Excellent letter. I think we are on much firmer ground when dealing with the EU’s responsibilities regarding the banks than our fiscal policies though.
We made mistakes on the fiscal side which are ours alone. The banking side is much more of a European issue.
It reminds me of Leo Amory, in the historic HoC debate that ousted Chamberlain in May 1940, exhorting Arthur Greenwood, who was standing in for Clem Attlee, to ‘Speak for England, Arthur”. It seems John Bruton has taken it upon himself to “Speak for Ireland”. It’s not before time, but it needs a proper follow-through from a government with a solid popular mandate to make the case for a viable exit strategy from this economically-damaging ‘support’ package.
Fair play to Bruton. Barroso is out of his depth. He’s trying to hold the line on the banks and it is not sustainable.
Refreshing, but the taxpayer is now not only on the hook for the cost of bailing out Irish banks but the interest on the IMF/EFSF loans. It is one thing to call for an admission of responsibility, another to seek reasonable burden-sharing.
Excellent letter. Just the sort of firm but balanced dialogue we should be engaged in.
Another former Fine Gael leader, Michael Noonan, gives an important interview to the FT (link below). It hits most of the right notes: the joint interest in findig a formula for the bailouts that works; the necessity of lowering the self-defeating interest rates on the EFSF and EFSM monies; the distinction between guaranteed and unguaranteed bank debt; and Ireland’s commitment to paying its debts. While it is hard to take losses not being imposed on unguaranteed senior bond holders of insolvent institutions (in the context of a proper resolution regime), I fear that particular ship has sailed. But it is no harm putting it on the table — complementing John Bruton’s message — to remind people that Ireland is not the only one being bailed out in “Ireland’s bailout”.
I would be interested to see the reply (if there ever is one).
@Bond. Eoin Bond
That is interesting. Even the threat of doing it could be a good ‘re’-negotiating lever.
At last – a move in the right direction. Together with the supposed move to bring in a third party to negotiate a restructuring of Ireland’s debts we may be on the way to see some light at the end of a very long tunnel.
Hopefully this change can be done in an agreed and controlled manner via the EU/ECB/IMF.
In return we must be prepared to agree to much closer fiscal monitoring and control by the EU. For example we should consider changing our constitution to limit government deficit and borrowing levels. We should also change our public accounting rules to force proper accounting and transparency for items such as future pension liabilities and off-balance sheet liabilities for NAMA etc.
Let’s take this opportunity to make basic changes to prevent politicians (egged on by powerful lobby groups) making such disastrous mistakes ever again.
In his letter, John Bruton asks what did the EU do about the Irish property bubble. Well, back in 2000 the BBC reported the following:
“The European Commission has publicly reprimanded Ireland over its economic policy. The Commission has expressed concern over Irish budgetary plans for 2001, which it says are inconsistent with the 2000 Broad Economic Policy Guidelines adopted last June by the European Council. Ireland’s plans for tax cuts and increased government spending conflict with the European Union’s current support of budgetary constraint, according to the Commission.”
That was a very good letter from John Bruton. Considering Barroso’s demonstratively angry demeanour in the European Parliament I think it was important to get on to him quickly. I hope the incoming Taoiseach will do the same.
I was also heartened by Micheal Martin’s contributions on Prime Time last night. His references to the FT’s position on default at least showed that the cabinet had considered going down that road. I may not agree with their ultimate decision but at least we know they are informing themselves.
In the meantime, the recent developments and chatter surrounding the EFSF suggest to me that our policy of going with the EU flow in the hope of a multilateral solution being devised is starting to look like it could bear fruit. This makes Sinn Fein unilateralism look even more risky (the name was never more apt!).
It seems the new govt will try to put the “R” option on the table post the election. Although as John McHale points out “burning the non guaranteed bank debt” will have limited impact as will reductions in the rate or even sovereign debt buybacks.
Nevertheless, there seems a decent prospect of this issue being debated in the election. In one corner you have the crazies in SF who would throuw out the deal, raise taxes and throw the Nprf into the pot. On the other hand, you have FF plus the bureacracy plus the CB who have to defend the deal. In the middle somewhere you have FF & LAB who are moving towards a negotiated solution involving restructuring.
edit …that shoud be FG and LAbour
@Eureka
mistakes on the fiscal side ? – how can you have negative fiscal debt ?- please explain as perhaps I am missing something.
@ Eoin Bond
Ireland is really an island. A default is a default. If Ireland do not respect its engagements it will be left out alone in the cold and know the fate of Argentina. The only way out is to renegotiate with the same people you signed with in the first place and you cannot do that until the original agreement has been proved to be unworkable ,which will take a few years.
If there is any talk of an unilateral default during the coming electoral campaign by one of the main political parties, be prepared to be vilified by the press and the public opinion of the rest of Europe, the ECB; will stop financing any private or sovereign debt and the interest rates will skyrocket in Ireland with awful consequences on the variable rate mortgages.
You cannot be serious.
Ps having a surplus pension was not really a good idea now was it – like walking through Salthill with a flash purse with cash hanging out the top , not a good idea.
It is interesting to see this and other noises from FG that indicates that restructuring of our debt may be, at least, be moving onto the agenda.
John Bruton is rightly concerned about EMU interest rates which were inappropriate for Ireland. But it was his government which signed up to an EMU which, as designed, will almost always give us inappropriate interest rates.
It would have been better then had we never joined EMU. It would be better now if we could find a way out.
Rushing any attempt to renegotiate is not the right thing to do. We need to identify our ducks, develop them and then get them in a row. We should assess external factors over which we have no influence but have a bearing on any renegotiation. We’ll need to be prepared to sacrifice our 12.5% corporate tax rate. I’d be prepared to raise it to 20% when Ireland’s debt to GDP reaches 60% (though I would insist on the tie to debt to gdp or ,preferably gnp).
@Dominique Jean-Raymond
Default on the Conflationist Vichy_Bank/Sovereign Debt remains on the table as an option.
Best discussed with our European partners in a true spirit of solidarity. 1789 and all that (-;
Hi to Christine from Patricia the Irish_Sovereign_in_exile … and please do not put any more idiotic ideas into Minister Brian’s head – we cannot afford them.
@Dominique Jean-Raymond
People are not talking about reneging on the deal. They are talking about not providing additional guarantees for unguaranteed private debt. Please point me to the section of the Memorandum with the EFSF/ECB/EU that deals with that.
Part of the history of war is the history of revolt against humiliation and the threats of bullies. Ireland has such a history.
John Bruton weakens his case by introducing the issue of the low ECB benchmark rate.
That’s the way a common curreny area works; in the UK in the past, the gripe was that interest rates were set for the greater London area.
It is recognised now by the elites that an independent fiscal policy and an efectively voluntary central governance system was doomed to fail.
As Tim above has alluded to, we basically gave a big PFO to the ECB and the EC when Budget 2011 was criticised.
Ibec and Ictu told Brussels that they didn’t understand the Irish economy and crucially for the FF-PD government, there was a big jump in their approval level.
The general attitude was how dare they!
Of course, by that time we thought the days of rattling the tin ponny were in he past
Good letter – but not as good as Joe Higgins impassioned rant which provoked Barrossos outburst. He makes essentially the same point just not as forcefully. Barrosso will find that easier to sidestep again.
Talking about rants Max Keiser has another one on Anglo – in the first part interview with Stacy here. Gotta love extreme views – at least you know where people are standing – Episode 115 http://rt.com/programs/keiser-report/finance-china-metal-credit/
@Keith
I probably mixed up terms – just don’t think that this:
“I also believe the European Commission was involved, under the Treaties, in some responsibility for supervising the Irish economy, and that it too had full information on the obvious imbalances I refer to above. You ought to have acknowledged that responsibility of your own institution, which the Commission shares with ECOFIN”
is as strong as the rest of the letter. I may have misinterpreted this though.
Excellent letter. The country could do with this tone around a few tables in the coming months.
@Tull Mcadoo
See IMF on Eurozone Policy regarding SF ‘Crazies’ . The craziest thing is they appear to agree !
I wonder who would be most disappointed in that situation.
@ Keith
What I’m trying to say is:
As I see it there are two parts to this crisis:
1: A bloating of expenditure which we can and will take responsibility for (it’s nobodys business but our own) and
2: A European wide failure in banking which we are unfairly expected to contain in our tiny economy.
Point 2 is what we need the Europeans to face up to. We have to manage point 1 ourselves because if we state that they failed to exercise sufficient oversight in monitoring our non-bank economy we are inviting more oversight and more influence on such measures as the corporation tax.
Two different issues and it’s best to treat them separately.
@Eureka
Sure don’t worry about it , I was just looking for a scrap
However as I have said before we need to get our head around the Euro system which gives superiority of bank entities over states although sometimes even these priests have to confront the realitity that their own brethren have been engaged in systematic buggering.
Their method to deal with this that will preserve their disdain for the nation state and all things temporal will I believe expand the liabilities side of the Euro balance sheet to incorporate bank deposits on a large scale rather then sovergin debt which they wish to preserve in a small box to prevent any princes from gaining any authority over his subjects.
Expanding the Euro balance sheet in a dramatic way may also accomplish their great goal to transfer dollar savings / reserves into the Euro system.
Given the fact that Ireland is a mixed up place on the edge of these huge financial / cultural tectonic or is it teutonic plates we appear to be at the centre of the action.
Well done, John Bruton.
@Dominique
re:The only way out is to renegotiate with the same people you signed with in the first place.
There is a simpler way out. Don’t draw down the money. The only purpose is to pay off the private bank losses and to bail out the private bondholders. If somebody in Europe wants to save the Irish banks let them come up with the money.
There was no need and there still is no need to draw down this money.
But when the Irish banks fail, let the chips fall where they will.
Sombres jours.
“That is also, in part, a European responsibility, although, of course, the Irish authorities should have found other measures to compensate for the fact that the ECB was pursuing interest rate policies that were unsuitable to Ireland.”
“Unsuitable to Ireland”
I think this is a bit mixed up as it refers to the 2002-2007 period.
If we hadn’t of had the construction boom which made our growth rates look much higher than the “real” growth then the rates would have been suitable. The problem was not the European interest rates. The problem was the construction boom that made our growth rate look higher than it otherwise would have been.
@ Eoin
Thanks for the link to the business and finance article.
The comment by King of city group rang true to me.
As a matter of interest, did the State of Newyork in the 70’s give a blanket guarantee prior to their restructuring efforts.
Yet again it seems to be the main obstacle, legally speaking.
Also doesnt the IMF Euro ‘bail in’ forbid any senior burning?
Also I wouldnt be a fan of extending the time limits on the outstanding debt. Not when the interest is higher than our growth rate.
@Ordinary
I don’t think that the IMF would advise a unilateral abrogation of an agreement with the IMF/EU/ECB. In addition it would not agree with SF about postponement of the fiscal adjustment. I doubt it also agrees with SF on raising taxation to th degree that the party espouses.
It probably agrees that on balance the debt burden is beyond the capacity of the economy to service. But Ajai and Baron Adams probably do not agree on much else.
I would like to extend a very warm welcome to the Finfacts ipad.
Yes. It is a very nice letter. It’s election time in Ireland! And there’s a lot of truth in it. And it makes us feel better. And everybody in Ireland and in Europe knows what the truth is.
