Still defending the bankster/develeper bailout that is NAMA.
Sad.
Softest of soap being applied there.
Utter puffery, no sense that he had any role had act or part as a fig leaf to a gargantuan mess. No sense that he should reflect. No sense that he even thought about whether it was right or not to take the central bank gig. No ….
God, one would love to see Vincent Browne or Boucher-Hayes or cathal mcquilla get their teeth into him
Nice that he could return to his former overpaid position in academia. No questions to answer on performance, no public appraisal or transparency in the motivation or rationale for decisions.
Yes indeed having to make tough decisions everyday is the lot of most business peolple exposed to the elements in Ireland today for a priveledged man with a comfy fall back position it must have quite a shock, their ‘going over the top’ analogy is what I will tomorrow and the next day and the day after that.
If this group of over paid protected peacocks had produced a competent outcome for Ireland then some of their cribbing might be tolerable, in my world they should sacked and sued for incompetence but sure we couldn’t have that
As Alan relates, a lot of effort and stress went into ‘can kicking’, and preserving the fabric of our institutions. If the ever sharper tone on this board is any guide, those efforts, however well meaning, were in large part misguided. No personal offence is intended, and there is still much to be learned. We are where we are.
‘So will Ireland default?
“If you crunch the numbers now, Ireland passes the sustainability test. Our national debt will peak in 2013 and then fall, so it stops growing. It’s tough but it’s do-able.
“But that’s assuming the economy grows as forecast, but there is a lot of doubt about that. This economy desperately needs growth. If we don’t get growth around Europe, all bets are off, we’re in trouble,” he adds.
“If growth comes in below forecast, then we fail that test. Our numbers will be unsustainable,” he concludes.
Ahearne also feels that a federal Europe is inevitable, and that Ireland should not fear such a move.
“EU federal fiscal union is the ultimate goal, the end game of all of this. Part of the goal of setting up the single currency was establishing a fiscal union. That thinking is right, for a properly functioning single currency, you need fiscal unity. In general, EU integration has been good for Ireland. Our future is with Europe. Fiscal union is the end game,” he says”
End quote. Alan seems to acknowledge that, absent the necessary growth, Ireland cannot realistically expect to continue as an independent state. Sadly, our growth prospects are deteriorating along with the European and global enivronnment. This is path dependent stuff, and decisions will be taken onje way or another.
Given the size of the PS pay bill and the transfer payments, EU administration of some sort may seem to offer the most orderly outcome for Ireland. I can see why public servants may perceive it as ‘safer’ than Euro exit, but there are other economic actors, with lesser claims on a state which they perceive as ‘corrupt’, ‘failed’ or at least ‘seriously compromised’. Those folk may call the options very differently.
The ‘less secure’ group will increase as the stagnation continues, so it’s an open question as to how this tendency can be organised and expressed politically. As the presidential campaign illustrates, Irish politics is in a state of flux. The old labels are losing their capacity to povide orientation. Widespread cynicism and political alienation would be a disaster, so the political spectrum will have to widen.
Order at Euro level is a bit shaky too, as core EZ banks are in the soup. The extent to which that can of worms can be managed by the bigger states will be a limiting factor on assistance to peripherals. If the machinations around ECB collateral are a guide, sauve qui peut might be the dominant guiding principle.
We can hope for the best, but we should plan for the worst. The Dork rightly points the finger at our crazy settlement patterns and energy consumption habits. Our planning authorities have been juvenile in that regard.
In any case, it’s clear we are wandering further into the bog, but we are not alone in that status. We may yet get to a place where the real political foundations of the economy can be contested firmly, peacefully and democratically. Lets schedule Paul Hunt for Day One of the hearings.
I hope we can limit the inevitable element of chaos and public disorder during the recovery process. We have enough trouble already from the drink.
Finally, some latter day Greek dogma for a Sunday mornning.
It seems to me that the interview with Alan Ahearne is notable for its candour and a very welcome addition to the public record.
However, I wonder if now is the moment for looking back against the background of what is happening this weekend, a make or break one for the EU and the euro. It might be useful to read the article by Colm McCarthy in conjunction with the interview and examine the difference of view on the the logic of economic and monetary union.
In fact, events are proving it to be correct, notably the sharp change in tone of the UK with regard to the crisis. The debate between at least two major insiders with Jeremy Paxman earlier in the week provides the background.
The latest press reports hinge on the continuing differences between Paris and Berlin. The core issue is the answer to the question; will all banks with “doubtful” sovereign bond exposure, including the UK and the other major non-euro country Sweden, agree to jump into the pool together i.e. accept recapitalisation even if a major bank – Deutsche Bank in this instance – insists that such a step for it is not necessary? Both the UK (RBS) and Sweden appear to be on board. And Germany?
The subsidiary question is; how damaging would it be if France lost its AAA rating? Not that damaging in an economic sense but probably fatal to the electoral chances of Sarkozy.
@ All
And for those wishing to re-hash the past, a reminder from 2005.
As DOCM says, the interview is notable for it’s condour. The confirmation of the existence of the threatening letter from JCT should be of great concern from a political point of view…not to mention the ongoing threat from the institution he represents.
It is also of great interest that a member of the Central Bank Commission believes we could still default and that a Greek default is inevitable.
With all the puffery going on at the moment it is a welcome reality check.
Much in agreement with paul quigley.
