Dodgy banking assets and the viability of the IMF/EU deal Post author By Kevin O’Rourke Post date February 20, 2011 Colm McCarthy’s latest offering in the Sunday Independent is available here. Like its predecessors, it is a must-read. Categories In Uncategorized 77 Comments on Dodgy banking assets and the viability of the IMF/EU deal ← Irish Society of New Economists Conference → More Black Holes? The Curious Case of the Missing €700 Million 77 replies on “Dodgy banking assets and the viability of the IMF/EU deal” @Colm McCarthy Yes. Default is inevitable – The Local Sovereign is now so infected with the Banking plague that condition is terminal – hopeless, and desperate (cf hoganmahew) . Has been visibly wasting away for quiet some time … Denial is not a policy. “Not one of the weaknesses in the design of the European Central Bank and the Eurosystem over which it presides has been addressed. The principal weaknesses exposed over these last few years are the absence of centralised bank supervision and resolution, and the reliance on uncoordinated national-level fiscal support when banks fail. (…..) What began in 2008 as a deficit crisis with illiquid banks became successively a debt crisis with insolvent banks and finally a State-plus-banks liquidity crisis with resort to official lenders. This system-wide liquidity crisis continues three months after the IMF/EU deal was concluded. The gross financial liability of the State, when items such as Nama bonds, promissory notes issued to the banks, and emergency liquidity operations conducted by the Irish Central Bank are added to the gross Exchequer debt, is now heading for levels which could prevent indefinitely a re-entry to the markets. Bluntly, the markets see a rising risk of default. When the next Finance Minister goes to Brussels to re-negotiate the terms of the IMF/EU deal, there is a more powerful argument than the unfairness of the burden on Irish tax-payers. The deal, as envisaged in the Memorandum of Understanding, may not be capable of implementation and thus, as a matter of pragmatism, the preservation of order in the eurozone financial system requires that it be modified. The problem with the bank guarantee is not that it was unfair, although it was. The problem is that it was a mistake, and mistakes, fairness aside, have to be undone as a matter of practical policy. “ @Michael Noonan, Joan Burton, Pearse Doherty An open, and honest, response to McCarthy the savvy Pragmatist would be appreciated. @The ECB Anyone listening? Yes, a good article. We are facing the most enormous liquidity crisis any country has ever had to face, I guess. Nobody trusts the Irish banks, nobody trusts the sovereign. Except the ECB, and let’s hope that it’s faith is not wishful thinking. But I quibble with his closing remarks that this is all to do with the bank guarantee. Irrespective of guarantees we have reached a stage were no-one is confident that the 100s of millions of bank assets are worth what they are claimed to be. We would have arrived here anyway, probably sooner without the guarantee, and certainly under any blanket nationalisation approach. The Irish bubble was truly horrendous. It will be some time before non central bank agents believe in any of the assets of Ireland Inc. @BWII Is it a solvency crisis not a liquidity crisis, don’t repeat the same mistake the was made at the start of the crisis. Good piece by Colm, especially on the market value of mortgage assets. It would have been good to have more on the possible consequences of defaulting on the guarantee. David McWilliams is worth reading if just for his fabulous euphemism for default: “give the debt back to the people who own it”. It is a good idea to read Cliff Taylor’s Comment and Analysis piece in the Business Post along with Colm’s article for some additional balance. (No link until tomoorow.) @ D_E At the moment it is a liquidity crisis as Colm McCarthy states. The ECB does not think it is a solvency crisis, that is why it is prepared to put in whatever it takes to stem the flow, all on the collateral security of Irish bank assets and the sovereign’s covenant. If it turns out to be a solvency crisis, then god help us all, except of course those people who have salted all their wealth in foreign banks. @ DE the real problem is that we still haven’t a f***ing cluse what to do with a large failed or failing financial institution, and the ECB doesn’t seem all that keen to find out yet. This means that we cannot extract the solvency problem (the banks) from the liquidity problem (the state). An indecisive decision-maker or an ignorant expert are, in fact, imposters. I have the unpleasant opinion that the necessity driving this virtual liquidity or real insolvency predicament is that ‘honest business’ can no longer keep the virtual world of FIRE* expanding at the required rate to sustain the existing debt load, never mind cope with any future increases. The technicians are desparately attempting to control a ‘run-away’ reactor. It is just a matter of time before a terminal error of judgement is made. [*Finance, Insurance, Real Estate economy] BpW @Brian Woods II “he ECB does not think it is a solvency crisis, that is why it is prepared to put in whatever it takes to stem the flow, all on the collateral security of Irish bank assets and the sovereign’s covenant.” The ECB is wrong IMO. The banks and the state are facing a solvency crisis. @Eoin As I said to BWII I believe it is a solvency crisis for the state due to the solvency crisis at the banks Does this mean that Morgan Kelly was right – again! Morgan Kelly’s article here http://www.irishtimes.com/newspaper/opinion/2010/1108/1224282865400.html It takes mastery of a subject to make an article on such complex issues read so well using simple and inescapable logic. The incoming government has nothing to gain from persisting with the game of let’s pretend favoured by all elements since last November. It must explain the issues outlined without fear of the reaction, with particular emphasis on the fact that the euro simply cannot survive either in the current framework or in the Merkel/Sarkozy framework. Many EU financial institutions can access funds cheaply, indicating a systemic crisis is not felt to be imminent. Neither have core countries’ bond rates risen steeply, indicating it’s felt a eurozone crisis can be averted affordably. A eurozone crisis that ran on untreated would certainly not be affordable, ergo… @Brian Woods Nothing has been solved here, in the eurozone, in the UK or in the US. Measures taken to date have relieved the international panic, but the political crisis resulting from deficits is only getting started. Just today, the Republicans are threatening to shut down government in the US just as Newt Gingrich did. Apparently they feel that control of half of the legislative branch gives them authority to do what they want. The prospect looms of decades with patches of stuttering growth interspersed with stagflation and recessions (each time the BRICs send commodity prices soaring again). It may seem obscure, but the most dangerous element in all this is that people are being robbed of their dreams: of financial security, of a university education for themselves or their children and so on. Very good article but I cannot agree with this line: “The government guarantee burdens the State finances but is now valueless to the banks it was designed to assist” Just over a week ago there was a downgrade of senior unsecured Irish bank debt and I would suggest careful readers should read all the words in it. This followed the “not a penny more” rhetoric and a technical breach of the MoU by Lenihan. This has made the banks’ position even more pressured. However nobody should underestimate the importance to the banking system in Ireland of the government guarantee on deposits, it is far from valueless – if you want the Irish banks to continue to function. I have argued for a wind down of these banks but anyone thinking of doing so must be very very careful about having a convincing story for the depositors with respect to transfer to new institutions and that any scheme of compensation is watertight. Deposits are very different to bonds in nature. Get the ducks in a row. Thanks Kevin, and thank you Colm! You say: Bluntly, the markets see a rising risk of default. When the next Finance Minister goes to Brussels to re-negotiate the terms of the IMF/EU deal, there is a more powerful argument than the unfairness of the burden on Irish tax-payers. I think, we had plenty of leverage for negotiations all the way, but deliberately or not, failed or chose not to utilize it. – Astonishing isn’t it? – The next finance minister…. Yeah well…. I am not too enthusiastic on the rather poor options available, and as it stands, the Irish electorate reminds me of turkeys voting for christmas. I am not astonished though, the Lisbon referendum comes to mind. Have a nice Sunday. It is safe here on the coast in NW Ireland at the moment, no canvassers trying to wreck your brain with parrot like jabber. 