Kenny Returns from Brussels

Enda Kenny has returned from Brussels without any agreement yet to reduce Ireland’s interest rate (Irish Times story here and FT story here). Not surprisingly, Mr. Kenny wasn’t too keen to give up Ireland’s 12.5% corporate tax rate in return for a mere one percent reduction in the interest rate on the EU loans.

To my mind, there is a lot of shadow boxing going on here. The EFSF is an EU institution and it cannot set the terms of its lending on a bilateral basis with individual countries. I’d be surprised if thee tradeoff between these two elements ended up being as explicit as suggested in this weekend’s news stories.

I think the business about interest rates and corporation tax rates has a feel of fiddling while Rome burns. More interesting were Kenny’s comments about the ECB:

“I made the point that for me to conclude a deal here I need to be much clearer in respect of elements related to the ECB,” he said.

“I spoke to president Jean-Claude Trichet and the Minister for Finance will be meeting with him on Monday. He has agreed that I should meet with him before the [next EU summit on March] 24th/25th to discuss a number of issues relating to the ECB and its positions.

“Before the council meets again in two weeks time we hope to be in a much clear position insofar as Ireland’s position is concerned and continue on our progress arising from the mandate that I’ve got about an improvement in the terms of the package for Ireland,” the Taoiseach said.

He continued: “In the next couple of weeks I expect to be in a much clearer position in respect of the state of what we have inherited is in respect of Ireland’s position.

“We’ll have had discussions with the ECB in respect of a number of matters. We’ll have a much clearer picture of what’s emerging from the stress tests and as the principle has now been accepted and implemented of a reduction in the interest rate I . . . would regard that actually as the beginning of a process.”

I reckon they could fill Croke Park if they sold tickets for those discussions with the ECB.

59 thoughts on “Kenny Returns from Brussels”

  1. Don’t forget the US angle. Kenny will be in DC next week for St Patrick’s Day. Obama played a crucial role in lobbying Merkel in advance of the Greek bailout. Will Kenny bring the eurozone crisis up and will Irish govt officials meet with representatives from Treasury?

    Also, this may be of interest to readers here: video of a Bretton Woods Committee panel discussion last week on the effect of the Eurocrisis on the US and the world featuring Aja Chopra, Simon Johnson, Carmen Reinhart
    http://www.brettonwoods.org/events/index.php/67/Turmoil_in_Europe_A_Wider_Threat

  2. 2 questions:

    1. Does anyone/everyone think that, politically and morally (ie not legally), FG/Labour would have to put any CT tax change to a referendum, either on a stand alone basis or on an EU/IMF deal basis?

    2. Such a referendum would result in a massive no vote?

  3. They could certainly fill the National Stadium, but I think the doctor would stop it after the third round.

    Speaking of ‘a much clearer picture of what’s emerging from the stress tests’: the front page of the Sindo (byline Daniel McConnell) reports a (surely-)authorised-leak that the result of the second ‘rigorous stress-testing process’ was (surprise!) ‘”considerably worse” than previously thought’ and therefore the next capital injection will be €25bn-€35bn rather than €10bn. But a senior government source reassures us that this is ‘”lower than the huge figures being spoken about in Europe”‘. Brian Lenihan is quoted in a way which suggests that this single large injection could take the place of the later injections. But elsewhere the article speculates that the later injections might well still happen, and that they could take the total injected well over the €35bn agreed in the contingency fund.

  4. Anyone could have seen this script – sure you would’nt have needed tarot cards or crystal balls (although there is no shortage of them on Irish politicians) – it’s like death by a thousad cuts.
    All this jockeying for positions and ultimately Kenny will come back with 0.5% or 1% reduction and CT rate intact claiming a huge victory whilst the real problem is completely ignored.

    Tell them to F** off – not another penny into Irish Banks!!!!!

  5. @ Eoin

    1. Why would we have a ref on the CT issue if we didn’t have one on the guarantee or IMF/EU bailout? I suspect the answer to both of those would be no.

