A new referendum likely, says IT

stephen Collins is at it again!!
http://www.irishtimes.com/newspaper/opinion/2011/1203/1224308521780.html
(how do you do a link?)

So, in a Union of 27, if Merkozy wants a new Treaty requiring an Irish referendum then, the IT assumes, this is what will happen. They are quite possibly right.

Yes, one reason to think that no attempt will be made to squeak the treaty changes through as de minimis revisions is that Sarkozy, for one, was talking about a “new treaty” in his big speech. It seems that Merkozy specifically want this to be received as (at the minimum) a major treaty revision with all that entails. (Another reason to think that won’t happen is that it could cause problems with the Constitutional Court in Germany.)

That raises the question of why the French and German governments want full ceremony. One explanation is that they hope the awful solemnity of a new treaty ratification will cow the Italians, Irish etc. into abiding by the new debt-brake commitments for a little longer than they otherwise would – or at least sell German etc. voters on the idea that the commitments will bind in practise. Another explanation is that they’re actually hoping that some peripheral governments will take a hint and decline to ratify the new treaty, saving the trouble of actively ejecting them from the Euro or full EU membership. My money is on the first explanation, though. In the first place because the whole object of the exercise is protecting the EU core/world banking systems by preventing Eurogroup-member defaults or redenomination-and-devaluations (not “saving the Euro”). Secondly because Sarkozy was as emphatic as ever that Greece’s default would be the last.

Well they either think

1)we could pass it without a treaty,
2)want us out
3)are willing to give us concessions.

If we take what Sarkozy said seriously then we can rule out 3. If we take what the IT says as fact we can rule out 1.

Maybe Endas speech Sunday is the first part in a series, with part 2 the following Sunday detailing the concept of Capital controls and Punt Nua to the Irish people.

I’d consider voting yes IF AND ONLY IF we get rid of the Anglo-tross round our neck…

If the overall aim (or a substantial part of it) of a treaty change is to give the ECB cover to make waves in the market, then we’re likely to get a 4am on a Sunday night sort of solution. Good enough for a college essay but not the future of the EZ.

I think the crucial part of the debate will be enforcement mechanisms and penalties. If we get some Stability & Growth Pact (ha!) type targets, what would be the consequences of breaking them? I’ve seen the European Court of Justice mentioned but what sort of actions could they take?

If this does come to a referendum I won’t look forward to the debate. Threats and rhetoric all round.

After another fudgy muddle from Merkozy and once again the new kite of a summit announcement, which invariably seasoned observers will probably be an announcement of an announcement that will announce news of a coming announcement.

We neither have a Green Paper nor a White Paper just a speculative morass of mess contaminating the contagion and making it worse.

Let’s have some technical detail on the table from Merkozy on what treaty changes will be required:

Re Sean Hunt

face of this requirement to apply effective, sensible economic governance that secures sufficient democratic legitimacy.

Technically, I’d like to point out the above sentence verges on being a paradoxical oxymoron 🙂 Reason, what Sean is referring to is the imposition of powers from the coming Treaty revisions to Lisbon, that will subordinate our consitutional primacy of the people in Articles 5 and 6, to an overarching power vis a vis the Bundestag/ECB and LisbonNUA.

On technical detail, I do hope Enda in his speech tomorrow will do more than a Fr Ted in the lingerie shop job, ‘Ladies and gentlemen, the store is about to close’ job. http://www.youtube.com/watch?v=beN7FftWNCM It has been noticed the ATM’s have been running short of 50’s recently!

I would like to hear the technical detail on ELA, promissory notes, 20% GDP debt repayment schedules and the increase in debt obligations especially over 2012 with falling tax revenue and increasing vat rates.

What progress have we actually made in reducing our debt burden. And don’t give me the rubbish on reduction of our penal 5.8% catastrophy following the Greek default to save total embarrassment all round.

Paradoxes and oxymorons and Ceausescu late coffee announcements to beguile the bewildered will probably be served up for all.

Next year the national debt will rise by ¢2.6 bn euros.

@John Foody 

There is a fourth more depressing option.

They want us in (they are afraid of anyone leaving) they are not willing to give us concessions. ( every one else will want something) but they have not thought through the difficulty of a treaty change in Ireland.

BTW a  number of posters seem to believe that this is part of some Germanic or banking conspiracy.  But Hanlon’s razor says

“Never attribute to malice that which is adequately explained by stupidity”

Can there be any doubt at this point about the stupidity

Well – IF a Referendum – Let it be a European Referendum – with ALL EU Citizens allowed, by right, to exercise their democratic rights …. Now: what is to be written on the referendum?__This is what matters …. what’s it all about? Who sets the agenda?

Citizens of the EU [ Der Spiegel International Yesterday ]

How to Forge a Common European Identity

By Thomas Darnstädt, Christoph Schult and Helene Zuber

Europeans are searching for an idea: What should the Europe of the future look like? Could a federation of European nations function? How could a working government in Brussels be structured? And could a continent-wide democracy foster unity and solidarity among European nations? In a three-part series, SPIEGEL reports on new plans to restructure the European Union. This is Part 3. Be sure to also read Part 1 and Part 2.

Europe has a face. It can grin, and it has freckles. Almost everyone in Germany knows it. It’s the face of Daniel Cohn-Bendit, 66, the Green member of the European Parliament and former revolutionary.

No one else can explain Europe the way “Red Dany” can. No one but this polyglot global citizen can convince people in almost every country on the continent to listen and to pick up at least some of the enthusiasm he exudes for Europe. “There will be a United States of Europe,” he says. “I’m sure of that.”

http://www.spiegel.de/international/europe/0,1518,800775,00.html#ref=nlint

So – what is the text to be? Very open question …………

@Michael H,

Of those who vote in these EU-related referenda there seems to be a hard-core of about 30% which will vote ‘no’ irrespective of the question that is posed. The ‘powers-that-be’, both in Ireland and throughout the EU, will want to ensure that ratification of any changes that will be required will not require a referendum in Ireland – or, indeed, anywhere else. Since we don’t know, in detail, what changes will be proposed and agreed in the Council, we don’t know to what extent it would be legitimate for this course to be pursued.

