WSJ: Ireland Enduring a Long Age of Austerity

The WSJ analyses the Irish austerity experience here.

108 replies on “WSJ: Ireland Enduring a Long Age of Austerity”

Hopefully WSJ will get its hands on concrete plans responding to the crisis that should emerge soon – and do a more forensic job, note not plans to have plans:)

The difficulty with Treaty changes is the same difficulty faced in persuading turkeys to vote for Xmas.

decent summary article – to flog the dead horse of the questions of seniors…

“What most Irish people can’t understand is why they should be responsible for repaying the debts of banks that were private companies when that borrowing was undertaken. Yet the European Central Bank in particular has insisted that is what they should do, chiefly in an effort to preserve the stability of the European banking system. Of course, the stability of that system has already been undermined by threats that are a lot greater than the ability of Irish banks to repay their bond holders, so there are doubts over whether there is now any point in requiring Irish taxpayers to foot the bill. But if euro-zone policy makers want to see their treaty changes passed, they may have to think long and hard about whether they want to stick to that requirement.”

What strikes me from this is a further point – even if there was a reason for bailing out seniors Irish people would be annoyed that we are being asked to pay it for the benefit of the rest of the euro zone.

To engage in the argument as to whether or not bailing out seniors is a good idea or a waste of time is to allow proponents of that policy to skip over the key argument as to who should pay for the bailout and jump straight to whether there should be a bailout.

In particular, if our European “partners” think that that bailing out creditors in insolvent banks is the correct way to go – then let them pay for it!

The fact that the policy is pointless – the fact that the ECB won’t meaningfully engage in an explanation as to why they are pursuing this policy; the fact that they won’t engage in a discussion as to why Ireland should pick up the tab ; the fact that many people, including the radical IMF, think that its ill advised; and the fact that the ECB uses veiled threats through leaks in the media to collapse our banking system to push its agenda, all just adds to the sense that the ECB is exercising its power in an arbitrary, unreasonable and unaccountable manner

We could spend the next 10 years blaming Germany for our travails and it maybe therapeutic because we don’t have a clue how to respond to the Great Recession.

It’s evident that there is little appetite for significant change from the older generation. Japan ended up with a system where old people have significant political power while a large section of the young workforce are temps with few rights, earning less than the Irish minimum wage.

We shouldn’t depend on a dysfunctional US Congress not getting around to reforming the US corporate tax system.

As for banks and the sovereign Irish government, it took 13 months of denial after the onset of the credit crunch to get action — then panic and unilateral action, without any consultation with the EU, to give banks state protection of its debt for 2 years.

On Sept 30, 2008, some people felt we had pulled a stroke and shown the plodding Europeans what should be done.

It was hardly a way to negotiate from strength and not one of the other then 15 members of the Eurozone supported us.

But it’s all the fault of the Europeans is the more popular narrative today and as many had believed in simple ways taht was producing a permanent boom, there are no simple solutions today!

Also, to my mind, the policy of the ECB is in effect hiding the real issue here – if our “partners” wish us to bail out seniors, then the issue as to whether we do or not ought to be an issue that is decided between the governments of the eurozone.

In other words it ought not to be a question that is linked to our ability to tap funding from the ECB – instead it could be linked to our ability to get bailouts from the other states in the eurozone.

But if the question was linked to whether we could get a bailout from the other governments we would be in a much stronger negotiating position – because those governments would have to justify, both domestically and internationally, why they were insisting on the repayment of private creditors in insolvent banks. They would be accountable to their own electorate for forcing these decisions on another member state.

But when the ECB does it, there is no such accountability. The ECB can act as the agent of our “partners”, enforce a bailout, and our “partners” don’t suffer any consequences as a result.

But this is surely not the role of the ECB?

I got to this para. Then things went poofff!

“Irish people do broadly feel responsible for getting themselves into the mess they’re in. There is an acknowledgment that people got too greedy, borrowed too much, chose the wrong people to govern for the wrong reasons, and paid little if any attention to the admittedly recondite world of financial regulation.”

I have not met, and spoken with, a single person who would agree with the first sentence. Not one. Yes, all acknowledge we (that would be some, not all) were caught up in an episode of ‘irrational exuberance’. But some of us were not, and regularly warned anyone who would heed (as opposed to listening) that a disaster was coming.

“(The) recondite world of financial regulation”. WTF! as CMcC might exclaim. There was NO regulation, isn’t that one of the causal mechanisms of this disaster. There were indeed some ‘regs’, but these were just ignored as temporary inconveniences.

I am quite convinced that the political critters in EU (and EZ) know full well what is in store. The goodship Euro Maru set sail sans enough life boats, is all. Rogue waves are most unforgiving.


People seem excessively concerned about fiscal austerity, Kahneman+Tversky showed that we are unduly concerned about loss (rating it c twice as strongly as gain). I think people need to wise up to this one. Too much whining is distracting, fact is Ireland is one of the richest countries in Earth’s history.

As for this cobbler’s about ‘loss of economic sovereignty’….well avoiding spending money you don’t have is simply common sense – and citizenry should be happy that fiscal spending limit authority is removed from knavish politicians.

That said, the current crisis masks sea changes in the real economy, both those associated with globalisation, and technological advancement…and public outcry+policymakers would do well to focus on this.

@Brian Woods Snr

I guess that we have only met electronically, but I would provide a counterexample to your claim – I agree broadly with that first sentence of the article. You should read our article on the roots of the Irish crisis (by myself, Tom Flavin and Brian O’Kelly of DCU) in the most recent, online issue of JIMF. (I think that you might need a university access portal to read it.) The samme perspective appears in the main policy reviews by Honohan and Regling-Watson. Don’t most sensible commentators blame the Irish crisis on Irish-domiciled actors such as the financial regulator, banks, reckless Irish borrowers (both retail borrowers and business borrowers), not just foreign lenders?