And the letter basically says you shouldn’t have let us behave irresponsibly. You could see that we were behaving irresponsibly. And you gave us money to behave irresponsibly. And we did.
And then, when one of our MEPs attacked you, not for allowing us to behave irresponsibly, but because you ( not us) are a bunch of capitalists, you told him that we had behaved irresponsibly.
This makes us angry. So please write us a letter in response telling us you’re very sorry for allowing us to behave irresponsibly. We are a sovereign people, you know.
@MH.
Typo in comment. Should be 2001 not 2011. You had me worried for a second!
@Richard
How could we be a sovergin people if we have no control over our currency or its supply ?
The fiscal arguments are the greatest load of tosh I have ever seen – have you’ve seen our external debt lately ? , even after its great fiscal expansion to cover private losses our state controlled fiances are a little toad on the shoulders of giants.
@Eoin Bond
@Eamonn Moran
Felix Rohatyn will be speaking here in Paris at an event on 8th February at http://www.theamericanlibraryofparis.org ( see “Events Programme”) – 10, rue Général Camou (just beside the Eiffel Tower) at 19.30.
It will be a relatively small group (100 or so) with drinks afterwards and a chance to speak with him.
If there’s interest I could make arrangements for a small group but best to let me know in advance so I can fix it with Charlie Trueheart, Directory of the Library.
I would like to extend a very warm welcome to the Finfacts ipad.
Your kind comment is appreciated!
I was out for dinner earlier and I was trying to copy the URL address from the Safari browser but I had to e-mail it to myself and thus the tagline, which was below the window.
It’s an economical device as the print-type formats for the likes of the FT and Economist with the functionality to flick through the stories, makes the need for delivery of the print copies redundant.
Besides latest versions can be downloaded if wi-fi is not likely to be available in a place of destination.
Besides all that, Nokia’s report today of a 21% profit drop in Q4, shows that eaten bread is soon forgotten; Nokia has been big in Asia but Apple is making advances in markets where few Macs were sold in the past.
@ All
José Manuel must be thinking that John Bruton is an ingrate, having proposed him for the Washington post!
@tull mcadoo
That little piece of Tory unilateralism has been firmly debunked in the House of Commons today – Nigel Dodds MP, DUP was particularly impressive in coming to the aid of Mr Adams, exMP, SF and future TD, SF ably backed up by Sammy Wilson MP, DUP. Time to move on ….
The Greatest Bank Heist in Irish History remains a PD/FF construction …
@The DUP
Nice one!
@Tull Mcadoo
100%
But they agree on one thing, the most important thing, this economy cannot sustain the deal as it is.
Everything else is positioning for negotiation – the baron, the banker and anyone wiht half a brain knows that !
The problem here in this country is there is too much ego and emotion flying around for solid business to be done.
The only good deal is one that both sides can deliver on – that’s negotiation and good politics.
Now the baron got the ‘woolies faces’ to take a deal – I’d say give the boy a chance.
Michael Noonan spoke a lot of sense today on RTE One and just hope he brings John Bruton with him for his chat with Barrossa (Portugals Bertie ).
Enda wasn’t letting Michael away with the three way debate (you never know who you’ll be needing to chat to at the end of this).
Everyone has something to offer the debate.
I never met a person who was right all of the time – maybe you have?
13 years and a wrecked economy before Michel said “Sorry”
Sorry, should have read Micháel Martin (Last line)
Baroso might see this as merely a blog entry with his name at the top.
We might get a reduction in interest rates but it won’t be enough. You can only hold out for so long before you eventually have to face the truth and restructure.
@ Ordinary,
Agree with you here. The only party tht is out of the sync is FF. It is the best deal they could do and the fact that the deeds of the country have to be handed over is largely but not solely their problem.
Mickey Martin is apologising profusely although when asked for a specific example of a bad decsion made by him, there is none. He is basically saying it Bertie and Biffo that caused the problem. He was whispering stop.
@ Tull Mcadoo
I agree regarding FF – but hey there is also a lot of voters who put them there need to do a bit of carrying too !
But anyway ‘We are where …………..’ !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
As I mentioned on a subject earlier in the week. The main problem in this economy is that people are not behaving as they should for this capitalist model to function correctly.
Investors are not investing, bankers are not banking and consumers aren’t consuming, government is not governing – RESPONSIBLY
Lets all concentrate on inclusive, deliverable solutions and maybe then we will all know where we are going.
Great chat.
It appears an unguarded (arrogant?) outburst by an Iberian “politician” may have done more for Irish political consensus and sovereignty than decades of hot air in Leinster House.
Somehow I doubt that was Mr Barrossoś intention and neither was it, I am sure, his intention to cause us to examine what kind of “Union” we are turning into.
However as Mr Barrosso and a frighteningly large number of his Commission colleagues are relative neophytes in the concept of democracy we should all be patient and sympathetic. By doing so we will be able to allow more `politicians` on the Commission give us ample opportunities to re-negotiate the “stitch-up” of last November .
Perhaps Mr Barrosso became confused and believed that just because Messrs Bruton and Higgins have different political and socio/economic views (and backgrounds) that they would not have shared values while respecting each others right to hold different political beliefs.
IMHO Mr Bruton behaved like a statesman should (and Mr Higgins like a national representative should) as opposed to Berties expresssion of regret, to day outside the Dail, over our failure to build a stadium.
Did Mr Barrosso behave like a President should?
@Richard Fedigan!
“And the letter basically says you shouldn’t have let us behave irresponsibly. You could see that we were behaving irresponsibly. And you gave us money to behave irresponsibly. And we did.”
I agree with you the letter is weak and made considerably weaker by that childish sentiment.
“And then, when one of our MEPs attacked you, not for allowing us to behave irresponsibly, but because you ( not us) are a bunch of capitalists, you told him that we had behaved irresponsibly.”
I am guessing that it was reference to Barrossos response to Joe Higgins last week
If so I think you should first listen to exactly what Joe Higgins said:
I can’t find a transcript of Joes speech but I attach a youtube link.
This was the report of Joe’s comments on the Irish times:
“During a debate at the European Parliament in Strasbourg, Mr Higgins described the European Financial Stability Facility, as the euro zone rescue fund is known, as “nothing more than another tool to cushion major European banks from the consequences of their reckless speculation on the financial markets”.
Mr Higgins claimed the EFSF was a “mechanism to make working class people throughout Europe pay for the crisis of a broken financial system and a crisis-ridden European capitalism”.
He accused Mr Barroso and European Council president Herman Van Rompuy of effectively transferring tens of billions of euros of private bad debts “on to the shoulders of the Irish people”.
Mr Higgins claimed the EU was destroying services and the living standards of Irish people. “Far from being a bailout, your International Monetary Fund-EU intervention in Ireland is a mechanism to make vassals of Irish taxpayers to the European banks,” he said. “We on the left in Ireland will insist that it goes to a referendum of the Irish people before it is passed.”
And just after that Barrosso threw out the dummy and without answering any of the points Joe made proceeded to conflate financial system and fiscal problems.
As a Belgian living in Germany, I am sorry to see that the Irish seem to go down the whining route.
Do not expect to make a lot of friends that way.
@ Incognito
How would you suggest that we win friends?
I’m afraid Incognito sums up a grim reality. Despite implementing the most severe austerity measures of any country, despite playing by the ECB rules of not letting banks fail we will have no friends in Europe.
The worst scenario would be for us to accept the bailout after the rate is “maganimously” reduced to 3.8% only to have to default later. Without restructuring of some description this will not work.
We are severely weakened. We must negotiate with the IMF alone. It is fairer and cleaner for all concerned. It is a simple easy solution and one we must follow. We must do that now.
@Eureka
Incognito is correct – John Brutons letter is just a whine – we need to take Joe Higgins advice. The next government must have a referendum on the bank guarantees. With the moral authority granted by a huge “NO” the guarantee will be exposed as a cosy settlement between a corrupt government and crooked bankers and the problems can then be addressed from a position of strength. Cap in hand whining will always draw a response like incognitos.
@AMcGrath
We just can’t be in this position. We have to ditch the EU piece
@Eureka
It is increasingly obvious that we have been trapped into a position where the likes of Bin Smaghi (just now again on Prime Time) is treating the fiscal and financial components of the debt as one. This they can not be alllowed to get away with. A referendum won’t roll back the clock but since now most people seem to accept that default under the present circumstances is inevitable – we must do what we can to counterract this. The first thing needed is referendum on the guarantees. It is arguable and has been argued convincingly enough for me that the appropriation of taxpayers money to pay bankers debts is unconstitutional. A referendum will sort that out. I’m afraid I have to vote with Sinn Fein on this one.
I don’t really agree that the IMF will be a better option – apart from there noises about restructuring which are lukewarm. None of the bank debts are taxpayers debts – we should just mot pay them – at all!!
IMF bailout might mean:
Lower interest rates
Restructuring
No interference with corporate tax
Not being beholden to the European taxpayer
Freer of political interference
Also serious egg on face for ECB and EC
We could gain, they could lose. An alternative that presents some leverage
@Eureka
Why not ditch the guarantee first – then we will probably need the IMF anyway. It sounds like a plan.
This link is broken – it appears the story has been pulled. Now that it has been officially denied we can take it as being true…
Negotiating with the IMF alone is not and has never been an option.
The fiscal and financial part of the debt are one, money is fungible. Ireland cannot attempt to go for it alone because it cannot balance its budget and the deficit must be financed .The consequence of a default would be so awful that it is not an option .The reality is unpleasant but you will not escape it by complaining that you have been unfairly treated .For your creditors the question of the constitutionality of the agreement is not terribly important .It is important for you to have friends in Europe because you will have to renegotiate the terms of the agreement that your government signed .Whining will not gain you any sympathy.
I am in favour of poltical parties taking on the cabal (if that is really what they intend to do – I have my doubts )
But any group or party needs to be honest with the Irish people – they will seek to destroy us and are very likely to succeed given the fact we have almost zero physical capital to call on and are entirely dependent on outside credit.
Iceland has had a much shorter period of monetarist policies and its people still know how to fish and hunt.
Even our farmers now are dependent on outside credit for existence – the European project has infantilised successive generations of Irish people – they seem incapable of anything but submission.
Andrew Jackson was honest about the dangers and he spoke to a agrarian people – we have nothing and are nothing of the sort now.
“NEVER, NEVER, NEVER, never!” who said that and then made the deal? The Rev. I.K. Paisley
“We are going to finish this thing, one and for all” Who said that and then made the deal? P.O’Neill PIRA
Primetime inst.
Saddened me this evening to hear and see the financial spokepersons for FF,FG & Lab cringing in fear that the European bondholders will not come back to us if we negotiate any harder on this or threaten telling them to Feck Off.
I don’t think we will/should tell them that but we should make it very clear that we are only interested in a deliverable deal if the sovereign debt is not confused with the sovereign/banking debt as currently situated. If not it’s the Joe Higgins show – both barrels. If they want to save the bad banks then they should be prepared to accomodate that by negotiation.
Bowen (I think that was his name) FF is confused as above between bank debt and fiscal debt before the disaster of the bank guarantee.
Leo FG thinks 3% is a reasonable rate while still underpinning anglo et al. (forgetting that smart investment requires interest above inflation for risk over the term) – no one in the ECB is buying that deal with that logic.
Kelly Lab. thinks 6% (his quote) is political – with European partners like that who needs enemies (tough love?)
