April Fools One Year Ago

Given the day that’s in it, I was contemplating whether to do a funny story. But then I remembered the Irish Independent’s entry in the April Fool’s stakes from last year and figured I couldn’t beat it.

Brendan Keenan interviewing Brian Lenihan:

“With the banks playing for time, and the regulatory system discredited, we needed to establish an asset-relief programme like NAMA. That takes time to put into practice. It can’t be done overnight.”

He makes a point that tends to be overlooked in discussions of whether more should have been done sooner. It could not have been done 12 months ago, with the financial markets fretting over the scale of the budget deficit.

The country came close to not being able to borrow the money to keep it running. Attempting to cover the bank losses as well might have made that danger a reality.

At the time, however, I didn’t find it that funny.

78 thoughts on “April Fools One Year Ago”

  1. Does this qualify

    Ms. Atkinson of IMF=

    I have another question online: What is the IMF’s feeling on the stress tests in Ireland and their utility in restoring confidence?

    I am just going to put that off -– we are expecting announcements, as you all know, from Ireland on their stress tests later today so I don’t want to anticipate those announcements now.

    QUESTION: Aside from these stress tests, does the IMF still believe that Ireland should restructure unguaranteed bank bonds?

    MS. ATKINSON: That is like, have you stopped beating your wife.

  2. @karl

    Ah yes ‘hubris’, fittingly laid low by Nemesis a.k.a. stress tests.

    There is no escaping the past.

    As I age, I am more and more reminded of the meaningless gushing of Nimrod in The Inferno – Raphèl maì amècche zabì almi – followed by

    ‘he started screaming from his fierce mouth for which no sweeter psalm would be proper’.

    We need to leave aside all the babble of debate and get to grips with Honohan’s key point – the economy can only recover with jobs.

  3. There have been many April fools through the bubble years and it could be convenient to bookend the banking crisis with Brian Lenihan’s Oct 2008 comments that the bank guarantee scheme was “a necessary first step” and “the cheapest bailout in the world so far,” with Central Bank governor Patrick Honohan’s comment yesterday that this was “one of the costliest banking crises in history.”

    However, it’s relevant to ask of the many who are now foaming with indignation, where they all were when for example criticisms of budgetary policy from the ECB and EC were greeted with “bizarre” (Harney), “alarmist” (IBEC), and “a misunderstanding” (ICTU)? And the questions could go on.

    It’s also relevant to repeat the Reinhart and Rogoff comment again from a current paper: “The larger debt buildups in Iceland and Ireland are importantly associated with not only the sheer magnitude of the recessions/depressions in those countries but also with the scale of the bank debt buildup prior to the crisis – – which is, as far as these authors are aware – – without parallel in the long history of financial crises..” Their own history covers 800 years – – a time scale that has some resonance for Irish people.

    We do have choices but none are palatable.

    Within the Eurozone, Governor Honohan set out the options yesterday: “So I think the arrangements with our European partners could over time be restructured in such a way that we give them a bigger share of our prosperity and our growth and on the other side if things don’t go well that we would have deferrals and a longer period of time.”

  4. “We campaign in poetry, but when we’re elected we’re forced to govern in prose,” New York governor, Mario Cuomo, said in a speech at Yale University, in 1985.

    That observation about politics isn’t a surprise.

    Is it likely that the academic critics of Thursday’s announcement would likely share Prof. Honohan’s view of the options, if they were looking down at the world from his tower on Dame Street?

  5. The bankers ……

    “They led everyone up the garden path. I think it’s fair to say there was an element of denial on their part.”

    Well, call them in and lead them straight to Mountjoy – that might clarify the issue for them.

  6. If anyone has ever applied for finance from a bank there are all manner of commitments to the truthfullness and accuracy of the information provided – with legal consequences of knowingly providing false information.

    Why then have this shower of s*** not been made to answer for the false and misleading information provided to the CB and MoF et al.?

    If they lied willfully there should be consequences.

    If they didn’t understand what was happening there should be consequences.

    There should be consequences personal and severe to all involved in this shameful episode – willful or not.

    They have just taken the country back 30 years and impoverished the state for two generations at least.

    If you drove a car in the manner these people drove the banks and crashed, for sure, there would be consequences.

    “It is a political decision”. CEO Pimco

  7. I think it was Prof H who said yesterday that the stress tests went far further than even the banks would have.
    And that has always been the problem with the banks.

    What sort of risk management system would they have been using in 2007 ?

  8. @ seafoid

    the risk management staff in our banks are probably the finest solitaire players in the world.

  9. It looks like Michael Noonan has triggered the biggest explosion of mourning in Ireland since the Kennedy assassination. For why? Because, as calculated by a reputable international company, and assuming an adverse scenario that is extremely unlikely to occur, the amount that the banks need hasn’t turned out to be nearly as high as the doom pornographers predicted and, as a consequence, Noonan has concluded that Ireland can comfortably sustain its debts, which, away from all the hyperbole and hysteria whipped up in the media and on sites like this, is actually not much different as a percentage of GDP than the OECD average (113% at peak in Ireland in 2013, versus just over 100% for the OECD average). To put it in a nutshell, Noonan has come down on the JTO side of things, and rejected the McWilliams/Kelly/Gurgdiev/Lucey line. I like to dream that he has done so because he has been reading my posts on here. Of course, that is vanity and nonsense, as daft as my believing that Fergie picks his team on the basis of my comments in the Man U fan site. But, still I can dream, can’t I?