It is a thoughtful, well-written small article in the WSJ which gives Ireland due credit for its recent struggles, and past errors.

The question of whether Irish taxpayers should pick up the tab is a little irrelevant, a more pertinent question is whether Irish taxpayers CAN pick up the tab:

1. Debt as proportion of GDP exceeds 100%
2. Private debt which includes mortgage debt is near 120% of GDP
3. 14-15% unemployment excluding emigration figures

4. Note the chart in above link re Irish exports 2011 leveling off amid exposure
to a global economic downturn.

5. Austerity budget taking ¢3.6 bn from the economy….

Add the above five together… justs needs a leaf blowing in the wind to sink that ship.

@gregory, is this the paper you’re referring to?

Btw I accept Irish society made lots of mistakes, and of course we are very far from blameless. But when a german/british/french bank does business with an Irish bank. That has NOTHING to do with me and to a lesser extent, the Irish authorities. It seems as if those in charge of regulating the german/french/british banks are getting away scott free.

“Eternal vigilance is the price of liberty”. How easily people forget this fundamental precept. But it never secured a hold in the Irish mind. For centuries liberty was ‘freedom from’; and for a very short period it became ‘licence to’. But, once relinquished, liberty is difficult to regain.

And nothing has been learned. It appears that a majority of voters are putting their faith, how ever grudgingly and sceptically, in a government, comprised of and pandering to native power elites, that is not subject to any effective scrutiny or restraint and that is expected to extract concessions from far better governed countries.

And, though better governed, they have the outcomes of their own misgovernance to attend to. If only Irish people could look from the outside in and see how sad and pathetic their government looks, as it wades though the mess it inherited, employs precisely the same system and mode of governance that created this mess, without any recognition that the process requires fundamental reform, and demands concessions from those who are struggling to deal with the outcome of their own much less damaging migovernance.

Blame is a waste of time.
This is what’s happening. The Germans will stand their ground. We will be between a German jackboot and a hard place.
Only game we can play is to hang in there until the EFSF runs out of money. Then we will be free

@ Paul Hunt
And the Germans dont pander to their bankers? And the liberation of Libya had nothing to do with oil. The world is a crooked place

@Michael H

Either the Europeans or the British are to blame. That’s the Irish mindset. The idea that the problem might be closer to the kitchen table is anathema. Nonetheless, the expectation is that the ‘others’, the foreigners will fix it up. Even when they threaten the opposite, sure they couldn’t be serious? Ireland’s role as chief victim of the crisis can’t be compromised.

The present crisis affords opportunities for reforms. It seems nonsensical to have so many unemployed, in debt and sitting in their hands (not by choice in most cases). There must be some way of working with what the banks have been given, the future, and getting people into work that sees their mortgages partly paid while they retain their welfare payments. The trade unions will object but are they offering apart from socialism for the well heeled?

There is no future for Ireland unless except as a low wage economy. But I suspect that message is unlikely to penetrate the official mindset not to mention the islands stuffed with various elites.

And who benefits from all this austerity?

Strange, isn’t it. Italy, the largest EU country that requires a bailout of its debt, can still sell its bonds, but Germany, which requires no bailout and which is expected to bear a disproportionate cost of Italy’s, Greece’s and Spain’s bailout, could not sell its bonds.

In my opinion, the failed German bond auction was orchestrated by the US Treasury, by the European Central Bank and EU authorities, and by the private banks that own the troubled sovereign debt.

My opinion is based on the following facts. Goldman Sachs and US banks have guaranteed perhaps one trillion dollars or more of European sovereign debt by selling swaps or insurance against which they have not reserved. The fees the US banks received for guaranteeing the values of European sovereign debt instruments simply went into profits and executive bonuses. This, of course, is what ruined the American insurance giant, AIG, leading to the TARP bailout at US taxpayers’ expense and Goldman Sachs’ enormous profits.


h/t The Blind Biddy Hedge Fund; anon. analyst note

On the issue of treaty change, this paper (and others) by Gavin Barrett is interesting
And doubtless the people that need information about issues like this, have the information and their opinions

On the issue of the ECB etc, a reminder that it is was the previous government – along wit the Dail – in 2008 that decided the socialisation of the debts of local banks.
This process was substantially accomplished by late 2010, when Ireland could no longer finance itself on markets, and the ECB opposed any further changes of regime.

The actions and analysis today by Moody’s on banking debt is of relevance to the ongoing debate.

“here is an acknowledgment that people .got too greedy, borrowed too much and chose the wrong people to govern for the wrong reasons”

How many votes did FF lite get in the pres. election ?
Has the author been reading the Sindo recently?

Jacques Delors, a founder of the European Union, promised the British Trade Union Congress in 1988 that the European Commission would require governments to introduce pro-labor legislation. Instead, we find the banker-controlled European Commission demanding that European labor bail out the private banks by accepting lower pay, fewer social services, and a later retirement.

@ Rory Mc Gonagle

In the world beyond the horizons of the likes of Michele Bachmann, life comes innshades of grey rather than black and white.

You appear to put all the blame on foreign lenders but where is the responsibility of the likes of Ahern and McCreevy and a weak regulator who apearred to see the promotion of the IFSC as part of his role.

Were you in Ripvanwinkleland when the banks sharply increased their foreign borrowings from 2003?

The Germans were responsible too for turning a blind eye when AIB, the biggest bank, sold part of its Hq to a stretched developer, Sean Dunne, to fuel its lending.