C.O’C SF. Is threatening the Europeans with a Joe Higgins (but we’ll negotiate) ala NI Peace Process.
Who needs the Europeans? Japan bought a third of the first traunch of bonds sold – with interest rates as far above their own why wouldn’t they?
Goldman Sach can borrow from the US government and lend to us at plus 20 points and still sell the bonds at a profit.
Not to mention the Chinese (who like to buy lots of hard currency debt).
We are being too eurocentric in this whole deal. It is a big world out there and we have some of the most talented deal makers, negotiators and results getters on the planet – unfortunately most in business and spread over the world – not politics here.
The IMF want a deliverable deal (see previous threads and think the ECB is protectionist in the context of banks), the EU sound like a Eurofied FF (looking after ther boys the bankers).
I say take a German approach to this;
make a deliverable deal
keep the head up and keep working at it,
we will get there in the end.
Apologies for any spelling mistakes – Cabernet Sauvignon. Got that right !
And as Dave Allen would say – “May your God go with you”
@DJR
Ireland would not be “going for it alone”. We would be “going for it” with the IMF.
We would be letting the European taxpayer off the hook too. We would be operating in accordance with the Lusbon treaty. The current bail out is only designed to protect the banks.
@Dominique Jean-Raymond
The debts of private banks and sovereign debt are not the same thing. What has the fungibility of money got to do with anything?
The Irish government made many mistakes – but the one which is crippling us is the bank guarantee. It is most likely uncinsttitutional in Ireland – as private property is protected under our constitution – to use taxpaers money to bail out private institutions. It is alao probably illegal under European law but it suited them not to enforce it.
It must be overturned so that we can draw a clear distinction. We will honour our sovereign debt. If Europe wants to go further to as Joe Higgins said “fix the broken financial system” that is another discussion – but lets stop conflating soveriegn and bank debt.
I agree with you – whing is contemptible and John Brutons letter is a whine.
@ AMcGrath
Like the man with one leg shorter than the other and a’Big Shoe’ – I stand corrected.
But stand I do.
You may be right in your reading of John’s letter today (but the ‘boy’s are for Burssels tomorrow so let’s set the stall – Michael N.).
Just great to see ‘Fungibility’ used in it’s proper context – well done.
@DJR
How serious the guarantee was in creating the perception that bank and sovereign debt are the same can be sen from the comment by Ken Rogoff in the IT article linked in the “Ceaucesco” thread here:
“Dr Rogoff, a professor of economics at Harvard, said Ireland had “good fundamentals” outside the debt problem and said most of the country’s growth story was real. For any incoming government, the task would be to maintain that and not undermine it.
However, he said it will be difficult for Ireland to avoid some form of debt restructuring. Asked if he was referring to sovereign or bank debt, he said “I’m afraid it might be the sovereign debt”, since the sovereign had guaranteed bank debt. ”
That statement would have been impossible without the guarantee – it must and can be undone.
Dominique,
This is a two-way street with consequences for both sides. Taxpayers embark on massive austerity programs and are relentlessly threatened and cajoled at the slightest hint of dissension while bank bondholders refuse to even discuss haircuts and are largely ignored.
Having looked at PrimeTime, it is clear that among all the other problems, there is a big propaganda battle going on, and one in which Ireland is not doing very well.
Let’s take one theme – “Diligent German workers have adjusted to globalization, taken the pain, and are now being unfairly asked to pay the bills for the Irish people’s party lifestyle”
In practice the average German worker understands globalization far less than private sector USA, UK or Irish workers. Look at what happened when Nokia decided to close down a large factory in Germany a couple of years ago. They were attacked by all politicians, from Merkel down. Merkel urged consumers to favour products made in Germany. The finance minister accused the company of “caravan capitalism”. Politicians and union leaders urged a national boycott of Nokia phones (which were banned from some government ministries). Unions organized huge street protests. There were lots of YouTube videos of people smashing their Nokia phones. Local politicians tried to illegally claw back subsidies that had been paid to attract the factory back in the 1990s. Not exactly the behaviour of a populace that is diligently playing in the global marketplace, is it?
In fact the level of hypocrisy by politicians (so subsidies to attract FDI are a Good Thing if they happen in your own country, but a Bad Thing if they happen in another country; Protectionism is a Good Thing if it happens in your own country, but a Bad Thing if it happens in another) and the complete lack of understanding by the average German worker about how the global economy actually works (costs were 10 times lower in Romania where a new factory was built) were just stunning. Now there were a number of German commentators that pointed all this out, but they were drowned out in the surge of irrational populism that manifested itself.
Moving onto the second part of the theme – many German workers think that German taxpayer money is simply being shipped to Ireland to pay the post-party bills, and do not understand that it is a loan, with a profit margin, and that has a side-agreement that requires the Irish taxpayer to assume private debt. Now of course there is some credit risk here, but to discuss that requires understanding the basic parameters of how the bailout works, which many Germans do not.
German politicians are no better, and no worse, than Irish politicians when it comes to hypocrisy and populism. They are, however, better at defending their own interests and those of the taxpayers that they represent. They are good at creating memes that spread that further these interests. Barroso’s angry rant is a good example of this. These memes involve gross oversimplifications, and pose false questions (e.g. is A or B responsible) when the underlying reality is that A, B, C, D, E and F in combination are responsible.
“Dominique” and our Belgian friend appear once or twice in every discussion, I note, solely to stir the pot and make bold claims about Irish sovereignty as it relates to monies due and owing, in their view. I sincerely hope this does not reflect a widespread view in Europe, but unfortunately I fear it does. European politicians need scapegoats too, as Sarkozy, who is in deep trouble with his own electorate, has shown.
The only voices worth listening to in this discussion are those with rational and cool headed facts, and likewise practical solutions. We’ve been stitched up not only by our European fellows, but by our own government, and by the time the curtains drew back it was too late to do anything. Let’s bend the ears of those with the ability to make a change, and point them in the right direction, play it smart.
The rest may be safely ignored, including the relics in FF.
What we could use right now is someone or some people to go on a “charm offensive” throughout Europe, speaking directly to the media and thus to the peoples of Europe, and disarm what seems to be an increasingly polarised situation with reality.
The fate of Argentina is mentioned here as something to be avoided. Argentina did not accept the terms and conditions of the IMF in 2002-2003. The Peso was at parity with US $. The Argentinian Gov’t over the previous five years had frequently declared that it was firmly and irrevocably committed to maintaining parity. The usual mix of international banks, Trust Funds, companies, individuals and pension plans believed the Argentinian Gov’t and bought bonds, stocks and tangible assets denominated in Arg. Pesos. Suddenly in a flash one night the Arg. Gov’t devalued their investments 66.66%. Domestically a Peso was still a Peso although imports cost three times what they did prior to the devaluation. Exports boomed and after the short sharp shock employment picked up. A major problem was that companies saddled with debt denominated in foreign currencies had a high default rate and bankruptcies were common. It should be said that employees taking over company premises and production machinery was also common. Argentinians are a feisty bunch with rights and entitlements and do not go quietly into the dark night. Argentina today has little difficulty raising money abroad. Many Argentinians are grateful that the Arg. Gov’t is being looked upon warily by Goldman Sachs, Chase Morgan, CitiBank, Deutsche Bank, UBS, Barclays. I am sure there are many Irish who wish that Ireland were subjected to external discipline by its lenders.
There is no need to cry for Argentina they have the best steaks in the world, very good wine, Media Lunas for breakfast, excellent coffee. I look forward to going back it is a beautiful country with excellent climates (plural literally).
@Bryan G, well said sir and good shot, a more eloquent addendum to the sentiments I expressed. We need to take the offensive in the propaganda battle, before the damage on the street level to the reputation of the country, and its ability to function within the European framework to head off derisory comments about our reputation, becomes irreperable.
Irresponsibility all round as mentioned in the letter. The nub of the matter as I see it is there were highly paid adults running the foreign banks which were irresponsibly lending to Irish banks and other institutions also run by highly paid adults who were borrowing and lending irresponsibly. And our Central Bank and Gov’t the foreigners would have to assume that the highly paid people running those august institutions were compos mentis for at least a couple of hours per day.
There was no necessity for the Irish Gov’t to backstop the Irish Banks, I have seen no evidence of threats or blackmail attempts directed at the Irish Gov’t. Of their own volition, supposedly during those couple of hours daily during which they were compos mentis our Gov’t declared to the world that they were back stopping the profligate Irish Banks. The response ranged from raucous laughter to the intense pain and sinking feeling that those Irish drunks, clowns or fools have now committed every country in the Eurozone to bailing out its banks. It is understandable if intelligent people with good business sense are angry at us, Barroso has every right to be angry.
We have to stop grasping at straws and manufacturing weak excuses. We are the ones making mistake after mistake, amateurism and incompetence piled upon more amateurism and incompetence. Are we living through a comic opera or a tragi-comedy.
@AMcGrath
@Ronan Burke
Thank you for a (rare) correct reading of my comment on Mr. Bruton’s letter. I was beginning to think that irony (or the spotting of it) was dead in Ireland!
I repeat, it was a nice letter and it’s election time. As one would expect in a letter from a former Prime Minister ( from one of the political parties about to form the next Irish government) and former EU Ambassador to the President of the EU commission, it had some truth in it.
Regarding the “charm offensives” suggested by Ronan to influence the media to counter the damage at the street level ( exacerbated by populist and disingenuous politicians for their own electoral purposes) “before it affects our ability to function within the European framework”, well that would have been an appropriate course of action BEFORE the damage was done by, to come back to my paraphrasing of Mr. Bruton’s nice letter, our own irresponsible behaviour”. Which, we all agree, “Europe” should never have “allowed” us to engage in. Even if we’ve been saying for years that we’re big enough to look after ourselves and we’ve been responsibly exercising the degree of sovereignty properly ours within the “European framework”. Even if we haven’t been using this sovereignty responsiby and Mr Bruton says as much in his letter.
The response, which will come in due course ‘cos in the nature of these things, it is considered nice to reply to letters, will also contain some truth and then we’ll be back where we started. Except that the Irish election will be over by then and the letter will have contributed to the achievement of its real objective. Which has almost nothing whatsoever to do with the substance of, or the manner of, the exchange in the EU Parliament.
At this stage I (once again) feel it appropriate to refer to the wisdom of the ( former?) Head of the US Joint Chiefs of Staff, Admiral Mike Mullen, when he said that the US should worry less about communicating “our actions and more about what “our actions” communicate.
One hopes that with FF out of the picture in Ireland, there’ll be less of the spinning of the Irish narrative that has been wearing so thin for a long time now as to be entirely counterproductive.
1. Assuming Michael Noonan becomes the next Finance Minister, he should certainly try to get an improved interest rate and some burden sharing with senior bondholders. There is the complication of new funding for banks as the ECB tries to extricate itself from the role of main wholesale funder.
2. The prospect of restructuring via a direct haircut of non-bank related Irish sovereign debt seems remote; the IMF’s Fiscal Monitor Update issued on Thursday shows that debt in advanced countries of the G-20 is at 107%; the US is running a budget deficit of almost 10% this year; while Italy has a high gross public debt of 120%, its citizens are among Europe’s best savers. Why would Ireland be treated as a special case?
