A Flexible EFSF

In his latest speech, Lorenzo Bini-Smaghi provides some insights into how European financial stability can be improved.  Some key passages:

One objection to a more integrated banking system in Europe is the role of national budgets in crisis resolution. As long as budgets remain national – so goes the argument – crisis resolution has to remain national, and so does supervision. The crisis has shown that bank resolution and restructuring are more complicated for cross-border institutions, given that any fiscal costs have to be distributed across several host sovereigns. As Charles Goodhart has said, “…cross-border banks are international in life, but national in death”. [4]

As I see it, enhanced financial integration in the euro area does not necessarily imply a need for greater fiscal union – if that is understood as a pooling of tax revenues, harmonisation of tax rates or issuance of a common bond. Instead, we must develop the capacity at the area-wide level to address specific financial tensions that threaten to spill over to the area as a whole, minimising disruptions to market integration and supporting the transmission of monetary policy.

The recent crisis – and, in particular, developments in Ireland – have demonstrated that, despite the imperfect integration of the European financial system, very strong cross-border contagion takes place within the financial sector. The instruments available at present to block this contagion are not efficient and have side-effects. In practice, much of the burden to contain contagion has fallen on central banks. This is neither desirable nor appropriate.

In my view, the European authorities need to develop a capacity to conduct a surgical strike’ on problematic financial institutions or market segments in the event of a financial crisis. Through such actions, the area-wide externalities created by specific problems can be contained. In practice, this means ensuring that programmes such as the European Financial Stability Facility (EFSF) or the European Financial Stabilisation Mechanism (EFSM) – and their envisaged permanent successors – are given sufficient financial resources and the required flexibility by the Member States to act as necessary to support financial stability. To do so, these bodies may also need to be able to support the recapitalisation of an ailing banking system, if its weakness threatens the stability of the area as a whole. All this of course comes with strict conditionality in the context of an overall EU/IMF programme.

This has been the case in both the Greek and Irish programmes, in which funds are dedicated to the recapitalisation of the weak banks. A more systematic approach should be pursued, making it easier for countries to implement such a scheme.

and

The recent crisis has demonstrated that the European financial system was insufficiently robust. Further measures to deepen integration and bolster stability are required. Looking forward, we have to identify any remaining weaknesses and seek to address them.

Until now, it has generally been argued that the main responsibility for financial supervision has to remain at national level. The consequences of failures in supervision ultimately fall on the taxpayers of the country where the bank resides. To align incentives and ensure appropriate accountability, nationally defined tax bases imply nationally defined supervisory institutions.

However, the crisis has demonstrated that the implications of supervisory failures extend well beyond national boundaries. First, cross-border contagion has been magnified by externalities and spillovers arising from greater area-wide financial integration. Second, experience has shown that, within a more integrated market, greater specialisation may imply that financial systems in one country outgrow the capacity of national taxpayers to support them.

The implications of this experience are profound. As I have argued, they point to the need for a much greater euro area and EU perspective in the supervisory and regulatory framework. While progress has been made in this domain, much remains to be done.

85 thoughts on “A Flexible EFSF”

  1. “The recent crisis – and, in particular, developments in Ireland – have demonstrated that, despite the imperfect integration of the European financial system, very strong cross-border contagion takes place within the financial sector.”

    Especially when it takes Europe so long to come up with an institutional response to crisis. How long did it take to bring in the IMF to help out with Greece ? Why didn’t the ECB have a credible approach to Irish bank funding? Why did everything come as such a surprise to the markets? Why has communication been such a disaster? Is anyone going to examine the issue of EU credibility in the market and name names? When can we expect a report?

  2. @ Philip Lane

    Again many thanks.

    ‘experience has shown that, within a more integrated market, greater specialisation may imply that financial systems in one country outgrow the capacity of national taxpayers to support them.’

    Is this a recognition that Ireland cannot deliver on the ECB/IMF deal as currently constructed?

    And it the case that their main problem now is that they do not have a plan if/when Ireland defaults or tells the bondholders to ‘swing for it’ and cannot negotiate a deliverable solution?

  3. We are witnessing the opening stages of a Titanic battle between the banks who own and control the state and the people who wish to take back the state.
    The ECB for the moment is refusing to monetize its client banks criminality and wants the taxpayer to pay for the sins of our host banker parasites.
    Many honest people believe that a central bank that refuses to monetize debt is a good thing as it preserves the value of their money.
    Yet they do not hold money – they hold currency with liabilties.
    A treasury that performs the functions of a central bank can create money without liabilties.
    Until people recognize their wealth is a control system they will continue to remain in the ships hold with invisible shackles , rowing and rowing to what they see as freedom but at best is a more comfortable prison.

  4. I don’t like Mr Bini’s certainty in what needs to be done. It’s more waffle/complication when simple is better. Where’s the moral hazard? Let creditors take the hit in failed ventures. It should not be left up to governments/taxpayers to cover private losses.

    In the future, if depositors require security; they should have the option of saving with a state owned savings bank. If depositors are willing to take the risk and save with a private bank, this should be done on the basis of risk/reward.

    Nassim Taleb’s “Ten principles for a Black Swan-proof world” from Apr 2009 ( http://www.ft.com/cms/s/0/5d5aa24e-23a4-11de-996a-00144feabdc0.html#axzz1DfI01TtW ) is the best ‘to do’ list I’ve seen.

  5. @all

    ‘The recent crisis has demonstrated that the European financial system was insufficiently robust.’ I concur.

    ‘This has been the case in both the Greek and Irish programmes, in which funds are dedicated to the recapitalisation of the weak banks.’ …. Oh dear! Contexts are very different – in Irish case – banks were/are not weak – they were/are insolvent. Banks fail – let them go; this is capitalism – Tough!

    ‘The consequences of failures in supervision ultimately fall on the taxpayers of the country where the bank resides.’ Yes – The Vichy Banks who lent recklessly to reckless Irish banks reside in France and Germany; ergo, based on Economics_101, when reckless Irish banks fail Vichy lenders take their losses on the chin. Where is it written in the European Project that citizens are responsible for all losses in their financial systems? This is slavery. Blind Biddy concurs.

    Blind Biddy: “Not very bright – is he? Where did he go to school? Did he go to school?
    DO’D: You might be onto something there Biddy.

  6. Is it me, or has anyone else noticed that, apart from kicking off a few threads, our principal contributors have gone very quiet?

  7. @ PH
    Are you insinuating that they are in possession of facts that havent arisen in public?
    Or have been secretly detained?
    Heard B Lucey on pat kenny earlier…

  8. @Paul
    The elite here are especially stupid – I believe Morgan Kelly has warned of this – they are kicking a gigantic hornets nest with their grand “plan”.

  9. What a load of old monkeys.
    “The crisis has shown that bank resolution and restructuring are more complicated for cross-border institutions, given that any fiscal costs have to be distributed across several host sovereigns.”
    and
    “The recent crisis – and, in particular, developments in Ireland – have demonstrated that, despite the imperfect integration of the European financial system, very strong cross-border contagion takes place within the financial sector.”

    Cobblers. The Irish financial crisis was grown at home. Fed with imported food, no doubt, but grown at home. The Irish banks are simply not internationally significant.

