Bini-Smaghi: ‘Ireland’s meltdown is the outcome of the policies of its elected politicians’

Lorenzo Bini-Smaghi of the ECB is interviewed by Arthur Beesley in today’s Irish Times; it provides a very interesting account of the concerns of the ECB during Summer/Autumn 2009.  You can read it here.

103 replies on “Bini-Smaghi: ‘Ireland’s meltdown is the outcome of the policies of its elected politicians’”

“It would be dramatic for Ireland if just by changing government you renege on the promises that Ireland as a sovereign has made.”

This, from an Italian? Mama mia! I gather he got his PhD in Chicago. No surprise there.

What unbelivable arrogance from the ECB.

If you accept FFs bona fidas outside the obviously corrupt bankers pets in the PDs and their FF/PD brethren, most of FF were dumb rednecks incapable of dealing with the flow of credit and their greedy supporters were obvious cannon fodder in the great goal of the Euro which is to transfer dollar reserves into the euro system.
They could not control the capital flows nor did they understand the goals of the euro system which has nothing directly to do with Ireland.
Ireland and Iberia’s local administration districts kept the fiscal bargain but the surplus created went into titanic malinvestment overseen by the ECB and its sister central banks.
I really cannot comprehend the scale of the darkness – this is beyond terrible.

“Again, the banks have been the basis of the growth and prosperity of Ireland. Unless you want to change model, and make all the banks broke, you have to ensure a smooth transition which requires a recapitalisation and support of the banking system through public funds.”

That is overlysimplistic tripe.

“He therefore excludes any possibility of a “haircut” for senior bank bondholders and says that would fatally compromise the effort to regain investor confidence.

“If you want to put that into question, you put into question everything and the markets will also question the trust in the Irish state. If the Irish state says, ‘support us, trust us, we will repay you’, and after a while you say ‘sorry, we won’t repay you’, then there’s no way to regain the confidence not only of the markets but also of the rest of the people of Europe who have supported Ireland.”

But post 2013 it will be okay?

Personal endorsement (for what its worth, make up your own mind) – this is highly unpalatable to an Irish audience, but is highly accurate as a view from abroad, ie where the funders are.

“the bank repeatedly pressed the Taoiseach, Brian Cowen, and his finance minister, Brian Lenihan, to do more to avoid that fate”

“meltdown is the outcome of policies made by politicians the people elected, he says. As the bubble inflated, the Government, taxpayers and regulators believed it was in their interest to keep the party going” – correct!

“Democracies have to be accountable and consistent with their own choices. I don’t think anybody outside Ireland should tell Ireland what to do, but you should not complain if now you have to increase taxes as a result of the choice of economic model the Irish people made.” – correct, a sovereign state too long now to blame British colonialism.

“I think it was a choice of the Irish. It was the choice of the successive governments, and their voters, to try to adopt a growth model very similar to the British one, with an overly competitive financial system, underestimating the risks associated with this kind of model. Many others were not aware of the risks.” – correct.

“For many months last year, there was nothing but praise from Frankfurt for the austerity policies championed by Cowen and Lenihan” – thats right, the optics were excellent at that point.

So why did the overseas funders loose it with Ireland? Yes the farcical spoofing with the bank asset writedowns is a favorite reason on this forum, but is only part of the picture so far as foreigners are concerned. Viz:

“Whereas Cowen and his ministers had responded swiftly during 2009 as fiscal conditions worsened, Bini Smaghi says there was no comparable action to reassure markets when the heat came on last year”

“Markets waited and waited and since they saw no policy reactions they started to lose confidence in the course of the summer.”

“It’s difficult to recreate history, but certainly in 2009 when the Government announced bold measures, this had a very strong impact on the markets. This kind of boldness was not repeated in 2010.

“On the contrary, the impression was that actions were delayed while uncertainties about what increased.”

Well, when you lose the confidence of the markets, you can’t just wait to follow the normal procedures. In 2009, for instance, the Irish Government announced tough measures much before the Budget, and this was very convincing for the markets.”

The key thing here is that the initial “austerity measures” announcement made Ireland look like it was still what most foreign investors had been spun that it was all along – the poster boy of a country that “gets it”. Even the Chicago school bond vigilante types would just go and whinge about somewhere else. Just taking the lead in a decisive way, telling the public sector times have changed, we are cutting your pay

What followed was ideally not for foreign consumption. Croke Park revealed that the reality was that the pay cuts were a one off, and that what was really happening was the start of a long-winded negotiation pantomime. During 2010 it gradually dawned on overseas investors that they had been conned – that the decisive leadership displayed initially was a stunt and was all about the optics of giving that impression. Peal away the facade and what was actually done was another BIG GAMBLE – this time that the recession was going to be V shaped but just a bit deeper than usual. That meant one-off cuts could be cemented and there would be useful headlines about how Irish unions were cooperating with the required adjustments.

If it wasn’t a “V”, the country was stuffed – and on its way to the IMF because all flexibility for the big current spending items had been traded away.

There have been very few occasions i the last 25 years when I have been close to absolutely convinced about anything much in the financial markets – there is usually a lot of uncertainty, and it is a probability thing – but the granting of the blanket guarantee in 2008 made me very very strongly suspect the country would end up bust. The Croke Park agreement, for me, was as good as confirmation the IMF were on the way.

All of that is not to say that the alternative would not lead to the trap Keynes might suggests, but the route that was chosen – and in Croke Park, retains popular support – was inevitably going to result in the bond market walking away.

“WHEN THERE are people who say that the Irish taxpayers are suffering from the problems created by the banking system, I would remind that for many years the Irish taxpayers benefited from that system,”

A fascinating comment. Let us consider the Balance of Payments etc. Ireland owes foreigners lots of money. That can only be the case if Ireland has spent lots on foreign goods or has acquired lots of foreign investments. A typical illustration of the latter is as follows: Foreign Bank lends Irish Bank money, Irish Bank onward lends to developer, developer buys land from Irish farmer, farmer acquires foreign investment. At the aggregate level Ireland has acquired a foreign investment that it hasn’t paid for yet.

Now developer says to Irish bank it can’t pay the loan back. If Irish bank says to foreign lender sorry can’t pay you back then Ireland as an aggregate has effectively stolen the foreign investment which is in the possession of the farmer.

We borrowed the money, we benefited from it, we have to pay it back. This is an Irish problem of our own making. It is a failure of us Irish that this results in a massive wealth transfer from the taxpayers as a collective to those lucky farmers (or wives of Labour Party leaders) who creamed ridiculous windfalls from the bubble. It is not a wealth transfer from Ireland to foreigners.

National default is an unprecedented option and yet it has become PC to consider it – the argument seems to be that things are so dire that the unthinkable becomes thinkable. Why is nobody thinking of the following unthinkable option? We should strive as far as possible to ensure that those who enjoyed the benefist of this borrowing pay it pack. I have in mind a retrospective tax on net property gains made since 2000.

The structure of the ESCB is such that the ECB has no supervisory role over either the National Central Banks or the banks themselves. This is, as has been seen, a glaring gap in the system of oversight. Mr. Bini-Smaghi is correct in what he says in so far as he goes, but he skips the elephant that is the gap. The Irish Regulator and Central Bank governor were appointed by the Irish government and answerable only to them.

You pick monkeys, you get bottoms.


And, pardon my ignorance, but I was under the impression the summer stress tests did more than simply rubber stamped last March’s PCAR.

You’d think that Dr. Bini-Smaghi would feel bashful enough over the ECB’s Lisbon Article 123 compliance issues that he would be slow to make pronouncements about the solemn commitments of others. But he brings up an important question. Does the public part of the EFSF/EFSM/ECB deal contain a commitment to fully support all senior bondholders in Irish banks? Or does the secret side-letter contain such a commitment? Or was Dr. Bini-Smaghi’s statement misleading?

It’s also interesting that Bini-Smaghi’s position apparently diverges from that of Ewald Nowotny.

Bini Smaghi says: ““You have to think whether you want to continue to have this kind of model which relies extensively on volatile corporate taxation income.”

Eh, im sorry, but this is b*ll*x. Corporation tax has been, if anything, bizarrely stable throughout this crisis.

Secondly, the comment about our stress tests contaminating the rest is also, im afraid, complete b*ll*x. At the time the skepticism was not aimed at the Irish banks, but at the Spanish and German ones which somehow passed. The Spanish government is now looking at injecting up to 80bn in fresh capital into the cajas, and the German bad bank framework is covering up hundreds of billions in banking losses.

This is the ECB trying to whitewash its chronic mismanagement of the Eurozone banking system over the last decade. JCT tried the same trick on Thursday when trying to justify the now insane decision to raise rates back in July 2008.

Its a balance of fear game. Burn the bank bondholders and we become Argentina. However this is far from certain, and we can go bankrupt if we don’t burn the bondholders.

Perhaps the ECB’s policies are failing because their policies are wrong?


You make an interesting point here:

“We borrowed the money, we benefited from it, we have to pay it back. This is an Irish problem of our own making. It is a failure of us Irish that this results in a massive wealth transfer from the taxpayers as a collective to those lucky farmers (or wives of Labour Party leaders) who creamed ridiculous windfalls from the bubble. ”

There was a recent Prime Time – i think (maybe it was another property crash aftermath one) – programme which attempted to explain “where did the money go?”

The answer was “nowhere – nobody benefited”.

The camera crew and interviewer of the “expert” visited actual unfinished build The example was – property developer bought land from farmer with borrowed money. Sold units, made profit. Went to bank, borrowed much more money from bank, bought neighbouring field for astronomical price, went bust.

