VAT to rise by 2%?

It is widely reported that the German parliament is debating the news that Ireland is planning to raise the top VAT rate by 2%.   Of course, all else equal, an increase in any tax rate has a negative impact.  However, it is important to appreciate that an increase in VAT that avoids an increase in labour taxes is, in relative terms, an employment-friendly policy and is also part of the mix that can engineer a “fiscal devaluation” that can partially replicate the impact of a “currency devaluation” .

A VAT increase is especially effective if it is understood to be permanent (no point in delaying consumption until the tax increase is reversed).  Even better, a widening of the VAT base can further assist in raising revenue, alleviating pressure on other parts of the tax base.

In terms of income distribution, the regressive impact of a VAT increase has to be calculated in the context of the overall package of taxes and transfers, since it is important to work out the net impact of all policy changes taken together, rather than on a “one at a time” basis.

177 replies on “VAT to rise by 2%?”

Thought I said this before although I used the term Synthetic Devaluation – although I am uncomfortable with a scatter gun approach that may effect life support.
The waste is in transport – being on the road during the school run proves this hypothesis.

An easy way to devalue wages would be an x% income levy, with the money remitted straight back to employers

It is widely reported that the German parliament is debating the news that Ireland is planning to raise the top VAT rate by 2%.

Its quite possible that the German parliament might think the 2% vat increase is not enough. They might change the figure to 3% and give it back to Dail Eireann to sign off.
After all the German banks wants their money back.
How about Ireland introduce a new tax 80% tax on dividends on all foreign bonds and 80% tax on foreign deposit interest for both individuals and corporations.
That might be as good for the domestic as a VAT increase.

Tax should be all about freeing capital for productive use , not raising revenue – but what if it is all about paying back malinvested capital , what is it then ?

The only proper use of this exercise is to get the right fiscal measures in before default but if we default we will not need such a synthetic tax ………..I am puzzled by it all really.
Why don’t all economists accept we have a suboptimal currency that “they” will not even modify by destroying malinvested debt.

This Frankestein like creation is a abomination – wrecking ancient poltical contracts for what exactly ?
Another year of depreciating our capital stock so that financial capital has enough time to escape !!!!
We desperatly need men with Liathroidi.

We live in a medieval like Sheriff of Nottingham economy where tax only serves to raise revenue for the local collectors and the far away Kings.

Meanwhile the wenches sit around their hearth televisions waiting for the next episode of Robin Hood Men in Tights.


“It is widely reported that the German parliament is debating the news that Ireland is planning to raise the top VAT rate by 2%”

One would imagine that German voters would be expecting their Parliamentarians to be debating German issues. With a population of over eighty million I am sure there must be plenty of pressing national German issues that need debating and which they are paid to deal with.


From the little I have gathered from the media reports today on VAT rise
the only thing certainty is that a 2% rise will happen but it does not seem clear when this will actually happen 2012 or 2013.

Earlier this year I seem to remember a thread on this site (possibly by Colm McCarthy) which suggested that if a VAT increase was signalled 12 months before it happened that it would result in a stimulus in the preceeding 12 months as consumers brought forward their consumer spending.

Consequently (according to that argument) the same would happen in the next few weeks before the December 6th Budget whcih would effect consumer spending.

It would be very interesting if a we witnessed a boost in spending in November, followed by collective “sigh of relief” (reflected by a pre Christmas buying splurge) when consumers realise that they can actually cope with the upcoming “budget from hell” which in turn would be followed by more increased spending/stimulus in 2012 if the 2% VAT increase is postponed until 2013.

Faced with the possibility of being able to encourage a “consumer stimulus” for 14 months or immediately imposing a 2%increase I would imagine the former would be a lot more attractive.

The only other reason I would see for an immediate VAT increase would be if the Government has “smelt fear” in Germany and has decided that we may need to get down to a balanced budget rapidly while we still have (admittedly borrowed) money in the fiscal kitty.


I doubt very much that the German Parliament would publicly tell Ireland what to do regarding VAT. They are well aware that there are a lot more serious problems throughout the EU and EZ. Having said that I am sure their Parliament also has a itś fair share of “characters” who may express unusual (but powerless) opinions.

IMHO if they really are discussing Ireland it is because they see Ireland as a crucial cog in the EZ/EU that appears to have lost patience with “can kicking” and has (like a true friend) politely expressed a few “home truths” about the current reality and future of Europe.

@Richard Tol

I would have some concerns about a flat rate system as analysed in your paper. I find it hard to see how it would not very inequitable.
When the UK rate went from 17.5% to 20%, that allows the ROI to increase from from 21% to 23.5% with no more cross border issues than previously.

Another point that your paper did not cover and needs to be looked at separately.

There was a major VAT change introduced on July 1st 2008.
In my humble opinion is will cost the State billions in lost VAT. I have seen no analysis done on the change. Nor have I seen any report of it being examined by the Dail PAC.
That VAT change had the effect of deferring the 13.5% VAT charged on new buildings that were “leased” from that date and spreading the collection of that VAT over a 20 year period.
It was introduced just about the time that the “Gasworks” building failed to sell and was being put into use for leasing or renting.
It was a political stunt to help banks and FF developers at the time but is costing billions.
Yet it has never been analysed.

@ All

What is really quite astonishing in this affair is not that the issue of a possible VAT rise in Ireland is being considered as a subject of discussion outside Ireland but the forum in which it is being discussed. Putting the matter in another way; why is it not being discussed in the other parliaments of Euro Area? This would be equally logical and equally out of place.

The imbroglio that has been created in the consideration of European issues in Germany, through a combination of government ineptitude and idiosyncratic decisions by the country’s constitutional court, is quite extraordinary and carries very considerable risks for the future of the European Union.


“Putting the matter in another way; why is it not being discussed in the other parliaments of Euro Area?”

Perhaps the “other parliaments” are not so concerned about how Ireland manages itś fiscal affairs. From my perspective it looked like Enda Kenny was speaking, yesterday, in Germany like a trusted friend rather than a “jingoist” or “lapdog”.

Of course like family members trusted friends often tend to tell you things which are not always easily dismissed or flattering.

@Desmond Brennan ‘An easy way to devalue wages would be an x% income levy, with the money remitted straight back to employers’ – is this a joke?

Are you seriously proposing a direct wealth transfer from workers to business? I know this is happening all the time anyway but I don’t think things are yet at that stage where this can be proposed so blatantly. Even the government had the decency to stagger the VAT cut for business with the VAT rise for workers by a few months.


It looks like we are going to be ruled from Brussels/Berlin if the document the Telegraph got hold of is accurate….
“The six-page German foreign ministry paper sets out plans for the creation of a European Monetary Fund with a transfer of sovereignty away from member states.
The fund will have the power to take ailing countries into receivership and run their economies. Even more controversially, the document, entitled The future of the EU: required integration policy improvements for the creation of a Stability Union, declares that the treaty changes are a first stage “in which the EU will develop into a political union”. “The debate on the way towards a political union must begin as soon as the course toward stability union is charted,” it concludes.
The negotiating document also explicitly examines ways to limit treaty changes to speed up the reforms. It indicates that Mrs Merkel will tell Mr Cameron to rule out a popular EU vote in Britain.”

Nein to Referendums


I think what Mr Kenny was trying to put across yesterday is that if Ireland had not been “misdiagnosed” (i.e not saddled with a Euro wide Bank debt) we would not be “ailing”.

In his Adenauer speech (a link was posted on another thread yesterday by Georg Baumann) Enda Kenny highlighted the fact that Ireland , prior to the banking madness, had always stuck to the terms of the stability and growth pact. What he did not (need to) add was “unlike other countries”.

Combined with the media reports of his visit his Adenauer speech is well worth reading as an example of a”diplomatic offensive” action. 🙂

Hang on, were peoples private pension funds not ‘robbed’ to fund a jobs plan that did not create one job so that vat could be cut on a night out after an afternoon in the hairdressers and now they are going to increase it. This lot are worse then the last. And it seems stuff the Irish we better let the Germans know that Enda and the lads think more of them then the Irish voter/taxpayer. Reasons to be mad, growing by the day!


I hope you mean the countries that are driving us off the cliff, Germany and France who broke the rules 10 years ago.


Enda was wasting his time. The game has changed and Angela is going for the complete makeover.
The Eureopean Monetary Fund ( with full receivers powers) is the new game in town for debt ridden countries.


Forget 2% on VAT [which is Regressive and a further kick in the teeth to the lower serfs] … This Telegraph leaK is EXPLOSIVE – It effectively provides further proof of dictatorship and a further downgrade of EU Democracy to sub_sub_Junk Status


not to worry – our dezzie hopes to go to neo-kon school and is collecting brownie points for entry to its nat_front faculty

“In terms of income distribution, the regressive impact of a VAT increase has to be calculated in the context of the overall package of taxes and transfers, since it is important to work out the net impact of all policy changes taken together, rather than on a “one at a time” basis.”

That’s a fair point, but considering the government’s pledge not to increase income tax, along with planned social welfare cuts, and the proposed introduction of a pointless flat tax for water users; isn’t it fair to think that a generally progressive budget is nigh on impossible?

@ Ceterisparibus

“The Eureopean Monetary Fund ( with full receivers powers) is the new game in town”

Here’s a snippet from the end of a report in the Indo
“However, many analysts believe no amount of austerity will calm the bond markets at this stage with intervention by the European Central Bank seen by some as the only resolution.

They see the bank as the lender of last resort for troubled eurozone economies but the German Government is resisting any suggestions that its top bank would bale out Governments in the region.”

Looks like the Germans do indeed own the ECB and now they are trying to tell the Brits what to do.


Germany is just the Host.
It thinks it is sentient but it is following subconscious signals implanted by its Bundesbank.


I’m inclined to accept that no amount of austerity will appease the bond markets.
The difficulty is the lady is not for turning.
The new EMF looks like the only game in town and it could work..that is if she can knock 27 heads together.

Her is a surprise…from the IT
THE CHAIRMAN of the Irish Fiscal Advisory Council has defended the council’s call on the Government to implement greater austerity measures in the forthcoming budget, saying its assessment “was not taken lightly”.

Prof John McHale, chairman of the five-person council established in June to monitor and assess the Government’s fiscal policy, was addressing the joint Oireachtas committee on finance, public expenditure and reform yesterday.


“LEAKED DOCUMENTS: When you are a programme country you no longer have full control of your destiny

BEYOND THE Government’s huge embarrassment at the German Bundestag getting sight of Irish budgetary proposals in advance of the Oireachtas is a new and harsh reality – when you are a programme country you no longer have full ownership or control of your destiny, or even your secrets.”

And when you join the new European Monetary Fund you lose all control of your destiny…whether or not you are a good pupil and digilently squeeze the life out of the population.
It get beyond belief.


Sarkozy went to Asia with the begging bowl out and achieved the opposite so he must have said something to spook the Chinese. It was then whispered on. Sell sell sell.

I would take any eu scare mongering stories in the Torygraph with a pinch of salt, especially one written just as Dave is going to see Dr Merkel. They certainly have their own agenda.

@Ceteris/PR Guy
The article in the Telegraph is interesting for the following among other items.

Jean-Claude Juncker, Eurogroup chief, fueled the fire by warning that Germany is no longer a sound credit with debt of 82pc of GDP. “I think the level of German debt is worrying. Germany has higher debts than Spain,” he said.