    “The recent crisis has demonstrated that the European financial system was insufficiently robust.”
    What an understatement. At the expense of, so far, two states and possibly two more. Mind you, I’m not sure we can blame the failure of Greece on its domestic banks…

    “This has been the case in both the Greek and Irish programmes, in which funds are dedicated to the recapitalisation of the weak banks.”
    Mendacious. The EU/IMF bailout has told us to put 10 bn of NPRF funds into the banks. A further 15 bn (IIRC) is earmarked as contingency capital. This is not a “surgical strike”. This is flogging a dead horse.

    “The instruments available at present to block this contagion are not efficient and have side-effects. In practice, much of the burden to contain contagion has fallen on central banks. This is neither desirable nor appropriate.”
    Bananas. That’s what Central Banks are for. Just because the ECB were foolish enough to think they could set up MiFID without supervision of the entities doesn’t mean this is a new problem. No admission of liability from the ECB now that their flagship project has fallen to pieces. It has been clear for some time that you cannot have financial integration without supervision and resolution. The US found that in the 1930s, hence the FDIC. What made the jokers in Frankfurt think that Europe would be, this time, different?

    Another day late, euro short speech. Kicking and screaming into the infancy of central banking. Close your eyes Walter, you don’t want to be reading this http://www.gutenberg.org/ebooks/4359

  10. @Paul Hunt

    Shuuuuu … Blind Biddy is drilling them up the Dublin mountains on the intricicies of handling a bazooka …. rumour that NicolaS might be in town, and the island off the Outer Blaskets has been prepared – plenty of hay brought in for the white horse ….. the entire French front row are onside and were drilled by Biddy yesterday ….. the match, of course, remains open.

  11. @Paul Hunt

    Alternatively, they are probably Reading Sommerville & Ross, with an introduction by Ghensis. C. G. Khan in Dublin South East and Dublin South. Political economy an all that ….

  12. I think it is fair enough to blame a certain amount on Irish incompetence , especially that of E Sheehy, P Neary, M Fingers, S Fitzpatrick, B Lenihan etc but the slowness and procrastination of the Euro panjandrums from February to November last year was also lethal. Their communication with the markets was abysmal. Traders were happy with Irish yields at 5% at the start of 2010- it was only when they realised that the people supposedly in charge at Euro level were clueless that they lost confidence in whatever solution was cobbled together. Confidence is ultimately the main support for the price of any financial instrument.

  13. ‘ The consequences of failures in supervision ultimately fall on the taxpayers of the country where the bank resides. ‘

    LBS*

    Have these bondholders informed the governments, central banks and taxpayers of their host that they have been buying bonds in ‘bonkers banks’ and that their due diligence and analysis was s*****?

    Is that us off the hook then?

    (sic)

    *Load of Bull S****.

  14. LBS

    By that logic the safest thing for a countrys taxpayers to do is invite in any bank from the EU and ban the formation of any indigenous bank.

    Sound like a plan ?

  15. Hosni Mubarak has fallen and the joy on the streets in Cairo is what I expect to feel when the banks are resolved and Lorenzo BS admits he couldn’t hold the line.

  16. Those of you who read the document about ECB, its function and its ability to influence should know:

    The primary objective of the ECB is price stability. It has no tools to impact in any local market without also impacting other markets. Anyone know why Ireland has a banking regulator? Is it just a cushy job with a big salary and nothing to do?

    Ireland has a banking crisis due to Irish bankers being unable to do their most central function – evaluate credit risk in their own local market. They were the ones who had the best possible chance of correctly evaluating the creditworthiness of Irish borrowers. Irish board of directors were happy with how things were done. Irish regulators were happy with how things were done.

    Irish borrowers and Irish bankers and Irish regulators – > Irish mess.

    The good thing coming out of this crisis is that Irish will not be allowed to regulate banking in Ireland. The bad is that all EU countries will have to give up that control to Brussels. The EU will need a budget for that so taxes will be raised. Given the ‘competence’ available in countries such as Ireland, the national governments are likely to be bypassed & the tax will go directly to Brussels without touching national governments coffers.

  17. Wow!

    This is huge. It may be the speech that finally signals a realization that, in a monetary union that can amplify regional disturbances, the costs of catastrophic bank failure should be shared between members. It is hard to believe that this is the same person who gave an interview to Arthur Beesley in the Irish Times just two weeks ago. I need to read it again.

  18. Have a look at:
    http://www.financialregulator.ie/industry-sectors/credit-institutions/Documents/Licensing%20and%20Supervision%20Requirements%20and%20Standards%20for%20Credit%20Institutions.pdf

    ‘8.6
    A credit institution, incorporated in the State, shall not have the risk assets
    amounting to more than 200 per cent. of own funds concentrated in any one
    sector of business or economic activity which is subject to a common
    predominant risk factor; where a common risk could be considered to apply to
    two or more separate sectors (as, for example, the property development and
    building sectors) not more than 250 per cent. of own funds shall be employed
    with such sectors in aggregate.

  19. This may or may not be the best thread to announce, but I finally ran out of patience with Irish politics and have registered as a candidate in Dublin South East.

    Obviously I’d like people to look at the website (www.hughsheehy2011.com) and give feedback and thoughts on policy. Am also on twitter (hughsheehy) and Facebook

    Meantime, while I’ll go along with many of hoganmahew’s points, this speech seems to be a major shift, talking of the *European* system being insufficiently robust rather than tossing the blame entirely at Ireland. Also, the recognition that the costs may need to be shared sounds significant.

  20. @Paul Hunt
    Maybe they have finally been taken inside the tent. I suspect, however, they realise just how bad things really are. Much, much worse than even the Militant Tendency-types who remain, mostly, the only contributors to this blog.
    At each stage in this crisis most people have ended up fighting the last war. Currently, we all wantto burn the bondholders. That is so 2009. Our insovency/bankruptcy is now so complete, and there are so few bondholders left, you can burn them and make no difference whatsoever. The only bondholder that you could burn and make a difference is one jean-claude trichet.
    There are no domestic policies left to pursue. The next govenment will have to go cap in hand to those famous strangers and ask for kindness. It’s time to pt our hands up and admit that we are insolvent and declare Chapter 11. The debt for which the soverign is now responsible for is beyond any taxable capacity of this economy.
    Who debates who on TV3 is a touch beside th epoint. The next government won’t make it to the next budget.

  21. @ Hugh

    First, real strong congratulations to you for going for it. Respect is due and you should feel proud of yourself for standing up.

    Ignore the following if it is no use:

    * Reach out to friends in person or online. Say what you’re doing and why. People want to help. You’ve gone for it now, so don’t be shy in asking for support.
    * Talk to people (without being a nutter) at your local shops, businesses and bus-stops. Ask them what is important and listen to the answers. Be clear when you agree or disagree with their points. People rate integrity over fawning.
    * Be specific: you say, “Major constitutional changes are needed”: name them.
    * Don’t think you have to behave like a politician. Having been on TV once is (sorry!) rubbish. Be calm, be yourself, have something to say and the TV requests will flow.
    * Deal well with your local press. If you want help on this, email me.
    * Have a vision. Be clear about the country you wish to live in and explain how you will work to make that happen. Accept that if you do that not all will agree.

    Huge respect again.

  22. @ Gary O’Callaghan

    I’ve read the full speech. He is bouncing some big balls – but in a confusing way – . Recognising, finally, what simpleton notes above, and what most of us here have figured out many moons ago ….. we are so insolvent that repayment of conflationist-vichy_bank/sovereign debt is pie in sky ….