Also fascinating to read right from the start with imagery continued throughout:
“He [A Ahearne] spent two years in there, and every day was like going over the top at the Somme.
“”No, I don’t miss it, I remember going in on the train thinking what missiles will be fired at us today, it was awful,” he says.”
Obviously A Ahearne felt the way he felt, but just for clarity I’d suggest that working in the Department of Finance is absolutely nothing like going over the top in the Somme. One hopes that the current DoF hasn’t worked itself up into such an unhealthy lather.
Also note more on the ECB letter:
“Yeah, the letter came in on the Friday from Trichet. The ECB were getting very hostile about the amount of money that it was having to lend to Ireland’s banks. The ECB demanded something be done about it and it mentioned Ireland going into the bailout. They were keen to get Ireland into the programme.”
I still don’t really know why the Irish public weren’t provided with this information – as per Italian public.
On Sunday reading, good articles in the Observer:
‘Big Bang’s shockwaves left us with today’s big bust’
With quote from Karel Williams:
“What have the markets spent all summer doing, except wittering on asking for political leadership, which is [code for: Angela] Merkel should listen to them and not the German electorate. But in a democracy, the prime responsibility of a political leader is to the electorate. Deregulation created a sectional interest in finance, which is beyond political subordination.”
And William Keegan
“If Cameron takes his lead from Macmillan, Osborne is in trouble”
with the last paragraph on QE2:
“Quantitative easing works, if it does at all, in mysterious ways. The nation’s credit card debt is £67bn. So why does the government not copy Solon the legislator (circa 638BC-558BC), who cancelled all debts, and wipe out that credit card debt? Cheaper than quantitative easing…”
Can any comentator give a reason why the BoE shouldn’t just pay off government debt rather than use QE? Any reason the ECB can’t do similar in the EZ?
On the Dexia saga..
“The two countries were yesterday discussing how to split responsibility for a “bad bank” to hold its troubled assets. The Belgian state wants to buy the bank’s Belgian retail arm, according to the union involved.
The bank’s board is set to meet on Sunday to discuss plans.
“Dexia’s funeral will be announced on Sunday,” a source told Reuters.”
And…From IT
“Talks are continuing over a vital aid tranche for Greece, which could run out of cash as soon as mid-November.
“There is a high risk that this crisis further escalates and broadens,” German finance minister Wolfgang Schaeuble was cited as saying by a newspaper today.”
I would agree that it is a very candid interview by an insider. It confirms that we were pushed into bailout by the ECB. He deftly dodges the issue of the role played in this by the Guvvnor. He also gives very little insight into the negotiating tactics of the Irish govt in run up to the bail out. The original terms were usurious to say the least. Morevoer, the throw away lines about the demands of other MS for collatoral confirm that our friends in the EZ were not friends at all but quick buck merchants with a eye for the main chance.
The one question that I would like to have answered was on the genesis of the original guarantee. Where did that come from. Was it cooked up somewhere between Trichet’s office and Merrion street (clue not the DOF). I supect we will only know that when the files are opened.
Interesting that a board member of the CB only speculates on the possibility of an Irish default (in 2013?) and a retrospective burning of bondholders or by that stage the EU taxpayer.
Has anyone submitted a FoI request for a copy of the letter sent by ECB president, Jean Claude Trichet on the Friday before the announcement of the Troika bailout. The letter is again referred to in today’s article.
The letter has been described as threatening, intimidating, bullying. Shouldn’t we see the letter ourselves as it seems to have had an important role in shaping the course of our nation’s fate.
I wonder has anyone had a historical record of the performance of the ministry of Finance and their departments of Finance and in the world?
Pehaps someone could correct me and show another time when an Irish department of Finance has done a worse job than the last 4 years?
We haven’t actually had to be bailed out by the IMF before, So I guess not.
In 2007 we had a completely healthy debt GDP ration which just makes it worse.
The ministry of finance in Ireland 2007-2011 must rank pretty highly among the contenders for the worlds worst historical performances too.
Jagdip,
I doubt if you will see the bit after “Dear Brian” and “before let’s do lunch next tiem you are over”. The offending bits will be redacted.
This idea of a fiscal union is a higher form of madness then the currency union idea.
It completly ignores the differences in the bedrock poltical structure culture between the US & EU.
Anyhow the US currency union led to major wars before they became a full fiscal union.
Even in the 20th century the San Francisco Fed was running different interest rates then the NY Fed.
The best solution for Europe is for the ECB to dramatically balloon its balance sheet – this is viable if most of the debt is internal.
But they are happy to see countries tear each other apart with the absurd state financed EFSF I guess.
The lack of cultural understanding withen a new Imperial Romes Treasury will be spectacular….. and as for its potential corruption………………….
This is social engineering on a massive scale.
Such megalomania normally leads to wars unfortunetly.
Just triple the bloody ECBs balance sheet for Christ sake.
Its interesting that Dr. Ahearne alludes to the ECB as pressurising emmensely for Ireland not to let bondholders take a haircut in bankrupt banks. This was unjust and immoral.
The ECB is clearly undemocratic and unrepresentitive of the European people. It is so clearly biased towards firstly financial institutions and secondly core countries. I would say that this is the key for the crisis. The ECBs decision making structure and appiontment of officals needs to be reformed completly. Imagine a young Dutch woman who dreams to be head of her central bank someday. Its not possible I’m afraid, She may be European, In this case all Europeans are not equal. Only Germans, French and Italians are allowed to be President of the ECB, and she would have trouble getting onto the executive committee.