It was carefully explained that despite all the money being lavished on the developer by the bank he had not benefited at all. The money had just vanished.

It was pathetic. It fits in with classically Irish narratives brilliantly. The straw man was the developer disappearing into the sunset with everyone’s money. Nobody benefited, Ireland was, yet again nothing more than a hapless victim and – most importantly of all, all farmers are poor.

You will not that farmers ere exempt from Capital Acquisitions Tax for transfers of up to in excess of 4m euros to class 1 beneficiaries. Over 4m it starts being taxed at – wait for it…..about 2.5%. This is because farming assets are “valued” at 10% of their market value for tax purposes. There is talk of increasing this to about 25% in a few years!!!

Farmers are ten times more valued by the state the the mugs in the non-subsidised sectors.

FG used to be known as the farmers party, so its not surprising they will leave it alone. What motivates Labour is beyond me.

@Keith et al.

“What unbelivable arrogance from the ECB”.

Yes. I nearly fell off my chair when I read this article. It makes Diamond, Dimon, Blankfein etc. look timid and hesitant in their defence of corporate welfare and its “privatization of profits and socialization of losses” mantra. The conflation of bankers, borrowers, government, taxpayers, ‘the Irish people’ and the country is stunning. Everyone is collectively responsible for the “model”, and so the taxpayer must pay back private debts.

The role and authority of the ECB in enforcing this “collective responsibility” needs to be examined much more. Again I’ll quote what Lenihan said in the Seanad a few weeks ago

The European Central Bank made it clear to us in the recent negotiations that it would not countenance a default on senior debt.

While not stated explicitly, my interpretation of subsequent comments is that the ECB threatened to stop funding the banks if senior bondholders were hit. This would have been a good question to ask Mr. Bini-Smaghi, and why he believes he has the authority to effectively force governments to assume (unguaranteed) private debt.

Another easy question would have been to ask why the EFSM/EFSF is charging a 3% profit margin on loans to EZ member states at the same time as charging a 0% profit margin on loans to non-EZ member states under the BoP program.

As B.E.B. points out the statements on corporate taxation and the bank stress tests are complete nonsense and bear no relation to the facts.

This is just an exposition of a narrative, crafted in Frankfurt, to make the ECB seem blameless and to protect EU core banks at all costs. I am sure Ackermann and his buddies are giving a hearty “gut gemacht” to Mr. Bini-Smaghi on his performance.

I hope this article makes it way to Poland, Latvia etc and other countries considering joining the Euro. They should be very clear about what they are getting themselves into.

@Mr. Bond

JCT tried the same trick on Thursday when trying to justify the now insane decision to raise rates back in July 2008.

I thought the chatter was that this was a ruse by Trichet to help squeeze those short the Euro: bring up the 2008 rate hike to suggest (truthfully or not) that rates could rise again soon?

@Bryan G

Please! It’s Dr. Bini-Smaghi.

I would like to remind everyone that there are two primary fiscal rules that the ECB recommends and enforces.
1 . The 3% yearly deficit rule

2 . The 60% government debt ratio.

If the Irish Government was not a vassal state it could have defaulted on all bank debt in 2008 citing the above rules – stating that it would be impossible to conform to the above unless it could default on all bank debt other then deposits.
Indeed it can still default on all bank debt citing that it is impossible to get its goverment debt down unless bank debt is defaulted – stating it has got no cooperation from the ECB.
I get the feeling that the ECB is stunned by our servitude and cannot understand why we are not playing a game of chicken as all states vs central banks do – you cannot blame a fox for killing hens in a chicken coup – the lack of reaction from the Irish chickens is merely activating the killing gene in the bank fox , it is conforming to instinct.

These guys are gaming us and laughing all the way to the bank – why cannot we game them – using their own rules and using it as a weapon.

We have little left to loose now – the worst that can happen is that we would enter the orbit of the BOE again , whats the difference ?

@ grumpy

Glad to see your support. The money did not go nowhere. It was a wealth transfer within Ireland. To try and correct that by stealing money from foreigners is both immoral and hopelessly destined to isolate us.

Now while Bini-Smaghi is waffling about this that and the other on the broad theoretical plain that shelters middle Europe’s intelligentsia, he has cut to the heart of the problem in Ireland. Total denial about the role played by indigenous forces in destroying the economy and individual wealth across a range of sectors.

NAMA will shortly move to liquidate certain developers unless a change of government intervenes. Since LTV ratios have gone into free-fall, many developers are in breach of loan covenants. Recall that NAMA promised to realize certain monies before 2012, 2014, etc. The impact of firesales on the economy, probably two years too late, will be not go unfelt, and the Irish ‘banks’ reliance ECB funds and the kindness of strangers will be tested to the limit. At that point in time, what will Bini-Smaghi have to offer?

I have looked on events in Tunisia with a certain shallow envy over the past few days.

“Bini Smaghi says: ““You have to think whether you want to continue to have this kind of model which relies extensively on volatile corporate taxation income.”

Eh, im sorry, but this is b*ll*x. Corporation tax has been, if anything, bizarrely stable throughout this crisis.”
Eh, no. Testicles is what you are talking. Or rather, it is both of you at it.

Corporation tax was 6,685 mn in 2006
In 2009 it was 3,889 a decline of 41%
Mr. Bini-Smaghi could have also pointed out that VAT and CAT were down 25%, Stamp down 72% and CGT down 81%… but then they were the primary bubble taxes, weren’t they?

I’ll reserve my “Dr.” for addressing people for whom the title is part of their job description thank you.

YM. MA with Oak leaves…

I tried to figure out before where the money went. I agree with you that a fair amount of it was transferred within the country, but a fair amount of that has been wee’d away. Not just in the usual shares in banks “safe as houses”, leveraged mezzanine property fund no lose and all that, but just on spending. I tried to work out how much was spent on vehicles for two years – 2005 and 2006.

Here’s where I got:

I think we blew it. And not on anything sensible like hookers and beer. Mind you, I suspect a fair amount marched up the hills of Colombia…

I’d see Mr Bini Smaghi’s comments in the area of fiscal policy as quite reasonable. It was, as I saw it too, mostly the prospect of elevated public deficits in Ireland in 2011 and beyond that led to Ireland’s fall of grace. And the market was right, as Ireland is yet again looking at a deficit in excess of 10% of GDP this year, and has yet to start on a programme of meaningful austerity.
To those who argue that Ireland’s woes are mostly due to the banks, think of it this way. Suppose Ireland’s banks had been sold to foreign interests 2/3 years ago, would the prospects for the Irish budget deficit be that much better? Public debt would be a bit lower, and contingent debt would have been far lower. But there’d probably still have been a yawning gap between public receipts and spending, and little leadership on how that gap will be closed. The history and prospect of double digit deficits, several years on the trot, relative to national income, was a sufficient condition (and foreseeably so) for trouble.
Moreover Ireland was the last country in the eurozone to attempt to put together a budget for the following year; the outline of a European semester had already been agreed in June. Did we see much thinking in Dublin around what that entailed (even if not strictly obligatory)? That is the sense of Mr Bini-Smaghi’s description of what happened in H2.
There are governments that like their publics to believe that that the problems in the public finances are the fault of bankers. Much of the public buys the story. Unfortunately, they are not being prepared for the tough fiscal choices that lie ahead in the west in the years to come, and particularly so in Ireland.
Let’s distinguish between the actual quotes and the ideas attributed by the journalist to the interviewee. There can be a world of difference between the two. The line “which relies extensively on volatile corporate taxation income” looks like a misquote (they do occur). The point he is making I think is widely agreed – Ireland lacks automatic stabilisers relative to the rest of continental Europe, partly because its tax base is too narrow, partly because it shares no land border with eurozone countries, etc (also cf. hoganmahew above). Nothing can be done about the latter (other than to have stuck with sterling). But who is responsible for the narrowness of the tax base? Think, a government abolished local rates, etc in the late 1970s, followed by an explosion in the public deficit. A pro-austerity government across the water was elected. And presto, the Irish punt was born. With the benefit of hindsight, there is a certain logic here. What needs to be done to avoid a repeat show?
I wouldn’t share Mr Bini-Smaghi’s comments as to what the next Irish government should or should not do over the coming year. I wouldn’t however have expected an ECB council member to say anything different in the current context. Doubtless there is an extensive debate within the ECB, as there is outside, on “burden sharing” (and cf. anonym above).
Set the ECB’s comments against a backdrop of an extraordinarily large increase in Irish public indebtedness in 2011, as outlined here
i.e. in 2010/2011, loans of over €15bn from the EU, a similarly chunky figure again from the EFSF, an equally large sum from the IMF, plus loans from the UK, Scandinavia, plus a run down in pensions funds and in liquidities. All over end 2010 to end 2011. Add it all up. Twist it any way you want. Look at the sum on a per capita basis or relative to revenues. It is extraordinary. It is more extraordinary that the implications are not talked about in Ireland, it seems (not even on this blog). That is the sense of Mr Bini-Smaghi’s comment that the onus is on the Irish public, and its governments, to engage in meaningful austerity for a change. And rapidos.
What I find particularly troublesome, and doubtless many in Frankfurt etc too, is that the public debate in Ireland still seems to comfortably ignore the need to make tough choices (cf. The Alchemist’s “total denial”, or Grumpy, “the route that was chosen retains popular support”). That’s supported by a stylised view of its recent history that ignores essential elements (like in asking where all the money went, it is conveniently forgotten that there has been a massive public deficit). You’d hope that that the opposition would be well placed now to show some leadership.

“Democracies have to be accountable and consistent with their own choices. I don’t think anybody outside Ireland should tell Ireland what to do, but you should not complain if now you have to increase taxes as a result of the choice of economic model the Irish people made.”