    What do you make of his bouncing balls [and who is he bouncing them for?] – he does not fancy EuroBond, takes tax harmonisation off table [byebye CCCTB], more power to supervisory authority to ‘intervene’, terrified of a repeat of the FF ‘blanket guarantee elsewhere’, & M&A across the EU banking system on ‘retail banking’ ??? a complete restructing – doubt he cleared this with Herr Ackermann………

    @simpleton

    ‘only bondholder that you could burn and make a difference is one jean-claude trichet.’ Bini-Smaghi appears to recognise this – and to ‘hint’ that it might be possible …….. personally, I’d prefer to hear it from Axel Weber ……….
    I’m in despair on the political system here – ‘[they] won’t make it to the next budget.’ Probably. Oh for an administration with Balls and eyes to face reality …

    @seafóid

    Re Cairo: it is still the ‘army’ – has been since Nasser …. still is ….. false dawn. Army, with US support, more or less in full control – whatever the present party in downtown Cairo or Alexandria – Copts, wisely, are keeping their heads down. Who knows …. populations in the Middle East could do with a bit of a break ……… they have been hammered by their own and outsiders long enough.

  23. @Hugh
    You mad fool you. Best of luck.

    @simpleton
    Absolutely. One thing that hasn’t gone away is the deficit. The bubble income for the state isn’t going to come back. The deficit has to be bridged whether by revenue raises abd/or spending reductions. At this stage, as a ward of court, the indebtedness is no longer really our problem. Maybe Mr. Bini-Smaghi has just realised that…

    @Jesper
    “The primary objective of the ECB is price stability.”
    And this is the problem with the European setup. There is a single financial system with no-one in charge. It matters not a jot that the Irish banks have gone bust. Nobody should care. It should be just an Irish issue as it is a result of Irish regulatory and political incompetence. We have, however, a single financial system where deposit and bond money flows. The bond money always flowed, but deposits moving yield-chasing is new. People and institutions are not used to nobody being in charge, apart from some old codger with an insecure moustache. They expected that in this day and age banks were regulated, that the financial system was managed.

    Ireland became systemic. It didn’t stand there with a gun to its head saying “stop or I’ll shoot”. The failure that allowed Ireland to become systemic was external.

    Indeed, it can be argued that the ECB’s task to “promote the smooth operation of payment systems” and encourage open and competitive markets (it is not just responsible for price stability, price stability is its primary aim) which gave rise to MiFID should have encouraged it to take a closer look at what was going on in the payment systems between the banks.

    That the ECB has had a lot to say on banks since the crisis says to me that it has the authority. It still seems to be lacking the will. See, for example, M. Trichet’s speech today on the good and the bad: http://www.ecb.int/press/key/date/2011/html/sp110211.en.html . No mention of regulation, no mention of market stability.

  24. Now that we know we are going to restructure we are impatient to get it over with and angry that the other Europeans won’t oblidge. Unfortunately our entire establishment was maintaining vociferously that we were solvent right up to the bail out. Then we get the recent NTMA report.

    Our banks’ deposits have fled. There is no use in pretending any more.
    We need to tell the other EU members that we’re broke as hell and we can’t pay it any more.

    Perhaps we also need to state – after consultation with the other European countries – that we cannot pay the bank debt but that we will honour all guarantees on deposits and that we will honour all sovereign debt. Do that and the deposits might flow back? Just a thought.

    @Hugh Sheehy
    I would say you are to the right of where I am – and more conciliatory in tone (but not I would say in actual effect) towards bondholders – but good luck with the campaign. Dublin SE would be better off without both Creighton and FF’s Andrews (whose policy principles are here via politics.ie)
    http://www.quizazz.com/quiz.php/825582/Fainna-Failure-Quiz/
    as well as Gormley. It would be great to see yourself and Paul Somerville returned. I see that his website is here:
    http://www.paulsommerville.com/

    @All
    The reality I would guess is that whether FG/FF/Lab/GP get into power taxes will go through the roof while spending is held down. Taxes would go higher under SP/SF but not gigantically so. There is probably a limit to the permanent taxability of the Irish electorate that is below Scandinavian levels.

    The gombeen mentality is fixated on taxes. LABOUR WILL KILL US ALL WITH THEIR SOCIALIST TAXES etc etc. The real question is who will be the best at raising competitiveness and introducing economic and government reforms. That’s the real test.

  25. @ Hugh Sheehy,

    Well done that brave man!!! I sincerely wish you every success.

    If I may mention however don’t underestimate the effort which is required for success in the Irish political arena. Cold calling on doorsteps is tough, arguing endless times over and over again.

    However perhaps now is the perfect time for a jump to politics, one thing is for certain, the support for independents is definetly growing.

    Best of luck and if I have any good ideas I will put them your way!

    Good website by the way!!

  26. @Hugh Sheehy
    I thought the website was good too and more importantly put your case across well.

    It won’t happen but given that we have multiple seat constituencies with 100,000 or more in some why are there not debates between the candidates in Dublin as a matter of course? We live in an age of electronic communication. It’s time to move Irish politics into the nineteen sixties (or perhaps even the nineteen thirties).

  27. @Gary o Callaghan

    I don’t get your point – he still wants to give the bill to taxpayers , just spread the slurry around a bit more like.
    Monetize or default is coming – although perversely if they hit the nuclear M button the dollar will be knocked for 6 – maybe not a good idea yet with the middle east on the brink.

  28. What’s going on with LBS thee days? Seems all over the place for a central banker. The interview was the least coherent I have ever seen from an ECB official.

    Axel Weber will be happy.

  29. However the most important info from this seems to be he wants banking systems in proportion to the size of the sovergin – this explains the attack on Ireland by the ECB in the autumn – they may want deposits to leave here until it reaches whatever max/ min threshold they see fit.
    We are in a zero sum / one currency Western Europe now so a economic contraction in one peripheral Euro currency can serve to recapitalise another.

    @Seafoid
    These guys are not ameteurs – they are expert geopoltical chess players.

  30. @hoganmahew

    Read Trichet’s speech in Bremen. Commonality with Bini-Smaghi is that both focus on the ‘E’ in EMU …….. rules, rules rules on table March 24 …. Panoption here we come (makes 1984 look like a tea party) – no bouncing balls from Trichet – but then again, he is a Celt, a Celt from Brittany …… one of our own! To his credit – he admits flaws … and he has only one shot left in his tenure …. methinks he will go for bigger game than his cousins across the pond …

    @Hugh Sheehy

    You should have great fun in Dublin South East in arguing on the doorsteps of The FlatEarth Society as to whether yourself or Ghensis Constantin G. Khan (who supports Sommerville, as does B. Lucey) is further to the Roight of Attila the Hun. Think McDowell shaded Atilla in the last contest …..

    That said, you fully deserve the Brass Balls of the Blog Award for this week – best of luck.

  31. Ireland would have messed up anyway, euro or no euro. The scale would probably have been the same & you’d be looking for foreigners to blame instead of improving then too. Lack of competence to the point of being possibly criminal incompetence would have wrecked your economy as it has done now.

    Ireland is a country with failed institutions where rule of law does not apply.

    If anyone would like to disagree with me, please do & that means clarify:
    -How the punt would have saved you from the failure of your bankers.
    -How the punt would have saved you from the failure of your regulators.
    -How the punt would have saved you from a government running pro-cyclical economic policies.
    -How the punt would have saved you from your obsession with property and rent-seeking.

