Boone, Dooley, O’Hagan and Pisani-Ferry on European Sovereign Debt Crisis

The audio and video recordings from the October 25 event are now available

Also available on iTunes (search for Henry Grattan)

8 replies on “Boone, Dooley, O’Hagan and Pisani-Ferry on European Sovereign Debt Crisis”

More from Mr O’Hagan…

Sep 9, 2010 on this site: “we can safely exclude any repeat of the Greek crisis for Ireland”.

In the Independent, Sep 21, 2010: “Ireland, however, is very far from finding itself with an empty kitty. The National Treasury Management Agency has access to the largest cash reserves of any in the eurozone, relative to the size of its debt. Its professional expertise has been successful in giving the Government freedom to pursue its policies, unfettered by the discipline of markets.


Today’s two auctions will go swimmingly. Yields have already risen to attract investors, and there will be plenty of bids. Irish government bond prices will rally sharply afterwards. Indeed, dealers won’t have enough bonds to sell to all the investors that will be clamouring for them.

Ireland’s credit for now is as safe as houses. The Exchequer is swimming in cash. And it has ultra-strong backing from the European authorities. A 6pc+ yield today on government bonds will prove a bargain, as long as the Government digs the Exchequer deficit out of its hole.”

Back in Sep 2010, the eurozone economy was growing. Demand has since collapsed and a new recession is imminent or already underway.

Having cheered on as EU governments adopted the policies his bank demanded, Mr O’Hagan now turns around and claims everything’s gone wrong because they really haven’t been doing it right. The legal disclaimer at the end of his presentation is wise:

“Employees of SG, and their affiliated companies in the SG Group, or individuals connected to them may from time to time have a position in or be holding any of the investments or related investments mentioned in this publication. SG and their affiliated companies in the SG Group are under no obligation to disclose or take account of this publication when advising or dealing with or for their customers. The views of SG reflected in this publication may change without notice. To the maximum extent possible at law, SG does not accept any liability whatsoever arising from the use of the material or information contained herein.”

Mr O’Hagan was the headline source for Apr 25 2008 Bloomberg article announcing “Government Bonds Decline Worldwide as Credit Crisis Nears End.

Apr 29, 2008 interview with the FT:

“CO’H: …we’re faced with a very resilient economy. The share of profits and overall GDP is at very high levels so luckily this crisis is occurring at a time when the overall economy is at very strong levels.

FT: So you’ve got some buffer there to actually try and absorb that shock.

CO’H: Exactly, a very, very strong buffer. We’ve had several years now of global growth around about 5%, unparalleled history of global growth, and yet despite that we’ve got very moderate wage growth at the same time, in Europe, in the US and in Japan. And the inflationary pressures which we’re seeing are, for the moment, luckily, just commodity-led, so we’ve got an economy which remains, it seems for the timebeing, somewhat resilient. A consumer in the US, despite the forthcoming credit crunch, remains resilient…”

Also in the FT, Feb 27, 2008: “Ciaran O’Hagan, head of Paris fixed income strategy, at Société Générale, says: ”Many investors are asking if Italy and Greece are seriously sick, or if the recent asset price moves are just driven by global risk aversion.”

”The answer for us is firmly the latter . . . both Greece and Italy will be around in 30 years’ time and will probably be much more prosperous than what is reflected in today’s repricing of sovereign risk.””

He’s singing a different song now, eh?

The policies the banks, Mr O’Hagan’s employer among them, have urged on the continent have certainly made that more likely. But he wasn’t always so hostile to state aid…

In Aug 2007, he welcomed massive ECB aid (“prompt intervention”) to address what he called the “liquidity issues” in his industry. A little over a year later, his only concern was that the free money might be cut off too soon. Not that he felt there was any problem with his employer or its peers. On the contrary, he felt that “what once seemed like the end of the financial industry a few months ago now barely registers as a blip”, thanks to the breathing room central bank funding had provided.

Never during this period did he find any need for the “market discipline” he finds so pressing nowadays, or mention the phrase “moral hazard”. Of course at that time, it was his employer that was in receipt of unlimited and open-ended government support. It appears moral hazard is a danger only in others.

COH makes a good point about credibility in the market . The Swiss currency floor worked well and the EFSF didn’t.

@ Adrian Kelleher
It seems you want to portray me as having been quite optimistic these past years. Altogether the contrary (albeit public comments are necessarily guarded). You splice and dice and mix up to suit what you want to say. Read the next paragraph in the FT article after the one you begin to cite ..
(which doubtless you did but choose not to cite )

And contrary to what you want to have me say, I would on the whole see negative value for the taxpayer from state aid for banks generally in Europe, as indeed many banks would be themselves, (but there is quite some differences in circumstances…).. But read or listen to the pres, and you ll get a far better idea.

I do believe Western sovereigns face very difficult challenges in the years to come, that will necessitate extraordinarily tough decisions. More later.

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