Government Statement on Joint EU-IMF Programme

The Government’s statement on the joint EU-IMF programme for Ireland is available here.

Update: See here for joint EU-IMF statement; here for IMF press release.

362 replies on “Government Statement on Joint EU-IMF Programme”

The programme builds on and complements the broad set of actions taken by the Government over the past two years

Why it took two years to come up with a special statutory resolution scheme for the banks is beyond me.

The NAMA Scheme will be extended to remove remaining vulnerable land and development loans from Bank of Ireland and Allied Irish Bank by end-Q1 2011

Does this simply involve the reversal of September’s increase in the threshold from 5mi to 20mi, or does it involve a more radical extension to include other classes of loan facilities?

From the property pin latest posts:
“This was on

Cardiff of DoF saying no, the 5.83% is on the €67.5bn.” site is having problems again. Interest obviously huge.

Interesting debate between Antoin and Begrudginov on RTE. The latter seems very upset that it looks like we have staved off Armageddon at least for a while.

It is a typical EU solution to a problem. keep talking, kick the can down the road, hope for good weather. Remember Bosnia. The EU stood around and did nothing for years other than prevaricate and stall. It took the USA and the Brits to bring a solution to the crisis.

Ireland is being given a package at a rate just low enough to keep the show on the road to the middle years of the decade. the rate is just high enough to discourage “les autres.” For somebody with our current credit rating getting a lump of money at any rate between 4 and 7% is as much as could be hoped for.

Not burning seniors is designed to reassure investors in European banks that it is safe to buy these intruments at current yields. It also avoids the need to write this stuff down. The hope is that this will preserve the current status quo in European financial system whereby banks look solvent & well funded.

Will it work-the first 20 minutes of trade will tell tomorrow.

Is the averaged interest rate computed by including our contribution i.e. from the pension reserve, etc.? If so is this not disingenuous? By taking the borrowing to be €67.5 Billion I would recalculate the interest to be ~7.3%. Am I completely off here?


Sounds like the last solution to the banking crisis. Nothing radical – as predicted.

Noonan: it was a game of poker and we played a very bad hand
Antoin Murphy: we had a pair of 2s
Begrudginov: we have 130Bn from the ECB, we could threaten not to pay them back (this is poker not Russian roulette)
Antoin: defaulting on seniors would have cause unforeseeable contagion
Begrudginov: then why does the proposal to burn seniors post 2013 not cause contagion (up to then I thought he was just a clever begrudger, but this actually shows that he dosen’t understand; the post 2013 regime will be a new regime applying to loans taken out under that regime, contagion does not arise, we are simply changing the rules of the game going forward)

It seems we did not get anything better than we could have hoped for. One wonders did we have any preparation for plan B done. Were we in a position to say to the EU that we have considered what we will have to do if they do not offer a sustainable deal and we have the legislation ready to go? I doubt it.

It is not clear that there will be a convincing resolution of the banking system in the immediate future.

1. Ireland has been instructed to pay all bondholders.
2. Ireland has been instructed to use its last reserves in shoring up the banks and the paying the bondholders.
3. Ireland has been instructed to borrow money at a “composite” rate of 5.8% to bail out the European banking system.
4. In effect Ireland has been instructed to borrow money to destroy itself.

Ireland should refuse this “offer”.
Tell the hard men of the ECB to go **** themselves. The same hard men who oversaw the chaos in the European banking system grow, overwhelm and destroy itself.
To hell with Europe.

Ireland says NEIN
This is well known attempt at corporate take over
it will not succeed

Ireland has a worldwide community. Remember that a grandson of Ireland saved the world from the Cuban missile crisis holocaust and probably paid with his life for his courage. You must stand by us now, es muss sein.
Frisch weht der wind
1.der heimat zu
2.mein Irish kind
3.wo wielest du
4.Wagner, Tristan und Isolde
everything that is happening was fully anticipated by the Kerry historian JJ Lee in the best history of Ireland, he warned about herrenvolk, master race
God himself will not be able to save you mien freunds if you try and talk down to the old Gaeilic families of Eireann
5.‘what you do to the smallest of my creatures
you do to me’
Gospels of the European tradition
this is an outrageous Versailles moment for Irish people who were not aware there was a war on
Anyone talking at this time in Ireland and about Ireland had better keep it very respectful when you are speaking to one of the old gaelic families who have not been part of the Fianna Fail project
Fine Gael and Labour in government now
restore tolerant inclusive democracy in Ireland
6.Put not your trust in princes, bureaucrats or generals, they will plead expedience while spilling your blood from a safe distance. Niccolò
Machiavelli 1503
we will not accept any malfeasance
Peter Matthews does not speak for me he speaks for corporate predatory finance, I worked for the biggest of these Nomura Bank of Japan
Ireland has to look after Ireland
goodbye Berlin and hello Boston
the new 2011 Atlantic Alliance, Canada, USA, Iceland, Ireland, Great Britain
courage my brothers and sisters
we tried, they failed


the proposal re 2013 is going to have someinteresting consequences for bank and sovereign funding. Would you buy a bond with a maturity date longer than 3 years. Sure you might take a chance that you would be “grandfathered”

I understand you are an actuary in your spare tiem. Do you think regime shift in 2013 will have any implications for the business written by insurance companies and the way in which the invest to match these liablilities?

Ireland will regroup, Europe can wait, Ireland is Ireland and Europe is Europe.
We dealt with greater madness than this and we refused to be afraid and hence we made a world class international agreement called the Good Friday Agreement
We voted on lisbon and we said NO on instinct
I assert that Lisbon 2 is bogus, was coerced and as we can see, was malfeasance
Are we still using the coin of rome?
Things just don’t always work out
we need to leave this failed experiment, the new currency could be called the Punt
We can put this proposal to the people of Ireland and they can vote on it as they did with the terms that came back from London in 1922
‘They mistook our gentleness for weakness’ Michael Collins

Mr. Cowen please leave the document there
And do not hurry back
Election January 19th, 2011
corporate warriors………
we will see
8.I am interested to see what David McWilliams has to say
oiche mhaith poball na Gaeilge agus gach duine eile san sean Tir seo
9.Paul Moran, Sandyford, Dublin

‘It is not clear that there will be a convincing resolution of the banking system in the immediate future.’
We blew the best opportunity we had to finally resolve the banking mess. More expensive recaps now and nothing about the primary problem of liquidity.

predictable solution from the EU elite. The question is whats more important to you being Irish or being European? For me its the former, forcing Irish taxpayers to pay debts it has no interest in paying is not on even if it means the end of the Euro. Govt bond yields to rise tomorrow I expect

These idiots don’t realise that they have reacreated the ERM. Instead of attacking exchange rates, the hedgies now have carte blanche to have a go at sovereign and bank debt. This will go on and on.
The euro is toast.

Simpleton, you are dead right. The euro is a piece of toast, but it is not fully cooked yet. It will have to be turned over a few more times. However, we can be re-assured by the fact that Conor Lenihan will ride to the rescue. This is a great little country.

By putting in the NPRF have FF drastically limited the bargaining position of future governments? Have the ECB/EU/IMF ensured that we are now completely disarmed and helpless?

So…explain again why when Constantin has been pretty much on the button time and again, you think hes wrong now? And while Antoin is a great guy, hes not noted for his contributions to this debate over the last few years. One is a seasoned macroeconomist whom, you conveniently forget, actually works in the “real world” as a working macroeconomic analyst and forecaster. The other isnt, no more than me. comments when you come back from the culvert.

They played, they gambled, we lost. It’s extremely frustrating that we have ministers who are over paid and will retire on very healthy pensions are arguing with union officials who are over paid about negotiations with EU/IMF officials who also are overpaid about a deal that will have to be paid by ordinary everyday middle income workers. The top end will evade tax, the bottom end won’t pay any or much tax and the middle tranche will get screwed. Now is the time for the government to resign en masse. Lets take this opportunity to decide who will deal with this shocking deal. Hopefully someone with cahones will have the bottle to tell the EU to get stuffed. Could we come out with a worse deal. I don’t think so. I remember years ago when Roy Keane left our world cup squad thinking that the only people happy were our opponents. If we implement this deal the only people who will be happy will be the the senior bond holders who walk away unscathed. It makes my blood boil.

Ah, forgot to mention, Dr G also has and continues to have real world experience in the financial markets, is chair of an exporters association, and commentates on the world on a regular basis. You are an anonymous internet troll. Antoin is an expert in C18 History of Economic Thought. I know the credibility ranking I would put in place. And in all permutations your at the bottom.

The statement is non-specific in many respects.

Is the actual agreement more detailed? Is it on the internet anywhere, or is everyone just guessing about the details (e.g. “restructuring” could mean lots of things)?

The interest rate may not be 5.8%. Many suspicious of another government snow job/Iceland! deception.

@John McCormack

Public Service Costs

– Reduction of public service costs through a reduction in numbers and reform of work practices as agreed in the Croke Park Agreement.

Not even a modest trim for senior bondholders and yet Rehn says they will redo some stress test on Euro banks. Uh, I’m not a barber or a banker but if European banks cannot withstand even the most minor haircut on their holdings of Irish assets isn’t that a ‘real world’ stress test and not a very reasssuring one at that.

Look the euro is finished and the sooner we get ahead of the game and realise this the better – we might have a chance of salvaging our little nation. we might take a bit of heat for a while but we’ll survive. the ECB simply doesnt have enough money to bail out Greece, Port, Spain, irl etc Sure it could print money – for a while – but it probably wont even try and it would only put off the inevitable. The Germans know the game is up -its purely about who they blame and how they save face

Couldn’t help but think of Paddy Kavanagh’s lines tonight which seem to reflect our leaders performance:

“You clogged the feet of my boyhood
And I believed that my stumble
Had the poise and stride of Apollo
And his voice my thick-tongued mumble.

You told me the plough was immortal!
O green-life-conquering plough!
Your mandril strained, your coulter blunted
In the smooth lea-field of my brow.

You sang on steaming dunghills
A song of coward’s brood,
You perfumed my clothes with weasel itch,
You fed me on swinish food.”

What a waste of the NPRF. Would it not have made more sense to disburse it to the citizenry and get them spending rather than flushing it down the toilet via the banks?

It sounds very like Chamberlain coming back from Munich. Euro peace in our time. Until say 9.05 tomorrow morning.

The country tonight ceased to be a Republic.

Cowen and Lenny have done the opposite of Collins they have gone abroad and handed back 26 counties.

We are screwed and finished.

Next year I will leave this country and never ever return.

@Brian Lucey. Totally agree with Brian. Constantin has been pretty much on the button regarding the likely cost of the bank bailout. Ihave no idea what Antoin’s view was, but having been in a room in RTE with both of them this afternoon, there is not a lot of love lost. Post today’s announcement not a lot has changed for Ireland. The National Recovery Plan cannot and will not be capable of delivery, and the annual interest rate bill on Ireland’s national debt will in my view surpass €10 billion by 2014. Given that tax revenues are expected to be around €36 billion by then, there will not be much left to run the country. The social and economic consequences of what our government has agreed to today, is potentially too horrible to contemplate. Having lived and worked through the 92/93 currency crisis, it strikes me that nothing has been learned and there has to be potential for major market turmoil over the coming months.

@ Gadge

cheers. Please dont mention this to Juicey Lucey, he may go off on a self-back-slapping rant once again. Silver bulletts, magic beans, theory vs reality etc etc etc…If only we could securitize the use of the words ‘troll’, ‘shill’ and “here’s solve the problem!”, then maybe we’d be able to create a bubble big enough to get us out of this mess…

Ireland`s only hope is to tell Europe to sod off. Ditch the Euro pull out of the EU, take back our oil and Gas and fishing rights.

If only we had the Lisbon vote now!

@Oliver Vandt.
re Have the ECB/EU/IMF ensured that we are now completely disarmed and helpless?

Spot on. ALL pockets now empty. We have not been asked to attach a star to our jackets-yet.

Couldnt agree more – the people deciding all this are the one with the gold plated pensions who will walk away from this laughing at the rest of us

All we need now is JtO to crawl out of the culvert. Lads..look around at what the non-financial services part of the world (and Jim Power) are saying. IT.WONT.WORK
back now to the research paper i was working on…

@bw II
@brian lucey

Thought I recognised Antonin. Was he the guy that gave that priceless advice about “calling the bond market’s bluff” by staying out ’till next Spring after that last bond auction?

Nothing to see here…..move on. More non-specific waffle from Biffo. We are being robbed to shore up the German and British bankers who lent to our own idiots without asking prudent questions. The Irish are going to attempt to prop up europe just so we can have a good reputation. My kids (now 6 year old and 4) and their grandkids will be paying for this. Ireland will be on it’s knees for generations and not a single banker or politician will be held accountable. If Biffo was killed tomorrow in an accident we would have a state funeral with eulogies about his great negociating skills and how he built Ireland. I give up !!

@Oliver Vandt

This is probably correct and one of the most concerning outcomes of today. Joan Burton was on to this on Six One.

Has the government got a cast-iron guarantee that corp tax will not be touched over the next 4 years as part of ANY deal? I suspect not and I wonder what will be at the top of the re-negotiating agenda when we are over a barrel in 6-12 months.

The problem is the aggregate public and private sector debt is too high. Today’s announcement fails to address this. If you don’t tackle the correct problem then you’re unlikely to stumble on the correct solution. The only ‘non-forgiveness’ solution requires the ecb to buy sovereign bonds. If the eu embraces the dark side and jumps a few moves ahead of the market, the crisis could be resolved.

@seafoid etc. – NPRF

The term ‘National Pensions Reserve Fund’ is now a misnomer.

There is no fund.
There is no reserve.
There will be no pensions.

@Jim Power

“However, we can be re-assured by the fact that Conor Lenihan will ride to the rescue.”

Just listened to you with him on Newstalk, he is a bollox.

Yeah, just shut up Conor and get your head around the figures.

@ Prof Lucey

“You are an anonymous internet troll” Honestly, that’s my name, well maybe the II makes me a bit anonymous.

Begrudgenov was visibly upset. He tried repeatedly to tell us that “I told you so”, but clearly the fact that Armaggedon had at least been postponed was deeply disappointing. Do you think he was right to suggest that we should welch on the 130Bn support being provided by the ECB?

BTW I see in today’s papers a suggestion that the plan is to sell the deposit books of Anglo and INBS. You were right after all, albeit your calculation of the financial consequences of such a sale were a bit left field.

22.5 bn EFSF
22.5 bn EFSM
22.5 bn IMF
17.5 bn NPRF and other doms
85 bn tot 35 for banks 50 for gov funding

“If drawn down in total today, the combined annual average interest rate would be of the order of 5.8% per annum.”

I hope I am mistaken but that reads very like that the domestic and NPRF funds are include in the 5.8 per cent calculation. Surely not?

@Brian Lucey,

Your chest-thumping triumphalism re. the burning of senior bondholders from late last week looks a little flat now, doesn’t it?

Are you going to apologize to Eoin for calling him a ‘shill’ and a ‘sockpuppet’?

“BTW I see in today’s papers a suggestion that the plan is to sell the deposit books of Anglo and INBS. ”
I think the debate was about the technicall ability to do so – now we see it can be done. What can be raised – differnet story, and happy to debate.
Do give Constantin the human deceny of his name. As it is you sound racist. He is dissapointed if he is because with a 4yold and a 8w old he is very very long ireland and wants to see it work. Sniping and sneering from the sidelines and piling debt on debt will not do it. But then, if you really really wanted to make your views known youd get onto a newspaper and say “heres my 1000 words”. Youd be surprised how open they are to comment. Till you do, you remain a troll.

@Eoin Bond

Yes – you were spot on. I was ready to be dissapointed with a 15%shave but giving in on some semplance of resolution of the Irish Banking System … silly me.


Yes – The Banks remain with us …. and I don’t remember seeing a nice Futures Note from the ECB mentioned in the press release that they will take it on next tuesday (soon) in return our eating gravel sandwiches today, tomorrow, and next years in support of the Borg Collective!

@irishpancake. Thanks. Not one of my better days, but it nearly turned into a bloodier affir, but i suppose enough Irish blood has been spilled today.

Thats the debate. It seems that they are. The blends are making it hard to see whats going on where. I think the IMF are more on the side of the angels : they want hard medicine but doable to get growth back; our “colleagues” and “partners” in euroland are going “take that paddy. now for ya…”

DavidC, heads they win, tails they win. It’s so frustrating. The social injustice creates a dangerous political climate.

I would like a political solution that would burn the bondholders and stuff the perceived consequences for Europe. Europe’s head is in the sand. They hope to kick the can down the road. Deal with the issue now – no point delaying the inevitable defaults.

I wish politician’s future pensions were indexed linked to the national recovery. No recovery…. no pension.

@ tull

A new regime which effectively envisages bondholders losing even when the banks don’t go into liquidation will be a complete change in the rules. I will welcome that. Our problems have substantially arisen because Irish banks had access to Euro wide funding at seemingly risk free rates.

A situation where domestic banks are substantially funded by domestic deposits is to be welcomed. As far as insurance companies are concerned and indeed all other investors bank seniors will simply become a riskier fixed term asset.

Under the Euro, Irish banks got far too big for their boots.

Maybe Im wrong here but


if that 68 was to be borrowed at 7.3% and our own money the NPRF, which I am assuming has a rate of 0%, unless they have borrowed the money from themselves, would give a rate of about 5.8%…….

It looks like the government have swopped a bank default for a sovereign default. The reputation of Irish banking was trashed anyway but now they will trash the reputation of the entire country. I hope that after the several years of further deep austerity that will precede the default our EU partners are very kind when we arrive – Imelda Marcos like – on our knees looking for a rescue. If they are then I predict that FF will claim they negotiated a secret unwritten understanding in phone calls to Merkel and Trichet in recent weeks. That may be the next background briefing to journalists. “They will be tough on us now but Trichet assured Brian that in a few years we will be rescued. No, there’s nothing in writing because that would undermine the plan you see but it’s all agreed….”.

@ Prof Lucey

“Do give Constantin the human deceny of his name. As it is you sound racist” I understand old Constie to be a caucasian like myself. Do you think he was right that we should have refused to pay back the ECB support of 130bn?


I think we need a reality check. A lot of the post announcement commentary was about how badly we played our hand, with lots of references to the nuclear option — default. A better analogy would be that could have put a gun to our head and threatened to shoot. It surely would have made a mess for everyone to deal with, but hardly credible. What we were really engaged in was an effort to convince our potential funders that it was in all our interests to give us a path through this that would avoid a destabilising default.

Some of the details are disappointing. I think we all hoped for an interest rate less than 5.83 percent (average across funders/maturities). It is especially irritating that we could have obtained a much lower rate — though probably not as large a package — if we only dependent on the IMF. On the positive side, the 71/2 year average maturity is a big advantage, substantially reducing the roll over challenges we would face down the road, and thereby making it easier to re-enter the market.

The additional year on the fiscal adjustment is also to be welcomed. It reflects more conserative (and credible) growth assumptions and a higher starting debt value to reflect the immediate additional recapitalisation cost. We will still have to achieve the €15 billion adjustment by 2014, but it is a relief to know that we won’t have to pursue even more austerity over this period.