    I’m expecting to hear the Optimal Currency Area theory again as a reply. I consider that a pretty theory with little to no practical application.

    Do you really think that the Irish Central Bank would have raised any interest rate? That would have been an unpopular move & Irish leaders don’t come across as leaders who would make unpopular decisions.

    Ireland was poor before, it will be poor again as it lacks what can sustain wealth: Good governance.

  32. @Jesper
    I am not saying that, indeed, those are the points I’ve argued for a good long time. What I am saying is that there should be no reason why the ECB cares that Ireland is going to default on its banks. It is at pains to say that regulation is none of its business, yet it is interfering in orderly or disorderly resolution in Ireland. No burden-sharing is the mantra, both in private and now increasingly in public.

    Let the suckers who invested in the Irish car-crash without due diligence take their losses. But no, the non-regulators are preventing us from doing that because, eh, now that the crash has happened, they suddenly have a responsibility to an orderly market. Shame they didn’t think about that when they took the jobs of being the European Central Bank…

    @David O’Donnell
    Read the speech? I quoted it above. Entirely devoid of content. At least LBS gives us something to argue with!

  33. @ Jesper 6.16 pm

    Not just Ireland Jesper, as per Hoganmahew’s excellent essay reference, it is in the nature of the animal not the colour of his flag – though guilty they are no doubt.

    (:

  34. @ Jesper

    The problem is Jesper you know that – but Neary probably didn’t !

    C McCarthy kind of summed him up in VF. F***

    Well done

  35. @ Hugh Sheehy

    Best of luck

    If you are elected…maybe you could keep a sort of day to day diary regarding the various pitfalls and travails of an irish TD….not sure if that would be to your liking but i would love to see a first hand, waffle free account of what exactly is involved.

  36. @Jesper

    That is a lot of anger you have there, big euro positions?

    More seriously Ireland’s problem was not corruption in the conventional sense, recent surveys have the country as less corrupt than most of continental Europe – certainly no where near as high as the levels in Italy or Greece and almost certainly less so than that of France.

    It is fair to say our regulation was terribly lax, that governments policies were procyclical and that property has never been taxed sufficiently. In this we were hardly alone.

    If I had to put a name on the smaller of our two problems they would be greed and fear, we caught the contagion of right wing economics (Boston or Berlin anyone? Shall we discuss it over a pint in D&N?) and that legitimized greed in a way that had never been done before. The fear was fear that if we changed anything our magic recipe for economic growth would be lost and also a fear, still present, of confronting the great and the good, whether at home or in Europe. It is that fear that makes Lenihan a much better performer in the Seanad than in Europe and that fear that prevented an orderly liquidation and replacement of the banks.

    However our biggest problem by far is that we are very small country and can not shape, in any meaningful way, European fiscal or monetary policy while being bound by it completely. Now that the west is enjoying one of its periodic crises of capitalism (Croke Park caused it of course) we get to see just how much solidarity there is when wealth needs to be protected.

  37. @jesper

    “If anyone would like to disagree with me, please do & that means clarify:
    -How the punt would have saved you from the failure of your bankers.
    -How the punt would have saved you from the failure of your regulators.
    -How the punt would have saved you from a government running pro-cyclical economic policies.
    -How the punt would have saved you from your obsession with property and rent-seeking.”

    Ok, in the run up to Euro entry it was clear to market participants that the mini-boom and fast rising property prices meant interest rates would have been increased. However the fact that a political agreement had fixed an exchange rate told us that interest rates would fall toward entry and the exchange rate would converge on its fix.

    You started with a low-ish fx rate and way too low rates.

    Outside Euro the increase in prices would have been less disruptive within the economy and less encouraging of the property fetish, because it would have partly been achieved via currency appreciation. This route would have had a much quicker effect on general competitiveness and the upward move would not have been so long, drawn-out and habit forming.

    Some of the capital flows would have been discouraged by exchange rate risk alongside the fact that the boom would have been more moderate and therefore less interesting. Some of the mindless Euro-flow would have been absent, and people would not now be complaining about the ECB all the time.

    The obvious correction of currency depreciation would be there automatically and the Croke Park internal devaluation avoidance machine would not have had to be set up by the more powerful groupings.

  38. @Hugh sheehy

    Excellent. Don’t know the details but suggest you really aim for election on an I-told-you-that-would-happen platform at the next election.

  39. @David O’D
    I won the “Brass Balls of the Blog” award? Brilliant!

    @All
    While reaching back into the past and recovering money from the bondholders that cashed out and telling them that they need to repay a chunk of the money might be impossibly difficult (apart from the administration issues you’d cause all sorts of liquidity problems for people and companies that had put that money elsewhere already), would there be any possibility to do a reverse levy?

    Could the exited bondholders be made to refund money over 10 years? Almost any solution has to be better than piling the debt onto the taxpayer.

  40. @Jesper

    that was quite well put.

    I think it is pretty much accepted (feel free anyone to correct me to the contrary) that Japan was at fault for the Japanese property bubble/banking crisis….and Sweden was at fault for the Swedish property bubble/banking crisis……and Argentina was at fault for the Argentinian property bubble/banking crisis….

    Hopefully you can see where i’m going with this…

  41. @ Hugh
    No joy there….
    You should do something big for publicity….
    Assault or serious vandalism
    Your running out of time…

  42. Hugh,

    “Could the exited bondholders be made to refund money over 10 years?”

    Bonds are very legalistic things. You could ask them, but they would say – no, that wasn’t in the documentation, you chose to provide the guarantee gratis.

  43. @ DOD

    There is a wall of money waiting to be invested in the Middle East. I think this time could be different. The region has been a laggard for years and there is a lot of catch up to be done. Even the Army would benefit.

    http://www.aipac.org/130.asp#42570

    Turkey and Iran will triple their bilateral trade to $30 billion over the next five years, Ha’aretz reported Monday. “There is a political determination in the two countries to develop relations further,” said Iranian Foreign Minister Ali Akbar Salehi. Turkish State Minister Cevdet Yilmaz also set a target of $30 billion in trade volume. Trade between the two nations rose to $10.7 billion last year from about $1 billion in 2000.

  44. @ Hugh Sheehy

    Best of luck

    If you want to make an impact beyond the middle class intelligentsia you have to have something for the “working man” and the unemployed woman. What is it ? What is the key message ?

  45. @grumpy

    Legalism is one approach. However, you could also potentially make a case that the guarantee was unconstitutional (43) and is therefore null and void and that you’re just undoing it: that the govt simply had no right to do what it did and you’re taking the money back.

    The guarantee created a huge negative asset for every Irish resident and resident citizen, which interferes significantly with their ownership of other goods. You can only limit private property rights in Ireland on grounds of social justice and in the common good. Which is more socially just? Keep paying the Anglo creditors with taxpayer money, or recovering the taxpayers money from Anglo creditors.

    It’s certainly a debatable point which side would win that argument. Anyway, we have to find some solution.

  46. @seafoid
    I don’t want to turn this into the “Hugh Sheehy policy thread”, but to some extent the message to the working man and unemployed woman is that we need to stop promising quick fixes and easy solutions. That approach doesn’t seem to be working very well, does it? Didn’t last time either, or the time before.