I can appreciate that Merrion St could only be a baptism of fire for an academic. NUIG must seem a little drab on a wet day.
That’s the way I felt about UCC after 6 years.
I guess the interview is a prelude to Alan’s return to his old gig at the Sindo.
@Dork
Nigel Lawson agrees with you and says it’s not going to happen…..interview on RTE 1 radio just finished.
We are getting a lot of insider views..
@ Michael Hennigan
I guess the interview is a prelude to Alan’s return to his old gig at the Sindo.</blockquote?
Did anyone read Boomerang by Michael Lewis? Not very flattering for the late Brian with his four different reasons for the bank guarantee.
Notice his adviser did not have much to say on the issue.
@jagdip
“Has anyone submitted a FoI request for a copy of the letter sent by ECB president, Jean Claude Trichet on the Friday before the announcement of the Troika bailout. The letter is again referred to in today’s article.
The letter has been described as threatening, intimidating, bullying. Shouldn’t we see the letter ourselves as it seems to have had an important role in shaping the course of our nation’s fate.”
There are specific requirements that have to be fulfilled in respect of information redacted or correspondence refused for release. If you, or someone who has a real name puts in such a request, any redactions should questioned and then referred to the information commissioner.
It is possible you know, that Ireland has the most passive press in the developed world.
Quite apart from that, the only logical reason I can think of for the Irish authorities not having published this (and the supposed side letter to the MoU) is that one or both either doesn’t exist, or one or both are actually far less threatening, specific, or insistent than the Irish authorities would like everybody to assume.
I find the comparison to the Somme quite bizarre. Either Alan was trying to be funny or he has a poor sense of judgement. Maybe a few more market-hardened individuals around the place might have been an idea.
@ grumpy
I find the comparison to the Somme quite bizarre.
Maybe it’s a reference to a DoF predilection for cunning plans, underpants and pencils!
@ Grumpy
I agree. There is no letter. These guys are just trying to come up with excuses for landing Ireland in the s***.
@Ceteris
Yes , well it was a interesting interview as always with Lawson – but I do disagree with him , it is possible to have a currency union for many more decades , possibly a century or more before we have anymore fiscal integration.
It happened very slowly in the US also.
Its not nice but neither is breaking up now – I think that was the plan to be honest.
But the debt needs to be devalued dramatically via ECB balance sheet expansion – otherwise its toast and the dollar wins again.
Lawson has perhaps skin in the game also – there is at least some difference between the Anglo bankers and the Continentals(Paris).
Lawson alluded to that – but something very strange is happening between London & Paris now with the rail link , not unlike the New York , London Concorde connection in the 80s.
But who knows whats really going on ?
My hunch is that something big will happen in November at Cannes.
@Dork
It could be sooner. Apparently the Swiss have convened their war cabinet…
I suspect the letter, if it exists at all, was a mundane reminder that the guarantee was expiring and that the ECB would refuse to accept irish bank risk from a given date. The Irish government made their bed when they extended the guarantee, at some point they would be asked to lie in it.
The frank discussions are indeed very interesting. I suspect that the core countries are in a huddle and the Anglo countries are in a panic as they are left outside the door. Their banks are on the hook for likely billions of CDS contracts and they are terrified that they will have to pony up for losses when Greece defaults. If Greece is rescued, then phew, no problem, because that will create a free money precedent. Banks and hedge funds will move on to attack Italy, Sapin and France.
We are in a no win situation, we lose big now if we allow default, and bigger in future if we don’t or if we protect the vampire squid and their hedge fund offspring from their losses.
@ grumpy/Gavin
Give the guy a break, I think it was a fairly offhand quip about the pressure and intensity of the situation they found themselves in every day., and that they were in the ‘firing line’ every day with a fresh wave of problems. I don’t think he was actually comparing the situation to that faced by soldiers in WW1. I think people should maybe relax a bit on the comment.
It seems fairly clear that what is agreed between France and Belgium in respect of Dexia will have a major influence on the subsequent decisions in respect of recapitalisation at a European level. The level of influence that the major rating agencies have in the negotiations between governments is truly remarkable and without any precedent that I can think of.
I see that intellectual economic giant John Major has waded in:
That Reuters article sums it all up very well in the sub-headline:
” (Reuters) – The leaders of Germany and France promised Sunday to unveil a new comprehensive package for solving the euro zone’s debt crisis by the end of the month, but offered no details and papered over differences on how to shore up European banks.”
Promises.
No details.
Differences.
@Ceterisparibus
“It’s a hoot”
Isn’t it? I promise to pay you as soon as I get these 27 agreements, for a hamburger at the end of the month. No wait, that’s two hamburgers, no, it’s a trillion of them and I now need to go back and re-get the agreement. Stop looking at the Slovenian fellow jumping up and down at the back. He’ll do what we tell him.
@Eoin
“Give the guy a break, I think it was a fairly offhand quip”
er, what I said was …”Either Alan was trying to be funny or he has a poor sense of judgement”
I think I can stand over that.
If you are right then Alan needs a different comedic adviser.
@Ceteris
From Rtrs:
“Paris wants to tap the euro zone’s 440-billion-euro European Financial Stability Facility (EFSF) to shore up its banks, worried that pouring its own money into them could compromise its coveted triple-A credit rating.”