I regularly wrote on Finfacts on the annual investment of €10bn+ in overseas commercial property while less than €200m was available annually for venture capital investment in the tradeable goods and services sector.

Arrogont fools on web fora such as used to brag about our growth compared with Germany’s.

Harney had fuelled that tomfoolery in a country where most exports were made by American firms, with her Boston and Berlin jibe.

And back we are now back to Berlin.

@GO’C: Thanks for citation. I have access -I think!

I accept, fthat or all institutions there are ‘System Effects’ (Robert Jervis), but its us fallible humans who man the control stations. OK, so a component in the system may/will fail, but if your ‘fail safe’ device (me) is a tad distracted: its bye-bye time.

God bless the men (it was men?) who gave us this wonderful electronic communication system! Imagine what it must have been like when the first, stable, tele-phones were deployed!


“a reminder that it is was the previous government – along wit the Dail – in 2008 that decided the socialisation of the debts of local banks.”

BLTD RIP sold a product called cheapest bailout in history. And the Dáil wasn’t consulted.

Sometimes CoH reminds me of an elderly Brahmin who has come to the house of a Dalit farmer. The farmer’s crop has failed and the Brahmin has come to take away his daughter. As is the custom.

One thing that Fintan O’Toole forgot in his calculations is that we got the money loaned to the banks, we spent it. It is our fault that we spent it on the wrong things.
With that said we should not be paying back the loans we cannot pay, that is what receivership is for.

@Ciaran O’Hagan and All
It seems we can be sure that the original guarantee was a surprise for the ECB/Commission etc.
However was there pressure applied to renew it? And who applied it? ECB? Merkozy? IMF? Goldman Sachs? Geithner?

@ The Alchemist

The Irish Examiner has 2 relevant stories today:

1) More than 30,000 teachers will receive pay increases worth almost €22 million next year, while students and their families suffer another round of cutbacks.

The increases are part of a €250m annual increase to the public sector pay bill arising from salary increments guaranteed under the Croke Park deal between unions and the last government in return for productivity measures.

2) BAILED-OUT banks spent almost €7 million on legal fees over the past three years to repossess homes from people who have fallen on hard times.

The legal profession has been described as the real winner in the raging mortgage crisis, which experts predict is only going to get worse. 

AIB and its subsidiary EBS spent over €2m on legal fees relating to repossession cases since the start of 2009. AIB revealed recently it has repossessed just 17 owner-occupied homes and 21 buy-to-let homes. 

The sums paid to lawyers by Bank of Ireland in such cases has more than trebled since 2009, from €67,000 to €206,000 this year. 

The taxpayer-backed Irish Bank Resolution Corporation — which replaced Anglo — has paid €4m to lawyers in such cases, mainly taking homes for which the wound-down Irish Nationwide had given loans.


Then there is one of the busiest service operations in the country, the Commercial court, keeping many in clover.

The basic pay of TDs is 28% above Swedish counterparts and Irish expenses are grand larceny by comparison.

The independent TDs are still in line for the €205,000 tax free gift that was agreed by Ahern in 1997.

Most of the misery is invisible to the insiders and and the truth is bitter.

We have as many afflicted with ‘bodhar Uí Laoghaire’ as in bubble times.

This week, NUI Galway have a Stanford University expert on campus advising on research strategies . He was a member of the Innovation Task force group that produced a report in 2010 with the fairytale of up to 235,000 new jobs in high tech in a decade.

Just wonder, in this bankrupt country, if NUI Galway’s concern is about league tables or the use of scarce tax euros to create sustainable jobs?

There should be a footnote on each MH post
“Michael is not a resident of Ireland, all “we” commonly should not be taken to include either him, not his neighbors in kuala lumpur, but instead read as “you” ”
You are still in KL Michael?

@ Phillip

would that change the substance of what he says? Or are you again just trying to shut down dissent from people you don’t agree with? Anonymous posters, members of the IFAC, people living abroad, anyone working for an Irish bank, anyone working for someone doing business with an Irish bank, anyone with a position in a security of the Irish government or banking sector, anyone you even think might have a position in a security of the Irish government or banking sector….the list is getting chunky….


I think you have the wrong way around. I am happy not to be in a collective with somebody who thinks he is a 16th Century Spanish King.

@Philip II
The logical conclusion of your xenophobia is that the Irish people remaining on this island are indeed liable for the debts that the bankers, also resident on this island, took out.



The overpayment of senior public servants is beyond question. By overpayment I don’t mean compared to our international peers (although we are overpaid by that standard – I suggest a quick comparison of the pay scales at NUIG and Cambridge if you want a real giggle) I mean in moral terms. As, for example, a Professor of Irish Studies, you can’t accept 145k a year AND observe the reintroduction of student fees AND observe that there are no employment opportunities for new PhDs AND look at yourself in the mirror in the morning and say “yes I am a good person”.

We simply can’t afford the current salaries of our senior public servants. What is senior is up for grabs – I’d say anything over 50k should get the hatchet.

Let’s also put to bed the red herring that cutting public sector pay won’t solve all our problems because (i) we owe so much money (ii) the public sector pays taxes. Of course we won’t solve all our problems with more pay cuts but we’ll solve a bit of our problems and that is how grown ups deal with problems, bit by bit.

@Ciaran O’Hagan @Michael Hennigan

The bank guarantee came up for renewal several times since 2008. On every occasion the Irish government sought not to renew the blanket nature of the guarantee. Some ‘concessions’ were allowed by the ECB in negotiating with subordinate bank bondholders. But the ECB in particular insisted that Ireland RENEW the guarantee in relation to all banks ‘seniors’.

So I am not buying your spiel that because Ireland made a fatal decision in 2008, that our predicament is all Ireland’s fault.