    2. No need for a red C poll

  6. Re your questions:

    1. Absolutely not. Firstly, there is no morality in taxation. the idea of referenda on such matters is revolting canard.

    2. Of course it would be defeated. However, how could people be properly informed and educated as to the issues, trade-offs and probable consequences?

    What would happen if they had a referendum to delegate the task of making such a decision to elected representatives of the people aided by a coterie of experts and staff used to dealing with such issues? I think such a referendum would pass.

  7. Our CT rate has nothing to do with the debt crisis we are in. Any increase would place the multinational sector of our economy in danger and must be resisted at all costs. As Noel says above in this regard we should indeed tell them to F off.

  8. It seems the deal, as previously leaked, of a 1% reduction in Ireland’s rate for an increasein corporation tax was offered and rejected.

    It also seems that the rules can be changed for some but not others. Greece’s interest rate was reduced but ours wasn’t.

    I am heartened by Enda Kenny’s plain speaking. I am also heartened by his rejection of a bad deal.

    One could interpret the fact that Greece can get a reduction and Ireland can’t and the fact that Ireland is the only country in the EFSF as a threat that the rest of Europe is willing to screw us if we do not do as we are told while giving others a better deal.

    This will be unpleasant news if it transpires but at least it will give us an insight as to what lies ahead if we keep taking bank debt on to the sovereign balance sheet in the hope of being treated better down the line. It is worrying that Merkel and Sarkozy have made the spat public as it leaves them little political room for manouevre.

    The bank stress tests are likely to show a much worse situation than envisaged under the IMF/EU deal. Furthermore, the EU/IMF deal has not had the effect of reassuring the markets as Honoohan hoped it would. It is clear that things have changed fundamentally since Brian Lenihan agreed to put the 10bn into the banks by the end of this month. This justifies Enda Kenny and Michael Noonan revisiting the deal.

    Kenny and Noonan are now going to talk to the ECB. The ECB may well be more concerned for Ireland’s well-being when it gets an update on the severity of the gaping wound on Europe’s periphary. This may help Enda in his talks with other EU leaders.

  9. Ireland’s 12.5% corporate tax rate has its supporters in every European Union member country. It is in the interest of the business community and its representatives to promote lower corporate taxes, lobbying for lower corporate taxes continues relentlessly. If Ireland raises its corporate tax rate it would be seen as a major setback by the Europe wide business community.

    Politicians are well aware of the competing interests at play and say one thing to placate the public and another to the business community which supports Merkel, Sarkozy and Berlusconi who head right of centre gov’ts. We should not get our knickers in a proverbial knot about corporate tax rates, if we want low rates we can have low rates and if we do not we can use it as leverage with left of centre regimes to get some of the concessions we need. Our LCTR is not benefiting the country to the extent we like to believe.

  10. @ Zhou

    Do the stress tests have credibility based on what has gone before? Do you think the mkts have not already made their mind up?

  11. They may have credibility depending on who signs off on them, the level of fact finding and the assumptions.

    They will certainly be credible insofar as people will believe that the situation isn’t better than the tests reveal. If they reveal that things are much worse than previously thought then a different solution may be required.

  12. Or they could do more damage. How is it possible to have stress tests that are independent and not biased unless non banking people are are doing them?

  13. Chopra’s comments are in talk linked to by tw are enlightening. The big issue is to stop spill-over of problems from the peripherary to the core through the bank linkages. As such, Irish wellbeing is not the central concern. In a negotiation is important to understand where the other party’s interests lie.

  14. @zhou_enlai Lots of other interesting insights in that panel. Johnson’s “translation” of Chopra is quite good as is Reinhart and the Q and A near the end. One clip in particular was Kleinman at 1.15 on models of preemptive restructuring and on the dangers of the Kazakhstan model

  15. It’s good that there will be direct engagement with the ECB.

    Kenny shouldn’t agree to change the corporation tax rate even though it could well be offset with various tax credits. Nevertheless, a change would be a bad signal to investors.

    The Sunday Independent says: “Any climbdown by the Taoiseach on the issue would represent a case of ‘economic and political suicide’, Michael McDowell, the former Progressive Democrat leader, said yesterday.”