This is clear evidence that European countries are no longer willing to have their funds sucked into German while they are unable to raise funds except at exorbitant rates.
It is not only a statement of the obvious but a prelude to capital controls if the situation continues.
IMHO Germany should be asked to buy back its bonds from foreign residents and replace that funding with domestic savings. That might sort the Target2 balance that Prof Sinn and Thomas Meyer of Deutsche Bank keep bleating on about.

@ Ceterisparibus

“The difficulty is the lady is not for turning.”

I’m inclined to agree and if Cameron does a good impression of Neville Chamberlain this evening we might as well fly the Bundesflagge over Leinster House tomorrow.

Deutschland uber alles!

I agree with PR Guy on the Torygraph. Last August on a Saturday afternoon I found myself in the drawing room of a very agreeable country pile in Somerset . The only newspaper in the room was the Telegraph. I had read the guardian in the morning. They had the same stories. But the treatments were polar opposites. The Torygraph is rabid concerning Europe.

Regarding the leak, Enda has to get the Germans onside. The narrative is that Ireland is the perfect bailout. IT readers got it on Tuesday. Bild readers are getting it now.


If I were Juncker’s PR Guy I would be telling him to button it right now. That’s inflammatory at a time when it’s just not needed. If prominent players are going to start openly/publicly taking sides in the bickering we know is going on behind the scenes (and best kept there until they resolve their issues and agree on action/way forward) then they might as well throw in the towel now and say goodbye to the Euro before the markets do it for them.

Ireland in denial of German budget primacy

But the Irish Times, which has seen the document, said giving the information to the Bundestag was in line with German guidelines for participation in the European Financial Stability Facility (EFSF) – the German budgetary committee has to approve proposals to increase income and reduce spending before each bailout tranche can be released.

“What’s happened is the federal government meeting its legal information to inform the Bundestag about the EFSF,” one committee member told the Irish Times.

“This is widely known and seems unproblematic from our perspective. This is the day-to-day reality of a programme country.”

@ All

Despite the gloom, there are some positive signs on the horizon. (The Telegraph and the Daily Mail, with the exception of a few journalists in the case of the first, cannot be taken as providing anything even approaching an objective assessment).

The report from Derek Scally in the IT today indicates that, in fact, the lady may be turning (a bit!).

Notably, the following;

“Yesterday she appeared to qualify her call further.

‘We can limit this to the euro zone members. We can do it in the form of a protocol that we already have in some cases for euro-zone members,” she said. ‘We’re talking about a very limited treaty change’.”

She also displays her ability as rug-puller extraordinare by pulling it on this occasion from under her FDP Foreign Minister Westerwelle.

He says “At the European Council in December, we should agree on establishing a convention for a limited treaty change”. A convention to negotiate a protocol would appear to be ideas at odds with one another.

There are also strong indications from an article in the FT that Cameron is ready to strike a deal and that it may be in Germany’s interest to agree. The Lisbon Treaty provides for a change in voting arrangements from 2014 with the weightings being changed to that of population. There is s big risk that the non-EZ countries, including the UK, would be unable to make up a blocking minority and that the UK could be overruled on sensitive (read, financial/City of London) issues. The FT is reporting that Cameron is seeking the introduction of an “emergency brake” (no doubt on the pattern of that in the Lisbon Treaty for legislation in relation to police and judicial matters) which would protect the UK position.

Ironically, Germany finds herself in a parallel situation withing the EZ and, again as an FT blog has reported, demands by the CDU to have voting weights in the governing council adjusted to reflect economic (as opposed to demographic) weightings have been quietly dropped. The non triple AAA’s would have a bigger weighting than the triple AAA’s.

However, the general conclusion that can be drawn is that negotiations, as opposed to diktats, have shown a rather timid head above the parapet.

On the specific subject matter of this thread, it is clear from the Irish experience that the distinction between intergovernmental – as in this case – and the Community method is not artificial, as Merkel recently stated, but of the most fundamental importance. Under the latter, all countries are treated equally and have the protection of the treaties and the European Court of Justice. Under the former a budgetary committee in one parliament can take it upon itself to appear, at the very least, to comment on, if not to interfere in, the business of another. Such a situation is democratically intolerable. The sooner the Merkozy approach is consigned to history the better!

I’m not sure if it is clear what is done in budgetary committees. It might surprise some here that when evaluating an investment then the business plan, including projected costs and projected revenues, is evaluated by the budget committee. For countries the business plan consists of taxes and state spending.

Ireland is asking for a loan to invest in Irish economy. Either the budget committee looks at the business plan, taxes and spending, or it does not. If it does not evaluate, then it is not doing its job and is then as useful as the risk-committees proved to be in Anglo, AIB etc

At the risk of being accused of ‘raising hares’, how should countries decide if they want to offer a bilateral loan & release funds?

OK – thats the deal – if the Irish middle management follow orders their kids will work for the German rather then the British civil service.

The Brits have having a mad laugh off this 64 pager like comedy.

Two great lines from FT bloggers
“For you Enda ze spending ist over”
“Herr Kenny your papers are not in order”

The Oceanic indirect monetory means of control is clashing with the more Continental in your face method.
Fascinating juxtaposition.
Completely unsustainable in my opinion – but you never can really know.

Anyhow we can all learn to laugh in the face of this dark absurdity……………..
Thinking of digging up my old Victor & Commando annuals now.


Jean-Claude Juncker has proved himself to be one of the leading, if not the leading, centre right pragmatists throughout this crisis.

Not that I could be considered centre roight meself, but I seek pragmatists on left, right and centre … On German Debt, he is absolutely correct – the ‘real’ debt of the German Financial System has been ruthlessly ‘hidden’ and an absolute joke that 100 billion will be sufficient to re-capitalise EZ banks …. as noted on earlier thread, unlike China which kept a good few bob in reserve, German finance tossed it out like confetti to peripherals (anglo-irish and aib anyone? PD/FF anyone) so that they could binge on reckless consumption [while the ECB and the BundesBank stood idly if smilingly by – readers of the blog will be familiar with the supreme ostrich on capital flows LBS the Magnificent who is shortly to be sent to Coventry in Harvard]

And the Bundesbank and Chancellor have been highly successful to date in ‘getting their deutsche dosh back’ to the extent, to take one minor example, of lending dosh to the Irish Sovereign so that it can be sent straight back to the German Financial System – and the poor eejits of innocent supine irish_citizen_serfs, skewed towards the lower orders, and their offspring having to pay it back …………. and this is NOT being sufficiently communicated to the European Citizenry – and especially not to the general mass of German Citizenry.

@PR Guy

Nothing personal – but cosmopolitan J-CJ would have FIREd you within a few days …… got a lighter?

Might try the Irish Gov though …. our EU Communications on Reality, and key reps, is Abysmal ….

And for those with the time … the recent IMF working paper – which I’ve tossed in to a few threads last night – provides some empirical evidence that The Conflationist Fallacy [now deemed a fact due to squatter rights and adverse possession] has now crossed the Rhine and is ready to storm both gates of Frankfurt – and I’m not talking about the Russians this time, nor about the Goths or the Visi-Goths either.

@ Jesper

“At the risk of being accused of ‘raising hares’, how should countries decide if they want to offer a bilateral loan & release funds?”

Its not a bilateral loan between Ireland and Germany. Its between the Troika and Ireland. Enda Kenny, pre this unfortunate but unsurprising German political idiocy, said the same to Merkel on Wednesday – Ireland is in a program, has signed up to an agreement, and is meeting the demands laid down in that agreement. The Troika is supervising and analysing Irish measures and enaction of those measures, and it is happy. That is all that is required of Ireland. While the German courts have decided that the Bundestag should debate the contributions to the EFSF and what they are being used for, this does not necessarily necessitate them being given every document that has been provided to the Troika (as opposed to some headline numbers contained therein), and it certainly does not mean that the German Bundestag is entitled to leak it to journalists ahead of it actually being debated and enacted within the originating and ultimately deciding country. If the Germans want to play this game, i’d suggest they will find it very difficult to convince the periphery to yield more sovereignty to the core going forward. At some stage the Germans will have to realise that while they are the guiding force within the EU, they cannot simply do as they choose without there being some reaction from a periphery that is already struggling to keep their economies and societies together as-is.

Breaking Newz

Unconfirmed reports, from a usually unreliable source in Rioters, that a bazooka round has been fired in the unpopulated vicinity of a historic building in berlin ….

Blind Biddy has been drinking tea, and knitting, with me all morning 😆

@David O’Donnell

Nothing personal – I always enjoy your posts and you’re probably a great guy – but cobblers.

If the various unelected EU ptb want to see Europe out of this mess they had better get a comms plan together that doesn’t include shooting their mouths off individually and being seen to disagree with others in the ‘team’ in public (by all means shout at each other behind closed doors as much as they want until they get to an agreement). I don’t personally give a toss what he says but he’s clearly gone off on his own agenda. The saying ‘loose lips sink ships’ came about for a reason. The current situation is precarious – and I for one don’t want to go back to hunter-gathering.

@PR Guy

Nothing personal – we are entitled to our opinions. But you haven’t addressed the substantive question! Do you carry a lighter on your person?


the parliament is doing what it is supposed to do. Trust but verify. To verify they need information, they asked for information and the information was given.

It is surprising that the Irish government agreed to hand over a draft to another parliament before the Irish parliament had debated it. However, that was a choice that the Irish government made. A borrower can refuse to give information and a borrower does not have to agree to everything their lender asks for.

@David O’Donnell

H’mmm not sure why you are asking this question and at the risk of being on the butt end of a joke, yes, I do have a lighter. Nothing nicer than a cigar now and then.

@ Jesper

“It is surprising that the Irish government agreed to hand over a draft to another parliament before the Irish parliament had debated it.”

They didn’t. They gave it to the Troika. “Germany” and Ireland have no deal in place. The EU, ECB and IMF do, aka the Troika. This isn’t difficult to understand.

Germany, while entitled to some information, is not entitled to every single document the Troika receives on Ireland. The German constitutional court simply says that the Bundestag must be informed of how the EFSF is being deployed. This isn’t difficult to understand.

Further, they are definitely not entitled to leak this information to the press, in a bid to gain domestic favour but which risks undermining the democratically elected government of a program country. This isn’t difficult to understand.

Using your own inaccurate example, if you ask for a loan from a bank, are the banks shreholders entitled to look at all the information you have given? Further, are they entitled to leak this to the press? No, they are not.


It is surprising that the Irish government agreed to hand over a draft to another parliament before the Irish parliament had debated it.

Do you think, by any chance, that the Irish government were threatened with adverse consequences if they did not surrender the information on Germany’s schedule? The EU has become a place where large nations can dictate terms to small ones and effectively direct Eurozone monetary and fiscal policy so as to suit their own domestic political priorities and national ambitions, all perfectly legally. Unfortunately it has happened at a time when the Eurozone is also affected by a right wing malaise.

I do hope that Europe’s Calvinist right reaps what it sows – enjoy your economic thuggery while you can.

@Mr. Bond,

Completely agree with the points you’re making, but this is ‘grubby politics’. Most German voters are pretty mad because they were lied to. They were promised by their politicians when they were being asked to abandon their beloved Deutschmark for the Euro that there was absolutely no possibility of anything even remotely like a transfer union arising. There were told that every possible safeguard to prevent this had been put in place. Now the voters realise that this was a tissue of lies. The politicians are hoping that by demonstrating that they will be able to exercise some oversight on support funding of other states and on the fiscal performance of these states, they might be mollified.

And this isn’t going to get any better. German voters are still being lied to about the state of their banks. It’ll probably need a bit more than some passing embarrassment of other sovereigns and the Troika to mollify them when they eventually extract the full story.