I think there was a typo in Mr Beesely’s article so I fixed it for him.

“INVESTORS have to be accountable and consistent with their own choices. I don’t think anybody outside Ireland should tell Ireland what to do, but you should not complain if BONDHOLDERS have to TAKE HAIRCUTS as a result of the choice of economic model the Irish people made.”

My thoughs readng this were:

1. Why wasn’t he questioned about the role of the ECB in the September 2008 loan guarantee? What arm-twisting occured? What promises were made?

2. Those EU stress tests were flawed? Huh? Maybe, Mr Bini-Smaghi needs to speak more often with his boss…

“The European bank stress tests completed last month have helped increase transparency and were a step toward restoring market confidence in the banking sector, European Central Bank President Jean-Claude ”

Here’s some more reportage from August:

“The president of the European Central Bank, Jean-Claude Trichet, offered a somewhat more optimistic assessment of the euro zone economy Thursday and said that bank stress tests in July were “an important step forward in restoring market confidence.”

@ Hogan

Corporation tax made up 14.5% of all tax receipts in 2006, and it made up 12.3% of all tax receipts in 2010. Throughout it all, corporation tax receipts as a % of total revenue have been pretty solid.

We never over-relied on CT, and it decreased at pretty much the same rate as the overall tax take (chiefly down to all the bust banks no longer paying CT – it doesn’t matter what rate you try to levy a tax on a bust entity, it won’t pay you anything). It has had nothing to do with our current crisis.

Very good point about farmers and applies even more so to developers. Should be done plus higher permanent taxes. But nowhere near enough to plug the gap.

Very important article. On stress tests, early budget announcement, emergency support, senior bondholders and loan interest rate. Gauntlet thrown down to next government. Clearly ECB puts bank bondholders ahead of Irish public. Ireland is ECB whipped. Who would vote again for euro entry?

What is this “stealing money from foreigners” nonsense? I thought self -flagellation was more likely in hill villages in Italy. Do we think that we will be rewarded in some after economy for beating our breasts and shouting “I have sinned!”
Lets get real. I didn’t like our “model” and I can understand that most of the rest of europe didn’t like it, but to cast all the blame for just about every problem europe has on the heads of ALL the Irish is just ludicrous. The idea that the stress tests on German Banks were any thing short of farcical and that the German govt hasn’t spent its time denying the reality of the situation is not credible.
The problems of the periphery countries may all be slightly different, but the basic problem has been the lack of a system of transfers in the Euro area. It could also be argued that German economic policy contributed to the problems in the periphery, and is certainly not helping now.
German productivity has not risen and the growth i exports can be argued to be on the back of a weak euro. USA has growth on a weak currency – caused by QE. Here there is no QE. It could be argued there is a transfer going from the periphery to the core.

@BWII & Grumpy,

Karl Marx believed that only socially necessary labour can create value. The price of “land” has no value. It is a free gift of nature. Therefore if the price of land goes down there has been no destruction of value since no value was created in the first place. As you say, all that has happened is a transfer of wealth from one class (developers) to another class (land owners). As you also say, if the Irish bank defaults (following the default of developers) the loss is transferred abroad (assuming the purchase was facilitated by foreign capital flowing into Irish banks).

There is only one caveat. There was labour expended in developing the land and the buildings on that land. If the resulting buildings are idle and serve no social purpose then the labour is not “socially necessary”. And there has indeed been a destruction of value. There is an aggregate loss to Irish society.

However, I suspect that of the total losses incurred by developers, only a small proportion is accounted for by the “destruction of value”. The bulk of the losses were in effect a transfer of wealth from one class of people to another.

If it is accepted that the net aggregate wealth has not diminished appreciably then Irish society has the capacity to repay foreign debts. The problem is political rather than economic.

I agree part of the solution could be retrospective taxation on capital gains. There may be constitutional problems. However, in an economic crisis constitutional problems can be overcome. This is not a panacea. The banking crisis is only part of a general debt problem.

“Corporation tax made up 14.5% of all tax receipts in 2006, and it made up 12.3% of all tax receipts in 2010. Throughout it all, corporation tax receipts as a % of total revenue have been pretty solid.”
That’s patently ridiculous.

You say that corporate tax has held up pretty well. The numbers you give show it has followed the rest of the tax heads down the toilet. That is not stable, that is as pro-cyclical as everything else.

“It has had nothing to do with our current crisis.”
Au contraire. It has 2.796bn plus expected growth since 2006 to do with our current crisis. That’s 15%ish of the exchequer shortfall.

As I say, it’s not the whole story, but it’s not nothing. That’s why I say that both of you are talking rubbish.

I’ve had a drink now, it’s funnier!

@Ciaran O’Hagan
Almost everyone agrees public deficit had to be reduced and tough measures were taken. Unfortunately the crash was such that really painful measures would have been needed to make an impact. If you are saying we should have gone down the Latvian route then, no, the public weren’t prepared for THAT, but they have gone along with tough measures so far
(perhaps Mr Bini-Smaghi should come to Ireland and spell it out to us – after all his institution is now running the country). In any case our/the ECB’s banking policy are going to make us insolvent anyway, and that has been widely debated. Also note that our public debt shot up after the bubble broke due to deficit/bank losses. We did not have deficits during the bubble.

Would Latvian austerity make any difference now?
Would we need Latvia Max? If we are going bankrupt anyway should we wreck the economy in a vain effort to stave off the inevitable. And what would it take to make bankruptcy preferable to austerity? If the troika want Latvian austerity they have to make a deal on the bank debt. If they want Latvia Max………….

P.S. What do people think the current budget will do to unemployment?

@grumpy & John Martin
There is one problem with the farmer-bashing – farmers paid CGT on land they sold, or bought other land (so the seller there paid CGT). The current rate of CGT is, I believe, 28%? With the old rate 25%? So at best you’re looking at 3% of the gain…

I don’t disagree about CAT, though, indeed the current limits even for normal transfers are still astonishingly high (I was amazed when they were increased and I am stunned that they haven’t been decreased).

From Discuss there as this is an important thread:

“Tomorrow’s Tribune says David McWilliams is believed to be planning on contesting the general election in Dun Laoghaire.

It also reports (as it did last week) that Shane Ross is believed to be standing in Dublin South, whilst Delta Index’ Paul Sommerville is believed to be planning a run in Dublin South East.”

Firstly his comment about corporation tax is well wide of the mark, didn’t it actually rise this year!

Secondly he seems to be going in for fear mongering, first we were going to be like Iceland now Argentina. i really do wish we were like Iceland now. He makes the point that we (some of us) voted for FF so tough shit, on the other hand my point qould be that the bondholders invested in the banks so tough shit…….ah wait a minute we can’t do that!!! Playing the blame methinks and trying to ave their won skins!

Another point about corporation tax, shouldn’t it be pointed out to the French and Germans that every time we need interest rates to go down they go up an vice versa……is this more unfair or less unfair than our corporation tax!!!


This may be good news.
Alot of people have avoided a political life like the plague, and look at what happened.
Time to end the Gombeen man!
Saying this if the political parties released their claws from the senate and it was populated with long term thinkers then maybe these gentleman might be better placed there.

But tis time to stand!

@De Roiste
The blind failed to exercise due diligence and must be punished but senior bond investors did and must be protected.


I agree. Let’s not attack farmers. One of the most spectacular deals was done in rural (?) Dublin 4. The property owners who sold to Sean Dunne were not farmers.

You are saying that the State received a proportion of the gains from the bubble in the form of CGT and CAT (even though the rates were low). This is an example of we (in the form of the State) benefitting from the bubble, which in turn enabled us (as a country) to pay lower income and other taxes than was sustainable.

Brian Lenihan is not wrong when he says we (as a country) partied. We are now having to deal with the consequences.


No, lets not attack farmers, lets just treat them the same as the second class element of the middle class whose pre-taxed assets end up getting taxed again at the headline rate of CAT.

If you are thinking about getting a tax yield out of this tax just remember that it is only the middle class who pay anything like the headline rate. The really wealthy can shelter assets from the tax through farms or business assets and pay nominal rates. All the political parties seem intent on continuing with this two tier system – they will make a big song and dance about reducing the thresholds for the ordinary and keep effectively exempting the properly wedged-up.

Its all about the optics, as usual.

@ Oliver

but in fairness in a round about way he does make the point that bondholders are necessary for the system if it is to hold up as is and I think we can conclude from this that tax payers don’t matter in the grand scheme of things!

he also points out we are in a democracy so I vote to change the system, how do you like them apples!!! Or like bondholders can the system not be interfered with!

There was a wealth transfer from EU banks. The EU want it back. The country generally is paying its share. Building workers are unemployed or emigrating. That leaves developers/farmers. Good idea but it still won’t be enough. Wealth transfer on scale needed would be like Versailles reparations, only bigger?

@De Roiste
The ECB’s loyalty is clearly to bondholders.

Are we going to get Latvia or (new improved) Latvia Max austerity? What will this do to the economy?

“Good old Biffo! Fianna Fail’s very own Father Jack: thick, stubborn, uncomprehending and unyielding right to the bitter (very bitter) end.”


While we’re down on the farm(ers):

“There is one problem with the farmer-bashing – farmers paid CGT on land they sold”

Did you know about the handy little CGT exemption for farmers over 55 selling sites worth less than 750,000?

Here’s how it worked. The periphery was forwarded credit it didn’t need. This was not regulated by the ECB. It was not regulated because German prosperity relied on credit rather than trade because Germans are too frugal to support other economies.
Jean Claude cannot accept that the Euro and the ECB has failed and would rather scapegoat Ireland.
Ireland missed out on WW2 so still has a few little Mosleyites willing to buy into the theory of peripheral inferiority.
The peoples of Europe are decent. The elites are not. Time for us to seriously ask the question – is this a political union worth defending?


