Patrick Honohan on Prime Time

Governor Honohan gave a substantial interview to Richard Crowley on Prime Time last night (available here).   The interview covered many of the economic and banking topics debated on this blog in recent weeks and months.   If you didn’t get a chance to see it live, it is essential viewing.   The interview is preceded by a report by Donogh Diamond and followed by a panel discussion with Cliff Taylor and Stephen Collins.   The interview itself starts at minute 8:20 and ends at 27:35.

46 replies on “Patrick Honohan on Prime Time”

His comments about the saving of Anglo benefitting all of Europe, and that this needed to be understood and recognised in dealing with Ireland now, were interesting to say the least. Is he about to tell the ECB that we need some reciprocity?

These are some of the screen headlines that I see
The initial 10bn euros earmarked for the banks may not be enough, though he didn’t place any “credence” in an estimate that the banks may need as much as 50bn { NSN LHEKGA6TTDS3 }

@Bond, Eoin Bond.

Spot on – but why didn’t he force the Lehmans senario the first time round?

Was he pushed into the background by a government that knew it had lost control?

They all rant on about contagion but give no share in the fact that the Irish taxpayer is ‘finger in the dyke’ while getting it’s head kicked in by those who’s banks we are trying to save along with our own.

I just don’t believe there was any serious ‘negotiation’ done at all. It apperars to me the ECB presented a paper entitled ‘Here is how we do this’ and everyone went along with it without actually addressing the facts at the time and the consequences over the next five/ten years.

Our european partners are just short term hoping to get away with it until they can figure how to sort themselves out.

As long as ‘social cohesion’ is maintained – keep going!

Good luck to the next team – they couldn’t do any worse than the last.

My comment:

Elites Utd. (of whatever hue) 1: Irish Citizen + Taxpayer Utd. 0.

Taxpayers, now who they would be? Oh yes, the dupes that will actually have to pay. Bondholders, now who would they be? Oh yes, those who must be ‘serviced’ or else they would never lend to Irl again.

Taxpayers were mentioned thrice – biblical? Be very careful for what you wish. When, not if, the Irish taxpayers and consumer citizens of this state legally withhold their taxes (by working less and consuming less). What do the non-citizen elites do then?

“What do you do when you are about to lose the debate?” You start cheating!” [Karl Denninger]


Mr Honohan is a man under pressure that much is obvious. Default is not an option for any part of Irish society was stated with more emotion than would indicate confidence in what he was saying. I would be extremely surprised if the September shoe dropping was the last such incident and poor Mr Honohan is steeling himself for more bad but not entirely unexpected results after the “stress” tests. In the fourth year of this debacle I see no willingness to deal with the harsh reality beyond going to Frankfurt cap in hand and as a result digging the hole deeper. The only solution is receivership for the banks, sovereign default for the nation. An up front offer of 33.33% for funds the sovereign backstopped and full repayment of what we owe ECB and IMF. An immediate sell off of all bank assets with what is realized being applied as a deduction to our 33.33% contribution. Enda is off in a few days to kiss Angela’s ring with the plan being as he does so Irish debt will vaporize and drift up to heaven as in a scene in a Wagnerian opera. Jonathan Swift, George Orwell or Franz Kafka would be well equipped to comment on what is now transpiring in Ireland.

This interview was a missed opportunity to ask why the ECB have a no bondholder left behind policy; what the ECB response would likely be should €15bn in unguaranteed seniors be hit; whether he believes the ECB are acting outside their remit in forcing taxpayers to assume private debts; whether he believes the ECB position to be fair on Irish taxpayers; why the markets will fund Ireland in H2 2012 if they won’t now; and whether he believes the debt servicing load will be sustainable for the next ten years without a significant restructuring/debt writedown.

The reply to the one question on default was

“Starting from here, this is not an option which is attractive at all for any part of Irish society”

Given the way it was said, it almost sounded like a threat.

“Starting from here, this is not an option which is attractive at all for any part of Irish society”

Ie. “starting from” the intention to gradually eliminate the structural deficit and having insolvent banks at the same time.

I thought he looked a lot less mellowed-out and hand-wavey about things like property valuations than he did last Autumn on VB.

