FG Banking Policies

Fintan O’Toole has a piece in today’s Irish Times that criticises Fine Gael for various flip-flops and changes of position on banking issues. You can read it yourself and decide if these points are important or whether Fintan is over-egging it a bit.

I’m reluctant to get into political argument on this point. However, I would note that Fintan seems to have missed the biggest change in Fine Gael position. While Fine Gael are currently placing a lot of emphasis on haircutting senior bank bondholders, as recently as October this was not their position at all. Here’s a link to a Bloomberg piece quoting Michael Noonan as follows

Fine Gael, Ireland’s biggest opposition party, said Oct. 8 that it would also repay Anglo Irish senior bondholders in full. In September, the party had demanded that Finance Minister Lenihan negotiate with bondholders.

The party doesn’t want to “risk the reputation of the country” as a re-payer of its debt, said Fine Gael finance spokesman Michael Noonan.

Bloomberg also have a more detailed story on this interview which, unfortunately, is not on the web. However, here are some excerpts:

Anglo Irish Senior Bondholders Should Be Repaid, Opposition Says

2010-10-08 12:06:09.402 GMT

By Joe Brennan

Oct. 8 (Bloomberg) — Anglo Irish Bank Corp. senior bondholders would be repaid in full by an Irish government led by Fine Gael, the countrys biggest opposition party, finance spokesman Michael Noonan said.

Last month, the Dublin-based party demanded Finance Minister Brian Lenihan sought negotiations on all Anglo Irish bonds, including 4 billion euros ($5.5 billion) which lost the government guarantee on Sept. 30. Noonan said yesterday that circumstances had changed.

“The advice I got was you might get half a billion euros out of it on a negotiation”, Noonan, 67, said in an interview in the parliament in Dublin. “Now, I don’t think we should risk the reputation of the country for the sake of a half billion.”

and

Lenihan said yesterday the government wouldnt impose losses on senior bondholders via new laws.

“It was an option two years ago when there was very serious amounts, about 17 billion, of senior bonds there that wasn’t under guarantee”, Noonan said. “ The debate is effectively over now.”

One can, of course, argue that circumstances have changed again since October. But the general point that Fine Gael have been inconsistent on banking policy seems a fair charge.

44 thoughts on “FG Banking Policies”

  1. Keynes had a good quote about when one should change one’s mind. Circumstances have indeed changed since October.

  2. Plain unvarnished electioneering. Are we surprised? It will be business as usual with FG, we will not even notice that FF is no longer in power.

    Fintan to his credit clarified what is wrong when he wrote “In the Ireland of today masturbation is a bigger sin than tax evasion.”

  3. I suspect the imminent prospect of governing – in quite frankly ghastly circumstances – is focusing minds some what. And it encourages relinquishing childish, oppositional, factional games. I wish the same could be said of its putative partner in government.

  4. On banking – Fine Gael have thrown in the towel before a ball is played, or even a substantive punch thrown. They have bought the Conflationist Fallacy hook, line, and stinker. Their policy is the equivalent of asking the representatives of Vichy_BankLand how many chains they would like added to the shackels of the Irish citizen-serfs, and whether they would like lead or pig-iron as the preferred metal.

    No mettle at all at all at all….

  5. @ PH

    I don’t get it. When was Noonan was being “childish and oppositional”?

    In October, when he supported FF’s position on bondholders? Or now, when he seems to agree with the Labour Party?

    I must be missing your point …

  6. @ Karl

    i think its more a case of circumstances changing. Even a few months ago the notion of senior debt restructuring was considered a complete no-go area for the vast majority of the market, but now there’s the start of a debate about whether it could be done to smaller, non-systemic banks where the circumstances (ie complete lack of lending standards) justified it.

  7. In addition to Paul Hunt’s point, I think that the dribble of information that is coming out of the banks and the actions taken ‘so far’ are diminishing options.

    I don’t believe we know the full scale of bank difficulties. As FG get closer to office, I believe they are getting more information.

    Actions that have been taken are difficult to untake. The time for a bond settlement and resolution scheme was last September when the CIFS guarantee expired and then ELG was closed to new issuance. Instead we have repayments of unsecured creditors post CIFS and extensions of ELG.

