Quote of the day

“When we were faced with a similar situation after coming into government, we agreed with the ECB and we held back from burden sharing with senior bond holders and we didn’t proceed down that road.”

Michael Noonan, reported here.

It wouldn’t be altogether surprising, I suppose, if the most conservative party in the State agreed with the ECB when it came to the distribution of bank losses as between ordinary taxpayers and financial institutions. But this isn’t the story we have been told to date.

So: does Fine Gael — and Labour — agree with the ECB regarding burden sharing with bondholders?

Update: Michael Noonan has said that Anglo and Irish Nationwide senior bondholders should face losses.

41 replies on “Quote of the day”

From ‘Government for National Recovery 2011-2016’

“The Government accepts that enabling provisions in legislation may be necessary to extend the scope of bank liability restructuring to include unsecured, unguaranteed senior bonds.”

Can anyone in our media ask the Government what Patrick Honohan meant by “influence” when he said on VB

” It was influence [nods head] and I think definitely”

in answer to why we agreed to save senior bondholders.

Did the ECB parade the ICBMs which would not have been very diplomatic.

And can anyone in our media ask the Government what is in the secret sideletter to the Memorandum of Understanding. We know it deals with the banks but what does it say?

Comment, of course, is free, but, given its loss of sovereignty in these matters, highlighting the weakness of the Government’s position doesn’t help in advancing progress towards a sensible solution. These matters will be resolved in the corridors of power in Berlin, Paris, Frankfurt, Brussels and Washington. And, although I find it distressing that Ireland is not in a position to express solidarity with Greece and Portugal, it is in Ireland’s interests to highlight the extent to which Ireland is different from them.

I’m pretty sure the sovereign bond market recognises the difference, but they have only one tool – the yield in the secondary market – to convey its view. In so far as the bank-related deficit and debt-burden may be separated, Ireland’s basic fiscal deficit may be resolved. Considerable progress has been made with an admirable degree of popular acceptance (if not a full-throated expression of consent) – and there is little reason to doubt that this degree of popular acceptance will not remain intact to see the process through.

It’s just the darned banks where the ECB and ICB are exposed far beyond what is sensible or reasonable – but have been forced to accept this exposure due to serious political and institutional failings throughout the EZ and the EU. But all this exposure and the Govt.’s bank recap are backed by assets. It will take time to unwind and the political will has not yet been secured. But it will be secured eventually. There is too much at stake.

The basic calculation for Chancellor Merkel and the CDU is to accept a future hammering, lose the FDP, form a coalition with the Greens, but remain the dominant partner. The nuclear about turn is evidence of this thinking. And Joschka Fischer’s paper on another thread highlights Green commitment to the EU project.

Pres. Sarkozy is facing a different challenge – and it’s more immediate. Hence his obduracy. But he, too, wants a way out. He is desperate to avoid being in third place in the first round next May. It’s brutal realpolitik, but Ireland must give him something he can sell to help him out of the corner into which he has painted himself.

I know it’s annoying and frustrating that Ireland’s future economic well-being is being decided by the throw of the political dice in the major EU powers, but that’s what happens when a small nation succumbs to stupidity and greed. It would be best to accept this and only say and do those things that might weight the dice in our favour.

The Irish Times reports this piece of fantasy thinking:

“As the authorities push to strike a new rescue deal at an EU summit tomorrow week, there is concern in Dublin the Greek turmoil could undermine the Government’s effort to regain entry to private debt markets next year.”

It reminds me of the game ‘call my bluff’.

Individually I, G and P are not being dealt with seriously. If they issued a joint declaration of impending default it would cause sleepless nights for both Merkel and Sarkozy. Ireland is not different or unique we are an equeal participant approaching sovereign default. This is not the time for Celtic fantasy and myth the Greeks are better at that than we are.
An example of Ireland copying others is a move straight out of Christina Kirchners raiding of Argentinian pension funds. Different and unique my patooty.

I expect he would say that those remarks are being taken out of context.

“Held back” is not the same as “agreed not do do it ever” 😉

It would be nice to know what is being said behind closed doors between Labour and FG but the people doing the talking aren’t leaking….. yet.