    If McDowell did say this, it is ridiculous.

    Even a 1% change would be suicide?

    On the base, some of the tax haven aspects are indefensible and if any change could be limited, it may well to agree a deal.

    Saving a few billion in interest over a few years is not to be easily brushed off.

  16. If the stress tests turn out worse than expected as per the Indo article and it is 25 billion that would have to be pumped into the banks obviously this will make the likelihood of default even stronger. When does it get to the stage where the government will turn around to Europe and say sorry we can’t pay it is your problem as well so burden sharing is the way to go or else we have to leave the euro………do you think this could be the straw that will break the camel’s back or would there be a further step or 2 to go?

  17. I meant to add that I was impressed by Kenny and having discussions with the ECB will be a good move as well, after all they were the ones that said the bondholders could not be hit.

  18. The CT rate would be a good place to take a stand in the sense that, if a rift with the EZ is inevitable, Ireland’s reputation with the international business community is best preserved by making the CT rate the issue on which the government refused to budge. But when it comes to hard cash, what matters most is the banking problem. If Ireland commits to spending even more on the zombies then default is practically inevitable. So by all means let’s have defiant speeches about the CT rate, but the thing to stress in private is that, if the ECB loves the banks that much, it can convert its loans into equity.

  19. “Ireland was disappointed at the end. It basically got nothing,” The Wall Street Journal quotes an official.

    “I think the reason for this is that their government is still very new and they have a way to go in order to prove that they are on the right track,” the official said. “They were also very demanding which I think angered everyone in the room.”

    That is surely good news!

  20. @ Andrew

    “Or they could do more damage. How is it possible to have stress tests that are independent and not biased unless non banking people are are doing them?”

    Today’s Sunday Business Post (where’s my Tribune?) P.13 discusses this. Online Monday I think. Outsiders brought in named as Blackrock. Does this mean anything to anyone?

  21. @ Karl Whelan

    “To my mind, there is a lot of shadow boxing going on here. The EFSF is an EU institution and it cannot set the terms of its lending on a bilateral basis with individual countries. I’d be surprised if the tradeoff between these two elements ended up being as explicit as suggested in this weekend’s news stories”.

    You may be, it seems to me, right on the second point but you are wrong on the first. The EFSF is anything but, on German insistence, a EU institution.

    http://www.efsf.europa.eu/about/index.htm

    It will do whatever France and Germany and the other AAA rated countries tell it to do but I doubt if it could discriminate between borrowers in its lending. The problem is that, for the moment at least, there is only one borrower; Ireland.

    The decision to allow for the purchase of bonds in the primary market seems to me to be the decisive decision (the rest is just window-dressing) in return, of course, for additional strict austerity measures cf. case of Portugal. Although I am no expert in the matter, this seems to me to be a shot across the bows to bond speculators, starting with the next Portuguese issues (followed by Spain).

    It seems best to suspend judgement until there is a clearer perception of market reaction (which cannot but be influenced also by developments in Libya and by the catastrophe in Japan).

    As to the CT issue, what Ireland would gain by giving in pales in comparison with what it would lose in terms of its capacity to dig itself out of the current mess. The plain people of Ireland have the sense to see that. I think that they also have the sense to see that further austerity to put the public finances right is their only salvation.

  22. On the one hand, its good to see Mr Kenny hasn’t allowed himself to be sold a pig in a poke of derisory 1% and capitulation on CT.

    Its also good to see Mr Kenny is demanding a full audit of our lending situation with the ECB and presumably will use this as a basis for negotiation of a full package for Ireland that will fully address its needs.

    Its extraordinary after 3yrs, stress tests, NAMA, that a full audit of our banks has not yet been able to give us a complete picture of our account and we await end of MArch for this.

    In one way its fitting we might have those results on April 1. Unlike his predecessor, Mr Kenny is not prepared to write a blank cheque and wants to know what he’s going to get back in return for his signature.