Ireland has bee threatened and blackmailed by the ECB with economic armageddon if she did not comply with ECB directives in relation to bank seniors. An ECB that was supposedly independent of Germany but even to the edge of Euro-cliff must look to Germany for the nod to say what it can or cannot do.

Germany and the German ECB has Europe by the throat for three years now, tightening their grip all the time.
It looks like they would prefer to destroy Europe than to let Europe breathe again.

@Shaun Byrne,

Re “One thing that Fintan O’Toole forgot in his calculations is that we got the money loaned to the banks, we spent it. It is our fault that we spent it on the wrong things.”

Actually, I never got the cheque though apparently from your post everyone else did:)

So, can I opt out of the ‘WEEEEE’ who have to pay it back:)

@Mr. Bond,

Hear, hear. The more Philip Lane opens these threads and the longer they extend the more evidence they provide, with diminishing and notable exceptions, of the closing of the Irish mind. And those of us who reveal our identities are subject to increasing abuse from the pseudonymic.

The EU is impaled on the hook it created for itself when the governments of major states ignored the requirement to secure and maintain genuine democratic legitimacy. With national parliaments in the better governed states asserting their primacy in response to angry voters it is difficult to see how the EU will get off this hook.

Of course, governments in the southern and peripheral countries routinely ignored the required to secure and maintain democratic legitimacy. Once it was secured at an election they believed there was no need to maintain it during the life-time of government. They could literally do what they wanted to do – or what the vested interests demanded.

Nothing has really changed in Ireland – the limits of sovereignty have been circumscribed, but, within these, the government can operate without effective scrutiny or restraint. (At least the technocratic government in Italy and the technocrat-led government in Greece have to put in the effort to secure the consent of their parliaments.)

What a sad pathetic farce. But abuse is heaped on those who point it out.

Ireland was always better than most at exiling, silencing or shooting messengers – or suggesting they should commit suicide 🙂

@ All

The most recent statement of the objectives which Germany wishes to achieve is in an article by Derek Scally in today’s IT.

This quote from Schaeuble drew my attention.

“Sometimes I feel like a fireman being bad-mouthed by the arsonists for not yet putting out the fire,”

He cannot have read the reference in Handelsblatt to the alternative view that Germany was like a fire brigade allowing a house to burn down in order to teach the children the danger of playing with matches.

@ Ciarán O’Hagan

A very useful paper by Gavin Barrett. It underlines how incoherent the German legal position is. The paper predates the recent decision by the constitutional court which has simply muddied the waters even further. And it has yet to adjudicate on whether the ‘Committee Of Nine’ of the Bundestag or the full Bundestag is to be involved in major decisions by the EFSF. The situation would be funny if it were not so critical.

But one has to look on the bright side. The leaked negotiating paper, it now seems, was simply Westerwelle as foreign minister trying to strengthen the role of the FDP. Genscher is trying to get it not to reject the EFSF in an internal party referendum. If it does, the governing coalition can hardly continue.

But, to look on the bright side, the people who actually know what they are talking about, the ministers for finance, the ECB, and their officials have been given a clear run for a few days following the vow of silence agreed by Merkozymo and the elements of an overall global compromise seem to be in place. For the meeting on 9 December to succeed, only the politico/institutional questions can be left to the leaders. The rest will have to be in place with yes or no decisions. That is all they can cope with.

@Ciaran O Hagan

“On the issue of the ECB etc, a reminder that it is was the previous government – along wit the Dail – in 2008 that decided the socialisation of the debts of local banks.
This process was substantially accomplished by late 2010, when Ireland could no longer finance itself on markets, and the ECB opposed any further changes of regime.”

First, it seems clear that, in teh wake of Lehmans, the ECB would always have opposed losses on senior creditors.

The real question is whether the ECB would have been able to do anything to stop us imposing losses if we did not have an immediate need for a sovereign bailout.

On the one hand, our banks would still have needed substantial funding, but on the other our sovereign would have been in a better position.

But the key point is that, although we undoubtedly put ourselves in a position where we had little choice but to agree to what terms were on offer, it does not follow that it is legitimate for the ECB to impose, at the barrel of a gun, whatever terms it sees fit.

Our financial system is entitled to be considered for refinancing as a matter of right. If the ECB believes our banks are insolvent it ought not to lend to them. If it thinks our banks are solvent then it should act as a lender of last resort at the interest rate that each and every bank is entitled to avail of. In other words an Irish bank ought to be treated the same way as a bank from any other country. What the Irish state has chosen to do in relation to losses, at other Irish banks, is neither here nor there.

When the ECB chooses, when making its decision as whether or not to re finance Irish banks, and if so at what price, the question of whether or not we have burned seniors ought to be irrelevant to that decision, and it could be argued, that by taking into account they have acted ultra vires in the exercise of their powers etc.

I think the title could be more accurately stated as Ireland Contemplating a Long Age of Austerity… Or Ireland Staring At a Long Age of Austerity


Or “Ireland’s elite wondering how much austerity they can pile on the masses before they have to suffer a bit of their own.”

@Ciaran O’Hagan

This process was substantially accomplished by late 2010, when Ireland could no longer finance itself on markets, and the ECB opposed any further changes of regime.

That’s some very fuzzy phrasing there. It could easily be read as “This process was already substantially accomplished before late 2010, when Ireland could no longer finance itself on markets, and the ECB opposed any further changes of regime.” But of course you know that this is untrue. I’m sure you will be happy to clarify.


Has Hans Dietrich re-emerged? Would that he had. But perhaps your right. The pygmies that have succeeded him might stay quiet for a little while. But I still doubt the circle can be squared without denting the tender and delicate sense of propriety of voters in the smaller, less well-governed member states – with Ireland, of course, in the vanguard.