    Other than that, my message is that the govt/state needs to move fast. Make the cuts fast, cut the costs, fast. This business of dragging the adjustment out over years simply drives the lack of investment out for years. Worse than being unemployed is being unemployed for a long time. If we move fast to make it obvious we’re in control then investment might restart.

    The big thing for me is really the longer term stuff. We all recognize that stability in the 12.5% rate is a big deal for corporations, but we’re all somehow happy to feck around with every other tax and policy on an annual basis. People make life decisions on a timescale easily as long as corporations, and the govt keeps messing around with people by changing the rules all the time.

    Give me a better message. Happy to use it!

  47. @Hugh Sheehy,

    You know you’re mad, but I can only applaud and wish you the best of luck as this is the madness we need – the madness of people lied to and manipulated for for too long (similar to the madness of the people of Egypt who took to the streets).

    I presume you are standing as an independent – and that, without the umbrella of faction, if elected, your influence will be limited. But this should not prevent you making the case and prodding, cajoling and ridiculing the other factions to reform the procedures of the Dail so that it properly exercises the ultimate authority of the Irish people who have delegated to the Dail this authority – and holds government (and the entire government machine) to account.

    I posted this on the church door in another parish:

    “To reinforce the case for Dail reform, I have this enjoyable scene in my mind of Charlie McCreevy or Brian Cowen (it’s a two-reeler) pitching up before a properly constituted, resourced and empowered Oireachtas Cttee on Finance & Public Service with their senior officials, advisers and consultants and having their existing economic and financial policies and policy proposals being taken to pieces using facts and figures by one or two competent economists (I’m sure we all have our own favourites now to play that role). They would then be given an opportunity to respond to the critique and both they and the economists would be subject to questioning from the Cttee members. There would be further opportunity for cross-examination, rebuttal and counter-rebuttal before the Cttee would go into private session to form a view and report back to the Dail.

    There’s no guarantee that this would have prevented the subsequent property/banking/construction bubble and the accompanying fiscal bubble, as the government would have the ‘payroll’ and lobby fodder votes to whip the policies through, but citizens and the media would be able to see the gaping holes in the policies. Ridicule is often the best antidote to policy stupidity.”

    Again, the best of luck.

  48. The ECB is the one EU institution that has retained its credibility, under the inspired leadership of Jean-Claude Trichet.

    He is not god (lower case intended) of course.

    Last year the ECB president accused French and German governments of failing to uphold the Stability Pact standards they had demanded by watering down penalties for excessive state deficits in 2004.

    “I wish the German public had reacted with the same indignation to the breach of the Stability Pact in 2004 that they showed toward our decision to buy government bonds,” he said in an interview with a German publication.

    Many of those doing the breastbeating on burden sharing today were surely with the Irish consensus in 2004 that the EU shouldn’t interfere with fiscal policy.

    The Economist 2004: “Ireland is also exposed to property prices abroad. The Irish, like the British, have always liked property portfolios. Various London landmarks, such as Claridge’s, the Connaught hotel and the Unilever building, are Irish-owned. The banking system is heavily exposed: the big Irish banks, such as Bank of Ireland and Allied Irish, are in effect mortgage banks, observes Colm McCarthy of DKM Economic Consultants. A property crash would badly hit their balance sheets.”

    @ Paul Hunt

    Is it me, or has anyone else noticed that, apart from kicking off a few threads, our principal contributors have gone very quiet?

    Maybe, there is nothing novel to add to the grim story.

    There are 2 adjunct professors of economics at UCC, our old alma mater, who could have some interesting disinterested things to say, given their semi-public roles now and their prominent roles during the bubble years.

    For those unfamiliar with academic lingua franca, Merriam-Webster defines ‘adjunct’ as something joined or added to another thing but not essentially a part of it. That seems clear!

    Michael Buckley, the former AIB chief, is also a former senior civil servant.

    Colin Hunt, as Goodbody’s chief economist, was a prominent boom cheerleader and Buckley was his ultimate boss. He later became Cowen’s special economic adviser.

    The Gordon Gekko character in the ‘Wall Street’ Sequel, makes a perceptive observation: “Wake up, will ya, pal? If you’re not inside, you’re outside, okay?”

    @ Hugh Sheehy

    Best of luck.

    Young Dylan Haskins seems to be the Barack Obama of that constituency but with 4 seats, credit for making the effort.

  49. @Hugh Sheehy

    This may or may not be the best thread to announce, but I finally ran out of patience with Irish politics and have registered as a candidate in Dublin South East. I’m not even properly middle-aged and I’ve seen Ireland’s prosperity thrown away twice in my life. Twice.

    JTO again:

    I have no idea why you should expect people to vote for you with such ridiculous nonsense. What you actually mean is that there have been 2 recessions in your lifetime. There have been at least 2 in virtually every other developed country in that time. There have been 4 or 5 (depending on how you define recession) in the U. States and the U. Kingdom. Ireland had a recession in 1958, another in the mid 80s, and another one that lasted from 2007 Q4 to 2009 Q4. That one is now over. The U. States and U. Kingdom had the mid 80s and 2007-2009 recessions as well, but also recesions, that Ireland avoided, in the mid 70s, early 90s and possibly in the early 2000s. Most EU countries had recessions in the mid 70s, mid 80s, mid 90s, early 2000s and 2007-2009. Regarding Ireland’s recessions, they have occurred about once every quarter century, with massive growth in between, which you conveniently ignore in your manifesto. Between 1958 and the mid 80s, the economy grew by nearly 200 per cent, then contracted by 2 per cent in the recession. Between the mid 80s and 2007, the economy grew by nearly 300 per cent, then contracted by 10 per cent in the recession. It is now growing again. Manufacturing output was up 20 per cent in November, according to CSO figures published this week. A better perspective on the economy’s performance during your lifetime than your ridiculous ‘prosperity has been thrown away twice in my lifetime’ would be ‘the economy is 8 times as large in 2011 as it was when I was born’.

    All these independents running as ‘saviours’ of the country are a joke. Ideally, I’d like them all to get zero votes and lose lots of money. I think that a lot of them are in it simply as a form of therapy and attention-seeking, not because they have the slightest belief that their election would be of any benefit to the country. Just imagine if 166 independents got elected, each thinking that their own particular quack manifesto was all that could ‘save’ the country. It would be chaos. Nothing would ever get decided and nothing would ever get done. Dail debates would ressemble debates on this site, which is really as low as one can go. The ideal outcome of the election would be an FF overall majority. Since that obviously won’t happen, the next best outcome would be an FG overall majority. The fewer quack independents the better.

  50. @ JTO

    Good comment, I agree with a lot of it. Though you do as always ignore the fact that the state is currently bolted on to a banking system which is essentially a black hole with a gravitational pull getting greater by the day. Also consdiering 166 independents would never get elected, but a few always will, the more that run the higher the chance of those independants being of good quality. Though I do admire your level of cynicism.

  51. @Hoganmahew Feb 11th 4.42PM.

    Excelllent rebuttal. Whatever you do in your day job, you should consider formalising a rebuttal to the report, publicise it and sent it to ECB. Also to EC commission who say at the end of their self serving nonsense, that they welcome public comments.

  52. @Jesper.
    re

    Ireland would have messed up anyway, euro or no euro. The scale would probably have been the same & you’d be looking for foreigners to blame instead of improving then too. Lack of competence to the point of being possibly criminal incompetence would have wrecked your economy as it has done now.