    As the Department of Finance presentation put up on another thread shows, Ireland’s debt repayments in coming years will amount to around 5% of GDP. In the early 1990s, they amounted to 10%. And that was in an economy that was barely one-third the size in real terms that it is now. Back then, no one called for a default, and the growth that followed made the debt repayments easily affordable. The reason so many more are whining for a default now has nothing to do with economics, but is simply a manifestation of the spiritual, moral and cultural decline that has occurred since then. The generation in the 1980s and the early 1990s were a lot poorer in real terms than today’s generation. Living standards and employment prospects were a lot lower then. Contrary to ESRI claims, net emigration was much higher. Social conditions and poverty were a lot worse. And, in addition, a war of resistance was taking place an hour’s drive from Dublin, which has now happily ended. But, that generation had much higher spiritual, moral and cultural and standards and would never have contemplated default.

    I really feel sorry for most posters on this site this morning. They haven’t got any of what they wanted. Nothing at all. Nothing new there, of course. But, this time they haven’t got FF to kick around and blame for their frustration. No prospect of an early election to relieve them of the burden of pain they are experiencing this morning. They were simply self-deceiving themselves into believing that all the decisions made in the past couple of years were the result of evil Fianna Fail’s greed and desire to reward their paymasters, and that a Fine Gael-dominated government would act differently.

    As Noonan himself said, the key now is growth. Between Q1 2010 and Q4 2010, GNP rose 4%, one of the highest rates of growth in the EU. Noonan must ensure that this continues. As recent figures and today’s manufacturing PMI show (manufacturing employment growing at its fastest rate since 2000), the wealth-producing and exporting sectors of the economy are roaring ahead. I work in one and am currently run off my feet. However, the construction industry is still at rock bottom. No houses, office blocks, shopping centres, roads are being built currently. As last week’s GDP figures showed, construction output as a share of GDP has fallen to 3%, compared with the norm of 7% to 9% in developed countries. Ireland should be at the higher end of this range because of its extremely high natural population growth. Nearly all the fall in GNP since 2007 has been due to a fall in construction output. Nearly all the fall in employment since 2007 has been in construction. This is no accident. The construction industry had been demonised for a decade before this collapse by the Dublin 4 media/academia classes. Wild exaggerations of the number of empty houses and the likely fall in house prices have been churned out daily by those same media/academia classes in order to destroy all confidence in that great industry. Given that the the wealth-producing and exporting sectors of the economy are now roaring ahead, Noonan’s first priority must now be the resurgence of the construction industry. Much though the Dublin 4 media/academia classes will vilify him for it, he should revive the Galway Tent this summer, this time as Fine Gael’s social centre, and formulate a plan with the leading developers to get construction projects going again.

  10. @ Ordinary man

    If they lied willfully there should be consequences.

    It’s fraud, by any definition you may care to use. But they won’t face any consequences, because laws in this country aren’t for the middle class and above, are they?

  11. There has been nothing wrong, as far as I can see, with the economic arguments advanced by those who advocate bondholders being made to share some the pain. There has, however, been an underestimation on their part of the political and institutional constraints.

    The next stage of negotiation relates to the level of interest rate being charged under the EFSF, an issue that is intimately linked to what happens in Portugal. Arthur Beesley puts the issues well in today’s FT but overlooks this institutional point.

    “It is in Budapest that the Minister must overcome Franco-German pressure to provide a concession on corporate tax in return for a one percentage point cut in the interest rate on Ireland’s bailout loans.

    That debate, “parked” last week pending the stress tests, now looms again. Whereas Germany has signalled its willingness to accept something other than a gesture on the tax, France has not yielded an inch.

    In all likelihood, Mr Noonan will have to provide something substantial on the fiscal front to get better terms. While he may see potential here in overlooked elements of the programme for government, he needs to avoid being accused of presenting something old as something new”.

    What could this something new be, bearing in mind that it depends on the present coalition coming to terms with the fact that it is not part of Europe’s responsibilities to help paper over their political and economic differences?

  12. @JTO

    ‘To put it in a nutshell, Noonan has come down on the JTO side of things, and rejected the McWilliams/Kelly/Gurgdiev/Lucey line’

    A bit of company for you? (-:

    ‘ In addition, a war of resistance was taking place an hour’s drive from Dublin, which has now happily ended. But, that generation had much higher spiritual, moral and cultural and standards and would never have contemplated default.’

    You are right there.

    But I would suggest there would have been serious consideration given to whether they should shoot the authors of this catastrophe, for behaving like the economic terrorists that they are, against the Irish people.

    ‘Nearly all the fall in employment since 2007 has been in construction. This is no accident. The construction industry had been demonised for a decade before this collapse by the Dublin 4 media/academia classes. Wild exaggerations of the number of empty houses and the likely fall in house prices have been churned out daily by those same media/academia classes in order to destroy all confidence in that great industry. Given that the the wealth-producing and exporting sectors of the economy are now roaring ahead, Noonan’s first priority must now be the resurgence of the construction industry.’