But one thing we can we sure of, irresespective of what emerges from the Council, is that there will be enormous sound and fury in Ireland demanding a referendum. The 30% of ‘nay-sayers’ will have there numbers increased for all sorts of reasons – good and bad. But there will be a sizeable number of voters who will be disposed to accept what is proposed, but who will want a referendum so that they may affirm their ultimate authority in these matters.

It is these voters that the Government needs to respect. The 30% of ‘nay-sayers’ will always be unpersuadable. If the Government seeks to over-rule the desire of those who are disposed to accept whatever might be on offer, but who, quite rightly and legitimately, would wish to have their say and refuses a referendum, there is a serious risk that they will be driven in to the camp of those who espouse the mythic, transcendental Republic.

And another thing we can be sure of is that there will be a huge upsurge in references to and imagery of the Nazi era – and the British media with organs in Ireland will help to whip this up.

If there is a referendum, I can see Ireland rejecting what is on offer – irrespective of its merits. And this time there will be no opportunity to vote again.

It is remarkable how as soon as Empress Merkel decides on the necessity of EU wide CDU friendly constitutional change that Mr Collins is out of the gate yapping in his mistresses voice.

Note how Merkel’s refusal to adopt a policy better reflecting a more inclusive/sane/fact based idea of Europe is labelled as “standing firm” (Another EU referendum looms as Merkel stands firm) rather than “intransigent”, “self interested” or “self indulgent” in another Collin’s penned article? I wonder how he really fells, underneath his no doubt disciplined journalistic impartiality?

Something Mr Hennigan often riffs on is how Ireland’s citizenry never showed much interest in confronting the plutocracy led policy making of the last decade. I think the role of the print media has been unfairly ignored in this. Our paper of record enjoyed a former right wing political representative as its editor for much of the boom, even now the politics of the Irish Times are an almost perfect statistical representative survey of members of the European People Party members (with Fintan O’Toole allowed as a court jester as along as he keeps us his revisionist schtick).

Meanwhile Independent Newspapers has a political outlook more closely matching that of the European People’s Party’s forebears around 1936.

With a press substantially committed to whatever the current right wing establishment line is it is any wonder that much of the public is still convinced the Croke Park deal and the undeserving poor somehow caused the Global Financial Crisis?

If this new treaty effectively forces all of Europe’s democracies to adopt right wing economic dogma as policy it has to be opposed, how ever frightening it will be to vote “No” in a referendum and take a stand.

Beautiful and blustery Saturday morning in Donegal. 🙂

Messrs. Beesley and Collins were perceptive to notice that:

… “the second-best solution” was an intergovernmental deal operating outside the framework of EU law.

Merkel’s speech had an embarrassing tone of “Do as I say, or go to Hell” attitude, and her little intrigue now named Frankfurt Group Of Eight is testimony to the disastrous ways Europe is steered.

The sudden outcry of Catherine Ahston against Teheran came just in time after the FED opened the flood gates again, and European Banks now can access $ cheaper than U.S. Banks.

If there should be a referendum in Ireland on treaty changes, and I doubt this very much so, what would an Irish ‘NO’ vote mean if already backup plans exist to circumvent this? Let aside the fact that the rest of Europe’s citizens that would not be asked to vote.

The motivations of this woman with an orange shopping bag might be multifold, but one thing is for certain, the European project never was envisioned to turn into German Europe.

This short time of a post Lisbon Europe has left very deep impressions already, and personally, I put a lot of weight on first impressions. The Troika’s missions was a 100% failure, and the “Incrementalists” deepened this disaster considerably.

What I can see now, it is a scared and confused public that was force fed with a shit sandwich of austerity and propaganda lies, a public that will be bullied again into a mind frame of ….”There is no other way!”

Perhaps this call comes just in time for treaty changes: (shaking head in disbelief)

A consultant psychiatrist last night called on Government to add lithium salts to the public water supply in a bid to lower the suicide rate and depression among the general population.

http://www.irishtimes.com/newspaper/ireland/2011/1202/1224308474582.html

Poor Merkel can’t win. If she says do what you like, but we are not bailing everyone out indefinitely, she’s accused of trying to create a German Europe. She clearly wants a European Germany and is prepared to fight for it, but instead it’s, “oh, no, she’s arrogant and pissy and why can’t she just pay up and stay quiet”

Ireland is entitled to vote on a new treaty, so we should.

@Paul Hunt

“While the centre-left panders to those within its ranks who are well-organised and are able to exercise economic and political power at the expense of those who do not have these advantages, but who should be part of its core support, it will continue to fail to secure the democratic plurality required to govern.”

I think there is a not quite so centre centre right experiment in simplistic macroeconomics going on.

In Europe and in Ireland very much so, the ‘centre left’ are not distancing themeselves too much as they have morphed in part into protectors of protected and quite affluent sectors of society. They too are protectors of ‘the establishment’. To the extent they oppose the right, it is to frustrate reforms, and ivert the austerity to the people the ‘left’ was always supposed to protect.

After the experiment has unravelled, a new ‘left’ could be in a very strong position given macroeconomic consistency. They do not seem capable of that though.

@ Paul Hunt,

“…Of those who vote in these EU-related referenda there seems to be a hard-core of about 30% which will vote ‘no’ irrespective of the question that is posed…”

“…It is these voters that the Government needs to respect. The 30% of ‘nay-sayers’ will always be unpersuadable. If the Government seeks to over-rule the desire of those who are disposed to accept whatever might be on offer, but who, quite rightly and legitimately, would wish to have their say and refuses a referendum, there is a serious risk that they will be driven in to the camp of those who espouse the mythic, transcendental Republic….”

Wow. You really puzzle me sometimes. You say you’re on the left, but take every opportunity to deride the left. You consistently advocate democracy, but then everytime you find a group of people who vote on a point of view you disagree with, present them as dogmatic and unpersuadable, and use cheap snide remarks to deride them, such as their espousal of a “mythic, transcendental republic.” Having once or twice done the same myself but from a different standpoint, I would be remiss and a little hypocritical to take too much issue with you on that, but you do it so often it’s becoming really tiresome. You seem to believe that democracy is for only those who can be persuaded of your views.

You may well be thinking, “but there are 30% or so who always vote no on EU treaties.” And you may well be right, but equally there may well be 30% who will always vote yes, irrespective of the treaties worth or legitimacy, and who hold views of Europe of a “mythical transcendental” nature. So should the government ignore them too? Should policy on the EU only be made to represent the 40% or so presumably reasonable, considering citizens who have no view on anything until it is studied, parsed and pondered, and who clearly have a thorough understanding of European politics, political structure, and historical roots?