@ Colm Brazil

You may not personally have spent any of the money but most people saw their incomes rise dramatically on the back of the housing bubble. It is this false wealth that has now to be clawed back. The state is bankrupt because the ephemeral tax income on which it was based has disappeared.

Some people benefited enormously from the boom through unjustified pay and pension increases but mainly through the sale or transfer of bubble-priced assets. These are the same people, if they did not put the money in bank shares, that are probably the source of the capital flight from Irish banks.

In my view, everybody is aware of this but unwilling to face up to the logical conclusion; some were winners, most were losers. Asking the German taxpayer to make the pain go away is not a realistic option.

Seeing what can be done about burden-sharing on the bailout of the banking system, on the other hand, is another ball of wax. However, the sums involved are marginal with regard to the overall cost of the party (and wasn’t it great while it lasted!).

The WSJ analyses the Irish austerity ‘experience’

Not experience Phillip, experiment, a social experiment, self defeating austerity.

@Brian Mercer

“The comentary suggests this is not as bad as it looks”

The golden touch of a PR Guy!

This is bad and anyone glossing it must think Italy won’t worry too much because they know they’ve got a line of credit coming to them from somewhere that means they won’t have to borrow at these high rates much longer. Just make it easy for Italy to roll those debts over and get those bondholders kept whole and for goodness sakes, don’t go creating any credit events or the US banking system is going to fall over (then the French, UK, German, tumble tumble). Once most of the money is back in its ‘rightful’ hands, when it goes wrong the taxpayers can then pick up the tab.


I see that Gorgeous George has stuck a two year pay cap on the public sector over in the UK. Imagine pulling a stunt like that here! Perhaps he’ll get around to telling them next year that maybe inflation won’t drop much below 5% after all and their spending power is going down the pan when he’s forced to renew the pay cap in two years time because he’s run out of options. Austerity and trebles all round.

I’m not sure I buy these austerity programmes the way they’ve been devised. Who plucked the timescales out of the air? What was wrong with spreading out necessary changes/deficits and debt back to a sane level to be in place by 2018 or 2020? Perhaps some people were too intent on satisfying the ‘Meerkats’… and making sure bondholders are paid back as quickly as possible when the big rollovers happen because there’s no time to lose as some up on high can see precisely where the kicked can has fallen over the cliff and they need to get everything lined up to be the last ones standing with money in their hands when the music stops. Taking a small hit on Greece isn’t too big a price to pay as long as the majority of the money gets back to them before it really hits the fan.


Jacques Delors, a founder of the European Union, promised the British Trade Union Congress in 1988 that the European Commission would require governments to introduce pro-labor legislation. Instead, we find the banker-controlled European Commission demanding that European labor bail out the private banks by accepting lower pay, fewer social services, and a later retirement.

The fundamental Ideas the founders of the European Union had on their minds, in my humble opinion, the Frankfurt Group of Eight have absolutely nothing in common with these ideas anymore. What I find most astonishing is the simplistic view presented as a solution by the current opinion leaders, to copy cat the american system to a large degree.

Europe, by any standards, it is unique, and should be advanced in much better ways than what the american system has evolved into.

As always, such a deep rooted crisis has to be understood as a chance at the same time, unfortunately, too little I see moving on these grounds.

The most likely effect of strengthening political union in the eurozone would be to give Germany the power to control the other members’ budgets and prescribe changes in their taxes and spending. This formal transfer of sovereignty would only increase the tensions and conflicts that already exist between Germany and other EU countries. – Martin Feldstein –

@Georg R

You trying to wind me up with a link to Mairt_een Feldsteen – the arch randite and keeper of the neo-libertine gospels? Spose I better read it now ….

@ Bond. Eoin Bond…, Paul Hunt, hoganmahew


@ Philip II

As an anonymous poster, seeking to negatively profile a poster who provides a valid identity, the word coward comes to mind.

The comment also reveals base ignorance and is from the toolkit of those who for example call people ‘West Brits’ rather than challenge views or arguments

Foreign companies are responsible for most of the exports and was it leprechauns who provided the expertise in particular during the early years of FDI?

One can wonder what your definition of ‘Irish’ is. I left 5 days before the onset of the credit crunch.

I’m not asking to have a vote; just expressing an opinion.

I encountered your ignorant type during the bubble who were intolerant of dissent because the promised land had been discovered .

I will say again, the truth is often bitter and we do not have a history of handling it very well.

Dissenting voices have seldom been welcome. With 14 board positions on the typical quango, it really pays to keep the trap shut or remain anonymous like you.

Is it surprising that a head of government as recently as 2007 could wonder why critics didn’t commit suicide?

A fool could only believe that this mindset has really changed.


believe you me, I was tempted to say in the same post that I found myself laughing to agree with Feldstein, something I would not have thought to be possible in my lifetime, however, I chose not to say it, because I try to understand opinions on their own merit, and only to a lesser degree the person that stands behind it, as they are coming and going, ideas however, stay longer.

@Georg R Baumann

Phew! That was close. I agree with Martin Feldstein’s cogently presented statement that Europe is not The United States of America. Phew! That was close. The high infants graduate in the corner also agrees. Unanimous.

Minor point: ‘Even a state like California, seen by many as a poster child for fiscal profligacy, now has an annual budget deficit of just 1% of its GDP and a general obligation debt of just 4% of GDP.’

Typical Feldstein. Once his abstractions figure – all is OK in his delusional universe. Doubt he has read Lewis’ most revealing little essay on California in Vanity Fair recently, or how firefighting has had to be re-thought!