    The biggest action is, of course, the EU/IMF funding deal. The agreements on what has to be done to secure funding are fairly clear. That Mr. Lenihan has already abrogated the agreement makes life difficult for an incoming administration. They are immediately on the back foot. That stroke has immensely weakened the position of the incoming government. They can no longer say “look, we’ve been good boys so far, how about cutting us some slack”.

  8. Next week, Fintan may critise some political leader for not changing his or her mind.

    Margaret Thatcher was determined to avoid the charge of a u-turn at all costs as it had become a taboo issue a taboo issue during the premiership of Edward Heath.

    Ronald Reagan had the charisma to succeed in switching from damning the ‘evil empire’ to seruious talks with its leaders.

    As for Maurice Hickey’s charge of “plain unvarnished electioneering” and saying with FG, we will not even notice that FF is no longer in power, this is the type of baloney we used hear from the media political correspondents when John Bruton was dismissed as a “Meath rancher” lacking charisma compared with “man of the people,” Charlie Haughey.

    We had a dose of similar superficial claptrap in May 2008, hailing the new Sean Lemass.

  9. @Karl,

    Mr. Bond and Hogan, as usual, have clarified the practicalities. I see a shift from rejecting unilateral burning of bondholders to support for a potential and feasible reduction of these liabilities as a reasonable response to changing external circumstances.

    My ‘oppositional’ has ill-chosen. The childish, factional games have been between FG and Labour once both recognised that FF was a busted flush.

  10. @Karl Whelan
    The facts change quote seems to be attributed to “Lost Prophets: An Insider’s History of the Modern Economists” By Alfred L. Malabre, Jr.

    It is in chapter 7 on page 220. Unfortunately, the notes for that chapter are not available on google books, but I’m sure you have such an august work on your bookshelf…

    Mr. Malabre is a former editor of the WSJ… can I have my 10 dollars now please? Surely there’s no chance of a WSJ journalist/editor making stuff up?

  11. @ Mickey Hickey

    It should also be recognised that FF like the LDP in Japan who were long dominant parties in their countries with links to the construction sectors that have been extremely damaging, more likely attracts members who are more mercenary than parties which has a lower chance of winning power.

  12. @ Hoganmahew

    “I don’t believe we know the full scale of bank difficulties. As FG get closer to office, I believe they are getting more information.”

    On an interview recently with Ivan Yates on the subject of Alan Dukes’s intervention, Michael Noonan, roughly, tended to side with Brian Lenihan, stating that they shared the same sources of information, but he couldn’t disclose what they were. I have looked for this clip but it seems to be no longer there (not sinister, just elapsed).

    I took this as meaning the DoF is now briefing at least FG in an effort to provide a smooth transition.

  13. @ Karl Whelan,

    “But the general point that Fine Gael have been inconsistent on banking policy seems a fair charge.”

    Who cares? If only Lenihan had the balls to “flip-flop” pre EU/IMF*, we would be in much better shape. Fear of a flip-flop is a weakness.

    *(though it recently appears he did try to hit snr bonds in these negotiations – it’s a pity this was too late and little more than an afterthought)

    For what it’s worth, I think the threat of burning snr bonds is probably of greater value than actually burning these bondholders. Wouldn’t burning bondholders require burning guaranteed equal ranking bonds (which would require the state to pay out)?

  14. @Karl,

    An occasional visitor to this parish, encountering only these relatively infrequent homilies of yours, might form the view that you are intent on doing FG down to the advantage of Labour 🙂

    I hold no brief for FG; I try to form my view on the basis of the statements and the context. I’m just praying for the day when we will have competing left-of-centre and right-of-centre blocs, with their policies subject to effective parliamentary scrutiny (supported by the provision of external advice and evidence) and with frequent rotation of these blocs.

  15. The big change since October was the IMF/EU deal. I think when that sank in – a lot of otherwise measured voices realised enough was enough.

  16. The elephant in the room is that Enda Kenny replaced Richard Bruton with Michael Noonan last June and when spokesmen change, policy changes.
    Noonan likes sounding all statesman like and gives the impression he has seen it all before – of course no one has ever seen a crisis like this before.