“Lorenzo Bini Smaghi is very much the ECB ‘enforcer’. Here he in October 2010 on Greece:

WASHINGTON (MNI) – If Greece were to restructure its sovereign debt, this would trigger the total collapse of its economy, European Central Bank Executive Board member Lorenzo Bini Smaghi warmed Saturday. ………. Bini Smaghi argued that the ECB is “doing the right thing” by providing banks with the liquidity they need.
In this way “we are helping the transmission mechanism of monetary policy work better,” he explained on a panel sponsored by Germany’s DZ bank……Speaking about Greece and its IMF/Eurozone-sponsored recovery program, the central banker said, “We have to make sure it works,” since “if Greece restructures it would have a total collapse of the economy.”

My emphasis above. So if Bini Smaghi is the ‘bad cop’ who is the ‘good cop’?”


“Please! It’s Dr. Bini-Smaghi”

Ah yes, my mistake. However imagine my surprise when I found out his doctorate was not in Creative Writing or Mythology Studies!

@Ciaran O’Hagan

In figuring out how much of the problem is due to the banks, it is useful to put some numbers on things. Here is my take:

The IMF estimate that gross government debt at end of 2015 will be €228bn. At the end of 2007 it was €47bn. So there’s an increase of €181bn in the 8 years 2008 through 2015.

About €50bn has been pumped into the banks for recapitalization. Another €25bn has been reserved as a contingency, and I think the IMF numbers assume this will all be used. So that’s a total of €75bn for the banks, leaving €106bn due to the government living beyond its means for reasons other than the banks. This is roughly a 40/60 split between bank/non-bank.

There is about €20bn of unguaranteed senior debt which the Irish government has now effectively guaranteed thanks to the ECB enforcers. So a decent haircut on this certainly wouldn’t be a game changer, but it would map to a couple of budget cycles. My view is that this should never had been agreed to. If the ECB had pulled funding it would have triggered the crisis they were trying to avoid, so they could not have done this.

At the end of 2015, if there are no major surprises and after 5 more years of austerity measures, Ireland ends up like Belgium – relatively stable deficit but huge debt level. At that point Mr Dr. Bini Smaghi will probably arrive and say “Now, my good friends, it is time to talk about the 60% GDP debt level target….”

Bini-Smaghi is correct when he implies that there was strong public support for boomtime policies and the slow-motion response to the banking crisis resulted in the eventual collapse of market confidence.

1. If the global credit crunch had been deferred to 2013, the most likely result of the 2012 Irish general election would be a Fianna Fáil-Labour coalition.

While I don’t buy the argument that the whole population had been transformed into a shower of eejits, absent a global downturn that would be much worse than 2000/2001, fiscal prudence was never likely to be popular with the majority of the electorate who had become obsessed with the paper-profits of the bubble.

For older people with their mortgages paid off and the attraction of equity release, they no longer had to dream of summer days competing with pushy Germans for deck chairs on a tacky beach in Spain but they could aspire to their own place in the sun — even if it was somewhere they had never heard of.

2. The credit crunch broke out in early Aug 2007, 7 months after HSBC Bank announced big subprime losses in the US and revealed the rickety state of the US housing market; by mid-Sept 2008 when Lehman Bros. collapsed, Irish political leaders and the Department of Finance were still relying on reassurances from the financial regulator and the banks themselves on the strength of the banking sector.

Using the Pareto 80/20 rule, how long would it have taken to establish the true state – – who was meeting interest obligations etc? One week?

Anglo made a powerpoint presentation to DoF officials days after the Lehman collapse and Fingleton of Irish Nationwide was also reassuring; liquidity not solvency was the problem.

3. Whatever was discussed on the Trichet-Lenihan phone call a week before, the Irish government was the only member of the Eurozone to guarantee existing bank debt and it was presented as a fait accompli to the ECB and both the Ecofin and Eurogroup. The decision of Sept 29/30 was made without access to crucial information by the political leadership or their advisers.

4. Anglo was nationalised in Jan 2009; in Jan 2010, the head of NAMA said on the detail of property loans presented by the banks: “We opened it up and said, ‘Oh, my God,’ What they are telling us is not the reality.”

5. I have seen no credible analysis to support the case that outside of the euro, the same individuals who were responsible for the economic crash would have behaved prudently at a time when the carry-trade would have been attracted by Ireland’s ‘miracle’ economy.

6. All the wealth hasn’t evaporated; some €60bn was invested in commercial property mainly in Europe; investments were made in prime properties in for example New Bond Street in London, where values have recovered and tenants are usually sound PLCs.

The focus has been on the transferring of homes in Ireland; there are surely many overseas investments in shelter vehicles that are difficult to source.

Irish per capita GNP is at the average of the EU27.

7. As for restructuring, in March 2010, Germany’s top bank, Deutsche Bank, had a combined €14.8bn of gross sovereign debt exposure to the “peripheral” EU states of Greece, Spain, Portugal, Ireland and Italy, of which €10.4bn was to Italy.

So depending on the number of countries involved, German banks should be able to handle bond losses well in coming years.

While it should be easy for Greece to make its case for a ‘haircut,’ with a public debt GDP ratio of over 150%, how could Ireland’s case be accepted without including say Italy and Belgium?

Include private debt and argue that Irish consumers weren’t as prudent as Italian counterparts during the credit boom!

8. If parliamentary pay and allowances are an indicator of public costs, Ireland has still some road to travel.

Sweden is one of Europe’s fastest growing economies and the members of the Riksdag receive a basic, monthly pay of SEK 56,000 (€6,200), a sum that is subject to income tax – – and is at a higher level than Ireland’s.

Members living more than 50 kilometres from the Riksdag are entitled to reimbursement of up to SEK 7000 (€780)/month spent on overnight accommodation in Stockholm. However, the Riksdag has about 250 overnight apartments which are provided free of charge for members.

Fifty TDs only get the basic Dáil salary of €92,672 and their overall earnings in 2010 were at an average of €112,000

A TD living in the range 60-90km from Leinster House can claim €30,350 annually with effect from March 2010.

“Did you know about the handy little CGT exemption for farmers over 55 selling sites worth less than 750,000?”
Do tell. Does it apply to CPO?

You and John Martin should like my “no exemptions, not now, not ever” tax rates proposal.

@ Oliver
“Why do we deserve better treatment than Latvia?”
That’s probably how Jean Claude sees it alright.
Why does a bank deserve to be bailed out more than a small family business?
The rules of fairness and who deserves have been suspende a long time.
Europe has too many political nooks and crannies where people who just couldn’t make it in the anglophone world can hide.

Behind the smooth chat, this is a blunt warning to our educated classes and incoming adminstration.
” Talk about about bondholder haircuts is dangerous. Shut up unless you want to lose your savings and have to sell your furniture’.

Doubtless the IT was persuaded that it is in the national interest to provide a platform.

The article purports to be an interview, but all of the focus is on Ireland, and none on the ECB, or the big European banks. According to Bini Smaghi, Ireland has ‘an economic model in which the banks have been the focus of growth and prosperity’. In passing, such an analysis totally ignores the contribution of the MNCs to Irelands growth.

More importantly, it ignores the financialisation of the real economy at a global level. The big EZ banks growth model was itself a credit bubble, which bloated peripheral banks, and filled their own balance sheets with toxic derivatives. The peripheral sovereigns are not the only sick pups in Europe, not by a long chalk.

Central bankers advising on fiscal responsibility is a bit like the Vatican advising on child protection. As Palmerston said about the British empire, we don’t have policies, we have interests.

That said, much of Bini Smaghi’s analysis is correct. The adminstration has been inept. Ciaran O’Hagan and Michael H have, as usual, tabled some unpalatable fiscal realities. Even if they are addressed vigorously, it’s hard to see anything other than debt deflation as an outcome.

I am not sure that emigration can be relied on as a permanent safety valve, especially for the poorly qualified. With chronic long term unemployment, property and property crime will eventually become an explosive issue. Especially if we get significant import price inflation. We might be nearer to Tunisia than we think.

@ Hoganmahew,

I don’t disagree with you on principle re: no exemptions. I’d have to look at the detail. However, such tax revenue is dependent on transactions. The taxpayer is only liable to CGT and CAT if there is a sale or a gift/inheritance.

The overall point that I am making is that a number of economists have been questioning the country’s ability to repay its debts based on current income. But a country has wealth (past accumulated income that has not been consumed, held in the form of money and assets of various forms). This cannot be ignored. In particular our tax system should not ignore this.

The problem, of course, is many forms of wealth are mobile. But other forms such as property are not.

The general point of Bini-Smaghi is valid. In a system of high taxes, there are automatic stabilisers. A curb is kept on consumption during a boom. Also, the system of social protection stabilises income and consumption during a downturn.

We didn’t go for this continental model. We (meaning the electorate and the 3 main political parties) went for a low tax model (which also gave us high growth). We partied during the boom and are now suffering in the downturn.

The point of Bini-Smaghi and Rehn is we chose our economic model long before the IMF rode into town. We should stop whinging, face up to the consequences and pay our bills. That’s what serious States do. It is what FF has been attempting to do in the last 2 years (with the occasional hiccup). And it is what FG/Labour is likely to do (despite the rhetoric and bluster) if it forms the next government.

I am not farmer bashing. Let’s take the example of the family who creamed 400M out of the illusion, a family who probably think that pigs can fly. I have no problem with them cashing in, even the wife of a Labour Party leader does not look a gift horse in the mouth.