With respect to the general issue of ‘austerity’ it can’t be repeated often enough that each and every person you see in public life in Ireland pontificating on austerity is experiencing zero austerity. Zilch. Nada.

Eamon Gilmore, Pat Kenny, Joe Duffy, Mary Lou, Vincent Browne, Fintan O’Toole, Gurdgiev, Eddie Hobbs, George Hook, Eamon Dunphy, Marian Finucane, Kieran Allen etc. All crocodile tears.

Sometimes I just give up.
+1 ing the bondster and running down the public service.
A good teacher is worth 10,000 bondsters
But much easier to attack a teacher than a bondster.
I agree with taking pay cuts in the public service (more at the top than at the bottom) but I am sick to death of this stupid up-its-own-arse mob that equates verbosity with intelligence.
If you cannot see that this crisis was caused by cheap credit flowing whereever it could then you are just stupid.
Now bring it….!

This thing starting to get traction btw, i know DOD aint a fan, never mind Blind Biddy, but definite ability to be a game changer if true…




@ Michael Hennigan

While I must admit (I am only a recent graduate of Economics) I haven’t followed current/business/economic affairs for long, I was very sceptical of much of the Celtic Tiger by the sheer absurdity and greed of it all. The ridiculous prices people were been asked to pay for houses never sat right with me. Of course everyone knows why we had ridiculous prices now.

As did the mindless populism of FF – but I can accept as a democrat(even though I never voted for FF) that all the irish should face the consequences of having populists in power for so long, who promise the world to everyone. So yes, we must pay higher taxes, and lower spending. The country needs austerity.

However “burning the bondholders etc” argument has merit. To what extent we can discuss. But surely they must share some of the pain.

A foreign bank buying a Irish bank bond has nothing to do with me. I would dare to presume that before a foreign bank buys a bond from a irish bank, that they would conduct a rigorous analysis of its business affairs?? If there was any analysis it has shown to have been woeful. (If you claim to have foreseen the fatal weakness in the whole system, it shows that someone with economic intelligence can spot a good deal from a bad one.) The people involved should have been made to pay by receiving haircuts for their malinvestments. Why should they get their money back when they have been proven to acted completely incompetantly with it? Why don’t these banks employ people who know something about macroeconomic crises? Why don’t they seem to know that a small country can only absorb so much cheap money?

Yes the regulators are to blame and could have stopped all this, but that argument can only go so far. People should be held accountable for THEIR actions. The foreign banks made bad investments. Why are they being rewarded for this? they are walking away scott free. Do you see no merit in arguing that this is moral hazard gone mad?



MatrixsQuid in perpetuity … game changer for who?

Ta for update …

@ Michael Hennigan
I think I get where you’re coming from. There’s a lot that needs to change in Ireland – and it needs to happen fast.
If Croke Park was abandoned and pay cuts were introduced would that make you change your mind and join the good fight against the external enemy? or would you always be railing against some unfairness in the Irish state? (it sounds narky but its not meant to be – but you reflect the divisions in the country)
I think Croke Park is ridiculous myself and I’m beginning to wonder if it has set up the public service as a scape goat. Let’s just get rid of Croke Park Agreement.
And then focus on the real problem of runaway bondsters.

@ BEB + 1
Philip that’s a low blow.
Say what you like about MH but his contributions are always about trying to find ways to do what is best for Ireland. I sometimes disagree with him on how that should be done but he continually attacks our litany of vested interests using numerical and factual evidence. I can see why some would want his comments silenced or devalued.

@ Bond,
So where does that leave us then?
Potentially dealing with just the IMF???
Raises the probability of debt restructuring – shouldn’t it!
Let’s hope this bird flies. (Kinda goes against my conspiracy theory of a few very dodgy and very rich bond traders running the show. Have to figure out what’s in if for them – unless Goldman have taken out a fortune in those default insurance thingies)

@ Shaun burne

“It is our fault that we spent it on the wrong things.”
In the wise words of Tonto ‘Whats this WE business, pale face’

@Rory McMonagle – yes that is the earlier unpublished working paper version which is maybe better — the journal editors made us change a few things – a combination of some improvements but also perhaps some disimprovements.

After reading this article I will have to to to the trouble of emailing the reporter.
The cornerstone of Ireland economic policy is our low corporate tax rate. When that is gone Irelands export sector will decline unemployment will rise debts will not be serviced, bailout 2 won’t happen and the whole thing will go belly up! So in order to save the Euro we have put ourselves into bonded slavery as debt serfs. Our next move will be to endorse Treaty changes to keep the money flowing from the ATM’s the well rehearsed mantra of nurses, garda and keeping hospitals and schools open will be spat out be every politician in the Dail.

Two questions. Who will be the last public servant left sucking from the teat of debt and will NAMA be sacrosanct, allowed to continue willy nilly to divest itself of the proceeds of the Great Great Bank Robbery to keep it’s own salaries and the salaries of all the ‘professionals’ paid. After all they don’t want to have to depend on making a profit do they?


“You may not personally have spent any of the money but most people saw their incomes rise dramatically on the back of the housing bubble. It is this false wealth that has now to be clawed back. The state is bankrupt because the ephemeral tax income on which it was based has disappeared.”

Come on DOCM, you can’t remain a gombeen forever:)

A small group of FF officials, led by incompetent Department of Finance officials with too few PHd’s, a useless NTMA and Regulator running on blind, a bunch of coining it developers, a mismanaged bank elephant in a glasshouse breaking growth rates known to every decent banker in the world as alarm bells, cheap credit handed out to the population like whisky to indians, an ECB running on empty as far as regulation is concerned….a financial industry in Ireland stealing salaries to pay for ponsi property prices….I’d say you could blame this on less than a hundred people in Ireland. Most those who were at the party, were bribed to go there and they didn’t organise it; many were not at the party.