It is a pity, but not unexpected, that we did not hear anything from ECB beyond a broad welcome for the programme. It is essential that part of the quid pro quo is that they will act as lender of last resort to the banking system.

At this stage I think the public debate has become dysfunctional. When it comes down to it, the loudest and dominant voices are essentially pushing a line that would lead to the collapse of the Irish banking system and force a massive immediate fiscal adjustment — and the media are not calling them on it.

I was under the impression that the NPRF was defined by legislation and its funding and investment were restricted see;

Extracts include:
“a statutory obligation on the Government to pay a sum equivalent to 1 per cent of GNP from the Exchequer into the Fund each year until at least 2055. The legislation also provides that the Government may pay additional sums into the Fund from time to time, following approval by Dáil Éireann”

‘the establishment of an independent Commission, the National Pensions Reserve Fund Commission, to control and manage the Fund. The Commission will have discretionary authority to determine and implement an investment strategy for the Fund, consistent with the investment mandate contained in the legislation’

So how was it available for negotiation and will its dissolution require legislation?

The interest can only possibly apply to the €67.5bn surely?

That being said, aren’t we forgoing whatever interest the NPRF money was currently invested in?

A breakdown would be nice alright.

-Has the term of the loan been confirmed?

-What is the best case scenario?

-Can we decide we want to draw the (less expensive) IMF money down first?


I wonder if behind this humiliation is there a German supported ECB strategy of forcing the weaker links out of the euro?

BL, most of the people I know in the FS village doubt this will work either. It’s nowt but a bridge to the next crisis.
Massive buying of Spanish debt to narrow spreads might change the calc.

@ John Mchale

And nor should they. The ‘keep seniors whole’ or it’s the EOTWAWKI mantra is plain wrong.

@Brian Lucey and @Jim Power and Tull McAdoo:
You guys seem intent on rubbishing BWII’s viewpoint just because he questions Constantin’s view that contagion would not arise now if “we burned the bondholders” now, simply on the basis that the proposal to burn seniors post 2013 has not caused contagion.
You have not answered his main point which is that the 2013 proposal refers only to loans/bonds issued post 2013 and so would have no effect on any existing loans.
At least Tull made an effort to address this point on its technical merits, though I disaree with his conclusions, rather than relying solely on the “what a wonderful guy Constantin is, so he must be right” argument.

“BL, most of the people I know in the FS village doubt this will work either. It’s nowt but a bridge to the next crisis.
Massive buying of Spanish debt to narrow spreads might change the calc.”
yes, its a can kicking exercise on a gargantuan scale. But in waiting to solve the real problems we will be rogered. When the spanish flu hits a real solution will emerge but it will not be backdated. We have lost. They will win. Tercios beat wild courageous charges all day. And our lads didnt even charge.

@Winston Smith
Did the guy on Cowans left (I think Kevin Cardiff, head of DoF, who if I am not mistaken was in charge of the Banking section in the DoF before his promotion and therefore asleep on the job while the banks were running amok – what a republic, promoted for being incompetent or does he know too much and therefore cannot be sacrificed – excuse the conspiracy theory) that €17.5 b was coming from Irish resources, €5 b cash reserves and €12.5 b from the NPRF. If you net this off the €35 b, leaving €17.5 b coming from external sources. In order to get to an average rate of 5.8% on the €67.5 b, assuming 5% on €50 b then we will be paying 8% on €18.5%.

@John McHale

I agree with you. The option to play “hardball” would have had to be backed up by popular political will in the country to essentially go onto an economic war footing. Public sector being paid only part of salary, very quick move to budget surplus etc.

I see no evidence public on board for that. Most still think there’s nothing wrong with Croke Park – even another 10% off would be too much. They just seem to want to continue drifting along.

On Banking: Basically, we’re continuing the same policy as we have for the last few years, only now we have a new source of funding, and now we are serious about providing for likely losses. It certainly hasn’t worked yet, but maybe with a more supervised attempt (supervised by our new guests) we can make it work. I’m a bit nervous about our track record in this area, but am pinning all my hopes (perhaps naievely) on the IMF’s supervision of the process.

I am rather more enthusiastic about the commitments under the competition heading. If these are taken seriously (and presumably they will) this will have a significant impact on Irish Society and economic performance. This section is undoubtedly a huge plus.

@ all

“But then, if you really really wanted to make your views known youd get onto a newspaper and say “heres my 1000 words”. Youd be surprised how open they are to comment. Till you do, you remain a troll.”

Please note Wiki the new definition of a troll, anybody that is not in the newspapers.

Can anyone give the breakdown of how much each of our banks will be getting in recapitalistion cash? Also, what will be the total cost of banking recapitalisation after this measure?

@John McCormack – is it possible the shocking rate is a claw back for permitting 12.5% corpo tax rate to continue. You can have your special tax rate Brian and Kevin but by God you’ll sweat for it.

The assertion of 5.83%, without any detail whatsoever, is beginning to look like a fudge of the worst, and usual, type.

@Michael O’Donnell

I think some of the arguments that applied to the same idea for sovs will apply. Geography of law, CACs and diffuculties of a 2 tier market.

@Bill Hobbs.
re Are the printing presses still working in Sanyford?

I hope so. But knowing the incompetence and quisling demeanour of this government they probably don’t have this contingency in place.

@Carolus Galviensis

You state that the NPRF is now a misnomer. I believe the NPRF had 24.5 billion in funds as of Q3 2010 – so it will still have 12 billion left when 12.5 is used as part of the bailout. So, I think it would be an exaggeration to say there is no longer an NPRF, or am I missing something.

I am not an expert but I think talk of default and restructuring now is unrealistic while markets are so unstable, in true EU style the problem will be pushed out through consensus and hopefully dealt with on a larger scale when things are calmer. Although I am an Irish citizen I feel very ‘patriotic’ towards the EU and euro project. As a public servant I would like to see public service wage levels, especially at senior levels, reduced dramatically and huge efforts made by government and civil society to protect the most vulnerable and to encourage sustainable growth.

The whole point of this bailout was to deliver enough backup to calm the markets and get the 10 yr yield back down below the 6% it was at in September and thus get the NTMA back in the market with the start of the National Football league in February. The yield would be down and there would be no need to draw on the funds as the country would be able to borrow its way.

So are yields going to go down to 6% tomorrow ?

If not there should be a referendum. Do the people vote to take on 10bn in immediate bank recap and another 25bn in the Christmas recap ? Or do they not.

@John MCHale
The media are not calling the “only game in town” cheerleaders either. Theres a diffuse popular anger at bailing out bondholders. Theres a generalised ignorance of the stakes. But theres a hard supermajority that think the present govt are part of the problem not the solution. Its a gordian knot and we know how to deal with same.
If we forced the senior issue now it would be messy. Will it be any less in three years or whenever spain pops?

@Michael O’Donnell
I merely said that Constantin’s numbers have been pretty good to date. The guy has form and that should be respected. His prognosis may be right or it may be wrong, but I attach more credibility to his views than many others. Personally, I still cannot understand how in a capitalist economic model bond investors in the banks should be given precedence over the taxpayers of the country. I also find it difficult to envisage how the Irish economy and Irish society will be able to work through this. I do not agree with point that just because the post-13 proposal has not caused contagion that burning bondholders now would not cause contagion. However, it will be interesting to see post-13 the risk premia that will be attached to bondmarkets. Hopefully, this potential penalty will force government to behave properly. We can blame whosoever we like for Ireland’s current crtisis, but the fact that we are in the mess we are in due to a failure of governance at most the political and permanent administration level. Meanwhile, the risk of contagion has not gone away I fear.

@Brian Lucey
Just trying to confirm that from the RTE news right now and it looks like the interest calculation is exclusive of the domestic part i.e it is calculated on the 67.5 bn made up of IMF ECB and the Swe/Dan/Brit with 3 different nominal rates all combined into the blended rate. They culd have clarified that a bit better

Given the lack of a punchier response to our situation the hedge funds will short Portugal with all they can muster.Weeks to IMF for them.

I had thought the Euro might muddle through for another 2-3 years but it could be over in months now.Clearly the appetite for the scale of support required is not there in Germany.What will hasten the end is flight of deposits – the risk of break-up has risen beyond the point at which a rational investor will believe it worthwhile to move their money.

Your attack on BWII out of order.

@Holbrook Fields

I believe the 24bn in the NPRF includes that @€11bn for BOI and AIB.

I am open to correcteion on that but I think that is what they mean by the NPRF is being finished.

@John McHale
You seem to be happy to have the entire country skating right at the edge of fiscal solvency. The rest of us would like to haircut bank seniors so that we at least start a bit away it. Lenihan and Cowen say they were deceived by the banks. What is certain is that they grossly deceived the public about the state of the banks and acted unconstitutionally in committing us to their debts without full diclosure by them and the banks. Given that, I now think that haircutting senior bank debt issued after Sept 2008 is morally justified. It is probably financially essential. What the government should at least have done was got the EU to cover further bank recapitalisation costs. If they want to protect seniors then they should pay. The government have failed and given their record why did anyone expect differently. Throughout this crisis they have treated the public like mushrooms, kept us in the dark and fed us on manure. For example they are about to conduct yet another stress test on the banks. Given this you are taking a huge risk putting your public reputation behind a discredited elite who have ruined the country, are proven incompetents and have never disclosed the truth at any time.

@John McHale,

Surely there was a middle road between the Scylla of what we have done and the Charybdis of going nuclear. If we had gone straight to the IMF, and cut out the EU folks with the enormous conflict of interest, there is at least a chance that we could have got a standard IMF deal. You know, funding with a decent interest rate while we got our finances in order, and assistance with restructuring our liabilities enough to restore us to solvency.

@ brian lucey
“If we forced the senior issue now it would be messy. Will it be any less in three years or whenever spain pops?”

Yes, probably. If you had orchestrated that now the 90% who either don’t understand or are not interested in this stuff would simply blame you for total chaos. They wiil now assume it was all a bit of a fuss about a couple of difficult budgets. Give it a while and reality may sink in – sufficiently widely – for there to be public support for a different approach.

@Brian Woods II
re: Gurdgiev
Go into YouTube and enter ‘Constantin Gurdgiev’ / ‘Brian Lucey’ (NAMA Workshop 2009) — where they put their anti-NAMA case in such a clear and concise way that anybody who fails to understand it needs his or her head examined (Brian Lucey part 3 is perhaps the best of all for biting sarcasm + black humour).

These guys should get a six-digit euro reward for they said but instead they trigger the Irish swine-dog reaction.

A country of ingrates.

@ Brian Lucey

Yes, we are lucky to have Constantin here, even if he still has a touch of the Ayn Rands about him. He has a genuinely global view and he works bloody hard. I’d say he casts a cold eye on all the players in this and maybe he is right.

As Keynes said ‘When the facts change, I change my mind’. BW II is free to do that too. He also has made many interesting contributions, so peace be to you both.

@John McHale:
“What we were really engaged in was an effort to convince our potential funders that it was in all our interests to give us a path through this that would avoid a destabilising default. […] When it comes down to it, the loudest and dominant voices are essentially pushing a line that would lead to the collapse of the Irish banking system and force a massive immediate fiscal adjustment — and the media are not calling them on it.”

I can think of several possibilities here:

– the “loudest and dominant voices” (L&DV) may not agree that the avoidance of default is the best result for this state (perhaps because default might be cheaper in the long run) OR

– the L&DV may not believe that default can be avoided (rather than postponed) in any likely set of circumstances OR

– the L&DV may believe that avoidance of default would be a good idea, and that it would be possible, but that neither the current nor any likely future government will be able so to manage things as to ensure avoidance.

I didn’t hear debates on the wireless and I don’t see the television, so I’d welcome clarification of the nature of the disagreement between yourself and the L&DV.


@John McHale

Your comment below is my dominant emotion having looked through everything so far. Looking from the outside, the IMF look like very honest brokers in this whole deal but we need a lot more clarity on how the EU fund rates were determined and why. There is growing public perception that the EU Commission is facilitating a mugging of the Irish taxpayer. The catastrophe option is not on the table but surely the government must make more of an effort to impress on our European partners that the Irish taxpayer is now bearing the brunt of all Europe’s bank gambling losses at the same time as effecting a comparatively massive fiscal adjustment. The moral hazard reduction lesson here seems to be “don’t let your country’s banks become gambling dens” rather than “dont lend money to gambling dens”.

“Some of the details are disappointing. I think we all hoped for an interest rate less than 5.83 percent (average across funders/maturities). It is especially irritating that we could have obtained a much lower rate — though probably not as large a package — if we only dependent on the IMF.”

@seafoid That is exactly my point. In a truly capitalist system bank bondholders should not be bailed out.

@Brian L

Just watched the Minister for Finance on the 9 o’clock news. He said that if we insisted on imposing losses on seniors, there would have been no programme. At least when it comes to the ECB, I’m inclined to believe him. What would you have done facing this reality?

I have no problem with people strongly disagreeing with the policy course, and I certainly don’t agree with all of it myself. But why do people jump so quickly to assuming bad faith? Granted I am back in Ireland for just overa year after a 20 year absence, and I have no political ties whatsoever, but what I see is people working hard to find a path through an incredibly difficult situaiton. Huge mistakes have been made along way, but can’t we tone down the rhetoric just a bit?

Just heard Brian Cowen on RTE News arguing that access to this fund will save us from having to borrow at higher rates in the markets. He clearly thinks that what we agreed to today is a great idea, but just over a week ago he told us that we had no need for the fund. I am confused because Ireland’s mees 10 days ago was pretty similar to Ireland’s mess today. Am i missing something?

Spain got hosed last week on spread, and in absolute yield terms. There was a big pop in their CDS open interest as well.

Hedge funds are most likely moving on to Italy. Much cheaper to short. The Euro itself is the next big target, with bets that Germany/Austria/Netherlands/Finland and, because they’ll insist, France and Belgium (or should that be Flanders and Wallonia) leaving the Euro out the top, and the remainder being left with our current currency.

None of this has to happen to make money – all it takes is for what’s called “real money” to follow, and profits are made.

Not against hedge funds, per se. If they’re wrong, they lose. Or should do, anyway, and many have. Post-LTCM-type policy responses are not helpful when this happens.

@John McHale
“Just watched the Minister for Finance on the 9 o’clock news…..I’m inclined to believe him….”
“…why do people jump so quickly to assuming bad faith?”
No comment.

@Jim Power

No – when your leaders merely repeat what they’re told to by your real leaders it can sometimes be confusing.

@ Seafoid
I actually do think it will get us back into the market (as well as an election and passing the budget).

Although, getting back into the bond markets doesn’t really solve the problem any more than borrowing from our allies does.

The way I see it, this scheme allows us to use up our remaining funds to try and have a final go at recapitalisation, while maintaining a safety net of funds to access once that money is used.

It’s very expensive, but it might work. I choose mindless optimism over thoughtful hysteria.

I’m not sure this will contain the crisis. If Europe cannot properly solve the Irish problem, how are they expecting to save the other sovereigns. A real deal, a real process, a real solution, no matter what form it might take would stop contagion, I do no see any detail or plan here which meets that challenge.

This is not a game changer, it does not move the situation on, it is nothingness. If this was the solution we would not be here.


Looks like FF have given away the money from the NPRF that FG/Labour were planning on using as a stimulus package for the economy.

Their election trump card has been wiped out! Bad news for them.

Ajman, is Belgium not the obvious short on the basis of it’s politics, debt burden, tight spread and large financial sector


I have long argued for imposing losses on unguaranteed seniors in the contect of a proper resolution regime.

You seem to have a quite benign scenario in mind if we go ahead loss imposition of seniors.

Suppose that we do this to such an extent that we end up with well capitalised banks, but with no support from our international partners. With no lender of last resort and worthless ELGs, would deposits come flowing back to the banks to replace the rapidly retreating ECB? Not likely in my view. And where would the State get the funds to fill the €19 billion buget gap? It would be one hell of a fiscal adjustment then. None of this is certain, but do you really want to take the chance?

@John McHale

If you are suggesting that this deal is the best that could have been negotiated under the circumstances I would very much have to disagree. The government made a huge blunder in not negotiating the interest rate up front before entering formal negotiations last Monday. (It appears that an agreement not to touch the 12.5% tax rate was made up front). The card the government could have played was “delay”, not “default”. There was no compelling need for Ireland to enter negotiations last Monday, but there was a compelling need for the EU as a whole to stop the markets hammering Portugal even further.

The IMF rate is 3.1% or a bit more depending on maturity. Their philosophy is to take a country out of the markets for a time to allow the country to rebuild. The EU philosophy is different – it is that a country should stay in the markets but that the EU provide a ceiling, hence the interest rate is high by design. The problem with this is that it is just unrealistic, and you end up forcing a high interest rate on a country right at the point when it can least afford it. The government should have taken the position that they would go along with an IMF+ type of approach (where the plus could have been the EFSM and a series of bilateral loans) but that the structure of the EFSF was just not suitable for Ireland and would further harm the country. This would have forced the bailout package to either be done without the EFSF (and there was the money to do this) or to agree to fix the EFSF (i.e. get rid of the over-collateralization overhead) before agreeing to use it. This would have resulted in a considerably lower interest rate.

To me it is yet another example of the extremely weak, inept and amateurish leadership, after years of the same (which is no surprise). As mentioned above by zhou_enlai if there had been a credible plan B that could have held the fort for a few more months, with bank resolution and other legislation in place to enforce it, our negotiating position would have been much stronger. I have no doubt that a combination of this plan B and using the threat of delay for a few weeks would have resulted in a much better outcome. Whether this better outcome would make much difference in the overall scheme of things is another question, however a further demonstration of the weaknesses and failures of the current leadership does not help.

“The option to play “hardball” would have had to be backed up by popular political will in the country to essentially go onto an economic war footing.”
And not just the public service. Welfare would all but disappear. We’d be looking at a 22-25 bn adjustment, I reckon, in about six months. With the NPRF used to keep the lumpen banks working and to rollover 2011 debt refinancing (if we only defaulted on bank debt – I don’t really want to consider sovereign default at this stage; time enough for that in 2014 😀 ).

I only see public willingness for “them” to pay, where “them” is somebody else.

@Jim Power
Well done for standing up to the spoof and bluster from the less-talented brother.

I don’t agree at all that our hand is strong. The scale of the disaster is so large that on pushing the nuclear button we would shortly be hiring Gideon Gono to head up the Punt Nua currency policy unit. As the Keynsians have found, you can’t create expectations if you are not willing to go through with them (you can’t raise inflation expectations without causing inflation).

If the EU and the ECB were against bank bondholders being burned and the IMF, whatever it thought, was prepared to go along with them, we have no cards to play.

Empty hand may work in Kung Foo, but we ended up Chop Suey.

@Tull = you can do bigger size in Italy, and Belgium’s numbers have been overridden constantly by its EU capital status. You’d end up fighting political will, in a way you wouldn’t necessarily with Italy.

Were Germany and France to form the two main players in a new currency, I wouldn’t give it 5 years.

Since the NPRF was destined only ever to meet some of the liablilities of publics sector pension commitments, if they now pay for their pensions like the 1 m in the private sector, then maybe not so much lost as might appear at first sight.

John McHale writes:
But why do people jump so quickly to assuming bad faith?