    But if Mr Kenny doesn’t want to end up a complete fool he should strongly consider two things:

    1. That information on our banks as it arises be made public and not for his eyes only

    2. That he respect the Irish people enough to allow them to decide by referendum what he should sign up to on our behalf.

  23. @ Gavin Kostick

    BlackRock is a big name American fund manager.

    In January, the Central Bank appointed 3 expert external advisors to assist it to execute the Prudential Capital Assessment Review (PCAR) and Prudential Liquidity Assessment Review (PLAR):

    US fund maanger BlackRock Solutions to perform reviews of asset and data quality of those banks participating in the PCAR and PLAR.

    US consultants, The Boston Consulting Group, to provide project management resources for the Central Bank’s Financial Measures Implementation Project. It is to also contribute advice for the PCAR and PLAR.

    Barclays Capital to provide advice on banking sector structure issues. It is also contributing advice on matters arising from the PCAR and PLAR.

  24. @ Colm Brazel

    I agree with you on the still muky picture.

    The Quinn Group is effectively owned by the people; it and the family owe €3bn to Anglo and over €1bn to bondholders and it has properties across the world.

    There’s more like it and the Government must be eager to assess when NAAM can start selling more overseas properties.

  25. If we lose our economic self determination, increase of to 15% or 25%, what’s the difference? If, however, we need to leave the EZ, as I believe we do, because there will be no comprehensive package offered to us, apart from penal, derisory insults.

    If we’re not offered an overall rescue package based on debt for equity swap, then CT should be a no go area for us. We will need it outside the EZ to boost our economy with a reduction of CT to 10%.

    We should be very concerned at the ECB insistence that we spend the NPRF on the banks or initial tranches of ‘bailout’ on the banks. Any reserves we have including our CT rate that could be used by us to leave the EZ and burn the banks and bondholders are being siphoned away.

    Mr Kenny should analyse if economic dependence rather than independence is being offered to us, it should be obvious its vassal state dependence with our economy crippled by the ECB and its banks for the foreseeable future.

  26. @Andrew
    MNCs’ would continue to be attracted to Ireland for all the old familiar reasons. Competitive wages, productive workforce, low rent, little rigidity in the hiring/firing processes, little/no regulation, favourable rule of law, malleable politicians. Low corporate taxes are a small part of the pie and not the most essential part of the pie. Low corporate taxes are likened to price competition in business as being the product of bankrupt minds. In any case the race to the bottom in corporate taxes is under way to Limbo music as in “watch me see how low I can go”. We have to be careful that we do not grab onto LCTR in the same way we grabbed on to the Holy Trinity, BVM, Gaelic like straws and twigs in a flood.

  27. So the Greek prime minister returned home with his EU bailout increased from 3 to 7.5 years and the average interest rate reduced from 5.2% to 4.2%. (Source link below)

    Ireland is now paying an average of 5.8% on the EU element of its bailout.

    Last December 2010 in the Dail, Taoiseach Cowen defended the bailout by saying the Greeks were now looking for the same terms as Ireland (sure Greece was paying 5.2% but for a shorter term bailout).

    The positions have now well and truly reversed and Greece plainly has better terms. And remember that the banks were peripheral to Greece’s problems which are mainly fiscal – they spend more than they earn, they don’t report the true position correctly and they have high levels of corruption. All problems which would lead to any country being sat down on the naughty step until they sorted their problems out.

    Here we are with a fiscal problem to be sure (and in the cold light of day most people would say taking 8 years from 2008 to 2015 to address your fiscal imbalance was taking the mikey) but we have a yawning great problem in our banks partly repaying foreign banks operating from our European friends’ territories. So maybe we too deserve to be on the naught step but shouldn’t we get some credit for taking on debt to repay other countries’ banks?