Now for the international component to our mess….another day’ :D’

@ Johnny foreigner

Are you sure that the IT and other meejya outfits have maintained pay at 2008 levels ? George Hook , Eamon Dunphy and Fintan O Toole have probably had pay cuts and pensions trimmed . Ad spend is way down.


The term austerity is associated with the 1930’s Depression or the post WWII period or the 1970’s – a period when food, energy and other essentials were rationed.

Cutting pay from the Irish 2008 levels is not austerity – that’s just having less disposable income. Austerity is having no disposable income or not having enough for essentials.

I’m sure Fintan hasn’t missed any meals yet.


“Austerity” is putting bondholders before citizens. When masses of citizens do not have enough for essentials the terms is “depression”.

@Bond. Eoin Bond (or anyone who can answer these questions)

I’m not really sure what the implications of the ECB lending to the IMF are.

I presume it’s to provide money to Italy/Spain (anyone else?) so they can pay back existing bondholders when they roll over because the EFSF can’t (and God forbid we don’t want those guys defaulting) – and then end up owing the IMF instead of bondholders – and/or to fund any new borrowing requirements i.e. not have to go to the market for funding at crippling rates for the forseeable future.

What’s the German stance about the ECB lending to the IMF? Which EZ countries might be against the idea? Would it require the likes of the UK/USA to OK it?

Can the IMF ‘leverage up’ in a similar way to how they’ve been trying to leverage the EFSF up?

What’s the potential downside?

Is it just another mechanism for making sure bondholders get paid in full and are able to continue to reduce their exposure to the EZ periphery as quickly as possible (and I presume it also lowers the risk of a credit event happening if debt ends up being owed to the IMF instead of bondholders)?

What would the likely rate be? 4-5%?

Is the IMF ‘the only game in town’ now? Lucky the fragrant Christine is there.



Looking more and more official. Should encourage more BRIC’s money to be involved though, more likely if IMF is managing the project rather than a bunch of overpaid Eurocrats.

It is unacceptable that some countries are seeking to control the drafting of the new measures.

This is anamthema to the ethos of the EU where smaller nations can rely on the EU institutions to guarantee fair play.

Seeking to control the drafting of a document and presenting documents to people for approval at short notice is typical of the sharp practice which people in a dominant economic position, or indeed those with most control over a committee or cabinet, engage in.

@PR Guy

IMF can press a button – bit like ‘letters of comfort from the ECB, fed, boe; in this case ECB – the comfort is that like the mounties they always get them back (sovs downgraded to 4th in line) – the real comfort is that the financial system gets paid (while the serfs get roightly laid) – think fragrant french cheese – and a few trillion to be doled out on wall street as protection money … think the blue pills all round … think of the world.

@ Bond, Eoin Bond

Agreed that the IMF have way more credibility then the ECB/EU. If only they had full control over our programme.

His first name isn’t Rudolf is it? 🙂


To me austerity means imposing an austere lifestyle. It’s intimately bound up with the detail of living conditions, it’s not just about proportional falls in income. I agree that the word has come to mean something completely different but that’s a sign of how deluded we all became in the bubble.

@ Hogan

“His first name isn’t Rudolf is it?”

Thats awful. I’m so stealing it though… 😀






@Eoin & PR Guy
“Believes in Santa though.”
Don’t we all live in hope these days.

Do you reckon if we put Ireland under the pillow, the toothfairy would be kind to us?


Didier Reynders is a Belgian Francophone liberal. So in no sense is he Rudolph the Red. More of a yellow/blue really.

@David O’Donnell

Any truth in the rumour that Blind Biddy orchestrated the takeover of the UK embassy in Tehran, is encouraging dissent in Syria and currently has that guy who runs Moody’s tied to a tank in Damascus until he agrees to downgrade France?

@ PR Guy

Embassy trouble in Tehran and George’s slashhook to public salaries is all very 1979

@DOD “And who benefits from all this austerity?”
The bund was trying to sell below 2.0%. Most bunds are bought by Germans (>95% I have seen somewhere) but not directly, but through insurances, who are required by law to guarantee 2.25% payout (changes to 1.75% next year 2012). Buying a 2.0 % bund would be just a lawsuit waiting to happen, no matter what that means in reality. I have seen way more hilarious judgements in German courts.

US banks going up in smoke with CDS would be something not many Germans would feel pity about. The MBS deals with German state banks are not forgotten : -)

Frau Doktor Angela Merkel is in a league where she is impervious to criticism from the peanut gallery.

Angela imbibed some of the following quotations with mother’s milk. In Ireland we have quotations along the lines of ” I eats when I’se hungry I drinks when I’se dry and if Poteen doesn’t kill me I’ll live ’til I die.”

All action takes place, so to speak, in a kind of twilight, which like a fog or moonlight, often tends to make things seem grotesque and larger than they really are.
Karl Von Clausewitz

It is even better to act quickly and err than to hesitate until the time of action is past.
Karl Von Clausewitz

Principles and rules are intended to provide a thinking man with a frame of reference.
Karl Von Clausewitz

Lastly, the great uncertainty of all data in War is a peculiar difficulty, because all action must, to a certain extent, be planned in a mere twilight, which in addition not infrequently – like the effect of a fog or moonshine – gives to things exaggeration.
Karl Von Clausewitz

His most famous quotation was “War is politics by other means.”.