Exactly. Besides, there seems to be a failure to distinguish between the ethical and the purely pragmatic aspects of the bondholder issue. It may be morally self-evident that the bondholders should be given a haircut — but the question is whether it is in the country’s interests (including those of the taxpayer) to do so at this juncture.
Whatever the government does now there will always be the counterfactualists who will argue that a different option would have been a better solution. Unfortunately one cannot replay history, so we’ll never know for certain.

I would love if FF would put themselves in the position of being in opposition. Think of how you would react to what has happened today. You would, understandably, be livid. We are. So now that you are starting to appreciate how angry we are you should take this opportunity to fight for us – the people who empowered you. I cannot claim to have given you a mandate to negotiate on our behalf and strangely I’m shocked that 20 odd % voted for you in Donegal but for those who did in the last election and for those who didn’t bother, and as a result don’t have a reason to bitch, please stay out of this argument. As a result we now have a FF government who think they are in control but really are fighting for their own survival. The fascinating apect of all of this is that the basic common FF supporter has never managed to make any millions or be at the centre of any powerful local decision but still will stick by their men – mostly men. Congratulations. When the world was falling you can tell your grand children that you didn’t see the tsunami, that you stood by the party and still managed to convince yourself that you still tried your best but those lehman buggers let you down.

@ Rob S
Thanks for clearing up my error re what has been taken from the NPRF. Just two weeks ago I told a colleague of mine in the public sector not to rely on the pension they have been promised, with the demise of the NPRF it seems likely to me that current public sector workers may be looking at reductions in the pension they thought they would get.

The Governor of the CB was very adamant that the NPRF should be ring fenced from politicians before it was even established, of course it was not, and in any event they brought in legislation that made it the plaything of Lenihan his personal piggy bank so to speak. I predicted some months ago on this site the fund would become mono “invested” in banks and that we would end up owning all the banks! Ireland is turning into a communist country with a bit of rugby, soccer and GAA thrown in to distract the masses.

It is ironic that the man who forecast the NPRF would not survive an economic crisis was one of the three men team that actually negotiated it’s surrender.

Ireland negotiators had no guts, we had a great chance to make the ECB share in our misery. The Euro architecture was wrong the engineering was wrong and when the building burned down it was foreign banks, bondholders, hedge funds first to the exits. This deal replaces zombie banks with a zombie economy. I now live and walk among the undead!

Hogan, I dispute the contention that he is the less intelligent sibling. I believe a third sibling is the head of legal in the ECB. Agree with you on default. We have 2 – 3 years to shrink the banks and & balance the primary budget. Game on then. A bridge loan to restructure at under 6 pct might not look too bad.

And amid a program of borrowing that will cripple the state, the Croke Park deal apparently still stands…or have I missed its demise in all the fuss?

I mean, it seems almost like a detail at this stage.

@John McHale
We went eyeball to eyeball with the EU/ECB – and we blinked.
We had the nuke of Eurozone contagion. They had the nuke of cutting off credit. With the loss of the NPRF it is as if President Kennedy had ended the Cuban missile crisis – by agreeing to unilateral US nuclear disarmament. Not a successful outcome, I’m sure you would agree. We should have stated that we weren’t covering the losses the seniors should have had and kept on repeating this ad infinitum. They would have blinked. We are 1% of the Eurozone.

As regards people acting in good faith, the size of the bank bailout and the deficit, the lack of accountability, the token investigations, the rescue of the developers, the protection of the establishment’s remuneration, of vested interests etc are all indices of how corrupt the country’s establishment is. All say they are very corrupt. Do your supping with a long spoon.

Prediction: they’re getting the 5.8% by calculating a 1% opportunity cost on the Irish money.

@Hugh Sheehy:

And amid a program of borrowing that will cripple the state, the Croke Park deal apparently still stands…or have I missed its demise in all the fuss?

No, you haven’t. It beggars belief that it remains unaltered — despite the fact that there are absolutely no formal-juristic grounds for leaving it untouched. Here I go again, for the umpteenth time:

Article 28 of CP agreement:

The implementation of this Agreement is subject to no currently unforeseen budgetary deterioration

Shhhh …


I wonder it we will look back at this event and bitterly remember Von Clausewitz’ dictum that Politics is War by other means,
and that we were fooling ourselves thinking that we were in the company of friends

@AMcGrath – “I hope I am mistaken but that reads very like that the domestic and NPRF funds are include in the 5.8 per cent calculation. Surely not?”

It does sound like it doesn’t it. But it’s not at all clear from the usual lack of detail that’s been put out. A typical ploy to ensure that the papers in the morning don’t have the detail and it doesn’t come out until later in the week when people have absorbed the headlines (lost interest).

Whatever, looks like they’ve ensured we will use the NPRF etc. (what’s in our pockets at the moment) first so that we are without any means of our own by the time we start drawing down …. and that puts one in a really weak position – especially if we do end up at a point down the road when we might find ourselves re-negotiating as we will be in an even weaker state that we are today. A bit like being neutered/castrated.

Don’t forget that it’s not just the NPRF in terms of our ‘own stuff’ that we will be using first in that total of 85bn. There’s also the money the NTMA already borrowed (we are funded up to the middle of next year stuff!) which was borrowed at a rate that I can’t remember…. was it less than 5.83% ??

AS FAR AS I CAN SEE, FF have pi55ed the NPRF up against the wall and EU kicked the can down the road to a sovereign default in what? 2-3 years tops?

Who’s up next to bat? Belgium or Portugal – or will it go straight to Spain now?


Out of interest, can ‘the markets’ discern from how the EU/ECB have handled this situation what positions the various dealers should adopt over the coming weaks i.e. have they shown too much of their hand and you guys are ready to leap all over it?

Probably better to secure a funding deal now, as it probably won’t be on the table later on in the year if Spain and/or Italy slide further into trouble. I think Spain is particularly at risk.

@Brian J Goggin

The L&DV might also reasonably challenge the unsupported assertion that threatening to refuse the bailout would be like threatening to shoot ourselves (devastating for us, not for our negotiating partners) rather than threatening to let off a hand grenade (devastating for all parties). As long as we’re assuming good faith of our leaders, they might point out that Cowen himself today characterised a bank default on senior debt as unacceptable because of the threat to the European financial system – a grenade not a handgun, in other words.

@BL – “Good god…its getting worse the troll infestation here…”

Mr Moran sure has made some unusal posts in various threads in the last few days but that’s one of his more unusual !

I’ll see if I can draw his fire 😉

I watched Constantin Gurdgiev on the 9pm news and what worried me was his comment that there still is a possibility of another 30 billion or so of bank losses that will have to be dealt with when home mortgage lending losses accumulate (and other losses?) – I wonder how likely we are to see more calls for bank recapitalisation (beyond the 35 billion in the EU/IMF/Irish State bailout) and what can possibly be done if these arise.


re: If the EU and the ECB were against bank bondholders being burned and the IMF, whatever it thought, was prepared to go along with them, we have no cards to play.

Not correct. There were other options, surely.
1. Refuse the deal. This would meand emergency legislation to burn bondholders. It would also mean emergency restrictions on deposit flows.
2 Agree to leave euro.
3. Set up new currency at devaluation of 30% linked to stg.

Within six months the worst would be over.

@John McHale

re bad faith..

here’s the problem.

There have been many times when I have said in the column and on programmes that I trust BL and believe he is doing the right thing. I’ve attended briefings where they (BL + aides) have looked me in the eye and sworn that There Is No Alternative.

And then every time you have to face the fact that what you’ve been told is wrong – just completely wrong. Sometimes I think its because they are mistaken; sometimes because they are incompetent, sometimes its because I think they hope, and sometimes they tell barefaced lies because they think we can’t handle the truth. Just this week Peter Bacon let the cat out of the bag about the losses (he told them 150 – BL told the Dail 80). There’s also been total tosh talked about legal problems and this pari passu rubbish BL trots out like clockwork.

But for me the final straw this week was that BS plan. They knew the day it was published it was BS. Didn’t touch the public sector. Didn’t touch the pensions. Fictional cuts in other places.

Always they have one eye on the politics – they will leave it to the next government to do the real cutting and bank on getting back in 5 years.

So look, I think your post is super reasonable and I’d be happy to talk to you this week and perhaps reflect it in a column – but you have to understand – the Brians have NO credibility left. They used up any good faith they had – certainly with someone like me who was prepared to give them a chance.

I said on the Late Late last year I trusted BL. Today, I can’t say that anymore. I think he’ll say anything to get him through the next week.

From, Krugman comments:

“The Irish Non-bailout

So, a credit line at 5.8 percent interest. Considering that Ireland was able to borrow at that rate as recently as mid-September, and was falling off a cliff then, why is this supposed to solve the problem?

What’s the Gaelic for “You’ve gotta be kidding”?”

Please, I beg of you, do not suggest a translation.

I just read this (IT) – I presume he was talking about Morgan Kelly. These really do look like words that could come back to haunt you one day Mr Lenihan…… Not that he would care…..

Asked whether the issue of mortgage defaults came up for discussion in the bailout talks, Mr Lenihan said the EU and the International Monetary Fund believed the threat of mass mortgage defaults in Ireland was exaggerated.

He said the problem of mortgage defaults was discussed “in detail” in the negotiations.

“The international authorities did not accept some of the literature that was written in Ireland in recent times about this. They believe it was exaggerated.”

@Joseph Ryan
“Not correct. There were other options, surely.
1. Refuse the deal. This would meand emergency legislation to burn bondholders. It would also mean emergency restrictions on deposit flows.
2 Agree to leave euro.
3. Set up new currency at devaluation of 30% linked to stg.

Within six months the worst would be over.”
As grumpy says, only if you are prepared to slash public spending to the tune of some 20-25 bn. If you are prepared to do that, then we don need no stinkin’ bailout… and that’s before the real economy fallout from no longer being in the euro (it is not trivial).

So…if i read you right. Not now but later? What about signals? (note to Paul the madder above : this is a secret nazi code….)

@ Ger

What sort of rate do you think the NTMA could get in the market with this deal ? The FT had a quote from someone there last week saying that anything over 6% “and we would be f$@@#d so we would”.

@bl. Did RBS really predict a 12-20% loss rate on residential mortgages? Do you know when they said that because that those levels of losses are completely unheard of in any previous crash that I can think of. Be interested to read their report.

After watching RTE news at 9 – especially Sean Whelan’s analysis of the interest rates that is still not clear. He breaks it down like this
EC 5.7%
Klaus Reglings fund (EFSF?) 6.4%
and IMF 3.12% but translated into Euros this also becomes 5.7%

Not sure how the agglomeration of these arrives at 5.83% but he didn’t mention our own funds or the sums involved –

@Sarah Carey:
For the sake of new readers, it might be well to make it clear that your BL = BLTD (MinFin), not the more famous BL who posts here.



” A more immediate accident could be an unco-ordinated decision to wipe out Irish bank bondholders. ” Puts the deal in context. At least taxpayers can vote.

He makes an interesting point about separating sovereign and financial debt .

Europe is edging towards the unthinkable
By Wolfgang Münchau

Published: November 28 2010 20:49 | Last updated: November 28 2010 20:49

A correspondent whom I respect challenged me last week. It is easy to criticise eurozone governments, he wrote. But how about some constructive advice?

OK. The following actions would solve the problem. But the chances are you are going to hate them.

First, I would favour some immediate debt restructuring for Greece, Ireland and Portugal – the three countries with the most unsustainable debt trajectories. This could involve haircuts, debt-for-equity swaps or other schemes. What matters is that the liabilities of the public sector are reduced to a sustainable level.

On its own, this would not be a solution at all. On the contrary, the bond markets would seize up completely. Investors would quickly conclude that all European debt – except German – was insecure.

For the plan to work, it would take two further steps. First, we have to find a way to separate national debt from financial debt. I would change the remit of the European financial stability facility, the sovereign bail-out fund, and charge it with the restructuring and downsizing of the European banking sector. Banking must be taken away from the member states.

That would alleviate the pressure on sovereign debt but would not solve the problem. For that, I would turn all outstanding sovereign bonds, existing and new, into a common European treasury bond.

Since a single bond constitutes the core of a fiscal union, you also need a functioning institutional set-up. You need, of course, a eurozone treasury, lots of rules and democratic control. What I am proposing is a regime change. It would require a new European treaty, no doubt. But it would end the crisis. And it would end all speculation about the longevity of the euro.

Meanwhile, back on earth, let me assure you that my proposal stands no chance of success. For a start, Angela Merkel, the German chancellor, would not allow it. The German constitutional court would not allow it either. The proposed treaty change would almost certainly be defeated in some referendum if it were agreed. And member states would never countenance ceding control of their banking sectors.

So how about some realistic suggestions? I think we have moved beyond a situation in which the “realistic” technical fix can do the job. If we had the luxury of not starting from here, as the Irish joke goes, a much less invasive solution could have been found several years ago. One could have constructed a system based on policy co-ordination. One could have established credible bail-out, default and exit rules. But the European Union chose not to act during the euro’s fair-weather decade. The longer you wait, the more radical the solution has to become. Today, the eurozone must deal with a simultaneous – and inter-acting – financial and governance crisis. The radical nature of my proposed solutions is merely a reflection of the mess we are in.

So what is going to happen? The eurozone has only one strategy for now, the bail-out, shortly to be followed by the bail-in. Axel Weber, president of the Bundesbank, last week made a revealing comment when he offered his macro-arithmetic of the crisis. He said the various bail-out funds added up to €925bn. The maximal possible financial risk in the eurozone is €1,070bn, leaving a small gap of €145bn. The implication is that the eurozone would somehow find the petty cash to make up the difference in a worst-case scenario.

This is very typical of the complacency with which European policymakers approach this crisis. How can we be so certain about the maximum damage? Every day last week, the markets seized on another country. On Friday it was the turn of Spain. Who knows, this week they might go after Italy and Belgium.

There are other accidents waiting to happen. Ms Merkel and Nicolas Sarkozy, the French president, were last week putting the final touches to their new bail-in rules, to introduce collective action clauses in sovereign bond contracts. I would not be surprised if at least one member state rejected the Franco-German diktat. For example, I cannot see how Spain or Italy can conceivably support them. To use a seasonal analogy, it would be like turkeys voting for Christmas.

Another accident waiting to happen could be a decision to appoint an unknown technocrat to lead the European Central Bank when Jean-Claude Trichet retires next autumn. As Mr Weber is skilfully manoeuvring himself out of contention, there is a danger that the EU may once again settle for a less well-known candidate, similar to Herman Van Rompuy, who in his first year as president of the European Council has failed to provide leadership during the crisis.

A more immediate accident could be an unco-ordinated decision to wipe out Irish bank bondholders. If that happened, eurozone sovereign risk premiums would go through the roof. This is why I am proposing to separate banking risk from sovereign risk – and to pool the latter. I think bondholder bail-ins are a good idea. But they cannot work on their own.

The eurozone is manoeuvring itself into a position where it confronts the choice between two alternatives considered “unimaginable”: fiscal union or break-up. If you are saying my proposals are unrealistic, you are making a very strong statement indeed – one with implications that I somehow find unimaginable.

Thanks Sarah,

I actually agree with a lot of what you just wrote.

Leaving the Croke Park agreement and pensions completely out of the plan is indefensible. It was clearly a political judgement based on the fact that the unions and pensioners are the only ones organised enough to bring the plan down. The unions then went ahead and cynically organised a march on the part of those it had pushed the burden on.

I also agree that Brian Lenihan sometimes really lets himself down, none more so when he says that a guarantee was necessary in September 2008 — something that all serious observers agree — when the problem was the blanket nature of that guarantee.

I did not expect to be providing a defense of the minister when this thread started. My basic point is that many critics get off too easy in terms of the outlining the alternative. I am not saying that alternatives should not be debated, nor claiming that there is not a better path. I have some serious disagreements with government policy. But we have to recognise how difficult a corner we are in — not least our unfortunate dependence on the ECB.

NPRF down the banking swanee?And that was ringfenced for public sector pensions?Including inflaton proofed ‘pensions’ for ministers/td’s/senior administrators et al?
Aw gee……………

From The Guardian

“EU ministers tonight spelt out the terms of Ireland’s €85bn international financial rescue package, and revealed the Dublin government will have to raid its national pension fund and other cash reserves for €17.5bn as a condition of the deal to bail out its banks and debt-laden economy.

The unexpected contribution from Ireland was demanded at a hastily arranged meeting of the eurozone’s finance ministers, who were desperate to secure a deal before the markets open tomorrow.”

John McH
this is now and has always been political economy. A year ago a v senior FF person said to me “why should we do all the hard work and let that shower get the credit. Wed be better off feckin it up for them”. And lo….it came to pass.
Im not saying it was a deliberate politicised decision. but im sure that in any choice the politics entered into it. As an economist, ask : whats in the utilty function of FF….what weight the longterm public good v somehow having a FF presence on teh plinth in 2016. Or am i too cynical and should go to

@ Brian Lucey

I don’t think FF cunning had anything to do with it. FF are too knackered for cuteness now.
The great game is being played on the Continent.
FF are ffed anyway.

@Brian Lucey
“So…if i read you right. Not now but later? What about signals?”
Yes, but not intentionally later.

In three years time, we will still be in no position to return to the markets:
– still running a deficit
– high debt level
– more austerity to come
– the new Merkel bond clauses
– banks only just profitable (if even)
– contingent liabilities due to credit enhancement

Our european partners are making the same mistake our elites have – completely underestimating the impact of the bubble. We are not in a trough that will recover, we are on the downslope of a ^-shaped top. It hasn’t worked its way out yet as median property prices to median incomes (which are probably still to high) is probably still out of line (if we had any figures we’d know!).

We haven’t really had a property crash yet, we’ve just had a slide with attempts to slow the fall…

ah, right…and they call me a gloomy sod.
Meanwhile…been thinking of Ken Whittaker. That he should live to see this day (and long may he live). Lemass and he dragged us from the abyss. Now we are plunging into it…
Read Ronan Fanning “irish dept of finance” … far we have come

The rate of interest on the bailout

(1) NPRF €17.5bn @ 0.00%, current opportunity cost 4.90%…erformance.pdf

(2) IMF €22.5bn @ 3.12% for first 3 years and 3.99% thereafter upto 10 years.

Press Release: IMF Reaches Staff-level Agreement with Ireland on €22.5 Billion Extended Fund Facility Arrangement

This gives a blended rate of 3.73% over 10 years,

Mr Chopra said on RTE news that it could rise to 4.5% after initial period.

We know that the EFSF has a lower rate than the EFSM,

(3) If we assume that the EFSF €22.5bn is @ 6.50% and

(4) We assume that the EFSM €22.5bn is 7.25%

This gives a blended rate of 5.83% for the €67.5bn

and implies a penal borrowing rate of 6.875% from Europe equivalent to ECB + 587.5bps.
(similar to the 6.9% that has been speculated)

This assumes the worst case scenario and the full €85 bn is drawn down and highlights the penalties that incentivise Ireland not to do so.

@Sarah Carey

I realise it’s a source of great consternation to you that public sector workers haven’t been stripped of all remaining dignity and made destitute. But you can console yourself with the knowledge that your own taxes will rise by the same amount as those of a daylabourer making €40,000.