    Bruton had a clear policy line from December 2008 when he stated that Anglo should be wound up in an orderly fashion at a time when Lenihan wanted to inject preference shares into Anglo despite the revelations of Fitzpatricks loans being warehoused by INBS.

    This policy developed into telling the guaranteed institutions to solve their own problems or face the consequences at the end of the guarantee – he made clear that existing investors including bondholders would have to pick over the carcass of any insolvent institutions while the state would ensure that there would be successor banks carved out out less putrid parts so that we would have a functioning banking system.

    Early last year there was controversy when Bruton clarified that he intended that senior bondholders would share the pain – a prospect that reduced many commentators to hysterical responses and Minister Lenihan into characteristically assured denunciations.

    Time passes and we now have Minister Lenihan claiming to have tabled burden sharing for all bondholders when he negotiated away our future in 5 minutes with the EU/IMF.

    In the midst of all this, Noonan did his own little odyssey, competing with Joan Burton for Lenihan’s affections, before reverting to the Bruton policy.

    Fintan O’Toole chooses a simple narrative to support his point of view. i would have expected a columnist of his stature to have given a fairer presentation.

    BTW – the IT website is very frustrating.
    Some opinion articles allow for comments, other don’t and I can’t fathom the logic. This FO’T missive does not allow comment.

  17. @ Paul Hunt

    In these negotiations what will be our outside option? If we can credibly threaten to withdraw unilaterally it boosts our bargaining position.

    Imagine if you are desperate for a house, and if you don’t buy a house by tomorrow your family are on the streets. When negotiating the price of the house you wouldn’t say, ‘well at the end of the day I’ll accept whatever price you are offering, but I’d like we talk about it first’.

    Our threat point simply must be unilateral, even if we don’t want to do it. Its our outside option.

  18. @ all

    I think what you are seeing is the old guard V the young capitalists.
    Leo Varadkar is the one leading the charge toward the need to burn bondholders, however the more centrist conservative types like o’ reilly and noonan (very like ff) are afraid of their lives of the European elites.
    Varadkar is very capable of going on solo runs when he believes he is right.

  19. @Rory O’F,

    Everyone knows that option exists. Nobody rational on the Irish side wants to exercise it; and nobody rational on the EU side wants to force us into a position where we have no choice but to exercise it. If, in any engagement/negotiation with our EU partners, a wired control panel is placed on the table with a finger hovering over the button, we should not be surprised if there is no effective engagement from our partners. Nobody should be expected to negotiate under duress – and any outcome is likely to be unsustainable.

    It will be hard-won, but some form of orderly restructuring is in everyones’ interests. What will hinder progress towards this is an unwarranted expectation by some on the Irish side that restructuring of bank debt is a magic bullet that will obviate the requirement for reform of democratic governance and structural economic reform – and the prospect of this prize stiffens their resolve to resist reform. A commitment to these refroms will be required to generate the external political consent to share the burden that debt restructuring will impose.

    These reforms are, first and foremost, in our own interest, but they are also a necessary quid pro quo to facilitate effective engagement with our EU partners.

  20. @Sarah Carey

    Hope you enjoyed that little light blue billet-doux from the ‘measured voice’ of 2_of_7 (aka 50_billion more mister dukes) yesterday – (-;

    p.s. All those disenfranchised forced emigrants from the peasant class say:

    Hi Sarah! Will be reporting on our little upcoming bash at the European Court of Human Rights? You are always welcome ….

  21. @ PH

    “An occasional visitor to this parish, encountering only these relatively infrequent homilies of yours, might form the view that you are intent on doing FG down to the advantage of Labour”

    Trust me, Paul, you can’t both (a) Be an honest economist and (b) Toe the line for any of our political parties. My approach has been to go for (a) and take proposals from political parties on their merits.

    On the banking issue, I’ve adopted a fairly consistent line and Labour have been closer to that line than FG and deserve some credit for not backing the guarantee. FG are getting an easy ride in the comments here for their inconsistency on the banking issue but the constant changes in policy bother me all the same.