It is the essence of democracy that power is held as close to the people as possible. What I have increasingly observed is power becoming ever more centralized, both at home and abroad. Referenda on the EU, are the only times the population gets a say on whether more centralization of power should take place, and increasingly they have been saying no. Oh, it comes across as zany arguments about all sorts of things that commentators then deride as idiotic for they have nothing to do with the treaties, but what all these arguments have in common is a sense of loss. Loss of power, the right to decide, democracy, and yes sovereignty. I voted no in the last two referenda, not because I’m anti EU. I’m empatically not. I’ve lived in other EU countries. My wife is not from here. But I do not like this constant erosion of democracy. When a people have to be scared and cowed into submission it has gone too far. It has gone beyond the point of consent.

We need to think about who our country allies would be in such negotiations but this will require a change in negotiating strategy relative to the previous EU standoffs. For instance, Lisbon II essentially became about securing a Fianna Fail spot on the European Commission indefinitely and our typical strategy for EU policy towards lagging regions was to ensure that we could keep defining parts of the country as lagging (hence the BMW nonsense) even as we shot up the income per head league — and awarded ourselves pay raises and bonuses accordingly. Now our administrative elite has learned that there were some serious policy issues at stake during those discussions. Going in looking for a repeat of “brave brians battle for Ireland” type headlines is not going to do it.

@Shay and Grumpy,

You both make very valid points – and I suspect from very different perspectives. But we are going off-topic to an extent. I accept I encouraged some consideration of this detour, but it was for a purpose. It was to clear some ground to make clear that my willingness to look positively on the steps that are being indicated will be taken to resolve this crisis does not imply approval of the centre-right policies being pursued.

It pains me that two remarkable and gifted, and generally progressive, politicians of this age, Bill Clinton and Tony Blair, were suckered, and allowed themselves to be suckered, by the Neocon hegemony – and, directly or indirectly, influenced politicians of the centre-left in other advanced economies. And it pains me even more that the centre-left throughout the EU has not been able to confront and transcend its internal contradictions to secure electability – without reliance on the woolly-brained and utopian Greens.

But we have to deal with what’s in front of us – and that is a, hopefully temporary, centre-right plurality in most EU member-states. However, my focus is on sensible economic governance and this leads me to…

@Paul Quigley,

Ireland as a republic differs little from the parliamentary democracies in most other EU member-states. It has a written constitution; but so have many others – indeed Germany’s constitution (and its intepretation by the judges in Karlsruhe) is a major hindrance to Chancellor Merkel. It has an elected head of state, but the powers exercised are little different from those exercised by constitutional monarchs or heads of state elected by parliament in other states. So, in essence, the Republic is a parliamentary democracy established by and sustained by the ultimate authority of the people. But the historcial symbolism is that it is not a political entity governed by an external parliament under a constitutional monarch.

So the Irish Republic has been defined historically in the popular perception as ‘freedom from’ rather than the liberty of the people to decide their own governance and to impose this governance on native power elites. And, for a while from the late ’90s, freedom and liberty was defined as ‘licence to’.

Ireland’s autonomy has always been limited – both by circumstance and choice, but, unfortunately for many years of its independent existence, this autonomy was not exercised properly in the national or public interest. And, during most of the first decade of this century, this limited autonomy was abused to such an extent that much of it has been taken away to prevent unnecessary damage to Ireland and others.

It is an unfortunate fact that those who now restrict autonomy and exercise a measure of control have their own interests and these may not always coincide with Irish interests. (And their interests include minimising the cost to the major economies of dealing with the extent to which they too succumbed to the Neocon hegemony.) But that is a regrettable outcome of abusing one’s autonomy and sovereignty to make decisions while being part of a union of nations where sovereignty is pooled in key economic and other areas.

The decision of a majority of the people to eject the previous government and, by default or intent, to legitimise this coalition government was a necessary frist step. But is has not, and could not, restore the previous limited autonomy of the Republic. It has instead established an ‘elected dictatorship’ in domestic matters, but subject to external restraint.

It is a further unfortunate fact that this external restraint will continue to be imposed in some shape or form while Ireland chooses to remain a member of the EU and EMU. Because some economies in the EMU were woefully badly governed all economies in the EMU will, in the future, be subject to restraint. It is a measure of the extent to which parliaments, not only in Ireland and the other PIIGS, but also in many other member-states failed to assert their primacy over governments. It was a general failure in parliamentary democracy and it is difficult to see how it will ever be fully remedied. And, while an ‘elected dictatorship’ is required in Ireland and the rest of the PIIGS to comply with external requirements, it is even more difficult to see how parliamentary will ever be fully restored.

What a mess – all driven by greed and stupidity.

No matter what the real referendum question is ,all the other Eurozone countries (and I suspect most Irish citizens) will believe that the question really is “Do you want to stay in the Eurozone or leave it?”.In a sense, it will really clarify the situation.

@@DOCM
“Both Merkel and Sarkozy are bidding up the treaty revision aspect for obvious domestic political reasons. But the markets could not care less. They are not interested in whether Ireland needs a referendum or when and if a treaty change is agreed. They want action now on a number of specific and related issues that could be summed up as a trade-off between (i) immediate clear progress with regard to binding sanctions and (ii) steps to restore confidence in the markets.”

Two stories today suggest that neither issue you highlight are going anywhere
fast..

http://www.nytimes.com/2011/12/03/business/global/german-bank-chief-sticks-to-hard-line-on-euro-support.html?ref=world
The first is Schaeuble and his Redemption Fund for each country
http://www.reuters.com/article/2011/12/03/us-eurozone-germany-idUSTRE7B20FF20111203
And the second is Weidmanns continuing opposition to euro bonds or suchlike

The Redemption fund where anything over 60% of GDP would be paid off over 20 years looks very difficult for Ireland

@ Ceterisparibus

Thanks for these very informative links.

There is nothing really surprising in either. The idea that Germany is going to accept that the ECB launch into an unlimited bond purchasing spree is a pure fiction of the Anglo-Saxon financial press.

However, how can one not be struck by the following in the Reuters report?