😉 http://dl.dropbox.com/u/4914840/_DSC7450_fp_57x37.jpg Best wishes Georg The part in the beginning is to me the central part: ‘Not one of the weaknesses in the design of the European Central Bank and the Eurosystem over which it presides has been addressed. The principal weaknesses exposed over these last few years are the absence of centralised bank supervision and resolution, and the reliance on uncoordinated national-level fiscal support when banks fail. ‘ How does one those weaknesses? Banking regulations are laws. Laws are made by national legislatures. So if there is a weakness in the absence of centralised bank supervision then that weakness is probably going to be addressed by introducing centralised bank supervision. I.e. laws regarding banking should no longer be made by national legislatures. EU superstate here we come. Fiscal support to banks coming from national state. Suggestion is to have it from all states – EU to pay for it. EU has no funds for that -> EU wide taxes. EU superstate here we come. Due to the failure in Ireland it seems likely that EU wide legislation regarding banks will be introduced. So for me the interesting thing is what should that regulation be? One easy way would be to model the EU banking regulation on some national regulation that did work. Which country would that be and how should that regulation be amended? Furthermore, that regulation should somehow be protected from behaviour such as this: http://www.thepost.ie/news-features/bowing-to-the-bankers-54486.html How can that be accomplished? Rather than doing like the US and introducing something to address the issue before the issue had been clarified (legislation was introduced before the investigation was concluded…..) the EU way (slow as it might seem to be) is more likely to do good. So for example: Should interest income be taxed on an EU level instead of a national level? Should bank profits be taxed on an EU level (probably at a higher CT level than Ireland)? @ grumpy The issue of deposits you raise is a very important one. Danske Bank’s Irish subsidiary National Irish Bank, this month reported a 28% rise in deposits in 2010. I have been contacted by Irish depositors worried about their savings; what happens if through downgrades and fright most of the overseas deposits are withdrawn from the domestic banks? @grumpy “nobody should underestimate the importance to the banking system in Ireland of the government guarantee on deposits, ” I would agree with you – if the guarantee were only on deposits. The extension of the guarantee has – in my view – and in my case – resulted in the departure of deposits. The logic is simple. The insistence on treating bondholders as – in BLens favourite phrase “parri passu” with depositors, has in fact ensured that in a crisis/colllapse situation the bondholders would get priority simply because they would have the resources to follow through legally. This would leave the small depositors completely exposed. Therefore they logically apply their only advantage – i.e get out before the crash – since they are not locked to any term. Rightly or wrongly you can’t blame people for seeking safety first. If the guarantee were so valuable why has there been a run on deposits? I am glad to see that someone with colms pedigree is now apparently supporting calls for scrapping this abomination. But let’s get legal backing via referendum or court challenge or both, so we cannot be accused of reneging. @MH “Danske Bank’s Irish subsidiary National Irish Bank, this month reported a 28% rise in deposits in 2010.” Most of your posts are worth reading but sometimes I think you are guilty of a strange contrarian logic. If deposits are moving from “guaranteed” institutions into “unguaranteed” ones, I would consider that the nature of the guarantee was the problem. You seems to be saying that the guarantee is helpng maintain the residual ones. Pardon me but you are not making sense. Colm, of course, is absolutely correct to lambast the EU’s Grand Panjandrums (and their some what unwilling IMF accomplices) for failing to resolve the EZ’s banking and financial crisis. But the political requirement to square more than one quarter of a billion core EZ citizens will, inevitably, outweigh the plight of 4 million on the periphery. And there are two crude political elements to this, in particular for Germany, to avoid revealing to core voters the extent they have been hood-winked in the design of the EZ. First, the peripherals must be seen to repent – and to repent painfully – for their previous fecklessness. Second, core EZ voters, again in particular in Germany, will need to be convinced that there is a strategic vision that will ensure a prosperous future and make the pain of any fiscal support for the EZ’s dodgy banking system – plus any burden-sharing with the peripherals – worth while. Germany is facing significant economic and demographic challenges, viz: http://www.nytimes.com/2011/02/05/business/global/05workers.html?pagewanted=2&_r=1&sq=Low%20German%20unemployment%20Judy%20Dempsey&st=cse&scp=2 Chancellor Merkel is building a ‘coalition of the willing’ to meet these challenges. Is Ireland willing to be part of the solution – or part of the problem? Ireland got greedy, gorged itself and became sluggish. The mood now is sullen, morose and defensive – with occasional flashes of self-pitying defiance. One needs to be nimble and fleet-footed if one wishes to play where the elephants dance. But do we realise what is now required? @Jesper Logic dictates that in a Europe explicitly built upon tax and regulatory competition at the explicit behest of its major corporations, lax banking regulation will emerge somewhere. The eurozone demands centralised bank regulation because a currency cannot survive if banking crises are to emerge and be dealt with locally, and this is as true with Ireland out of the euro as in it. I’m glad you’ve moved on from correcting perceived moral and intellectual defects in the Irish nation to addressing your real concern: aversion to the EU. @Paul Hunt It’s fairly incontrovertible that Ireland is in fact paying handsomely for the privilege of eurozone membership. @Adrian Kelleher, your condescending tone is quite refreshing 😀 If it was inevitable then nobody in Ireland is guilty of anything & best of all, if it was inevitable in Ireland it is also inevitable on an EU level so by your logic we’re all doomed. If someone broke your window, would you hold that person responsible or would you just say: ‘Well, the window would break sooner or later so no foul & off you go’? Irelands regulation was poor, therefore Ireland had a banking crisis. Current Irish governance is poor, deal with it. Railing at foreigners might feel good but won’t help much with the actual problem. @Paul Hunt Let’s not forget ‘the origin’ and the little matter of ‘dangerous capital flows’, from whence to where, and who monitors? Who counts (in both senses of the verb)?