For a man described in the introduction as straight talking he was circumspect in many of his answers – perhaps because he was burnt once or twice previously for being too open. Especially on the question of why Anglo was included in the guarantee, I felt his answer “if what we know now was known then ..maybe things would have been done differently..”, only leads on to question – yet again – why a guarantee wasn’t put in place which would have automatically invalidated the cover for any institution which was found subsequently to be less than upfront about their material status. All insurance contracts include such a clause and to overlook it has always semed to me to be at least imprudent, and at worst criminal.

Its time we got rid of Honahan, blog here:

“Wait for it, Honahan was Our Lord Cardigan, who led the negotiations that gave us our death rate of 5.8%. Honahan is the guy telling us the Russian guns will be fine tuned not to annihilate our economy, ………”

@all barby army

England 200 for 2; vs Ireland; 33 overs. Tuff but manageable (-;

@ AMcGrath

“All insurance contracts include such a clause and to overlook it has always seemed to me to be at least imprudent, and at worst criminal.”

Knowing what we know now (so far) I’d be very much inclined to lean towards the latter.

There surely is a strong case to be made for the incoming government to make public the Dept. of Finance files on events surrounding the September 2008 ‘blanket banking guarantee.’

@Colm Brazel,

Your view of Professor Honahan is simplistic and divorced from reality. Indeed the view of the banking crisis as it developed over the months leading to the bailout are often skewed with hindsight. Honahan took over a situation which was in constant flux. There was no solid ground under his feet. The situation in terms of bank loan books going through Nama took time to develop. And the international situation deteriorated unexpectedly. It is far too easy to say A or B should have been done with the benefit of hindsight.

Regarding the soft ride Honahan got on prime time – yes, perhaps. But I welcome the fact that agreed to make an appearance. Whether we like it or not, and for good reasons and bad, central bankers tend not to expose themselves to too much media examination. When they do they have to weigh their words very carefully. True, Professor Honahan presides over what is essentially a regional office of the real central bank the ECB, but for all that he our representative, and is on the ground so to speak, in the eye of the Irish storm.

For me the most worrying part of the interview was that Honahan was not as categoric and clear about the managability of the Irish situation as he was before. I think it is very clear that he understands we are in a terribly difficult predicament and that it requires a great deal of dedicated, careful diplomacy and concentrated minds.

In that sense, the challenge for the new political leadership is to rapidly ramp down election rhetoric and to quickly develop a more sober and calcuated comprehension of where Ireland’s interests lie. It is this, more than anything, that makes me nervous.

The way he came across last night was a man with a lot on his mind.He did,nt convince me at all (remember I,m economics 101). Body language was all over the place and Richard Crowley let him off way too easy as did morning Ireland this morning. When are going to get some hard hitting individuals in the media who are going to ask some really serious questions. Bring on Max Keiser, he,d eat Honahan for supper.


Emperor Honahan as portrayed on RTE, has no clothes on.

He got his figures wrong about Anglo, by his own admission. He was wrong about the arrival of the IMF/EU. Figures show the inevitability of our default. His solution is to hope the ECB will manage this for us. This is absurd. I concur with others, he should be questioned more carefully. He doesn’t agree with Dukes the figures for Anglo will be as bad as Dukes believes they might be. But he doesn’t know until the stress tests are complete! This is absurd. Currently there is a run on the banks, mortgage default is getting worse. Deflation will make things a lot worse fast. But he hopes EZ will fix this for us sometime in the distant future! This ivory tower of jelly is no use in solving our problems, instead its part of the problem.


Indeed, Honohan is unusual in going on the telly and he deserves some credit and slack for doing so. I get the impression he is a good deal less slimy than most and you have to bear in mind that in giving an interview aimed at appearing frank and trustworthy for domestic credibility reasons, he is giving up the standard central banker advantage of basically saying ‘nowt and thereby not screwing up.

Seems a bit more market aware now, and it should be noted that his piont about Anglo and Lehmans is a “position” that is to be defended in order to spread the pressure to clean up the banking situation beyond the state in “negotiations”.

@ grumpy

‘Indeed, Honohan is unusual in going on the telly and he deserves some credit and slack for doing so. I get the impression he is a good deal less slimy than most..’

That’s a pretty harsh view of the banking fraternity, but I suspect there will be few dissenters.