As for the “plan,” it is of course BS but not fore the reasons you cite. You think the plan is “BS” because it doesn’t hit the PS hard enough (ignoring the two rounds of paycuts and the thousands of suppressed positions in the prior rounds while taxes were increased by a derisory amount) but have nothing whatever to say about the fact that it hits the poor far harder than it hits you and your country club friends. That says it all really.

@John McHale
‘The additional year on the fiscal adjustment is also to be welcomed. It reflects more conserative (and credible) growth assumptions and a higher starting debt value to reflect the immediate additional recapitalisation cost. ‘

This additional time simply reflects the fact that the four year plan in not credible.

As for the ECB silence is it not the case they they precipitated the crisis by withdrawing liquidity or signaling their intention to do so. (along with the Merkel problem)

Recaps without guaranteed liquidity is not going to work given the views of the ECB on withdrawal and the time span required to shrink the balance sheets of the banks.

I welcome your balanced view but some of the major issues appear to be glossed over. The markets should tell us tomorrow.

On the topic of BLTD and the various others, the choice has long been similar to the one Niall Fitz proposed. It seems impossible that there’s any other option than two; either they’re incompetent or ignorant to an astonishing degree, or somehow involved in corruption of an astonishing nature, or some combination of both. The consistency with which the things they say are entirely untrue is astonishing. Lots of astonishing things today.

I’ve met Lenihan – although only briefly and only a few times – and he comes across as committed and persuasive and entirely reasonable and then he’ll say something that is so impossible that it causes the cogs in my brain to sieze up as I try to parse it. I’m not terribly good at believing impossible things, even after breakfast.

Oh, one final point on BLTD and co.. I still hope I’m wrong and there’s some other explanation.

Just on market reaction, This looks like a bit a yawn with superficial posi spin from the 5 yr element. For sovs, what has changed? Seniors might come in a bit. Any thoughts?

Going beyond 3yrs might tempt more sov holders in – assuming this reduces sov default risk. The greeks had a problem with this.

Don’t think foreigners will have much clue about political risk.

Er, if we borrow this money at 5.83% how much could we lend it to Portugal for until we need to use it? Somewhere north of 7%? Come on my son, let’s get in there! A bit of the old arbitrage and bobs yer uncle.

Whaddya mean we might not get it back? Bondholders don’t get torched don’tcha know.

Sorry, I was trying to sound like a London bond dealer.

….. I’ll get my coat and go home to bed 🙂

@BL: If FF were a sentient organism, it would have fought to lose the 2007 election. But no political party is, does, or will. The next opinion poll/bye-election/local elections/ GE are, in order of temporal occurrence, often the sole focus of policy decisions.

With doom imminent for them, a scorched earth policy now is understandable. That they had no clue they’ve been doomed for a long time, and might as well have behaved responsibly in that knowledge, is unforgivable.


what is the status to the existing bonds. Are they sub-ordinate to the IMF/EU/bilaterals or parri passu in a default? I realise that this might start a 1000 threads but thought I would ask.

It was nice to have shared the journey with you all. A great bunch of people. Even though people have often disagreed the patriotism and decency of all on this blog has never been in doubt.
Pity about Lenihan and Cowen. Heroes – not

@Jospeh Ryan

What funds would we use to peg our currency at a 30% discount on sterling?

You don’t get to decide how much your currency is worth. If you want to your currency to be worth a certain amount, you have to be able to buy enough of it to make it so.

At what point are these ‘silver bullet’ solutions going to be put to bed?

At what point exactly does the reality kick in that borrowing money at half the market rate is preferable to becoming a pariah in the international banking system, a pariah in the sovereign debt market and reverting to a toilet paper currency that we don’t have the reserves to support, particularly when the deal involved in the loan has the potential to finally provide the type of hard-nosed economic competitiveness that we do desperately need?

This country can be run on €30bn per annum. All that has been missing is an incentive to do so.

no and no. This is a long war. And it is now a war. Capitalism v cronyism. I guess, and this is despite having read a lot of c19 history what palmerston said
“therefore I say that it is a narrow policy to suppose that this country or that is to be marked out as the eternal ally or the perpetual enemy of England. We have no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow”
And its not now in the interests of the franco-german axis to be too nice to us. Right…what now. Irish geopolitics are not well developed. Last week i wrote “This is geopolitical hardball: Brian Lenihan from Castleknock versus the heirs of Bismarck and Cardinal Richelieu”
We now know who won.

@ hugh sheehy
Could collective delusional disorder explain how the cheapest bail out in the world morphed into a national calamity ? Group think at the very least appears to have been a behavioural characteristic from an early stage along with a heft dose of confabulation.

“At what point exactly does the reality kick in that borrowing money at half the market rate ”
errr…when did the 3/7/well get back to you on the maturity go to 11.6%?

@John McHale

Just to be clear – I don’t condemn your argument or reduce it to a defence of BLTD [thanks BJG 🙂 ]. I think you could be right [hope you are!]- for instance – the “shoulda let Anglo fail’ brigade ignored the unavoidable costs of that strategy. And in my less panic stricken moments I think -well – we go to subsistence for a few years – personally and nationally and maybe it’ll turn out okay. And maybe it will 🙂

@whoever it was said I wanted to reduce public sector to penury etc.

I’m a part-time freelance columnist in a tanking industry. I don’t think people’s opinions should be qualified by their earnings – they should stand on their merits whether one is unemployed or rich – but I’ll take that manual labourer’s if it was secure and pensionable.

It’s not about being anti-public sector – its about fairly spreading the burden. The recovery plan protected two sectors based not on right, but on politics. That’s the worrying bit.

We have suffered a serious defeat here. It’s equivalent to 1169 but…
The conquering army this time don’t really want to stay – they just want our money and…
They will soon be fighting battles on many fronts…
Let’s just wait until the crisis spreads to Spain and Portugal. It will be up for grabs again then. If we have people with political acumen in then we can really turn this back to our favour. This is done by negotiating a collective default with the other PIIGS and joining them in the Oink – the new Euro currency for the peripherals.

@ Carolus Galviensis
“Article 28 of CP agreement:
“The implementation of this Agreement is subject to no currently unforeseen budgetary deterioration””
Do you not see what they are at? FF normally receive the votes of the Public Sector, years and years of bribery at election time and of course the notorious Benchmarking. I see Mary Harney now admits it was a mistake. How much has that cost over the intervening years since implemention? Surely Article 28 of CP should be invoked and Benchmarking reversed. However, that will no happen. This vote has now shifted to the Labour Party in the opinion polls. FF know that this election is lost but they are planning ahead for 2016 and so are leaving the incoming Government to deal with the problem of the over paid Civil and Public Sectors.


“Partners” “colleagues” etc

Rabbite on Prime Time 24/11/2010 (about 15 min from start)
“the agreement we have already made with our European masters”
Presumably a slip of the tongue.

Interesting point. As new money always takes precedence over old then it would appear that existing long term sovereign bonds are more risky. I think this is one of the reasons that the Greek bonds are still through the roof despite their bailout. Perhaps Eoin might enlighten us.

@bill hobbs
I don’t believe that collective delusional disorder could explain how the world’s cheapest bank bailout has become such a catastrophe unless it’s you and I that are having the delusions.

As for Ernie having a go at Sarah Carey, while Colm Mc is not always correct about everything, one of his quotes seems appropriate.

“A small reality is this country is bust. There is no shortage of compassion; there is a shortage of money. We are borrowing €400 million per week and a big component is the public sector payroll.”

@Sarah Carey, @John McCormack

The fact that the public sector took two separate pay cuts in the last 18 months, totalling around 15% in addition to the 5% or so of increased levies applied to all earners, contradicts your claims of a general FF protection of PS workers. I would have legitimate criticisms of the salaries paid to senior management in public administration, health, education etc., but it’s just lazy to malign “the public sector” as a whole.

The impact of the 5.8% rate on variable mortgage rates may not be very healthy. Hard to see how variable rates can be retained at their artificial rates now that a long term rate has been fixed. Acceleration of mortgage difficulties unavoidable.

The Greeks should be grateful to Ireland. It appears we got them an extension of their loans – ‘In a third move, Greece was told it could have an extra four-and-a-half years to repay emergency loans totaling 110 billion euros to match the seven-year term under Ireland’s deal. ‘

Point taken. I was not in favour of the lower paid Public Sector workers being hit previously. But we have the highest paid political leaders and representatives and also the upper levels of the Civil Service who have been totally incompetent in carrying out their duties. They get hugely rewarded and yet did not do the job they should have done over the past 10 years.
The pensions of the Public and Civil Service are a huge burden that private sector workers are paying for and many of these private sector workers are not in a position to provided pensions for themselves.

The Public Sector do themselves no favours. They receive a 1/2 hour off to cash cheques that do not exist, as they are paid by electronic transfer and this item is only up for discussion. What a ridiculous situation. Let’s get real here the country is going down the toilet and this will be part of the improved efficiency in the Public Sector through the Croke park Agreement if we are lucky.
What a joke.

from Bloomberg
‘Germany yesterday backed away from the pitch for an automatic penalty, agreeing to give the International Monetary Fund a role in determining losses on a case-by-case basis.

The new proposal, fast-tracked from a debate set for December, would introduce “collective action clauses” for debt sold as of 2013, enabling fiscally hard-hit governments to renegotiate bond contracts. EU governments aim to enshrine it in the bloc’s treaties by mid-2013 and pair it with a new emergency liquidity fund to replace the one expiring then. ‘


Those numbers look reasonable and show that the EU portion of the deal was punitive.

The fact that the country would have received a much better deal (3-4%) just being an ‘ordinary’ indebted country that could get a loan from the IMF, than it did “in cooperation with our EU partners”, pretty much sums it all up. I hope the DoF issue a clarification for their press releases indicating that all instances of “EU partners” should be replaced by “EU masters”.

There have been many ‘key’ moments since the crisis began, but I think the contents of this deal and the way it was negotiated will be regarded as a turning point in the nature of the relationship between Ireland the EU. Given a chance to provide a reasonable package of assistance, the EU shafted the country with a punitive interest rate. No amount of subsequent spin or waffle will alter this fact.

Does anyone have a link to video of the joint EU/IMF press conference held today (after the government one)? I caught some of it on RTE News Now and it appeared as if the EU representative was fudging the EU portion of the interest rate and there was silence when asked how, if the IMF rate was 3.1%, the EU portion was 5.8%, which was originally claimed. However I’d like to hear the whole exchange again.

Cowens comment that the EU wouldn’t allow us to touch the bondholders is something else! The culmination of easy politics that was ‘the cheapest bailout in the world’ has brought the country to the edge of the abyss. Does he recognise this? does he resign? does he apologise? no he uses this crisis to lay the blame for the whole mess at the foot of the ECB. What neck he has, it’s abosutely incredicle.

Queue the media to follow suit with a frenzy of anti-eu comment, replacing public anger at FF with public anger at the EU, just in time for a spring election.

This crisis is the fault of Irelands cronyism, her imature politics and her peoples willingness to hold the ‘cute whore’ in such high esteem. As a country we have to recognise this. It is more than unfortunate that we’re paying such a high price for our inept politics, but it should be recognised for what it is.

Even now, we are still looking for the easy option, the magic lever that’ll make it all go away. It’s time for us to grow up.

@Brian Lucey, RE: capitalism – when asked what he thought of western civilisation Ghandi responded “it might be a good idea”. Same goes for capitalism. Is there a difference between state capitalism & cronyism? Is Ireland a special case in this regard?

@Garreth “This country can be run on €30bn per annum.”
Really? I’d like to see your budget for that considering many are using social welfare payments to pay their mortgage. Would the IMF/EU bailout “loan” repayments be factored in to that €30bn?

As for Sarah Carey’s talk about wanting *another* round of vicious public sector pay cuts or pension cuts: there are two separate public sectors, one where half get paid something like 30grand or less and the other one where a minister costs circa half million and what have you.

On pensions, if you’re talking about social welfare pensions, 3 in 4 rely on that&balance on the poverty line (that is poverty as defined by ESRI/Combat Poverty Agency). The amount that could be saved removing the welfare pension from those that have a private pension and/or savings/other income is overstated. There’s an income tax system there, govt. should use it! Any notion of equality is gone out the window it seems in place of easy targets.

Lots of talk about “fairness” but shag all talk about equality. One can be quantified while the other is a lame political slogan. To be honest I thought you would’ve learned to not buy in to political slogans.

RE: nuclear button, that chap from UCC on VinB that mentioned “mutually assured destruction” I thought offered a wee bit of hope of a strong bargaining position.

O’Keefe waffled about playing poker. Antoin says we had a pair of ducks. I think the deck was loaded.

Mad as hell!

If Ireland accepts this usury from EU and IMF.

Then Ireland is no longer an independent country.

Ireland should take the hit now.

And if necessary go into default.

The outcome would be better in the long term.

Plus FF and its partners got Ireland into this mess, they have no authority to negotiate anything with anyone.

Antoin says we had a pair of ducks.
Antoin: defaulting on seniors would have cause unforeseeable contagion

One really has to hope that astronomers don’t discover an asteroid headed directly towards Earth in the near future. Because if they do then Barack Obama will be on to us for the full cost of the €50b program to destroy it, which he will generously finance with a 6% loan. Then our leaders and economists will be on telly to tell us how weak our negotiating position was.

“The best thing about the Irish right now is that there are so few of them.” – Paul Krugman, November 28, 2010

“If you were forced to take the loan, how come you agreed to such a high interest rate?” was a question I was asked this morning in Kuala Lumpur.

Life can be confusing.

Last Saturday, Fintan O’Toole, in the words of his own newspaper, The Irish Times, “was master of ceremonies at Saturday’s Ictu demonstration in Dublin against the austerity plan.”

He has advocated radical reform but was the cheerleader for trade union leaders who have been the conservative defenders of the status quo.

They resisted reform in common cause with groups on the right of the spectrum. In addition, they linked their pay and perks with those of senior civil servants.

They in effect represent the privileged in an unfair society and O’Toole’s ideological blinkers seems to obscure this reality.

Hope, anger and denial on Ireland’s Day of Infamy

However, while anger that the burden on taxpayers has not been reduced, given the fears of destabilisation in other fragile markets, the expectations were unrealistic.

This is why I keep coming back to the question of grants, despite the fact that I would rather have senior debt haircuts myself. (I regard a bit of Eurozone financial contagion as a positive good right now.) If Ireland is performing a vital service to the EU and the Eurozone by not permitting banks elsewhere in Europe to take a loss on their bad investments – and both Lenihan and Cowen are now explicitly claiming this – why is this vital EU program not being paid for on a pro rata basis by the EU (or even Eurogroup) members?

Perhaps in the cold light of day the inevitability of what was agreed might be seen. the Irish economy is simply too small the bear the burden imposed by the banks. This was the case from the very beginning. If the half-baked, spatchcocked emergency funding arrangements that the Troika have finally cobbled together were in place then, they should and would have been used.

On three levels, any attempt to impose losses on bondholders wasn’t on. 1. Banks in the core EZ countries could not take the losses without serious state redcap; 2. too many EZ sovs are exposed to the bond market in terms of deficits and the need to rollover funding; and 3. imposing losses on voters’ savings pots isn’t on.

Ireland has become the sacrificial lamb to protect the Euro as a political project – and the tragedy is it won’t be enough.

The IMF hasn’t covered itself in glory. Perhaps it is compromised by DSK’s political ambitions. Perhaps its arguments were overruled b EU politics. It appears not to have had the time or made the effort to make a proper structural assessment of the Irish economy – and to make recommendations. As a result all the cosseted vested interests that are imposing deadweight costs remain untouched – and those that are (lawyers, medicos and pharmacists) get a touch of the feather-duster.

The IMF will come to regret its compromised involvement in this mess – and Irish citizens will pay a long drawn out and bitter price.

@Brian Lucey

Will it be any less in three years or whenever spain pops?

Actually, if one assumes that Spain is about to have a failed rescue, that leads to one of the better, if quite cynical, arguments for accepting our EFSF package. We avoid the flak for destabilising the European project or the European financial system and get to lie low for a bit. After Spain defaults, we then quietly pop off our own sovereign and bank defaults, covered by the media attention on Spain and the fact that – so sorry! – no-one will lend to us anymore anyway. Unfortunately I don’t think that it’s an especially good gamble to assume that a failed Spanish rescue is very imminent.

Again we’re seeing the subtlety of the spin.

First, Minister Lenihan is saying that the interest rate in the deal is very good compared to today’s 9% …….whereas a month ago today’s rate was irrelevant since we didn’t need to go to the markets until next year.

Then there is the continued reference to the NPRF as a “rainy day fund”. It wasn’t a rainy day fund. It was a pension reserve fund that was supposed to pay people’s pension for many years, not merely one day.

@ Paul Hunt

It appears not to have had the time or made the effort to make a proper structural assessment of the Irish economy

This is a good point about the IMF.

We shouldn’t be surprised that outsiders buy-in to government spin when superficially it appears to be consistent with expectations.

The high tech boom was taking off in the early 1990’s; it’s a different situation for Ireland now and there has been job shedding as exports have grown in our best exporting sector.


Fair point on the 30k salaried PS workers.

But the unions hide behind those while the head of the DAA stil gets 400k.

On pensions I meant PS pensions and not the state pension.

But I think we will reach a point where the contrib pension will have to be means tested.

But the big big issue is the public sector pension bill and the way they were benchmarked.

Oh and a 15% cut – “savage” !!!!!!!! lol.

If you think 15% is savage that just shows the different realities for private and public sector workers.

@Michael H,

The reality is that the IMF, even if they disposed to conduct a preliminary structural review, would not be able to find relevant analysis. Irish academics – and what might pass as ‘think-tanks’ – have had no interest in assessing (in any meaningful and comprehensive manner) the state’s role in the infrastructure and utility sectors. There are, of course, notable exceptions, but one swallow does not make a summer and they, too, are often compromised by their affiliations.

Colm McCarthy and his colleagues are locked in to their review of state assets and liabilities until the end of the year and it wasn’t on the table for the IMF to consider. How convenient. Any analysis I (or others) might present – however well-researched and documented – is simply dismissed. I don’t have the proper affiliation or the long list of citations in academic journals.

In this deal with the Troika, the Government has sold the future of the domestic economy to protect their favoured vested interests in the hope that will secure power at the second next time of asking. While ensuring the economy is being screwed from within and without, they have played a blinder on this front.

How sad – and how predictable.

“So basically, what you’re saying is “ICELAND!”? Works for me?”
Perhaps it does, it might even work for me and for a few others who didn’t sup at the tiger and who do not depend on the Irish economy for income. The vast majority, however, would experience harder times. So going with the flow, not looking at 2013 (oh, sure it’s ages away) is much easier.

On the NPRF. We have been means tested. We have been found to have means. We must use our means before we get more…

@John McHale / YM

I should clarify that I did not mean to suggest that Ireland should have gone nuclear. I think we did only have a pair of twos in our hand and talk of playing “hardball” is specious. However, I do not believe that our DoF had the capacity to get ready for a Plan B in case the deal was wholly unacceptable. Lacking that capacity left us without even a pair of twos.