- Who controls? And in whose interests? http://www.irisheconomy.ie/index.php/2011/02/15/imbalances-in-the-euro-area/#comment-124629 @Jesper You regularly counsel foreigners not to blame foreigners for things, exhibiting a flair for logic of a sort that’s beyond my grasp. You’re correct in stating that we are all doomed if things go on as they are: that another crisis will eventually occur that will be terminal for the euro. Your broken window analogy is obtuse. Here’s some more direct logic: the taxpayer bears no moral or other responsibility to meet the obligations of private individuals and institutions. Let’s leave analogies and metaphors behind and deal plainly with the facts. The rest of your post mixes half-truths with strawman misrepresentation. Why don’t you make a fool out of me: find a single word I wrote that endorsed either regulation or governance here. In fact I have more than once outlined measures to improve governance and would endorse almost any reasonable measures regarding regulation. @AMcGrath On the deposits the over 100k guarantee lacks credibility and I agree entirely that it would have more credibility if the state were not trying to over the bonds also. The point I was trying to make is that the general guarantee allows some funds to stay on deposit. The value of the under 100K guarantee is that without it the deposit flight would be total. Some people for example would be forced through fiduciary duty to remove funds. That guarantee is the only thing keeping deposits at the Irish banks. This could be still all about the Euro. Major pressure will be exerted on it up to 2013. Portugal will be next for a bailout. The Germans will soon stop paying and Ireland and Portugal will default on the ECB. And the Euro depreciates. @grumpy I have to disagree – as I said in my response to Michael Hennigan comment reagrding the influx of deposits to Nationwide etc/ I believe that because the guarantee effectively makes bondholders superior to small depositirs. therefore the only rational behaviour for small depositors is to withdraw them to banks who do not have such explicit guarantees of seniors. The guarantee as MHs exa,ple shows is that the guarantee is doing excatly the opposite of what you suggest. If not what is the explanation for the flight of small deposits? @Adrian Kelleher, I agree with most of your posts, to some extent I even agree with me being chauvinist (it definitely has more than a grain of truth to it). Your reasoning about competing using regulation and tax-policies is true. However, I see the EU as a pact between nations and in my opinion Ireland competed so hard that it broke the pact. I will not accept a defense along the lines: If we wouldn’t have done it someone else would have. Ireland chose its path and is where it is due to its choice. The design flaw in the euro seems to have been that nobody expected the level of governance that has been displayed in Ireland and Greece. Irish politicians are railing against foreigners instead of focusing their efforts on what they could do and what they could do is improve governance. Governments in the EU have obligations towards their citizens in providing good governance. In my opinion they also have an obligation in not blaming other nations for not providing good governance for them. Irish governance failed, I do not see how blaming foreigners will do anything except provide an excuse (distraction) for not improving Irish governance. Jesper, your sermonizing is growing tiresome and doesn’t contribute anything to the discussion of what should be done about the problems we face. Changes in governance may help head off the next crisis. They won’t do anything about the current one. @AMcGrath Danske Bank A/S (trading as National Irish Bank) is authorised by the Danish FSA in Copenhagen. The Irish deposits are guaranteed by Denmark. Some savers are scared about leaving their savings in Irish banks despite a guarantee; the less jittery would likely join them if there was more uncertainty. @ Jesper I dont think anyway is trying, or has suggested, that all the blame lies with those “damn foreigners”. Quite the contrary, almost everyone believes that it was our own fault and mistakes which led us to where we are now. Most of us are honest enough to put our hands up to those mistakes and take the blame for them. However, nothing happens in a vaccuum anymore in our globalised world, particularly so within a monetary union such as the Eurozone, which is fast making strides to becoming a quasi-political union as well. To ignore the roles played by the European banks in the lead up to the crisis, the ECB and EU during the crisis, and how the likes of Germany and France want things to look after the crisis, is sadly missing an awful lot of the story. Some would say most of the story, in fact. While you claim that we Irish are too busy blaming foreigners, you seem devoid any ability to see the impact the bigger picture has had and is having on Ireland. @Jesper All the parties have some reform proposals. Labour’s are by far the most comprehensive, I believe. Also, some simple cartel-busting measures regarding traditional professions that have achieved guild status in the economy — medicine, law etc. — are part of the MoU with the IMF/EU. The carping at (specific) foreigners dates only from last October — the date when Sarkozy shouted down JC Trichet at the European Council meeting and tipped Ireland prematurely into the 5.8% ‘rescue’. I’m certain you’re aware that the IMF, elsewhere seen as a sort of demon, is an angel to this country by comparison. As the saying goes, with friends like these… The wording “once the market normalises” leaves a lot of wriggle room. And it’s only plans that need to be submitted by Feb 2011, not deeds. In his analysis of 14/12/10, Ronan Lyons came up with this conclusion: “repossession of 20,000 homes and their resale by banks for two-thirds of their loan value would mean balance sheet losses in the order of €1.3bn”. Even if it’s 100,000 homes and he’s out by a factor of 5, that’s still within Colm’s gap tolerance (as an actual balance sheet impact). Though clearly impossible in current market conditions, by 2012-2013 – as growth returns and repossession rates stabilise – it should be perfectly feasible to offload these mortgage books without derailing the EU/IMF deal. Markets will eventually look through to the recovery and switch back into greed mode. There was a short run on Danish banks recently when the Danes raised the prospect of ‘haircuts’. The deposit flight from Irish domestic banks has another angle. The willingness of multinational companies wishing to purchase property in Ireland to park funds in domestic banks pending the signing of a contract is an interesting question. If one considers that the sums involved could range from the tens of millions upwards, and the Irish banks’ knife edge cash position, well the risks have to be acknowledged. @AMcGrath There is a wide spectrum of views among “small” savers even to the point that a few don’t even understand what the fuss is about. There is a flow out of the Irish banks by depositors at the more jittery end of that spectrum. Last weekend’s downgrade publicity and the political rhetoric shifted quite a few more along into the jittery camp and off went the funds. If you think that the deposit guarantees are worthless as Colm implied (but I don’t think he meant, maybe he could clarify) then you might remove them. I can more or less guarantee that if Noonan renounces the guarantee covering deposits next weekend then there will be a bigger version of the Northern Rock scenes all around the country and the banks will implode. I don’t think there is any chance he will do that, for good reason. Iceland’s President forces 2nd referendum on