@ Shay

just so we’re clear – the European Commission has admitted that they forwarded on this document to the German finance ministry by mistake. These documents were never intended for them. The German finance ministry then decided to use (and abuse) it in the manner in which they did.

The EU Commission today admitted that “there has been a lot of leaks” in Berlin recently, which, as i pointed out, is being caused by domestic political games seeking to trump a much more serious Eurozone crisis. Given that Germany is on such a moral crusade to point out the mistakes being made by the rest of the Eurozone, remarks like Jean Claude Junckers above are necessary as a counter balance to their potential sleep walking into the apocalypse.

The IT featured a picture of a building in Berlin on the front page today. “People walk by the Reichstag building, the seat of Germany’s parliament the Bundestag, in Berlin”. The Reichstag was the Imperial parliament. The building now holds the Federal parliament .The Empire fell following a previous financial crisis. The Reichstag was burnt after the next one. The Federation followed the war that followed.

@PR Guy

… then you might have lasted a week (-; at a recent ‘hot’ meeting Jean-Claude pulled out a packet of fags and set to light up when Hermann V. P. went through the roof, threw a roight wobbly, and Jean Claude had to set off for the front door (about 27 floors down) – and it was p1ssin rain at the time: the meeting, apparently, did not reach any definitive conclusions – no correlation intended. Looks like the ol smoke filled rooms have entered political economic history … if you like Cubans there is a property boom about to emerge ….

every Tom, Dick, and Harriet in the EU finance departments have one … before the Irish Citizenry – sad ol spot we are in alrite …

Where is Grumpy ?

The Croke Park agreement on public service pay and reform is unsustainable and needs to be renegotiated, the chairman of the Dáil Public Accounts Committee has said.

Speaking after a speech in Dublin this morning, Fianna Fáil TD John McGuinness said the pay and pensions of staff in the public service were being protected under the deal.

He said that only 58 per cent of the workforce in the country had a pension while 42 per cent had not.

“But those 42 per cent who cannot afford a pension for themselves are contributing to the pension of the public sector. It is creating a two-tier workforce, it is creating a two–tier pension scheme and it has to be renegotiated.”


the ones who leak information are of course guilty of wrongdoing. I’ve not defended that so I don’t understand why you keep asking me to do so.

Are you saying that the EFSF should not have given the information to the Bundestag? The Bundestag is entitled to ask for information, if you believe that the EFSF should not have given the information to the Bundestag then I can’t see other than that the complaint should be with the EFSF.

As for your inaccurate description of my example, I’m not sure what you’re getting at. I think you might be equating the parliament with shareholders, I’d see the parliament as more of being similar to the board of directors. The board of directors are entitled to ask for information and, just to be clear, no they are not allowed to leak sensitive information.

@David O’Donnell

Yes, I heard that Juncker ended up having his smoke outside, with a bunch of journalists.

I’ve already contacted my cousin Carlos to take advantage of the new law re buying private homes in Cuba. He is currently converting cigar factories to apartments. Cigarminiums.

@ B.EB

That is about it! But there is one slight qualification. It applies only to countries “in a programme” which is unlikely to be the case for Germany.

For the information of Paul Hunt, Germany has not paid one red cent to any bailout up to this point other than in respect of her own banks. What the country has accepted is a very large contingent liability through the IMF, the ECB, the budget of the EU and the bilateral guarantees given under the EFSF. But that is enough to make any German voter queasy.

What is really rather unsettling is that the very valid case being made by Germany is being undermined by the lack of a coherent position in Berlin, the participants being evidently more interested in scoring political points off one another rather than having regard to the disastrous possible consequences for the image of Germany abroad and, more seriously, the future of the euro.

It is simply incoherent to insist on diziplin in order to restore access to the markets while at the same time announcing to private investors that they will lose their shirts in the rather likely event that the necessary discipline may not be forthcoming.

But as I have indicated above, there is some reason for optimism. The German opening bid was always likely to be high and Merkel has already retreated somewhat (if the quotation from Derek Scally is to be believed).

But, meanwhile, in the real world, France risks falling out of the bed (maybe even this weekend).

@ Jesper

you seem confused. The Irish government gave the documents to the Troika, not the EFSF. The EFSF is a tool of the Troika (the EU arm’s funding mechanism). The EU, ECB and IMF are entitled to receive and read those documents, no one else. The EFSF is an SPV domiciled in Luxembourg, which the EU uses to rasise the necessary funds for financial support programs.

As i have explained before, Ireland is in a joint EU/IMF program, and it has signed up to certain demands of that program. They are currently meeting those demands. That the German Constitutional Court has decided, post-agreement, that that it has additional demands should be no concern of the Irish government. However, even if it was of concern to the Irish government, the German Constitutional Court does not have the power to tell the German government that every single piece of information on a program country should be made available to the Bundestag. Are you claiming it both has this power and has directed the German government to do this? It only has the power to declare that the Bundestag be adequately informed of the progress of these programs and the use of the EFSF funds.

The German government should be well able to inform the Bundestag of the progress of the Irish program and its use of the EFSF funding without needing to go through confidential Irish budgetary documents or risk undermining the very measures it is incessantly demanding of the periphery. If the Bundestag does not understand this, they are quite clearly living in a different reality, as has been suggested on here, and we are much closer to the breakup of the eurozone than even many bearish commentators would have you believe. Enda Kenny asked for solidarity from the Germans on Wednesday, and 24 hours later he got his answer in unequivical fashion from them.

@Mr. Bond,

You may view them as ‘domestic politcial games’, but I would see them as mere tactics in a bigger strategy to secure voters’ consent to what needs to be done to resolve this crisis. We’re used to politicians lying routinely to us. Many Germans, for all sorts of reasons, seem to find this offensive – particularly on matters related to the currency or economic management. They have been lied to once on these matters and it will take some convincing for them to trust their politicians on these matters again.

Let the German politicians do what they have to do. In any event if you’re in the treatment room because you couldn’t manage on your own you haven’t much grounds for quibbling if those who are paying for your stay want to make sure you’re taking the medicine and might be heading for the exit soon.


“It applies only to countries “in a programme””

Aha, but does it??? From that same document…

“To what extent persistent violation of the provisions of the Stability and
Growth Pact could result in intervention in the budgets of member states
should be fully assessed. In the discussion it has been suggested that the
post of a European “Stability commissioner” could be established, who
would have the right of direct intervention in national budgets in the event
of permanent breaches of the Stability Pact, or could make suggestions
for relevant Council decisions. In Germany, this would raise fundamental
questions of constitutional compatibility (given the financial autonomy of the Bundestag).”

Also, Germany would still have to sign up for the possibility of one day being in a program, something which would appear unconstitutional. Germany cannot seriously expect an opt out clause purely for itself, although recent events would suggest they are not necessarily in touch with reality all the time.

Thanks fo link.

@Joseph Ryan@Livonian
Those two countries were exactly the countries that sprung to my mind (recalling their rule breaking 10 years ago) when I read Mr Kennyś Adenauer speech. I would venture to guess that his audience also knew what he was diplomatically referring to.

re Lady not for turning.

I see that following Taoiseachs visit to Germany the good Doctor is now proposing “limited” treaty changes.

Face saving is important in politics and diplomacy which is why we are hearing about German Parliament “inspecting” the Irish budget.

“Inspection” can mean anything and nothing except as a useful “bone” to toss at German tabloids.

“Limited”treaty changes can also (and probably will) be “watered down”.

We need to avoid the temptation of “jingoism” and not indulging in “voyeurism” by equating Cameronś upcoming visit to Germany with Chamberlains visit in 1938.

Dr Merkel has many flaws (including forgettting that the EZ started in the West and that that is where it will succeed or collapse) but she can never be compared to her 1938 predecessor.

If I remember correctly Margaret Thatcher (same poitical party as Cameron) had many “rows” with her Helmut Kohl (same party as Merkel) but it never seemd to do any harm.

@Bond @DOCM

“so they can intervene in ours, but we can’t intervene in theirs?”

IMHO some Germans (who are very worried the Euro will collapse and the new DM will skyrocket thus damaging exports)might argue that by saying that Ireland was not interested in Treaty changes but that the crisis should be fixed quickly using existing treaties Ireland did “intervene in theirs”. 🙂


I agree “the game has changed” but somehow I think (hope) it was the “Quiet man from the West” who has just restricted the “game” into 15 minutes extra time rather than the “hour” Dr Merkel wanted.

Two state visits from North West Europe with Germany in a matter of days looks like this “game” is moving very fast.:)

@Bond Eoin Bond
” In Germany, this would raise fundamental
questions of constitutional compatibility (given the financial autonomy of the Bundestag).”

I raised this issue here but got no takers. Could it be said that the financial autonomy of the Oireachtas has been abrogated to the diktat of the Troika.


just so we’re clear – the European Commission has admitted that they forwarded on this document to the German finance ministry by mistake. These documents were never intended for them. The German finance ministry then decided to use (and abuse) it in the manner in which they did.

I’ll allow that sending the budget on to German TDs certainly seems like a mistake to the Commission in retrospect but I would question whether it was something that was done unintentionally. What the CDU wants it gets.

I do not think it is hyperbole to say that this is now the German centre rights EU and that this is a bad outcome considering their instincts are not progressive. A CDU EU will be a pretty miserable place for anyone not bordering Germany and aligned with its economic priorities.

@ CP

the financial autonomyof the Oireachtais does not seem to be as hardcoded as the Bundestag’s is. As was pointed out by the unflinching democratic position of people like Paul Hunt, this autonomy is both unquestionably a theoretically ‘good’ thing, whilst at the same time being practically a complete and total nightmare, and one we are seeing played out already at such a micro level that even stalwart supporters must be appalled. Think about it, per the Bundestag ridiculous logic, or per Jesper’s contention that every single document should be made available to them, they could be debating (vetoing?) in the Bundestag whether the Irish government should pursue every minor detail imaginable. We should have a contest for the most ridiculous hypotethical debtate they could have (must involve real measures enacted or due to be enacted by the government). It doesn’t bear thinking about.

El Pais Madrid

An election for nothing

Mariano Rajoy’s right-wing Popular Party is set to win the Spanish general election this 20 November and apply more austerity. But as long as Germany fails to assume its responsibilities at a European level, the new government will be powerless to solve the country’s crisis.

And this is Madrid – wonder what the story is in Barcelona or Bilbao …


I read your link and once again many thanks.:)

Actually right now there are two “outer groups” in addition to the EuroZone which IMHO “3 tiers” already exist.

Tier A Sweden, Denmark and UK
Tier B EuroZone
Tier C about nine accession states.

IMHO unlike Portugal and Greece (I suspect Belgium will be “carried” by Holland, Estonia will be “carried”by Finland and Austria may “carry” one or two of its EZ meighbours) Ireland is currently assessing whether Tier A or Tier B is the best option.

Portugal and Greece may well be happy to opt for Tier C if Spain and Italy also opt for that.

This may all be spun as a “struggle” between Germany and UK but behind the “smoke and mirrors” this may actually be a struggle between Germany and the ECB.

If the “proverbial” hits the fan I might even consider betting my solitary Transnistrian Ruble that Berlin will win out over Frankfurt.

The ECB may have made the mistake, which many banks have made, and hired to many PR specialists as advisers to Economists rather than Political Scientists and Business specialists.


“The ECB may have made the mistake, which many banks have made, and hired to many PR specialists as advisers to Economists ”

WTF?!! People like you are bad for business 😉

…but I’m not convinced this is a struggle between Germany and the ECB. More a country by country protection of self interests. Several divisions.