@ tomaltach

‘…the challenge for the new political leadership is to rapidly ramp down election rhetoric and to quickly develop a more sober and calcuated comprehension of where Ireland’s interests lie’

Sober is the key word. People are being asked (once more) to calm down and wait for matters to be sorted out by sound reliable persons. The debt numbers are going to be a a bit bigger but there will be more time to pay.

I worry that we are not in a well-defined adjustment programme, but are actually in uncharted economic waters. Lets suppose also that the same is true of the EZ and the global economy. What is the sober thing to do ?

Colm Brazel,

But he hopes EZ will fix this for us sometime in the distant future!. That is not his position and well you know it. But you see no harm in misrepresenting the man anyway.

The EZ will not fix this for us because, largely, we must fix this problem ourselves one way or another. In my opinion, without accepting this starting point, no further discussion is worth while. In the challenging times which lie ahead this much is certain: the Irish state, the Irish tax payer, and the Irish citizen, will bear the vast bulk of the burden of dealing with the Irish financial and economic shock. Anything else is fantasy and would be absurd anyway.

Why does BOI have so much secured senior debt?

Does this not fundamentally weaken the position of the state by making some creditors senior to depositors?

Is it the outcome of issuing covered bonds?


Methinks The Governor needs to be congratulated!

I can’t get a bob – and he facilitates a flow of 100 + 50 + 60 … €210 billion Euro …. & No FireSales

Unlike Ireland vs England at the mo, looks like he is on 150 not out (-;

Fascinating program. I thought Crowley was well on top of his brief and that the two journos spoke sensibly. Pity though that Miriam hadn’t her darling McWilliams on the show to make a fool of himself.

The Guv was indeed circumspect but a few nuggats for me were:

1) If we knew then what we know now we wuda done a Lehmans on Anglo.

2) Once Anglo realised the game was up in terms of a future (last year some time) they came out with their hands up regarding the extent of their losses.

3) A default/restructuring could well be on the cards at some time in the future but it would be done in partnership with the EU.

But he spelt out very clearly for all those macho arsonists that our very survival is hugely dependent on the ECB/EU and there can be absolutely no unilateral strike against their wishes. The comment about how “we saved Europe from a Lehmans” would help us in the “moral” suasion stakes was truly revealing.


Look, my Lord Cardigan analogy was well thought out. Look at the Primetime interview and listen carefully to what Professor Honahan is saying. If you listen carefully, you will see how absurd it is. He lectures us on how he thought our debt was manageable without external assistance. But the markets lost confidence in us. The result was the IMF/EU are here. The markets didn’t have confidence in him, why should you? But it gets more absurd, because he drags out the old canard of Ireland saving Europe by saving Anglo. When did I hear that argument before? Oh, it was during the negotiations on the bailout deal. But he acknowledges we got no concessions in that deal, so he’s hoping we’ll get concessions now in March.
After being shot down by the markets, he’s going to lead the Charge of the Light Brigade again:) Look at KW’s post on the agenda for March summit, no concessions there for us. Banks owe a €100 bn to ECB, €50bn to ICB and there’s €63 bn approx figure released today of bondholder exposure total of Irish banks and Honahan is worried burning bondholders will damage the Irish economy! We’re holed beneath the waterline. Even with burning bondholders, it will be difficult to get our economy on its feet again.
One other disastrous, I believe, view of his, is this resistance to a firesale of assets. This is not only absurd but its incredible. The global economy for the next ten years will have difficulty recovering from the shock of 2008, there will be a downturn, asset values will steadily decrease until things begin to pick up again. He should be flogging whatever assets the banks have asap and taking the advice of the europeans, but he’s against this, probably hoping for some LTEV to realise, or that he’ll wake some morning
and all our debt evaporated and our economy is back to growth at 6%. He had his chance, his approach lost, we need fresh thinking and a new mindset. Hope you wakeup soon:)

@barmy army

Ireland 272-5, 41 overs

Kevin O’Brien ‘innings of the tournament’ – fastest 100 in world cup history

a great comment over at the grauniad

“Being a second generation plastic Paddy can be confusing at times,” says Lee Cashin. “Personally, I’d like to see an Ireland v England hurling match.” Especially if John Terry plays.”