bank bondholders REYKJAVIK (Reuters) – Iceland’s president today triggered a referendum on an updated plan to pay $5 billion to Britain and Netherlands for debts incurred from the financial crisis, creating new uncertainty over the island’s economic recovery. http://news.yahoo.com/s/nm/20110220/bs_nm/us_iceland @Toxic Avenger, I’m getting the impression that you’d like me to propose some easy solution. I don’t believe there is one & I’d be cautious about trusting anyone who says he has one. @Adrian, you’re right, there are reform proposals and there are many signs that indicate that what has been is in the process of being improved. Might as well do some more sermonising and say that until the proposals are implemented it might be good to monitor the ones with the power to implement them. @Eoin, yep, foreign banks aren’t wide eyed innocents. They went in, however, I’ve read the ODCE yearly report for 2010 and there was some mention of the Anglo financial statements in that report. I don’t know more than that, however, if there have been irregularities there then the bondholders (&shareholders) of Anglo might claim they were victims of fraud. As is, I don’t know. Openess about what happened is essential for trust. Predicting the future is a fools game so I might as well give it a go: I believe there will be restructuring of Irish debt after Ireland has made an effort to try to pay it back. The effort will include unpleasant things like cutting state spending and raising taxes. Whoever is in charge in Ireland will have to make difficult choices & unless vested interests are being tackled a lot of the cost will fall on the average citizen. Openess will benefit the citizen, secrecy will benefit vested interests (including bondholders). @Toxic Avenger Complaints about foreign sermonising and Irish whinging are useless discussion stoppers. We wouldn’t have handled the crisis so disastrously after it arose if our governance wasn’t so bad. Fixing it will help us to solve the current problem as much as future ones. A new government is an important step but if it carries on the crony led policy making, cover ups and misinformation of its predecessor a solution will be farther away. As regards the article, might we be wrong in assuming that bank debt is Europe’s primary problem? It’s not Greece’s and it’s not Portugal’s (AFAIK). Spain has a problem but if it balances its national books then with support from the ECB it should be ok. If Spain is ok the banks in the rest of Europe are ok so long as their sovereigns are.The structural problems of the single currency can be solved over time. So it looks like the French and Germans are solving Europe’s difficulties. They are just not solving Ireland’s. Perhaps we should take the hint and realise that the only people who have a vital interest in a quick solution to our problems are…er…us. For the moment they are happy to leave us twisting slowly, slowly in the wind. After all our unemployment rate is still only two thirds of Spain’s or Latvia’s…. @ AMcGrath The absolutely only reason that any deposits remain in Irish banks is the guarantee. Bondholders ARE pari passu with depositors, that has nothing to do with the guarantee. Depositors don’t actually care or know whether they are paris passu with bondholders, they don’t care of know whether any particular bank is not going to go belly up in the morning. What many still believe is that if their bank went belly up or even if the State went belly up, that the 100K guarantee is probably fairly safe, mind you they are getting less confident even on that. Withdrawing the guarantee on bondholders would have minimal impact on depositors though in theory they should get more nervous as it would hasten the day when their bank would go bust and they would be faced with some uncertainty as to just how that 100k guarantee would kick in. What Colm is saying is that the ultimate saftey net of a state guarantee is no longer working to stem the liquidity crisis which amounts now to over 150bn. But he is not at all implying that ergo we should remove the guarantee. What is happening is that wholedsale agents and to a lesser extent retail agents no longer think the State guarantee is sufficient to entice them to place funds with Irish banks. The only outfit still prepared to accept the State guarantee is the ECB. But notice that all that is happening is that the State guarantee has transferred from market agents to the ECB, as John McHale points out in another thread. @jesper: What gives you that impression? I don’t believe there are any easy solutions to the current problems. That is why is so important that we discuss what is to be done now rather than what we should have done five ( or even two and a bit ) years ago. When the ship has hit an iceberg, deciding whether the captain or the navigator is to blame should not be the highest priority. It is you, in fact, that is pushing for “easy solutions”, but from the other side of the debate, since you seem to suggest that, having decided that Ireland is to blame for it’s own predicament , Europe can wash it’s hands and walk away. This is no more realistic than the belief of some Irish people who think that we can solve our problems by unilaterally defaulting. Like it or not the Irish problem is also a problem for Europe, and in particular, for the ECB. It would seem to me that it would therefore make sense for our partners to engage constructively with us in the search for solutions. The apportioning of blame, whilst immensely enjoyable for the righteous, is an irrelevance in these terms. I @ Oliver: Re:governance “Fixing it will help us to solve the current problem as much as future ones”. How? Will it change it the maths in some way? @Toxic Avenger I completely agree with you. But… In a week Ireland will have a new government .This government will have to negotiate with all its partners (the IMF, the ECB, the commission_even the dreaded Sarkozy and Merkel_etc.).The objectives of that negotiation and the arguments to be used in the negotiation should be the most important part of each party’s program (it might impact the life of every Irishman for years to come). From what I read I have no clue about what the new government will try to do and I am afraid the electorate does not know any more than I do .It does not seem very democratic. @MH I obviously should make myself clearer. It seems to me obvious that the extension of the guarantee (ELG) to explicitly include senior bondholders has spooked the small depositor – who now knows that in the event of a bank crash the seniors will definitely be honoured – which would mean that far from being Parri passu the small depositor would be trampled. The removal of the ELG has no effect on retail deposits under €100,000 which does NOT apply to these. Check the NTMA website: http://www.ntma.ie/Publications/2009/FAQELGscheme.pdf These deposits are covered under the Deposit Guarantee Scheme (DGS). I do NOT advocate rescinding of the DGS. @grumpy I am not saying that “the deposit guarantees are worthless”. The DGS of course should remain. I am saying that the ELG which applies to the larger deposits and Seniors is having exactly an opposite effect to what whas intended, and is therefore not just worthless but insane. @BWII “The absolutely only reason that any deposits remain in Irish banks is the guarantee.” if you meant the DGS then I would agree – but you seem to believe that the ELG is reassuring deposit holders when quite clearly the depositors are quietly departing for Rabo, Nationwide, Northern Rock and elsewhere. @Eoin It is only not a solvency crisis because the government has guaranteed the banks. On the contrary, everyone knows what to do with a failed or failing bank. You take it into administration and resolve it. The FDIC announces the latest done deals every friday. What nobody know how to do is to do these things without an FDIC… the search for a “costless to