I think there is a lot to be said for not defaulting on senior bank debt. We need low interest rates in the Eurozone generally if Ireland is to have a good chance of recovering. Those low rates would be very hard to achieve if European banks started defaulting on senior debt. On the other hand, lots of US banks have gone bust without puching their rates up. Is there a reason why contagion risks are so much worse in Europe or is the size of our banks’ balance sheets the real problem?

In any event, I would suggest that we should under no circumstances have considered restructuring ELGS debts.

At the end of the day, showing a willingness to buckle down and pay our debts will play a large part in our economic recovery. The fact of the matter is that we messed up royally in failing to understand the implicit guarantee that was there before the explicit guarantee was put in place. We allowed our banks to expand way beyond what was sustainable and EVERYBODY was given a slice of the pie to keep them happy. Wages went up, welfare went up, special projects went up, income tax went down.

There may have been no mens rea (being the mental intention needed to establish guilt of a crime) on the part of those who did not understand what was going on, but we did get the money and we did spend it. We need to accept that other people in other countries, who did not get that money and did not spend it, are not going to foot the bill for our mistake. Cui bono? We bono’d.

I am starting to see the grim and inevitable logic behind the high interest rate. One should not play hard-ball for too long against a much stronger counterparty. The truth is that the EU could probably have put us into isolation if we really acted up. I doubt that they didn’t have a Plan B in case our Government could not deliver. We will have to get over ourselves and buckle down.

Michael Somers said something interesting last night on The Week in Politics. He described a previous occasion when we were stuck for money and had to borrow expensive US money but once we did – then we could go back to cheaper sources who were willing to deal with us once we had cash. i.e. its easier to get money when you have money.

So call this a grasping at straws query – but is this the basis for the stabilisation argument –

1. Now that deal is done maybe we can go to the Chinese or something and get cheaper money.
2. Default will come but in 2013.


@Paul Hunt

“As a result all the cosseted vested interests that are imposing deadweight costs remain untouched – and those that are (lawyers, medicos and pharmacists) get a touch of the feather-duster.”

I think we should all be a bit more sensitive as to how others in the economy are faring. The idea that pharmacists and lawyers are cosseted is ridiculous. They are closing their doors at a rate of knots. If we are going to preserve the unity in Ireland then we should all think before we speak. Suggesting that sectors which have been more than decimated are cosseted, as Mary Coughlan did before, creates huge anger. People having no sympathy becasue they are suffering too is one thing; people attacking others based on a baseless asumption that those others are doing well, is another thing altogether.

Here’s a comment on the Krugman blog –

“It’s worse than 5.8% when you unpick it. Ireland itself is contributing €17.5bn, or 20%, to this fund. That money comes from the its pension fund, so it’s not money it should be monkeying around with. The IMF is contributing about 26%, at a rate of 3.1% so I’ve heard. That means the 54% that comes from Europe has a 9.4% interest rate attached! So much for helping out friends in the Eurozone. This is a rate at which Ireland is guaranteed to default, and therefore certain to lose (much of) the €17.5bn from its pension fund. Misery.”

Chopra didn’t want to get into the nitty gritty of the interest this morning on RTE maybe this is why, we stump up the first tranche and if it looks like its going south the ECB/EU and IMF minimise their losses.

Is this Europe slapping us on the face for our incompetence and should we be worried by the serious anti euro sentiment that will emerge from this debacle.

What we need is some of that thinking outside of the the box.

Let’s all vote FF at the next election and leave them to take the blame and try to clean up the mess over the next few years!

@seamus – “should we be worried by the serious anti euro sentiment that will emerge from this debacle”

I’m not expecting to see any EU-related referendums coming our way over the next few years.

@hogan On the NPRF. We have been means tested….

Probably the most accurate comment of the lot….

The other M word I heard this morning is Milestone. Shock horror, looks like the four year plan might actually be overseen by a project manager….. Nobody in official circles seems to be picking it up. I would suggest the commentators look the word up and perhaps get some understanding how projects are run, the full implications may sink in.

An atavistic infatuation with perpetual victim-hood has bred in the Irish a strong sense of entitlement to special treatment at every turn in the road, especially when caught out. Amongst the reams of denial and whinging there is scant acceptance that official Ireland and its large oligarchy of vested interests – from academics promising a new economy every other day, to trade unionists promising reforms and efficiency, and the rest of the cash hungry alphabet in between – collectively contributed in their own measure to this nadir. Rather than accept that responsibility may lie within, even unequally, the trend is denial followed by blame. Both are very primitive defense mechanisms leading to the projection of ‘responsibility’ onto others, in this case, the ECB, the EU Commission, the IMF, the bondholders, some bloke with a beard, without a beard, whatever. Why should Ireland receive special treatment, a special dispensation, rather than Greece, or another eurozone nation? Wasn’t the nation after all closer to Boston than Berlin?

The bank guarantee was an egregious act of stupidity on a par with approaching a Zeppelin with a blowtorch to repair a leak. It antagonized the other European capitals. The offices of the Irish Central Bank and Financial Regulator, plus Governments, broadcast for international consumption a wizard’s tale of Ireland. They filed regular health reports to the ECB. Banks were fine, solid, the best capitalized in Europe and other shrill guff.

And despite the arguably villainous roles played by bankers, the citizenry are still waiting for indictments. Notional professionals can contribute to bankrupting huge sections of the population with the reassurance that a race amongst stone tortoises will move faster than any official investigation. No need for alacrity when politicians are tangled up in the wash.

If the government had any money sense, and actually fished in its own seas of economic propaganda, would immediately scrap Croke Park and ensure the compulsory redundancy of at least 10% of the public sector. But it won’t of course. Better keep the deal intact. It’s a good target for blame after all.


I mentioned these professions because they are the only ones, to my knowedge, identified in the NRP as candidates for some treatment in the context of structural reform. I can only assume that the Government has a prima facie case for selecting them.

But this just confirms my key point: we do not have the required detailed and comprehensive analysis of the state’s role the infrastructural and utility sectors – or in the sheltered sectors generally – to provide the basis for meaningful structural reforms that will benefit the domestic economy.

“I think we should all be a bit more sensitive as to how others in the economy are faring.”

You might be interested in this, from the Ireland after NAMA blog:

“[…] “fat pharma going lean”. […] Pharma companies paid little attention to production efficiencies. […] In response, following the example of the electronics industry, most pharmaceutical companies are now introducing more efficient processes. As a result, Irish plants are starting to produce significantly more output, while at the same time reducing their head count. In some Irish plants, staff numbers have been reduced by over 10 per cent, completely under the radar of the media.”’s-four-year-economic-recovery-plan-and-“job-shedding”-growth-in-pharma/

My point is not based on the coincidence that IAN mentions the pharmaceutical industry while the bailout plan mentions pharmacists. It is rather that the public sector and the licensed sectors have been protected from the sort of never-ending pressure for improvements in quality and output and reductions in cost that characterise much of the exporting manufacturing sector. What new processes have been introduced into the legal, drug-dispensing, school, policing and medical sectors in recent years? How have the costs of local authority and central government sectors been reduced? These sectors should be forced to become better and cheaper, and that may mean removing many operatives from the sectors. But they shouldn’t get any more protection than anyone else.

And nor should pensioners.


The mechanics of the interest rate are interesting alright and we deserve to be given clarity. Can we draw down IMF or UK-Swedish-Danish money on its own or do all facilities need to be drawn upon at the one time?

The EFSF needs to be clear what rate it is charging. We are going to find out anyway.


I know of plenty of “operatives” who have been let go and costs that have been cut. Everybody is getting leaner and that is good.

I thought last week that FG would back the budget but now with the details of the reparations imposed I am not so sure. Why would FG vote for a budget that is so blatantly against the national interest, involving as it does another transfer of wealth from the taxpayer to the bondholder?

Add the many disaffected FFers to the opposition and what chance does the budget have ?

@ John McHale,

It’s useful to find the three statements in the one spot. Thanks. Not that they’re saying anything beyond what one might expect in the circumstances. Namely that this is a ‘good deal’ for Ireland or more ominously, that it was either this deal or no deal at all.

Reading through the comments on this thread there’s little enlightenment as to the basic questions that trouble the likes of me: will it work and what effect is it likely to have on my life and the lives of those closest to me in the months and years ahead?

If it doesn’t work in the broader context of the eurozone, then the EU will likely collapse and Ireland’s bailout deal will become an academic footnote of history. Leaving that aside, since we have no control over it anyway, we can move on to what it does, or doesn’t do, for Ireland and there appear to be as many opinions on that as grains of sand on a beach, though their uniform negativity is as futile as it is uninspiring.

The immediate consequences of having to accept this deal may be the evisceration of Fianna Fail as a political force. Meanwhile, the preferred government timetable of sticking it out until early March, when the Budget and the Finance Bill are secured, may not hold. But even if the opposition can force an immediate general election through a Dail motion of no confidence, for instance, when the dust from that election is cleared, the parties taking office will still be confronted with the same problem – where do we get the money to run the country for the next four years?

Would the same team who negotiated the terms with the EU/IMF be prepared, on behalf of their new political overlords (and ladies) to return to the table and say, ‘Sorry, can we start again, lads?’ Indeed, would the IMF/EU be prepared to sit down with Ireland again either? I don’t think so.

On one level it looks like the opposition have been stitched up in terms of what they can, or can’t do, in the next administration. On another, they will have an opportunity to make their mark by working the deal and sticking to the parameters of the four year plan so that in those areas in which they have room to maneouvre they make rational choices that will strengthen the performance of the economy and ensure a return to growth, however modest, over that period. As the experience of the late 1980s shows, fixing the fiscal deficit is a precursor to recovery in growth and employment levels, is it not?

The notion of the NPRF being frittered away on daft ‘stimulus’ schemes that may provide no payback or the creation of ‘national banks for recovery’ or the like is just as dispiriting a prospect as seeing it used to recapitalise the banks. Personally, right now I’d have more faith in the banks returning to profitability in the long run and the state getting some sort of return on that investment than either the creation of a national recovery bank to do god know’s what or throwing money at massively expensive ‘green economy’ initiatives. I’d like to be convinced otherwise of course.

The government may appear pathetic, but the opposition have hardly covered themselves in glory over the past twenty four hours either particularlin in terms of in their respective capacities to lead opinion in any constructive direction or handle a crisis situation. It’s extraordinary that our political class always seem to be the last to cop on to reality, revelling instead in taking off down cul de sacs in pursuit of shoals of red herrings.

One thing we badly need is political reform, not just replacing one political adminsitration with another that thinks and acts the same way as its predecessor in office, but that’s an argument for another day.

In simple terms Ireland Inc (ignoring politics and who the designated negotiators were) had to make a choice between 2 alternatives, framed as follows:

1st. Accept imposed bailout conditions with some modifications – ATM’s will operate on Monday morning

2nd. Hardball and end up with a default on senior bonds – ATM’s will not work on Monday

Each outcome would have consequences which were uncertain to different degrees

The framing effect in the Asian disease problem of Amos Tversky and Daniel Kahneman (2002 joint Nobel Prize winner in Economics), helps to inform a properly grounded analysis of Ireland’s dilemma and why B was never likely to happen:

Imagine that the United States is preparing for the outbreak of an unusual Asian disease, which is expected to kill 600 people. Two alternative programmes to combat the disease have been proposed. Assume that the exact scientific estimates of the consequences of the programmes are as follows:

If Programme A is adopted, 200 people will be saved
If Programme B is adopted, there is a one-third probability that 600 people will be saved and a two-thirds probability that no people will be saved

Which of the two programmes would you favour?

In this version of the problem, a substantial majority of respondents favoured programme A, indicating risk aversion. Other respondents, selected at random, received a question in which the same cover story is followed by a different description of the options:

If Programme A’ is adopted, 400 people will die
If Programme B’ is adopted, there is a one-third probability that nobody will die and a two-thirds probability that 600 people will die

A clear majority of respondents now favoured programme B’, the risk-seeking option.

Although there is no substantive difference between the versions, they evidently evoke different associations and evaluations. This is easiest to see in the certain option, because outcomes that are certain are over-weighted relative to outcomes of high or intermediate probability. Thus, the certainty of saving people is disproportionately attractive, and the certainty of deaths is disproportionately aversive. These immediate affective responses respectively favour A over B and B’ over A’.

George Lowenstein helped to explain why this is so as far back as 1996 with his 7 propositions concerning the Actual, Desired, Predicted, and Recollected influence of visceral factors on behaviour:

1. The discrepancy between the actual and desired value placed on a particular good or activity increases with the intensity of the immediate good-relevant visceral factor.
2. Future visceral factors produce little discrepancy between the value we plan to place on goods in the future and the value we view as desirable.
3. Increasing the level of an immediate and delayed visceral factor simultaneously enhances the actual valuation of immediate relative to delayed consumption of the associated good.
4. Currently experienced visceral factors have a mild effect on decisions for the future, even when those factors will not be operative in the future.
5. People underestimate the impact of visceral factors on their own future behaviour.
6. As time passes, people forget the degree of influence that visceral factors had on their own past behaviour. As a result, past behaviour that occurred under the influence of visceral factors will increasingly be forgotten, or will seem perplexing to the individual.
7. The first six propositions apply to interpersonal as well as intrapersonal comparisons, where other people play the same role vis a vis the self as the delayed self plays relative to the current self:

i. We tend to become less altruistic than we would like to be when visceral factors intensify.
ii. When making decisions for another person, we tend to ignore or give little weight to visceral factors they are experiencing
iii. Increasing the intensity of a visceral factor for ourselves and another person in parallel leads to a decline in altruism.
iv. When we experience a particular visceral factor, we tend to imagine others experiencing it as well, regardless of whether they actually are.
v. People underestimate the impact of visceral factors on other people’s behaviour.

The question of whether the ‘ATM’s would have continued to work’ if the second alternative, listed at the start, was selected by Ireland Inc was never answered and will continue to feed the political debate. However, the visceral impact of the consequences of the second alternative would have made the negotiators for Ireland Inc. risk aversive and Prospect Theory explains why they did what they did. They may well have made the wrong decision but that’s another matter. I’m only trying to explain why the first alternative was chosen using Prospect Theory to help my analysis.


Thank you. But the absence of data and research is generally used to avoid consideration of difficult issues. And, in reality, there is some research, though not as comprehensive or as focused as it could or should be, but it has, consistently, been ignored or dismissed. The Competition Authority has produced numerous reports and all gather dust as it is neither empowered nor resourced to take the appropriate action. Very late in the day – and only when the Government was running out of road, Colm McCarthy and his colleagues have been charged to review state assets and liabilities. One has to doubt the ability of this government to respond sensibly to the report that will emerge next month. For the last 7 years I have focused on the policy and regulatory dysfunction in the energy sector that has imposed huge deadweight costs on consumers and the economy. I have been pilloried here and elsewhere as an ‘obsessive’. But it merely stregthens my resolve as I know the truth will out – as it has following the banking debacle.

We are all fiscal and banking experts now, even though the key decisions in these areas have been out of Ireland’s hands for the last 2 years (and now finally confirmed), but there is no interest in the required reforms in areas where Ireland retains sovereignty.

So AIB’s capital target was €10.4bn announced at the end of Sept.

They only raised €3.4bn so far. So still have a target of €7bn before the announcement.

How much more,plus the 7, do they need now?

Lets look on the bright side, we were intelligent enough to join the EU. We have enjoyed over thirty years of prosperity as a result. Prior to joining the EU we had bad government with long dole queues in every little town and a very high emigration rate. Now we still have bad gov’t but we became prosperous enough to afford a “bank crisis”. We have also acquired fame as the country that followed the neo liberal leadership of Ronald Regan, the Bushes’ and crackpot right wing economists like Phillips, Laffer, Greenspan and others. We failed as a country and as a people but we have done this many times in the past. Now, let us stop whining and complaining helplessly and start voting for honest politicians. We are lucky that the ECB kept us afloat the past two years and are still willing to add buoyancy to our economy. The IMF will impose some discipline on the errant sons and daughters of Eireann sitting in the Dail. The rest of us will just muddle along at a higher level of prosperity than we ever dreamed of.

This might sound like a stupid question but bear with me. So FF, the republican party my hole, have sold out and we are going to draw down these loans as we need them. The IMF have given us the most favourable interest rate while our EU “partners” have screwed us. What is to stop a new government with a mandate drawing down only the IMF portion and when the guarantee runs out screwing the bondholders?? By that time problems could easily have spread to Portugal and Spain so no point in keeping a sinking ship floating and we leave it go under.

Suppose it depends on when, not if, it spreads to Portugal and Spain and it also depends on when these senior bondholders are due payment.

I think the EU are forgetting that a referendum is needed on new treaties in Ireland and no doubt they will need one to extend their powers further in the next 5 years so if all else fails get them at the ballot box then if our politicians haven’t grown a pair of balls by then!

They have saved a system and fucked the people!!!

And the NPRF.

€25bn it had at the end of Sept I believe.

But does that include the €3.5bn for BOI, the €7.2bn for AIB (€3.5bn PLUS €3.7bn) co,,itted to AIB already?

So thats not €25bn but €14.3bn. Which will actually be €4.3bn once the €10bn is taken out for the Gov’s contribution to the bailout?

@Paul Hunt

Competition has increased hugely in the legal sector. I am not sure about pharmacies but I think they can be owned by non-pharmacists.


So their overal target has been increased to €10.4bn PLUS €2.75bn = €13bn+?

Or since they only had €7bn left to raise then they now need €7bn + €2.75bn = €9.75bn as you say.


Imposing on your good offices again, but do you have news to impart on how the market is responding? Are they going for Portugal – or is it straight for Belgium?

@ Paul

actually skipping straight to Spain it seems! Barclays had a negative piece out on the Spanish sov/bank funding requirements for Q1 2011. They reckon combined 73bn is required by end April.

Spain/Italy/Portugal yields all 10-15bps higher, Belgium 5-10bps higher.

Thanks hogan.

Still though, I was under the impression they had still had to raise €7bn before this announcement so an additional €5.265 would have brought the new amount they still have to raise to €12bn+.

Ah well – it will be clear soon.

@Sarah Carey

Why dont you change your name to Palin and set up the Irish tea Party movement and be done with it. Extremely tired of your non-contribution to public discourse.

@Vincent Byrne

Attacking Sarah for non contributions to public discourse is a non sequiter.

She contributes and offers her neck on many issues.

That you choose to disagree is your privilege, but not a reason for ad hominen attacks.

And anyway, I dont think Sarah can see Alaska from her kitchen window, so that option you suggest is a non runner!

John McHale fairly asks the default people to outline what they would have suggested.

A bit like (though in no way comparing myself to) Muncheau, when asked to outline what he would propose a solution to the European problem as outlined above. What would be required is something that goes beyond what the political classes would believe to be acceptable.

We needed to burn the bond holders completely and make a 20 billion adjustment in two budgets, six months apart.

There are at least 11 billion in taxbreaks at the moment so all of them then massive pay reductions From 40%-15% starting at the top of all the public sector all the way down.
And tax increases.
To do this would have been very, very painful but the majority of the adjustment would be made by those that could afford it most. It would also involve debt forgiveness for people in high negative equity. Using money freed up by the burning mentioned above.

The reason that that would not even be contemplated is that those on middle and hight incomes make up the vast majority of the political class so none of the 3 Parties will be willing to allow people on about 50K to take a fair portion of the pain.
Under the 4 year plan the insiders have been insulated.