Agree very much with your argument that our agreement is with the Troika.
But it appears that is not how Germany sees it, as quoted below from Ir Times.

“Without this obligation to inform the Bundestag we are unable to pay the next tranche. To free up the next tranche today in Brussels we had to inform yesterday about the EFSF legislation,” said a finance ministry spokesman.

We are no longer just in the a legal with the Troika, Germany demands that we stand cowed and cowering to whatever their latest whim is. Ireland should cut its losses. It is no longer a currency union. It is a currency disunion.
The Eurozone is now a Combatzone.
And Germany is winning the Geldkrieg.

While there is argument for sorting issues behind closed doors, clearly the behind closed doors approach has not worked. I am glad Juncker has decided to raise his head above the parapet. No amount of talking behind closed doors is going to change Germany’s mind.

How about this for misery….

“Portugal has to do more than initially planned to meet its budget goals, Passos Coelho said Oct. 13. The government has announced a one-time Christmas income-tax surcharge on all taxpayers to help cover the budget shortfall this year.”

@all daily hit of Der Spiegel International

Debt Crisis Contagion
The Euro Zone’s Deadly Domino Effect
A Commentary by Wolfgang Münchau

In Germany, these matters will continue to be debated, commented upon and processed. Meanwhile the dominos will continue toppling. And that’s the point when there will no longer be any alternative in Germany but to accept the unpopular euro bonds as well as the much more unpopular price guarantees via the ECB.,1518,798695,00.html#ref=nlint

Münchau understands one of the key variables – TIME. Had this been understood earlier The Conflationist Fallacy could not have become a ‘fact due to adverse possession’; it may be too late now? Political Economy

Blind Biddy still quietly knitting away – beginnning to look like a parachute!

I don’t understand the Bund trade if you are a maturity investor – it displays a complete ignorance of game theory.

We are witnessing the possible break down of the modern version of the Latin Monetary unit and we all know what happened after that episode.

If you are confident the Euro will survive you buy Gold as that is the only monetory asset that will save it under its current inter sov framework.

If not you row as fast as possible across the Atlantic and buy $$$$$$$$$$$$$$$

I see I’ve landed myself in the ‘unlflinching democratic’ box, but I would never advocate preventing a government actually governing. My objective is to highlight how unbalanced the system had become with an impotent parliament and government exercising excessive executive dominance.

The Euro and most high-level EU policy in the last decade or more was driven through by national governments exercising executive dominance aided and abetted by the top officials. We should see all this as the back-swing of the pendulum in Germany and the revenge of parliament. But is is all a show to convince voters that they should trust their politicians ago.

@ B.EB

I think the wording to which you refer is a roundabout way of saying to the Dutch – who are pushing hard for it – that the idea will not fly.

The problem that has arisen for Germany is not related to the democratic legitimacy issue as such but to the fact that, courtesy of the constitutional court, the representative (Bundestag) and executive (Federal Government) responsibilities have been mixed up. This is a serious problem of which the “Irish leak” may be a useful reminder. Combined with the requirement for unanimity, the involvement of the Bundestag makes the EFSF effectively inoperable.

At the same time, the German government is clinging to the idea that it is the solution. The fact that it has so far raised only about €16 billion, and at a cost that has now risen by 100 basis points, shows how delusional this position is (unless it is back-stopped by the ECB, a move, among the many others tried, blocked by Germany/Merkel?).

Of course, the EFSF is the branch on which Ireland is sitting and, as I have pointed out elsewhere, I do not suppose we are in the best position to point out how weak that branch is.

P.S. Jousting with Jesper is a hare-raising experience.

@ Joseph

Our agreement is with the Troika.

Germany’s agreement is with the EU, or with the EFSF, or both, and more importantly it is on the other side of the equation.

Our agreement is completely different to the German’s agreement.

The Troika is essentially the middle man in this, and has obligations to both sides it could be argued.

As i said above, getting adequate information from the Troika is very different to demanding every document that you could wish for, debating said documents on the Bundestag floor, and then abusing that position by leaking those documents to the press. Both of these actions are at odds with the assumed “solidarity” that is to be shown by EU members to each other, and is entitled to raise worries in the periphery about what the intentions of the Bundestag are going forward, a problem which is only augmented by the document and opt out language that myself and DOCM noted above.

The German constitutional court does not grant a veto power to the German Bundestag over Irish fiscal policy, nor does it intend to (yet!). It simply notes that the Bundestag should debate any tranches before they are given. As long as Ireland is meeting the Troika demands, which we are, they should have no other input into the matter. The constitutional court’s decision was designed to address use of the EFSF where there was no defined metric or conditionality or agreement in place to safeguard its usage (ie secondary market purchases, loans to finance bank recapitalisations). I would argue that the Bundestag actually had no need to debate the latest tranche of the EFSF funding beyond noting that the Troika reviews were going to plan and Ireland was fully expected to meet the demands placed on it going forward. Some particular members of the Bundestag are trying to change the rules of the game after it has started in my opinion.

@ Paul Hunt

for the record, the unflinching remark was meant as the highest compliment, even if i may disagree with this democratic power being used so purely at times (as you yourself just noted, and as i have complained re Greece and Germany recently). A pure democratic balancing argument is often required against arguments for more efficient and quick decision making.

Gross and Fink not impressed…
“Investors are basically fleeing what were previously safe havens,” Gross said. It’s “certainly a moment of 2011 which is significant”


““It is a very dangerous stake Germany’s playing,” Fink, who runs the world’s biggest asset manager, said at the event at the Beverly Hilton Hotel in Beverly Hills, California. “And many people would not play these stakes because the outcomes can be black or white.”

Gross and Fink, whose firms collectively manage $4.7 trillion in assets.”..

@PR Guy

A good PR guy (or gal) is worth their weight in gold. I can think of one who contributes to this site which would be worth more than an entire department in Frankfurt or Brusselsls .:)

I also have had the pleasure of working with an Irish PR “gal” and a Swedish PR “guy” on European issues , during the 09 election,who could do the work of ten people and not break into a sweat.

You are probably right that this involves several divisions but there may well be some interesting “rifts”developing between Berlin and Frankfurt recently.

I wonder if Enda will be a good referee when Ireland takes over the EU Presidency at the end of 2012? Maybe he was doing a “practise session” two days ago.


I used to disagree with 90% of what Ambrose used to write until I worked with him on a project in September 09. Now I just disagree with about 60% (usually when he deals with Ireland) of what he writes. Last week however he did seem genuinely “rattled” about the transfer of power in Greece and Italy.

Dan Hannon MEP wrote an interesting blog on the Telegraph ( I am not any good at posting links) in the last two days which clearly sets ot the difference between asking important questions about Europe and “European Skepticism”.

I have always believed I was pro Europe but since 2009 many people in certain parts of Europe (usually where Democracy is “quaint”new concept which must be endured) have incorrectly presumed I am a “European Skeptic “.

I suppose that is what happens when too many PR people are drafted in to help “solve” an economic and political crisis. I seem to remember that “Propoganda” was still a “growth” industry in the USSR even as the whole house of cards was collapsing.


I’ve repeatedly said that a borrower does not have to agree to everything that the lender wants. I don’t see how you can interpret that as me contending that the Bundestag has to have access to every single document it wants.

Given how the competence of political leaders is being ridiculed here I’d expect that people would welcome limitations imposed on political leaders by their courts and parliaments. The biggest failure in this crisis comes from the incompetence of the financial industry & now the advise from the same industry is seen as the way to go?

It seems more likely that a few banks would do well in copying the prudent and careful approach of the German parliament in their lending practices.


This one is well worth reading – for ‘believers’ and ‘nothing is impossible’ EU Brigade (of which I remain one – albeit a bit battered …)

Phoenix Europe: How the EU Can Emerge from the Ashes

“We must invent and establish Europe a second time,” says Sigmar Gabriel, the chairman of Germany’s center-left Social Democrats (SPD). It’s easy enough to say this from his standpoint as leader of the opposition. But many in Merkel’s party, the center-right Christian Democratic Union (CDU), tend to agree — they just don’t talk openly about it. Officials at the Chancellery are also looking for concepts for the day when the crisis is over.

Philosopher [Jurgen] Habermas refers to the global societies that can no longer afford to solve their problems on a nation-by-nation basis as the “post-national constellation.” On issues from finance to climate, energy and immigration, Habermas finds it “simply foolish to assume that Europe’s voice will still count if it doesn’t learn to speak with one voice.”
… “The difference between domestic and foreign is beginning to blur,” says Habermas, noting that international law and domestic law are starting to resemble one another. Frankfurt constitutional law professor Erhard Denninger questions “whether it will even make sense in the future to speak of national sovereignty.” …

[Habermas] sees Merkel’s method of decision making as “a disenfranchisement of European citizens,” and notes that a “gray veil” has descended on the national parliaments, which often have no choice by to rubber-stamp the Merkozy oracle. Parliamentarians, Europe skeptic Peter Gauweiler of Germany’s conservative Christian Social Union (CSU) scoffs, are playing the role of “a school of sardines” swimming behind the Lady.,1518,797626,00.html#ref=nlint

I trust one understands what sharks do to schools of sardines!


“It seems more likely that a few banks would do well in copying the prudent and careful approach of the German parliament in their lending practices.”

I wonder if that sentence provides a clue as to why this is turning out to be a “have a go at Germany week” in various media outlets?


re Der Spiegel article.,1518,797626,00.html#ref=nlint

I have to say I found it difficult to get a coherent view from the article and did not see too many positives in it.
I got the view that the weight of opinion, much supported by the article, was in favour of a two speed Europe. Or more correctly a new core Europe and a coterie of outsiders who could sink or swim. While Habermas’ views were welcome, the solution being proposed even by Fischer seems to be an inner core run by a Eurostag!
Perhaps the fact that there were several authors gave the article it lack of coherence or perhaps it was just my own lack of understanding of the article.

@ Livonian

“It seems more likely that a few banks would do well in copying the prudent and careful approach of the German parliament in their lending practices.”

Would that include German banks?

By the way, I was unaware that the Bundestag had become a bank.

I would also add that criticism of German policy actions should not be taken as an expression of anti-German sentiment any more than criticism applied to any other country should be taken as anti-French, anti-Spanish, anti-Swedish or whatever.

” it is important to appreciate that an increase in VAT that avoids an increase in labour taxes is, in relative terms, an employment-friendly policy and is also part of the mix that can engineer a “fiscal devaluation” that can partially replicate the impact of a “currency devaluation” .”

Aha – so that was why this government had the cunning plan of raiding my pension to CUT VAT rates as part of their stimulus package?

@ Jesper

Again you seem to misunderstand what is taking place in this process. The German state is not lending to Ireland. The Troika, via the EFSF, is. If anything, the German state is providing guarantees solely to the EFSF. As such, it’s questions should be directed at entity, or else at the EU or IMF. Given the rather lengthy progress reports provided by the Troika on Ireland, that should ordinarily provide more than enough information to placate the Bundestag budgetary committee, but seemingly not.

The Irish government signed up to a multilateral deal with the Troika, whereby financial assistance would be provided on the basis of the Irish State signing up to a Memorandum of Understanding, this document laying out in very exact detail what was required of the Irish government and state in the coming years. Nowhere in this document does it say that the Bundestag would have a bilateral veto or input into the Irish fiscal situation, and nowhere does it say that any documents must be provided to the Bundestag to “prove” the Irish state’s creditworthiness. In fact, so long as Ireland continues to meet its obligations under the MoU, it would appear the Troika is obliged to provide funding to the Irish state under this agreement.