3. Blaming Johnny Foreigner can be more interesting than ‘boring’ issues of reform and the development of a credible jobs strategy but it wouldn’t be very useful to have the election campaign dominated by anti-European sentiment.
The unemployed are invisible to the many still comfortable folk who have done well from the status quo.
We can stupidly pat ourselves on the back for cutting unit wage costs thanks to a surge in pharmaceutical exports without adding jobs, but it’s well to keep in mind that most public discussion on jobs is dominated by spoof and people who have no experience of selling, in particular overseas.
The long-term issue of competitiveness and what it entails simply gets no attention.
It simply emphasises the requirement there has been for the last 18 months for a new government with a solid popular mandate to speak clearly and persuasively to the people of Ireland and on their behalf to politicians and voters throughout the EU – rather than the combination of spoofery, deception and denial that has been served up and risks driving a majority of Irish voters to support the pressing of the self-destruct button.
It does not have to be a sackcloth and ashes routine in the EU. A simple acknowledgement that we screwed up royally would be sufficient, but it would need to be accompanied by a clear declaration that Ireland’s ‘light touch’ banking supervision and financial regulation was approved of, advocated by and taken full advantage of by many EZ banks and other financial institutions. I Ireland had tried to rein in its financial sector previously it would have faced the wrath of these institutions and their political backers. For many reasons, not all of them self-generated, Ireland found itself in a ‘lose-lose’ situation.
As a result, Ireland should not be burdened with the responsibility of keeping these financial institutions whole with regard to their investments in Ireland. Ireland should, and will, take responsibility for resolving its fiscal incontinence, but seeking to impose the full burden of bank resolution runs the risk of no escape from a continuing requirement for EU/IMF support. It is in the EU’s interests to devise and implement and exit strategy.
@Paul Hunt
Bravo! Who is that man?
You, Paul, have summarised this thread, and indeed many others, in a two ( alright, not as tight as they might be, but still) messages:
1.)”It does not need to be a sackcloth and ashes routine in the EU. A simple acknowledgement that we screwed up royally would be sufficient…….Ireland’s light touch banking was taken full advantage of by many EZ banks…” and
2.) “It is in the the EU’s interests to devise and implement an exit strategy”.
The “action”points arising out of this excellent summary are also just two two:
1.) Put together a COMPETENT negotiating team more attuned to and with more experience of the “organ grinders” ( the German bankers, preferably someone who KNOWS Josef Ackerman at Deutsche Bank) than the political “monkeys” and
2.) “Profit from” the fact that, ( as with Cowen, Lenihan et al. ) the ordinary European taxpayer in the street has NEVER HEARD of Messrs. Kenny, Gilmore, Noonan et al. to polish up a new, short, clear, non-whining, non-slogan message expressing the two messages in your summary.
From there it is reasonable to expect a negotiated (somewhat lower interest rate) conclusion that does NOT call the already negotiated deal into question.
More importantly, such a tactical approach begins the strategic process of getting “Europe” to face up to the fact ( it already knows, really) that IT has a banking crisis ( and a threat to the Euro) and that a European solution is required.
Angela has ALREADY conceded the principle of “haircuts” by mooting the concept but only after 2013, for the moment!
This approach has the merit of Ireland being seen to be proposing a “European” solution ( while taking our licks) and abandoning the whining that has ALREADY alienated the European taxpayers who believe they’re paying for irresponsible peripherals….like Ireland!
@Bryan G
@Paul Hunt
Amen!
@Michael Hennigan – “Assuming Michael Noonan becomes the next Finance Minister”
Do you know if any bookie is offering odds on who will be the next Finance Minister? If Enda insists on becoming our beloved leader in any coalition, this role could well go to Joan Burton.
@Dominique Jean-Raymond
I agree that whining will not help us. We should just shut up and keep our heads down when Corporation Tax is mantioned. Any defence should take place behind closed doors in Brussells (preferably in smoke-fille rooms). Turning the rest of the European populace against us and thereby forcing their politicians to punish us is not a good game plan.
@Joseph
*off topic, sorry!*
Despite Burton being Labour finance spokesperson on finance I thought the rumour mill was suggesting that Rabitte would be next finance minister?
@ Richard Fedigan
I didn’t say that Bruton was the man for the charm offensive, or that his letter was part of a charm offensive. I do believe we need something of that character however, one should not underestimate the long term damage that can be done by a politician trying to play alpha male internationally to cover his own blushes.
I mean, I think many Americans *still* call them freedom fries.
Besides all of which, the irony of Barroso looking down his nose at us for fiscal irresponsibility is heavy to the point of parody.
Superb letter and very interesting website.
Why not appoint John Bruton to the Senate and make him Minister for Foreign Affairs? A man who knows his way around Europe and wouldn’t have to worry about clinics in Rathmolyon.
Yes, I know FG want to abolish the senate, but we will be stuck with it for the next Dail and we might as well get some value from it.
@Paul Hunt
“It does not have to be a sackcloth and ashes routine ..”
None of my business Paul but I am guessing from the confessional tenor you are Roman Catholic. To summarise:
Ireland has sinned grievously and needs forgiveness – our new negotiators will attend confession and show we have “a firm purpose of amendment” and hopefully we will get someone more lenient than Fr BinSmaghi – who would probably impose said sackcloth. – maybe we will escape with 3 hail Mary’s.
Well good luck but that should have them rolling in the aisles!
Please this is farcical – top talkng about haircuts. There is no moral justification for taking on bank debt – at all! That is the bottom line
I want to precise what I said earlier.
Obviously, many banks and countries have made mistakes before and during the financial crisis. Almost all European countries provided guarantees of some kind to their banks at the height of the financial crisis. And a lot of countries had to bail out some of their banks: the US, the UK, Germany, Belgium, the Netherlands, Ireland and Spain among others.
The cost of these rescues has been manageable in most countries, except in Iceland and perhaps in Ireland.
Arguing that those who lend to Irish banks are to blame because they had access to the same information as the Irish is quite disinginuous. As if foreigners would have a better understanding of what was going on in Ireland (or in any other country for that matter) than the locals. Did the Irish authorities warn anyone in say 2005-2007 of the danger of the real estate bubble? Did they talk to the EU Commission? To the ECB? To the other EU governments? To my knowledge no. Simply because they did not know themselves. Why then blame the EU Commission, the ECB, foreign banks or EU governments for doing nothing to prevent the catastrophe? This is pure and total whining that I find absolutely repulsive.
Some players should have known better. I suspect that the foreign banks were lending to the Irish banks simply on the basis of debt ratings. How were the rating of Irish banks in 2005-2007? Probably quite solid, as they were everywhere. Together with many banks, the rating agencies have proven to be complete failures in this crisis.
Could the Irish authorities have taken any action to prick the bubble? Or to mitigate its impact? Yes, for example impose higher reserve ratios on real estate related lending. Did they? No, of course. At the time, the bubble was not perceived as such by the authorities. Why then try to shift the blame to the ECB, to the EU Commission or whoever for not intervening? This is incredibly childish.
Anyway, I have quite some sympathy for the idea of having senior bondholders share in the losses of the banks. I do not fully understand why the EU Commission and the ECB seem to be opposed to that. But keep in mind that there are Irish representatives at the EU Commission and at the ECB council. Have they protested against the decisions of the Commission or the ECB? I believe not. Arguing that this decision was taken simply to protect other European banks is thus unconvincing. There are probably other issues at play, but the public does not know which ones.
I would like to conclude by saying this. I read that the Irish public debt is expected to reach 100-120% of GDP in a few years. If that is correct, then pretending that this is not manageable is laughable when countries such as Belgium or Italy have had higher levels of debt for many years without major trouble (so far).
Fact of the matter is that Ireland has not yet done its home work, especially regarding the banks. As long as nobody has confidence about what the banking mess will really cost to the country, no one can assess the true debt position. And do not expect your European partners to come up with much more help as long as you have not done your home work.
And by the way, you are complaining about the interest rate of the bail-out mechanism? Well, then it works as intended. The bailout mechanism is not meant to be liked. It is meant to be disliked. If you want to get rid of it, just make sure that you can access the financial markets at better conditions. That is the worst I am wishing you.
@ Incognito
“As if foreigners would have a better understanding of what was going on in Ireland (or in any other country for that matter) than the locals. ”
During the property bubble here, foreign direct investment in Irish property was basically zero. Is it the case that property investors had access to better information than European bankers?
@Incognito
“At the time, the bubble was not perceived as such by the authorities. Why then try to shift the blame to the ECB, to the EU Commission or whoever for not intervening? This is incredibly childish.”
I am sorry to say this but incognito is right. This argument can and will go nowhere so long as we accept that there is any any moral justification for bailing the banks. We will be just inviting derision of this kind. The Guarantees have put us in this situation. There is no way out of this mess without overturning them
Any elected government will not credibly be able to this without the backing of a referendum. A relatively simple first step would be to use the legal system to challenge the constitutionality of the guarantees – but irrespective a referendum must be demanded – on the doorsteps over the next few weeks.
That is the only way to separate out the issue of fiscal and financial debt. The bond markets are closed to us no because of fiscal debt (as you poit out it is high but sustainable) but because a crony government ( I refuse to say “we”) made the gargantuan blunder of offering blanket guarantees .
@ Uncognito
‘Could the Irish authorities have taken any action to prick the bubble? Or to mitigate its impact? Yes, for example impose higher reserve ratios on real estate related lending. Did they? No, of course. At the time, the bubble was not perceived as such by the authorities’
A flood of credit was being released from the EZ core banks. In many respects, Ireland and its banks were simply the guinea pigs for a Ponzi. The big EZ and global players didn’t want it ‘perceived’ for what it was. They were too busy stashing the loot.
Of course, that is not the whole story of Ireland’s crisis, but it is an important part.
We know the European banks are no angels if given half a chance. Look at Hypo for goodness sake, delegating to Dublin what they weren’t allowed do in Frankfurt.
I hope Incognito won’t mind a few lectures on what going 229 days without a government is doing for confidence in the European economy.
As for Bruton’s letter, I feel it could have done with a subeditor’s touch as well as a text colour other than bright blue. I’m sure it looked better on his letterhead when he dropped it in the post box. I admire the attempt at balanced sentiment but unfortunately given the sensitivity of a concurrent election campaign it is going to be viewed in different ways in different places.
Were I writing to Mr. Barroso, I’d remind him that he should grow a thicker skin. It’s obvious that when you have Independent MEPs they have to shout louder to be heard in places like Dublin from far away in Brussels. Whether one agrees with his sentiments or not Mr. Higgins has reminded many many people that the European Parliament actually exists, which is a good thing for European governance, right?
Bruton’s intervention is welcome. We need to make our case in every way possible. Hopefully he continues to campaign on this.
Unfortunately the Bruton letter is easily ignored with (all too accurate) remarks like the one reported today in the Irish Times; “It’s a bit like the criminal blaming the policeman”.
So, even if we take an RC Confessional approach, John B’s letter isn’t going to get us far.
84 replies on “John Bruton writes to Barroso”
Excellent letter. I think we are on much firmer ground when dealing with the EU’s responsibilities regarding the banks than our fiscal policies though.
We made mistakes on the fiscal side which are ours alone. The banking side is much more of a European issue.