The likely % reduction that someone on the min wage will face by 2014 is between 25-30 %
The likely % reduction that somone on the dole will face is 25-30% by 2014

Someone on 50K is likely to face between 5% and 10% (depending on personal circumstances) according to Conor Pope’s article in the times the morning after the plan was announced.

Peoples positions are interesting from a psychological point of view
The proposals of many economists and the active party membership must contain the element of self interest that sees middle income (public and private) pay a proportionately lower price than the poor.

It looks to me that Brian Luceys position must come from some kind of solidarity with the serfs or perhaps the desire to expose the whole rotten system. It is counter to his economic interest.

Jim Power it seems has a genuine guilt for the shackels the financial services industry has thrust upon the current 25-40 age group.

Constantin I genuinely cant even come up with a guess.
Other than a genuine belief in the necessity for market forces to be allowed to act freely to administer justice.
He is acting against his own economic interests and surely does not have any sense of responsibility towards the Irish serfs?

This has become a battle between those that benefit form the continuation of a corporate capitalist state (about 99% of people who contribute to this blog or are active members of the political economy) and those who earn 40,000 a year or less who have neither the power or energy to do anything.

We need to find out who senior bank holders actually are. Some journalist out there needs to start digging. The truth of this question is where the terms of our 85 billion “Bail out” rest.
Every one said it was the German banks but they have been denying exposure last week.
My belief much like a poster on an earlier thread claiming to be an international trader is that they are American european and asian wealth funds of a relatively small number of very very wealthy people.
Schmucks buy shares. The really wealthy old money buy Bank Bonds. They get paid a risk premium but there is no risk.

@ zhou_enlai

The idea that pharmacists and lawyers are cosseted is ridiculous.

It is also ridiculous that in most professions, the people who run them are usually the biggest and most powerful and arguing that there are small operators who are exposed to competition, is beside the point.

To argue that small solicitors firms are going out of business means that there is a competitive market in the legal business is risible; read what the Competition Authority has to say about it.

How ridiculous is it that in a small country lawyers on the public payroll investigating corruption can become multimillionaires – – rather confusing surely?

The Government announced in June 2009 plans to cut to €133 million in payments to pharmacists over the coming year.

The Irish Pharmacy Union (IPU), which represents about 1,900 pharmacists, said up to 5,000 pharmacy jobs could be lost as a result of the cuts and that frontline health services would be seriously damaged.

The cost to the State of providing drugs has doubled since 2002 to over €1.68 billion in 2008 — up from €332 million in 1997 – -and it costs €640 million to provide €1.04 billion of drugs at ex-factory prices, to patients.

The middlemen collected €640 million and that was only from State purchases.

Ingredient costs €1,240 million (ex-factory price of €1,040 million plus wholesale mark-up of €200 million);

Dispensing fees and mark-up, including over 70s fee: €440 million;

Total €1,680 million.


Perhaps a more granular approach is required? The millionaires in the law library are obviously a different set of people providing a different service to those going out of business.

@Sarah Carey

You wrote: It’s not about being anti-public sector – its about fairly spreading the burden. The recovery plan protected two sectors based not on right, but on politics. That’s the worrying bit.

Did someone say “fairly spreading the burden”? Did you think the burden was “fairly spread” in the last 3-4 budget adjusting exercises when PS workers were cut by 15%, and had to pay the same derisory levies of 5% that everyone else did?

The mechanism for fairly spreading the burden is the income tax system. It hasn’t been used, despite the fact that income tax rates were imprudently lowered (in order to buy elections) throughout the last decade.

What infuriates those in the public sector is having to listen to blinkered morons in the press go on about “fairly spreading the burden” while ignoring entirely the way the burden has been spread thus far.

As for this non-sequitur: Oh and a 15% cut – “savage” !!!!!!!! lol. If you think 15% is savage that just shows the different realities for private and public sector workers.

Is this what passes for thinking in your circles? The utterly juvenile “lol” and exclamation marks, which would not be out of place in a 12-year-old’s love letter to a boyband betokens a complete lack of compassion. You’re talking about people’s lives here, Marie Antoinette. The question at hand, the one you seem to be missing perpetually, is “what is a fair way of distributing the burden of bridging the deficit gap.” In this context, blabbering on endlessly in newspapers, the radio and TV about how “redundancy is a 100% pay cut” (5 years ago you would no doubt have been spouting another idiotic cliché like “rent is dead money”) is to confuse the problem with the solution. The question is: who should pay for the solution? Now, all evidence suggests that the vast majority of private sector workers have experienced neither redundancy nor pay cuts. You apparently think that this group should still be spared any sacrifice to solve the nation’s problems because somebody else took a pay cut or lost their job. You think unions “hide behind” the low paid in the PS (who, by the way, make up the majority of PS workers). Well, what you’re doing is more reprehensible: hiding behind the unemployed, among whose number you are not. Because those who have not suffered or paid much at all have, in your view, suffered by proxy (since someone else lost his job), it is only right and just that the society repeatedly go after the 20% of workers who happen to work in the public sector. What could be more popular than 80% of population repeatedly pinning the entire burden on 20%? It’s a grave injustice when the EU does it to Ireland. When Ireland does it to its PS? Not so much, apparently.


BTW, I always thought it farcical that people who were being paid millions of euros to keep tribunals going spent days and days questioning people about tens of thousands of Euros. We still haven’t any outcome since the days of cross-examination Bertie soent in the box. The whole tribunal system is absolutely shameful.

Already raised by a few people but not answered:

According to the Government, the “combined annual average interest rate” will be of the order of 5.8% per annum. If we exclude the State’s contribution of €17.5 billion which is “interest-free” then the average interest rate on the borrowed €67.5 billion rises to 7.3%.

If correct, this rate assumes an even chance of Ireland defaulting on the loans. When is the point of the bale out if there is such a high risk of failure?

Aw thanks highway 🙂

I can see Kildare from my house.

In championship season – it get’s quite tense.

But back to the chinese – if we’re can-kicking… it crackpot to suggest we might be able to borrow cheaper money down the line.

I don’t mind learning Mandarin. Certainly be happy to get the kids started on it.

@Brian Flanagan
Mr. Kevin Cardiff stated at the press conference last night that the 5.8% was on the borrowed money, excluding the NPRF funds.

@ Eoin

Have you any political opinion on the targeted systemic attack on the weaker European country bonds by the market?
Are you of the view that they are merely exposing reality.
Or would you consider it unfair and a little cruel
Or what?

Perhaps if you view it another way you’ll get less angry.

The tax mechanism could potentially be used to fairly spread the burden. You’re right. We could introduce flat taxes and have a fair tax system. I like your suggestion.

However, lowering public sector pay – perhaps to align with international benchmark levels – would be a way of reducing the burden in the first place.

Public sector workers are still net tax recipients, so you’ll have to excuse private sector workers for being a tad more upset about tax increases.

Private sector workers, particularly in the tradeable sector, have pay that is internationally benchmarked on a regular basis. If the pay is too high it either comes down or the company goes elsewhere. Also, remember that many private sector workers might not be unemployed today but have either previously been unemployed or are facing a likelihood in the future.

We’re not all tribunal lawyers. Crikey, they probably even count as private sector in the statisics!

Can Eoin have initiation rights?

I know he’s pseudonymous but I think everyone here accepts he has good reasons for that and has lots of credibility.

Having JtO withdrawal symptoms….sniff.

@Hugh Sheehy

You write: “However, lowering public sector pay – perhaps to align with international benchmark levels – would be a way of reducing the burden in the first place.”

What evidence do you have that it isn’t already so aligned? Be sure to use purchasing power parities and include the recent 15% pay cuts in formulating your response.

Oh, and I’m truly touched to see that someone still believes this old saw:

“Private sector workers, particularly in the tradeable sector, have pay that is internationally benchmarked on a regular basis. If the pay is too high it either comes down or the company goes elsewhere.”

I wonder if Michael Fingleton knows about this?

@ Ernie

I believe Mr Fingleton is unemployed at the moment.
However, he may be actively seeking work?
And possibly claiming unemployment benefit?

From ‘About’ at Ernie Ball’s blog:

Ernie Ball is the nom de guerre of a UCD lecturer in a humanities subject.

Cristicising Sarah Carey, Ernie Ball writes:

You apparently think that this group [private sector workers – CG ] should still be spared any sacrifice to solve the nation’s problems because somebody else took a pay cut or lost their job. You think unions “hide behind” the low paid in the Public Sector ..


Let me put it like this: many public sector workers are dispensable, including yourself. You are a lecturer in humanities (Media Studies?). I can get all the humanities I want in any language I choose free of charge on the Net.

But the private-sector plumbers or bakers – the workers who pay the taxes that pay your salary – are not dispensable. They produce added value. You (quite possibly) do not. Perhaps you produce subtracted value (Media Studies?). You might be overpriced even if you worked for free. Think about it.


Pharmacy costs in Ireland are beyond outlandish but like legal fees and the ‘free’ legal aid pot, beyond serious reform.

In London recently I had to pop into a pharmacy in Bayswater. A packet of generic paracetamol cost 30p and a packet of branded throat lozenges were 65p. I was so surprised I asked the cashier were the prices correct. The equivalent in Ireland runs to about €6. In Italy common medications cost less than the prices charged in Ireland and it has a functioning health service too – personal experience.

While FG/Labour may bang the table about the economy, I have yet to read any policies that contain anything sensible and adequately costed. There really isn’t a great deal of distance between any of the parties in the Dail when it comes to the economy and industry. Ultimately none of them see anything wrong with feeding their own clubs of lawyers and advisers on huge cheques. At the end of the the day emigration will take care of dissenters and manufacturing is something largely for China to worry over.

@ Eamonn

Paul Hunt is the man for the political game-theory! But i think the market has decided that this whole Eurozone concept is flawed and needs fixing asap. So like the good vigilantes that they are, they press on the easy pressure points, ie the worst or the smallest of the countries involved. So thats us, Greece and Portugal. Potentially Belgium as some have suggested. Going big game hunting for Spain may prove too difficult and dangerous, but they’re certainly gonna take a shot at it if they are given the opportunity. With 15 floating rate currencies gone from the markets with the adoption of the Euro, there’s less markets for these guys to play relative value currency and interest rates trades with on Europe, ie Irish Punt vs French France, Spainish Peseta vs Italian Lira. Until now that is…


Given your pseudonym I’m surprised you’re surprised at the Irish ability to turn generic drugs into gold.

@ Eamonn Moran

Well said. I think the rate of interest is a message that there is wealth in Ireland, there are inefficiencies and before you put on the béal bocht you need to pony up.

Specifically there is an urgent need to destroy the tax avoidance industry. I don’t think the political class has the balls to go after the many nice respectable people who suck from the national teat and are far more damaging to the budget than the average PS wallah. .

Sarah Carey Says:

Aw thanks highway

I can see Kildare from my house.

In championship season – it get’s quite tense.

You are welcome, getting tired of the bitching here, getting very here and thats not a good thing.
I can see Kildare too, a Tea Party on the frozen Curragh this afternoon, perhaps? I’ll bring the scones!

As you say, we are all now playing Senior Hurling, yet this little arrangment our Govt has entered may be enough to kill the game and allow them to eke out a (dis)honourable draw?

Where is the next move, the move that forces total reform?
Wait for inevitable default?

What will provoke the coping classes to say enough?


What’s the matter, don’t you believe in markets? Unlike the market for plumbers, there actually is an international market for humanities lecturers. It determines the going wage rates. If you want to second guess the market in this case and pay below the going wage rates (relative to the cost of living, of course), that is your prerogative but you will pay a price one way or another.

The view that humanities lecturers are somehow “dispensable” while plumbers and bakers are not is as apt an expression of philistinism as one is likely to come across. The fact of the matter is, if we had had a bit more of the broad historical perspective that those in the humanities provide and a bit less of the benighted assumption that economics is the Master Science as well as the Ultimate Tribunal before which all must bow, we mightn’t be in the mess we are in currently. I don’t expect you’ve learned that lesson. Maybe you can go find it out on the internet…

Also I must quibble with the claim that plumbers and bakers “pay the taxes that pay my salary.” We all pay taxes to the state, myself included. Your view implies either that I’m paying my own salary or that I’m only earning what I’m paid net of tax, in which case you’re getting a real bargain.

A thought experiment:

Nasty dictatorial philosopher-king such as myself takes over Ireland and immediately on grounds of force majeure cuts public sector salaries by 30%, while encouraging public sector workers to resign immediately with a ‘golden handshake’ equivalent to one-year’s pay.

What percentage do you think would leave to try their luck in the private sector?


Mr Fingleton still has a very nice pension. But if you like, substitute for his the name of any of the top personnel at the banks who were there before the collapse and are still there on enormous salaries.


I’m not sure if that’s a bankable recommendation! The game theory is above my pay grade – and grey matter capacity. I just look at the gaps between political fantasy and reality. And a currency union without effective fiscal governance, bank supervision and resolution, an emergency fund and financial regulation – not to mnd an appropriately empowered central bank – is a fantasy. And that fantasy which was foisted on the EU voter’s without their consent is now turning into a nightmare. And the politicos in the big economies are too frightened to confront their voters with the reality – and the cost to their saving pots and the public purse of dealing with the losses their banks are hiding.

Merkel et al want to kick the can down the road for as long as possible – and take the small fry into painful custody to reduce vulnerability as required, but the markets are damned if they’re going to allow this suspension of disbelief to continue indefinitely.

@Ernie Ball

The market for humanities lecturers is to a large extent a public sector artefact. And I am not denying the “broad historical perspective that those in the humanities provide”, just saying that I don’t have to pay for it. For example, try the Arts and Letters Daily website and tell me what you can provide that I can’t find there.

I said nothing whatsoever about economics being a Master Science ‘before which all must bow’ (in fact tend to agree with you on that point).

@ Highway 61 “I can see Kildare too, a Tea Party on the frozen Curragh this afternoon, perhaps? I’ll bring the scones!

As you say, we are all now playing Senior Hurling,”

senior hurling in Kildare! Wow! we are delusional!

@Comrade Ball:
“… there actually is an international market for humanities lecturers. It determines the going wage rates.”

That being so, I hope that you won’t be expected to sacrifice yourself unduly in your noble efforts to save the proletariat. When your wages are cut here, you should certainly seek employment abroad, in places where humanities lecturers are properly appreciated and rewarded.


Ernie Ball is the nom de guerre of a UCD lecturer in a humanities subject

If Fingleton is your reference point for private sector pensions, one can only wonder about the tripe you feed to your students.

In real terms 3, 5, and 10 year managed pension fund returns are in the red and that is only for the minority in the private sector with pensions who face limited payouts because of fund deficits.

You can have the ‘legitimate expectation’ of added years as if they are not a cost and you get paid irrespective of a deficit.

You say you have faced a 15% pay cut.

I have yet to see a justification for the so-called average 9% benchmarking award and almost a decade later, baby-steps are being
taken to achieve ‘transformational’ change.

Your hero should be Bertie Ahern for that award.

As for the rest of the 15%, a pensions levy, the net pension cost (after the levy) of a new entrant to the public sector is 20%.

How unfair it all is!; you are one of the privileged in an unfair/corrupt society.

I suppose it’s some private sector vigilante who has reported that sick pay in the public service has DOUBLED since the 1980’s and the average public servant took more than 11 days sick in 2007 — more than 2 work weeks.

It was Comptroller and Auditor-General who reported this in 2009.

Apropos Media Studies:

Little Bill Daggett: I don’t deserve this… to die like this. I was building a house.
Will Munny: Deserve’s got nothin’ to do with it.

Some people here seem genuinely shocked to have discovered the Golden Rule: (S)he who has the gold, makes the rules.

@Sarah Carey

Your at it again, kicking the public service. this is a society we live in and the public service provide a platform for society to function. I know your beef is benchmarking and I agree with you on this. PLease be specific before throwing anymore knives.
Just look to the failed State of America and see how dsfunctional public service is there. Is that your wish.

Can you believe it, someone out there is making billions right now on our misery. Upside down capitialism. Right now some meathead is going short through a CDF on Ireland going bust. Its hard to believe.

“Did someone say “fairly spreading the burden”? Did you think the burden was “fairly spread” in the last 3-4 budget adjusting exercises when PS workers were cut by 15%, and had to pay the same derisory levies of 5% that everyone else did?”

Come on Ernie, you have to look at the starting point. Before any adjustments were made the PS was very overpaid relative to the private sector. And for many in the private sector, their pensions have been wiped out.
I believe the PS is still highly overpaid, and now we’re getting loans from tax payers in Europe to keep us afloat, and they righly don’t care about the relative cost of living here. That’s for us to sort out.

@Ernie Ball

If bin men and Media Studies lecturers decide not to show up at work tomorrow will be noticed by society first?

By definition Humanites, and even fundamental science (pointing at me) are luxuries. While there is a possibility we may add value to the economy, tradesmen and support staff keep this country going. Without people to fix your plumbing and wiring, put food on your table, or keep the streets clean you or I cannot do our jobs.

You also need to get some perspective and not take things so personally; people discussing wage cuts here are not talking about the lowest paid, they are targetting the inefficient, overpaid and useless jobs at the top. I have no vested interest in seeing our near mythical ‘evil’ bankers get away scot free, nor to see them demonised. Generalisations like that are idiotic and nonsensical, allowing the real culprits to hide behind the smokescreen of greed and incompetence that rule the roost.

Before you take a swipe at me, I’m paid out of the public purse, and I’ve spent the last five years working 60-80 hour weeks (on average) starting at EUR250 per week, reaching the glossy heights of EUR380 p/w, and now back down to EUR350 p/w. In relative terms I will be hammered worse in the next budget than you.

I know that some of what I’m working on is of use in industry, just not in our industry. Thus my job is not important or useful in any sense to the economic recovery of our country; do you have the honesty to admit that about your job?

Carey’s Law: (with nod to Godwin)

As a thread on Irish Economy passes 200 comments, the probability of Sarah Carey being compared to Sarah Palin approaches 1.

And of course, the natural consequence

When Sarah Carey is compared to Sarah Palin, the thread must be closed off since no further constructive debate is likely to ensue.

Time to move to a new post lads 🙂

btw, Ernie, someone just helpfully emailed me your name. I can like, totally stalk you and stuff, if you keep being mean to me. Or at least add unnecessary exclamation marks to comments just to annoy you!!!!!!!!!!!!!!!!!

All you public v private people are unwilling to face the cold hard facts.

If you are earning above 40K the gross likelyhood is that we are all being paid too much and taxed too little.

marginal rate, smarginal rate. What counts is our take home pay and through a mixture of very low tax bands and all the other tax avoidance measures people on average earnings are paying a tiny % in tax. Cuts need to start hard at he top and middle.

The increases in the pay in the private sector was based on an unsustainable credit/property bubble and increases in the public sector were based on keeping up with this.

Both increases wrong.
6 years ago Irish nurses went on Strike in order to get a 20% increase in pay the gov was offering 14% At the same time in the UK Nurses were going on strike cos they wanted a 2% increase and were only offered 1%

Something they don’t tell you about being a dynamic open economy.
The peaks and troughs are massive.