Europe” solution is turning out to be very costly to Europe… @Michael Hennigan “what happens if through downgrades and fright most of the overseas deposits are withdrawn from the domestic banks?” Well, it becomes like the bonds (as Seamus Coffey has discovered). We cease to be systemic… I presume the reason that AmargenDen bank didn’t cause panic in the streets is because it was local savers who lost out. I again go back to Reinhart and Rogoff – domestic default is far more common than default on international obligations. @AMcGrath Unfortunately, I would say that the only reason there are any deposits in the Irish banking system is ECB liquidity/funding support. I know most depositors don’t think of it this way, but this support is what is stopping the “deposits are unsafe” meme from getting started. The guarantees are integral to the apparent deal whereby the Irish State agrees to absorb the ultimate losses and the ECB provides the liquidity that prevents a (rapid) collapse of the banking system. The loose talk about the guarantee under the current circumstances , often with no recognition that the original blanket guarantee has expired, and from people who should know better, is really quite shocking. I can’t believe that Colm is guilty here, but I wish he would be more explicit that nothing should be done that would threaten the current liquidity support, for his prestige is giving cover to those with much wilder ideas and much weaker understanding. I also wish that more of our macro and international finance experts would weigh in — if not now, when? Of course, it is quite legitimate to consider how part of the burden of the losses might be shifted to investors and foreign taxpayers based on fairness or effectiveness arguments. And indeed I would agree that this would be in line with broader European interests. Unfortunately, it doesn’t appear that such burden shifting will fly, at least for now, so I think it is better to focus energies on potentially mutually advantageous actions that have a better chance of getting traction: interest rate reductions, maturity extensions, shifting from market discipline (the post-2013 threats of burden sharing) to regulatory discipline (embracing fiscal rules and institutions) and debt buybacks to achieve some element of debt reduction. @AMcGrath “It seems to me obvious that the extension of the guarantee (ELG) to explicitly include senior bondholders has spooked the small depositor” I don’t believe this to be the case. The ELG was designed for bond issuance. It is a series of windows in which guaranteed bonds can be issued for up to five years duration. If the ELG was not renewed at the next window (March? or June?), the bonds issued under it would remain guaranteed for their duration. Likewise any term deposit accounts of greater than three months duration (IIRC). Why has the ELG failed? Some possible answers: 1. The incredibility of it has become clear to even the most obtuse optimists. 2. The fiscal situation has not improved. 3. Paying back unsecured bondholders shows an air of unreality still pervades. 4. The IMF/EU ‘bailout’ is laughable. 5. As some of us said at the time, the last EU bank stress test was ridiculous. AIB, having passed it, is now practically nationalised. 6. The EU/ECB are coming up with the wrong solutions to the wrong problems. 7. As grumpy says, Lenny has already reneged on the EU/IMF deal. 8. Ratings downgrades… in case you hadn’t noticed, the deposit ratings of the Irish banks are hovering over the “risk of not being repaid” levels. Supposing you are managing someone else’s money (2/3’s of deposits in Ireland were rate tart deposits, I reckon (yes, it’s made up number)), what do you do? Bottom line: there wouldn’t be a (new) red cent deposited with Irish banks since Sept ’08 except for State guarantees and that still holds. For a while the State guarantee satisfied most. Then the wholesale punters took fright. Now even the retail punters don’t really trust the State guarantee though I think many, like myself, think the first 100k reasonably safe. We are left that only the ECB are willing lenders to our banks. At first they accepted collataral security but that appears to be exhausted and all further lending from that source requires a State guarantee. Any argument that all this will be solved by removing some or all of the State guarantee is bonkers. @BWII and others “We are left that only the ECB are willing lenders to our banks.” Um, no. We’ve not even left with them. We’re lending to ourselves at this stage… Hogan, it is frustrating that there are economists currently saying that bonds are “debts of the banks”, and are therefore fundamentally different to deposits. I think there is a strong case for discriminating between them but there seems to be some confusion in the discussion. It might btw be the case that the ECB are back lending in respect of the UK assets instead of the CBI – but at the overnight rate. Dunno. Anyway its only 16bn or so. OK sport’s fans, the BOI lost about 45% of its customer deposits from 12/31/09 to 12/31/10. This is the “strong” Irish bank. I would be willing to bet that the trend is still outward. Game, set, match. @ grumpy didn’t you see the story in the IT yesterday about the o/n borrowings? Related to Anglo/IRNW deposit sale apparently. @ Jake Watts I actually don’t think thats right. As Hogan (i think) suggested, i think a lot of the figures for BOI were RoI only (they said the 50bn deposit figures excluded UK post office figs for instance), so i don’t think the 50bn is their current depopsit figure. Note: *I think @John McHale I’m afraid “apparent deals” are way beyond my comprehension. I was suggesting that the ongoing flight of deposits – and here I am thinking mainly of those < 100k – are at least partly caused by the perception that senior bondholders are of higher priority in ELG guaranteed institutions. I’m afraid that I may be one of “those with much wilder ideas and much weaker understanding” you refer to, but I consider the ELG to be in some senses a worse mistake than the original “blanket” (CIFS) guarantee, in that it was implemented in cold blood so to speak. Although the blanket nature of the original guarantee was unforgiveable, there was a degree of panic which mitigates the circumstances. The Deposit Guarantee Scheme (DGS) for deposits up to 100K was and remains absolutely correct and should remain. This if it had not been compromised by the imposition of the ELG would be enough to reassure small depositors – since on it’s own it has some chance of being affordable. If the ELG, and the impression that it is incapable of being honoured, is not the cause of deposit flights to other institutions which are not covered under ELG, then what is? @BWII “Now even the retail punters don’t really trust the State guarantee though I think many, like myself, think the first 100k reasonably safe” I don’t follow this logic – are you suggesting that the DGS which covers the first 100K has some priority over the ELG? My feeling is that it will be exactly the opposite. The seniors are issued ceriificates guaranteeing their funds which they will not hesitate to take to the courts as evidence. What are the chances of a small depositor in such an event? @all Breaking newz in Hamburg CDU gain 16% of the vote – equivalent to FF polls – no correlation intended – but this places Dr Merkel under severe local pressure as she’s on way to losing her the upper house – and 6/7 more regionals to follow … SPD on way up – Grand Coaliton would assist EU at the mo imho … No more Deauvilles and Tangos with Nicolas …. @hoganmahew Sound summary @John McHale Where are they (the other macro-specialists) ?- I’ve been asking for many moons …. Other than a tiny few – public response of the posse of professors [of all disciplines] in Irish HEIs to this banking crisis has been abysmal – truly abysmal @Dominique J-R ‘… I am afraid the electorate does not know any more than I do.’ At last, a FACT. Well done (-; Any truth in the rumour that the Bin Ally property affair could result in a snap election in France? EU could do with a return of Dominique S-K to real European affairs imho. @Eoin “Last week Anglo and Irish Nationwide could only use them as collateral for, at most, overnight loans as they have to be ready to be sold within weeks and possibly days.” “A spokesman for Anglo said that the bank didn’t comment on “market and financial operations”. Nationwide had no comment. The Central Bank said it could not comment, as it was a matter for the ECB. Frankfurt does not comment on individual banks borrowing from Frankfurt.” Call me a cynic if you like but this is a story. If there s a sale in weeks it is going to cost millions in extra interest. Someone wants them before Wednesday?! @ David O’Donnell The London Independent reports: “Mr Scholz defeated his unpopular conservative opponent Christoph Ahlhaus by advocating rightwing pro- business policies which some critics argued were ‘more conservative’ than the conservatives.” Maybe you should have a word with your mate Eamon!!! The ECB is prepared to put lots of money on deposit with Irish banks as it believes it will get its money back, and it is a way to defer “proper” resolution that would see losses imposed up the creditor chain. The ECB assume that the Irish government will make up any shortfall between bank assets and liabilities. This has cost the Irish taxpayer €46bn so far, and a commitment to pay a further €35bn has been made should this be needed. If more than that is needed, my guess is the taxpayer will pay that too. By dragging out and deferring proper bank resolution, much of the senior debt has already matured. (Last year the value of debt securities in BoI dropped by about 50% from €26bn to €12bn) If €81bn is paid to the banks to cover asset losses, that is equivalent to 6 full years of income tax revenues, or 8 full years of VAT revenues (using projected 2011 figures). These are stunningly high figures – the income tax and USC for nearly 2m workers for six years used to pay back bank creditors instead of for the public good. And this assumes NAMA breaks even. This could have been avoided with a single, simple clause added to the bank guarantee – an upper bound on exposure (say €10bn) as was included in bank guarantees given by some other countries. The constant portrayal of a bank failure being equivalent to the sky falling, rioters on the streets and everything looking like a Mad Max landscape before the end of the month is fantasy. Last Friday eight banks failed in the USA. The previous week there were nine. No Mad Max scenes anywhere to be found. Done right, bank resolution really isn’t that hard – find/nominate a buyer bank to take over the insured deposits and equivalent amount of good assets, allocate the losses up the creditor chain and move on to next week’s batch of failures. @ Grumpy someone wants them before February 28th i would suggest… @Michael Hennigan I’m on record on this blog and in real life, since last day of this Dail, as supporting ALL who challenge present Irish banking policy – inclusive of Sinn Fein, Joe Higgins, and all left or pragmatic right wing independents who are ‘SOUND on the Banking Question’. SOUND ON THE BANKING QUESTION is my primary criterion. We are beyond ideology here – heck, I’m supporting Paul Sommerville with Ghensis C. G. Khan on the one hand and Honest Joe Higgins on the other – and 40 shades on realistic heterodoxy in between …. Pro Biz from SPD in Germany is no surprise … there is no contradiction in European Social Democrats being pro-business – imho essential. As for Eamonn – hope he is elected in Galway West – if only to remind FF of how they have betrayed their original republican principles. Assuming a Credit Enhancement element to any book sales, hopefully the Irish authorities will be sensible enough to use a non-prefunded loss reserve. I know this is common in terms of structuring transactions, but it’s better not to make any assumptions on what the Irish apparatchik might attempt. In simple terms, let’s assume that a 100bn of trackers need to be spun off. In order to attract investors we need to put up 25bn ‘first loss’ with investors taking the other 75bn. If we fund this ‘first loss’ we’ll immediately borrow 25bn at c6%, costing the taxpayer 1.5bn p.a. in interest. The alternative is to have a 25bn worth of junior swap. The Irish state as swap counterparty won’t work due to it’s poor credit rating. However the European bail-out fund is AAA-rated. It should be relatively easy to ring-fence this credit facility to the benefit of any transaction. We state would then only have to borrow from this facility as losses emerge. Good stuff from McManus in the IT today. Strikes the right middle ground – negotiate where we clearly have actual rather than perceived flexibility http://www.irishtimes.com/newspaper/finance/2011/0221/1224290426008.html @Bond Eoin Bond Distinction between the ‘perceptual and the real’! You bin playin around in The Matrix over the weekend? (-; I had to give the IMF a tutorial on this some time back …. there is (some) hope … A quick reading of this excellent article about the PAST led me to the conclusions that the excellent writer believes that the bank guarantee ( apart from from being unfair) was a mistake. And needs to be undone. So, (perhap it’s my background as a manager in the real, international, business world), and in the context of European and global politics economics and politics today, here are four simple qustions about the FUTURE. (Reminder: The questions are about undoing the unfair mistake.) How? By whom? When? What criteria do we use to decide whether we ( see the Whom? question) are succeeding or failing? @Mr. Bond, Well spotted. From Mr. McManus’s conclusion: “As things stand, we have not yet even got the other parties to the deal to accept that the interest rate and burden sharing are even up for negotiation. There is little to lose by hammering away on these fronts over the next few weeks as the negotiations on the new framework for rescuing member states are concluded. But in the end it may prove more fruitful to try to exploit the wriggle room in the existing agreement.” I know that, between the dissolution of the Dail and the election of a new government, the outgoing government is fully empowered to act, but, given the doubt the MoF has recently cast, for obvious factional advantage, on the government’s mandate during this interregnum, what credibility do those who are now representing Ireland have in the corridors of power while the EU’s Grand Panjandrums are concocting significiant measures in advance of the EU summit at the end of next month? @Richard F I’ll have a stab at answering your questions, but I can’t resist a little lecture first. Whenever I see a message like yours I wonder if it’s a real person or some sort of anarchic subversive. Take a read of your own post and see if you can raise a laugh at its self-parody. You’re correct of course if you’re of the opinion that we can do something about the FUTURE whereas the PAST is fixed. If you think that paying attention to the PAST is of no use, however, and furthermore regard your experiences of the ontologically concrete trans-jurisdictional commercial milieu as reinforcing this belief, then you are missing out on the fact that we are where we are (the PRESENT as it’s generally known) precisely because of a studied ignorance of the PAST, even very recent PAST, among those whose transition through the materially definite cross-border mercantile environment has elevated them to positions of prominence. We live in a world of science. The crackpot ideologies of the past have shattered people’s faith in argumentation or even sound judgement, but in the social sciences only small elements of any problem are amenable to scientific analysis. So we’re trapped in a