“Merkel’s spokesman welcomed Schaeuble’s proposal as “interesting,” saying it could help rebuild investor confidence.

However, it is far from clear whether Merkel will push the idea. Her main focus is securing a deal on changing EU treaties to force states to be more rigorous in budget discipline”.

Does Germany have a government?

What the final elements in the mix are going to be is impossible to say. I certainly believe that the PSI issue will figure largely cf. extract from Sarkozy’s speech.

“Il doit être absolument clair que tous les pays de la zone euro seront solidaires les uns des autres. Il doit être clair que ce qui a été fait pour la Grèce, dans un contexte très particulier, ne se reproduira plus, qu’aucun État de la zone euro désormais ne sera mis en défaut. Il doit être absolument clair qu’à l’avenir aucun épargnant ne perdra un centime sur le remboursement d’un prêt accordé à un pays de la zone euro. C’est une question de confiance et la confiance conditionne tout”.

“It should be absolutely clear that all the countries of the euro will show mutual solidarity. It should be clear that what has been done for Greece, in a very particular context, will not be repeated, that no other state of the euro zone will be placed in default. It should be absolutely clear that in the future no saver will lose a centime of the repayment of a loan accorded to a country of the euro zone. It is a question of confidence and confidence shapes everything”.

But should we not be discussing the pressing issue of Ireland’s next referendum. After all, the paper of record has given its view!

P.S. One of the snippets in the report is of interest. It is the reference by Merkel to “regulations”. Such can only be adopted in a Community legislative context (as in the case of the Six-Pack).

Greece 2000
http://www.youtube.com/watch?v=D8ONKSmsw5s&feature=related

Greece 2011

@Al

“Is Collins channeling what Govt wants us to think?”

In a word – ‘yes’.

The PR starts here. We are going to get plenty more of it before Christmas.

And after that, if (and I still think it’s an ‘if’) a referendum is called, I can already see what I would be writing for the likes of Barroso piling on the pressure… “It is the choice of the Irish people but they have to think about whether they want to go it alone (will be the threat even if that’s not what’s in the ref. question) or stay in the EZ and enjoy the backing, strength and support of their partners in what is a difficult and dangerous situation out there for a smaller economy…. etc etc. laying it on thick about the consequences of not voting how the EC/Merkozy want us to.”

When the PR really starts to come on thick and fast, just remember guys that everything before the ‘but’ is bullshit e.g.

It is the choice of the Irish people but …. (they have no choice)

We respect the wishes of the Irish people but …. (we have absolutely zilch respect for their wishes)

The EC will do everything in its power to support Ireland but …. (you are having a larf if you expect us to lift a finger)

etc.

Enda’s PR position is of course very weak… he can’t get on TV3 because it seems the X-Factor is more important than anything he might have to say!

@Brian Woods Snr

“I have a nasty feeling that there is a very unpleasant surprise lurking in the not too distant future: an energy crisis.”

Sooner that possibly even you think…. my man in Israel says it’s at least 60/40 odds on a strike against Iran in 2012 and all the oil price spikes that’s going to bring with it. Iran knows where the West’s jugular is and it’s oil supply and apparently the war games scenario what-iffing that goes on with military types assumes they have already decided what they are going to take out to massively disrupt oil supplies from the mid-East.

@ Paul Quigley

Most aspects of life are in shades of grey but arguments about responsibility at inter-country level tend to be viewed in black and white.

I think Merkel has acknowledged that countries like her own and others had failed collectively in respect of risks that the EMU faced but sovereign countries like Greece and Ireland made bad choices that negligent regulation in other countries should not eclipse.

Germany would have become the export power that it is, if the euro had never appeared as the UK’s previous strength in manufacturing waned. What is remarkable is not only the world class reputation of its engineering but the number of sectors where its companies both big and the traditional family-run Mittelstand firm, that meet the demands of the emerging economies. The British car industry died decades ago while VW this year will end the year as the world’s No 1 automobile company.

The foreign import content of German exports mainly comes from Europe. Superficial commentary argues that Greece was left out on a limb but it had a dysfunctional system that never took advantage of its close ties with the Arab world as that region got rich. Nor did it seek to actively attract FDI as Ireland did. Debt to GDP ratio in 1980 was 22%.
Neighbour Turkey has a strong economy and a debt level of less than 40% of GDP.
It would be stupid to say that Turkey has done well just because of devaluation.

Countries like Ireland and Greece did get significant cash transfers and in 1991, Ireland collected more than 6% of GDP.

In net terms, we have not paid a cent towards the budget since 1973.

@ All

Twice in a generation the Irish economy was brought to its knees and despite the latest episode with its collateral damage that has wrecked the lives of tens of thousands of fellow citizens with little consequence for the guilty, have things so fundamentally changed that we could say, it will never happen again?

External supervision should be welcome.

Probability of default within 5 years according to a Bank of England report
Greece. 100%
Portugal 60%
Ireland. 50%
Italy. 40%

Not very inspiring if accurately reported…
http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_02/12/2011_417257

@Paul Hunt at 4:01 pm
“Ireland as a republic differs little from the parliamentary democracies in most other EU member-states. ”

This is misleading, as most people in this Republic assume that this means that all members of Government are also members of Parliament.

In her Nover 2009 paper “Institutional Design and Irish Political Reform” UCD’s Dr. Niamh Hardiman pointed out that
“The main concern expressed about the electoral system is that it does not supply us with people who are skilled in specific policy areas. We might consider two issues that arise in this connection. Firstly, we should consider what the conventional Irish pattern of recruitment to government looks like in comparative perspective. Secondly, we need to consider the opportunities to improve recruitment and quality of debate across both chambers. The manner of appointing government Ministers is quite varied across democratic countries….,

The Irish pattern of recruitment to government is quite unusual in European terms: no other system relies as heavily on elected representatives for its government ministers…..

Ireland also stands out as having an unusually high level of executive dominance over legislative practices, in comparative European context, as Figure 4 indicates……”

http://www.tara.tcd.ie/bitstream/2262/41161/1/Hardiman%20new%2015%20nov%2010.pdf

Earlier this year, I put forward a series of mutually reinforcing ideas for changing the way our Government Ministers (Cabinet and non-Cabinet Minister of State), without any need to change our Constitution.

for summary, see p. 57 of Dublin City Business Association(DCBA) Towards a Second Republic here
http://www.dcba.ie/static/doclib/Towards_a_Second_Republic.pdf
here

@michael
So who will ‘supervise’ us. I think you’ll find the German economy has been brought too its knees twice also in the not to distant past. Maybe we should get the Canadians in to run the place seeing as we can’t do so ourselves. I really do not understand where your coming from or what you want for our country

@PR Guy: Thanks for that update.