Karl had a thread a couple of weeks ago about the idea of replacing the Anglo promissory notes with efsf funds. I was fairly skeptical partly because the fund is too small already given Italy etc and that the rest of the EZ and the market now has little interest in Ireland. I drew attention then to the French position.
I am surprised the French approach to the use of efsf funds to recapitalise their banks has sirred so little debate on this board, given the what the official Irish version of recent economic history ‘reveals’ about the options available to Ireland when its banks required a recapitalisation.
Am I off the mark here or has everyone nodded off?
@ Grumpy
Zzzzzzzz
Sorry man. Yep – nodded off. Europe’s a mess. The markets will probably hammer the currency this week ( not because they should but because it’s what any self-respecting psychopath would do)
@Grumpy
The 440b or so available to the EFSF is not going to last p…ing time with the buying of sovereign bonds, recapitalizing the banks and lending to insolvent nations.
Simply, it’s a farce.
And no, some of us are still awake. Just don’t believe a word they utter. The dreaded market is the real arbitrar.
I think the ECB were worried that the ELA, was covering a general black hole in the Irish economy. They were concerned about legality of this. However they precipitated a financial crisis here, and their solution was very lacklustre, it caused little public policy change, all it really did wad ensure the IMF/etc would fund us. Usually an IMF intervention would come with political change. The ECB forced crisis was short sighted, as their ‘solution’ didn’t scale to other countries, and didn’t clarify matters. It appears emotion won out. That said…who here was respinsible for monitoring the ELA ?
The interesting thing for me in Ahearne’s piece was that he thought the AIB senior bondholders should be burnt. That is news to me, and we’ve never had a quality public debate on this issue in Ireland.
The “threatening” letter from J. C. Trichet was in effect notice that the ECB could not continue lending large amounts to the Irish Banks. The ECB could lend to the sovereign or to entities backed by guarantees from the sovereign. JCT was simply being a responsible President of the ECB.
On receiving the letter from JCT Ahern, Cowen, Lenihan did not have to act like rabbits transfixed in the headlights, they had a duty to act responsibly. The ECB made it abundantly clear that a collapse by any of the PIIGS would be as serious as the Lehman collapse was in the USA. Ireland was in a position to exploit that weakness to its advantage. But instead of even attempting to negotiate terms and conditions of the country’s role in bailing out and back stopping the banks they just hand the ECB, Irish Banks and the creditors (European Banks), hedge funds and bond holders of the Irish banks a blank cheque.
There are tens of thousands of people out there (myself included) who are still puzzled at the gross stupidity exhibited.
@grumpy
“Am I off the mark here or has everyone nodded off?”
It’s such a non-starter it cannot be taken seriously. As ceteris says, the institutional response is farcical. We’ve now had the commitment to sort it all out in a few weeks, what, three times?
@ Grumpy
actually, reading through it again, i don’t know if Ahearne himself actually references the Somme. He comments on it being like in the trenches, a constant battle/warfare, a war cabinet etc, but its actually the Sindo which makes the Somme inference, possibly via an excitable copy editor.
“He had to take rests a lot. There was a bed brought in for him to lie down during the day and his private secretary would make sure that he was left alone when he needed to rest. He used to rest for a couple of hours during the day. But he still did long hours, early morning, late evenings. In meetings, he was still very focused.”
Brian Lenihan’s illness should have precluded him from continuing as Finance Minister. One wonders how much it influenced decision making.
@Eoin
If a sub-editor stuck that in it was neither necessary nor helpful – just distracts from an otherwise fairly reasonable take on events.
The indo is a uniquely Irish phenomenon – a tabloid masquerading as a broadsheet. It cheerlead the boom, cheerleads the austerity and cheerleads the badger baiting in the current presidential election.
There, that’s the end of my rant. Going back to reading about Paul McCartney’s wedding.
On a human level, its hard not to feel pity for Aherne and co…. people trying to do a job that would have been very punishing on far tougher and far better people…
What is most remarkable about our bust is not the collapse, but the structures we have put in place to distort, retard and generally prevent….
In warfare it is vital to cut off the enemy’s visibility and lines of communication….. to disorient; to keep the element of surprise; to spread panic by misdirection and to hide the real threat.
The “war cabinet” managed to destroy themselves (and us as well)…. they first destroyed their own sources and lines of communication…. and then descended into a rabble looking for someone to surrender to.
But some of the institutions they set up to distort, to conceal to retard and generally prevent are still around.
And will do damage for years to come.
46 replies on “Alan Ahearne Interview”
Still defending the bankster/develeper bailout that is NAMA.
Sad.
Softest of soap being applied there.
Utter puffery, no sense that he had any role had act or part as a fig leaf to a gargantuan mess. No sense that he should reflect. No sense that he even thought about whether it was right or not to take the central bank gig. No ….
God, one would love to see Vincent Browne or Boucher-Hayes or cathal mcquilla get their teeth into him
Nice that he could return to his former overpaid position in academia. No questions to answer on performance, no public appraisal or transparency in the motivation or rationale for decisions.
Yes indeed having to make tough decisions everyday is the lot of most business peolple exposed to the elements in Ireland today for a priveledged man with a comfy fall back position it must have quite a shock, their ‘going over the top’ analogy is what I will tomorrow and the next day and the day after that.