    So it can collapse the economy again? Think about that.
    You want another boom to bust?

    Can you get that ‘gear’ you are on in a bottle? (-:

  13. @EWI

    It’s the ‘appaling vista’ of someone with a shirt and tie actually being a criminal.

  14. April Fool gags? Leave it to the professionals at the Irish Indo. Classic.

    McCreevy joins board of BNY Mellon’s Dublin unit

    By Donal O’Donovan
    Friday April 01 2011
    FORMER finance minister Charlie McCreevy has been appointed as a director of Dublin-based Bank of New York Mellon Clearing International (BNY Mellon Clearing), a unit of the global banking group.

  15. @ Ordinary Man

    ” Can you get that gear you are on in a bottle?”

    Only in the North where their govt allows it – probably banned down here!

  16. @ JtO

    I agre that the tiny minority of us have been entirely proven correct by yesterday’s events but let us not stoop to the standards of the populists and gloat at our vindication.

    I think the fact that default is fashionable this time round is not so much a sign of moral decline but more as a result of the academic populists stirring up the thesis that this problem is all to do with foreign speculators and bankers and feeding a fantasy that a small bonfire of that evil elite would solve all our woes. In the 1980s/early ’90s we really didn’t have any scapegoat for living beyond our means.

  17. @ Noel
    There’s a crossborder opportunity Intertrade Ireland might show some interest in if you get the legals right ! (-:

  18. @ David O’Donnell

    I have a hang-over …

    Reconsidering revolutionary marxism ….

    Two frauds don’t make a right!

    @ DOCM

    Noonan should tell belligerent colleagues to Zug off!

    THe CT rate in the Swiss canton of Zug is 8.8%; it can be lower and is geared to attracting companies with most of their activities outside Switzerland.

    The EU considers the low rates to be in violation of a 1972 free trade agreement with Switzerland.

    Noonan could agree a review on some aspects of non-rate issues with a fudge providing that any change proposals only to take effect on the return of prosperity.

    @ All

    There is a point when the siren voices of the well-heeled on default and confiscation of savings can become self-fulfilling prophecies while people lose their jobs as a result.

    Of course everyone should know that there is a State deposit guarantee but why are people withdrawing cash and literally putting it under the bed?

    There is no easy way back while the international backdrop in the developed world is going to remain rocky for several years.

    Servicing the national debt took 28% of tax revenues in 1991 but the net cash receipts from Europe in 1991 at 6.2% of GDP more than offset the interest burden. In 2013 we will become a net contributor to the EU budget for the first time since 1973 after receiving over €40bn in aid.

    In 1987, Ireland’s debt to GDP ratio was 125% and the spread on Irish 10 year bonds with the German bund was 700 basis points or 7%. On joining the European Exchange Rate Mechanism (ERM) the spread began to fall, and was down to 100bps in 1992. Before joining the euro in Jan 1999, the spread was 10-20bps.

    As that great leader Mao Zedong, once said:’Every long march begins with a first step’

  19. @Michael H

    “We do have choices but none are palatable.

    Within the Eurozone, Governor Honohan set out the options yesterday: “So I think the arrangements with our European partners could over time be restructured in such a way that we give them a bigger share of our prosperity and our growth and on the other side if things don’t go well that we would have deferrals and a longer period of time.””

    What do you think he had in mind? It struck me at the time as odd to be referring to sharing ‘our prosperity’ at the current time. Are we talking about the beginning of the end of the existing MNC friendly tax regime? More austerity and higher taxes? Hard to see how Croke Park can weather this storm. If I hear anymore BS about protecting ‘frontline staff’ I’ll contemplate jumping out a ground floor window.

  20. @ JtO

    I agree with your analysis, and am surprised that this isn’t the story this morning – that our debt level seems sustainable, and the the doom-mongers may have been proven incorrect. This could be a turning point as it’s the first time when the worst case scenario being mooted has not materialized.

    On another point, you must get very tired carrying around that monumental chip on your shoulder…

  21. @Michael Hennigan

    Mao ZeDong, after a cure in Bandon, has retaken Kinsale. Next step Cork for the Rebels … & since the wise men have not spoken …. looks like we are all fools now … revolutionary marxism looks more appealing … (-;

  22. Was the greatest April Fool’s joke the release of ILP’s annual report on Wednesday evening which basically said everything was hunky-dory and the stress test results yesterday which said they needed another €4bn to keep their banking licence.

  23. I’ve asked this on another thread

    €70Bn was dolled out on property either residential or commercial over the past 15 years. There have been many casualties in this war todate, some were lucky to escape because they sold a property/piece of development land the right side of the boom. This wealth remains at large!

    The ECB in cahoots with the government should freeze all Irish resident bank accounts with more than €50K and instigate an immediate investigation using CAB. Those that received more than the inflation based price for property since 2002 (an earlier year is fine) should be stripped of the excess and this cash given back to the ECB from where it came

    For all those in a tizzy about the concept, remember we are bankrupt, the government will use private pensions to purchase government before this is over, the tax payer will foot the bill, education/hospitals everything will time warp backwards beyond recognition.