The 400M is very real but the people who paid it had borrowed it from a bank and can’t pay up, the bank borrowed it from depositors and bondholders and it too can’t pay up. It would be nice to think that one could target the foreign element of that last constituency. A case of having your bubble and bursting it. The windfall winners keep their loot and foreigners lick their losses. That is not the real world.

It is equally unreal to expect the generality of taxpayers to pay for the bubble windfalls of a few. The payment for this should as far as possible and within the constitution (probably amended) be targetted at the winners. I have in mind a Bubble Tax of 80% not a mere backdating of 28% CGT.

A bit shocked to learn that Karl Marx agrees with me, maybe that guy is not as bad as the media would have you believe.

@ Brian Woods II

Farmers got more than €4bn from the national roadbuilding programme

@ All

With the demise of Boyzone and Roy Keane, Irish branding in Asia is now getting a boost from a Taiwanese company.

China is the world’s biggest producer of potatoes and the Taiwanese company has a franchise business selling chunky potato chips.

Three outlets have opened in Kuala Lumpur and they are as popular as donut stores.

The Taiwanese company seems to believe that we are more interesed in potatoes than drink. This is what it says:


The meanings of Ireland Potato can be split in to 3 parts : –




a) Ireland – Ireland country tradition, serious in Potato just like how they treat marriage.

b) Crazy – Crazy in the sense of they are willing to migrate primarily to the United States just to escape starvation. To them potato is just like a main food for the living. They even leave their homeland in searching for potatoes.

c) Potato – a diet of potato and milk will supply enough nutrients the human body needs. The potato has long been considered a staple for the poor.

@Micheal Hennigan
The vast majority bought their houses to live in or already owned them. Those who owned them regarded rising prices as a pleasant bonus, those who didn’t as a difficulty. There was no universal constituency DEMANDING rising house prices. The demand for greater house building reflected this – people believed there was a shortage that needed to be met and this would have then stabilised prices – but in fact the problem was the loan explosion. Towards the end of the bubble the impossibility of even a teacher and a garda affording a house in Dublin was being widely debated.

@John Martin
Those who took out mortgages are paying their debts. Some partied – for many others the mortgage repayments and long commutes made that impossible. But at the end of the night they are paying their bills. It is FF/Builders/Investors/Developers/Land owners/Bankers who are not paying. And they REALLY partied.

The Irish Times had an editorial ordering the opposition to accept the Troika deal a while back.

@Ciarn O’Hagan

Where did the money go?

A lot of it went back into a spiral of property reinvestment – Dublin, London, Prague, Warsaw, Budapest, Dubai, Shanghai, etc. Only James Bond visits as many cities in a movie.

More went into Irish equities which then underwent accelerated self-combustion.

Of course, one can’t ignore domestic investment into overseas properties (luxury developments in such exotic places as Bulgaria), Audi and BMW 4wds, Mercedes that took a minute to pass by they were so long, Range Rovers with more gadgets that a space shuttle, visits to New York to buy up 5th avenue and the clothes to go with it, and so on.

Ultimately most of it was credit piled on credit piled on credit. Isn’t that the problem now? The cash wasn’t ever really ‘there’?

@ Bryan G, I can’t find in the IMF Dec assessment ( ) an estimate for public debt of EUR228bn in 2015 (eg p39). That’s probably just as well, given that such a number would immediately make it clear what’s what. The IMF does project debt under its central scenario to grow to over 120% of GDP. So approaching the EUR 200bn mark. At an average 5% interest repayment pa (after some time), that’d be the equivalent in interest of EUR 2,500 per capita per year. I’d think there is no equivalent today or in the past of such a high burden imposed on taxpayers just about anywhere (for any economy larger than Ireland, I’m not sure about Iceland etc.). An interest rate bill of some EUR 10bn sits uncomfortably with total public revenues pa of a little over EUR 30bn. And all the more so if policies are flaithiulach towards banks and social welfare.
Bryan, G, You draw a comparison with Belgium, tending to reduce the seriousness of the challenges ahead. I wouldn’t think Belgium’s debt is a good yardstick of comparison. I do fear, however, a lack of urgency in policy making based on comparisons such as this one and others.
The IMF forecasts that I do see however for Irish public debt are likely to be far too low, within a few months, unless the Irish government takes very tough decisions within weeks. Again, go tot up the figures pointed to in previous posts. The quotes here from that IMF report (see make it quite clear, I’d think, what the IMF is thinking aloud.
(Also Bryan G “There is about €20bn of unguaranteed senior debt” I have higher figures, excluding guaranteed covered bonds, from a quick perusal of Bloomberg. But we’d need to look at bonds in depth. Whatever, it is clear that there is progressively less flexibility in policy, unless policy changes).
(Sorry have to rush out. No time to reply to other comments. But thanks!)

It occurs to me that Ulster Bank owned by RBS bankrolled Sean Dunne. Also, HBOS was an aggressive player in the property market making loans at the top of the market. We will never know the true extent of the losses incurred by the British banks in Ireland since the impaired loans were dumped in Britain’s version of NAMA.

So, in this instance foreigners were left with the losses. Tough!

I have more sympathy with the German Banks/pension funds. They did not lend directly into the Irish market. They lent to the Irish banks. The assumption was that the Irish banks were stable since they were licensed by the Irish State.

I remain of the view that there is a world of difference between an individual or company defaulting on the one hand and a Bank licensed and regulated by the State on the other. The distinction between sovereign debt and bank debt even in the absence of a guarantee is not so clear. A default in senior bank debt has implications for Sovereign debt. This is not the case for defaults by individuals or ordinary commercial enterprises.

I agree with the bubble tax proposal. 80% in total is very reasonable. The family in question will still have 80 million after tax profit without having generated any new wealth.

@ Oliver Vandt,

You’re right! Some in this country partied and some didn’t. Fair enough. But that is an argument for deciding who in this country should pick up the bill. It is NOT an argument for screwing German Banks and ultimately German savers.

But let’s be honest. The partying was not confined to an elite. Tax cuts applied across all income groups.

A commission was set up to investigate house prices. If memory serves me the Chairman Peter Bacon concluded that property prices were not a problem and would be sorted out by the laws of demand and supply. No political party called for property taxes. No political party called for restrictions on credit. The interests of those on the property ladder trumped those looking to buy.

@Michael Hennigan
Correction of my comment above. You didn’t say everyone – but everyone is paying.
“fiscal prudence was never likely to be popular with the majority of the electorate who had become obsessed with the paper-profits of the bubble.”
As far as the public knew we were a shining beacon of fiscal prudence. The private debt issue was little discussed.

@ Oliver Vandt

The Central Bank published data each month which showed private sector credit growing a double-digit rates over several years.

However, it was a case of Bodhar Uí Loaoghire on a national scale.

Two years before the launch of the euro, central bank governor Maurice O’Connell, told the Oireachtas Committee on Finance and the Public Service in early 1997: “There seems to be a perception that the Central Bank can exercise some legal authority in restricting credit. It has no such authority. Any restriction would be inconsistent with European Union practice. Besides, it would be unworkable as demand would probably be met by overseas lenders.”

This was balderdash!

@ John
I have more sympathy with the German Banks/pension funds. They did not lend directly into the Irish market. They lent to the Irish banks. The assumption was that the Irish banks were stable since they were licensed by the Irish State.”
I know people who assumed that due diligence had been performed by all parties in the credit stream before buying their overvalued houses.
Personally I have more sympathy for the thousands of unemployed, the hundreds being cut off from electricity, the 60 somethings watching their kids and grandkids abandon them, the small business owners watching their livluhoods evaporate than some guy in Franfurt who didn’t do his sums.
But then maybe that’s just me…..

Interesting to see Jean Claude Trichet went on trial for banking irregularities at Credit Lyonnais while he was in charge of French Treasuries.
Would be interesting to find out more about his stance then and just how close he was to the banks

My reading of Dr. Bini-Smaghi is a little different.

He is saying that we can continue live beyond our means, at core-EZ countries’ expense, only if we agree to repay lendings from the core.

Defaulting on those loans from the core would involve penury not seen since ‘the emergency’ (1940s).

And why won’t the core-ez play nice and let the ez-banks collectively sort out thier business, and leave the hairdressers/plumbers/nurses out of it ?

It’s because the “anglo-saxon” model countries have all along insisted on resisting any unified fiscal power being ceded to brussels of frankfurt.

It is this model that is now being asked to face the consequences of it’s actions.

And we can avoid getting in to other fine messes of this type if we see what’s best for us and surrender fiscal authority to the wise heads at the center.

> So is this it? Can we finally accept that Europe has failed? Please?

Or : Europe is finally accepting that /we/ have failed .. ? 😉

@ Eureka

Unemployed Paddy unable to afford his electricity versus Frankfurt bondholder – that certainly stifles the discussion.

@ BW2
I’m sure you didn’t mean to be pejorative about unemployed Irish citizens some of whom have taken their own lives because things got so bad.
Wasn’t meant to hinder debate – just nobody is defending the interests of the Irish people.

Certainly not scandal tainted Mr Trichet. The parallels between Anglo and credit lyonnais are troubling to my untrained eye. Not only a tax payer bailout but also the creation of a bad bank and nobody (yes nobody) was charged with anything.
Our Government wasn’t handling Anglo – Jean Claude Trichet was.
And if anybody knew what perils could lie in bank balance sheets it was him! And yet he still advised the Irish to guarantee the banks (wonder if Lenny saved that voicemail)
We have been played!!!