    And today shouldn’t Enda be hopping mad. The Greeks are paying 1.6% less on their loans than the Irish and a large part of our bailout is going to square debts with French and German banks.

    http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_868_12/03/2011_382614

  28. @ Mickey Hickey
    ‘Low corporate taxes are a small part of the pie and not the most essential part of the pie’

    So the Double Irish is a myth ? Even Wikipedia has it as fact.

    http://en.wikipedia.org/wiki/Double_Irish_Arrangement

    @ DOCM

    ‘The decision to allow for the purchase of bonds in the primary market seems to me to be the decisive decision (the rest is just window-dressing) in return, of course, for additional strict austerity measures cf. case of Portugal. Although I am no expert in the matter, this seems to me to be a shot across the bows to bond speculators, starting with the next Portuguese issues (followed by Spain)’

    I am no expert either, but that view makes sense. They are going to fire another bazooka, and one which they had previously agreed that they would never fire. So it’s already a retreat. What will the EC/ECB do if this one fails to halt the attack ? It has been said that the EZ will stand or fall in Spain.

    In regard to your support for austerity, you are treading on a well worn path
    http://www.irisheconomy.ie/index.php/2011/03/11/bini-smaghi-whither-europe-after-the-crisis/#comments

    Did you notice those enormous crowds of young adults marching through Cairo ?. ‘Better to die for something than to live for nothing’ is one of the things they say. Youth unemployment and underemployment is dangerously high in the PIGS too, so this is certainly game on, in poltiical as well as economic terms.

  29. Finally, things are coming to a head…..

    1. A reduction in the interest rate on the bailout terms that is rolling up and not due to be paid back until 2015 onwards is completely irrelevant to Ireland’s current situation. Will the Eurozone be in existence in 18 months, let alone 4 years time? The reduction in interest rate in exchange for tax concessions is a complete sideshow.

    2. What worries me is that Merkel, Sarkozy et al don’t seem to have a plan so they are constantly trying to seek short term remedies in the hope that eventually Ireland will return to growth and everyone will live happily ever after. To me, it looks like the Eurozone don’t have a credible plan – they are stuck between a rock and a hard place – they can’t allow an Irish default because of contagion so in order to give them some further time to try and think of a credible solution, they will grant Ireland concessions in the bailout package and do so similarly to Greece’s and Portugal’s imminent bailout pacckage. This will have no effect on the market and bond yields will become worse when the stress test figures are announced before the month end. Ireland is so deep in it, there is no way out without burden sharing for a start.

    3. Ireland is heading for default no question about it. If those figures are correct in the Sindo, we are in even deeper trouble than we could ever imagine. Enda Kenny could not give the green light for a recapitalisation of that magnitude, the nation would not be behind such a decision.

    4. It is time Enda Kenny put it up to Europe and simply explain to them that we cannot and will not be able to repay our debt. It might as well come to a head over the next few weeks than in 6 months or 12 months time. The size of our problems will not disappear.

  30. … shouldn’t we get some credit for taking on debt to repay other countries’ banks?

    Certainly not. We should draw the appropriate lesson and not be played for suckers again.

    If He play, being young and unskilful, for shekels of silver and gold,
    Take His money, my son, praising Allah. The kid was ordained to be sold.

    I hope Enda is hopping mad. That could mean that the lesson is sinking in.

  31. @colm Brazel

    We should be very concerned at the ECB insistence that we spend the NPRF on the banks or initial tranches of ‘bailout’ on the banks.

    Simple. They are asking their opponent to empty his pockets first. Like Oliver we would then have to plead for more as all reserves will be gone.
    And the ECB/EZ have turned into opponents. Solidariity is gone out the window. The demand for a cut in corporate tax rate is merely the coup de grace to a badly wounded opponent. It would bring a loud cheer from the arena, hungry for blood.

    Ireland would be better off trying to cut a deal with China to buy bank Irish State and bank bonds on the market at a discount. Either that or pull out of the Euro and link to sterling.

  32. @Mickey, for the moment at least we have neither low wages nor low rents, and on the whole the thrust of policy has been to prevent them from falling. The corporation tax regime is currently rather a large part of “the pie” (as you describe it) for FDI.

  33. NeoKon Mick MacPeeDee borrowing ‘suicide’ metaphors from Bowel_Bertie de Dig_Out Queen now …. !!!!

    Get bleed1n real – who spun the default rope that is presently around the necks of the Irish citizen serfs and which has already led to ‘economic, social and psychological’ suicidal_debt for so many … !!!!!!