    Yes it is unfair but no worse than the inevitable

  24. @ Micahel Hennigan

    What I said was: “What could this something new be?” The issue of the French demand in respect of corporation tax is not new and the French, and everyone else, know that it cannot be conceded. The concession already made by Ireland, i.e. to agree to examine with a degree of scepticism the proposal on CCCTB, is already banked.

    Differences in fiscal and social laws are not considered as distortions of competition under the treaties. The Member States can adopt common rules but without making them necessary conditions for the internal market. This distinction is reflected in the two articles dealing with the internal market Articlel 114 TFEU (the basic article dealing with the internal market which is subject to QMV and co-decision with the European Parliament) and 115 TFEU (subject to unanimity and simple consultation of the European Parliament). The CCCTB proposal is necessarily based on Article 115.

    What is at issue, therefore, is not just Ireland and the level of company taxation but the view that one takes of the concept of “necessary conditions” for the success of the Euro Plus Pact. The Franco-German view on this issue is fairly widely shared within the eurogroup but not, however, outside it. When the CCTB negotiations run into the ground, which they inevitably will, the key question will be whether this happened because of the impracticality of what is proposed or a difference of political view on the desirability of proceeding. If the latter, then the possibility of nine countries using the enhanced cooperation provisions of the Lisbon Treaty to proceed on their own cannot be precluded.

    By the way, you quoted statistics some time ago on the growth in social welfare payments but I regretted that the information was not presented in a time series i.e. can one distinguish between what I would call the “Bertie largesse” aans the dramatic increase as a result of the crash?

  25. On V Browne show last night Constantin made a bit of a fool out of Richard Bruton. Easily done considering Richard was attempting to toe the party line.

    However in one nugget Richard mentioned that now via bond/collateral the ECB as bondholer now ranks ahead of depositors?! Maybe I heard this wrong or it was an early April fools joke but it certainly worried me.

    Was it just a slip of the tongue?

  26. @Brain Woods II

    I agre that the tiny minority of us have been entirely proven correct by yesterday’s events

    Yes indeed Brian, the collaborationists can be proud of the comprehensive defeat for Ireland that they have so bravely secured.

    So well done to everyone who put the interests of business and European financial capitalism before Ireland’s. Rest assured, history will not forget you.

  27. @ MM-ff: “As that great leader Mao Zedong, once said:’Every long march begins with a first step’”

    Michael, MzD was NOT looking in his rear-view mirror, ie. a virtual step forward = a real step backward! The Irish citizens have been betrayed Michael. Its just that simple.

    The REAL problem is the FIRE economy. This is a truly marvelous scheme to enrich the few at the expense of the many (I am no a socialist by the way – I am being educated in the Ghengis Khan School of Political Economy).

    The only ingredient (major input) of the FIRE is credit which may be conjured up from nothing. Nothing! Once emitted it immediately metamorphoses into a real, exponentially growing entity – debt!. There’s your problem – trillions of debt (aka. negative future disposable incomes).

    Ireland now has been handed a platinum opportunity to destroy the FIRE and restore the old-fashioned Production-Consumption economy (albeit in a sustainable form). We simply hurl our bank debts into the global financial slurry pit. Yes, everyone gets to get splattered, but there will be a lot less debt s*** in that pit. Once splattered? Yep, you become awfully careful – for a while anyways.

    BpW

  28. @Seafoid

    ILPM down to 17 cents with a market cap of 50 million.

    As Irish Life is supposedly worth €2billion in a sale, that values the PTSB bank at -€2billion. And the State is agreeing to put more money into. There is an astounding level of insanity in all this.

    @JTO
    If your tax contributions to the Irish State were as voluminious as your posts in this site, we would be out of the debt problem in jig time.

    @ All
    Personally I think we should now have a surcharge of 20% on all incomes above €50,000 in order to pay off the largesse shown to the European bondholders. The generation that has destroyed the country should not be allowed to place the burden of their economic treason on future generations.

  29. @ Oli Twist

    Technically, I think, ECB, senior bondholders and depositors rank pari passu in a liquidation. But if the bank does go into liquidation any collateralised creditors including the ECB and some covered bondholders have the collateral assets as security. So yes, as creditors, they are in a stronger position than depositors. However, if depositors lose out in the liquidation the various guarantees will make them good.

  30. @ Brian

    Thanks, suppose clarifies a bit more how they hold the gun to our head.

    By guarantees I assume you mean those issued by the sovereign? Hardly inspiring, and wouldn’t exactly push one to have any money down with an Irish bank?

    On a side note I see Anglo and the Central bank have been issuing guarantees to each other in lieu of collateral…………..you couldn’t make this stuff up but it seems perhaps you can.

  31. @ Joseph Ryan

    5 years ago ILPM was valued at €5.5bn
    Say €2.5bn of that was Irish Permanent. That would mean a return on capital of -€4.5 bn in 5 years.

    I wonder how much the accountants and auditors get paid.

  32. @ Oli

    I agree that there are some fairly strange “smoke and mirrors” behaviour afoot.