    On lots of other issues, like spending money on Strategic Investment Banks, windmills and electric cars, opposition to third-level fees, and its former commitment to a higher third tax rate, I would now and have in the past disagreed with Labour.

  22. @Maurice O’Leary

    I think the FG reshuffle does partly explain that party’s conflicting positions on the banks. Another part of the explanation, though, is that no party is ready to prescribe the bitter medicine that might have to follow unilateral action on the senior bank debt, and as showtime gets closer the contradiction between opposing the government’s policy and not supporting the alternative becomes more apparent. (To be fair, the medicine keeps getting bitterer too.) I don’t think FG is actually back to the Bruton policy now. And if Richard Bruton were still FG finance spokesman, would he sound as adamant today about sacking the seniors as he did in the first half of 2010? He’d have to keep Enda Kenny on board to start with.

    Probably those two explanations mostly cover it, but I also think you’d be a brave man to swear that the Irish establishment’s fatherly love of AIB and BoI hasn’t had any effect at all on FG politicians in the past while. FG did vote for the blanket guarantee initially. Richard Bruton’s banking policy was clearly not bank-friendly, but as you pointed out yourself Richard Bruton’s not the whole story. John Bruton’s an interesting example: he made a stir by rhetorically squaring up to Barroso, but what he was demanding so firmly from the EU was conspicuously not haircuts on Irish bank senior debt, but rather bank bailout money as a grant (or the functional equivalent) rather than as loans. O’Toole himself mentioned Sutherland, FitzGerald and Dukes. I also remember Enda Kenny’s decision to denounce the sale of AIB to foreigners back when that blessed deliverance seemed to be a possibility.

    But if you want to find voices still battling for the interests of the Irish banks, the first place to look for them is in the Irish Times. (Ned O’Keeffe doesn’t have a column in the IT, but let’s see what happens after the election. 😉 ) And I note Dan O’Brien’s burst of enthusiasm for Ruairi Quinn as Finance Minister. Bank-friendliness is certainly not confined to Fianna Fáil, but it’s not really confined to “the Civil War parties” either.

  23. Everyone knows that option exists. Nobody rational on the Irish side wants to exercise it;
    There is a whole literature behind pretending you are crazy in negotiations. It can be summed up by saying you get nowhere by being reasonable in negotiations.

  24. @Rory O’F,

    This isn’t the negotiation of a service contract between two parties, either of whom can walk away without penalty because there is no shortage of other parties to whom they can sell/from whom they can buy. This is an engagement between an association of sovereign nations and one member whose behaviour has put the continued functioning of key features of that association at risk.

    Feel free to believe that ‘pretending to be crazy’ will generate an outcome in our interests. I, for one, don’t.

  25. @Karl,

    Points taken – with tongue removed from cheek 🙂

    I sometimes think we expect far too much detail and consistency from opposition parties given the limited information they have available and the resources they can deploy – particularly in contrast to the ‘government machine’.

    Imo, at election time the parties should be judged on goals, objectives, principles and philosophies. Detailed policies should come later when in government and the full information and resources are available, but, of course, subject to thorough parliamentary scrutiny.

    How many people do you think read the detailed manifestos? Yet they are generally drafted by only a few people in accordance with an interpretation of agreed party-lines and generate multiple hostages for fortune.

  26. Does anybody actually think the Blazing Saddles option will work…”don’t shoot of the “Sheriff” gets it.” In this case we might find that the mob just shrugs and says “go ahead, we can clean up afterwards”.

    The US financial system survived the rogue Lehman and AIG because it dre a line in the sand and made unlimited liquidity and a bridge to recapitalisation available to through the TARP. Who is to say that the ECB just opens the liquidity spigot and reorganises/recaps the banking system and moves on without us. PH is right, we are not in a position to make radical demands, we negotiate and hope for the goodwill of allies.

  27. Worst case scenario for negotiating, unilaterally withdraw and we get screwed.
    Best case scenario for not negotiating, people realise we are insolvent within 3 years (probably sooner) and we get screwed.

    The new government may as well get it over with in the first week, that gives them 5 years to try tidy up the mess.