@Paul Hunt

Ireland’s problems will have exactly zero impact on the next French presidential election.There is some coverage of Greece on the French press becauce of the violence potential there,but the French voters know nothing of the situation in Portugal or Ireland.
The French banks have some exposure to Greece,but very little to Ireland.Today Moodys downgraded three French banks because of Greece’s problems,the share of the banks went down by 1%!
What is true though is that the French Ministry of Finance has a long term goal of unifying the tax systems throughout the EZ.It will keep the same objective under any new president.

In an attempt to secure the necessary political cover from the wrath of their voters senior EZ politicians are pursuing a futile attempt to identify and differentiate between those they perceive as ‘responsible’ and ‘irresponsible’ players. The former are investors of ‘good money’ and they wish to secure their support; the latter are the short-sellers and CDS merchants and they wish to punish them without mercy.

This is what is holding up securing the necessary political will to resolve this crisis in the Euro. There is understandable outrage at this excessive layer of poorly-regulated financialisation that hinders their best efforts, but the answer lies in effective finance industry restructuring and global regulation. This attempt to reward the innocent and punish the guilty is totally futile as they generally are one and the same. But some fudge will be found to provide the necessary political cover.

“We agreed with the ECB and we held back from burden sharing with senior bond holders and we didn’t proceed down that road”.

To “hold back” from doing something does not mean one is not going to do it.

Good questions, but I doubt we will get answers from our governemt, the EC or anybody else.

We are entitled to know as much as galley slaves into battle.

re: Quote of the day:

Listering to soon to be retired Judge Patwell on Newstalk this morning should have provided several quotes of the day.

If anyone wanted to know the concerns of people on another salary planet they should have listened to that interview.

@Michael Hennigan
Patwell interview. You should look it up. It confirms most things you say about the other Ireland. And all from you native county.

There’s a reason why the Romans awarded the corona muralis to the first man over the wall when assaulting a fortress or city. Going first is dangerous. If the Greeks are prepared to go first, there’s no need for immediate heroics on our part.

In the meantime, platitudes may be a better option than serious talks that might constrain future policy choices. This may even be what the Government is pursuing, if An Taoiseach is avoiding talking to M. Sarkozy, and the MoF is missing meetings with his EU counterparts.

@Overseas Commentator,

No intent to suggest that anything Ireland does or says would influence the outcome of the next French Presidential election directly. Just making the point that the horse-trading that will take place at a high-level and behind closed doors to resolve this crisis will have to include some concessions from Ireland on fiscal governance and taxation policy to allow France to demonstrate that its views on economic governance largely prevailed and that Germany isn’t making all the running.

Were into political optical illusions here in what is likely to be a tight and brutal presidential race.

@Kevin OR

Suggest you take this quote:

“Minister of State for Finance Brian Hayes, who represented the Government in Brussels, said the markets were not distinguishing between any of the “peripheral” euro zone countries at the moment.”

and email it round the City with the attached question:

“If a graduate trainee said that, would you ring HR and try to get him or her reassigned?”

Noonan doesn’t want “a contagion event for Ireland”. OK, so what happens if the arrangers of false markets actually manage to orchestrate a restructuring for Greece in such a way that the cds don’t trigger. Maybe Noonan has never heard of basis trades. Who does he think has been buying peripheral sov debt appart from people who buy cds insurance along with it? Who apart from Trichet or Draghi is going to buy it in future if the cds protection is no good?

From the article:

“With France backing the ECB, German chancellor Angela Merkel and French president Nicolas Sarkozy will attempt to reconcile their positions at a private meeting in Berlin on Friday night.

On American television yesterday on a visit to the US, Minister for Finance Michael Noonan said he did not agree with Germany.”

So he agrees with the Franco-ECB position that private sector investors should always be protected from downside risk to their investments by the use of taxpayers money? No wonder they think credit default swaps should be done away with – they are redundant, you want bond protection? – that’s what tax-payers are for.