    @ All

    Can’t we see now that when it comes to the incredibly complex problems of a modern financial collapse that elected politicians are way above their pay grade (i.e. typically school teachers). They just have to follow what the mandarins, and technocrats and eurocrats tell them. What Noonan did yesterday would be almost identical to what Lenny would have done if he was still in the hot seat.

    Furthermore if Noonan was in situ back in September ’08 he would have done substantially what Lenny did from that date i.e. what the technos told him to do. Even SF in power would have done what they are told.

    It is similar we went to war. The Commanderr in Chief would nominally be Enda or maybe Mary but the real decisions would be taken by the generals, same with this financial crisis.

  33. Ireland’s sovereign debt rating has just been cut to BBB+ by S&P. A clear signal that the Government’s acceptance of the bank obligations puts the country in a position where it will not be able to repay the debts.

  34. @ Colm

    “A clear signal that the Government’s acceptance of the bank obligations puts the country in a position where it will not be able to repay the debts”

    Eh, do you just make this stuff up? Stable outlook and one notch downgrade far, far less than feared. This is ridiculously good news relative to expectations. Some people were talking about a 3 notch downgrade and remaining on negative outlook. Essentially a thumbs up from S&P, and the first “stable” outlook for PIG bonds since the crisis erupted last year.

  35. “We believe that the Irish economy has stronger growth prospects than the
    Portuguese and Greek economies considering its openness (Ireland’s exports are forecast at 107% of GDP for 2011 compared with Portugal’s 30% of GDP), its flexibility, and its competitiveness,” Mr. Gill said. “We anticipate that Ireland’s current account will post a full-year surplus of more than 2% of GDP during 2011, for the first time since 2003, while net exports will continue to be the major contributor to headline GDP performance.”

  36. @Brian Woods 11

    Can’t we see now that when it comes to the incredibly complex problems of a modern financial collapse that elected politicians are way above their pay grade (i.e. typically school teachers). They just have to follow what the mandarins, and technocrats and eurocrats tell them.

    Incredibly complex? No, I can’t see that now. Is it an incredibly complex decision to hand over €70 billion of ordinary people money to gamblers who lost? Complex?
    And would these be the same mandarins, technocrats and eurocrats that spawned the whole ******* ponzi scheme and saw it bloom to its full potential and got very very very well paid for their Maddofrie.

  37. @ Bond, Eoin Bond

    I accept that my post was a bit overdramatic but the truth is the rating agencies have been behind the curve on this Sovereign Debt crisis, as they were on the Financial crisis in 2007/2008.

    The level of debt which the Irish government has accepted liability for can only be stabilized in a case where we run a primary surplus and real growth is within 2% of our real interest rate. As we draw down the IMF/EU funding our interest rate will get closer and closer to 5.9%. Do you really believe we can achieve and maintain a primary budget surplus and maintain a 4% growth rate in an environment where the ECB is raising interest rates to protect German consumers from a moderate level of inflation?

  38. @ Jo Ryan

    I take your point that the Mandies got it terribly wrong. But the fact remains that elected schoolteachers are completely out of their depth in making these calls and they quickly recognise that fact and simply toe the Mandie line.

    It was incredible to listen to Howlin on radio this morning. Justifying his U-turn on bondholder bonfires he explained in quite informed detail how you would only get a few billion and the risks to funding, reputaition, ECB support etc. would be enormously disproportionate to the nominal savings. Well now isn’t that what Lenny was saying when Howlin, La Burton etc. were booming “Frankfurt’s way or Labour’s way”.

  39. “This is ridiculously good news relative to expectations.”

    So the 10-year comes all the way down to 10.1% in response to ridiculously good news?

  40. @ Joseph Ryan

    Speaking of that €70bn.

    If the government’s policy does work out at around this cost, and Ireland does end up with two, healthy mid-size banks, how does the State then get its money back – plus a bit more for nuisance value?

    The programme for government suggests: “Once the banking sector has been restored and is functioning effectively, we will introduce a bank levy based on the size of a bank’s liabilities (other than shareholder capital).” Any ideas what this means in practice? What other ways are there of getting the cash back?

  41. @ BW2

    It is not as though the best paid financial professionals in the country would have done much better. Look what many of them did to their employers. The name of the game is power. Ireland vs the bondwallahs is like Gaza vs Israel. So even if Gaza/Ireland had the best leadership it wouldn’t change anything.

  42. @ Joseph Ryan

    That sounds about right.

    They try to make it sound complicated to confuse ‘outsiders’.

    But you are right it is all incredibily simple – they have confused themselves with their own analysis and can’t admit it.

  43. @ Colm

    “but the truth is the rating agencies have been behind the curve on this Sovereign Debt crisis, as they were on the Financial crisis in 2007/2008”

    So why bring their decision up as a reason to justify your point on debt unsustainability? It either suggests Ireland will maybe be ok, or you can just ignore it as a musing from a discredited organisation. But it in absolutely no way “clearly signals” that Ireland is gonna default.

    @ Kevin

    the hope is that we are starting out on a long, potentially very long, road to economic recovery and fiscal sustainability. Probably a bit much to expect everyone to buy into it in the first few hours. But its a start.