    …. &&55$$$$$@@&&££250*****&&&&& (in deference to the children)

  34. @Mickey Hickey

    The Intel Chief pointed out that corpo tax is the only positive left in Ireland out of the dozen reasons that attracted them here

    remove the low corpo tax and we go back to being the backwater we used to be

  35. Take the advice of Lance-Corporal Jones in ‘Dad’s Army’: “Don’t panic!”

    Whether or not you’ve the Nobel, Lenin, Confucius or Best Hurler in the Ditch prizes, you are not allowed mention default unless you are part of that rare local breed — an Irish Exporter.

    Ireland isn’t without aces and while I’m an admirer of Jean-Claude Trichet, it’s 28 years since Michael Noonan as Justice Minister faced down Ireland’s Long with what should have been devastating evidence of illegal phone tapping. Let’s say Noonan didn’t come up the River Shannon on a bike.

    Seriously, it’s only amateurs who would recommend that Ireland bring issues to a head at his early point.

    Chinese business folk tend to find Indians exasperating because many of them think that victory is when they have worn down the seller to give them the best price. It can be a Pyrrhic victory.

    A referendum now on this debacle would be a joke and would have no credibility with potential allies — this isn’t a game for Monday morning quarterbacks.

    Wait until the IMF program period is over.

    Just keep in mind as regards advocates of quitting the euro, NO advocate of such a move has even bothered to outine how that should happen without collapsing he economy.

  36. I’m encouraged by An Taoiseach’s assertive approach, which makes a fine contrast with the traditional near invisibility of Irish representatives in European affairs, and with the traditional Europe-or-bust approach of his party.

    But at the end of the day what matters will not be hard words. It will be a combination of logic and carrying a metaphorical hand grenade with the safety clip off and the pin half out, sufficiently conspicuously to focus the attention of our EU partners. To paraphrase Teddy Roosevelt, “speak softly and carry a fragmentation grenade”.

    Keep the ECB on the hook by refusing more bank recapitalisation from public funds. Maintain a distinction between regular sovereign debt and backing for the banks, so that we have the option of treating our regular creditors as senior when and if the evil day comes. Avoid making reassuring formal commitments to other states or the EU that it may be troublesome to break. Go through all the preliminary preparations necessary, so that wiping out the unguaranteed bank seniors is just a matter of a late sitting of the Oireachtas on a Friday. And come up with a credible plan to keep the State operating without access to new credit, preferably aiming to balance the budget long before 2015.

  37. Surely all the thrust for default ‘outwards’ should be paired against default ‘inwards’? If it is fine to pull up the armchair against the door and default on overseas lenders on the basis of their recklessness (gas fantasy that), is it not also dandy and fair to do the same with domestic institutions? After all for lessons in reckless lending, the Irish financial sector could field among the best experts in the world. Let’s hear it for domestic mortgage default en masse, restructuring, burden sharing etc. When a credible plan for that is in place, the sovereign default option can be taken more seriously. To sloganize it: Default begins at home.

  38. I dont understand why the Government allowed itself be bounced into the IMF/EU ‘bailout’ deal.
    There was enough money in the national pension reserve fund for at least 6 months.
    During that time the government could have driven a hard bargain backstopped by the fact that Trichet and co would be in radioactive meltdown at the prospect of the euro imploding.
    The only options open to trichet would have been to continue emergency liquidity provision and negotiate a deal with Ireland possibly in spring 2011 or let Ireland fend for itself and watch contagion spread throughout Europe.

    If Trichet had cut us loose the payoff for for Ireland would be we could have defaulted on all our debt lodged with the ECB (including Sovereign debt) as the ECB had refused to provide funds as lender of last resort.

    There was no benefit to us in engaging in any bailout deal unless the payoff structure was known to Ireland and was worth negotiating on.
    Unfortunately FF allowed itself be forced to play a game where the pay offs were massively stacked against us .

    FF should have played hardball and ensured the payoffs available were not as harsh as they are now.