Just to note in relation to your comment regarding the MoF missing meetings with his EU counterparts. Today NAMA Winelake has an interesting take on that particular issue where its suggested

“…But the impression given is that Ireland is being cold-shouldered out of current talks on Greece, even though we are likely to be the country possibly most affected by adverse developments there…”

The plot gets more complex by the hour.



Given Noonan’s comments, a reminder of Ireland’s “they, the people” moment referring to November, its posted on that namathingywotnot site.:

VB: And then of course that- On top of the EU/IMF deal they said to you that in addition to that you cannot default on even the unguaranteed debts of the banks.

PH: I think that’s the main reason he was crestfallen.

[moment of silence]

VB: And why did that –

PH: It wasn’t part of the negotiations as such. There was no deal. There was no agreement on that. But there was talk around, about that [gestures circular movement with hands] And eventually the decision was [resolute tone] “No”. I think he was quite discouraged by that.

VB: Was there no room for us to say “Well sorry, we’re not going to finance the unguaranteed debts”

PH: It’s not in the agreement. It’s not in the agreement. I mean you know the way the world works. There’s political room. There’s no political room. No political room was offered to him by the people.

VB: What political room did he need? The deal was there. The EU/IMF deal was there. You were guaranteed the funds for three years and that was it. And you could have said “No, this isn’t part of the deal, there was no legal or moral or any other obligation, political obligation on us to do this. We won’t do it”

PH: I think, well, I mean as I say that’s not really part of the deal. That’s part of the discussion, that’s the reason he was crestfallen. I think this is a matter that remains part of current policy discussion.

VB: But why was it agreed though?

PH: This was not an agreement which I was party to. This was not an agreement. It was influence [nods head] and I think definitely –


Firstly, the IMF is essentially owned by the countries who supply its funds, and that means the USA primarily. The reality is that the IMF can withdraw from a deal at any time if those countries are not happy with what is being done.

In Ireland’s case, the IMF may decide Leo Varadkar is right that a second bailout will be needed rendering the current deal defunct and prohibiting any further draw-downs. The IMF, and the people who own the IMF, have us by the short and curlies.

Secondly, the IMF cannot proceed with the deal unless there is security of funding, i.e. unless the EU side agree to keep delivering. Therefore, if the ECB decide to pull the plug because there is to be burden sharing with senior bondholders then the IMF must pull the plug too. Therefore, the ECB also have us by the short and curlies.

As such, the prohibition on burning bondholders does not have to be in the deal to be effective. Once Geithner and the ECB set out their opposition to burden sharing we were goosed if we wanted to access the funds.

It cannot be in the deal because it is contrary to all the principles the IMF normally espouses. However, it seems these are to be treated as extraordinary times and we are on the hook.

Of course, the fact that it is not in the deal means the position can change without the deal having to be altered. However, it requires political agreement to effect such a change. It seems there wasn’t even “political room” at the time the deal was done.

That is my read on it anyway.


‘… you want bond protection? – that’s what tax-payers are for.’

Lorenzo approves. So, apparently, do FG and Labour. Oh Dear … then again our Brian H and Lucinda C are such financial intellectual heavyweights one might need a little more than HR to shift them ….. and the bout between Michael and Herr Geithner at Madison Square Garden has been called off … if it was ever on. As the pre-school graduate puts it – ‘this gets worser and worser’!

Brendan Howlin said on Prime Time that they were still working on burden sharing but he did not answer Michael Mcgrath’s question as to what Government policy was on paying senior Anglo bond-holders.

One can only conclude that the Govt sees that either (i) we will get out of this mess and into the markets or (ii) default and some sort of burden sharing will become inevitable.

Accordingly, the Govt may see their pre-election promises to change the deal to be a shot to nothing, insofar as if we get back to the markets people will be so happy they won’t care about burden sharing anymore.

Cute enough, but means the promises were not for real.