If this group of over paid protected peacocks had produced a competent outcome for Ireland then some of their cribbing might be tolerable, in my world they should sacked and sued for incompetence but sure we couldn’t have that
As Alan relates, a lot of effort and stress went into ‘can kicking’, and preserving the fabric of our institutions. If the ever sharper tone on this board is any guide, those efforts, however well meaning, were in large part misguided. No personal offence is intended, and there is still much to be learned. We are where we are.
‘So will Ireland default?
“If you crunch the numbers now, Ireland passes the sustainability test. Our national debt will peak in 2013 and then fall, so it stops growing. It’s tough but it’s do-able.
“But that’s assuming the economy grows as forecast, but there is a lot of doubt about that. This economy desperately needs growth. If we don’t get growth around Europe, all bets are off, we’re in trouble,” he adds.
“If growth comes in below forecast, then we fail that test. Our numbers will be unsustainable,” he concludes.
Ahearne also feels that a federal Europe is inevitable, and that Ireland should not fear such a move.
“EU federal fiscal union is the ultimate goal, the end game of all of this. Part of the goal of setting up the single currency was establishing a fiscal union. That thinking is right, for a properly functioning single currency, you need fiscal unity. In general, EU integration has been good for Ireland. Our future is with Europe. Fiscal union is the end game,” he says”
End quote. Alan seems to acknowledge that, absent the necessary growth, Ireland cannot realistically expect to continue as an independent state. Sadly, our growth prospects are deteriorating along with the European and global enivronnment. This is path dependent stuff, and decisions will be taken onje way or another.
Given the size of the PS pay bill and the transfer payments, EU administration of some sort may seem to offer the most orderly outcome for Ireland. I can see why public servants may perceive it as ‘safer’ than Euro exit, but there are other economic actors, with lesser claims on a state which they perceive as ‘corrupt’, ‘failed’ or at least ‘seriously compromised’. Those folk may call the options very differently.
The ‘less secure’ group will increase as the stagnation continues, so it’s an open question as to how this tendency can be organised and expressed politically. As the presidential campaign illustrates, Irish politics is in a state of flux. The old labels are losing their capacity to povide orientation. Widespread cynicism and political alienation would be a disaster, so the political spectrum will have to widen.
Order at Euro level is a bit shaky too, as core EZ banks are in the soup. The extent to which that can of worms can be managed by the bigger states will be a limiting factor on assistance to peripherals. If the machinations around ECB collateral are a guide, sauve qui peut might be the dominant guiding principle.
We can hope for the best, but we should plan for the worst. The Dork rightly points the finger at our crazy settlement patterns and energy consumption habits. Our planning authorities have been juvenile in that regard.
In any case, it’s clear we are wandering further into the bog, but we are not alone in that status. We may yet get to a place where the real political foundations of the economy can be contested firmly, peacefully and democratically. Lets schedule Paul Hunt for Day One of the hearings.
I hope we can limit the inevitable element of chaos and public disorder during the recovery process. We have enough trouble already from the drink.
Finally, some latter day Greek dogma for a Sunday mornning.
http://www.keeptalkinggreece.com/2011/10/06/athens-riot-police-kicks-even-famous-riot-dog-loukanikos/
@ All
It seems to me that the interview with Alan Ahearne is notable for its candour and a very welcome addition to the public record.
However, I wonder if now is the moment for looking back against the background of what is happening this weekend, a make or break one for the EU and the euro. It might be useful to read the article by Colm McCarthy in conjunction with the interview and examine the difference of view on the the logic of economic and monetary union.
http://www.independent.ie/opinion/analysis/we-must-accept-euro-project-was-badly-designed-2900491.html
I would agree with the analysis of Colm McCarthy.
In fact, events are proving it to be correct, notably the sharp change in tone of the UK with regard to the crisis. The debate between at least two major insiders with Jeremy Paxman earlier in the week provides the background.
http://www.youtube.com/watch?v=6UGDTtqklSo
The latest press reports hinge on the continuing differences between Paris and Berlin. The core issue is the answer to the question; will all banks with “doubtful” sovereign bond exposure, including the UK and the other major non-euro country Sweden, agree to jump into the pool together i.e. accept recapitalisation even if a major bank – Deutsche Bank in this instance – insists that such a step for it is not necessary? Both the UK (RBS) and Sweden appear to be on board. And Germany?
The subsidiary question is; how damaging would it be if France lost its AAA rating? Not that damaging in an economic sense but probably fatal to the electoral chances of Sarkozy.
@ All
And for those wishing to re-hash the past, a reminder from 2005.
http://www.thepost.ie/archives/2005/1009/we-are-on-our-own-if-the-bubble-bursts-8640.html
As DOCM says, the interview is notable for it’s condour. The confirmation of the existence of the threatening letter from JCT should be of great concern from a political point of view…not to mention the ongoing threat from the institution he represents.
It is also of great interest that a member of the Central Bank Commission believes we could still default and that a Greek default is inevitable.
With all the puffery going on at the moment it is a welcome reality check.
Much in agreement with paul quigley.
Also fascinating to read right from the start with imagery continued throughout:
“He [A Ahearne] spent two years in there, and every day was like going over the top at the Somme.
“”No, I don’t miss it, I remember going in on the train thinking what missiles will be fired at us today, it was awful,” he says.”
Obviously A Ahearne felt the way he felt, but just for clarity I’d suggest that working in the Department of Finance is absolutely nothing like going over the top in the Somme. One hopes that the current DoF hasn’t worked itself up into such an unhealthy lather.