My thinking on this is that the fog of politics is greater than the fog of war and the financial data available emerges distorted into anything but daylight. It is then filtered and criticised by prejudiced pundits who are seeking anything but the plain, simple facts.

just a general comment:
In many discussions in Germany, I always try to tell people, “what would have you done” in their (GR, PT, IE, ES) situation, 5 years ago.
Germany gets now its own real estate bubble, just with a time shift, fueled by ridiculously low interest rates. And even with the disaster everywhere else, it is very difficult to get people off their buying urge. Even I think repeatedly, whether I could ride that tiger, it will work, I do know exactly what I am doing ……, LOL.

If the US Fed didnt get it, how can I blame other upcoming EU countries for not getting it either.


There is a high probability that the global financial system will collapse, and the timeframe is pretty darn obvious.


I know, makes me wonder, why people play that high stakes gamble, to get their fingers into the German wallet, against all treaties, and justice.

Xmas to New Years Eve is perfect for a long bank holiday. EU Summit is 9th of December, as I said before here, final binding decisions the latest 19th of December, 2 am GMT morning, before Tokyo Stock Exchange opens …. :- )

Vacations cancelled, stocked up on supplies, I am ready for a new Deutsche Mark. I don’t think I need a gun here around

Exit scenarios while not formalised can be concocted by any country unilaterally. Announce 1:00 a.m. Sunday morning that as of midnight Sunday night the Punt, Drachma or Escudo will be “the legal currency”. Currency or instruments received by the country’s banks will be converted to Ps’, Ds’ or Es’ likewise with withdrawals from banks or near banks. This will happen in an instant without notice. Euro denominated loans or deposits will automatically be converted to the new local currency. The enabling regulation will state whether the conversion is instant and up front or occurs on the amount due or deposited each month. The exit is there but accompanied by risk, pain and uncertainty. On the other hand the status quo is no bed of roses either. Better the devil you know would be my recommendation.
One of the big unknowns is what will be the least painful way to pay foreign creditors who will be demanding payment in real Euros at a time when we will have a currency worth 3 or 5 to the Euro. On the bright side all our domestic obligations will be reduced considerably when compared to the Euro. There will no longer be a need to cast aspersions on people who had high pensions or PS jobs. Exports will boom and even if we go into it dragging our feet GDP growth should be at a rate greater than 5%. Our farmers, god bless them, will get rough shift.


I don’t understand the Irish farmers part of your post. Why would they suffer? Can you help me?


“Embassy trouble in Tehran and George’s slashhook to public salaries is all very 1979”

Let’s call it retro-politics. It was also the year a female leader was frightening the hell out of Europe (Maggie), a nuclear reactor came close to meltdown (Three Mile Island) and a major world power found they had soldiers in Afghanistan. Nothing much changes does it?

If I am to believe reports, Irish farmers are 71% reliant on Common Agricultural Policy subsidies. Euro 55 billion in the EU as a whole. At the very least the flow of funds will be stopped as negotiations proceed on what is borrowed/owed and when, where and in what denomination will payment take place.

It will be a gargantuan task that could easily descend into stalemate.

I am totally opposed to separation but I do see it as an avenue that could be taken by politicians in a fit of pique or a bite off my nose to spite my face tactic. The Irish are good at tactics and weak on strategy. Backstopping the banks is a good example.


Dr. Angela’s personal history is something interesting, kind of an enigma to many people. Certainly not the traditional politicians CV.

I downloaded Clausewitz from, after you repeatedly mentioned it. At the time I read it, decades ago, Mao Tsetung left a larger impression on me, to be honest. And I lend my Clausewitz copy to somebody, and never got it back.

I would be pretty surprised, if any German politician would have ever talked about consequences like CAP payments, especially in writing, in case of a breakup. Just in case, I would like to hear about it, from you.

I do appreciate you thinking about it. If you hang around greek blogs, like, it is a lot more about, what bad things can they do to their creditors today, endless slander, and very little about, what might be the consequences the day after, like CAP cuts.
And any ideas to offer global customers something they buy happily, doesn’t happen, just endless demands for fresh money, and not even thinly veiled promises to not pay back any of it.

I see the european union as a kind of patch work family, not particularly loving each other, just right now, but growing together over time. Hilarious demands for financial payments can destroy it


when you read my post above, you see sentences starting with I, I, I, I.

This is certainly not meant to be the world circling around my “I”.
But that I only speak for myself, I am not “we, the pope”, “we the king”, “we the Germans”, “the eternal scientific truth”

The result of an effort to speak plainly and in simple words, gone a little extreme.

I read Clausewitz in my early teens. What fascinated me then was his quotations on countries having interests and not friends. The puzzle for me at the time was why from 1916 to 1922 the USA did not intervene materially in the Irish-British disagreement. There were 40 million people of Irish descent in America some of whom were extremely powerful politically and industrially. Yet they seemed to have no influence on US foreign policy. After reading Clausewitz it all fell into place and has cast a new light on the behaviour of the major powers ever since. For example today the animosity in the US and GB toward the Euro. On the one hand they complain it will bring down their economies and on the other they never hesitate to predict its doom with a good dollop of schadenfreude.

Clausewitz emphasized the need for states to involve their entire populations in the conduct of war.

Not much chance of that happening in the West today unless you could get through to them in adverts during the Xfactor or I’m an idiot get me out of here. Or perhaps on Facebook… Please go to our war page and ‘like’

Could be an interesting study .. the effect of war on social media… or social media on economics… or….. I really must get to work.

@PR Guy,
Clausewitz was born 1780.
The Mass conscriptions started 1793 in France
“…all the French, both sexes, all ages are called by the nation to defend liberty”.
long before the “Wollt ihr den totalen Krieg?”

and ended the “Cabinet Wars”
Uuugh, new German word, which has no translation, …. , interesting.

If I continue like that, I will become like “anne” on

back to work.

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