I was not even thinking about the two state you mention. I had in mind the 158 others, 156 of whom are nett oil importers. Chindia (2) + 42 oil exporters makes up the balance of the 200 odd states we have on the planet (act. I think it may be 195 – but no matter).

42 exporters – 9 of whom are inconsequential. That’s 33 exporters for the rest of us (158) to suck from. Now those 33 are sucking an increasing quantity of their own output, for their internal domestic use; like about +7% p/a, approx. It varies, but its still significant. So that leaves a nett for the rest of us.

Now Chindia has an exponentially increasing usage, +15% if you believe the stats. That’s a lot of sucking! The rest of us (156) make do on that netted nett; ie. [Total Global Production – domestic consumption] => Nett Global Exports. [Nett Global Exports – Chindia] => Us!

Big, big trouble ahead on the liquid fossil fuel front!

Brian.

@ DOCM

“…But the markets could not care less. They are not interested in whether Ireland needs a referendum or when and if a treaty change is agreed. They want action now on a number of specific and related issues that could be summed up as a trade-off between (i) immediate clear progress with regard to binding sanctions and (ii) steps to restore confidence in the markets…”

With all due respect DOCM, this shows how you completely misunderstand the nature of “the markets”. The markets are credit junkies. They don’t care about binding sanctions or steps to restore confidence. Those things are just excuses to throw the dice, forgotten about almost as soon as they’re spoken. The only thing they care about is that there is a constant stream of credit that is ever increasing so that when they’re at the roulette table they can take their losses along with their winnings and come out ahead. As long as they can double up the markets care about nothing else!!!

The problem that Paul Hunt refers to as “Neo Con,” and that has pervaded for the past thirty years was an ever increasing opportunity to gamble (i.e. deregulation) and the constant supply of credit that was affectionately referred to as the Greenspan put. As the Dork of Cork likes to point out, we’re all dollar bitches, and so in order not to destroy Germany in the midst of a deflationary post unification bust with a currency sky rocketing in value against the dollar, the ECB tracked the Federal Reserve’s interest rate policy. Germany was saved, Ireland and Spain, in particular, went to the moon. There were undoubtedly governance issues in many countries across the EU and elsewhere, however, substantially that is the story.

Both Paul Hunt and Michael Hennigan do have a point about Ireland’s governance, although they usually aim for their own peculiar targets. However, the chief failure of governance here wasn’t social spending or the size of the public sector, or even (despite the disgusting pay rates at the top) public sector pay, but tax breaks such as section 23 which existed pre ERM and set the institutional framework for a building boom. In fact, it was designed for two reasons: for legal tax evasion and quite frankly to create a building boom. A cursory reading of the past fifty years will show that this is Irish Economic policy. It was what happened in the 70’s, when the government not only fuelled the boom with subsidies and financial deregulation but then also became the chief buyer of commercial property when there appeared to be no demand. The 80’s was the consequence. This time around, the government couldn’t possibly provide the demand so instead it came up with NAMA. This is argued lucidly by Conor McCabe.

But what broke us was monetary: With the building boom already created, an insane interest rate that was wholly inappropriate fuelled it to the point of no return. You see, here’s the rub. The world was awash with credit. Iceland is a case in point: outside the euro, it received insane monetary inflows in the chase for yield. The only countries that came out okay where those who were in a cyclical downturns, or in the case of Germany and Japan and some Scandinavian countries, a bust, whilst this was all happening, (and in the case of Germany, there were serious governance issues there – Hartz IV has been a disaster that exported it’s demand problem to the periphery).

A question to consider: Despite all the rhetoric about German virtue, who do you think will be the first to face breaching the “new and improved” super stability pact? I’d place a bet on Germany. And I’d bet the automatic procedures would have no bearing on them also. But little auld us now, we need supervision. Reminds me of a teacher that drinks and smokes in class berating his students for bad behaviour.

http://www.thenational.ae/thenationalconversation/industry-insights/property/german-property-enjoys-a-boom

“You used to pay €2,500 to €4,000 per square metre in the Hamburg district of Eppendorf,” says Mr von Fehrn. “Now these flats are changing hands for €6,000 to €7,000. The rise has happened in less than two years, since the financial crisis.”

@ Michael H

Of course. Credit where credit is due.

My favoruite story of German ingenuity is the junior chemist who was shown an enormous mountain of some yellow coloured industrial by-product and told to make something useful out of it. And so we got paracetamol. No thinking person fails to recognise Germany’s technical strengths.

German business culture goes all the way back to the Hanseatic League and beyond. Paddy Kavanagh’s pungent observations about Dublin’s provincial culture have not lost their sting.

@ Paul Hunt

I merely note that technical strengths have not prevented the subversion of German democracy by the global plutocrats. Government has technical aspects, but cannot be reduced to technocratic functions. That would be another form of tyranny.

This is where Edward Harrison thinks the ‘external supervision’ will take us.

http://www.creditwritedowns.com/2011/12/more-on-what-will-happen-in-europe.html

DO’s point that the ‘supervision’ (aka enforced deflation) won’t actually disturb our existing domestic pecking order too much is also relevant.

@ All

FYI

http://online.wsj.com/article/SB10001424052970204012004577073623507093122.html

“hit the floor HARDER” ………….. I was getting thirsty & impatient.

November 2010, FT

” Ireland has done more than many other countries to shine a light on losses in its banks (although not enough, even now). Its fatal mistake was not to follow up with a credible and fair plan for who should shoulder those losses. Now that markets have caught on, as they eventually always do, the European response displays the worst instincts of a mob in fear: it puts Ireland in the stocks in order to protect Portugal and Spain,”

What we are seeing now are just the inevitable consequences of the decisions made by the PTB at that time. Irish culture is neither here nor there in this game. That nice man Peter Sutherland stuck the knife in too. I think it was Peter Barry who described him as “a gentleman thug”.

It might have been a little easier if the Euro wallahs were competent or understood the finance world.