Also note more on the ECB letter:
“Yeah, the letter came in on the Friday from Trichet. The ECB were getting very hostile about the amount of money that it was having to lend to Ireland’s banks. The ECB demanded something be done about it and it mentioned Ireland going into the bailout. They were keen to get Ireland into the programme.”
I still don’t really know why the Irish public weren’t provided with this information – as per Italian public.
On Sunday reading, good articles in the Observer:
‘Big Bang’s shockwaves left us with today’s big bust’
With quote from Karel Williams:
“What have the markets spent all summer doing, except wittering on asking for political leadership, which is [code for: Angela] Merkel should listen to them and not the German electorate. But in a democracy, the prime responsibility of a political leader is to the electorate. Deregulation created a sectional interest in finance, which is beyond political subordination.”
And William Keegan
“If Cameron takes his lead from Macmillan, Osborne is in trouble”
with the last paragraph on QE2:
“Quantitative easing works, if it does at all, in mysterious ways. The nation’s credit card debt is £67bn. So why does the government not copy Solon the legislator (circa 638BC-558BC), who cancelled all debts, and wipe out that credit card debt? Cheaper than quantitative easing…”
Can any comentator give a reason why the BoE shouldn’t just pay off government debt rather than use QE? Any reason the ECB can’t do similar in the EZ?
http://www.guardian.co.uk/business/2011/oct/09/big-bang-1986-city-deregulation-boom-bust
http://www.guardian.co.uk/business/2011/oct/09/david-cameron-macmillan-chancellor-in-trouble
On the Dexia saga..
“The two countries were yesterday discussing how to split responsibility for a “bad bank” to hold its troubled assets. The Belgian state wants to buy the bank’s Belgian retail arm, according to the union involved.
The bank’s board is set to meet on Sunday to discuss plans.
“Dexia’s funeral will be announced on Sunday,” a source told Reuters.”
And…From IT
“Talks are continuing over a vital aid tranche for Greece, which could run out of cash as soon as mid-November.
“There is a high risk that this crisis further escalates and broadens,” German finance minister Wolfgang Schaeuble was cited as saying by a newspaper today.”
I would agree that it is a very candid interview by an insider. It confirms that we were pushed into bailout by the ECB. He deftly dodges the issue of the role played in this by the Guvvnor. He also gives very little insight into the negotiating tactics of the Irish govt in run up to the bail out. The original terms were usurious to say the least. Morevoer, the throw away lines about the demands of other MS for collatoral confirm that our friends in the EZ were not friends at all but quick buck merchants with a eye for the main chance.
The one question that I would like to have answered was on the genesis of the original guarantee. Where did that come from. Was it cooked up somewhere between Trichet’s office and Merrion street (clue not the DOF). I supect we will only know that when the files are opened.
Interesting that a board member of the CB only speculates on the possibility of an Irish default (in 2013?) and a retrospective burning of bondholders or by that stage the EU taxpayer.
Has anyone submitted a FoI request for a copy of the letter sent by ECB president, Jean Claude Trichet on the Friday before the announcement of the Troika bailout. The letter is again referred to in today’s article.
The letter has been described as threatening, intimidating, bullying. Shouldn’t we see the letter ourselves as it seems to have had an important role in shaping the course of our nation’s fate.
I wonder has anyone had a historical record of the performance of the ministry of Finance and their departments of Finance and in the world?
Pehaps someone could correct me and show another time when an Irish department of Finance has done a worse job than the last 4 years?
We haven’t actually had to be bailed out by the IMF before, So I guess not.
In 2007 we had a completely healthy debt GDP ration which just makes it worse.
The ministry of finance in Ireland 2007-2011 must rank pretty highly among the contenders for the worlds worst historical performances too.
Jagdip,
I doubt if you will see the bit after “Dear Brian” and “before let’s do lunch next tiem you are over”. The offending bits will be redacted.
This idea of a fiscal union is a higher form of madness then the currency union idea.
It completly ignores the differences in the bedrock poltical structure culture between the US & EU.
Anyhow the US currency union led to major wars before they became a full fiscal union.
Even in the 20th century the San Francisco Fed was running different interest rates then the NY Fed.
The best solution for Europe is for the ECB to dramatically balloon its balance sheet – this is viable if most of the debt is internal.
But they are happy to see countries tear each other apart with the absurd state financed EFSF I guess.
The lack of cultural understanding withen a new Imperial Romes Treasury will be spectacular….. and as for its potential corruption………………….
This is social engineering on a massive scale.
Such megalomania normally leads to wars unfortunetly.
Just triple the bloody ECBs balance sheet for Christ sake.
Its interesting that Dr. Ahearne alludes to the ECB as pressurising emmensely for Ireland not to let bondholders take a haircut in bankrupt banks. This was unjust and immoral.
The ECB is clearly undemocratic and unrepresentitive of the European people. It is so clearly biased towards firstly financial institutions and secondly core countries. I would say that this is the key for the crisis. The ECBs decision making structure and appiontment of officals needs to be reformed completly. Imagine a young Dutch woman who dreams to be head of her central bank someday. Its not possible I’m afraid, She may be European, In this case all Europeans are not equal. Only Germans, French and Italians are allowed to be President of the ECB, and she would have trouble getting onto the executive committee.
I can appreciate that Merrion St could only be a baptism of fire for an academic. NUIG must seem a little drab on a wet day.
That’s the way I felt about UCC after 6 years.