    There is more than a hint of racism in your remarks.

    As for your comment re Irish interest rates if the Irish punt was still in existence. I recall paying over 16% mortgage interest in the 1980’s.

    Do you really think that the Irish Central Bank would have raised any interest rate? That would have been an unpopular move & Irish leaders don’t come across as leaders who would make unpopular decisions.
    Ireland was poor before, it will be poor again as it lacks what can sustain wealth: Good governance.

    There are very few European countries without a history of economic and political mistakes. Ireland’s admitted economic and political failures pale in comparison with the mayhem, bloodshed and loss of life wrought upon the peoples of Europe and the world by many of these European powers.

    And as far as the Irish banks are concerned, they should have been folded up a long times ago. We all know what can happen if a few megalomanics get their hands on the levers of power. In Ireland’s case that is what the banks have done and for that reason even more than for monetary reasons they should be shut down. The bondholders who invested in them should be told- take a hike.

  53. @Michael Hennigan

    Has Trichet done the job as in his ‘job specification’? Unquestionably, on inflation and price stability [< 2% over time] throughout EZ, YES.

    Flaws in original design re EZ governance now recognized OPENLY at last – but this is political decison – and so godamn (small ‘g’) slow ………

    @ seafoid

    On Turkey and Iran agreed. On Egypt, the upper officer corps in the army are intensely interlinked in the economy and politcal ruling party (beyond what ruling family have expropriated est. $70 billion) …. an institutionalised web of political/economic power …… tactically, methinks the ‘army’ have played this well ……… and september a long long ways away ….. caution etc ….. certain power players are terrified of an outbreak of democracy in ME [I won’t mention Iraq]

    but ME certainly has huge potential ….

  54. @John the Optimist

    ‘The ideal outcome of the election would be an FF overall majority. Since that obviously won’t happen, the next best outcome would be an FG overall majority.’

    You might resurrect the recent possible Coalition FG/FF talks – and follow your logic to its conclusion. The FF side are now more onside and Jimmy Glennon is looking for another partner in the 2nd row …. Lenihan junior is salivating like a rancid kebab to get back in there — and De Mammy would do a streak in/on Croke Park to get one over on Mickey M. Go for it John. Do the State some service.

  55. @Shay Begorrah,

    never understood the point of attacking the reputation of an unknown man (your reference to me being long on the euro), could it be that it was the only argument that you could bring to bear?

    @Joseph Ryan,

    accusing me of racism? Same people would have been in charge -> Same results unless you believe that the colour of the money would have made a big difference?

    Paragraph 8.6 in the Irish credit institution licensing requirements seem like it might have stopped some losses, if it was followed. Was it?

    & could someone please articulate the accusation that the ECB did something wrong into something more specific? What did/didn’t the ECB do to cause the crisis in Ireland?

    Another observation: Bondholders know that every euro that is not collected by the Irish banks will be a loss to them, not to anyone in Ireland. From the outside it does seem that more energy could be put into the collection effort. As long as the collection effort is what it currently is then I believe that the bondholders are doing correctly in holding the Irish to the issued guarantee. Why are the Irish protecting failed Irish investors & therefore putting costs on all Irish?

  56. @Jesper

    Well for starters eurozone inflation averaged rather more than 2% between 2002 and 2006. In fact, the ECB never achieved its legally mandated 2% ceiling for inflation more than fleetingly during this period.

    Its rediscovery of inflation-fighting zeal between 2006 and the present day coincided with the recovery of the core economies. As Axel Weber prophetically said in Jan 2008, “we have a positive economic outlook”.

  57. Eurozone inflation Jan 2000 – Sep 2010 is charted here. Note that the ECB was in violation of the law almost continuously between 2002-2006.

  58. Jesper Says:
    February 11th, 2011 at 10:35 pm

    Do you really think that the Irish Central Bank would have raised any interest rate? That would have been an unpopular move & Irish leaders don’t come across as leaders who would make unpopular decisions.

    You think? Irish mortgage rates 1979 (when we broke with sterling) to 1999 (when we joined the euro):
    1979 14.15%
    1980 14.15%
    1981 16.25%
    1982 16.25%
    1983 13.0%
    1984 11.75%
    1985 13%
    1986 12.5%
    1987 12.5%
    1988 9.25%
    1989 11.4%
    1990 12.37%
    1991 11.95%
    1992 13.99%
    1993 13.99%
    1994 7.49%
    1995 7.00%
    1996 6.75%
    1997 6.90%
    1998 5.85%
    1999 5.60%

    Source: http://www.moneyguideireland.com/history-of-mortgage-rates-in-ireland.html

    Also see: http://www.cso.ie/px/pxeirestat/Dialog/Saveshow.asp for a more comprehensive listing of interest rates.

    And:
    “One of the most notable features of the currency crisis [in 1993] was the unprecedented levels to which Irish interest rates were increased in defence of the currency. Initially, the Central Bank refrained from increasing its Short Term Facility (STF) rate but, as it became clear that pressure on money-market rates would persist, the STF rate was raised by three percentage points to 13.75 per cent on 28 September 1992. The Bank later suspended the STF and provided overnight support at rates of up to 100 per cent — see Chart 2. Official rate increases were reflected in short-term money-market interest rates and were passed on to business borrowers who had DIBOR-related contracts. Higher interest rates and intense competition for funds in the retail deposit market made depositors more aware of potential returns and resulted in a substantial switch from demand to higher yielding fixed-term deposits.

    While defence of the Irish pound had been costly, reflows in early 1993 were substantial and interest rates soon dropped back to normal levels. The markets had been impressed by the determination to hold the exchange rate over an extended period and there was renewed confidence in the Irish pound.”
    Source: http://www.centralbank.ie/data/site/spring8.pdf

    Your jaundiced opinions of the Irish are comical, but at least try and get your facts right before blowing snots at us, otherwise it rather spoils the effect.

  59. @ DoD

    The US is wasting its time slapping sanctions on Iran IMO. It just leaves the field open to Turkish business people. The demographics are very interesting too. I’m sure Vodafone would love to get in there.

  60. @Jesper

    re

    & could someone please articulate the accusation that the ECB did something wrong into something more specific? What did/didn’t the ECB do to cause the crisis in Ireland?

    Nothing. The ECB did nothing. That was the problem. It did nothing.

    That was part of the supervisory problem. What was the purpose of the ECB if all it can do is stand idly by and pontificate on target national deficits, when the root of the problem was the banking sector.

    re:

    Why are the Irish protecting failed Irish investors & therefore putting costs on all Irish?

    It is wrong that they are. But they are doing it at the behest of the ECB.
    But the question could be rephrased.
    Why are the ECB protecting failed bank investors & therefore putting costs on all Irish?

    And in relation to your comments having more than a hit of racism. I stand over those remarks.

  61. “The ideal outcome of the election would be an FF overall majority.”
    The ideal outcome of the 4 year plan would be an AIB share price of 50 Euros. I just saw a pig take off.

  62. @Arian Kelleher,

    yep, the inflation was higher than 2% & for that ECB should be held to account. How much higher should the ECB rate had been set to have put the inflation to closer to the 2%. 25 bps or maybe 50bps?

    Still, the bubble was local & wasn’t fought locally.

    @Furriskey,

    the person at the ICB during the time of the high interest, is that the same person who was in charge during the bubble years? If it was then yes, Ireland might have put up the interest rate. The inflation was a bit higher then as well which might have made it easier to live with/accept high interest. Are the interest rates after compensating for inflation also available?