The VAT rate is being raised by 2 percentage points to 23 percent from 21 percent.

Which is to say 2/21 = a 9.5% increase.

But then again 2/79 is a mere 2.5% decrease in the amount you are allowed to keep. Either way describing the VAT increase as 2% seems off. Just my 2 percents.

@ All

The defenders of the Community method attempt to head off the inter-governmentalists at the pass!

It may be noted that the immediate measures to be proposed next week by the Commission, and that would be adopted under the existing provisions of the treaties, are in the form of Regulations which would become part of the national legislation of the member states and would apply to all EQUALLY.

The distinction between the two approaches is fundamental. The Community method may achieve the necessary level of political and democratic legitimacy, the inter-governmental approach, as practiced hitherto largely on the insistence of Germany but with the active support of France, will most certainly not.

@Eoin Bond

Good post….it would appear to open up the question of the constitutionality
Of having a “foreign” parliament interfering in the fiscal affairs of the Irish State….a prerogative reserved to the Oireachtas.

As you say, the MOU does not contain any provision for such interference by the budget committee of the Bundestag. One could take the view that this “power” of the German budgetary committee was only recently imposed as a result of a decision of the German constitutional Court..and long after the MOU was signed. Consequently, it has no legal effect and is a direct interference in the fiscal affairs of a sovereign state. Again, as you stated in one of your posts, Germany is a mere contributory to the EFSF and as such is only entitled to such oversight as is provided in the agreements signed.
We borrowed from Britain and Sweden and we don’t permit their parliamentary committees to formulate budgetary strategy or to have a power of veto over our budget plans.

I wonder if the ECB will be the last fortess of monetarism, sort of a monetarist Masada with Trichet going down in history as a Bar Kochba type zealot.

@Joseph Ryan

Agree. there is no coherence here – what the article does is take us away from the idea that ‘Dr Merkel is l-etal c’est moi’ [which also applies to Sarkozy] …. the general point is that there is broad sprectrum of influential opinion in Germany [left, right, centre] that is pro-EU, pro-democracy, recognises extant failures in design, and wishes to move forward beyond the failed Bi-Dicatorship of MerKozy (now breaking up)

….. and


… which Walter Hallstein, CDU and first president of the EU Commission 60 yrs ago and a signatory to The Treaty of Rome, warned against. He foretold the danger of a Franco-German Gaullism (strongly personified in Dr Merkel’s approach to power) and wanted more power for a democratically elected Commission. De Gaulle got him fired in 1967.

…. and most mentioned in this Der Spiegel article are aware of this. I also take Habermas very seriously ….

Have you read any Habermas?

@Minister Michael Noonan

How much would an extra ONE PERCENT [1%] on the upper tax band for all those earning over €75,000 bring in?
How do you propose to alleviate the REGRESSIVE impact of a ~10% increase in the VAT rate on the underclass, those on social welfare, and all those entering or lucky enough to have a job on the minimum wage, or the 250,000 on Minister Bruton’s new slave labour secondary labour market @€10 an hour if they are lucky.

Looking forward to your measured response.


It’s half baked and fundamentally flawed. They acknowledge interference in national sovereignty and claim legal cover because a treaty mentions that the economic policy of the EU is ” of common concern”

That a threadbare legal argument and I could see at least one of our Supreme Court judges demolishing it very quickly.

I won’t even go into the proposed right to go before national parliaments or the right to veto (and that is the correct word) national budgets.

I despair. Borrosso and his crew are living in la la land.


a guarantee can easily enough become a debt. Ireland gave a guarantee and it ended up with being a huge debt. Are you now saying that the German parliament should consider it impossible that the guarantee will ever be called upon and therefore not treat it with care?

I’m surprised that someone in Ireland still chooses to ignore the danger of unwisely guaranteeing the debts of others.

It would appear that you do not like that the Troika gave information to the German budgetary committee. The solution seems to be to petition the Irish government to lodge a complaint about the Troika.

@ Jesper

Where exactly did I try to make out that the guarantees could not become debts? I was simply stating a fact – the German government has decided to guarantee the EFSF. It did not decide to provide loans to Ireland, and did not decide to provide guarantees to Ireland. Germany -> EFSF, that’s the agreement in place. Whats the confusion here???

And again, you need to keep up to speed here – the Irish government has formally complained to the EU Commission about the release of the document.

VAT being increased to 23% maybe its a master stroke or it may be the final death nail on thousands of small businesses in Ireland many it must be said are hanging on in there by the skin of their teeth in order that the coalition can access easy extra revenue but have looked at the downside risk that this may cause retail sales plunge.

while i agree we must get our house in order i feel the that some public sector employees the higher paid management grade particularly the higher civil service can have their cake and can eat it too through early retirements and golden handshakes reparations who negociated the Croke Park agreement on behalf of the people of Ireland you got it the higher civil servants

i have a bad feeling that while we have to go down this austerity route all will be in vain as we can not placate the markets and will not be able to re-enter
the bond markets as the debt level on the country is too great when you pool the Goverment ,Business and personal Debts together you can see that situation is near unsustainable

also i have lost faith in the EU/Euro project when i see these institutions are actively working against the people may be it is time to leave?

@ Livonian

Peace in our time or just more “jingoism”?

Der Spiegel and the Torygraph throw petrol on the fire.

Schauble thinks “that the survival and eventual stabilisation of the euro will convince non-members to join the currency club”. What planet is he on?

While even I wouldn’t compare Merkel to her 1938 predecessor I can only describe what has happened in Greece and Italy as the undermining of democracy. I’m sure that nobody in Europe wants to re-visit 1938 or the horrors that followed but I get a sense of history repeating itself.


“It looks like a full blown run on Euro assets.”

All true. I was working with a big continental client of mine this week who have, as of yesterday, reduced their (very significant) European holdings to less than 1% of their overall investment pot. I don’t quite get it when I read in the press that there ‘might’ be a run on European banks or that another recession ‘may be’ on the horizon. It’s already here. Wake up and smell the coffee press corps.


“No amount of talking behind closed doors is going to change Germany’s mind.”

I’m not trying to say it’s a bad thing (or a good thing). It just won’t work.
It will just create further retrenchment by Germany. Merkel knows she cannot afford to be seen (by her electorare) to be seen to be backing down to things that have been thrown in public.


Does anyone know if this vat rise will apply to dental work? I’ve some work I need doing unfortunately 🙁
maybe best to get it done before the budget though someone tells me there’s a Hungarian (?) dentist in the IFSC who also arranges cheap flights to go over there to get work done!

It’s probably just as cheap to pop across the border to Newry and go private there and pick up some booze in Sainsburys while I’m at it. And I think therein lies the tale. We are still getting ridiculously gouged for most things we pay for here and this vat rise will probably see a lot more money being spent in the north this Christmas – especially as the Euro is completely overvalued at the moment.

@ Ceterisparibus

The interpretation of the treaties is a matter for the European Court of Justice, not national courts. That is what the peoples of Europe have signed up to. The supreme courts of all EU countries, with the possible exception of that of Germany, have accepted this and even the latter has never actually put the matter to the test. Its judgements have been confined to forcing changes in domestic legislation while the more appropriate action would have been to refer the cases for a preliminary ruling to the ECJ (as many German legal experts have been urging it to do).

That is why we have such a mess in Berlin.

However, the essential and primordial point is that the EU would be proceeding within the agreed legal structures of the treaties, applicable on an equal basis to all member states, subject to decision in accordance with set procedures and the member states would be dealing with the executive of the EU and not a committee of a national parliament, no matter how powerful it imagined itself to be.

Incidentally, there is little prospect of change in the attitude of the German court if this report from Handelsblatt is any guide.

Google Translate does a faily good job. One simply could not imagine such a debate with the senior judge of a supreme court in any other country of the EU. Opinion polls confirm that the constitutional court is the most widely trusted institution in Germany. You will not the criticism of its most recent controversial decision removing the 5% threshold for elections for the European Parliament by the CDU elder statesman, Karl Lammert.

@ All

From a Bloomberg report carried in today’s IT.

“European officials may start talks with the International Monetary Fund on a mechanism for the ECB to lend to the IMF for sovereign bailouts in the region, the Dow Jones Newswires reported.

Agreement on the proposal may result in an announcement at a European Union summit on December 9th, the news agency reported, citing two unidentified people with direct knowledge of the matter. “If this story stays relevant and seems credible, the market will hold because it’s the one story that has hit the tape that seems to have the respect of the traders,” said Boris Schlossberg, director of research at online currency trader GFT Forex”.

The one to watch?

Or the fine political art of insisting that one is going in one direction while actually going in the opposite one.


re ECB to lend to the IMF for sovereign bailouts in the region, the Dow Jones Newswires reported.

Yes that would be a good start but even if initiated it would not solve the problem.
It still leaves the banks unresolved with the current position that unresolved banks acting as a hidden sword of Damocles over sovereigns.
However if the proposal you mention were accompanied by an agreement of the ECB to act as LOLR to banks with full power to wind down banks, impose losses on bondholders as part of ECB run Europe wide bank resolution regime, then that would resolve the immediate crisis.

@ Joseph Ryan

A good start is half the work!

Draghi’s speech (and the leader in today’s FT) is worth a read.


“So far, the ECB has taken several non-standard measures to ensure that short-term funding does not represent a problem for euro area banks. The most important non-standard measures are the fixed rate full allotment procedures and the longer-term refinancing operations. We have also implemented three additional US dollar operations, which cover the end of the year, and we have launched a second covered bond purchasing programme”.

“Gaining credibility is a long and laborious process. Maintaining it is a permanent challenge. But losing credibility can happen quickly – and history shows that regaining it has huge economic and social costs”.

“But in the euro area there is a third essential element for financial stability and that must be rooted in a much more robust economic governance of the union going forward. In the first place now, it implies the urgent implementation of the European Council and Summit decisions. We are more than one and a half years after the summit that launched the EFSF as part of a financial support package amounting to 750 billion euros or one trillion dollars; we are four months after the summit that decided to make the full EFSF guarantee volume available; and we are four weeks after the summit that agreed on leveraging of the resources by a factor of up to four or five and that declared the EFSF would be fully operational and that all its tools will be used in an effective way to ensure financial stability in the euro area. Where is the implementation of these long-standing decisions?”

All the above must be music to Merkel’s ears. My take on it is that the ECB is not for turning but the quid pro quo is that the EZ governments get their act together, which must include a move by Germany, notably on the issue of the dogmatic, indeed ideological, insistence on PSI and more involvement by the IMF (including some involvement of the ECB?).

The LOLR issue is a bit of a red herring as it has two, as far as I can see, different meanings depending on where you are coming from. The ECB simply does not have the legal mandate of the FED or the Bank of England and there is no way it is going to get it.

The other powers that you wish the ECB to have, it cannot simply assume. The Council has the capacity to give it those powers (except in the case of insurance undertakings) under Article 127.6 TFEU but it has as yet failed to do so although moves are now afoot to change this situation.

In short, all the parties, including Germany, appear to be finally willing to negotiate a compromise outcome. About time!

@all foolish fans of Bernard Connolly – Wise UP: AIG AIG AIG AIG ….

Words of a Euro Doomsayer Have New Resonance | Betting on Bernard Connolly
Good god….