It reminds me of Leo Amory, in the historic HoC debate that ousted Chamberlain in May 1940, exhorting Arthur Greenwood, who was standing in for Clem Attlee, to ‘Speak for England, Arthur”. It seems John Bruton has taken it upon himself to “Speak for Ireland”. It’s not before time, but it needs a proper follow-through from a government with a solid popular mandate to make the case for a viable exit strategy from this economically-damaging ‘support’ package.
Fair play to Bruton. Barroso is out of his depth. He’s trying to hold the line on the banks and it is not sustainable.
Refreshing, but the taxpayer is now not only on the hook for the cost of bailing out Irish banks but the interest on the IMF/EFSF loans. It is one thing to call for an admission of responsibility, another to seek reasonable burden-sharing.
Nice response from John Bruton.
However, far more interesting i feel…
http://www.businessandfinance.ie/cat_news_detail.jsp?itemID=3635
Excellent letter. Just the sort of firm but balanced dialogue we should be engaged in.
Another former Fine Gael leader, Michael Noonan, gives an important interview to the FT (link below). It hits most of the right notes: the joint interest in findig a formula for the bailouts that works; the necessity of lowering the self-defeating interest rates on the EFSF and EFSM monies; the distinction between guaranteed and unguaranteed bank debt; and Ireland’s commitment to paying its debts. While it is hard to take losses not being imposed on unguaranteed senior bond holders of insolvent institutions (in the context of a proper resolution regime), I fear that particular ship has sailed. But it is no harm putting it on the table — complementing John Bruton’s message — to remind people that Ireland is not the only one being bailed out in “Ireland’s bailout”.
http://www.ft.com/cms/s/0/ec9a3190-2979-11e0-bb9b-00144feab49a.html#axzz1CEFJC0il
I would be interested to see the reply (if there ever is one).
@Bond. Eoin Bond
That is interesting. Even the threat of doing it could be a good ‘re’-negotiating lever.
At last – a move in the right direction. Together with the supposed move to bring in a third party to negotiate a restructuring of Ireland’s debts we may be on the way to see some light at the end of a very long tunnel.
Hopefully this change can be done in an agreed and controlled manner via the EU/ECB/IMF.
In return we must be prepared to agree to much closer fiscal monitoring and control by the EU. For example we should consider changing our constitution to limit government deficit and borrowing levels. We should also change our public accounting rules to force proper accounting and transparency for items such as future pension liabilities and off-balance sheet liabilities for NAMA etc.
Let’s take this opportunity to make basic changes to prevent politicians (egged on by powerful lobby groups) making such disastrous mistakes ever again.
In his letter, John Bruton asks what did the EU do about the Irish property bubble. Well, back in 2000 the BBC reported the following:
“The European Commission has publicly reprimanded Ireland over its economic policy. The Commission has expressed concern over Irish budgetary plans for 2001, which it says are inconsistent with the 2000 Broad Economic Policy Guidelines adopted last June by the European Council. Ireland’s plans for tax cuts and increased government spending conflict with the European Union’s current support of budgetary constraint, according to the Commission.”
http://news.bbc.co.uk/2/hi/business/1136042.stm
That was a very good letter from John Bruton. Considering Barroso’s demonstratively angry demeanour in the European Parliament I think it was important to get on to him quickly. I hope the incoming Taoiseach will do the same.
I was also heartened by Micheal Martin’s contributions on Prime Time last night. His references to the FT’s position on default at least showed that the cabinet had considered going down that road. I may not agree with their ultimate decision but at least we know they are informing themselves.
In the meantime, the recent developments and chatter surrounding the EFSF suggest to me that our policy of going with the EU flow in the hope of a multilateral solution being devised is starting to look like it could bear fruit. This makes Sinn Fein unilateralism look even more risky (the name was never more apt!).
It seems the new govt will try to put the “R” option on the table post the election. Although as John McHale points out “burning the non guaranteed bank debt” will have limited impact as will reductions in the rate or even sovereign debt buybacks.
Nevertheless, there seems a decent prospect of this issue being debated in the election. In one corner you have the crazies in SF who would throuw out the deal, raise taxes and throw the Nprf into the pot. On the other hand, you have FF plus the bureacracy plus the CB who have to defend the deal. In the middle somewhere you have FF & LAB who are moving towards a negotiated solution involving restructuring.
edit …that shoud be FG and LAbour
@Eureka
mistakes on the fiscal side ? – how can you have negative fiscal debt ?- please explain as perhaps I am missing something.
@ Eoin Bond
Ireland is really an island. A default is a default. If Ireland do not respect its engagements it will be left out alone in the cold and know the fate of Argentina. The only way out is to renegotiate with the same people you signed with in the first place and you cannot do that until the original agreement has been proved to be unworkable ,which will take a few years.
If there is any talk of an unilateral default during the coming electoral campaign by one of the main political parties, be prepared to be vilified by the press and the public opinion of the rest of Europe, the ECB; will stop financing any private or sovereign debt and the interest rates will skyrocket in Ireland with awful consequences on the variable rate mortgages.
You cannot be serious.
Ps having a surplus pension was not really a good idea now was it – like walking through Salthill with a flash purse with cash hanging out the top , not a good idea.
It is interesting to see this and other noises from FG that indicates that restructuring of our debt may be, at least, be moving onto the agenda.
John Bruton is rightly concerned about EMU interest rates which were inappropriate for Ireland. But it was his government which signed up to an EMU which, as designed, will almost always give us inappropriate interest rates.
It would have been better then had we never joined EMU. It would be better now if we could find a way out.
Rushing any attempt to renegotiate is not the right thing to do. We need to identify our ducks, develop them and then get them in a row. We should assess external factors over which we have no influence but have a bearing on any renegotiation. We’ll need to be prepared to sacrifice our 12.5% corporate tax rate. I’d be prepared to raise it to 20% when Ireland’s debt to GDP reaches 60% (though I would insist on the tie to debt to gdp or ,preferably gnp).
@Dominique Jean-Raymond
Default on the Conflationist Vichy_Bank/Sovereign Debt remains on the table as an option.
Best discussed with our European partners in a true spirit of solidarity. 1789 and all that (-;
Hi to Christine from Patricia the Irish_Sovereign_in_exile … and please do not put any more idiotic ideas into Minister Brian’s head – we cannot afford them.
@Dominique Jean-Raymond
People are not talking about reneging on the deal. They are talking about not providing additional guarantees for unguaranteed private debt. Please point me to the section of the Memorandum with the EFSF/ECB/EU that deals with that.
Part of the history of war is the history of revolt against humiliation and the threats of bullies. Ireland has such a history.
John Bruton weakens his case by introducing the issue of the low ECB benchmark rate.
That’s the way a common curreny area works; in the UK in the past, the gripe was that interest rates were set for the greater London area.
It is recognised now by the elites that an independent fiscal policy and an efectively voluntary central governance system was doomed to fail.
As Tim above has alluded to, we basically gave a big PFO to the ECB and the EC when Budget 2011 was criticised.
Ibec and Ictu told Brussels that they didn’t understand the Irish economy and crucially for the FF-PD government, there was a big jump in their approval level.
The general attitude was how dare they!
Of course, by that time we thought the days of rattling the tin ponny were in he past
Read all about it here:
http://www.finfacts.ie/irishfinancenews/article_1016709.shtml
Sent from my iPad
Good letter – but not as good as Joe Higgins impassioned rant which provoked Barrossos outburst. He makes essentially the same point just not as forcefully. Barrosso will find that easier to sidestep again.
Talking about rants Max Keiser has another one on Anglo – in the first part interview with Stacy here. Gotta love extreme views – at least you know where people are standing – Episode 115
http://rt.com/programs/keiser-report/finance-china-metal-credit/
@Keith
I probably mixed up terms – just don’t think that this:
“I also believe the European Commission was involved, under the Treaties, in some responsibility for supervising the Irish economy, and that it too had full information on the obvious imbalances I refer to above. You ought to have acknowledged that responsibility of your own institution, which the Commission shares with ECOFIN”
is as strong as the rest of the letter. I may have misinterpreted this though.
Excellent letter. The country could do with this tone around a few tables in the coming months.
@Tull Mcadoo
See IMF on Eurozone Policy regarding SF ‘Crazies’ . The craziest thing is they appear to agree !
I wonder who would be most disappointed in that situation.
@ Keith
What I’m trying to say is:
As I see it there are two parts to this crisis:
1: A bloating of expenditure which we can and will take responsibility for (it’s nobodys business but our own) and
2: A European wide failure in banking which we are unfairly expected to contain in our tiny economy.
Point 2 is what we need the Europeans to face up to. We have to manage point 1 ourselves because if we state that they failed to exercise sufficient oversight in monitoring our non-bank economy we are inviting more oversight and more influence on such measures as the corporation tax.
Two different issues and it’s best to treat them separately.
@Eureka
Sure don’t worry about it , I was just looking for a scrap
However as I have said before we need to get our head around the Euro system which gives superiority of bank entities over states although sometimes even these priests have to confront the realitity that their own brethren have been engaged in systematic buggering.
Their method to deal with this that will preserve their disdain for the nation state and all things temporal will I believe expand the liabilities side of the Euro balance sheet to incorporate bank deposits on a large scale rather then sovergin debt which they wish to preserve in a small box to prevent any princes from gaining any authority over his subjects.
Expanding the Euro balance sheet in a dramatic way may also accomplish their great goal to transfer dollar savings / reserves into the Euro system.
Given the fact that Ireland is a mixed up place on the edge of these huge financial / cultural tectonic or is it teutonic plates we appear to be at the centre of the action.
Well done, John Bruton.
@Dominique
re:The only way out is to renegotiate with the same people you signed with in the first place.
There is a simpler way out. Don’t draw down the money. The only purpose is to pay off the private bank losses and to bail out the private bondholders. If somebody in Europe wants to save the Irish banks let them come up with the money.
There was no need and there still is no need to draw down this money.
But when the Irish banks fail, let the chips fall where they will.
Sombres jours.
“That is also, in part, a European responsibility, although, of course, the Irish authorities should have found other measures to compensate for the fact that the ECB was pursuing interest rate policies that were unsuitable to Ireland.”
“Unsuitable to Ireland”
I think this is a bit mixed up as it refers to the 2002-2007 period.
If we hadn’t of had the construction boom which made our growth rates look much higher than the “real” growth then the rates would have been suitable. The problem was not the European interest rates. The problem was the construction boom that made our growth rate look higher than it otherwise would have been.
@ Eoin
Thanks for the link to the business and finance article.
The comment by King of city group rang true to me.
As a matter of interest, did the State of Newyork in the 70’s give a blanket guarantee prior to their restructuring efforts.
Yet again it seems to be the main obstacle, legally speaking.
Also doesnt the IMF Euro ‘bail in’ forbid any senior burning?
Also I wouldnt be a fan of extending the time limits on the outstanding debt. Not when the interest is higher than our growth rate.
@Ordinary
I don’t think that the IMF would advise a unilateral abrogation of an agreement with the IMF/EU/ECB. In addition it would not agree with SF about postponement of the fiscal adjustment. I doubt it also agrees with SF on raising taxation to th degree that the party espouses.
It probably agrees that on balance the debt burden is beyond the capacity of the economy to service. But Ajai and Baron Adams probably do not agree on much else.
I would like to extend a very warm welcome to the Finfacts ipad.
Yes. It is a very nice letter. It’s election time in Ireland! And there’s a lot of truth in it. And it makes us feel better. And everybody in Ireland and in Europe knows what the truth is.