  44. @ Michael Hennigan

    “Within the Eurozone, Governor Honohan set out the options yesterday: “So I think the arrangements with our European partners could over time be restructured in such a way that we give them a bigger share of our prosperity and our growth and on the other side if things don’t go well that we would have deferrals and a longer period of time.””

    When I heard that I took it to mean that Patrick Honohan had already agreed that any “economic” surplus (GNP) for the forseeable future is now the property of the EU.

  45. @ Brian Woods 11

    ‘ I agree that the tiny minority of us have been entirely proven correct by yesterday’s events but let us not stoop to the standards of the populists and gloat at our vindication’…….
    ‘Can’t we see now that when it comes to the incredibly complex problems of a modern financial collapse that elected politicians are way above their pay grade (i.e. typically school teachers). They just have to follow what the mandarins, and technocrats and eurocrats tell them’

    You have been right in this limited sense. You correctlly identify the fact that the new goverrnment is as helpless as the old one, and that the MoF is being blown along before the big EZ players. These are the same technocrats who (in the most benign interpretation) failed to anticipate the current forces driving the EZ apart.

    The EZ was intended to be a vehicle which would promote the growth of all states within it. It’s now being downgrade to a vehicle which promotes the growth of ‘core’ states, and the divil take the hindmost. Nice.

    Richard Bruton actually began to listen to the dreaded Gurdgiev last night on VB. He could not fail to see that the ‘market aware’ panel were not buying any part of his ‘plan for recovery’. Let us hope there are a few more listeners in the cabinet.

    @ BEB

    ‘……..Stable outlook and one notch downgrade far, far less than feared. This is ridiculously good news relative to expectations’

    Yes, but the managements of market expectations is all part of the ‘plan’. Lets see how long it takes for the shine to wear off.

    @ B-E-B

  46. @ seafóid

    I am not arguing that Mandies do a good job. What I am saying is that elected politicians quickly feel out of their depth and toe the Mandi line. My contention, impossible to prove one way or the other, is that the official response since this crisis broke would have been much the same no matter who was in power.

  47. @Greg & others

    “So I think the arrangements with our European partners could over time be restructured in such a way that we give them a bigger share of our prosperity and our growth…”

    Is this central banker speak for conceding on Corporation Tax?

  48. Well if we’re talking about fools, spare a thought for whoevers money it was that was involved in the 500m private placement in BOI’s capital raise last year. From pg111 of http://www.bankofireland.com/fs/doc/publications/investor-relations/interim-results-20101.pdf

    “The placing, comprised the Institutional Placing1 and the NPRFC Placing1. The institutional placing involved the issue of 326,797,386 units of ordinary Stock at a price of €1.53 per unit of Ordinary Stock. The price at which the Ordinary Stock was issued to placees represented a 15% discount to the closing price of €1.80 of the Existing Stock1 on 23 April 2010 (being the last practicable date prior to announcement of the proposals). Placees were considered qualifying stockholders for the purposes of the rights issue in respect of their Ordinary Stock.”

    I hope they didn’t use some poor mug’s pension pot for green jersey exercises.

  49. @Gavin Kostick

    The programme for government suggests: “Once the banking sector has been restored and is functioning effectively, we will introduce a bank levy based on the size of a bank’s liabilities (other than shareholder capital).” Any ideas what this means in practice? What other ways are there of getting the cash back?

    I have a a real problem with this as well. Why?
    Because in the MoU document of last November (EU/ECB/IRL), it explicitly states that as soon as the banks are nursed back to health, they must be put back into private ownership. [The motto-Its the profits, stupid]! It says absolutely nothing about recovering bailout funds or levies etc etc.

    I would go along with Churchill’s conception of time in relation to getting the money back from the banks…’If it takes a thousand years’…

  50. @ BW2

    We have no way of modelling the relationship between the banks, the developers and FF and the level of corruption that existed. Once the EU
    got on board the thesis is probably sound but before that was nothing salvageable ?

  51. http://www.ft.com/cms/s/0/df9d628a-5c48-11e0-8f48-00144feab49a.html#ixzz1IHPLiRzR

    “The seasonally adjusted jobless rate in the 17 countries that use the single currency fell to 9.9 per cent from 10 per cent in January, according to the European Union’s statistical office, following an upward revision of previous monthly data. But a breakdown of the figures shows a widening of the chasm that separates the so-called “core” countries, led by Germany, from the struggling “peripheral” ones with far weaker economies.
    Over 50,000 of the 77,000 net jobs created in February were in Germany, whose 6.3 per cent unemployment rate is now among Europe’s lowest.
    By contrast, Spain’s jobless rate crept up 0.1 per cent to 20.5 per cent, with a record-breaking 43.5 per cent of its youth unemployed. Ireland, Portugal and Greece also remain firmly in double figures, with little improvement in recent months.”

  52. @ ceteris paribus

    It’s Central Banker speak for surrender.

    We had a banking crisis which morphed into a crisis of confidence in the government of the day.

    We had an election where the central platform of the “winning” parties was the restructuring of bank debt.

    Three weeks into the term of the “winning” parties’ and democracy has been further debased.

    Fine Gale and Labour need to understand that this is “winning” only as Charlie Sheen would understand it.