    @Josepth Ryan,

    the only way my comment can be seen as racist is by people who believe that all Irish would have behaved the same as the Irish who happened to be in charge during the bubble years. I don’t believe that, I do believe that the current system & the current people in the system are bad for Ireland. The opposition wasn’t very opposed to the pro-cyclical economic policies that were in place. The opposition is still the same and the ones who look likely to get elected are proposing some economic policies that I find at best ill conceived. Their policies haven’t been challenged much & they are still on the agenda. My assumption would be that it is accepted as it comes from new people & that is a bad reason for not challenging them. Good or bad, policies should be analysed on its own, not on who proposes them.

    The question ‘What did/didn’t the ECB do to cause the crisis in Ireland?’ still hasn’t been answered. Irish banks were regulated by the Irish regulator, Ireland wasn’t the ward of the ECB.

    You’re right: The question regarding why Ireland is protecting Irish investors etc could be rephrased as you suggest. What could solve it for Ireland? Going after the failed Irish investors and by doing that Ireland can credibly claim that rules of capitalism should apply & foreign investors should also suffer the consequences of their decisions. As is, someone has to make the first move & what has Ireland got to lose by collecting all that can be collected from Irish property investors?

  63. People need to understand that in this monetory system , it is not the amount of money printed or not that defines a currency’s value – but its overall yield – when the ECB prevents a state from defaulting on private obligations its real goal is to preserve the value of the currency.

    If it did not the opportunity cost for holding this paper would decline suddenly and people would rush out of paper.
    But yet if it wants to peserve real wealth in Europe it needs to do just that.
    The present Euro policey is not unlike Volkers hard dollar policey of the early 80s – even though the dollar was beginning to hyper inflate in the early 80s it kept its value as a result of high interest rates.
    The interest extracted capital from the American economy and transferrred it elsewhere – to Asia and the like.
    Even though the real interest rates are much lower in Europe now – they are higher then economic growth.
    The result is a decapitalisation and industrialisation of the European periphery much like the deindustrilisation of America in the 80s.

    Germany is now in the absurd postion of increasing its trade relationships with Asia at the expense of the poorer areas in Europe as a result of this crazy monetory policey.
    The authorties in the ECB need to dramatically expand their balance sheet by incorporating all Euro M1 – this will serve to re localise trade on the European continent at the expense of trans continental trade madness.

    Effectively they need to use the currency as a trade weopan much as the FED is doing with its increase of dollar base money but through the mechanism of expanding its balance sheet , using the Euro as a currency rather then money as in the states.
    If they do not the ECB will be guilty of impoverishing a entire European generation to get another decade of yield.
    That some achievement for a organisation that prides itself on European solidarity.
    Even the Eurovision has better bullshit then the ECB.

  64. correction –
    The result is a decapitalisation and deindustrialisation of the European periphery much like the deindustrilisation of America in the 80s

    Not – “industrialisation of the European periphery ”

    To add – the primary reason why Cork and Dublin are not exporting lower cost products to the core of Europe is a overvalued debt currency – the gaming of the system by the IDA and others is only a mechanism to farm these overvalued currencies via the multinational matrix – there is nothing efficient about such activities.
    The global economy is distorted to the point of absurdity.

    The central bankers have created a elephant man type global economy – which is falling apart due to its own internal contradictions as the real value of resourses are being computed into the global balance sheet.

    If they do not put down this global wage / tax arbitrage model soon we are all going to die.
    Externalities are a bitch but they must be confronted , not avoided until it is too late.

  65. @Jesper

    You state that “the only way my comment can be seen as racist is by people who believe that all Irish would have behaved the same as the Irish who happened to be in charge during the bubble years. I don’t believe that…”.

    Here are a couple of statements that suggest otherwise:

    1.
    The below link illustrates quite well my perception of how Irish citizens make their choices:
    http://notalwaysright.com/choosing-a-flavor-should-be-a-piece-of-cake/9940

    Want the benefit of light touch regulation but the costs should be for others to pay. Want the benefit of low taxes but want a big state which others should pay for. Surprisingly enough other countries don’t want to pay for the Irish.

    2.

    If nobody in Ireland is guilty then everybody in Ireland is guilty and the bank-debt should indeed be paid by the collective of Irish citizens.

    So yes, I do hold the Irish responsible for placing power further away from citizens. The option for the EU would be to hope for Ireland to improve. Hope is not a strategy. Personally I’d rather have Ireland out of the EU than centralise more power to eurocrats in Brussels.

    Whatever you now claim, you have cast the issue in terms that are not only nationalist but chauvinist as well. If the US behaved as the EU is doing now during the crises of ca. 1893-1910 or during the depression, it would have destroyed New York and possibly had calamitous effects for the US as a whole. Of course neither crisis was interpreted in nationalist or chauvinist terms.

    The ECB found it could break the law in the period before 2006 and did in fact do so with serious consequences for Ireland, Spain etc. Now we are told that quantitative easing or sovereign bailouts are impossible because they’re illegal. It may be noted that in each of the three cases, the eventual decision reached favoured the eurozone core even though on one occasion it entailed deliberate violation of the law.

    You have an ideological objection to QE that is not well founded; it is the politics of Herbert Hoover. I prefer Roosevelt.

    Both the ECB and the Fed were culpable in the boom period but the Fed’s subsequent response, permitted by its dual employment/price stability mandate, has been much better.

  66. Ireland is NOT Iceland!!, as Lenihan has continually said, the Irish government have made the right decisions about the banking crisis. Well, at least Lenihan did got one decision right: Iceland is certainly NOT Ireland. Just take a look at what the IMF said yesterday about Iceland:

    “The Icelandic economy is recovering. In 2011, Gross Domestic product (GDP) growth is set to turn positive for the first time since the crisis, though there is uncertainty surrounding the prospects for investment and private consumption. Inflation is projected to remain close to the central bank’s target. Public and external debt remain on a downward path, supported by the steady implementation of fiscal consolidation measures and projected improvements in the balance of payments.”

    http://www.imf.org/external/np/sec/pr/2011/pr1139.htm

  67. @Adrian Kelleher,

    believe it or not I want you (& the rest of Ireland) to prove me wrong.

    Elect people who will try to get elected on believable polices that will be good for Ireland. Put people who have the courage to say no in positions where the job is to say no when needed. I don’t know on what grounds the Irish regulator was appointed, it may have been on the assumption that he wouldn’t say no to the expansion of the bubble. It might have been something different, fact is that he was appointed and should have stopped the party.

    The coming years will be interesting for Ireland. Bubble year tax-incomes are unlikely to return and therefore a decision needs to be made about what kind of state Ireland wants. Hard decisions needs to be made. Will they be made or will foreigners be blamed?

    Make a choice between having a large state with high taxes or a small state with low taxes.

    People who have given personal guarantees and have caused hundreds of millions of losses are still living large. If you want bondholders to accept losses then a credible effort to have minimised their losses has to be made. I don’t see it.

    The failure in Ireland is being used to further integration, centralising of power and probably an EU tax. I am opposed to that & yes, I’d rather have an EU without Ireland than to see it happen. Take what you will from it, for me it is statement on how badly I dislike expanding power for the EU.