I guess the interview is a prelude to Alan’s return to his old gig at the Sindo.
@Dork
Nigel Lawson agrees with you and says it’s not going to happen…..interview on RTE 1 radio just finished.
We are getting a lot of insider views..
@ Michael Hennigan
@ Michael Hennigan
His previous Sindo article are here:
http://www.nuigalway.ie/staff-sites/alan_ahearne/media.html
You can take it he won’t be rehashing those!
Did anyone read Boomerang by Michael Lewis? Not very flattering for the late Brian with his four different reasons for the bank guarantee.
Notice his adviser did not have much to say on the issue.
@jagdip
“Has anyone submitted a FoI request for a copy of the letter sent by ECB president, Jean Claude Trichet on the Friday before the announcement of the Troika bailout. The letter is again referred to in today’s article.
The letter has been described as threatening, intimidating, bullying. Shouldn’t we see the letter ourselves as it seems to have had an important role in shaping the course of our nation’s fate.”
There are specific requirements that have to be fulfilled in respect of information redacted or correspondence refused for release. If you, or someone who has a real name puts in such a request, any redactions should questioned and then referred to the information commissioner.
It is possible you know, that Ireland has the most passive press in the developed world.
Quite apart from that, the only logical reason I can think of for the Irish authorities not having published this (and the supposed side letter to the MoU) is that one or both either doesn’t exist, or one or both are actually far less threatening, specific, or insistent than the Irish authorities would like everybody to assume.
I find the comparison to the Somme quite bizarre. Either Alan was trying to be funny or he has a poor sense of judgement. Maybe a few more market-hardened individuals around the place might have been an idea.
@ grumpy
Maybe it’s a reference to a DoF predilection for cunning plans, underpants and pencils!
@ Grumpy
I agree. There is no letter. These guys are just trying to come up with excuses for landing Ireland in the s***.
@Ceteris
Yes , well it was a interesting interview as always with Lawson – but I do disagree with him , it is possible to have a currency union for many more decades , possibly a century or more before we have anymore fiscal integration.
It happened very slowly in the US also.
Its not nice but neither is breaking up now – I think that was the plan to be honest.
But the debt needs to be devalued dramatically via ECB balance sheet expansion – otherwise its toast and the dollar wins again.
Lawson has perhaps skin in the game also – there is at least some difference between the Anglo bankers and the Continentals(Paris).
Lawson alluded to that – but something very strange is happening between London & Paris now with the rail link , not unlike the New York , London Concorde connection in the 80s.
But who knows whats really going on ?
My hunch is that something big will happen in November at Cannes.
@Dork
It could be sooner. Apparently the Swiss have convened their war cabinet…
http://www.guardian.co.uk/business/feedarticle/9886489
I suspect the letter, if it exists at all, was a mundane reminder that the guarantee was expiring and that the ECB would refuse to accept irish bank risk from a given date. The Irish government made their bed when they extended the guarantee, at some point they would be asked to lie in it.
The frank discussions are indeed very interesting. I suspect that the core countries are in a huddle and the Anglo countries are in a panic as they are left outside the door. Their banks are on the hook for likely billions of CDS contracts and they are terrified that they will have to pony up for losses when Greece defaults. If Greece is rescued, then phew, no problem, because that will create a free money precedent. Banks and hedge funds will move on to attack Italy, Sapin and France.
We are in a no win situation, we lose big now if we allow default, and bigger in future if we don’t or if we protect the vampire squid and their hedge fund offspring from their losses.
@ grumpy/Gavin
Give the guy a break, I think it was a fairly offhand quip about the pressure and intensity of the situation they found themselves in every day., and that they were in the ‘firing line’ every day with a fresh wave of problems. I don’t think he was actually comparing the situation to that faced by soldiers in WW1. I think people should maybe relax a bit on the comment.
@ All
A busy Sunday for Continental officials!
http://lexpansion.lexpress.fr/economie/le-triple-a-de-la-france-ne-serait-pas-menace-par-les-banques_264914.html
It seems fairly clear that what is agreed between France and Belgium in respect of Dexia will have a major influence on the subsequent decisions in respect of recapitalisation at a European level. The level of influence that the major rating agencies have in the negotiations between governments is truly remarkable and without any precedent that I can think of.
I see that intellectual economic giant John Major has waded in:
http://www.bbc.co.uk/news/business-15231789
“He said it would be “catastrophic” if the country defaulted before the banks had enough money to cover their losses.”
Rather let the cat out of the bag there John!
I should add that he was talking about Greece, not the UK!
Angela says..”we are determined to do everything necessary to ensure recapitalization of our banks”. From Bloomberg
Sarky says he will have a plan by the end of the month…
Strange?????
@Ceterisparibus
They both agreed that the ‘banks need recapitalising.’ There was no mention about any agreement on the how.
They need until the end of the month to try and come up with an agreement… if they can.
Comprehensive, sustainable and rapid response by the end of the month…according to Sarky is the result of the meeting.
It’s a hoot.
Interestingly changes will be required to Lisbon. That should be easy!!!
http://www.reuters.com/article/2011/10/09/us-eurozone-idUSTRE7953D520111009
That Reuters article sums it all up very well in the sub-headline:
” (Reuters) – The leaders of Germany and France promised Sunday to unveil a new comprehensive package for solving the euro zone’s debt crisis by the end of the month, but offered no details and papered over differences on how to shore up European banks.”