world of numbers but, unlike physics or chemistry, the human sciences are ultimately not reducible in this way. Economists and the like end up with a vast number of precise but fragmentary elements that could contribute to understanding the problem but don’t constitute an understanding themselves. What’s missing is a unifying narrative. Nor is the collection of fragments necessarily random or representative — in fact those elements not amenable to scientific study properly speaking are nearly certain to conceal systematic biases. Maybe the scientific fragments are like a jigsaw of an innocuous grassy field with only a few pieces missing but those missing pieces show landmines. Trying to make sense of the past involves trying to construct a story, then. Everybody has a different version, nothing is ever settled and it can seem like a complete waste of time. But if the attempt to construct a unifying narrative is abandoned, the world of scientific fragments flies apart and you end up with clever people making decisions that are obviously disastrous because their discipline — politics, economics or whatever — has become mired in expertise, that’s to say because expertise has become the only allowable language in some sphere where human knowledge simply does not permit expertise to exist as a draughtsman or a micribiologist or a lawyer would understand the term. Imperfect solutions amenable to analysis become preferred to better ones that aren’t, attractive points of detail seize the mind even though they may be dominated by numerically intractable features requiring judgement, and so on. So I’d suggest giving the PAST another chance. To try to answer your questions: How? By bankrupting large parts of the finance industry, to give the well-managed portions better prospects in future and to compensate for the money the industry can siphon invisibly from public funds via implicit guarantees during good times. Also by strengthening shareholder rights, e.g. by restrictions on management employing corporate funds to use PR to bamboozle investors or by fixing the system of non-executive directorships that simply does not work. By whom? This is a political question. When banks in a country like Ireland exploit the system and are permitted to do so by government, they complicate the answer. Still, a single market and currency cannot survive if competition between its elements is to be central but if crashes are still to be dealt with locally. Those elements suffering crashes will simply point out that those countries who participate but are not monetarily bound, i.e. Norway, Switzerland, Denmark, Sweden etc., enjoy the freedom to correct these disasters that countries like Ireland don’t. The short answer to your question is the EU. I’m aware this answer won’t please a lot of people and the claim it’s self-serving has obvious appeal. I believe the answer is the same whoever works it out, though. When? Now. What criteria are used to evaluate success? Believe it or not, slimming down the financial sector is a useful end in itself if Paul Volcker is to be believed. Employment levels should be the principal benchmark. Unemployment and the financial disaster don’t exist in some sort of moral framework: those suffering bear no responsibility for bringing the disaster down on people’s heads. In the end, the risk is that their anger at this will become unmanageable. @all Ming the Merciless Flanagan & The TurfCutters’ Ball make the New York Times “It depends what they are willing to offer the people of this country and the people of my constituency but I won’t look for something that will temporarily benefit the people of Roscommon and South Leitrim yet ultimately hang them.” Ming the Realist While Ireland’s creditors at the IMF and EU will be keen to avoid the government hanging by a thread again … ‘NYT’ … hmmmm thought we were already well hung up with a sturdy bank_rolled_hempen rope …. http://www.nytimes.com/reuters/2011/02/21/world/europe/international-us-ireland-politics-independents.html?ref=global-home @Dominique Jean Raymond http://www.nytimes.com/2011/02/17/world/europe/17briefs-France.html?ref=europe Perusing … Adrian Kelleher. Thanks for, I’m quoting you, “the lecture”. ( Although I’m not an academic I thought you were going to end up your”narratives” with paradigms, Popper and Kuhn. Let me just sum up my position on all that by saying I accept that the PAST strongly underlies the FUTURE but, as both a human actor and a manager, I most certainly do not accept that the PAST CAUSES the FUTURE. In a global sense, I find it very difficult to disagree with your your point ( I paraphrase) about bankrupting large portions of the financial sector to compensate for its siphoning of public funds and implicit and explicit guarantees. Creative Destruction should be central to real Capitalism and the World will one day find a way to outlaw Immoral hazard. In the meantime, what I was really looking for was how, who, when and how to measure Colm McCarthy’s recommended rectification and undoing of the unfair mistake that was the bank guarantee. And this in the context of the “Europeanisation” of the current “wherewithal” challenges faced by Ireland, Europe, “Europe” and ultimately, I suppose, the World. I see the Chinese are more than holding their own in the G20 “imbalances” ( and currency) negotiations, even though they’re being chaired by that European world leader, Monsieur Sarkozy. Maybe we should pull him back from the world stage to concentrate on European and “European” “wherewithal” issues before both of the Europes lose all prospect of ever being invited to occupy a possible third chair at the G2 table? Meanwhile, do we have anything to negotiate with in “Europe” now that we’re bust for the foreseeable FUTURE? What, How, When etc. @Richard Fedigan Technically, it’s very simple: relflate and inflate away the debt overhang, return consumer sentiment to something resembling normal and restore the economy to a higher employment level. The problem currently is that large parts of Europe are in a depression, i.e. a bad but potentially stable new equilibrium as was the case in the Great Depression. Measures to rein in rampant credit expansion (and Merkel and Sarkozy are correct that banking regulations there prevent blowouts like happened in Ireland and the USA) would help stave off future disasters. The major issue with reflation is that it’s illegal. The EU constitution would need to be changed to permit it to happen, and the political leadership in Germany and France are trying to pretend it’s all somebody else’s problem. Certainly Germany and probably France are very wrong. They’re endangering the union, and nothing less, a policy that’s bad for everyone but dangerous for Germany which has neither the diplomatic position nor tradition of France, Britain etc. (being basically historic compromises between the great powers in any case, the small nations would be in much the same position as they always were). So the solution is simply to try and get the political leadership in Germany and France to see reason. Many opinion formers in those countries see what needs to be done, but then that’s always been the case since Monnet and Schumann. I’ve posted over the last 4-5 days to the effect that I believe Ireland has more than is obvious to negotiate with, and should also be bold in offering things like the 12.5% rate if this might form part of a broader package. I’m not sure the politicians have the courage or the vision to negotiate hard, though, although it would be best if they did. The alternative is to risk an ungovernable political crisis sometime in the medium term with populists offering the electorate the prospect of simply giving the nation’s creditors the two fingers, possibly blowing the EU open in the process. The best deal suggested so far involves stretching the debt disaster over 3 or 4 decades and for many politicians, problems more than 5 years in the future simply don’t exist. @Adrian Kelleher “Technically, it’s very simple: relflate and inflate away the debt overhang, return consumer sentiment to something resembling normal and restore the economy to a higher employment level. The problem currently is that large parts of Europe are in a depression, i.e. a bad but potentially stable new equilibrium as was the case in the Great Depression. Measures to rein in rampant credit expansion (and Merkel and Sarkozy are correct that banking regulations there prevent blowouts like happened in Ireland and the USA) would help stave off future disasters. The major issue with reflation is that it’s illegal. ” My major problem with reflation is that it is impoverishing. The ‘eighties were a result of the ‘seventies and the inability of incomes to grow at an inflation beating rate. My problem with your argument is twofold: 1. Most of Europe is not in a depression. The reflation/inflation is not required in large parts of the continent. 