    @ Paul Hunt
    What do you think is our real outside option if unilateral withdrawal is not credible?

  28. “”I’m so insane, I voted for Eisenhower.”

    ”Oh yeah, well I’m so insane, I voted for Eisenhower TWICE!””

    Maybe we should get Lenny to do the negotiations again. The economy would be lobotomised, but at least we’d get a cool boat trip first.

  29. If, as several commenters seem to think, the question is what stance Ireland should adopt in negotiations, it might be useful to study the negotiating style of someone who has actually been in Ireland’s position and got a very good deal from his creditors: Donald Trump.

    It’s a terrible indictment of Irish policy that we find ourselves in a position where the Trump negotiating style is appropriate for us, but that’s life. As best I understand it, the key requirements are (1) a plausible recovery plan and (2) the brass neck to say to creditors: I’m broke; you can drag me off to the bankruptcy court and get your pitiful few cents there, or you can bankroll me for a fresh start; it’s your choice, but the latter course is actually a better bet.

    A meek disposition won’t do much good in this situation. As Woody Allen observed, the meek may inherit the earth but they never retain the mineral rights.

  30. @Kevin Donoghue
    I think its a good point. But there is no court to bring us 😀
    Before the US used to send a gunboat down to Mexico to ensure repayment, but that’s not really likely in our case.

    I think its important to outline our outside options rationally (I’m thinking in a framework of Nash Bargaining, so I must be nuts).

    Most people agree its better to reach a deal with the EU with mutual respect. Both sides should benefit from the deal, so the negotiation is about how that benefit is shared. (I don’t think we benefited from the last deal).

    Our outside option if negotiations breakdown:
    We must immediately have a primary fiscal balance.
    The ECB may stop lending to AIB etc.
    We can totally torch the bondholders and ECB.

    So we mightn’t run out of money for the ATMs, but I’m not a finance expert.
    Is this credible? I’d say yes (as much the same will happen if we continue with the bailout anyway in 3 years time).

    EU’s outside option:
    Contagion due to burned bondholders. Possible banking collapses.

    Both sides want to avoid this. What is the value to the EU of avoiding contagion? Lets pretend €200bn. In that case they could just give us €100bn for free, and still profit by €100bn over the alternative.
    What would the cost to Ireland be of exercising the outside option? Lets pretend €150bn (due to cost of social chaos etc.). So the total benefit is €350bn.

    How do we split that €350bn? That comes down to things like negotiating skill, patience etc. But as we burn through reserves we weaken our position.

    (Not really the best explanation as I didn’t endogenise the €200bn or €150bn, but hey this is wordpress, not LaTex.)

  31. “There is ‘considerable shock’ among EU finance ministers at the tone of the debate in Ireland regarding the possibility of a bond default in the Irish banking sector, according to the Minister for Finance, Brian Lenihan.”

    🙂 🙂 “Shocked, Schocked to find gambling in Casablanca”. I’m sure they’re well insulated given what they’ve likely been getting from Greece which doesn’t want to repay _sovereign_ debt.

    Interesting too that Rehn is telling us that if we’re good boys, we might get thrown a better deal next year when everything’s calmed down…..just go ahead and spend the last of your NPRF euro on recapping those banks and repay those senior bondholders. Sorry, been there done that in September.

    A few months later he was telling us we were a “tough and shrewd” people after they’d just forced an entire years tax revenue out of the Irish citizenry for French/German/Ducth pension funds via the “rescue”.

    Seriously, I fully support the latterly stiff spine of FG and especially Labour. But they have got to be ready to take the fight to European public opinion and we can only do that whilst there’s senior bondholders still to burn.

  32. BTW there’s no surprise here, but the willingness of unelected eurocrats yet again to treat the Irish democratic process- a peer sovereign state- with such contempt is truly amazing and speaks to the kind of due process we’ll get in any monetary and fiscal union.

    Begorrah, you lowly people are not even allowed to have an election debate if it infringes our guidelines on tone.

    What makes it worse is Lenihan’s supine attitude to all of his, and his expectation that their “surprise” should someone make us all button up.