And the letter basically says you shouldn’t have let us behave irresponsibly. You could see that we were behaving irresponsibly. And you gave us money to behave irresponsibly. And we did.
And then, when one of our MEPs attacked you, not for allowing us to behave irresponsibly, but because you ( not us) are a bunch of capitalists, you told him that we had behaved irresponsibly.
This makes us angry. So please write us a letter in response telling us you’re very sorry for allowing us to behave irresponsibly. We are a sovereign people, you know.
@MH.
Typo in comment. Should be 2001 not 2011. You had me worried for a second!
@Richard
How could we be a sovergin people if we have no control over our currency or its supply ?
The fiscal arguments are the greatest load of tosh I have ever seen – have you’ve seen our external debt lately ? , even after its great fiscal expansion to cover private losses our state controlled fiances are a little toad on the shoulders of giants.
@Eoin Bond
@Eamonn Moran
Felix Rohatyn will be speaking here in Paris at an event on 8th February at http://www.theamericanlibraryofparis.org ( see “Events Programme”) – 10, rue Général Camou (just beside the Eiffel Tower) at 19.30.
It will be a relatively small group (100 or so) with drinks afterwards and a chance to speak with him.
If there’s interest I could make arrangements for a small group but best to let me know in advance so I can fix it with Charlie Trueheart, Directory of the Library.
That should read ( for Felix Rohatyn) http://www.americanlibraryinparis.org ( see “Use the Library” – “Events & Programmes
@ seafóid
Your kind comment is appreciated!
I was out for dinner earlier and I was trying to copy the URL address from the Safari browser but I had to e-mail it to myself and thus the tagline, which was below the window.
It’s an economical device as the print-type formats for the likes of the FT and Economist with the functionality to flick through the stories, makes the need for delivery of the print copies redundant.
Besides latest versions can be downloaded if wi-fi is not likely to be available in a place of destination.
Besides all that, Nokia’s report today of a 21% profit drop in Q4, shows that eaten bread is soon forgotten; Nokia has been big in Asia but Apple is making advances in markets where few Macs were sold in the past.
@ All
José Manuel must be thinking that John Bruton is an ingrate, having proposed him for the Washington post!
@tull mcadoo
That little piece of Tory unilateralism has been firmly debunked in the House of Commons today – Nigel Dodds MP, DUP was particularly impressive in coming to the aid of Mr Adams, exMP, SF and future TD, SF ably backed up by Sammy Wilson MP, DUP. Time to move on ….
The Greatest Bank Heist in Irish History remains a PD/FF construction …
@The DUP
Nice one!
@Tull Mcadoo
100%
But they agree on one thing, the most important thing, this economy cannot sustain the deal as it is.
Everything else is positioning for negotiation – the baron, the banker and anyone wiht half a brain knows that !
The problem here in this country is there is too much ego and emotion flying around for solid business to be done.
The only good deal is one that both sides can deliver on – that’s negotiation and good politics.
Now the baron got the ‘woolies faces’ to take a deal – I’d say give the boy a chance.
Michael Noonan spoke a lot of sense today on RTE One and just hope he brings John Bruton with him for his chat with Barrossa (Portugals Bertie ).
Enda wasn’t letting Michael away with the three way debate (you never know who you’ll be needing to chat to at the end of this).
Everyone has something to offer the debate.
I never met a person who was right all of the time – maybe you have?
13 years and a wrecked economy before Michel said “Sorry”
Sorry, should have read Micháel Martin (Last line)
Baroso might see this as merely a blog entry with his name at the top.
We might get a reduction in interest rates but it won’t be enough. You can only hold out for so long before you eventually have to face the truth and restructure.
@ Ordinary,
Agree with you here. The only party tht is out of the sync is FF. It is the best deal they could do and the fact that the deeds of the country have to be handed over is largely but not solely their problem.
Mickey Martin is apologising profusely although when asked for a specific example of a bad decsion made by him, there is none. He is basically saying it Bertie and Biffo that caused the problem. He was whispering stop.
@ Tull Mcadoo
I agree regarding FF – but hey there is also a lot of voters who put them there need to do a bit of carrying too !
But anyway ‘We are where …………..’ !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
As I mentioned on a subject earlier in the week. The main problem in this economy is that people are not behaving as they should for this capitalist model to function correctly.
Investors are not investing, bankers are not banking and consumers aren’t consuming, government is not governing – RESPONSIBLY
Lets all concentrate on inclusive, deliverable solutions and maybe then we will all know where we are going.
Great chat.
It appears an unguarded (arrogant?) outburst by an Iberian “politician” may have done more for Irish political consensus and sovereignty than decades of hot air in Leinster House.
Somehow I doubt that was Mr Barrossoś intention and neither was it, I am sure, his intention to cause us to examine what kind of “Union” we are turning into.
However as Mr Barrosso and a frighteningly large number of his Commission colleagues are relative neophytes in the concept of democracy we should all be patient and sympathetic. By doing so we will be able to allow more `politicians` on the Commission give us ample opportunities to re-negotiate the “stitch-up” of last November .
Perhaps Mr Barrosso became confused and believed that just because Messrs Bruton and Higgins have different political and socio/economic views (and backgrounds) that they would not have shared values while respecting each others right to hold different political beliefs.
IMHO Mr Bruton behaved like a statesman should (and Mr Higgins like a national representative should) as opposed to Berties expresssion of regret, to day outside the Dail, over our failure to build a stadium.
Did Mr Barrosso behave like a President should?
@Richard Fedigan!
“And the letter basically says you shouldn’t have let us behave irresponsibly. You could see that we were behaving irresponsibly. And you gave us money to behave irresponsibly. And we did.”
I agree with you the letter is weak and made considerably weaker by that childish sentiment.
“And then, when one of our MEPs attacked you, not for allowing us to behave irresponsibly, but because you ( not us) are a bunch of capitalists, you told him that we had behaved irresponsibly.”
I am guessing that it was reference to Barrossos response to Joe Higgins last week
If so I think you should first listen to exactly what Joe Higgins said:
I can’t find a transcript of Joes speech but I attach a youtube link.
This was the report of Joe’s comments on the Irish times:
“During a debate at the European Parliament in Strasbourg, Mr Higgins described the European Financial Stability Facility, as the euro zone rescue fund is known, as “nothing more than another tool to cushion major European banks from the consequences of their reckless speculation on the financial markets”.
Mr Higgins claimed the EFSF was a “mechanism to make working class people throughout Europe pay for the crisis of a broken financial system and a crisis-ridden European capitalism”.
He accused Mr Barroso and European Council president Herman Van Rompuy of effectively transferring tens of billions of euros of private bad debts “on to the shoulders of the Irish people”.
Mr Higgins claimed the EU was destroying services and the living standards of Irish people. “Far from being a bailout, your International Monetary Fund-EU intervention in Ireland is a mechanism to make vassals of Irish taxpayers to the European banks,” he said. “We on the left in Ireland will insist that it goes to a referendum of the Irish people before it is passed.”
And just after that Barrosso threw out the dummy and without answering any of the points Joe made proceeded to conflate financial system and fiscal problems.
http://www.youtube.com/watch?v=uah_BVTmHeM
must do better – have another go!
As a Belgian living in Germany, I am sorry to see that the Irish seem to go down the whining route.
Do not expect to make a lot of friends that way.
@ Incognito
How would you suggest that we win friends?
I’m afraid Incognito sums up a grim reality. Despite implementing the most severe austerity measures of any country, despite playing by the ECB rules of not letting banks fail we will have no friends in Europe.
The worst scenario would be for us to accept the bailout after the rate is “maganimously” reduced to 3.8% only to have to default later. Without restructuring of some description this will not work.
We are severely weakened. We must negotiate with the IMF alone. It is fairer and cleaner for all concerned. It is a simple easy solution and one we must follow. We must do that now.
@Eureka
Incognito is correct – John Brutons letter is just a whine – we need to take Joe Higgins advice. The next government must have a referendum on the bank guarantees. With the moral authority granted by a huge “NO” the guarantee will be exposed as a cosy settlement between a corrupt government and crooked bankers and the problems can then be addressed from a position of strength. Cap in hand whining will always draw a response like incognitos.
@AMcGrath
We just can’t be in this position. We have to ditch the EU piece
@Eureka
It is increasingly obvious that we have been trapped into a position where the likes of Bin Smaghi (just now again on Prime Time) is treating the fiscal and financial components of the debt as one. This they can not be alllowed to get away with. A referendum won’t roll back the clock but since now most people seem to accept that default under the present circumstances is inevitable – we must do what we can to counterract this. The first thing needed is referendum on the guarantees. It is arguable and has been argued convincingly enough for me that the appropriation of taxpayers money to pay bankers debts is unconstitutional. A referendum will sort that out. I’m afraid I have to vote with Sinn Fein on this one.
I don’t really agree that the IMF will be a better option – apart from there noises about restructuring which are lukewarm. None of the bank debts are taxpayers debts – we should just mot pay them – at all!!
IMF bailout might mean:
Lower interest rates
Restructuring
No interference with corporate tax
Not being beholden to the European taxpayer
Freer of political interference
Also serious egg on face for ECB and EC
We could gain, they could lose. An alternative that presents some leverage
@Eureka
Why not ditch the guarantee first – then we will probably need the IMF anyway. It sounds like a plan.
This link is broken – it appears the story has been pulled. Now that it has been officially denied we can take it as being true…
Negotiating with the IMF alone is not and has never been an option.
The fiscal and financial part of the debt are one, money is fungible. Ireland cannot attempt to go for it alone because it cannot balance its budget and the deficit must be financed .The consequence of a default would be so awful that it is not an option .The reality is unpleasant but you will not escape it by complaining that you have been unfairly treated .For your creditors the question of the constitutionality of the agreement is not terribly important .It is important for you to have friends in Europe because you will have to renegotiate the terms of the agreement that your government signed .Whining will not gain you any sympathy.
I am in favour of poltical parties taking on the cabal (if that is really what they intend to do – I have my doubts )
But any group or party needs to be honest with the Irish people – they will seek to destroy us and are very likely to succeed given the fact we have almost zero physical capital to call on and are entirely dependent on outside credit.
Iceland has had a much shorter period of monetarist policies and its people still know how to fish and hunt.
Even our farmers now are dependent on outside credit for existence – the European project has infantilised successive generations of Irish people – they seem incapable of anything but submission.
Andrew Jackson was honest about the dangers and he spoke to a agrarian people – we have nothing and are nothing of the sort now.
“NEVER, NEVER, NEVER, never!” who said that and then made the deal? The Rev. I.K. Paisley
“We are going to finish this thing, one and for all” Who said that and then made the deal? P.O’Neill PIRA
Primetime inst.
Saddened me this evening to hear and see the financial spokepersons for FF,FG & Lab cringing in fear that the European bondholders will not come back to us if we negotiate any harder on this or threaten telling them to Feck Off.
I don’t think we will/should tell them that but we should make it very clear that we are only interested in a deliverable deal if the sovereign debt is not confused with the sovereign/banking debt as currently situated. If not it’s the Joe Higgins show – both barrels. If they want to save the bad banks then they should be prepared to accomodate that by negotiation.
Bowen (I think that was his name) FF is confused as above between bank debt and fiscal debt before the disaster of the bank guarantee.