2. What do you consider normal consumer sentiment? The debt fuelled excesses of the past? How do you restore consumer sentiment without restoring credit? Or without paying for past credit? How do you inflate without destroying competitiveness? Or without damaging the currency (leading to import price inflation – see the UK for example)? How do you stop capital exits in an inflation? I don’t think the solution is simple at all. Aside from the fact that, like an expansionary contraction, it is has not really worked in the past, short of a large war… @hoganmayhew On 1. Hence the concerns about asymmetric shocks as expressed prior to the launch of the euro — the EU is not culturally homogeneous like the USA, so imbalances won’t even out. On 2. Whatever normal consumer sentiment might be, it’s not economic terror of the sort this country is suffering and faces for the long term. Obviously a risk such a policy could be exploited or simply over-done. This isn’t like the 70s. That was a fundamental readjustment to a stepwise increase in the price of a fundamental input, i.e. oil, combined with the end of the postwar reconstruction boom. Now, the overhang of debt threatens to destroy the lives of millions of people, generally young and who have by and large contributed nothing to creating their own predicament. Stagflation was inappropriate to an inescapable downturn in the 73-83 period, and poor industrial relations aggravated the problems. In the end, Keynesianism is just a tool and like any tool it can be abused. Today’s circumstances demand Keynsian reflation however. The problems you raise are real it’s just that Keynes felt the alternatives to be worse, an opinion I share. Well, Keynes lived in the age of the gold standard. Repegging paper money to gold was a reflation measure which could be controlled. We live in an age of fiat currencies, all competing for advantage with each other and somewhat at the whim of capital flows. It is a fundamental difference that much diminishes the scope of keynsian reflation. We are not in the seventies yet because we have not tried to reflate yet. And there is also the problem that most of Europe doesn’t require reflation… try selling it in Austria, the Netherlands, Belgium, Poland (part of ERM II), Estonia, never mind France or Germany, even Italy and see where you get. Gold standard or fiat money, it’s still a matter of issuing more currency. Capital flows were possible in the 30s also as well – in fact sustained currency outflows would see a country simply run out of gold, a rather more concrete problem. It was acknowledged earlier that much of Europe doesn’t require reflation, although Belgium and Italy would benefit from government debt reduction. The only alternatives are letting Spain, Ireland and co stew, and fiscal transfers. I would say simply that anyone who thinks you can run a currency on the basis of automatic budget rules and inflation targetting alone, as appears to be the Merkel plan, is blind to all evidence. Add in the susceptibility to asymmetric shocks and the fact that the 90s “Maastricht convergence criteria” simply didn’t work (and Ireland and Spain adhered to the rules, though late-entrant Greece did not) and you have a recipe for disaster. The disaster has actually happened already so it doesn’t require great foresight to forecast it, but I do remember concerns framed in the terms of Mundell’s theory of optimal currency areas being voiced prior to the euro’s launch. Mundell’s theory tells us we shouldn’t be surprised no simple solution exists to asymmetric shocks to a multilingual currency block. Obviously Keynsian measures would result in inflation; futile stagflation as with the 70s to try and devalue wage rises on the fly is very different from inflation to correct a disastrously bloated debt mountain, however, a difference that can hardly be denied. While reflation of the sort Ireland might carry out on its own would be unfair, moderate measures across the eurozone would be justifiable as solving a political emergency. It can’t be forgotten that the current situation is in no way just either — quite the opposite, in fact wealth has spent the last decade sloshing around at random with returns on capital being negative in many cases, rewards for work being outweighed for long periods by speculative property gains and now mass unemployment striking a portion of the population that is basically random. Of course Germans may argue they’re random foreigners. The “German paymaster” is a simplification but Germany certainly has the just power to withhold agreement. It is my sincere opinion that that would be a disaster for Germany. The chances of the euro surviving the decade are very slim on the current path, and any sensible country would get out at the earliest opportunity even if its economy were not in trouble. @Adrian Kelleher “I would say simply that anyone who thinks you can run a currency on the basis of automatic budget rules and inflation targetting alone, as appears to be the Merkel plan, is blind to all evidence. ” No argument from me there. Herr Weber (as evidenced by the FT article that Mr. Lane links to on another thread) repeats the same tired old formula of oversight without responsibility. Ireland was model in meeting the Maastrict criteria up until the bubble collapsed in disorderly fashion. More than can be said for France or Germany to whom the rules don’t apply… @Adrian Kelleher I believe this thread is about the viability of the EU/ECB/IMF bailout and Colm McCarthy’s thesis that the bank guarantee that put the Irish State on the hook was both unfair and a mistake. Colm suggests it needs to be “undone” and I asked simply how, by whom, when and how we would know whether we are succeeding or failing ( while we’re undoing it!). There seems to be consensus that this “undoing” can only take place in the context of negotiations at European level ( with IMF involvement. So, Adrian, succinctly, in these negotiations, what would be your sta ( “submit” gremlins!)…….starting position ( i.e. a SHORT exposition of what you consider the strongest the Irish bargaining position to be) and what would you realistically expect to come away with from the negotiations? Note: We can anticipate that the people we’re negotiating with ( particularly German politicians and bankers, who are paying for “Europe”, will not be spending much time on the relative, historic strengths of French and German dilomacy!). @all Next ‘Dear Leader’ here: Be gentle … http://www.tv3.ie/shows.php?request=tonightwithvincentbrowne&tv3_preview=&video=32768 @Richard F I’m still labouring away at a reply. I’ll post one sometime today. @Adrian Kelleher Thank you? Adrian. I’ve switched over to John McHale’s “Stirring it” thread where, guess what?, the question is still the same ( and apparently the FT, Irish Times’ leader writer and Dan O’Brien all agree) so your “labouring away” won’t go to waste. Comments are closed.