Bernard Connolly was “a European Union economist in the early 1990s, where he helped design the common currency’s framework, but then he was dismissed after he expressed turncoat views. In 1998, just months before the euro’s introduction, he predicted that at least one of Europe’s weakest countries would face a rising budget deficit, a shrinking economy and a “downward spiral from which there is no escape unaided.”

“The origins of that fear, as well as the anger and passion that drive him, date to 1995, when he took a leave from his job with the European Commission to write “The Rotten Heart of Europe.” The book was an excoriating history of the failure of the euro’s predecessor, the European exchange rate mechanism.

In 2005, when Greek, Portuguese and Irish bonds were trading at rates barely higher than Germany’s, Mr. Connolly’s work at AIG Financial Products persuaded a small group of hedge funds and independent investors to bet on a euro zone crackup.

They did so by buying the credit-default swaps of what he saw as the most vulnerable European countries.

When fears that those countries would default took off in 2008 and 2009, sending the values of those swaps skyward, they were able to sell – reaping large profits.

“It took a while, but we finally were able to monetize Bernard’s views on Europe,” said James Aitken, who worked with him at AIG Financial Products and describes his job at the time as translating Mr. Connolly’s arcane musings into actual investment strategies.

While other investors have also profited from following Mr. Connolly’s advice, Mr. Aitken says that the analyst’s true passion is to try to prevent the social and political train wreck he fears is just around the corner.”

There is something really rotten at the heart of the global financial system’s derivatives wing ……….. it feeds on human flesh and blood … The Matrix Reloaded ….


The German Constitutional court have determined (by its actions, if nothing else,) that the German Basic Law is superior to all other international laws and treaties.

“We should not pretend to be from the sausage still incredibly much there. We have already cut a lot of slices of national sovereignty”

I take this to mean…you have gone far enough.

If put to the test, I believe our own supreme court would rule likewise. That is,of course, in the absence of a radically changed Irish constitution.


ECB lending to IMF which then lends to EU Sovereigns is MAD MAD MAD … it is simply loading more and more and more of Financial System losses onto present and future generations of European citizen_serfs …. this is simply SOCIALIZATION WRIT EVEN LARGER THAN IT IS NOW …..


His book is selling on Amazon for 700us dollars secondhand and one of his wealthy followers has offered his publisher 75,000 to reprint copies. Must be worth reading.

The idea of the ECB lending to the IMF sounds like madness to me and smacks of lining up the taxpayer to take the hit (in the country borrowing).

@ Ceterisparibus

I can resist no longer! That would be the wurst thing that could happen i.e. to cede to the idiotic pretension of the court in Karlsruhe that it can decide the future political development of Europe.

If the government of Germany wants Europe to go in a particular direction, and the constitution according to these curious judges does not permit it, then let them change their constitution! Merkel, in her usual logical way, already appears to have arrived at this unavoidable conclusion.

The same holds true for Ireland, or any other member state of the EU.

@PR Guy

A good article on Reuters as to why we are horlixed…. A flavour

“In fact, it’s the definition of a vicious cycle. The EFSF’s funding costs rise along with those of its guarantors, and perversely, bond market participants say that the very existence of the facility also causes its guarantors’ cost to rise. That’s because there aren’t many investors who are interested in buying European sovereign debt these days. Those who are demand a very high premium if they’re going to buy, say, Italian debt instead of EFSF debt. This is why the EFSF was going to be hurtful, rather than helpful, if it had to be used: it competes with its very creators for investment, driving spreads higher and higher. One hedge fund manager calls the EFSF  a “self-inflicted killer” of Europe’s bond markets.”

The EFSF is due to expire, and is supposed to be replaced by the European Stability Mechanism, or ESM, in mid-2013.  But the ESM looks like it’s going to have same problem the EFSF does: Its finances depend on the very same countries that it is supposed to bail out.  In other parts of the world, this isn’t called stability; this is called a Ponzi scheme.”

On the IMF thingy…I think DOCM has it right…smoke and mirrors.
The whole thing is just an almighty mess that has destroyed the European sovereign markets and is even reaching into the last bastion of financial credibility, Germany.

It’s already happening. Look at our neighbours. They are about to decimate their own Human Rights Act…will our guys follow?

@ All

I have just been reading the leader in today’s IT.

The missing element is that the Commission takes the view that what is proposed can be accommodated within the existing treaties which would appear to be the case from a reading of the relevant articles of the treaties.

To quote the paper of record;

“Chancellor Angela Merkel insists that all she is talking about is “limited treaty change” to give a legal basis for such collective accountability which Germany sees as a prerequisite for any form of collective sharing of euro zone risk. That means applying to the rest of the euro zone and to Germany itself the sort of budget scrutiny which the Bundestag is involved in with respect to Ireland. A taste of its own medicine, and the sort of scrutiny any prudent lender would quite understandably want of a borrower. What’s so difficult about that?”.

What indeed! Even less difficult that she imagines but, of course, to quote again the leaked German negotiating paper (it seems to be the week for leaks!) “the constitutional provisions on the budgetary autonomy of the Bundestag must be observed in every case”. What is sauce for the Irish goose (and assorted other geese) is, apparently, not to be sauce for the German gander.

That cannot be a basis for agreement.

Talking of the goose and the gander..apparently some expect a new Europe to emerge from Angela’s Ashes…

“Old Europe No Longer Exists

The German chancellor and French President Nicolas Sarkozy more or less singlehandedly implemented the bailout plan for Greece, brought down the government in Athens and placed ailing member state Italy under international supervision. The words “History is being made in Cannes” were emblazoned on posters in the city during the G-20 summit there in early November. But that’s new history. Old Europe, that construct of unity housed in imposing buildings in Brussels, that visionary collection of ideas about peace, freedom and prosperity, the Europe of big words and impenetrable treaties, the Babylonian monster that spits out tons of paper in 23 languages every day, meddles in everything and tries to spoon-feed its citizen. That Europe no longer exists.”
From Der Spiegal

The Europe of big words and impenetrable treaties…..leaves plenty of room for novel interpretation.


The German parliament is examining the quality of the underlying collateral for debts it is about to guarantee. The Troika has said they were satisfied but, as the German parliament will be stuck with the bill if the Troikas appraisal isn’t 100% correct, they’ve decided to verify the underlying collateral.

I asked what the German parliament should have done. The confusion seems to be what your answer is.

Your answer appears to be: Accept the Troikas appraisal and do not also do due diligence on their own. If that is your answer, then fair enough. I am of the opinion that the Troika can make mistakes & while I trust that they will do their best I’d still verify that their appraisal is correct.


The German parliament is examining the quality of the underlying collateral for debts it is about to guarantee. The Troika has said they were satisfied but, as the German parliament will be stuck with the bill if the Troikas appraisal isn’t 100% correct, they’ve decided to verify the underlying collateral.

Something that seems to be rather missing in this discussion is the fact that the policies of the currently dominant European players is that they represent a particular political outlook within their countries. Angela Merkel makes European policy for profoundly conservative CDU voters, not some more inclusive idea of Germany, let alone the European Union.

In this way Jesper serves a useful purpose in reminding us how critical it is that either the German political right’s lock on Eurozone fiscal policy is broken or we move ourselves further away from the Eurozone. Make no mistake that the further political integration Schauble sees the peripheral countries indenture to the ECB forcing will make right wing economic policies essentially a legal requirement for Eurozone membership in the same way that the ECB has institutionalized that other favourite of the German right, monetarism. It is to be privatization, austerity and wage deflation across the EU, a battle German mercantilism is well prepared for and that international capital is naturally very sympathetic to.

The plight of the EU reminds me very much of the subversion of the political system in the US by the Republican party, the European right were always going to lose any emerging popular pan European consensus so they focussed on making European Union institutions adopt inherently right wing policies and the centralization of technocratic power. Quite brilliant, a very European Union coup.

@ Ceterisparibus

The Der Spiegel assessment is utter and total rubbish. The very opposite is the case. The Commission has woken from its slumber, Barroso being startled to discover that the other countries of the EU – all 25 – do not wish to see the phenomenon Merkozy continue or to see the Commission rubber-stamp proposals just because the two capitals in question want them. There is no better indication of a return to the Community method than the fact that countries are beginning to assess possible winning and losing coalitions under the new voting arrangements that will come into force in 2014.

As to Schaeuble, the NYT should explain how he can be both a close confidante of Merkel and his own Chancellor. The world and his wife know that the two have been tussling incessantly for control of the the direction of German policy.


Defender of a currency that no longer exists….says it all.

I would have thought Der Spiegal a very credible publication.
My belief is the Barrosso et al are whistling in the wind and ultimately Frau Merkel will make the hard decisions.

I look forward to examining the German budgetary proposals before the Bundestag in 2015 after world trade has entered its fourth year of slump and Germany is once again in breach of Maastrict.


Brilliant coup by the financial system to take over the EZ. All empirical evidence suggest that I must concur.

But not a first – of the recent Tea Party Republicans who have been elected to Washington – their financial contributions in millions of dollars and the top four may be listed as follows:

1. Armaments Big Corp
2. American Bankers Assoc
3. Armamenets Big Corp_2
4. The K_ochBroz

the little people (those supposed to be their drivers etc) contribute but 4% of such funding – what another brilliant KON.

The formula has simply been repeated – and this is unquestionably the most dangerous time for Democratically minded European Citizens since the late 1930s.


“this is unquestionably the most dangerous time for Democratically minded European Citizens since the late 1930s.”

And the fascists are winning everywhere this time.

The last time the fascists appeared to be winning everywhere, they practiced and experimented in Spain (Stuka bombers were used for the first time, new types of tanks, military tactics, etc.) during the civil war there.

Let’s hope history doesn’t repeat itself. I’m sure the Spanish don’t want anyone experimenting with economic theories or new forms of austerity on them. The situation there is bad enough already. Rajoy looks the type who will be easy enough to lean on though. He was publicly supported by both Merkel and Sarkozy in the last Spanish election.

Anyway, back on thread, I see Enda is defending this vat rise as people will have a choice whether to pay it or not. Surely he’s not telling consumers they can opt out of shopping in the run up to Christmas? I’m with that.

And don’t forget that next Saturday is buy nothing day – a day for society to examine the issue of over-consumption….. what got us in this mess in the first place.


“I look forward to examining the German budgetary proposals before the Bundestag in 2015 after world trade has entered its fourth year of slump and Germany is once again in breach of Maastrict.”

Amen to that. Germany has put herself into a corner by being such a priest on morality. I wonder if they have a hidden goldmine or something, because when (not if) they have to re-capitalize their banks on a massive scale, they will need lots of money, to say nothing of the other expenses caused by the slump. And they are high up on the tree, having already kicked away that ladder called big deficit spending.

Or should we be ready to laugh at them when they embark on the Morally Revolting Reckless Spending?

@Jesper & All

Professor* Colm McCarthy in fine form this morning –

Professor Franz, and numerous other opinion-leaders in Germany, could do with a tutorial on the “collectivisation of debt under the auspices of the ECB”. It is the Irish Government’s job to communicate effectively that debt has been collectivised on an industrial scale, and at the insistence of the ECB, in Ireland. The Government has failed dismally to get this message across where it counts, in Germany.

*UCD response to TCD Unilateralism 😆

@Professor Eoin Bond
Some students never geddit!

@An Taoiseach

A few more tooreen hurlin tutorials – and bring the hurley to Berlin next time!