    I might not have high hopes, the current Irish government isn’t the best of examples. Given that the blame is placed on foreigners, I have no reason to believe that the Irish see a need to improve and therefore will not improve. And if there is no improvement on recent past experience then I believe there will be problems.

    I dislike QE on a couple of points, the central point is that the direct beneficiaries are the indebted and the bigger the debt the better off.

  68. @ Keith Cunneen

    Keith,

    You come from Cork I think, but it’s still hard to get your drift most of the time.

    Nevertheless, I suggest that you consider taking refuge from the modern world on Mushara Mountain or off the backroad from Leenane to Louisburg, as your counterparts in the US who ache for a simpler world, do on the Rockies, in places like Idaho.

    They are stunningly beautiful places and I would never suggest what is an ideal life to live but in an imperfect world, credit and fiat money appear to provide an enormous benefit most of the time for people who are born into situations where they do not have many choices in their lives.

    Warren Buffett, one of America’s richest persons, who has lived in the same house in Omaha, since 1958, said some time ago: ” I tell the students that come out here; they`re living better than John D. Rockefeller lived. I mean they`re warm in the winter and cool in the summer, and they can watch the series or they could do anything in the world. I mean — and they literally live better than Rockefeller.”

  69. @ Jesper

    ‘As is, someone has to make the first move & what has Ireland got to lose by collecting all that can be collected from Irish property investors?’

    The pragmatic view is that that would be a very dirty fight, in which we might lose what is left of our national virginity. How would we Irish cope with the discovery that many of our most prominent individuals and institutions had their fingers very deep in the property pie ?

    What would happen to the image of our prestigious private schools, for example, if it transpired that funding for endowments originated in unethical professional practices, or low standards in high places ?

    Your point about the need for internal redress is valid, but it is probably a bridge too far. This is a small island.

    NAMA has many stated purposes, but it seems to me the core function is the (unacknowledged and unacknowledgeable) one of avoiding public scandal and social change. The culture of secrecy still rules.

  70. @seafoid

    Yes – Persia is a very old, and very cultured civilization. What’s more, I dont’ think they have invaded any place in a long, long, long, long time. Demographics are similar to here – very young and growing – and political change is imminent in near term …… unless some idiot invades or attacks it.

    … not getting into the history of external intrusion in its internal affairs in the 20th century – or how a certain democratically elected leader was deposed, which they rightly remember.

    @Jesper

    You do attract a lot of ‘little irelanders’ – hope you didn’t marry one?

  71. @JtO
    I’m happy that you live in the “best of all possible Irelands”. I’d quite like to, to be honest.

    If you’d walked with me today you would have seen that few people share your view.

  72. @joseph ryan, jesper

    “And in relation to your comments having more than a hit of racism. I stand over those remarks.”

    I have observed the Irish political and economic scene long enough to be very wary when people start wrapping themselves in green, It has been done so often by people who have used the tactic to get the public on-side for decisions and policies which were stupid or reckless that I think it would be a good idea if the practice were regarded as anti-social. The green jersey has been pulled on many times in the charge down the cul de sac.

    An evident foreigner suggesting that the nation has determinedly backed the sort of policies that resulted in a ridiculous property bubble and tolerated say, corruption (“ah, sure – good on him” as the exposed grafting politician is returned with a increased majority), cronyism, gombeenism, chancer economic and regulatory management – is not racism.

    It seems a bit like Ali G. asking “Is it because I is black?”

  73. @Jesper & Grumpy
    Lots of people in Ireland want reform but the establishment don’t really or they want as little as possible or they are simply too unqualified, short-termist and limited in vision.

    Many in the opposition are genuinely certain that the only thing wrong in Ireland was the last government. They really believe that and they believe everyone else in the continent will too. They will keep on insisting it and eventually Europe will relent and Ireland will emerge from the crisis not very different from as it was before. It is also in the interests of our oligarchy to blame it all on FF too, once they are gone. They have been surprisingly loyal but then FF gave them NAMA and moved heaven and earth to protect the private shareholdings in the banks. FG seem equally determined to sacrifice the national interest to do this.

    The Germans seem to want reform in Ireland but mostly as a way of selling a bailout to their electorate. They want something that SOUNDS impressive. The Commission/ECB/IMF want economic reforms to get as much money out of Ireland as possible. They also want to avoid another crisis. They have no interest in any other reforms.

    Not surprising that Argentina keeps on crashing.

  74. M Martin now denying that he is M Martin…and this is being reported with a straight face! Why are the Irish media so astoundingly creduluous? The libel laws must be in dire need of change.
    http://www.independent.ie/national-news/martin-fury-as-fg-target-ff-links-to-developers-2537185.html

    Good comment from politics.ie:
    “Irish IndoFriday November 16 2007

    “”MINISTER Micheal Martin has no recollection of attending a meeting with Bertie Ahern and developer Owen O’Callaghan in 1994, he told the Mahon Tribunal yesterday.

    But a departmental diary entry, from when Bertie Ahern was Minister for Finance in 1994, shows the Taoiseach meeting with Mr O’Callaghan in the company of Mr Martin, who was then a Fianna Fail TD.””

    Irish Times – Feb 2011
    “”A payment of £1,000 in June 1989 was described by O’Callaghan as a donation to a school mini-project given via Martin but by Martin as a political donation to his campaign.

    O’Callaghan first told the tribunal that £5,000 he gave Martin in 1991 was for the Atlantic Pond Restoration Fund and was given to Martin in his capacity as lord mayor of Cork. He then changed his evidence to say that it was “a political contribution to Micheál Martin for the June 1991 local elections”.

    In relation to this donation Martin’s evidence was that “there was no issuing of receipts at that time in terms of election contributions”.

    As for the £5,000 cheque, it was actually lodged to an account held by Martin’s wife Mary, not in Cork, but in Allied Irish Bank in Baggot Street in Dublin. (She was living in Dublin at the time and working for Fianna Fáil.)

    Martin explained this by saying that at the time there were “no issues in terms of where you lodged the contribution or in terms of the manner in which you dealt with it . . . you used your personal money in your accounts, political contributions would have gone into your accounts”.

    Martin had no memory of a meeting with lobbyist Frank Dunlop in November 1991, which was recorded in Dunlop’s diary.””

    As a staunch Haughey and Bertie supporter, it would seem that MM was at best aware of the “dealings” with developers and politicians, and at worst was compliant and a full participant. His apparent memory loss should also be of concern.”

    All FF Dail deputies should be examined by a neurologist on an annual basis. This is a public health issue people!

  75. Also:
    “The Flood Tribunal has heard that it now appears that the PR Consultant Frank Dunlop was given more than £230,000 from the property developer Owen O Callaghan. Last week Mr Dunlop told the tribunal he was given £175,000. The Tribunal heard details of another account operated by Mr Dunlop in the early nineties.

    The Flood Tribunal heard that withdrawals from an account operated by Mr Dunlop coincided with rezoning motions on the Quarryvale lands in West Dublin. More than £173,000 pounds was lodged to this account in 1991. This money was in addition to £175,000 paid to Mr Dunlop by the property developer Owen O Callaghan. Mr Dunlop said no payments were made in his name for illicit or improper purposes.”

    http://www.rte.ie/news/2000/0418/flood.html?view=print?view=print

  76. I cannot think of any value-added that comes from the EFSF over and above the IMF.

    I’d like to see it allowed to expire and not be replaced. Let the IMF do its job unimpeded.

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