@Ciaran O’Hagan

Thanks for the detailed reply – some further comments:

I can’t find in the IMF Dec assessment ( ) an estimate for public debt of EUR228bn in 2015 (eg p39). That’s probably just as well, given that such a number would immediately make it clear what’s what.

Since I also think that looking at the Euro amounts rather than percentages makes things clearer I created a downloadable spreadsheet (ODS format) which has this information. The Euro amounts for debt are not stated directly in the IMF document, but there is a table that shows the stock of outstanding credit in SDR and also as a % of GDP. From this the assumptions on GDP amounts be found and converted to Euro and after that any figure represented as %GDP can be expressed in Euro. The spreadsheet contains notes on the source of the data and I am happy to have others check the calculations.

An interest rate bill of some EUR 10bn sits uncomfortably with total public revenues pa of a little over EUR 30bn.

Government revenues are actually about €55bn – there’s an excellent post on the economic-incentives blog “The exchequer account is not the public finances” which goes through this (I’ll include link in a followup post to avoid the ‘two links and you’re moderated’ rule). The easiest source to get the full picture seems to be the SGP/Maastricht returns which the government is required to produce.

You draw a comparison with Belgium, tending to reduce the seriousness of the challenges ahead. I wouldn’t think Belgium’s debt is a good yardstick of comparison. I do fear, however, a lack of urgency in policy making based on comparisons such as this one and others.

Belgium’s gross government debt is about 100% GDP, so I picked that as an example of a country with a high debt level but with one that is growing more slowly. Belgium’s deficits are more in the 5% range. The intent was not to reduce the seriousness of the challenges ahead, but more to point out that 2015 is not the finish line – there is likely to be pressure to make some progress towards the 60% GDP level at that time. I agree that the full impact of the austerity measures that are needed hasn’t really been taken on board yet by many.

“There is about €20bn of unguaranteed senior debt” I have higher figures, excluding guaranteed covered bonds, from a quick perusal of Bloomberg. But we’d need to look at bonds in depth.

I don’t have access to any non-public information, so I’d be glad to learn of the more accurate amounts. Some figures posted on this blog before Christmas indicated about €22bn, and in Dail debates lower amounts of €15 – €20 bn were thrown about, so I just picked a very rough average.

@ Eureka,

No it’s not just you. You are adopting the popular position. It’s all the krauts fault. They should have known that we were feckless paddies! That kind of rubbish exempts us from facing up to our own responsibilities.

As comrade Brian Woods II would no doubt point out: Lenin advocated during the First World War turning the international conflict into a civil conflict. The Irish Left does the opposite: it wants to turn the internal problems with our tax system and unsustainable private debt into a problem caused by the Germans. It’s a great way of avoiding thinking.

I haven’t heard anyone on the left advocating a retrospective 80% “bubble tax” on the Irish property owning class who sold at the top of the market. It takes a hard headed northerner to come up with that proposal. The critics of the government prefer to wallow in self pity.

@ John Martin
I’d be for the 80% tax. Don’t know how it would work but if it could be made work then go for it!

Ireland is to blame but the blame has to be shared. In order to bring that about sometimes its necessary to emphasise the role of others in all of this.

In the Credit Lyonnais scandal Jean Claude Trichet signed off on falsified accounts. While under his supervision CL was involved in serious fraud. He was exonnerated but – nobody got the blame.

Think about it. You are the supervisor of a department. You sign off on falsified accounts. You say you were told lies but you cannot say where the lie began or who told you it. Everybody walked away. Either he did not know (in which case he was not doing his job) or he did know (in which case he was really doing his job!!!). And then, this guy is pushed into the ECB role by the paragon of virtue himself Jacques Chirac. Sometimes you gotta ask why?

I think that JCT thought that Anglo was another Credit Lyonnais. What he didn’t take into account that France is about 30 times bigger than us and the debt we had to take on was about 4 times greater than that of CL (correct me on both of those) making our problem about 100 times worse per capita.

I think that twice in his career JCT was caught napping at the wheel. And in both instances he has made other people take the blame by making the tax payer pay. How ironic that for all these PIIGS the only bacon that’s going to be saved is his!

@ MH
“Using the Pareto 80/20 rule, how long would it have taken to establish the true state – – who was meeting interest obligations etc? One week?”

One week was good surely enough to ascertain if 50 individuals or any of the companies they controlled were on an interest only basis.

” 6. 6. All the wealth hasn’t evaporated; some €60bn was invested in commercial property mainly in Europe; investments were made in prime properties in for example New Bond Street in London, where values have recovered and tenants are usually sound PLCs.
The focus has been on the transferring of homes in Ireland; there are surely many overseas investments in shelter vehicles that are difficult to source. ”

If these people are transferring property in Ireland right under the noses of NAMA, with a two fingered jesture to boot, imagine how the overseas assets are being salted away.
My conclusion is that the last three years were all about giving these people time and space to hide the swag. How else can one account for the fact that there has been no attempt to freeze the assets or put receivers into most of the companies despite clear evidence of assets transfers outside of company and personal portfolios.
Ben-Swagi rightly points the finger at our elected leaders and by inference all the Irish. The Irish too can point the finger unequivocally at the ECB for its role in the lead up to the crisis and for its abysmal and nefarious response to the crisis..

@ Eureka,

Interesting anecdote about JCT, but not sure of the relevance except to shift responsibility from the debtor (us) to the creditor (them).

Your view of things is similar to David McWilliams. McWilliams recent book is called “Follow the money” but it could have been called “addicted to money” which is the title of his recent documentary.

In his book he compares our access to foreign credit as being similar to an addict’s addiction to drugs: similar distribution channels; a cut for the middlemen throughout the supply chain; the source of the product from abroad etc. The purpose of the analogy is to portray us (the Irish) as helpless victims and the suppliers of credit as devious, calculating, cynical and amoral. If you accept the analogy the moral justification for reneging on foreign debts is clear.

However, I don’t accept the analogy. On the contrary, we have been skilful players in the Global game. It is us, who have cynically used taxation policy to attract foreign capital to this country and thereby gain access to wealth that was created elsewhere.

Are we now to throw it all away because we have suffered a setback, largely but not exclusively because of domestic policy errors? The idea that a default on foreign capital (i.e. senior debt) supplied to the banks will have no wider implications (in particular for attracting foreign capital as part of our industrial policy) is, in my view, naïve. I haven’t even begun to speculate on the economic consequences of a default as result of a deterioration in our relationship with our European partners.

@ Eureka

+ 1
Sometimes I think I am getting old and cynical. The people like you come along and remind me how naive and innocent I am.

@ John Martin

‘On the contrary, we have been skilful players in the Global game. It is us, who have cynically used taxation policy to attract foreign capital to this country and thereby gain access to wealth that was created elsewhere’

I have no firm view on default, but the economic morality which you seem to espouse is equally skewed. We are a small ex-colony of Britain, which once controlled about a third of the world’s wealth.
Like all empires, Britain used gunboat diplomacy to safeguard its trading interests. Insofar as the Irish state may be cynical, we have learned it at Mother England’s knee. The reality is that European prosperity in based, in large part on colonial exploitation.

Our arrangements with the MNCs have been mutually beneficial, but they will not remotely address the problem of employment. While the MNCs do contribute a lot of corporation tax, they do not offer a development pathway. Fresh thinking is required.

@John Martin

A setback……………. …….. ….. .. . .
I like it – stiff upper lip and all that.
The only reason we are keeping the low corporation tax is because it is in the interest of certain players – our imagined game theory stratagems are beyond farcical.
We are a financial aircraft carrier for certain corporations and if it is the interest of these non state actors to sink us they will – the Irish themselves are merely bit actors on the grand stage of tax and labour arbitrage.

We just follow orders and if not we walk the plank – and thats it.

Let’s get a few things clear:

(a) The only requirement under the various EU Treaties, Pacts and so on is that government borrowing and debt have to be within certain limits. There is nothing about government spending or taxation. As long as a country keeps within, these borrowing/debt requirements, it has total freedom to choose to be a high-spend-high-tax country or a low-spend-low-tax country.

(b) Ireland is currently breaching these borrowing/debt requirements, and so is attempting to bring its deficit down. Ireland has total freedom to choose how to bring it down (ie via higher taxation or lower spending).

(c) Most other countries are currently also breaching these borrowing/debt requirements. They are not doing so by as much as Ireland in the period 2009-2011, but they were doing it by much more than Ireland for about 20 years prior to 2009-2011. Even in 2009-2011, the gap is not as large as the media claim. Reading the media, one would think that all other EU countries were in surplus. In fact, most have large deficits. The UK deficit (which, of course, is not subject to EU borrowing/debt requirements) is around 11% of GDP, much the same as Ireland. The French deficit in 2011 was around 8%, compared with 11.5% in Ireland. France has had a deficit every year since 1975. In most of those years, it was much higher than in Ireland.

(4) There is nothing in the various EU Treaties, Pacts and so on that says that all EU countries must have the same spend/tax as a percentage of GDP. Regarding the practicalities of it, it is self-evident that, in the long-term, a country with a much higher ratio of people aged 20-60 to people aged 65+, and, on top of that, has a much higher average retirement age, can sustain a much lower level of taxation as a percenatge of GDP than a country that has a very low ratio of people aged 20-60 to people aged 65+, and, on top of that, has most people retiring between 55 and 60.

(5) Within the overall spend/tax as a percentage of GDP figure, countries have perfect freedom to decide which taxes to make relatively low and which to make realtively high. Ireland has low Corporation Tax, but very high tax on alcohol and tobacco. In many EU countries, alcohol and tobacco are dirt cheap compared with Ireland. Is this unfair? Of course not. Countries have the freedom to choose. If a country wants to have very low taxation on alcohol and tobacco, and compensate with high taxation on business, then that is their free choice. Good luck to them. But, they shouldn’t then complain if Intel choose Ireland.