@ Alchemist

‘Ireland is ‘where it is’ because of a succession of development policies that favoured incentivising property investment above all else’

That is only one of the reasons. I refer again to Joe Lee’s excellent ‘Ireland 1912-85’ for an in depth analysis of our development problems. Ireland’s economic progress cannmot reasonably be

With all due respect to the efforts and achievements of those who work in the FDI sector, we had all we are going to get by way of net employment gain from that quarter. Spanish umemployment is going to hit 25% next year.

@docm

Regarding that Wall Street Journal article, a careful reading of the first of these paragraphs suggests it might have been written by a guy on sabbatical from Fox News:

“While Mr. Sarkozy is pushing for short-term moves to stop the crisis, Ms. Merkel’s proposals on Friday focused on making the euro zone more stable in the long term and preventing a crisis of excessive government from recurring.

Ms. Merkel said her strategy is to use the crisis as an opportunity to achieve long-term change in Europe, especially to make significant progress on building a closer political union in Europe to compliment its currency union.”

Also, the latest idea you draw attention to seems to be that the politicians think if they don’t say that bondholders will have to take writedowns if debts are otherwise unsustainable, then the market will assume something else will be done instead to make them sustainable. For the banks, this ‘something else’ is “get the sovereigns to pour money into them”. What is planned for the sovereigns if they have too much debt?

@Kevin et al

I was originally a bit surprised when Enda Kenny decided to address the nation on Sunday.

At first I thought it would make more sense to address the nation next Wednesday after the budget and ahead of the Euro meetings on thursday and Friday. However after thinking about it I can see certain political logic in the strategy.

There have been a lot of forceful statements aimed indirectly at Ireland by various EU/EZ personalities in recent days which have received prominent coverage in the media.

After Monday and Tuesday Irish people will be more focused on the impact of the “cuts budget”(monday) and “taxation budget”(Tuesday).

With Monday being devoted to coverage and analysis of the Taoiseachs address Irish media coverage of statements by various European personalites will be relegated to less prominence on Tuesday and Wednesday.

Consequently this will diminish opportunities for European personalities to adopt “carrot and stick” approaches which we witnessed in recent days.

Statements emanating from “our friends” such as “12BN gained” or “10 days to save the Euro” as well as comments about corporation tax and “fiscal compacts” are going to pale into insignificance as Irish people analyse the individual impact of the budget and reasons why we are paying for a stitch up-sorry- “bail out”.

IMHO it would not surprise me if the harsh facts of the budget, and the Irish people`s reaction, may actually strengthen what Enda Kenny will say at the meetings, behind closed doors, on December 8th-9th.

The Road to Serfdom by Marshall Auerbach (with apologies to Friedrich Hayek).
I am surprised this was not on here, I did search.

http://www.creditwritedowns.com/2011/11/the-road-to-serfdom.html

@Eureka
If our Gov’t had not backstopped the banks and bondholders we would now be on par with the Nederlands, Austria indebted around 80% of GDP.
Ireland would have had a normal downturn with enough room for stimulus without aid from ECB/IMF. Unemployment around 8-9%.

We did not cause it but we blindly and wilfully got ourselves entangled.

@ Mickey Hickey,

“If our Gov’t had not backstopped the banks and bondholders we would now be on par with the Nederlands, Austria indebted around 80% of GDP.
Ireland would have had a normal downturn with enough room for stimulus without aid from ECB/IMF. Unemployment around 8-9%.

We did not cause it but we blindly and wilfully got ourselves entangled.”

I can’t disagree with a word of that, however, it naturally leads to a number of questions.

Did we learn the mistake? If so, and we sought to untangle it, did anyone try to prevent us by making serious and credible threats? Alternatively, are we hiding behind supposed threats to maintain a status quo?

Finally, is there a way of untangling it now? Should we as Bklyn_rntr puts it, man up, but to finally take some bloody responsibility for ourselves? Should we condemn the country to servitude for the sins of our establishment? Should we give up on our democracy? These are the quesitons we’re being asked.

We are still an independent people. The answers are ours. But if we go down the road that’s been marked out, we’ll no longer have that right.

PS. Your analysis of point 3. is flawed. It’s the same tired auld, “shure we all partied.” If you want people to take responsibility for their actions here, you’ve got to stop the old Catholic line of universal guilt. The fish rots from the head.

I tried, but failed to submit a comment of Mr. McCarthy’s latest offering in the Sindo – accompanied by a separate, balancing (?) op-ed presenting the obligatory evocation of the Third Reich.

Probably just as well as I expect I’ve insulted far too many of the sensitive souls here.

In any event, and despite these straitened times and irrespective of the outcome of the coming week’s deliberations, it will be ‘business-as-usual’ for Ireland’s native power elites – and their assorted camp followers. Those who are unorganised or who lack the ability to apply effective collective action to exercise some political or economic power can go hang.

It was ever thus.

@ Paul Hunt

The fact that the native and EZ eilites are trying to do business as usual doesn’t necessarily mean that they will succeed. Otherwsie history would have no motor.

You have challenged my thinking an the thinking of others. Fair play to you and people like you.

It’s a time of crisis, so critical, impassioned debate is to be expected. What would worry me is if we didn’t have that.

As the saying goes, batter on regardless 🙂

@Kevin O’Rourke

I enjoyed reading your presentation linked here recently, but the comments left me wondering if I had read quite the same paper as everyone else. In particular I thought that your mention of “Rodrik’s trilemma” left some things hanging in the air. I was left with these questions:

1) Do you believe that the EU can sustainably have fiscal union without hard political union – a full United States of Europe, with the necessary police and military power to crush secessionism and regional insubordination? If so, can you explain how you consider fiscal union without hard political union can be achieved?

2) If you accept that EU fiscal union requires hard political union, can you make it clear whether you support, or oppose, hard EU political union as part of a response to the current crisis?

3) If you support hard EU political union, can you justify this preference? I won’t dredge over all the problems with dashing for a single European state here; I’ll just mention that if people nowadays are inclined to think that reopening the entire European nationalities question, in grand style, is a reasonable and proportionate response to a banking crisis, then this is another really good example of stability breeding instability.