    The only consolation is that given our respective demographics, one day Turkish and Algerian immigrants will be picking over the ruins of German and French civilisation while the GAA clubs of Meath and Kildare will still be thriving 🙂 🙂

  33. @Rory,

    what if the EU draws a line around Ireland, ceases providing liquidity to failed banks. Then there is a run & probably a collapse and closure due to the lack of a lender of last resort. In the vernacular..the ATMs run out.

    As regards the public finances, we would be running a 15bn primary deficit and this would have to be closed in ….immediately. So no salaries or welfare payments.

    I think that the populace would be rioting at this stage.

    The EU could then just wave their hands at the crazy Irish and proceed to draw inject massive liquidity into their banks and organise a recap of their banks. It would be messy but they might just be able to survive.

    The odds on us succeeding if we press the big red button are less than evens.

  34. @all

    Key link today is in the thread below: Word from the ECB Oracle Lorenzo Bini-Smaghi …….. just 3 comments and two are mine ..

    http://www.irisheconomy.ie/index.php/2011/02/15/imbalances-in-the-euro-area/#comment-124629

    Accoding to Lorenzo – EZ Citizens pick up ALL tab for Financial system. This is IMMORAL and WRONG.

    Commissioner Rehn today – has ‘no appetite’ for cutting senior bank debt in Ireland. This is due to EZ Governance failure to monitor capital flows (see link above). Placing dodgy bank debt on backs of Irish Citizen serfs is IMMORAL and WRONG. Fact our idiot FF/PD/gp Gov did it doesn’t excuse it.

    EU/ECB fleecing Irish citizen-serfs on the ‘bail-out’ (sic) to cover Vichy_Bank and UK seniors is IMMORAL and WRONG.

    Forcing 90billion ECB + 50 billion ICB fire sale of Irish banks to IMMEDIATELY cover the ECB adds further billions (almost certainly) to Irish Sovereign Debt – Further Conflation Nonsense

    What’s ‘contagion’ worth to those with a flawed EU policy on reform of its financial system?

    Observing the logic of Commissioner Rehn & ECB member R. Bini-Smaghi …. & EZ/IMF in Dublin at the moment re ECB/ICB 140 billion ……… The WASTELAND awaits ……….

    Only logical option for any sane Irish citizen is IMMEDIATE DEFAULT – there is no negotiation …….. present policy is simply to sacrifice Irish on the altar of protecting CORE BANKING SYSTEM. Irish have international friends – and we can build a Second Republic.

    Majority of Irish citizens might not be presently onside – stay with this policy and it will come to pass ….. Irish are democrats, no riots on streets, but there comes a limit and it is nigh.

  35. @Rory O’Farrell

    When it comes to outlining our options in a way that EU officials can understand, I think what they fail to grasp is just how peculiar the Irish economy is. For one thing it’s really a very small economy. Make the wrong choices and it will shrink even further. For me, the crucial question to ask regarding any recovery plan is: will it cause more people of working age to emigrate? If it will then it is doomed to failure. An impressive-looking per capita GDP is no good if the number of heads is declining. The tax-base needed to pay off debt will just be too small. Eventually the EU will grasp this and wonder why on earth the Irish negotiators didn’t explain it to them before the damage was done.

    If the message won’t get through despite strenuous efforts then we will have to take drastic action. Possibly we will have to exit the Eurozone and redenominate our debts in new punts. There is an interesting debate about this. Barry Eichengreen has argued that nobody can leave the Eurozone, because any indication of intent to do so would cause a catastrophic run on the exiting country’s banks. Paul Krugman pointed out that Eichengreen’s argument breaks down if the banks are already sunk. Ireland seems to be in a pretty good position to test Krugman’s claim that, in such a situation, the benefits of reintroducing our own currency outweigh the costs. The long-term benefits of making the break could be considerable. The ECB’s performance to date suggests that it is unlikely ever to become a well-run central bank, from any point of view other than that of a very blinkered bond-holder.