49 overs: Ireland 325-7 (need 3 from 6 balls; Mooney 29, Johnston 7) Mooney calmly pings another single to deep point. Just three needed from the last over. What on earth is happening?

IRELAND WIN BY THREE WICKETS!”Dublin, Galway, Belfast,” says Bumble. “Are you ready for this?” Jimmy Anderson runs in to bowl the last over, and Mooney hits him into the leg side for the winning runs!



Ireland 329 for 7


329-7? Jebus. That was a harsh but clearly manageable target. Perhaps FG should conscript the team into the DoF.

Didn’t see the interview but I read this quote in the IT:

“He said he believed the €10 billion would be put into the banks, but that doing so after the election would ensure greater legimitacy and “buy-in” from the Irish public. His recommendation to the new government would be to do this before the end of the month and following the completion of stress tests on the banks.”

Is Team Ireland still playing like its amateur hour. The state’s own CB Govenor saying the new Irish government _should_ pony up €10 Bn for the banks by the end of this month – cutting the feet from under any attempt to negotiate any concession. Great teamwork kids (not).

Also unclear, how he thinks that the election conferred any “legitimacy” or “buy in” – Irish people gave 20 seats to the party that signed the guarantee/rescue/etc….and even FG said the deal needed to be renegotiated.

Methinks oblivion awaits Labour (especially) and (maybe) FG if more taxpayer money goes to bondholders, recaps, etc.

If we want to have some EZ public opinion on our side, NOW is the time to hang tough. Even if the plan is to eventually cave to the ECB, let us do so only in the face of _very public_ threats to destroy us/kick us out of the euro etc if we don’t use public monies to pay private debts/bondholders.

I hope someone in FG/LAB is working on plan B:
a. EZ exit
b. Rapid convergence to 0% current fiscal deficit
c. Banking Resolution scheme for depositors.

good news is, after ireland beat england in euro ’88, the economy spent the following decade on an upward curve…bad news is we went on to be knocked out of that tournament by the dutch..

It would be tragic if he ends up as the Troika’s emissary in Ireland. He should certainly not dictate to a new government.

@Colm Brazel

Re Honohan

I agree with you. But Honohan is a civil servant. He does or should do what he is told.

It is now far too late for default on bondholders to make any substantial difference to the situation. The damage is done. The ECB and big euro banks won, thanks to Sarkozy in particular and the ECB.

When it comes to default eventually, the question that must be posed is who defaulted first.
In my humble opinion, the first and biggest institution to default was the ECB. It defaulted on its lender of last resort responsibilities.
It did so publicly in mid 2010. Since then it has been downhill all the way.
Sure, they continue to give some support, but through the ICB. To use your military metaphor. They announced that they were not going to hold the line, took the high ground and sent the Paddies and whoever else over the top.
But lets be clear, The ECB was the first European Institution to default.

@Joseph Ryan

As I understand it, since Ireland is part of the Eurosystem the CBI is not a branch of Ireland’s public administration, but is a branch of the ESCB/ECB. Hence Honohan is not an Irish civil servant in the normal sense. As a member of the ECB Governing Council he is required by law not to seek or take advice from the Irish government (quote taken from EU website):

The ECB works in complete independence. Neither the ECB, the national central banks of the Eurosystem, nor any member of their decision-making bodies can ask for or accept instructions from any other body. The EU institutions and member state governments must respect this principle and must not seek to influence the ECB or the national central banks.

The ECB, working closely with the national central banks, prepares and implements the decisions taken by the Eurosystem’s decision-making bodies – the Governing Council, the Executive Board and the General Council.

The question has to be why was someone whose legal responsibilities and duties are to the ECB and the Euro, and not to the Irish taxpayer, such a prominent part of the bailout negotiation team? Would not a role as an advisor have been more appropriate than as a deal-maker?

If you strip away the differences in personality and manner of presentation, on matters of substance relevant to the Irish taxpayer, there is little difference between the good professor and bad-boy Bini.

Given Honahans Remarks about Anglo, we now need clarification From Brian Lenihan and JC Trichet.
Michael Hennigan and some others are of the belief that the decision to include Anglo in the Blanket guarantee was a decision made primarily by Ireland without direction from Europe.
I am of the belief that there was a policy of no bank gets left behind and that the Irish government may have been under instruction from the ECB.
In truth both opinions are possibilities and some clarity would help.
Mr Honahans remarks about the ECB owing us something for not letting Anglo go are at least interesting.
Enda could do with some honest answers from Lenny before he goes to negotiate.