4) And basically the same question as one I asked in reaction to LBS’ FT article back in April: if Rodrik’s trilemma implies that Ireland must enter political union with Germany – and that both countries must have a common banking regulator – in order to maintain free trade between both countries and democracy in each, then in what way do you believe Brazil’s relationship with the EU must change? Must globalisation between the EU and the rest of the world be rolled back? Or must the EU and Brazil enter a political union? Or must dictatorships willing to hand over bank-bailout money to foreigners be installed in Brazil and/or the EU?

@Gavin & Paul Q,

Many thanks for your kind words. I drafted a longer comment in response, but it was rejected when I hit ‘submit’. Somebody, somewhere is trying to tell me something. Ah well.

@PH: I sincerely hope its only an electronic gremlin, not an unctious censor. Re-draft (shorten or split into several posts), then re-submit.

B

@anonym: I agree that if Europe moves towards a proper fiscal union, that logically implies more political federalism. (I guess that any such arrangement would allow countries to secede at any time if they so wished, which is the case presently.) The question is, would this be acceptable to European citizens? As I indicated in Dublin Castle, I am skeptical (although opinions can change with changing circumstances and in response to political leadership). It is this basic chain of arguments that has traditionally made many economists skeptical about the EMU project.

The point about trilemmas is that they force you to choose between things you would really rather not have to choose between. The genius of European politicians over the past 50 years is that they have been able to maneuver within the Rodrik triangle, avoiding the hard trade-offs it implies.This crisis seems to be forcing them ‘towards the edges’, and it isn’t clear what they will choose, For my part, I am with Rodrik: if you have to choose, democracy wins hands down every time. But that doesn’t mean that we shouldn’t try to preserve all of the many good things that European integration has accomplished over the past 50 years.

@Gavin Kostick
“It is even more ridiculous to have sacrificed the solvency of European states, Ireland included, in a failed attempt to pretend that the solvency of banks is more important.”
Honestly, I am not Colm McCarthy in disguise…

It’s strange how your opinion can evolve by reading a blog like this. A testimony to the blog itself.
Thinking strategically a referendum is not in our interest. It will occur at a point when they won’t care if we stay or go and we won’t be able to negotiate off it.
We are in a bind. Britain has the most exposure to our debt and is terrified of a Euro collapse because punts are worthless to them. They are also pushing for us to act as a simple conduit for ECB money to pay back their banks. But they are also using us to hold up Angels’s cherished financial transaction plans. So we are being squeezed.
In real terms who do we need more now? Where are our alliances best met?
Maybe it’s time to get onside and give Germany what they want. Let’s support the financial transaction tax (but only after guarantees on corpo tax). Maybe it’s time to start playing it a bit closer to Frankfurt than London?
And maybe it’s time for our govt to show signs of wavering too. (though the total thicks in Fiana Fail will probably offer to replace labour if they leave govt!) After all Europe only responds to crisis. The markets can “generate” them. We can too

Per Colm McCarthy

‘ It is ridiculous, in a monetary union with free capital flows and freedom of establishment for banks, to leave bank supervision in the hands of 17 national bank regulators. The United States abandoned this hands-off approach in 1913, after a succession of (you guessed it) banking crises’

+1.
The Fed makes mistakes too, but the EZ setup was a recipe for one colossal banking b****s up. As the Dork might say, of course, that was the plan 🙂

@Brian,

I hope nobody is arguing the fact that we are in a default process. The longer the process takes the longer the negatives (some of which you outlined) of being in a default process will continue. Can the economic system survive settled orderly partial defaults?

@Jesper: “Can the economic system survive settled orderly partial defaults?”

Yes, but the Dear Leaders have to accept, and to inform their respective folk, that ‘our borrowing days are over’. Not exactly a cheery message. At least not the sort of thing you want to be saying in the advent of an election. So, I suppose its panic-around-the-panic stations, for a while yet.

I expect Reality will tap on the window about 2015. “Gather yer harvest, fast!”

Brian

@ Alchemist

‘There is a atavism, a curious fatal optimism, in the Irish psyche entailing the fantasy that no matter how bad things are, something or someone will turn up with a bailout. This is usually accompanied by the backstory beginning with the myth ‘after 800 years of oppression…’

Are you really suggesting that economics and politics can be divorced from history ? Where was the ‘bailout’ during the Famine, the 1930s, or the 1950s, for example ? Do you deny all connection between colonial economic structures and emigration ? Michael Hudson, among others, sees it otherwise.

Let us please distinguish between the cynical use of nationalist mythology to sustain corrupt native elites, and the nationalist movement per se, insofar as we are able to understand it. A project of those dimensions and complexity requires serious and dispassionate analysis.

The record shows this. Having milked the nationalist mythology for decades, our elite then adopted an anti-nationalist mythology, largely in response the events in the north, but also as part of a broader secularisation process.

Most persons under 40 have been inculcated with that revisionist curriculum, so the Celtic Bubble was a revisionist, consumerist myth, rather than a nationalist one. Nationalism was reserved for footrball matches, and probably that was for the best.

We are where we are, as they say, and this is 2011. Given that matters in Ulster have settled down a lot, and secularisation is more or less complete, the revisionist exercise has surely served its purpose.

We are left with two mirro-image mythologies. Both have been utilised cynically for the purpose of obscuring the instituitional deficiencies and injustices which remain in our society. There is little to choose between them, sand they need to be recognised for what they are.

@jesper

central bank independent of political pressure has not much to benefit from the strategy of ‘extend & pretend’ by printing money to fund deficits.

One wealthy capitalists political pressure is another unemployed labourers democratic accountability, don’t you think?

It is also very tired to extend the pretence that the ECB and failed monetarist dogma is not substantially to blame for the effect that global financial crisis has had on the EU. Reverse genius Jean Claude Trichet’s last interest rate rises and enthusiasm for austerity have done almost as much to wound the EU as the requirement that state finances be destroyed to protect a fundamentally flawed financial system from restructuring.

Since the ECB will not be a proper central bank (and they and northern European conservatives are fanatically committed to this approach) then the only question is how to break up the Euro without breaking up the EU.

@ Jesper: “Is it now the case that as default by devaluation can’t be done means that no default is possible?”

“No, no, its default by default, silly!!!!” 8)

Sorry, just realized I may have skipped my medication this morning.