Promises.
No details.
Differences.
@Ceterisparibus
“It’s a hoot”
Isn’t it? I promise to pay you as soon as I get these 27 agreements, for a hamburger at the end of the month. No wait, that’s two hamburgers, no, it’s a trillion of them and I now need to go back and re-get the agreement. Stop looking at the Slovenian fellow jumping up and down at the back. He’ll do what we tell him.
@Eoin
“Give the guy a break, I think it was a fairly offhand quip”
er, what I said was …”Either Alan was trying to be funny or he has a poor sense of judgement”
I think I can stand over that.
If you are right then Alan needs a different comedic adviser.
@Ceteris
From Rtrs:
“Paris wants to tap the euro zone’s 440-billion-euro European Financial Stability Facility (EFSF) to shore up its banks, worried that pouring its own money into them could compromise its coveted triple-A credit rating.”
Karl had a thread a couple of weeks ago about the idea of replacing the Anglo promissory notes with efsf funds. I was fairly skeptical partly because the fund is too small already given Italy etc and that the rest of the EZ and the market now has little interest in Ireland. I drew attention then to the French position.
I am surprised the French approach to the use of efsf funds to recapitalise their banks has sirred so little debate on this board, given the what the official Irish version of recent economic history ‘reveals’ about the options available to Ireland when its banks required a recapitalisation.
Am I off the mark here or has everyone nodded off?
@ Grumpy
Zzzzzzzz
Sorry man. Yep – nodded off. Europe’s a mess. The markets will probably hammer the currency this week ( not because they should but because it’s what any self-respecting psychopath would do)
@Grumpy
The 440b or so available to the EFSF is not going to last p…ing time with the buying of sovereign bonds, recapitalizing the banks and lending to insolvent nations.
Simply, it’s a farce.
And no, some of us are still awake. Just don’t believe a word they utter. The dreaded market is the real arbitrar.
I think the ECB were worried that the ELA, was covering a general black hole in the Irish economy. They were concerned about legality of this. However they precipitated a financial crisis here, and their solution was very lacklustre, it caused little public policy change, all it really did wad ensure the IMF/etc would fund us. Usually an IMF intervention would come with political change. The ECB forced crisis was short sighted, as their ‘solution’ didn’t scale to other countries, and didn’t clarify matters. It appears emotion won out. That said…who here was respinsible for monitoring the ELA ?
The interesting thing for me in Ahearne’s piece was that he thought the AIB senior bondholders should be burnt. That is news to me, and we’ve never had a quality public debate on this issue in Ireland.
The “threatening” letter from J. C. Trichet was in effect notice that the ECB could not continue lending large amounts to the Irish Banks. The ECB could lend to the sovereign or to entities backed by guarantees from the sovereign. JCT was simply being a responsible President of the ECB.
On receiving the letter from JCT Ahern, Cowen, Lenihan did not have to act like rabbits transfixed in the headlights, they had a duty to act responsibly. The ECB made it abundantly clear that a collapse by any of the PIIGS would be as serious as the Lehman collapse was in the USA. Ireland was in a position to exploit that weakness to its advantage. But instead of even attempting to negotiate terms and conditions of the country’s role in bailing out and back stopping the banks they just hand the ECB, Irish Banks and the creditors (European Banks), hedge funds and bond holders of the Irish banks a blank cheque.
There are tens of thousands of people out there (myself included) who are still puzzled at the gross stupidity exhibited.
@grumpy
“Am I off the mark here or has everyone nodded off?”
It’s such a non-starter it cannot be taken seriously. As ceteris says, the institutional response is farcical. We’ve now had the commitment to sort it all out in a few weeks, what, three times?
@ Grumpy
actually, reading through it again, i don’t know if Ahearne himself actually references the Somme. He comments on it being like in the trenches, a constant battle/warfare, a war cabinet etc, but its actually the Sindo which makes the Somme inference, possibly via an excitable copy editor.
“He had to take rests a lot. There was a bed brought in for him to lie down during the day and his private secretary would make sure that he was left alone when he needed to rest. He used to rest for a couple of hours during the day. But he still did long hours, early morning, late evenings. In meetings, he was still very focused.”
Brian Lenihan’s illness should have precluded him from continuing as Finance Minister. One wonders how much it influenced decision making.
@Eoin
If a sub-editor stuck that in it was neither necessary nor helpful – just distracts from an otherwise fairly reasonable take on events.
The indo is a uniquely Irish phenomenon – a tabloid masquerading as a broadsheet. It cheerlead the boom, cheerleads the austerity and cheerleads the badger baiting in the current presidential election.
There, that’s the end of my rant. Going back to reading about Paul McCartney’s wedding.
On a human level, its hard not to feel pity for Aherne and co…. people trying to do a job that would have been very punishing on far tougher and far better people…
But Jadips comment on another thread is very relevant
http://www.irisheconomy.ie/index.php/2011/10/10/property-market-tv-hurray/#comment-177425
In warfare it is vital to cut off the enemy’s visibility and lines of communication….. to disorient; to keep the element of surprise; to spread panic by misdirection and to hide the real threat.
The “war cabinet” managed to destroy themselves (and us as well)…. they first destroyed their own sources and lines of communication…. and then descended into a rabble looking for someone to surrender to.
But some of the institutions they set up to distort, to conceal to retard and generally prevent are still around.
And will do damage for years to come.