    The entire renegotiation is about easing the terms of those payoffs instead of clearing the table and starting again.

  39. @ The Alchemist

    +1

    It seems that some people see default as not paying any portion of a debt.

    Up to 92% of Argentina’s creditors accepted haircuts but the country is still ensnared in US lawsuits brought by holdouts.

    To use the current jargon du jour: there is no such thing as a free lunch.

  40. @ Gavin Kostick

    see namawinelake from about a week ago and note that Blackrock are so big because they bought Ishare, the passive management business from …..Barclays. Barclays Capital also feature.

    @DOCM

    The primary market purchases look a bit like an attempt to avoid the PR of auction results hitting the wires combined with speculation about how much of the demand was pass through with the ECB buying in the aftermarket. The stats on QE in the US suggest that the driver for treasury yields has been the ammount purchased so it is reasonable to assume the totals bought by the various tentacles of the EZ is the only significant number.

    @all

    “Give us a cheaper deal or we will, er…, continue to draw on the existing facilities.”

    Brilliant tactics!

  41. @grumpy

    “Give us a cheaper deal or we will, er…, continue to draw on the existing facilities.”

    Brilliant tactics!

    It is indeed all bluster without a plausible plan B (which, in a perfect world, has been readied in private for some time).

    Purely for administrative and accounting purposes Ireland needs to functionally separate the management of total monies borrowed for the support of the banking system since the initial bank guarantee from the monies borrowed for meeting the primary budget deficit since that time.

    We then ascertain what proportion of banks deposits are backed by assets (at current market prices).

    Our plan B has to be bank resolution – possibly with no bondholder repayment of any kind and the loss of a proportion of all deposits, a short period of drastic austerity with whatever help the NPRF can give us and a believable commitment to meet the costs of borrowing related only to the primary budget deficit. We stick the ECB/EFSF with the costs of the bank bailout so far and suffer the rest ourselves.

    Whether we leave the Eurozone will not be up to us at that point.

    It has the possibility of resulting in failure and national ruin, the current approach seems to have those same outcomes as a guarantee.

  42. Irish are known for their bluster…and more.

    However on this occasion I don’t think Irish bluster will work…even with support from POTUS.

    Bottom line, as far as Brussels is concerned, the banking crisis was politically undertaken by then Gov for whatever ignominious raison d’etre. Current Gopv cannot but stomach its own failure to avoid the issue of sovereign contagion.

    After all, beggers cannot be choosers!

  43. @grumpy

    When MoF Noonan trots off to the ECB, he may well learn the uncomfortable truth that the ECB might turn off the tap. It is clearly not sustainable for ‘recapitalized banks’ to draw down the equivalent of half a year’s worth of GDP in a month from the ECB.

    Talk of Ireland bringing down the euro must be evidence, in a commercial context, of an atavistic roman catholic death wish. It’s suicide bomber psychology. Presumably, its advocates have invested heavily in gold. How long would FDI remain in those circumstances?

    The internal commercial debt situation in the country is dire by even the mildest of anecdotal standards leading to a debt chain reaction among suppliers. Even if high court judgments are obtained (cost €20k+) there is no guarantee that the claimant will get anymore than a fraction of the outstanding debt in a liquidation. Money is dwindling in the commercial sector. Until the internals of the economy are fixed, the external redresses simply have to be borne. As I said earlier: default begins at home.

  44. @Jockser

    “What worries me is that Merkel, Sarkozy et al don’t seem to have a plan so they are constantly trying to seek short term remedies in the hope that eventually Ireland will return to growth and everyone will live happily ever after.”

    They don’t care if Ireland returns to growth as long as the core returns to sustainable growth and their economies survive. They want us to sign up to the deal, to default down the line and for us to re-pay as much as humanly possible, including in terms of natural resources, over the next 30 years.

  45. Are there any an Articals that expain what the CCTB actuall is?

    Everything I read refuses to fully discuss the policy – the CT rate is untouchable.

    I’m not fully clear how the CT rate is affected by the CCTB?