(6) Even in the US, which is ‘One Nation Under God’, the individual states have freedom to set their own tax rates. It is the basis of their freedom. Even those states run by high-spend high-tax pinko-liberals accept the right of other states to follow a different route. Massachussets doesn’t demand that New Hampshire set its tax rates to those in Massachussets. In Europe, where the elites believe in neither ‘Nation’ nor ‘God’, they want to remove that freedom from the individual countries. However, they have no power to do so, and their whinging demands can easily be resisted. If they want to have such power, let them put it to a referendum of people across Europe and see how far they get.

“WHEN THERE are people who say that the Irish taxpayers are suffering from the problems created by the banking system, I would remind that for many years the Irish taxpayers benefited from that system,” he says.

“Democracies have to be accountable and consistent with their own choices. I don’t think anybody outside Ireland should tell Ireland what to do, but you should not complain if now you have to increase taxes as a result of the choice of economic model the Irish people made.”

So much for the political independence of the ECB!!!

First he makes a political judgment that the Irish public are to blame for excessive bank lending.

He then goes further to say that therefore the citizens and the state should be liable for bank losses notwithstanding that citizens and countries obligations are dictated by the law and there is no mechanism or statement in European law that this is the case.

He also says that we benefited from a certain economic model and we cannot abandon it now by abandoning the senior debt.

However, his corrollary is that the other beneficiaries of that economic model, i.e. German and French banks who lent to Irish banks, do not have to live by the rules of the economic model which they participated in, i.e. the capitalist model whereby higher rewards entail higher risk. They can play the game and walk away from the economic and legal implications but ordinary people can’t. This is despicable jesuitical logic.

He then says we rely on volatile corporate taxation which is not the case. did he mean to say transaction taxes? there is a big difference.

“You have to think whether you want to continue to have this kind of model which relies extensively on volatile corporate taxation income. When volatility occurs, it hurts negatively the individual Irish taxpayer. This kind of a model can apply very sharp shocks to taxation for the Irish taxpayer.”

In any event, he thinks that we should abandon our taxation model.

So… we can change our economic model… and the banks must be protected from the legal consequences of their economic mode… but we must continue to “be accountable” and take on responsibility for lesses which belong to others for some quasi-moral reason…

This is inimical to the principles upon which peaceful democracies are founded.

I agree with much of what you say. There is one exception on taxation, though – VAT is varyable between 15 and 25% as the ‘headline’ rate. Exemptions and reduced rates are allowed for specific items.

This failure had many fathers. FF’s links to the failed banking gurus were especially damaging as were the knobs managing Ireland’s banks but let’s not forget the ECB’s very poor performance in its role as lender of last resort. Over 2010 the market went through iteration after iteration and at each level there was a ratcheting up of crisis intensity. The lack of credibility of those making decisions at ECB and EZ level was critical to the progress of the crisis.
The Irish collapse was the end result of a game of chicken played between the financial markets on one side and FF, the NTMA, the ECB and the EZ panjandrums on the other.

John Authers on

“The market has suddenly re-evaluated the stance and co-operation of the eurozone. If the eurozone’s leaders have their act together, traders fear, then the chance of an existential crisis suddenly reduces. Once traders start thinking this, the chances of forcing a bail-out diminish.”

So who were the traders who forced the bailout and how much did they make?

@ John Martin
” They should have known that we were feckless paddies! ”

Well, actually yes. What is banking except finding a customer (the easy bit) and then establishing if he is trustworthy (the hard bit) . It seems to me thatthe bankers who loaned to Irish developers and the German bankers who loaned to Irish banks simply skipped the hard part of their job – establishing the likelihood of being repaid – because they couldn’t be arsed, and deserve some punishment for such delinquency. If you are relying on the integrity of a foreign governemnt to ensure the safety of billions that belong to someone elses’s pension fund, it behoves you to invest in a paperback book that might inform you that Ireland had the crookedest and stupidest ruling party of any Western democracy. How hard was that for a Master of the Universe?

Everyone here throws up their hands at the question, where did the money go? No-one seems to recognise that this is a fresh failure of Irish economics , that 30 months after the crash, their is no consensus on where the money has gone. Has anyone even attempted a proper study?

If any of the ideologically blinded members of the economics fraternity even gave a serious passing thought to a retrospective tax on this windfall profits, they would realise the need for such a study , and yet noone seems bothered that it has not happened. Is it not an indictment of our tax system that the question cannot be simply answered by a quick look at tax receipts?

German tax-payers should not be asked to make transfers to Irish tax-payers.

There should be no uneven QE whereby the feckless benefit more than the prudent.

The only way of sharing losses between the feckless and reckless is default.

Our tax-payers did benefit from bad policy but the money is gone – that is why the loans are going bad.

Therefore, Irish taxpayers should subsidise their banks only to the extent that it is in their interests to do so.

German/French/British taxpayers should subsidise their bank only to the extent that it is in their interests to do so.

The ECB should support the Eurozone economy only to the extent that it is in the interests of all members to do so.

Where losses exceed what it is in the interests of tax-payers to subsidise, then private lenders should suffer losses.

It may be that there is a shortfall between what the level of subsidies which the Irish, German/French/British, and Eurozone taxpayers should provide in their own iterest and what markets may provide.

It may also be the case that there is an overlap whereby the consequences of default justifiy greater subsidy.

The EU/Eurozone must create a mechanism for fairly dealing with any overlap and further enforcing any shortfall on lenders.

A system whereby a strong party “A” loans money to a weaker party “B” is not such a system. That is subjugation, not fairness.

Financial regulation and bank resoution schemes must necessarily be uniform across Europe.

The dissonance between Ireland which is seeking to crystallise banking losses quickly and other countries which are seeking to avoid immediate crystallisation makes the application of fair principles very difficult.

Bini Smaghi found himself on familiar territory when he took the Irish case.
Cronyism, nepotism, fraud, corruption, permeating the culture.

In Italy they have hiring methods similar to Ireland called “recommandazioni” if you do not have the pull you do not get the job. This leads to incompetents in high places.

Tax evasion a national sport with masturbation being a much bigger sin than defrauding the gov’t.

The party in power and its supporters living luxuriously off the avails of the public purse.

The professions, for all practical purposes are self serving closed union shops.

Politicians enriching themselves by giving favours to the highest bidders.

The sense of exaggerated pride and self importance of the population as a whole. Look at us we are walking on water because we are innately superior.

Lets face the facts, Ireland rode the one trick pony (low corporate taxes) to prosperity. We then blew a gigantic private and commercial property bubble equealling similar fiascos worldwide since Verona in the 14th century. Yes, we are world class right up there with the best.

Our gov’t then fumbled and bumbled the collapse as they continued their usual practices of cronyism, nepotism, fraud and corruption or business as usual Irish/Italian style. To be kind would one say they were simply incompetent and did not know any better. The majority of us think that kind of behaviour is normal, falling under the rubrik of taking care of the boys and the girls in the party and supporting the party.

We have to stop blaming foreigners, particularly the ones that can see right through us.

The “foreigners” are actually fellow Europeans. In fact, this is not about nationalities as much as feckless moneylenders not controlling the flow of credit through society.

1) private institutional investors made investments in irish banks. These investments went sour. Why should any taxpayer whether German french italian or irish have to foot the bill?

2) Where was the regulatory oversight from the ECB during the so called bubble period?

3) Voting for a government is one thing, but I don’t remember ever voting for a government that said it would use my money to pay off foreign speculators. I am all in favour of voting about it now however.

4) The interest rate argument — smaghi is saying that it should encourage us to get back to the markets quickly. Well, he is putting a moral argument on an economic issue – ie — can ireland realistically afford to repay this money?

5) the idea that we will suffer the same fate as argentina et all is totally rubbish. Do they have advanced IT and pharma industries? note they did sovereign default, not merely a banking sector default.

6) as a country who are we trying to impress? why are we trying to be the best behaved boys in class? joke..


re: Regarding the practicalities of it, it is self-evident that, in the long-term, a country with a much higher ratio of people aged 20-60 to people aged 65+, and, on top of that, has a much higher average retirement age, can sustain a much lower level of taxation as a percenatge of GDP than a country that has a very low ratio of people aged 20-60 to people aged 65+, and, on top of that, has most people retiring between 55 and 60.

Self evident facts.

In the long run people in the 20-60 age bracket grow old, 65+, then die. When dead they can sustain nothing.
Before they grow old, when they are still in the 20-60 age bracket but are unemployed in Ireland they can sustain very little in monetary terms either.

re ) Ireland is currently breaching these borrowing/debt requirements, and so is attempting to bring its deficit down. Ireland has total freedom to choose how to bring it down (ie via higher taxation or lower spending).

Maybe you are unaware of the EU/IMF Ireland signed. Whatever else that document is it is not an endorsement of Ireland’s total freedom to take as much as a piss.

Firstly, I would add to my last post by saying that whereas one might get fair play where there is a shortfall between the aggregate of what taxpayers in various jurisdictions will pay and what is required, one has ery little chance of fair play where there is an overlap as each group of taxpayers will seek to require the other group to pay as much as possible.

Secondly, Colm McCarthy socks it to Sarkozy and the Bini-Smaghi band of dissemblers in today’s indo:

Colm McCarthy points out the inconsistency of saying we must guard against moral hazard vis-a-vis countries but not vis-a-vis reckless lenders. He also points out the problems with countries abandoning law and established practices on the basis of false narratives.