Leo FG thinks 3% is a reasonable rate while still underpinning anglo et al. (forgetting that smart investment requires interest above inflation for risk over the term) – no one in the ECB is buying that deal with that logic.
Kelly Lab. thinks 6% (his quote) is political – with European partners like that who needs enemies (tough love?)
C.O’C SF. Is threatening the Europeans with a Joe Higgins (but we’ll negotiate) ala NI Peace Process.
Who needs the Europeans? Japan bought a third of the first traunch of bonds sold – with interest rates as far above their own why wouldn’t they?
Goldman Sach can borrow from the US government and lend to us at plus 20 points and still sell the bonds at a profit.
Not to mention the Chinese (who like to buy lots of hard currency debt).
We are being too eurocentric in this whole deal. It is a big world out there and we have some of the most talented deal makers, negotiators and results getters on the planet – unfortunately most in business and spread over the world – not politics here.
The IMF want a deliverable deal (see previous threads and think the ECB is protectionist in the context of banks), the EU sound like a Eurofied FF (looking after ther boys the bankers).
I say take a German approach to this;
make a deliverable deal
keep the head up and keep working at it,
we will get there in the end.
Apologies for any spelling mistakes – Cabernet Sauvignon. Got that right !
And as Dave Allen would say – “May your God go with you”
@DJR
Ireland would not be “going for it alone”. We would be “going for it” with the IMF.
We would be letting the European taxpayer off the hook too. We would be operating in accordance with the Lusbon treaty. The current bail out is only designed to protect the banks.
@Dominique Jean-Raymond
The debts of private banks and sovereign debt are not the same thing. What has the fungibility of money got to do with anything?
The Irish government made many mistakes – but the one which is crippling us is the bank guarantee. It is most likely uncinsttitutional in Ireland – as private property is protected under our constitution – to use taxpaers money to bail out private institutions. It is alao probably illegal under European law but it suited them not to enforce it.
It must be overturned so that we can draw a clear distinction. We will honour our sovereign debt. If Europe wants to go further to as Joe Higgins said “fix the broken financial system” that is another discussion – but lets stop conflating soveriegn and bank debt.
I agree with you – whing is contemptible and John Brutons letter is a whine.
@ AMcGrath
Like the man with one leg shorter than the other and a’Big Shoe’ – I stand corrected.
But stand I do.
You may be right in your reading of John’s letter today (but the ‘boy’s are for Burssels tomorrow so let’s set the stall – Michael N.).
Just great to see ‘Fungibility’ used in it’s proper context – well done.
@DJR
How serious the guarantee was in creating the perception that bank and sovereign debt are the same can be sen from the comment by Ken Rogoff in the IT article linked in the “Ceaucesco” thread here:
“Dr Rogoff, a professor of economics at Harvard, said Ireland had “good fundamentals” outside the debt problem and said most of the country’s growth story was real. For any incoming government, the task would be to maintain that and not undermine it.
However, he said it will be difficult for Ireland to avoid some form of debt restructuring. Asked if he was referring to sovereign or bank debt, he said “I’m afraid it might be the sovereign debt”, since the sovereign had guaranteed bank debt. ”
That statement would have been impossible without the guarantee – it must and can be undone.
Dominique,
This is a two-way street with consequences for both sides. Taxpayers embark on massive austerity programs and are relentlessly threatened and cajoled at the slightest hint of dissension while bank bondholders refuse to even discuss haircuts and are largely ignored.
Having looked at PrimeTime, it is clear that among all the other problems, there is a big propaganda battle going on, and one in which Ireland is not doing very well.
Let’s take one theme – “Diligent German workers have adjusted to globalization, taken the pain, and are now being unfairly asked to pay the bills for the Irish people’s party lifestyle”
In practice the average German worker understands globalization far less than private sector USA, UK or Irish workers. Look at what happened when Nokia decided to close down a large factory in Germany a couple of years ago. They were attacked by all politicians, from Merkel down. Merkel urged consumers to favour products made in Germany. The finance minister accused the company of “caravan capitalism”. Politicians and union leaders urged a national boycott of Nokia phones (which were banned from some government ministries). Unions organized huge street protests. There were lots of YouTube videos of people smashing their Nokia phones. Local politicians tried to illegally claw back subsidies that had been paid to attract the factory back in the 1990s. Not exactly the behaviour of a populace that is diligently playing in the global marketplace, is it?
In fact the level of hypocrisy by politicians (so subsidies to attract FDI are a Good Thing if they happen in your own country, but a Bad Thing if they happen in another country; Protectionism is a Good Thing if it happens in your own country, but a Bad Thing if it happens in another) and the complete lack of understanding by the average German worker about how the global economy actually works (costs were 10 times lower in Romania where a new factory was built) were just stunning. Now there were a number of German commentators that pointed all this out, but they were drowned out in the surge of irrational populism that manifested itself.
Moving onto the second part of the theme – many German workers think that German taxpayer money is simply being shipped to Ireland to pay the post-party bills, and do not understand that it is a loan, with a profit margin, and that has a side-agreement that requires the Irish taxpayer to assume private debt. Now of course there is some credit risk here, but to discuss that requires understanding the basic parameters of how the bailout works, which many Germans do not.
German politicians are no better, and no worse, than Irish politicians when it comes to hypocrisy and populism. They are, however, better at defending their own interests and those of the taxpayers that they represent. They are good at creating memes that spread that further these interests. Barroso’s angry rant is a good example of this. These memes involve gross oversimplifications, and pose false questions (e.g. is A or B responsible) when the underlying reality is that A, B, C, D, E and F in combination are responsible.
“Dominique” and our Belgian friend appear once or twice in every discussion, I note, solely to stir the pot and make bold claims about Irish sovereignty as it relates to monies due and owing, in their view. I sincerely hope this does not reflect a widespread view in Europe, but unfortunately I fear it does. European politicians need scapegoats too, as Sarkozy, who is in deep trouble with his own electorate, has shown.
The only voices worth listening to in this discussion are those with rational and cool headed facts, and likewise practical solutions. We’ve been stitched up not only by our European fellows, but by our own government, and by the time the curtains drew back it was too late to do anything. Let’s bend the ears of those with the ability to make a change, and point them in the right direction, play it smart.
The rest may be safely ignored, including the relics in FF.
What we could use right now is someone or some people to go on a “charm offensive” throughout Europe, speaking directly to the media and thus to the peoples of Europe, and disarm what seems to be an increasingly polarised situation with reality.
The fate of Argentina is mentioned here as something to be avoided. Argentina did not accept the terms and conditions of the IMF in 2002-2003. The Peso was at parity with US $. The Argentinian Gov’t over the previous five years had frequently declared that it was firmly and irrevocably committed to maintaining parity. The usual mix of international banks, Trust Funds, companies, individuals and pension plans believed the Argentinian Gov’t and bought bonds, stocks and tangible assets denominated in Arg. Pesos. Suddenly in a flash one night the Arg. Gov’t devalued their investments 66.66%. Domestically a Peso was still a Peso although imports cost three times what they did prior to the devaluation. Exports boomed and after the short sharp shock employment picked up. A major problem was that companies saddled with debt denominated in foreign currencies had a high default rate and bankruptcies were common. It should be said that employees taking over company premises and production machinery was also common. Argentinians are a feisty bunch with rights and entitlements and do not go quietly into the dark night. Argentina today has little difficulty raising money abroad. Many Argentinians are grateful that the Arg. Gov’t is being looked upon warily by Goldman Sachs, Chase Morgan, CitiBank, Deutsche Bank, UBS, Barclays. I am sure there are many Irish who wish that Ireland were subjected to external discipline by its lenders.
There is no need to cry for Argentina they have the best steaks in the world, very good wine, Media Lunas for breakfast, excellent coffee. I look forward to going back it is a beautiful country with excellent climates (plural literally).
@Bryan G, well said sir and good shot, a more eloquent addendum to the sentiments I expressed. We need to take the offensive in the propaganda battle, before the damage on the street level to the reputation of the country, and its ability to function within the European framework to head off derisory comments about our reputation, becomes irreperable.
Irresponsibility all round as mentioned in the letter. The nub of the matter as I see it is there were highly paid adults running the foreign banks which were irresponsibly lending to Irish banks and other institutions also run by highly paid adults who were borrowing and lending irresponsibly. And our Central Bank and Gov’t the foreigners would have to assume that the highly paid people running those august institutions were compos mentis for at least a couple of hours per day.
There was no necessity for the Irish Gov’t to backstop the Irish Banks, I have seen no evidence of threats or blackmail attempts directed at the Irish Gov’t. Of their own volition, supposedly during those couple of hours daily during which they were compos mentis our Gov’t declared to the world that they were back stopping the profligate Irish Banks. The response ranged from raucous laughter to the intense pain and sinking feeling that those Irish drunks, clowns or fools have now committed every country in the Eurozone to bailing out its banks. It is understandable if intelligent people with good business sense are angry at us, Barroso has every right to be angry.
We have to stop grasping at straws and manufacturing weak excuses. We are the ones making mistake after mistake, amateurism and incompetence piled upon more amateurism and incompetence. Are we living through a comic opera or a tragi-comedy.
@AMcGrath
@Ronan Burke
Thank you for a (rare) correct reading of my comment on Mr. Bruton’s letter. I was beginning to think that irony (or the spotting of it) was dead in Ireland!
I repeat, it was a nice letter and it’s election time. As one would expect in a letter from a former Prime Minister ( from one of the political parties about to form the next Irish government) and former EU Ambassador to the President of the EU commission, it had some truth in it.
Regarding the “charm offensives” suggested by Ronan to influence the media to counter the damage at the street level ( exacerbated by populist and disingenuous politicians for their own electoral purposes) “before it affects our ability to function within the European framework”, well that would have been an appropriate course of action BEFORE the damage was done by, to come back to my paraphrasing of Mr. Bruton’s nice letter, our own irresponsible behaviour”. Which, we all agree, “Europe” should never have “allowed” us to engage in. Even if we’ve been saying for years that we’re big enough to look after ourselves and we’ve been responsibly exercising the degree of sovereignty properly ours within the “European framework”. Even if we haven’t been using this sovereignty responsiby and Mr Bruton says as much in his letter.
The response, which will come in due course ‘cos in the nature of these things, it is considered nice to reply to letters, will also contain some truth and then we’ll be back where we started. Except that the Irish election will be over by then and the letter will have contributed to the achievement of its real objective. Which has almost nothing whatsoever to do with the substance of, or the manner of, the exchange in the EU Parliament.
At this stage I (once again) feel it appropriate to refer to the wisdom of the ( former?) Head of the US Joint Chiefs of Staff, Admiral Mike Mullen, when he said that the US should worry less about communicating “our actions and more about what “our actions” communicate.
One hopes that with FF out of the picture in Ireland, there’ll be less of the spinning of the Irish narrative that has been wearing so thin for a long time now as to be entirely counterproductive.
1. Assuming Michael Noonan becomes the next Finance Minister, he should certainly try to get an improved interest rate and some burden sharing with senior bondholders. There is the complication of new funding for banks as the ECB tries to extricate itself from the role of main wholesale funder.