    Corporation Tax?

    It’s over. The CCCTB will see to that no matter what the headline rate is.

    Don’t expect Fine Gale or Labour to do anything about it.

  53. @ Ahura Mazda

    “I hope they didn’t use some poor mug’s pension pot for green jersey exercises.”

    You can be damn sure “they” did.

    You surely didn’t expect “them” to use their own money.

  54. @Alchemist

    (Disclaimer: I am not an expert on anything.)

    The more immediate problem with Honohan’s suggestion is that no-one seems to have any interest in taking the other side of the deal by agreeing to cover our additional losses (by expending our repayments, or any other means) if our losses exceed the projected levels. Honohan seems to love the idea, but I don’t see any sign that the usual suspects in the EU like it any better than they like senior-bank-debt haircuts or more plain-vanilla forms of grants.

    Of course Honohan would argue (and I’m sure does argue) that this concept isn’t just grants in one of their many forms because unlike grants it would be profitable (or at worst profitable-to-cheap) for the EU (or whoever): the reason Ireland may perform more poorly than officially expected is (largely) because investors fear that it may perform more poorly than officially expected, so if the EU (or some other deep-pocketed actor) sells us insurance for extra losses caused by underperformance then we will (probably) not underperform, the insurer will pick up the insurance fee without having to make any payouts, and we get to muddle through. The first problem is that even if selling this insurance would indeed be a likely money-maker, it still faces most of the political and legal problems that make handing out grants so unpalatable for the Core (let alone the ECB). Try explaining to the German public why we deserve even more of their splendid generosity, or convincing them that NAMAinsuring Ireland really will make a profit. The second problem is that it’s not … completely clear that all we and our potential lenders have to fear really is just fear itself. If you assume that Ireland could well underperform even once insured against it, then the proposed insurance policy starts to look dreadfully like an open-ended grant. In that respect, the fact that the EU is so reluctant to sell even costly insurance, and that Honohan is so keen to buy it, doesn’t inspire confidence in their official expectations (though, again, there are other explanations). There are also problems of moral hazard (on our side) and political risk (on theirs) but those would probably be tractable.

    So I don’t take Honohan’s statement that an insurance arrangement “could” come dropping slowly “over time” as much more than advocacy mixed with hope. Indeed it could happen, but probably grants or senior restructuring are just as likely to happen, and it’s far from clear that any of them will happen at all, at least at a time and in a manner that will make the future less than grim for us. He more or less sounds like one more fellow trying out the idea that the EU will reverse its opposition to grants and senior haircuts if we propose just the right mechanism for implementing one of both of them, or if we ask for them using just the right argument and tone of voice. “What part of ‘no’ don’t you understand?”

  55. @ David O’Donnell

    We actually had a visit from another tyrant and in 1649 was not surprisingly better received in Bandon than in other towns that had too much of a melding with the local savages.

    An American surprised me onetime when he said that the said tyrant, Oliver Cromwell, was the first modern democrat.

    I surprised him when I told him that the democrat was the most hated man in the history of Ireland.

    @ DOCM

    The social welfare data came from The National Recovery Plan 2010-2014 report.

  56. @Michael H,

    Cromwell and his fellow parliamentarians were the first in the modern era to establish the supremacy of parliament – even to the point of removing the head of the king who sought to exercise a divine right to absolute rule. So I’m with your American acquaintance.

    And although his fundamentalist protestant beliefs may not resonate in the modern era (though perhaps in parts of the US), he viewed people who complied with the dictates of a foreign autocracy as being sedituous and treacherous. Perhaps if we had ensured, since the foundation of the state, that laws enacted by the elected representatives of the Irish people had primacy over the dictates of this foreign autocracy we might have reduced the extent of clerical physical and sexual abuse.

  57. @ Paul Hunt

    Here, here !

    Truth is he, like all directing protagonists, fought for the economic and political advancement of his ‘class’ – religion, freedom, marxism, democracy etc. the soup and bread for the uneducated and those with nothing better to do to keep them fighting.

    Has always and will always be.

  58. @Paul Hunt

    Cromwell and his fellow parliamentarians were the first in the modern era to establish the supremacy of parliament

    Most Irish people would selfishly view Cromwell through the lens of the awful misery, impoverishment and destruction he visited on the country in the name of civilizing the feckless Irish and preserving his precious commonwealth but you seem to be emphasising the good governance angle.

    It sounds oddly familiar.

  59. This blog is definitely going Tabloid. Some of the stuff posted here is not worthy of ink to print it. Maybe it is because it is April Fool’s Day and they are all on here today. The big let down for them is that the deficiency is €24 Billion and not €50 Billion as they hoped for so that the ranting could be ratcheted up more. Talk about people having some Patriotism well blow me down it does not exist here. As JTO says this is chickenfeed compared to the 80s when the cupboard was bare.

  60. @ Shay Begorrah

    Drogheda and Wexford looked for a debt for equity swap and Cromwell got really mad. He said their attitude was very cavalier and didn’t take account of the reality as he was creating it.

  61. @ Paul Hunt and others

    Gerrard Winstanley is the man.

    Also John Lilburne, Leveller, fought for parliament, refused to enforce religious intolerance in Ireland.