@ Zhou

“Our tax-payers did benefit from bad policy but the money is gone -”

The money is not gone. Someone has it. Transactions actually took place at bubble prices. The money is in the hands of the windfall recipients in these bubble transactions. Mainly it is the owners of land. Some sold property at the top. Some sold shares at the top. And of course there were quite a few who sold their labour in bubble transactions e.g. constructing worthless ghost estates, or getting juicy bonuses. There was also big tax handouts subsidised by bubble transaction taxes.

But the money has not gone. Who has it? I suggest the following breakdown:

Irish land sellers: 30%
The generality of Irish taxpayers: 20%
Irish property/share sellers: 10%
Irish construction workers etc. 10%
Irish financial services employees: 10%
Foreign property sellers: 10%
Foreign construction workers: 10%

Foreign banks lent the Irish banks who lent the developers who lavished the money to the above winners. The developers bought a dud. They can’t get their money back. They can’t pay the Irish banks back. The Irish banks can’t pay the foreign banks back.

The Irish taxpayer stepping in to pay back the foreign banks what they lent is simply underwriting the transfer of wealth that largely occurred between Irish citizens. It is not in any way to be compared with giving back to foreigners the 41bn in subsidies we had received from the EU. That is because no transfer of wealth to foreigners is involved, merely paying them back what we owe them.

The moral hazard argument can & should be applied to the current situation.

What will happen in a country that is not monitoring its banks?
1. Credit will flow easily and an asset price bubble will occur. The rising asset prices will make many rich & it will be seen as a great party. Not monitoring the banks will create the impression of a booming economy. Politically I’d say it is good to be seen as the steward of a booming economy. However, inevitably:
2. The bubble will burst, the party will end & someone will have to pay to clean up.

Anyone who knows even just a tiny bit about economic history will (or at least should) know the basic fact that asset price bubbles will burst & someone will have to pay.

& yes, it was a very obvious asset price bubble in Ireland.

Ireland wanted a big party & consequently the monitoring of its banks was done in the way it was, now it is time to pay up.

If the party people don’t have to pay, then the party will start again somewhere else. Now it should be clear that it is not possible to dodge the responsibility of monitoring ones banks without costs. Ireland is made to pay for its party to ensure other countries don’t try the same.


I was talking about money which tax-payers received by way of tax receipts. The money has left the public purse.

I was not talking about private money which was paid to private individuals on foot of contracts for the sale of goods/land.


Ireland is willing to pay what it can but it is being threatened with liquidation. Whilst we may voluntarily agree to pay what we can we should not agree to pay what we can’t. Where do people think all this will end if we become irretrievably insolvent?


It is re-assuring to know all the wealth is still in provate hands.

How clever all our investors are that they didn’t spend their wealth on perishable or consumable assets or on assets which have deteriorated in value!! It’s a wonder these people can stand up with all the gold dripping from their bodies.

When studying quantuum physics I was taught about doing thought experiments. Lets do one here:

1. Lets assume that Ireland has made the best possible economic choices the last 5-7 years. That would imply:
2. Every other choice made would have been worse.

If every other possible choice were worse, then it should be easy to come up with worse choices than Ireland has made. Can we possibly hear some choices that would be worse?


Ireland may or may not be bankrupt, however, the salaries the Irish can afford to pay and the low taxes they can afford not to raise would certainly indicate that Ireland does not consider itself close to bankruptcy & that being the case it is possible to come to the conclusion that no write-offs are necessary.

@ Zhou

The lowest form of wit does not become you.

If I buy a Yorkie bar and eat the perishible, the money is not gone, it belongs to the shopkeeper.

If I buy XYZ shares and they collapse in value the money is not gone, the seller is laughing.

Money has to stop somewhere.

As I noted above, Balance of Payments considerations require that any net foreign borrowings must have finished up as a deficit on current account or as an acquisition of a foreign asset.

If it was a current account deficit i.e. we imported more than we exported then we have to pay for that, don’t you agree? If we acquired appartments in Bulgaria well yes I can see an argument that we were conned but I think you will find that it was German, British and French banks who funded our extravagances but it was Spanish, Bulgarian etc. properties where we made fools of ourselves.

@ Jesper: “Ireland wanted a big party & consequently the monitoring of its banks was done in the way it was, now it is time to pay up.”

The average citizen influences economic policy like mars going into retrograde influences economic policy. 40-1 leverage and other nonsense wasn’t demanded by the masses. Hank Paulson was not a populist.


The yorkie bar has socially necessary labour contained within it. When it is consumed, the value contained in it is destroyed. You could say that there has been a transfer of wealth from the consumer to the shopkeeper. But that is not the case. The shopkeeper’s wealth has not changed. Formerly his wealth was held in the form of yorkie bars, but now his wealth is held in the form of cash. However, the consumer of yorkie bars has had a reduction in his wealth. He no longer has the yorkie bar or the money that he used to buy it. So there has been a diminution in society’s wealth.

Shares and land have no intrinsic value. Therefore rises and falls in their value represent a transfer of wealth. There is no diminution of aggregate wealth as a result of the transactions involving tens of billions.

Now, it is possible that the beneficiaries of the transfer of wealth spent all their money on yorkie bars (or cocaine or Bulgarian apartments). I would say it is unlikely given the tens of billions involved. Brian Lucey, I think half suggested, that it went back into the banking system and that this was a justification for torching the bond holders. But there is no particular evidence for this.

Wherever it has gone, it did not disappear. A large proportion of it should be expropriated by the State to repair the balance sheets of the State owned banks.

This is a global problem. It is no accident that the US administration has been taking an interest in the various tax havens around the world where the wealth is hidden.

@ John Martin

I sensed that when I dabbled in Yorkie Bar theory that I might be out of my depth and you have rightly exposed my Yorkie Bar moment.

But on the simpler subject of money, it just moves around. The money that was lent by banks to developers, which they cannot now pay back, has finished up somewhere, and a lot of it is in the form of windfall gains from the Bubble. Many people have made huge windfall gains and we have no means of getting them to give it back. The suggestion that we don’t give back foreigners what we owe them is in effect expecting them to cough up for those windfall gains.


Yes, apart from the yorkie bars, I agree with you on this subject.

My original idea was a wealth tax. But the problem with this type of tax is that you run the risk of a flight of capital. However, I think your idea of a retrospective tax is more feasible.

Basically, we (in the form of the State) would be saying to the beneficiaries of the massive gains:

You made enormous profits on a given property transaction. Normally, this wouldn’t bother us. But the chap who bought it off you has made an enormous loss. Again, this would not normally concern us. However, the aforementioned chap who made this loss is not paying back the bank and as a result we (the State and ultimately the taxpayer) is being asked to absorb this loss. We don’t think this is fair.

Therefore, we are going to have another look at the transaction that gave rise to the enormous profit and enormous loss. We notice you gave us 20%. We think 80% is fairer. We don’t care where you have hidden your wealth. We know you have it and we want an extra 60 percentage points on the property transactions which contributed to the financial crisis.

This proposal has constitutional implications (to put it mildly). But in my view the rights of the society as a whole take precedence over the rights of a small number of wealthy individuals. It also shows that we as a society are taking responsibility for the crisis and not fobbing it off on foreigners.

Finally, I stress the above is not a panacea, but it would help. The boom distorted our tax system, by making us too dependent on transaction taxes (stamp duty). We still need a reform of our tax system in order to bring order to the State finances.

@ John Martin


It is not going to happen of course. But I think it is useful to mention this possibility for, whilst unprecedented, it is not as unprecedented as defaulting on sovereign debt, bank debt and State guarantees. Yet the populist silver bullet peddlers present the default route as the panacea and never consider the retrospective tax angle.


I’ve been taught since a very young age that you have the leader you deserve. Support your current leader, follow another leader or try to lead yourself. Those are the options.

Irish leadership either didn’t spot the asset price bubble (gives some reason for concern over competence) or spotted the asset price bubble & chose the strategy of hope (I’m not aware if any other strategy has been followed).

Dealing with a small asset price bubble costs less than dealing with a large one. Asset price bubbles grow -> time is of importance. Had actions been taken to reduce the bubble there would have been less employment & peoples homes would not earn (appreciate) a years salary every year. The choice was between doing something which might have been seen as unpopular or chose the strategy of hope. The choice was made, party on (paying with profits that turned out not to exist) & hope. It brought Ireland to where it is.

Ireland elected its leaders, Ireland is responsible for the actions of its democratically elected leaders.

There is perception and then there is reality. Do the large core country Euro politicians cater to their base in the same way as our spalpeens in the Dail, they undoubtedly do. To determine how serious European politicians are about Ireland’s low corporate tax rate you would have to know how, and to what extent it is damaging their economies. Ask yourself is Ireland competing with VW, BMW, MB, Heidelberg, Mannesman Deutsche Bank in Germany or Renault, Peugeot, AirBus Industries, Paribas, Generale in France. My information is that Euro politicians are at least neutral and in some cases positive wrt Irish corporate tax rates. Very large and profitable corporations operating in Europe are washing transactions through Ireland to reduce their tax burden, most of these companies operate in over twenty countries and if Ireland was not available as a tax avoidance (make careful note of the difference between “avoidance” and “evasion”) vehicle they would be accommodated elsewhere. Ireland has no domestic company of any significance competing with companies in other European countries. The pros and cons of Irish corporate tax rates would take hundreds of pages to lay out by country and industry segment. The results would be surprising.

The country that appears to be most disturbed as in seriously and not just political posturing is our old friend, ally and refuge in our years of need the USA. If we were standing alone we would have been clobbered into submission the year after we implemented them.

Comments are closed.