Somebody’s economic-ism is; that when private consumers shut their wallets (G*P declines), then mammy and daddy (state) pick up the slack ’till confidence (whatever the hell that means) returns. Then, G*P picks up, incomes rise, tax revenue exceeds expenditure: happiness all around. Mostly that has been the historic experience – until it is not Then you head into sh**sville – which is now.

Irrespective of who picks up that tab, the unspoken codex is that it will be paid. Just, no one cares, or even thinks it necessary, to spell out in all the gory detail how this magical event will occur. You get utterly dopey commentary: usually from the brightest folk. They seem to be a tad short-staffed in the intellectual cop-on department.

All ideological economic Model-in-Use paradigms only continue to succeed if their annual increase in economic surplus exceeds their annual increase in dept accumulation (due to credit emission and uptake). Ideological economic paradigms have few restraints – ’cause Milton said so!

However, our actual economic activity takes place in a finite physical system, and is constrained by some very nasty, immutable laws of nature and iron rules of exponents. Guess who come off best in that contest?

“Creditworthiness precedes the granting of credit” That is, you prove your creditworthiness, in advance! Otherwise no credit! Looks like we inverted that boring old process.

“Where’s that damn medication?” 🙂

Brian

@Brian,

stay off the medication a bit longer 🙂 and have a read of this:
http://www.chrismartenson.com/crashcourse/chapter-16-fuzzy-numbers

A quote from the beginning:
“In Fuzzy Numbers, we will examine the ways that our measures of inflation and Gross Domestic Product, or GDP, are flawed, using charts of inflation and GDP as well as other easy-to-understand graphics. This chapter will help you understand inflation and GDP and how our national obsession with misrepresenting them to ourselves has led us to the edge of a recession and possibly depression.”

A quote from the closing:
“That’s it for Fuzzy Numbers. Join me next time for Peak Oil and its relationship to our economic future. “

Show us the full spreadsheet related to the banking guarantee costs and show us the one related to our borrowings under the budget deficit.

Don’t hide from the public the former under the latter; show concrete facts instead.

Similarly, we await concrete facts from Europe on what Merkozy propose re Treaty changes to replace obfuscation and more empty speculation, but we’ve nothing but peppered air on what might amount to ‘need for Treaty changes’.

@Brian
Yes 1500 – 2000 people( both the usual suspects & many others ) marched down the streets of Cork yesterday and not a word on the 6 O’ clock news.
In defence of the original Pravda – at least it was free………….

As for Germany’s weird trading with the Asian landmass strategy ….. I hope it works out for them – but perhaps they should now just beat it.
http://www.youtube.com/watch?v=3mvuQ6Es6Do

Although in this coming festive season perhaps it is time to finally compromise.

http://www.youtube.com/watch?v=DcICwPdlCwQ

@ Dork:

I have it in the most authoritive authority, that the Free Travel Pass is for the chop next week.

Reckon that should be good for a few hun thou!

The latinized version of your Non-de-Guerre sounds a lot better, classy even: less of a dork about it!

Reading the posts: parallel universe comes to mind. See you ’round.

Brian.

Does anybody see parallels with our economic path that will be outlined later this evening and the following:

“http://en.wikipedia.org/wiki/Nicolae_Ceau%C8%99escu

“Foreign debt Ceaușescu’s political independence from the Soviet Union and his
protest against the invasion of Czechoslovakia in 1968 drew the interest of
Western powers, who briefly believed he was an anti-Soviet maverick and hoped to
create a schism in the Warsaw Pact by funding him. Ceaușescu did not realise that
the funding was not always favorable. Ceaușescu was able to borrow heavily (more
than $13 billion) from the West to finance economic development programs, but
these loans ultimately devastated the country’s finances. In an attempt to correct
this, Ceaușescu decided to repay Romania’s foreign debts. He organised a
referendum and managed to change the constitution, adding a clause that barred
Romania from taking foreign loans in the future. The referendum yielded a nearly
unanimous “yes” vote. In the 1980s, Ceaușescu ordered the export of much of the
country’s agricultural and industrial production in order to repay its debts. The
resulting domestic shortages made the everyday life of Romanians a fight for
survival as food rationing was introduced and heating, gas and electricity
black-outs became the rule. During the 1980s, there was a steady decrease in the
living standard, especially the availability and quality of food and general goods
in stores. During this time, Ceaușescu shut down all radio stations outside of the
capital, and limited television to one channel broadcasting only two hours a day.
The official explanation was that the country was paying its debts and people
accepted the suffering, believing it to be for a short time only and for the
ultimate good.[citation needed] The debt was fully paid in summer 1989, shortly
before Ceaușescu was overthrown, but heavy exports continued until the revolution
in December.”

PS given that you want to introduce an new fiat currency, shouldn’t we call it the punto?

@Hogan
“PS given that you want to introduce an new fiat currency, shouldn’t we call it the punto?”

Holy God no. Had one of them once and it was a disaster..the Italians made it…I think.

@ Mr Bodn, Colm, Hogan etc.

Just keeping up.

I thought the ELA was supposed to be neutral – it is liquidity after all. That is – as IBRIC is wound down the ELA will no longer be needed. Is that right?

I gather a number EZ countries have used ELA-type arrangements from Central Banks for their banks – has anyone else ended up with pro-notes (or ‘letters of comfort’) to put government money behind the ELA?

@ Mr Bond

I take it that was for me – thanks very much. Much to chew on. A swift game of pass the parcel with the prom notes seems in order.

@Kevin O’Rourke

Thanks for your reply.

I agree that if Europe moves towards a proper fiscal union, that logically implies more political federalism. (I guess that any such arrangement would allow countries to secede at any time if they so wished, which is the case presently.)

The problem is that any kind of partial fiscal union supported by limited political federalism seems likely to be just as frangible as the current arrangements, at least as long as hard times keep pushing everyone out of the mushy middles of triangles. (And again, only as long as politicians keep blocking the safety-valve of default which was built into the present treaty.) Even the right to secede will likely be more than enough to allow the games of chicken over deficits etc. to continue: France will have as much to fear from an Italian secession as Italy itself.

It is this basic chain of arguments that has traditionally made many economists skeptical about the EMU project.

I’m not under the impression that I’m saying anything new or surprising here. I’m just alarmed at the ease with which all these fairly obvious things seem to slip out of many people’s minds the minute a halfways fiscal union (transfers or no) emerges as the last option to “save the euro”.