  46. We are borrowing from the EFSF at exhorbitant rates and paying openended social welfare to EU recipients unemployed in Ireland.
    Those are the EU rules.

    But why the hell should we pay welfare to any unemployed EU citizen and carry the burden for the unemployed of Europe on our shores when we are being squeezed by interest rates that are based on punishment and retaliation.

    At the very least Kenny and co should use this as a bargaining chip to lower the interest rate in line with IMF one or else we cut off all sw payments to EU nationals in Ireland.

  47. @ finfacts

    “Just keep in mind as regards advocates of quitting the euro, NO advocate of such a move has even bothered to outine how that should happen without collapsing he economy.”

    May I suggest you need a shave http://pespmc1.vub.ac.be/occamraz.html with occam’s razor. We should narrow down our problems at this point to whether its better to stay or go, not just apply any sort of propaganda fuzzy logic to falsely convincve us why we must stay in the EZ.

    Your proposition above assumes our economy won’t collapse but let’s see what’s offered to us before we make a judgement on that.

    What I find curious are the assumptions you make that; 1 the economy will collapse if we leave the euro, 2, that implications re leaving the euro need to be spelled out.

    But then I remind myself we still live in a rather narrow and closed society where debate on such matters is narrowly controlled. It is extraordinary in all the debate on the negotiations regarding our ‘ bailout ‘ including the D word, that media havn’t outlined in detail exactly what the implications of leaving the euro, eg for a PuntNUA or rejoin sterling, could be.

    This is because there is a narrow agenda to stifle debate around this.

    So glad you asked the question, but perhaps Big Brother can only give you the answer to your question. I don’t see debates every night on RTE about it, do you? I wonder why?

  48. What is the story with Rottweiler McDowell? Is he looking at a comeback? What was he doing in the Sindo today ?

  49. Thanks Joseph,

    Haven’t had time to read report yet but one line in excutive summary stands out.

    “…profits would be allocated between the participating
    Member States based on a formula apportionment and taxed in each of the States at the corporate tax rate applicable in that State”

    The rate that companies pay on profits would rise but it looks like the Irish state can still set its own rate for profits that are made in Ireland.

    I can’t really see what the problem is with this – why should the EU allow MNCs to cheery pick where they declare their profits. Profits should be declared where they are made. An equitable tax system has to based on a link between costs and benifits.

  50. @all

    Pardon my ignorance, but what has prevented us applying solely to the IMF for a bailout loan? Why must we also be bailed-out by the EU/ECB?

    I know this was all very much in doubt when Greece had to be bailed-out, but are we obliged to go to the EU for money? After all, we are fully paid-up members of the IMF.

    Is it simply a question of the bail-out being too large? If so, how would our bail-out compare with Iceland’s?

    Could scapping the deal with the EU and working only with the IMF be a workable plan B, if we are faced with the continued ignorance of the Euro-wide banking mess by France and Germany?

    I would imagine that any realistic threat of Ireland dealing directly with the IMF would focus minds in Brussels and Berlin.

  51. Thank you all for your comments. I do agree that the attempt to prop up property values and wages in the short term was successful. However in the medium to long term it will resemble the Japanese slow motion wreck that has lasted for over twenty years. My firmly held point of view is that LCTR on their own puts us in the same category as Cayman Islands, Panama, Costa Rica, Bermuda, Lichtenstein where “goods and services” are imported/exported with value added and subtracted to reduce worldwide taxes for MNCs. Very few jobs are generated in the countries of convenience and the tax revenue is also quite low. Ireland has to reduce rents, wages and other costs of doing business if we are to regain our previous reputation, prosperity and business acumen. LTCR on its own is for losers devoid of business sense, imagination and the ability to face the facts. It is not necessary for us to endure twenty years of stagnation before we come to our senses. We endured fifty years of stagnation in the recent past let us firmly resolve not to make LCTR the new protectionism.

  52. Perhaps under CCCB more companies will choose to locate more of their employees and Assets in low tax countires such as Ireland.

    Companies will still be attractive to counties with low tax rates and motivated (by the new calculation) to locate larger sections of their business their.

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