Isn’t it ironic. On Friday Michael Noonan was confirming his intention to raise the top rate of VAT from 21 to 23%. On the same day Patrick Kennedy of Paddy Power was reported in the Irish Times as saying that a 1% increase in the betting levy would move the bookmaking sector from profits to loss. How can Patrick Kennedy and the other bookies in Ireland continue to claim that their business cannot bear a tax rate of greater than 1%. Their business is totally exempt from VAT, pays absolutely no betting tax on either their internet and telephone business and they claim that they will go out of business if the rate of tax is greater than 1%. Who are they fooling when all other retailers are asked to bear a 23% rate on their turnover. When will our politicians wake up and notice the huge profits generated by bookmakers like Paddy Power. A look at the Paddy Power accounts for 2010 show that Patrick Kennedy, apart from his hugely generous remuneration package of euro 1.4m was granted 104,000 shares in the company worth a further euro 4.4m at today’s share price for a nice total of almost euro 6m. Nice work Patrick, especially when it is subsidised by the lowest gambling taxes in the world. Times are really tough at Paddy Power, I wonder why the share price increased by nearly 40% this year?’

@ All

Liam Halligan in the Telegraph is in equally fine form.

Colm McCarthy’s article is fine but for the bits that are missing. The article by Halligan fills in some of them but even he is presenting the issues too much in black and white terms.

He is particularly good on the true meaning of LOLR for a central bank and neither Germany nor the ECB will budge from this position and rightly so in my opinion.

Among the other bits that are missing from the McCarthy article is the fact that the Irish government, off its own bat and without consultation with either the ECB or other governments, gave a guarantee of bank debt because it feared a collapse of the Irish banking system and with it, the Irish economy, opening up in the process an entire can of worms for the rest of the EZ.

What is also missing is any attempt to answer the simple question that many that do not have a mastery of either economics or finance pose; where did the money go? They can see most of the answer all around them in the visible signs of wealth (now muted: ostentation is out!). This is without taking into consideration the capital held abroad. To expect the German taxpayer to pick up the bill for those unfortunate enough to be left holding the resulting debts is to ask the impossible. German was not the language of discourse in the Galway tent.

Advocating a “wall of money” approach and questioning the viability of the EFSF, the branch on which Ireland is currently perched, is hardly likely to win approval in Berlin.

There is a major problem of debt overhang. But there can be no resolution to it until the Irish people confront the reality of the situation in which they find themselves. The answer is to be found in the article. There has to be an early move to real austerity in relation to expenditures from the public purse and an immediate stop put to the continuing haemmorhage of spending with borrowed money.


Liam Halligan is Chief Economist at Prosperity Capital Management

One hopes that you enjoyed your dinner date with Liam. Your suggestion of a Wealth Tax in Ireland is certainly worthy of serious consideration by those ignorant citizen-serfs, such as I, who ‘do not have a mastery of either economics or finance’ as you so eloquently spin it.

C’mon DOCM! Declare your ‘precious’ interests.

@Others Odds Vulgar Political Economy for The EZZ Serfs of Capital

Democracy or the Jack-Boots of VultureCapital?


They can publish all the green, white, blue or purple papers they like (in 23 languages) and it will not change the fact that the lady said NEIN. More delusional ravings from Borrosso and co. How is he going to get Lisbon 3 through various electorates, or will he just dispense with that little formality and impose a new treaty.


Agree with you on the above. Germany will not ‘allow’ the ECB to print money. That is crystal clear. Even if euro collapses. No printing. Nein.

But no country will sign sign up for Germany hegemony. Not after the last century. And not after the last three years. Nein und Nein.

So countries must make it on their own. That is the logic of the current situation. Solidarité is aus das fenster.

But the follow-on logic of that is that no country can afford to take on any bank debt whatsoever if it is to have any chance of survival.
The next step therefore is widespread bank failures but this time accompanied by burnings bondholders.

There is a way out of the bank collapse situation. That is for the ECB to take on bank resolutions and if it believes that no bondholder should be left behind, then pay for the resolutions out of a FAT tax or other levy on Target2 banks.

Too late for Ireland though. We have lost the GeldKrieg.
And we now paying the reparations.

PS. Where do the latest growth revisions leave Ireland’s Debt/GDP at the end of 2014.

A Banker’s Prayer

Mario Draghi
Who art in Franfurt,
Hallowed be thy name,
Thy kingdom come,
Thy will be done,
In politics as it is in banking,
Give us this day our daily liquidity,
And forgive us our bonuses,
Though we don’t forgive those who bought defaults against us,
And lead us not into inflation,
But deliver us from involvement,
For thine are the Understandings,
The power to sercure us,
For ever and ever,

“Where do the latest growth revisions leave Ireland’s Debt/GDP at the end of 2014”

I would suggest well north of the previous figure of 118%…. A level deemed unsustainable in the case of Italy.

But the really worrying report today comes from the Chinese vice premier….

“BEIJING (Reuters) – A long-term global recession is certain to happen and China must focus on domestic problems, Chinese Vice Premier Wang Qishan has said.
“The one thing that we can be certain of, among all the uncertainties, is that the global economic recession caused by the international financial crisis will be chronic,” Wang was quoted by the official Xinhua news agency as saying at the weekend.
Wang’s comments were the most bearish forecast ever by a top Chinese decision-maker about the world economy, and Beijing’s worry about a worsening global environment could translate into an impetus for pro-growth policies at home.
China launched a massive fiscal stimulus package with a price tag of 4 trillion yuan ($650 billion) in late 2008 to avert a big impact from the global financial turmoil.
According to Xinhua, Wang did not speak this time about any major policy change but reiterated that banks should be more flexible lending to the agricultural sector and small firms.
“As for our country, which relies highly on external demands, we must see the situation clearly and get our own business done,” Xinhua quoted Wang as saying, referring to exports.
China’s central bank, which sometimes has to report to Wang, who is in charge of China’s financial sector, said last week that it is ready to fine-tune monetary policy if needed.
At a meeting of local government officials and financial executives in the central province of Hubei on Saturday, Wang said local financial institutions such as city commercial banks and credit cooperatives should not seek to expand their business beyond their regions.
Wang also urged banks to pay close attention to the international financial situation. Xinhua did not give further details.”

@ All

There was a very good item by Julian Coman in The Observer about the general Brussels mood.

The Commission’s green paper is not going to change the world but its timing and content is important, especially the third option identified; essentially, if I am not mistaken, that of “safe bonds” on which considerable work has been done (including by Philip Lane and his colleagues). There is also the not unimportant fact that the SDP is on board for the idea of the introduction of euro bonds and the indications are that Merkel is angling for the re-creation of the Grand Coalition in the operation of which she has considerable experience.

If the Humpty Dumpty of the European bond market is to be put back together, there has to be a start somewhere. And even an expression of willingness to try out the idea would have some of the desired impact.

There is also the wider global dimension. As Weber so incisively put it in the Der Spiegel article, the guiding principle so far has been to ask “how can I get myself out of my current difficulties with someone else’s money?”. This has been true of Ireland but also of the EZ as a whole in the misguided efforts so far with regard to leveraging the EFSF.

Involving the IMF means involving the UK and if the UK wishes to be a player in the game it must agree. It cannot say “nothing to do with me guv'” and, nevertheless, complain about the impact of what it claims has nothing to do with it. German politiciams, from Merkel down, have been making an issue of this for the past week.

What seems to me to be significant is that the various parties are evidently making their opening negotiating bids as evidenced in particular by the various “leaks”. This makes a change from the lead-in to previous European Councils and EZ summits (of which, of course, there has been a surfeit).


The Chinese vice premier is right
“The one thing that we can be certain of, among all the uncertainties, is that the global economic recession caused by the international financial crisis will be chronic,”

I note that China is learning the lessons of the too big to fail Western banks.

Wang said local financial institutions such as city commercial banks and credit cooperatives should not seek to expand their business beyond their regions.

ECB and German policy makers should try get one of those for dummies books:
‘Deleveraging for Dummies’.
It is now just like the early 1930s. My understanding is it was deleveraging and lack of funds that caused the major problems.
David McWilliams makes the point in today’s Sun Business Post that in fact it was the deflation immediately after the 1929 collapse that caused Germany’s problems not the much touted inflation of 1924.

It seems that the German phobia about inflation being at the root of all their evils may be misplaced. However what is not usually mentioned is that to my knowledge Germany also had a major problem immediately post war with massive inflation. Perhaps it is that post war inflation, conflated with the memory with the hunger and devastation, that has remained in the German psyche.

Either way as you say the answer is NEIN.

And so another century starts by holding its breadth wondering what Germany will do next. Will Germany do what is in the interests of Europe or will Germany pursue its own interests regardless of the views or concerns of other Europeans.

I wonder what the history curriculum was like in cold war Russian controlled East Germany where Ms Merkel was educated.


re As Weber so incisively put it in the Der Spiegel article, the guiding principle so far has been to ask “how can I get myself out of my current difficulties with someone else’s money?”.

Weber should have explained himself a little better as that quote is open to all kinds of interpretations. It possibly is a cut at people who want Germany to pay for everything which would be clearly unfair to Germany. However Germany showed no support for Ireland when the ECB insisted that we pay bond debts.
A bit of intellectual dishonesty there I would say on the part of Dr Weber, who was on the ECB Board at the time. On reflection a lot of intellectual dishonesty.

I would be interested also in seeing data on the foreign owned portion of Germany’s approx 2100 billion of debt. I have seen some estimates that approx 50% is in foreign ownership.
In that case running ones country “with someone else’s money” should also be thrown into the mix.

And just in case you don’t believe that Borrosso is dangerous….
“Last week Barroso told the European parliament in Strasbourg that those countries struggling to lower excessive levels of debt will also be subject to intervention from Brussels in “domains previously restricted to national governments or parliaments”.


“Will the eurozone’s population ultimately be reconciled to emasculated national parliaments enacting austerity programmes that may take their countries back into recession? Barroso has taken to quoting the wisdom of another of the founding fathers of the EU, Jean Monnet: “People are ready to change when they understand there is no alternative.”

From Observer article European Union ..the great leap forward.

I think we got enough of the TINA stuff from the infamous Brians. Barosso is deluded if he thinks people are going to accept his vision of our future..

@ Joseph Ryan

Who, exactly, is going to provide the money to alleviate Ireland’s banking debt if Weber’s contention is to be invalidated?


Weber was on the board of the body that purported to run the European banking system for a long number of years. His failure and that of the ECB leads me to question everything he says.
But back to your question and how to resolve the whole crisis. It is actually fairly simple to do so.

There are two principle involved in a resolution of the crisis.
1. Contain the banking crisis within an ECB -Euro wide bank resolution scheme, funded by a FAT tax or other levy. This levy to pay for all bank failures in the Eurozone post the Lehmans default of 2008. Under no circumstances should a State be made responsible for bailing out banks. This would remove the banking sword of Damocles over State funding that was at the root and still is at the root of many of the sovereign debt problems.

2. Sovereigns debt, following the removal of the banking monster, would then be easier to manage. These countries would have to on occasion borrow from an IMF type fund. This should be done with much lees humiliation of the ‘program’ country. Instead of austerity programs affecting the poor, there should be a super tax of say 25% on all incomes in excess of €50,000 that would be a first item on any ‘program’ agenda. There would be such a moral hazard element in that tax proposal for the ‘elite’ of society that the prospect of a State going bust would simply never arise again.


Who, exactly, is going to provide the money to alleviate Ireland’s banking debt if Weber’s contention is to be invalidated?

My favoured answer was “nobody”, let them sink but I think that neither the ECB or Herr Weber were too keen on that (though Weber’s feelings are a little conflicted on weasel phrase of the decade contender “private sector involvement”).