@ 40-80K private and public sector workers.
Dont worry the reality of what I pointed out above will not come to pass. You people are opinion leaders and you vote.

You will face far less hardship than those who rely on St. Vincent de Paul. Sleep well as you send the poor into destitution in order to preserve a status quo you actually hate. But the alternative is unknown and scary.
Continue to fumble in your greasy tills.
Romantic Ireland’s dead and gone

@Sarah Carey

Time to move to a new post lads …

Sarah Carey again reinforces the tired old stereotype that most commenters on this blog are male.

This “public sector 15% pay cut” thing is a fallacy. Average public sector weekly wages since the pension levy are down by 4% and Public sector workers are still in receipt of a yearly salary increment.

Playing senior hurling isn’t just about skill and ball control. It’s about standing your ground and representing your people whether it is the parish or the county. It is about doing justice to yourself. It is about pride in the jersey and working together . It is the complete antithesis of Fianna Fáil.

This might be an apt one to close this thread on….Fianna Fail minister Barry Andrews calls on irish people to show some humility

“If this gives us the confidence to know that where we’re going isn’t Armageddon, but is something that we lived with before, and if we have the humility to remember that we’ve come from situations like this before, I think it will give people confidence that this Government has an idea of the path to recovery for the country.”

@ Eammon

As a PS’er, I see Croke Park as an endangered entity, and rightly so.
Is it much more different than the fudge deal that the Govt did with the Church?

But, before we swing the knife, I would like to know what happens with the mortgage debt. I dont say this in the sense of ‘who’s going to do something for me’ but more in the sense has this all been taught through?

I can reschedule payments and extend the term, although it already is hitting the retirement age. I am not the only PS’er so I presume others, 000’s possible will be in this position. Is there macro consequences here?

I can cancel the payments, and come what may with the banks, leave the house or country and get on with life. Again macro consequences?

This isnt a claim for special treatment, just clarity but this is a clarity that may reveal how fecked the whole situation has been all along. Now if 000’s are faced with this situation, is it best dealt with ad hoc, or managed?
I dont mind whatever outcome, but lets not not! think this through.
Enough of that going around!

The Sage of Kuala Lumpur wrote:

“If Fingleton is your reference point for private sector pensions, one can only wonder about the tripe you feed to your students.”

My point was that the self-congratulatory Social Darwinist myth of the self-regulating market dies hard. The veneration of the private sector for the swiftness with which it metes out punishment to all those who do not “perform” is utterly belied by even a cursory acquaintance with how the capitalist world really works. To believe it, you’d really have to believe that those 1% who control vast percentages of the world’s wealth really are “worth it” because they are better than us.

As for tripe I feed my students, I can assure you it’s infinitely less ideological than the tripe regularly published on [sic].

Perhaps Sarkozy would be happy to see the ECB being forced into a little QE seeing as Trichet takes the hump if anyone dares to mention it to him.

I think I’m going to start a national campaign of lawful disobedience and persuade everyone to move their current and/or savings account away from banks (and their bondholders) that are receiving all these billions.

I couldn’t read your “self congratulatory Social Darwinist myth” line without thinking of this website; Hit refresh on that page a few times.

Excuse me in advance for my momentary sarcasm as I express confidence that you’re better placed working in humanities than in a science.

@ David Burke

Can you believe it, someone out there is making billions right now on our misery. Upside down capitialism. Right now some meathead is going short through a CDF on Ireland going bust. Its hard to believe.


We rationalise things like this away every day.

How many on Wall Street worry about the misery they have caused; ditto on Merrion Street.

Life is a little confusing.

Bond investors are the antithesis of hedge fund managers; they just seek a small return on the expectation of getting a return of their investments.

Purchases of peripheral debt has fallen in recent times from 85% to 65% and there will be a continuing premium to attract them in future years.

Without the guarantee of debt, it would have been right to have imposed losses in respect of a failed Anglo under examinership; the ECB couldn’t have stopped it.

Nevertheless, it was the over-paid on Wall Street who packaged junk mortgages and created much havoc.

Prudent Germans reformed their economy as our bubble was gaining traction and their frugal prime minister is the antithesis of the beggars on horseback we have got used to.

In normal times, the Irish would surely opt for the Haughey or Ahern over a Merkel type.


It’s fun, but probably futile, to speculate about the kind of horse-trading that goes on behind behind closed doors when the big shakers and movers get together.

At Deauville, Merkel conceded on the ‘automaticity’ of fiscal sanctions to get French support for her re-opening (how ever limited) of the Lisbon Treaty to get a Karlsruhe-proof permanent EFSF in place. Both Merkel and Sarkozy know that the salting away of their bank’s exposures to the periheral sovereigns and banks they have facilitated can’t be sustained forever. Sarkozy might like a bit of QE to lubricate the unwinding, but what would he be able to offer Merkel to overcome the existential German dread of same?

@Eamonn Moran:
“You people are opinion leaders and you vote.”

Only in the Senate elections. You get a better class of candidate, I find.

“Continue to fumble in your greasy tills.
Romantic Ireland’s dead and gone”

Thank goodness for that: it involved an unpleasant amount of murder and mayhem. And anyway facing reality is so much better.


Hi Al

In a comment above I did outline that debt forgiveness for those in negative equity should accompany the Burning of Seniors.
And massive fiscal adjustment in the double quick time available to avoid taking the “bail out”
Its the Iceland solution.
Not very pleasant but deffo the least worst option for the republic.
BTW Iceland have recently announced debt forgiveness for negative equity people in Iceland.

@Sarah Carey

Stalk me all you like. That fits your MO to a tee, as does the implicit threat to reveal my identity (if I don’t shut up). Kinda like a tiny little iron fist in the most gorgeous pink velveteen glove you ever saw. I mean, like, totally to die for.

“Bond investors are the antithesis of hedge fund managers; they just seek a small return on the expectation of getting a return of their investments.”

If you are suggesting the unwinding of the hedge fund industry you will get no complaints from me. But even though it needs to happen I don’t want to be around to clean up that car crash.

@ Eamonn

Good points

In many ways, our Govt is like a sailor on a boat waiting for the wind to pick up, while ignoring the oars…

Oh, for goodness sake. We have the continuing Bond. Eoin Bond-Brian Lucey spat; now we have the Sarah Carey-Ernie Ball tiff.
Economically, we are neck-deep in the unmentionable stuff – the big EU players having shat forcefully on us with the connivance of the IMF to protect their own interests. Misgovernance, greed and stupidity positioned us between them and the bowel evacuation facilities.

No one will willingly concedes a thing in terms of pay, profits or privilege unless all concede and are seen to concede. That’s why we elect governments. But we need one with a bit more authority, credibility and legitimacy than this one. And we certainly don’t need a new one that is comprised of two factions that are on opposite sides of the political divide in all mature developed economies. Continuing conflict, half-baked compromises and just a slightly different set of vested interests being pandered to.

It seems we’re scuppered whichever way we turn.


Or like a man with a petrol car, continously filling more diesel into the tank and wondering why the car wont run properly while the passangers argue about where to buy the diesel and whether Hydrogen, TNT or Wind power would be better in the long run!

It seems Prof Honohan has given another straight talking interview on RTE today. It appears a timeline for agreeing the plan for resolving Anglo has been agreed with the Commission.

@ highway

Or like a person with severe intestinal upset, in high company and afraid of this fact, wishing they were constipated and acting like so, but with a severe case of diarrhea….

!!!!!!!!!!!!!END OF THREAD!!!!!!!!!!!!

Is there a decent blog anywhere on Irish economics?

Suggest a new thread on the fact that, as predicted, the bailout was a yawn to the bond and currency markets. Has anyone noticed Portugal and Spain today?

What does that say about the assumptions of the bailout of Ireland / EU banks prop desks / Munich RE / civil servants…. or whatever suits your view?

@Paul Hunt
‘It seems we’re scuppered whichever way we turn.’
The only consolation is that they appear to have moved on from Ireland

Mr Roubini, the economist who predicted the financial crisis, told daily paper Diario Economico it is “increasingly likely” Portugal will require international assistance.

He said the country is approaching “a critical point” due to it high debt load and weak growth and there were ample funds to shore up Portugal, one of the eurozone’s smaller countries which contributes less than 2pc to the 16-nation bloc’s gross domestic product.

However, he said neighboring Spain, Europe’s fourth-largest economy, is “too big to bail out.” ‘

The markets obviously don’t buy the deal with the euro sinking – is this good for Germany?


I think we did only have a pair of twos in our hand and talk of playing “hardball” is specious.

How do you justify this belief?


Sure zho can answer for himself but how could you plat “hardball” without public support.

There is no willingness among the general population to do what would be equired to avoid taking big loans from EU IMF. mLook at the limpet-like attitude to Croke Park. That would be nothing compared to what would be required to give the finger to ther bond markets. There is no political leadership in this regard, just electioneering.

If you are just talking about bond debt then you would still need the population on-side for some disruption, bu tyou would probably have to threaten to go further in the negotiations. 10% of the population would be my guess for support that understands what might be involved.

@Eamon Moran
Not sure where you are coming from Eamon. I feel no guilt. I was ejected from the banking industry in October 2000.

re: They (the unions) in effect represent the privileged in an unfair society and O’Toole’s ideological blinkers seems to obscure this reality.
Spot on.

Union speak is not Labour speak.

Interestingly, the Forfas report – referenced on another thread – addresses Ernie’s concerns quite well.

(i) Public Sector wages in Ireland are too high
(ii) Wages in Ireland’s sheltered sectors are too high
(iii) Wages in the internationally traded sectors are broadly in line

Of course, we could tax the people working in the internationally competitive sector…particularly if they’re actually able to bring some money into the country, particularly money that comes in without already being owed to someone else. Bastards. Give them some more of the burden. That’ll teach them.


“How do you justify this belief?”

The Western World is in an economic crisis which has been hugely amplified by contagion. The best efforts of all our main trading partners and our political allies (official and unofficial) has been to avoid further contagion. Our economy is small compared to the rest of the Europe. Telling the rest of Europe and the USA to “go f_ck themselves” would undoubtedly lead to huge problems. Our pair of twos was that we could say that it may be for the good of the Eurozone and we were willing to take a hit fo the team by having a contained unilateral default. But, at the end of the day, everybody knows that is horse-sh*t and ultimately we would be screwed for generations in international politics, in FDI and probably in international finance.

I mean, really, telling the ECB and the EU that you were not paying back the ECB deposits was not going to work. There would have been no money in the banks machines by the end of today and we do not have the no capacity to deal with that.


Just listened to Governor Honohan’s interview. Highlights provided earlier on this board by Enda F. Did a credible job, given “No bondholder left behind” and ” No bank shall fail”. Disbelief cannot be suspended indefinitely, but he realises it’s not his – or Ireland’s – place to rock the boat. Misgovernance, greed and stupidity brought to this pass; and we must grin and bear it. But the markets will force some process to deal with – or an explicit recogntion of the continegent liability imposed on the relevant states by – the salting away by the big governments of the EZ banks’ loss exposures to the peripheral sovs and banks. There may be some limited relief for us then.

Live, horse, and you’ll get grass.

@Gerry Fahey, @hoganmahew

One of the well-known rules for laying an ambush is to leave one, clearly visible escape route for the ambushed force. A force which is fully surrounded has the courage of the doomed and is likely to stand and fight or even to do the thing which maximises its chance of survival – advance into the ambush. An ambushed force which can see a means of escape is likely to panic and bolt for it. I think Iceland’s great fortune was that its banking system was so bloated by the time of the crash, and so cut off from ECB “assistance”, that there was no question of trying to save it. So pace Bill Black, my guess is that we would have been much better off had Lehman exploded a year or two later than it did. Similarly we might be better off if our EFSF offer had come with 6.8%+ interest rates.

@ Hugh Sheehy,

I don’t know Hugh, I don’t want to get into a disagreement about public vrs private sectors, however I would say its not fair to paint either side with the same colour etc. I’m sure you would agree with that.

There are examples on both sides where huge salaries are paid. I think in this recession the private sector has come off worse than the public sector. The 450K unemployed is mostly made up of private sector workers, not public sector.

However the public sector have taken a hit as well. A secondary school teacher with 19 years experience is taking home less than 3K per month, maybe even around 2800 after taxes and levies. This is going to drop even more as more cuts and tax rises are implemented. Considering a secondary school teacher is highly qualified, sometimes with two or more degrees or even a masters / doctorate this is poor money. In addition teachers do a difficult job (subject to violence at times) but it is still a very noble one. It does not involve spin, useless spreadsheets or false accounting practices. It involves giving young people a start in life.

I accept that there is the consideration of the pension (described as gold plated by some), but I would not be too sure about that. Not much point in boasting about your public sector pension if the state is insolvent. Money does not come from nowhere. It could very well be that public sector pensions go the way of the private sector, simply dissappear. Personally my private pension has been decimated.

If we are going to pay less, or expect people to work for less and or we know pensions are not going to cut the grade in the future, then how about the establishment which runs this country bringing down the crazy cost of living.

its all about the pathway we choose-

‘Dow, a former staff economist at the IMF and U.S. Treasury, says policymakers are correctly focused on “path dependency,” which basically means your destination is heavily influenced by the route you take. In addition to individuals trying to lose weight — move too soon and you get sick, too slowly and you won’t lose anything — this concept applies to sovereign nations trying to get their fiscal balance sheets in order too, he says.’
I wonder what route we are taking

I’ve said in various places….I’m not anti public sector.

I am anti overpaying the public sector because the money comes from “someone else”, and while the example of nurses, teachers and guards is still the one that always gets used, the Forfas report is pretty clear on the topic. Here’s a sample quote.

“Forfás research for the NCC highlights that pay levels for a range of public sector professions (teachers, nurses, hospital consultants) are high in Ireland relative to other developed countries.”

I have no desire to victimise teachers or nurses or anyone, but Ireland’t public service has to be affordable in today’s context. Meantime, I completely agree on your point on cost of living, but we can’t bring down the cost of living in Ireland unless we do something to bring down the cost of living in Ireland. Public sector costs are too high. Sheltered sector costs are too high. Too much is sheltered. Housing is (still) too expensive. Where would you like to start? None of the adjustments will be pretty.

Meantime, I completely recognize the social value of good teachers (if you knew me you’d know why), guards, etc., but the idea should be for the surplus value of what they do to accrue to their customers and not just to the public sector union members themselves.

Finally, the establishment is only the establishment because we elect them. Would you be prepared to have people like me, with no connection to any vested interest, become the establishment and to try to sort things out? The only thing I can initially promise is that I’m numerate and I have no connection with any vested interest.

If yes, then I’ll run for election. I hear there may be an election soon.


There are examples on both sides where huge salaries are paid.

Sorry to seem pedantic, but what do you mean here?

A private company can pay their people what they like cant they ? If apple earn a billion a year and decide to give it all to steve jobs, i dont see a proble with that. they might have no staff left after a while, but as long as the price of their products is right for me ill continue to buy.

But, for me…the reason the public sector pay levels come under fire seems to be because the wages are

1)paid by the taxpayer
2)paid for roles that cannot be terminated except under certain circumstances
3)not subject to competitive pressures (eg…just cos the UK pays david cameron X amount, does not mean brian cowens wages are in danger of being reduced.)

in ireland right now, we are losing money each year (defecit), but pay increments are still being paid annually to state and semi state employees. Hiring is still going strong ,especially in the semi states.

@Sarah Carey confusing post.

Yes, a 10-15% cut on someone at the lower end is savage. I support Fintan O’Toole’s proposal to cap PS pay at €100,000.

Trick is, do we think Pat Honohan will work for less than 6 figures in the “national interest” ?

If the banks have lost between E50bn and E90bn, where exactly has the money gone? It hasn’t just disappeared. Presumably it was largely lent to developers who used it to fund real estate development in Ireland and abroad. To whom did the developers (many now bankrupt) pay the money? Ignoring the foreign developments, the answer is the Irish landowners and the Irish building industry including principal contractors and sub-contractors and the builders suppliers (I’m not talking here about ordinary labourers). These are the people who creamed it during the 10 years of the Celtic Tiger and who are now keeping the head down in the hope that a new Government will not introduce a wealth tax a la that which applied in the 1970’s. A lot of the money also remains with those developers who managed to liquidate their real estate portfolios at a profit before the crash. Some of this wealth will have been transferred abroad and or to spouses or to other family members.

I think an annual wealth tax would be reasonable in the circumstances and would hit those landowners/builders/contractors/developers/builders suppliers and their families in respect of the wealth created by the property bubble. Such a tax should apply to the worldwide assets of all individuals/companies/other entities who are resident or domiciled in Ireland, with the usual exceptions for business and agri assets which are creating jobs and exports.

The 4 year Plan talks about a property tax (real estate only) and about reforming capital gains tax and capital acquisitions tax. CGT and CAT are only relevant where property passes on a sale, a gift or on a death. What we need is an annual tax on all wealth, whether it passes or not, and not just wealth in the form of real property. That way, the people who creamed it during the Celtic Tiger will be the ones who shoulder a big chunk of the tax burden over the coming years.

IMHO, a wealth tax should apply in addition to hikes in income taxation mainly for the higher paid in both public and private sector.

@ Hugh Sheehy

You wrote:

I am anti overpaying the public sector because the money comes from “someone else”, and while the example of nurses, teachers and guards is still the one that always gets used, the Forfas report is pretty clear on the topic. Here’s a sample quote.

“Forfás research for the NCC highlights that pay levels for a range of public sector professions (teachers, nurses, hospital consultants) are high in Ireland relative to other developed countries.”

This “research” is based on pre-pay cut, pre-pension levy data. Indeed, they didn’t even use the most recent 2010 version of the OECD Education at a Glance report.

I guess the strategy here is, if you never count any pay cuts, you can keep cutting all the way to zero.

“If apple earn a billion a year and decide to give it all to steve jobs, i dont see a proble with that. they might have no staff left after a while, but as long as the price of their products is right for me ill continue to buy.”

That is the neoliberal model and you end up with Lehman Bros. Followed by a debt crisis.

@ Hugh Sheehy,

Apologies if I came across as accusing you of being anti public service. That was not my intention. I was just trying to stear a mid course between the points that Ernie and yourself were making.

Perhaps the teacher example was not the best example to give. However where does one start as there is not enough space on this blog to cover every job description in the civil service.

However the example I did give, a teacher with those years of experience (earning less than 2900/month) is an actual real figure. That was the figure paid at the end of last month. As they say real time data.

Do you think that is a good salary for someone with those qualifications?

To be honest with you I don’t.

However as we both agree if the bonkers cost of living in Ireland is reduced, then pay cuts will be much more palatable all round.

Oh by the way, if you are planning to run for election, I’ll vote for you!!

@ Judge John Deedes,

In answer to your question about “Huge Salaries” well I suppose it depends on where you are sitting in the salary scale. Some of the wages paid in the semi state sector, head of ESB, the DAA at the top seem very high to a person on a low salary such as myself. I believe Mr Brian Cowen was paid more than Frau Angela Merkel. In fact the German ambassador commented on this at one stage a few years ago. There was a article written a few weeks ago in one of the mainstream papers which compared various state and semi state jobs with their corresponding counterparts in the UK. Sorry I can’t remember the paper, but perhaps you read it yourself.