“We didn’t proceed down that road”

Handsome is good, pretty is better
What was that phrase
Grace under pressure?
Blind by the light bulb
Blood to the bank
Lost all your letters when the ship sank
In the disjointed breaking light
The soft blue approach of the water
Makes a sound you won’t forget
I took the Wrong Road round

Stranded at low-tide where the river bends
Wouldn’t you know it, that’s how life ends
Lucky at cards, that’s an old lie
Lucky in love, that’s how life ends
Well the turncoats turned around
When they heard the sound of the bell
Dropped their coins into the well
I took the Wrong Road round


It beginning to look like when the ECB says ‘sing’ we must say ‘how high’, ‘when’, and ‘how often’. And be sure to stay on tune.

‘Just to keep the ATM’ open and to pay the guards, the teachers, the nurses……’

In the words of the old Simon & Garfunkel song we have “squandered ‘our’ resistance for a pocketful of mumbles….”

“The IMF, and the people who own the IMF, have us by the short and curlies.”

Only for as long as we continue to run a primary deficit. Once we achieve that, the IMF has no necessary role, and we gain a firm grip on the ECB’s short & curlies.

Do you seriously expect Noonan on a US “investor roadshow”, Anglo loanbook seller …. etc., to countenance burning?

Ending the primary deficit is not sufficient ,you also need to replace the ECB financing of the banks,not much easier.

@OC, easy enough. If the ECB is not happy to keep on financing the banks, offer to put them through a resolution process. The ECB may decide it is more attractive to keep funding them than to recognise a large loss. If it refuses, we will have the sort of crisis in which it would be reasonable to convert senior debt (including ECB funds) to equity, leaving the banks extremely well capitalised.

BTW, Minister Brendan Howlin said on Prime Time last night that there was only one country opposing an interest rate reduction for Ireland. It is a pretty bad falling out with France.

The bond market is running this show. They want a default to pay off their CDS bets. The Greek two year is at 28% today. Keep you eye on the Irish two year, at 12%. They will prevail.

Stop rearranging the deckchairs and just do whatever your master – Rehn – dictates.

You always do.

@ seafóid

The Go-Betweens! Classy.

“You opened my mail
Apart at the seams
Now you know I live beyond my means
Beneath my bed
There’s gold in the earth
Above the price
That gold is now worth

Never to Bow Down
Don’t you ever slow down.”

Beats Simon and Garfunkel. Sorry.

In a weird turn of events Ironically it has turned into a matter of Labour’s (and FG and all the other Euro Govs and the ECB) way or Frankfurt’s Way (The German governments way)
So the German Government is the only one prepared to tell the Merchants of Corporate Capitalism that they have to participate in paying for some of their losses even though other Govs in the periphery would gain most by insisting on burden sharing. Do the financial industry capitalist big boys have every other gov by the short and curlies? Shame on the whole lot of them, Germany excluded.

Still no followup on MK’s Timothy Guitner revelation. Are there any investigative journalists in this country?

@ Jake Watts
“The bond market is running this show. They want a default to pay off their CDS bets. The Greek two year is at 28% today. Keep you eye on the Irish two year, at 12%. They will prevail.”

Here is the question though Who (which hedgefund/insurance company) is going to have to pay up. Cos let me tell you a little secret, they cant afford it and are going to have to be bailed out.
It is that unraveling that is the Lehmans style ‘credit event’ they are all trying to avoid.

From twitter,

@bryansixone (Bryan Dobson):
“Michael Noonan tells RTE News government will seek to impose losses on E3.5bn senior, unsecured bondholders in Anglo & INBS”

Anyone have any more details?

It looks designed to appease the public….

“He said these banks are no longer normal entities and are more like warehouses for bad debts.
In that context, he would be going to Ireland’s European partners to propose significant cuts in the money to be paid to the bondholders.”

But what will JCT say and will the markets see it as the thin edge as regards the twin pillars…..or more importantly how will the rating agencies react.

@ Nigele,

what was that you were saying? “Do you seriously expect Noonan on a US “investor roadshow”, Anglo loanbook seller …. etc., to countenance burning?”.

Will it make you pause before you comment in future? Sadly, I doubt it.

@ peader

Will it end up making Noonan pause before he comments in future? – is the more pertinent question.

Comments are closed.