Eurozone hyper-monetarism has been an epic failure, everyone not beholden to the European financial sector or the European centre right accepts it, but it remains a article of faith for Merkozy’s political constituency. Germany’s entirely rational insistence on private investors not being protected can not be made consistent with a single mandate central bank that will not take up the resulting financial slack, which they also insist on. Schauble’s insistence on the necessity of “market discipline” sits right next to his logically incompatible but laudable call for a Tobin tax. This set of mutually incompatible political and practical needs has crippled the European response to the Global Financial Crisis and that is the heart of our problem.

To put it another way there is no Christian Democrat solution to a set of problems very much the creation of the European centre right and I see no hope of a resolution of these logical contradictions in the Eurozone unless Germany and France turn to the left and the ECB is made democratically accountable.


One other small but relevant point

‘Ireland’s banking debt’

I have asked elsewhere if there is such a word as a tri-oxymoron or trixymoron.

There seems to be a number of knee jerk reactions going on based on perceptions formed by British and American media. Germany has been invaded many times by the Romans, French, Poles/Lithuanians, Austrians, Czechs, Danes, Dutch to name just a few. Since the state of Germany was formally recognised in the Versaille’s Palace hall of Mirrors in France Germany has participated in three wars namely with the Eight Nation Alliance in the Boxer rebellion (China), WW1 invaded by Britain as a pre-emptive move to retain mastery of the seas, WW2 started by Germany. Since WW2 they have reluctantly had minimal participation in UN sanctioned “peace keeping missions” originated by those great lover of peace and freedom the British and the Americans.

Today Germany and a few other responsible countries have trade surpluses that are keeping the Euro stable. At the other end we have the bubble blowers who feel the Germans owe them a decent living and should allow the ECB to give blank checks to the spendthrifts.

A good example of the sacrifices that we are not prepared to make are the tens of thousands of small business people who are in an uproar over a 2% VAT increase. If you are looking at this from the point of view of the people in the rest of Europe who will have to foot the tab that attitude is not instilling confidence. We are a nation of untouchables, public servants, dentists, accountants, lawyers, doctors, retailers, wholesalers, only manufacturers are exposed to competition.

When the debtor nations show some inclination to deal with domestic economic distortions then and only then could an honest dialogue begin on rescuing what is fast becoming the unrescuable.

@ All

The FT has now picked up the eurobonds story and, in fact, is the first paper to state the obvious; the startling resemblance of the third option to the existing EFSF, the difference being that the governments of the EZ would have to take the bond risk directly rather than try and palm it off on the markets. It would also, shock horror, show up in their national accounts.

This is the wrong approach to take from the Government, but it is not going to have the doomsday scenario pointed out by many people especially representatives from IBEC. Perhaps IBEC and its members should be focussed on how to become more price competitive rather than charging Celtic Tiger Prices for many of their products.

Companies in Ireland need to offer better value for money and become more market savvy things which were completely ignored during the Celtic Tiger.

Text from Blind Biddy – She has just parachuted into Tahrir Square …

@Mickey Hickey

Setting aside the banking system debt for a mo, on which a deal is necessary if default is to be avoided …

There is no evidence whatsoever of the type of radical change in governance philosophies, structures, processes and policies required to correct for the lunacy and recklessness of appreciation over the PD/FF decade, let alone the dominance of the possessive class and the institutionalization of a highly dysfunctional class structure since at least the latter part of the 19th century. It is 2011 and we have never been Modern – We have never been Industrial either – so where is the post-national and post-industrial constellation to come from around here?


Minor Point: LOLR does not imply that all who apply will get it. It simply implies that it exists, and that it has requisite capability.

Ambrose is in fine form at the telegraph…. – a sample..
“German finance minister Wolfgang Schauble the most dangerous man in the world is imposing a reactionary policy of synchronized tightening on the whole eurozone through the EU institutions, invoking a doctrine of “expansionary fiscal contractions” that has no record of success without offsetting monetary and exchange stimulus. What is abject is that EU bodies should acquiesce in this primitive dogma.”


Ambrose on the Euro, and I tuned in to him on France24 recently, has the identical countenance and mannerisms of Moor_een McDowell as he visualizes the minimum wage being reset to Wan Euro and 66 cents; were they to salivate together live on TV JedWard would be out of a job & Jay Leno would have his next magical moment of mindless neo-libertine madness. Hope Louis Walshe doesn’t read this blog!

Enda makin progress with the caman – liathroid to be introduced a little later … one thing at a time u know …


‘not very edifying’.

So Merkel gives the nod to Cameron that it is OK to flog the British workers more than 48hrs per week – and to essentially opt-out of the Working Time Directive … Angela must, obviously, not have heard about the Stormont Troopers from Belfast … could be a few little surprises in store here … and the other Nikki across the local pond might take a scan from the Irish GP …

Seriously concerned now on this upcoming treaty-tweak summit …. handcuffs are one thing – lead balls and steehl chains yet another …

@David O’Donnell
Unfortunately you are bang on when it comes to institutionalized class structure and the lack of modernity and industrialization. The only other place I have witnessed that has retained most of the British class structure and dismissive attitude to lesser mortals is India. The cult of class is taken to the point where they would sabotage their own well being if it brought greater suffering to others. The other thing about Ireland that astounds me is that until the economy started to take off shortly after we entered the EU four out of five working age Irish people had worked abroad. With that number of people exposed to good government one would think that it would have an effect for the better on society as a whole. It seems to have made not a whit of difference, that is how deeply entrenched our dysfunction was and still is.

@Joseph Ryan

“I have asked elsewhere if there is such a word as a tri-oxymoron or trixymoron.”

I know a Trixy Moron. She works in my local branch if B of I.

@PR Guy

Perhaps your acquaintance Trixy Moron, being a Bank employee, could explain the newly coined trixymoron that is ‘Ireland’s Banking Debt’.

The uproar over the VAT increase is nuts. The country is undergoing an IMF bailout .

What does a typical IMF bailout involve ? The IT covered it last year

“There are many measures in the 32-page Greek bailout document that could easily be envisaged as conditions for an Irish bailout.Regarding tax and spending issues, conditions include the reform or outright cancellation of welfare programmes that are deemed ineffective, privatisation of State assets, cuts in capital spending, an immediate increase in VAT and a widening of the VAT base, increases in excise duties, a widening of the property tax base and the imposition of a luxury goods tax.”

@Mickey Hickey

Peter Stringer is joining The Barbarians – maybe we should apply? ’nuff said at the mo …

@David O’Donnell

Peter Stringer is at the gates?

@Joseph Ryan

She can’t even explain what she’s supposed to be doing there.


Thankyou for posting that link. The article by Dan Hannan ( dealing with European scepticism) can be found under November 16th as I see Dan has wrtten a few blogs since then.


I agree with you re: criticism of anothers countries foreign policy.

I just feel that Germany (wjich IMHO could be doing more to placate “friends) should not be criticised in a way which brings up “old wounds”. We should not forget why the EU/EEC came into existence but if West Europeans cannot “forgive” then we cannot expect other parts of Europe to forgive and embrace democracy

As the only EZ country which escaped WWII unscathed we need to be especailly careful and lead by example. For some EU 15 countries the legacies of WWII only ended in the 1970`s while for most accesion states in addition to East Germany WWII did not end until 20 years ago.

We are dealing with Germany 2011 (albeit with a Chancellor who seems to have forgotten that West Europe is where EZ/EU will survive or fail) and not Germany of 1938.:)

@PR Guy

Open the gates – Blind Biddy wants to play open-side – and she does know how to handle the ball!


‘… as the only EZ country which escaped WWII unscathed …’ Huh! We fought on all sides, and decorated on all sides, under the pretense of tactical neutrality … and the Marshall Plan idly passed us by ….

… further integration demands some fraternal and sisterly constructive criticism of each other; unfortunately, we do not qualify as the concept has yet to be thought, let alone acted on, locally. The Irish have forgotten how to remember how to fight at home …. where_in the real enemy lies silent, powerful, and devastatingly cunning.

Germany is selling itself during the crisis as a haven of stability – and the financial markets even believe it. But, in truth, it’s hardly better off than the others. And its public role of disciplinarian is arrogant and dangerous, writes Spiegel Online.

Luxembourg Prime Minister Jean-Claude Juncker is therefore right to get worked up about German domineering. Spain, for example, with a debt ratio of 69.6 percent, is considerably closer to complying with the Stability Pact than Germany is. Even the Dutch (64.2 percent) and the Finns (49.1 percent) have more right to put themselves forward as European disciplinarian than the Germans do.

FYI Bond, seafoid, and all Lewis fans and confused citizen_serfs

New York Review of Books

Boomerang: Travels in the New Third World
by Michael Lewis
Norton, 213 pp., $25.95

Boomerang is about what he has come to see as the larger phenomenon behind the credit crunch: the increase in total worldwide debt from $84 trillion in 2002 to $195 trillion now. The thesis is that “the subprime mortgage crisis was more symptom than cause. The deeper social and economic problems that gave rise to it remained.” It is these deeper problems that are dominating economic news at the moment, and led to the desperate measures announced at the European summit on October 27 and to the aborted Greek plan to hold a referendum that followed. The G20 Economic Summit of November 3–4 was dominated by discussion of the Eurozone crisis, but ended with no coherent plan in view, and none has emerged since. Boomerang tells the story of how we got here, and in the course of doing so gathers together an extensive arsenal of data at the top end of my 0–10 Reykjavik waitress scale: the fact that Greek railways have €300 million in other costs; the fact that the Californian city of Vallejo spent 80 percent of its budget on the pension and pay of police, firemen, and other “public safety” workers; the fact that between 2003 and 2007, Iceland’s stock market went up ninefold; the fact that in Ireland, a developer paid €412 million in 2006 for a city dump that is now, because of cleanup costs, valued at negative €30 million.

With just a couple of weeks to go to Budget 2011, its surprising the lack of interest, debate or even topics here on what Ireland can, should or should not do.

It seems (to me anyways) the planned VAT rise is incredibly stupid. How are Irish companies going to export services to the UK, for example? And thats leaving aside the tax on domestic selling of most goods and services. where if your customers are not people who can claim VAT back, you will now be working almost 1 day in 4 to just pay VAT to the government….. It was bad enough at 1 day in 5…

Yet the the comments on this topic seems to be populated with people trying to give Germany or the EU advice

Are the problems facing the Irish Economy so intractable that people prefer to try to solve the Eurozone problems?
Or are those posting so protected they aren’t even aware of the impact of this.
Or is it easier to just waffle about global/eu issues than attempt to address pressing domestic issues.

Germany’s ace in the hole is its export machine which is well maintained and conquers new markets every month. If you look at the world’s greatest import machine NAFTA the high value added goods on display are from Germany and to a lesser extent Japan. Germany has flexibility given the range of goods it exports and the number of exporting manufacturers. Japan has a much narrower export market in terms of range and number of manufacturers. Korea and Taiwan are also in the winners circle.

Depth and breadth is what matters as we know only too well in Kerry, our team is now like the country narrow and unfocused. We will never be a small Germany but we could try for a small Netherlands, Denmark or Switzerland. We have our wits, imagination, social skills, we need to add some engineering know how and most of all get a grasp of the economics in the real world. In politics we need to shift from the cute rogues who drink ’til 3:00 a.m., renew our passports in five days and line their pockets with “campaign contributions”. Have any of you heard the phrase ” If oo do dat for me now I’ll throw in four tousand for da cause.”. Oh the patriotism of it all, so Irish.

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