the trend, admitting to an 11 per cent fall in its customer deposits in August and September.”

Hint: don’t join any ATM queues if there is already a JCB on it 🙂

watched VB on TV3 last night – worst ever. Justine McCarthy had no clue, Ferriter is a historian and VB himself was at his worst (mis)quoting Patrick Honohan. An easy win for Peter Power for FF – but no opposition


Because of the tendency for FF to shout “Lehman” at every opportunity

Bill Black has just observed this about the “Lehman!” excuse:

Fortunately, Lehman failed and the Irish banks’ ability to grow collapsed – which meant that the bubbles imploded in late 2008. Had it not done so, the Irish banks would have continued their staggering growth and caused almost incomprehensible losses (relative to the size of the Irish economy) when the (vastly larger) bubbles finally collapsed.
Had Dick Fuld’s avaricious heart not led to Lehman’s collapse, or had Treasury bailed out Lehman and prevented (delayed) its failure, Ireland (and Iceland) would have collapsed as nations.


Underlining the importance of a decision on Ireland for the banking sector in the wider eurozone, Josef Ackermann, the chief executive of Deutsche Bank, also attended yesterday’s meeting of finance ministers.
“A breakout of any state on the markets right now would lead to contagion and we want to avoid this with all means,” Mr Ackermann said.
“We have to do everything to catch every country that runs into trouble.”

Eee-Zone policy – peripheral little black holes must not trigger big core black holes … YET! Remember the Goths …

David O’Donnell

“Josef Ackermann, the chief executive of Deutsche Bank, also attended yesterday’s meeting of finance ministers.”

Well then. They could have saved a lot on expenses.

They could just written a cheque to Herr Ackermann on the spot.

“The Irish banking sector has to be made viable and sustainable,” Mr Rehn said after finance ministers ended their monthly meeting in Brussels yesterday.

It “will require quite some reorganisation and restructuring“, he added.

So after two years of TINA & WAWWA the Europeans are coming in to do the job.

Pity they won’t do the right thing of course.


What struck me was the fact that a private sector Big Bank CEO was in attendance …..

… any truth in the rumour that the IMF/EC/ECB troika have discovered traces of ‘anti-matter’ this afternoon in the Central Bank ….. and that it did not originate from the Hadron Collider in Switzerland …. how much is ‘anti-matter’ trading for on the commodities exchanges at the mo? Could we even out-Norway Norway?

How do serfs escape from a glass jar?

David O’Donnell

“What struck me was the fact that a private sector Big Bank CEO was in attendance ….. ”

Well absolutely. Not so much strange as disturbing.

Traces of ‘anti-matter’ discovered. Desparte search for blackhole underway.

“quite some reorganisation”

is a very German phrase construction. Is it the same in Finnish ?

@Justin Collery

Am I getting a sense (or just projecting it) that this bail out will be futile.

I think you’re right. The deal apparently on offer seems to have not many friends. There seems to be fairly wide agreement that it’s either unjust, or simply a means to delay and worsen the inevitable, or both. I think it’s fair to say that the most bank-friendly commentators on this site are struggling to achieve enthusiasm for it. Then there’s the press: this thread mentions editorials agin it in Handelsblatt, the NYT, the FT, and FT Deutschland. Among those with power, the swing to “orderly restructuring” initiated by Merkel (back in May) both exposes the deal as unjust (why not restructure now?) and seems to make it unviable (how will the government roll its debt in 2013 without EU support?), while even Lenihan seems to have lost the brio he used to show when putting public money in the banks. I’d even go so far as to suggest that this may be the moment at which the global No More Lehmans consensus ends. And yet the damned thing keeps grinding forward inexorably. It’s the zombie bailout.

Probably one of the things driving it forward is the ECB’s determination to get out of Dodge no matter what.

@Greg, David O’Donnell

Amen re. Ackermann. Intolerably brazen, and thoroughly revealing. He has had an eyebrow-raising role in the Greek crisis too.

@Brian J Goggin

That first Guardian headline is frightening. I watched Dick being interview by John Snow and he is full of waffle. It is astonishing that these guys are still denying that there is a problem given the fragility of the situation vis a vis the subject matter of the Guardian article.
The damage they are doing is immense.

Dick Roche has now spent an hour waffling on the wireless. Mind you, it’s pretty difficult to shut him up in any circumstances.

But I would suggest to media persons that they should cease inviting government spokespersons to contribute to their programmes. First, they never have anything useful to say and, second, with every word they speak another citizen reaches for the pike in the thatch. The poor chaps have no credibility and their every public appearance adds to the danger in which they stand.

On the other hand, the opposition should tone down the rubbish about loss of national sovereignty.


I also watched Dick R being interview by John Snow.

Anyone from outside Ireland looking at that interview would have been astonished and thought we must be a bunch of lying gobsh*tes.


Thanks for that. Mist it in the mist of the maelstrom.

So this fecker Ackermann is the only banker allowed attend ECOFIN?


Has German mercantilism run out of steam?

Time for Angela (Ashes) Merkel to wake up.

Here’s the thing Angela. It’s your bank not ours.

I’d be obliged if you didn’t export Germany’s problems to Ireland.

We have ways of dealing with thieves and traitors.

It’s called democracy.

Deutsche Bank is bankrupt.

You need to tell your people and let them decide what to do.

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