@ Michael Hennigan

I found your article in finfacts interesting but I have one point.

Seamus Coffees research showing that about half the bond are irish owned could be used by many to argue against burning bond holders as it would be shooting ourselves in the foot.
2 points.
1. But How much of this Irish element is Irish IFSC holdings?
2. Some people argue that whether the bond holders are Irish is not that relevant because peoples objection is with regard to Private losses being socialised. That some of this private loss is Irish isn’t the point. lower and middle income earners subsidising Poor investment decisions of large institutions doesn’t seem very fair regardless of their nationality.

@ JR: “It is now far too late for default on bondholders to make any substantial difference to the situation.”

I do not subscribe to this opinion Joseph. The Bondholders are – I assume, sophisticated and experienced financial persons who knew exactly what they were investing in. The alternative, that they ‘took-a-punt’ is simply too outlandish to contemplate.

However, they also knew, with a probability approaching 0.99, that they would be protected from major losses by sovereigns. The relevant ‘taxpayer’ would be ‘volunteered’ to keep losses to a bare minimum. Moral Hazard???

“The damage is done.”

Again I dissent. It has hardly even begun. Absent an orderly Debt Jubilee scheme we will have, perhaps, a decade of dreadful austerity – for those on the lowest incomes and increasingly, for middle-income groups also. By then, energy, and anything that is produced or depends on a significant input of energy will either be un-obtainable or, if a necessary, rationed.

My guess is that the necessity for an orderly debt cram-down is well understood and privately accepted but the awful reality is being concealed and the disassembling propaganda spun-out for as long as possible: Death by One Thousand Cuts and all!

Of course all bets are off if ‘they’ can miraculously repeal some of the universal laws of physics and chemistry and the black letter axioms of mathematics, including the logical consequences of exponential growth in the presence of finite resources. Taxpayers disposable incomes are finite. You do not fool around with universal truths.


@Bryan G.

Thank you for the quote from the EU Website.

If the quote is an accurate statement of the ECB responsibilities then:

1. As the ICB is answerable only to the ECB, then the full, repeat, full, responsibility for the disastrous non regulation is the full responsibility of the ECB.

2. Barroso was talking through his **** when he said that it was the fault of Tthe Irish regulations. The Irish regulators, according to your quote above, responsible only to the ECB and therefore to be ‘supervised’ only by the ECB.

3 Your question is spot on regarding Honahan being on the Irish negotating team. It would appear that while he was on the Irish team, his legal duties were to the ECB team, and to get the best deal for the ECB.

4 Perhaps two psychiatrists both with a good knowledge of schizophrenia, should have been added to both the Irish and ECB teams.

@Joseph Ryan

It’s more complicated than that. It appears that financial regulation and bank supervisory responsibilities were (pre-crisis) a national matter. From a Mr. Bini speech:

[Tommaso] was convinced that in a single market, and even more so within a single currency area, the supervisory framework had to be as convergent as possible, entailing a transfer of supervisory responsibilities from national to EU level. Indeed, he was convinced that the public good of financial stability also needed to be provided at EU level, and that would have necessitated the creation of an EU supervisory framework. At Maastricht, the Member States could not agree on this. Tommaso considered this a mistake – and the EU had to learn its lesson from this omission the hard way, during the financial crisis.

So there were fundamental problems with the design of the system from the beginning. Since the crisis there are now all sorts of EU-level Supervisory Authorities and Systemic Risk Boards, which could make true accountability even more vague, since there is now a mix of national and EU-level supervision. There are still fundamental design problems with the Euro – e.g. there are no mechanisms to prevent destabilizing capital flows that seek out high growth countries, create credit bubbles and inflation, and then flee when things go bad, since limiting capital flows, increasing interest rates and devaluation are all not possible.

The main reason for the design flaws is that at heart the Euro is a political project, not an economic one. The system will be patched up here and there, but the goal is not an efficient currency area – it is to foster political integration, since the only way that the economic problems can be solved is with greater political integration. The Euro founders were perfectly aware of this. The full Bini-Smaghi speech can be found here.

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