  62. @ TRP

    ‘Talk about people having some Patriotism well blow me down it does not exist here’

    I am not sure what it means to be ‘economically patriotic’ these days, but most folk on this board seem open to reasoned argument. Some contributions are passionate, which is understandable, given the number of able folk who are kicking their heels. That state of affairs has to be wrong.

    I also find Joe Lee’s ‘Ireland 1912-85’ a very useful, and massively evidenced, aid to thinking about the political economy issues.

  63. @ anonym

    ‘Disclaimer: I am not an expert on anything’

    I doubt that. Your BS detector is in excellent working order.

  64. It’s one year today since Brian Lucey’s Howler in The Irish Independent, for which he has neither explained nor admitted to be just human error (rather than sock-puppet error).

    Remember this: “Anglo can be wound up cheaply — here’s how. Sell the €28bn deposit book. This is a regular event in banking, and even if it has to take a discount of 25pc that would yield €21bn. Sell the bonds and withdraw deposits in other banks. This gives a further €14bn, a total of €35bn, that is sufficient to cover the senior bondholders (€13bn) and the interbank deposits with NAMA (€16bn), with €6bn left over.”

    http://www.independent.ie/business/keeping-it-alive-will-cost-an-arm-and-a-leg-with-any-upside-hard-to-ascertain-2120306.html

    As someone wrote in the Guardian business blog last Sept:

    http://www.guardian.co.uk/business/ireland-business-blog-with-lisa-ocarroll/2010/nov/16/ireland-bailout-crisis

    “Brian Lucey admitted that he was wrong to write a paper at the peak of the bubble claiming that there was no bubble. That’s a good thing and we can all forgive him.

    He hasn’t yet found it in himself to apologise for his suggestion that the solution to our banking crisis is for banks to ‘sell their deposit books’. In a moment that came straight out of a Two Ronnies sketch, Lucey wrote in the Irish Independent on 1 April 2010 (Title:”Keeping it alive will cost an arm and a leg with any upside hard to ascertain”) that Anglo Irish Bank could minimise its shutdown costs by selling its 28bn deposit book at a profit of 21bn.

    Lucey had made the error that only a child could make, he believed that deposits were kept in shoeboxes in the bank’s safe. He didn’t understand that bank deposits were liabilities rather than assets. Well, we all make mistakes and if very unlucky we write them down and publish them and the quality of mercy is not strained but Lucey still won’t admit that he was wrong. Whenever called on this he claims that deposit books can be sold, citing examples of banks who have sold the assets matching the value of a deposit book along with a deposit book at a small premium to market value to account for the goodwill of acquiring a customer base. You might make a few million this way but not 21 billion.

    I can forgive him for mistaking liabilities for assets and for not admitting this and I can forgive him for continuing to draw a state supported 6 figure salary to be a professor of banking at the same time.

  65. JOB,
    as a reluctant taxpayer could you quantify the cost to me of b lucey’s howler versus b lenihan’s cheapest bailout?

  66. @john o Brien,

    “Brian Lucey admitted that he was wrong to write a paper at the peak of the bubble claiming that there was no bubble. That’s a good thing and we can all forgive him.’

    Why should he be forgiven ?
    He wrote a report for a company involved in ratcheting up demand for mortgages in the property scam that was the ‘boom’ for which he was presumably paid.
    At the same time he parades himself in the media as an honest and independent broker which he verifiably is not.

    He also implicates Trinity college ,his employers and the third level education sector in general as there was unanimous support given by them to Nice 1 and 2,Lisbon 1 and 2 which resulted in mass immigration and the consequent need for expansive housng construction,the resultant firehosing of credit into the Irish economy.

    In my view every economist and university commentator should be put under scrutiny as well as the more obvious shills for the ‘boom’ who regularly appeared in the media effectively promoting the destruction of the Irish economy.

  67. Yes Brian Lucey is the real culprit here. Not the ones who called on tose wo criticised to go commit suicide or in 2007-2008 were calling for a soft landing in te property sector or in Sept. 2008 said tat our banks are strong and well-capitalised or called their guarantee ‘the cheapest bailout ever’. Or in 2009 said that NAMA will get credit flowing into the economy or in 2.5 years failed to investigate any crimes that were committed in Anglo. Or for that matter who called the 2009 Dec budget the last tough budget or who have said the economy as turned a corner so many times in the past two years one wonders if the economy is in a maze.

    No sir, Brian Lucey is the one who committed the unforgivable crime of being wrong twice but right over a dozen times as regards the bank bailouts.

  68. @Brian Woods II
    “Can’t we see now that when it comes to the incredibly complex problems of a modern financial collapse that elected politicians are way above their pay grade (i.e. typically school teachers). ”

    This is a bit rich coming from someone who works in an industry which has the most overpaid and – to judge by the mess they have landed us in – least competent people of any industry in the planet. Are you suggesting we should load the government with bankers?

  69. @
    ‘paul quigley Says:

    April 1st, 2011 at 9:08 pm
    @ anonym

    ‘Disclaimer: I am not an expert on anything’

    I doubt that. Your BS detector is in excellent working order.’

    🙂

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