As for private companies like Apple, well yes they can pay what they like, but it does not mean it is justified, it just means they were able to justify it at the time.

Stop the petty squabbling – the big issue is that we have been tricked into paying off bonholders in the banks by a combination of borrowing and breaking open our piggy bank.
This is just beyond luducrous – and you are arguing over relative triviliaties – you especially Sarah Carey – focus on the big issues here – you have a column to write.

“Do you think that is a good salary for someone with those qualifications?”

Why should a person’s “qualifications” determine that person’s earnings?


@ Brian J. Goggin,

In general the more skilled a person is the more value they can add to the environment in which they work. Hence it is possible to command a higher salary. Does not work that way always, but it is a general truth for most situations.

In this particular example, teachers not only are they qualified, but they put their qualification into practice on a daily basis.

In addition there are other atributes, such as empathy for students, care and consideration, patience and a general ability to try and bring out the best in a young immature person.

So I have two questions for your short question.

1) Do you think 2900E/month is a good salary in this example?
2) How else do you determine a persons earnings?

Are you suggesting teachers should be paid on the results of the number of students who pass the LC, or stay in school, or if no student goes to prison within 5 years of having left the school?

Experience and ability, beyond the entry level.

The qualifications, along with the other attributes you list, are the necessary requirements for entry level. All else is determined by experience and ability. As ability isn’t an input in the Irish system, it is down to experience, or seniority as it is called…

The answer to your final, unnumbered, question is yes … assuming that those achievements are what their customers want teachers to achieve. If the customers want some other results, then measurement of success, and thus payment, should be based on those results instead.

If such a direct link is too difficult, then customers can pay the employing enterprise (a company employing several teaching operatives and appropriate numbers of managers) whatever it charges and the company can decide what to pay its employees. Different companies might market different offerings.


@Hoganmahew, sporthog

The rationale behind paying for experience is presumably that the longer a teacher is in the job the more effective teacher they are. Whilst I think most people would agree that the first 5 years of teaching experience may improve teacher performance, I would be more sceptical about any increase beyond this and by the time a teacher gets to 15-20yrs experience I suspect that in many cases we are into serious diminishing marginal product to the extent that this may be negative – I’m thinking in terms of computer literacy and decreased motivation to teach the same subject for a 10th consecutive year.

I would like to see a study comparing the performance of teachers with 5 or so yrs experience to that of those with 15+ years before I would advocate pay for seniority.

I think given the number of young teachers struggling to get a position that we should focus on how to identify and retain good teachers while removing poor performers from the system. To presume that experience can act as a proxy for ability hinders this process it seems to me.

Funny, they talk about the public sector pay cuts several times.

On the other topic, of what salary someone “deserves”, it’s not a very meaningful question. In the 1980s we had Masters graduates working in McD’s. What salary did they “deserve”?

What pay needs to be provided to get suitable people to do the job? That IS a meaningful question. I’d put it a bit less bluntly than Carolus did earlier on the thread, but his question is still valid. On all the data and comparable’s I’ve seen, and I’m ignoring Marc Coleman tonight, Irish public sector pay is still too high.

Funny, they talk about the public sector pay cuts several times.

On the other topic, of what salary someone “deserves”, it’s not a very meaningful question. In the 1980s we had Masters graduates working in McD’s. What salary did they “deserve”?

What pay needs to be provided to get suitable people to do the job? That IS a meaningful question. I’d put it a bit less bluntly than Carolus did earlier on the thread, but his question is still valid. On all the data and comparable’s I’ve seen, and I’m ignoring Marc Coleman tonight, Irish public sector pay is still too high.

I can’t disagree with you. Having experience of non-computer literate older teachers and their attitude to IT…

“[…] by the time a teacher gets to 15-20yrs experience I suspect that in many cases we are into serious diminishing marginal product to the extent that this may be negative – I’m thinking in terms of computer literacy and decreased motivation to teach the same subject for a 10th consecutive year.”

I agree, but there is more to it than that. I suspect that operatives with twenty years of experience will by that stage know little about market demands for skills or about the range of jobs available. Furthermore, they will have little feel for the demands in the working life of, say, an engineer, technician or production operative in a multinational manufacturing company: four-cycle shifts, monitoring and measurement, annual appraisals, expectations about punctuality and sick leave ….

The root of the problem is defining people by what they “are” (teachers) rather than by what they “do” (teaching). I suggest that lifetime jobs for teachers should be abolished; we should instead encourage people to do some teaching for, say, five years, then go off and do something different and, perhaps, do another five-year stint later in life.

Such flexible employment patterns (teaching is not the only economic activity to which they might be applied) might also enable the state to get more of a grip on the cost of the activity and to cut it when economic circumstances required.


I can see where you are coming from and I’ve seen the idea of shorter term contracts etc. floated before. I’m certainly in favour of removing permanency. I’m not so keen on ‘encouraging’ a break from teaching – I’d much prefer to identify and keep the effective teachers – possibly giving them an option for career breaks etc to gain the benefits you have in mind.

Incidentally I would also prefer to see a more centralised recruitment/interview mechanism whereby the headmaster has less say in what teacher receives the job because I think local factors can come into play – certainly theres plenty of anecdotal evidene of that paricularly at the primary level. There may be some scope for giving them a say in a later interview round though.

One possibility to gain a reflection on teacher ability would be to move them around local schools every x number of years and examine the effect on results – obviously this has flaws and could only be used as part of a wider indicator of ability along with school inspections, anonymous student/colleague feedback etc.


You quoted this sentence in the report: “Forfás research for the NCC highlights that pay levels for a range of public sector professions (teachers, nurses, hospital consultants) are high in Ireland relative to other developed countries.” There follows a footnote (47) that cites the source of this information as being this report: “National Competitiveness Council, Costs of Doing Business in Ireland 2010 Volume 1, July 2010”

So we look at that report. It’s an extraordinarily sloppy piece of work. To take only one example, on p. 48 it says this: “The starting salary for primary teachers in Ireland in 2010 is 15 per cent above the OECD-25 average, while the top salary scale for primary school teachers in Ireland is 33 per cent above the OECD average (Fig. 7.4.1).” You look at figure 7.4.1 and it has nothing to do with this claim. The relevant figure is Figure 7.4.4 and there the reference is to the OECD-24, not the OECD-25. These clowns can’t even get the basics right: I have no confidence that they can handle the tricky bits.

Then there’s this little gem, which you must have missed: “While these salary levels reflect the impact of recent public sector pay cuts, they do not capture the impact of the public sector pension levy.”

That pensions levy is the gift that keeps on giving, isn’t it? It allows you to cut pay and, all the while, insist that you haven’t cut pay in order to justify further cutting pay. Orwell’s imagination couldn’t have done better.

But on to the matter at hand (limiting myself to teachers’ pay). On p. 402 of OECD Education at a Glance 2010, you have a table that shows teacher pay in the OECD countries in 2008 (i.e., before both the pensions levy and the recent pay cuts). Using the terms of the Forfas chart 7.4.4 let’s look at starting Primary Teacher pay, after 15 years and at the top of the scale. Forfas claims that “The starting salary for primary teachers in Ireland in 2010 is 15 per cent above the 2007 OECD-24 average. The remuneration for teachers in Ireland with 15 years experience and for those on the top scale salary is the second highest (after Luxembourg) of the benchmarked group.”

What does the 2010 OECD report say? First, the starting salary for primary teachers is not 15% higher than the OECD average, it’s 12.8% higher, again, not taking into account the pay cut or the pensions levy. The remuneration for teachers with 15 years experience and at the top of the scale is not “second highest.” For those with 15 years experience, the salary is exceeded by those in Germany, Korea, Luxembourg and Switzerland. Pay at the top of the scale is exceeded by pay in Japan, Korea, Luxembourg and Switzerland. Again, this is all before the pensions levy and the pay cut took an average of 15% off these scales. But the claim in the Forfas report is clearly false.

There’s still more to be said about this, however. One has to wonder why the report only chooses to look at primary school teachers rather than other kinds of teachers. Why not look at, say, Upper Secondary teachers? Why indeed.

Pay in 2008 for starting Upper Secondary teachers in Ireland was 2/10 of a percentage point above the OECD average (and remember that the OECD includes the likes of Poland and the Czech Republic which pay their teachers buttons). It is exceeded by the pay in: Australia, Belgium (both parts), Denmark, Finland, Germany, Luxembourg, Netherlands, Spain, Switzerland, USA. This is, at the risk of belabouring the point, before the two rounds of pay cuts here. At the top of the scale, Irish pay was 12% above the OECD average but exceeded by the pay in Austria, Flanders, Germany, Japan, Korea, Luxembourg, Netherlands, Switzerland.

Given that none of this includes the two rounds of pay cuts, I conclude that there is no evidence to support the claim that teacher pay (again, taking only that) is “high” relative to other countries. This is still less the case when one considers three other facts: 1. Irish teachers teach more hours per year than those of most other OECD countries; 2. Irish teachers teach larger classes than those in most other countries; 3. Irish students perform very well on standardised tests.

Facts 1 and 2 have enormous impacts on the amount of work done. I would expect those posting on an economics website to have the minimal sophistication to know that, when evaluating a salary, it won’t do simply to compare numbers without comparing the amount of work done for the salary. Alas, that sophistication is apparently not even in evidence at Forfas.

@ Ernie Ball
I spoke to a friend of mine recently who taught primary in England and now teaches primary in Ireland. According to him, an actual teacher, the pay levels here are far in excess of those in Britain, to the point where he felt he had to move home to avail of them. He also confessed that the hours required to work here as a teacher are derisory when compared with the demands made on teachers in Britain. So when i take this practical comparison of how things are in Britain as opposed to how they are here, then factor in that Britain are giving us a loan to help cover our public expenses…. it’s hard for me to not be left wondering..

Unfortunately for your argument the pension levy isn’t a pay cut. It feels like one, but it isn’t.

As for the fact that the Competitiveness report refers to chart 7.4.1 to show where teachers’ salaries rank in the OECD and the data is actually in chart 7.4.4, well, so what?

While you’re at it look at charts 7.4.1 through 7.4.6. Whatever about teachers’ salaries having adjusted from truly amazing down towards merely generous, doctors and nurses still rank towards the top of the scale. It’s not in those specific reports, but aren’t guards still getting paid allowances for not being able to receive other allowances.

On “international benchmarks”, I’m sure we could benchmark with Finland. Would that be OK? Based on PISA numbers their teachers seem to perform better and get paid a lot less. Also, as a minor point, the IMF isn’t running Finland.

Again, there’s no need to engage in blame games. Public sector workers didn’t cause the crash. They probably did benefit from the boom more than they should have, less than others but more than many.

The question for the future still remains. Why should Irish public sector pay be higher than it needs to be?

Strangely, that report also specifically says that it captures the impact of the Irish public sector pay cuts in the data.

[note, my longer previous comment with a link to the report is still awaiting moderation]

The Competitiveness report, linked in my 2nd last post, where it says

“This indicator measures primary teacher salaries across the OECD. It illustrates the salary levels for Irish teachers in 2007 and 2010 to capture the effect of the public sector pay cut in 2010.”

I think there’s nothing wrong with the deal itself. A lot of the complaints against it are basically misdirected from the guarantee to the present deal.

Yes, Ideally we could go back and reverse the disastrous guarantee. But we can’t, and this deal makes the best of a bad situation.

It will take us years to pay it back and I think there is a feeling that we are back where we were 20 years ago despite all the work that has gone in in the meantime. But frankly that’s all beside the point. We are on the hook for a lot of debt, and we have to quench our deficit and start to pay it back.


There’s no information given in the competitiveness report about how they made the determinations about teacher pay in 2010. And given the countervailing evidence in more recent versions of the OECD report that they are using as the basis for their extrapolations, I see no reason to believe that they got this right. It seems to my layperson’s eye that many of the public and semi-public research bodies in Ireland have as their primary aim to advance the agenda of the gov’t of the day.

What – are you telling me that these public sector agencies are not fulfilling their mandate? Not doing what they’re paid so well to do?

In any case, they say they took the 2010 pay cut into account. They say it very specifically. They called out the fact that they were taking it into account when describing the pay in these areas as high. I see no reason to disbelieve them.

If you do then get in touch with them and ask. In the interim it appears – to my layperson’s eye – as if you’ve got a very fixed idea of the truth in this area and you won’t accept any countervailing evidence.

Not so, Hugh.

I’ve provided the countervailing evidence using precisely the documents the competitiveness report authors claim to have used as the basis for their claims: the OECD annual Education at a Glance reports. The information in those reports cannot be squared with the information in the NCC report. So I’m left to ask which organisation is more trustworthy in this regard, the governmental quango or the transnational organisation? I’ll side with the OECD in this case. It’s incumbent on anyone who thinks the OECD is wrong (and unlike the NCC, they provide the data to tell the reader how they arrived at their conclusions) to explain why, rather than simply gainsay them with some other tendentious report.

I’ve no love for the proliferating quangos, by the way. If cutting of the public sector there is to be, it should start with them.

Oh, and the pension levy most certainly is a pay cut. The proof: those in the PS who have no pension entitlement still have to pay it. The fact that the gov’t is now talking about extending it to pensioners themselves is further proof, even if, in typical Orwellian fashion, they ultimately decide to call it something else (I suggest “The Geriatric Solidarity Contribution”).

@ Brian J.Goggin, Tony and hoganmahew,

Sorry I am currently overloaded with work, and as such I have been unable to keep up with your posts.

Brian you have mentioned this dropping in and out of education before, guest teachers from industry doing a few years in the secondary school system. I believe it has some merit. I’ll give you that.

However it might not be so easy for somebody in the private sector to spend 3 -5 years on a secondary school teachers wages, i.e. 2900/month, which of course will be even less next year.

I do not fully agree with your comment that teachers are insulated from the world, and that after some years teaching they are out of touch with the working environment. This is not true.

Firstly secondary education is mostly involved in basic education. Take the French language, does it change every 10 years?

Take Physics, many of the basic fundamentals such as Ohms law, Snells law are decades old. The constant for the speed of light has not changed. In a thousand years time they will still be teaching these laws. They are the basic foundation blocks of the particular science. Granted some other things might have changed, ie our understanding of nano technology or how the universe works etc.

So if the basics of many subjects do not change, ie river formation, U shaped valleys then it is not true that after 5 or 10 years teaching one is out of touch with the profession and or the real world. At the basic level change is incremental if not at all.

In addition Tony’s comment about “repeated experience”, i.e. a teacher is at their best after 5 years on the job, but performance dropping off at 15 to 20 years. This comment may be true, but it could also be true for most professions, not just teachers, but engineers, accountants and so on.

In addition I am concerned about the attention or focus on results. We are talking about young immature people here. Not every child started life from the same starting blocks.

Some children will due to certain circumstances go on to achieve great things. But what about the children who had it not been for the intervention of the school would have ended up in prison, or never completed the L.Cert?

Some children unfortunately will never be able to achieve 3rd level. But due to massive efforts by school staff the child made it to L.Cert. Does that mean because the child never got A’s all round the staff should have their salaries clipped, or they should be laid off?

There are “different definitions of success”.

The OECD document shows Irish teachers with among the top few pay packets in the OECD in 2008, and that’s on a PPP basis. Ireland was one of the most expensive countries in the world in 2008. The absolute value of the Irish package would be even higher in the ranking.

The Competitiveness document shows Irish teachers with among the top few pay packets in the OECD in 2010, after the pay cuts. It seems to be on an absolute basis.

In both cases, Irish teachers are among the best paid in the world.

Again, Ireland is not borrowing money on a PPP basis. The amount we’ll have to repay on the IMF bailout is not adjusted downwards because Ireland is an expensive place to live.

“So if the basics of many subjects do not change, ie river formation, U shaped valleys then it is not true that after 5 or 10 years teaching one is out of touch with the profession and or the real world. At the basic level change is incremental if not at all.”

You’re assuming that the same stuff has to be taught, irrespective of what the markets might want, and that stuff is best taught without context, which I suggest is not so.

“There are “different definitions of success”.”

Sure. The question is who gets to choose. At present the teachers, and their servants in the Dept of Ed, seem to do the deciding. I suggest that the customers of the service-providers should make the decisions.


@ Brian J.Goggin,

All right Brian, tell us your vision for the Irish education system. For a child aged 12 to 18 years, how would you do it?

I’d let a thousand flowers bloom. In other words, I’d abolish the Department of Education, remove the standard rules, pay and conditions for teaching operatives, abolish the minimum school leaving age and let lots of different organisations offer lots of different things.


@ Brian J. Goggin,

With respect I cannot agree that a broad base of education which is currently offered should be broken up and left to the markets as you have suggested.

What if the markets decided that they wanted lots of COBOL programmers, so adjustments were made to the education system, resulting in thousands of students qualified in COBOL within a few years.

But then the Govt decides to raise Corporation tax and these companies leave Ireland and we are left with thousands of COBOL programmers unemployed.

Because they specialised in a particular subject at an early age, they do not have a broad enough foundation to jump quickly into another area of education.

We have to realise that education is not just about producing a end product for the employer, its also about producing a person who has the skills to be employable in various areas. This is good for society, for the person and for the employer.

A recent example would be, lots of young students left 2nd level after Junior cert to work on building sites.

That was what the market demanded.

Now we have lots of unemployed construction workers who have no jobs, the market is gone and the state + tax payer picks up the tab.

In addition these workers who have made a decision early on in their life to specialise in the construction trade cannot now change to 3rd level education, as their educational standard is too low.

Changing the Irish education system to suit the markets is not a good idea, considering no one can control the market.

I think you are making some assumptions that I don’t accept.

First, I note that you are focusing mainly on matters of curriculum. However, a decentralised system might bring about improvements in other areas: for example, in labour productivity and product quality as well as in production innovation.

Second, “the market” of most concern to me is not that of potential employers but that of those who would buy the educational services. In most cases that is the parents of the consumers. Why would their decisions be worse than those made by a central authority, especially one whose deliberations seem to be dominated by teachers, ex-teachers and teachers of teachers?

Third, is there any reason to believe that, even amongst employers, short-termism is prevalent? I have not checked, but my recollection is that employers’ criticisms of the education system’s outputs relate more to generic skills (thinking, writing, mathematics etc) than to anything as specific as COBOL or river formation.

Fourth, you focus on a front-loaded model. There is no reason why persons who left school early cannot return to the education system (although I see no reason why they should have to sit the standard Leaving Cert to get into third level). I have myself seen persons who held only the Primary Cert go straight from that to earning (kosher) primary degrees.

Fifth, there is no reason why some persons should not be able to choose not to be educated beyond primary level. The state needs hewers of wood and drawers of water and some folk dislike school; why force them to stay on when they could be earning a living?

Sixth, there seems to be a contradiction in your argument: you seem to suggest that the market should have been ignored when it wanted construction operatives but heeded when it decided it didn’t need them any more. You rightly point out that no one can control the market (or at least we hope so) but, if folk are to obtain employment, or other ways of obtaining incomes, the market for labour cannot be ignored. A decentralised system, with decision-making made by the interaction between local producers and customers, offers greater responsiveness, with more scope for variety and innovation, than the Stalinist producer-dominated Dept of Ed.


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