    But while I would love to see our politicians exhibit courage and resourcefulness in adversity, my expectation is that they will continue to wheedle and whine to no avail. If I had kids I’d advise them to prepare for careers in foreign lands. It’s mostly crumblies like me who will stay. I recall reading that when East Germany was in its last throes, with the young mostly fleeing West, some old-age pensioners gathered outside government offices with placards reading: “We’re not going anywhere!”

    Perhaps I should start a pressure-group: Krumblies For Krugman.

  36. Tull,

    A couple of points-

    a. If we do this over _private_ bondholders and execute communications well, then ECB/EU/Merkel/Sarkozy would have massive massive international PR disaster. We have lots of eminment people on our side + large chunk of public opinion, etc.

    b. This is still hugely risky for them and has a non-zero probability of disaster. (LEH as the analogue for goodness sake!!)

    Also, huge power shift as ECB is immediately broke and has to go back to big countries cap-in-hand for 150 billion (minimum).

    For example, if ECB pulls trigger why would ever keep money in a peripheral european bank again. I think you’d see a bank run on GR, ES, PO, etc.

    The costs, on the other hand, of cutting us a few 10s of billions are minimal in comparison to these risks.

    c. We still have cash in NPRF and a little bit in Treasury. We’re not quite out of juice – and the short sharp fiscal shock is feasible. We have a positive balance of payments etc.

    Would I surrender 7% of my disposable income today _instead of 3 years from now_ to ensure sovereignty and free ourselves from a huge long-term forced transfer of wealth, erosion of 12.5% tax rate, etc. We’re going to have to balance our budgets anyway.

    d. We’d likely have to leave the euro – and there are costs from this- but at this stage and having read the Goodbody’s assessment which sees us having to run budget surpluses of 4% of GDP for 20 years, I’m not sure how these costs stack up against a century of “due process” at the hands of an arbitrary and capricious central bank not to mention the fiscal dictatorship of a couple of large countries that mean us no well- whose only strategic interest is in getting their gambling pension funds repaid and have a fundamental resentment towards our “American” model.

    Also, if we left the EUR, the DE/FR et al know that our peripheral countries will suddenly see it as a real possibility? We got EFSF because the Spanish threatened this?

    Do I think Irish pols have courage to do this? Probably not – and unfortunately – I think our negotiating counterparties have reached a similiar conclusion.

  37. @tull mcadoo

    It’s not at all clear that even the near-worst case of unilateral action is going to be any worse than what may be coming to us if we abstain from unilateral action no matter what the provocation. The only clear advantage of the latter option is that everything will be nice and gradual (until it isn’t) and no-one in Ireland will have to take any scary decisions (any such decisions will be taken for us). Unfortunately it seems as if this is the one thing most people in this country are still looking for in a response to our crisis – while the thing they want second-most is the chance to ride whatever their pre-existing budgetary hobby-horse was.

    @remnant

    There’s also the probability that in extremis the UK would be forced to play the Nordics to our Iceland. The British government can’t really afford to have a small Argentina on its doorstep and in its Arrivals lobbies. I hate to even mention this, for a host of reasons, and our Plan A should emphatically never be “jump and hope the British catch us”. But that net is – probably – down there somewhere in the dark between us and a full-scale meltdown.

  38. @anom

    If any party does anything about the dynamics of the Irish Economy is a complete and utter fairy-tail.

    We are among the most indebted nations in the earth (actually the most) we have absolutely no idea about how to deal with it. We are expected to pay an interest rate to unknown banks equating to 50% of all income tax because we unforgettably had a finance minister who had no education in economics. We now have a knew finance minister who knows nothing about economics and make a great play about meeting Merkel. Merkel wants what is best for gemany and what is best germany is that Ireland pays a 30% income tax on Everything to German banks beacause they backed Anglo. Thanks.

  39. We need to disconnect the productive side of the economy form the “irish economy” to avoid destroying anything productive. Any connect is lethal, irish politics aims to destroy what is productive by trying to tie it with itself with the giving fof avour By way of tax incentives and grants to high worth individuals in a type of third world embrace/

  40. @tull mcadoo

    But I mentioned those bad things. But what’s to stop them happening if we continue with the current agreement? The agreement is just delaying things. At least now we still have some cash reserves.

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