2. The prospect of restructuring via a direct haircut of non-bank related Irish sovereign debt seems remote; the IMF’s Fiscal Monitor Update issued on Thursday shows that debt in advanced countries of the G-20 is at 107%; the US is running a budget deficit of almost 10% this year; while Italy has a high gross public debt of 120%, its citizens are among Europe’s best savers. Why would Ireland be treated as a special case?
3. Blaming Johnny Foreigner can be more interesting than ‘boring’ issues of reform and the development of a credible jobs strategy but it wouldn’t be very useful to have the election campaign dominated by anti-European sentiment.
The unemployed are invisible to the many still comfortable folk who have done well from the status quo.
We can stupidly pat ourselves on the back for cutting unit wage costs thanks to a surge in pharmaceutical exports without adding jobs, but it’s well to keep in mind that most public discussion on jobs is dominated by spoof and people who have no experience of selling, in particular overseas.
The long-term issue of competitiveness and what it entails simply gets no attention.
Return to normal growth in Ireland may take up to 10 years says IMF chief; Japan and US warned on debt challenges
@Bryan G,
+1
It simply emphasises the requirement there has been for the last 18 months for a new government with a solid popular mandate to speak clearly and persuasively to the people of Ireland and on their behalf to politicians and voters throughout the EU – rather than the combination of spoofery, deception and denial that has been served up and risks driving a majority of Irish voters to support the pressing of the self-destruct button.
It does not have to be a sackcloth and ashes routine in the EU. A simple acknowledgement that we screwed up royally would be sufficient, but it would need to be accompanied by a clear declaration that Ireland’s ‘light touch’ banking supervision and financial regulation was approved of, advocated by and taken full advantage of by many EZ banks and other financial institutions. I Ireland had tried to rein in its financial sector previously it would have faced the wrath of these institutions and their political backers. For many reasons, not all of them self-generated, Ireland found itself in a ‘lose-lose’ situation.
As a result, Ireland should not be burdened with the responsibility of keeping these financial institutions whole with regard to their investments in Ireland. Ireland should, and will, take responsibility for resolving its fiscal incontinence, but seeking to impose the full burden of bank resolution runs the risk of no escape from a continuing requirement for EU/IMF support. It is in the EU’s interests to devise and implement and exit strategy.
@Paul Hunt
Bravo! Who is that man?
You, Paul, have summarised this thread, and indeed many others, in a two ( alright, not as tight as they might be, but still) messages:
1.)”It does not need to be a sackcloth and ashes routine in the EU. A simple acknowledgement that we screwed up royally would be sufficient…….Ireland’s light touch banking was taken full advantage of by many EZ banks…” and
2.) “It is in the the EU’s interests to devise and implement an exit strategy”.
The “action”points arising out of this excellent summary are also just two two:
1.) Put together a COMPETENT negotiating team more attuned to and with more experience of the “organ grinders” ( the German bankers, preferably someone who KNOWS Josef Ackerman at Deutsche Bank) than the political “monkeys” and
2.) “Profit from” the fact that, ( as with Cowen, Lenihan et al. ) the ordinary European taxpayer in the street has NEVER HEARD of Messrs. Kenny, Gilmore, Noonan et al. to polish up a new, short, clear, non-whining, non-slogan message expressing the two messages in your summary.
From there it is reasonable to expect a negotiated (somewhat lower interest rate) conclusion that does NOT call the already negotiated deal into question.
More importantly, such a tactical approach begins the strategic process of getting “Europe” to face up to the fact ( it already knows, really) that IT has a banking crisis ( and a threat to the Euro) and that a European solution is required.
Angela has ALREADY conceded the principle of “haircuts” by mooting the concept but only after 2013, for the moment!
This approach has the merit of Ireland being seen to be proposing a “European” solution ( while taking our licks) and abandoning the whining that has ALREADY alienated the European taxpayers who believe they’re paying for irresponsible peripherals….like Ireland!
@Bryan G
@Paul Hunt
Amen!
@Michael Hennigan – “Assuming Michael Noonan becomes the next Finance Minister”
Do you know if any bookie is offering odds on who will be the next Finance Minister? If Enda insists on becoming our beloved leader in any coalition, this role could well go to Joan Burton.
@Dominique Jean-Raymond
I agree that whining will not help us. We should just shut up and keep our heads down when Corporation Tax is mantioned. Any defence should take place behind closed doors in Brussells (preferably in smoke-fille rooms). Turning the rest of the European populace against us and thereby forcing their politicians to punish us is not a good game plan.
@Joseph
*off topic, sorry!*
Despite Burton being Labour finance spokesperson on finance I thought the rumour mill was suggesting that Rabitte would be next finance minister?
@ Richard Fedigan
I didn’t say that Bruton was the man for the charm offensive, or that his letter was part of a charm offensive. I do believe we need something of that character however, one should not underestimate the long term damage that can be done by a politician trying to play alpha male internationally to cover his own blushes.
I mean, I think many Americans *still* call them freedom fries.
Besides all of which, the irony of Barroso looking down his nose at us for fiscal irresponsibility is heavy to the point of parody.
Superb letter and very interesting website.
Why not appoint John Bruton to the Senate and make him Minister for Foreign Affairs? A man who knows his way around Europe and wouldn’t have to worry about clinics in Rathmolyon.
Yes, I know FG want to abolish the senate, but we will be stuck with it for the next Dail and we might as well get some value from it.
@Paul Hunt
“It does not have to be a sackcloth and ashes routine ..”
None of my business Paul but I am guessing from the confessional tenor you are Roman Catholic. To summarise:
Ireland has sinned grievously and needs forgiveness – our new negotiators will attend confession and show we have “a firm purpose of amendment” and hopefully we will get someone more lenient than Fr BinSmaghi – who would probably impose said sackcloth. – maybe we will escape with 3 hail Mary’s.
Well good luck but that should have them rolling in the aisles!
Please this is farcical – top talkng about haircuts. There is no moral justification for taking on bank debt – at all! That is the bottom line
I want to precise what I said earlier.
Obviously, many banks and countries have made mistakes before and during the financial crisis. Almost all European countries provided guarantees of some kind to their banks at the height of the financial crisis. And a lot of countries had to bail out some of their banks: the US, the UK, Germany, Belgium, the Netherlands, Ireland and Spain among others.
The cost of these rescues has been manageable in most countries, except in Iceland and perhaps in Ireland.
Arguing that those who lend to Irish banks are to blame because they had access to the same information as the Irish is quite disinginuous. As if foreigners would have a better understanding of what was going on in Ireland (or in any other country for that matter) than the locals. Did the Irish authorities warn anyone in say 2005-2007 of the danger of the real estate bubble? Did they talk to the EU Commission? To the ECB? To the other EU governments? To my knowledge no. Simply because they did not know themselves. Why then blame the EU Commission, the ECB, foreign banks or EU governments for doing nothing to prevent the catastrophe? This is pure and total whining that I find absolutely repulsive.
Some players should have known better. I suspect that the foreign banks were lending to the Irish banks simply on the basis of debt ratings. How were the rating of Irish banks in 2005-2007? Probably quite solid, as they were everywhere. Together with many banks, the rating agencies have proven to be complete failures in this crisis.
Could the Irish authorities have taken any action to prick the bubble? Or to mitigate its impact? Yes, for example impose higher reserve ratios on real estate related lending. Did they? No, of course. At the time, the bubble was not perceived as such by the authorities. Why then try to shift the blame to the ECB, to the EU Commission or whoever for not intervening? This is incredibly childish.
Anyway, I have quite some sympathy for the idea of having senior bondholders share in the losses of the banks. I do not fully understand why the EU Commission and the ECB seem to be opposed to that. But keep in mind that there are Irish representatives at the EU Commission and at the ECB council. Have they protested against the decisions of the Commission or the ECB? I believe not. Arguing that this decision was taken simply to protect other European banks is thus unconvincing. There are probably other issues at play, but the public does not know which ones.
I would like to conclude by saying this. I read that the Irish public debt is expected to reach 100-120% of GDP in a few years. If that is correct, then pretending that this is not manageable is laughable when countries such as Belgium or Italy have had higher levels of debt for many years without major trouble (so far).
Fact of the matter is that Ireland has not yet done its home work, especially regarding the banks. As long as nobody has confidence about what the banking mess will really cost to the country, no one can assess the true debt position. And do not expect your European partners to come up with much more help as long as you have not done your home work.
And by the way, you are complaining about the interest rate of the bail-out mechanism? Well, then it works as intended. The bailout mechanism is not meant to be liked. It is meant to be disliked. If you want to get rid of it, just make sure that you can access the financial markets at better conditions. That is the worst I am wishing you.
@ Incognito
“As if foreigners would have a better understanding of what was going on in Ireland (or in any other country for that matter) than the locals. ”
During the property bubble here, foreign direct investment in Irish property was basically zero. Is it the case that property investors had access to better information than European bankers?
@Incognito
“At the time, the bubble was not perceived as such by the authorities. Why then try to shift the blame to the ECB, to the EU Commission or whoever for not intervening? This is incredibly childish.”
I am sorry to say this but incognito is right. This argument can and will go nowhere so long as we accept that there is any any moral justification for bailing the banks. We will be just inviting derision of this kind. The Guarantees have put us in this situation. There is no way out of this mess without overturning them
Any elected government will not credibly be able to this without the backing of a referendum. A relatively simple first step would be to use the legal system to challenge the constitutionality of the guarantees – but irrespective a referendum must be demanded – on the doorsteps over the next few weeks.
That is the only way to separate out the issue of fiscal and financial debt. The bond markets are closed to us no because of fiscal debt (as you poit out it is high but sustainable) but because a crony government ( I refuse to say “we”) made the gargantuan blunder of offering blanket guarantees .
@ Uncognito
‘Could the Irish authorities have taken any action to prick the bubble? Or to mitigate its impact? Yes, for example impose higher reserve ratios on real estate related lending. Did they? No, of course. At the time, the bubble was not perceived as such by the authorities’
A flood of credit was being released from the EZ core banks. In many respects, Ireland and its banks were simply the guinea pigs for a Ponzi. The big EZ and global players didn’t want it ‘perceived’ for what it was. They were too busy stashing the loot.
Of course, that is not the whole story of Ireland’s crisis, but it is an important part.
We know the European banks are no angels if given half a chance. Look at Hypo for goodness sake, delegating to Dublin what they weren’t allowed do in Frankfurt.
I hope Incognito won’t mind a few lectures on what going 229 days without a government is doing for confidence in the European economy.
As for Bruton’s letter, I feel it could have done with a subeditor’s touch as well as a text colour other than bright blue. I’m sure it looked better on his letterhead when he dropped it in the post box. I admire the attempt at balanced sentiment but unfortunately given the sensitivity of a concurrent election campaign it is going to be viewed in different ways in different places.
Were I writing to Mr. Barroso, I’d remind him that he should grow a thicker skin. It’s obvious that when you have Independent MEPs they have to shout louder to be heard in places like Dublin from far away in Brussels. Whether one agrees with his sentiments or not Mr. Higgins has reminded many many people that the European Parliament actually exists, which is a good thing for European governance, right?
Bruton’s intervention is welcome. We need to make our case in every way possible. Hopefully he continues to campaign on this.
Unfortunately the Bruton letter is easily ignored with (all too accurate) remarks like the one reported today in the Irish Times; “It’s a bit like the criminal blaming the policeman”.
So, even if we take an RC Confessional approach, John B’s letter isn’t going to get us far.