FT Analysis: Warily On the Way Back

David Gardner writes an extensive article on the Irish situation in the FT Analysis slot today.

69 replies on “FT Analysis: Warily On the Way Back”

The Govt has said that proposals to give tenants relief from upward only rent reviews are dead:

Couple this with the govts failure to progress with any dispatch (i) personal insolvency legislation and (ii) full bank resolution legislation (both required by the IMF), and you have a Govt which just doesn’t get it.

Our chances of recovery are wholly dependent on getting
(a) people who are insolvent and
(b) viable businesses suffering under unsustainable debts and rents
out of the traps they fell into when the economy over heated and rents were incorrectly set.
The IMF have been very clear on this point in relation to Ireland and in relation to the USA.

The Govt seems to thin kthe state has some responsibility to foreign bondholders as a result of its failures of regulation. Surely it has the same responsibility to citizens. Apart from any moral responsibility, it is an economic imperative as we will not be able to service the foreign-held bonds if our domestic economy continues to implode.

This has to be the best line.

“We’re not making it public,” says Mr Noonan, “but one possibility is a longer lending period at a lower interest rate” for the Anglo-Irish debt, non-binding technical negotiations on which are already under way.

So, is this the consensus of some of the principal contributors here, who were quoted in this article, that some sort of deal on these damned promissory notes and, hey, with one bound our hero is free?

I suspect it isn’t, but it appears that this is the ‘green jersey’ line that has to be taken ‘at this point in time’. A ‘person of standing’ could get in to serious trouble if they were to draw attention to the fact that the performance of the ‘export enclave’ is concealing a huge amount of dysfunction in the domestic economy, or that the ‘black economy’ is expanding and eroding tax revenue from an excessively narrow tax base, or that the ‘structural reforms’ being advanced by the Government are largely window-dressing and an optical illusion, or that, even with a significant concession on these promissory notes, the ‘official’ domestic economy will stagnate without some meaningful – and not illusory – structural reforms.

I agree with some of the article, but overall its a ball os smoke:

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“I suspect what Enda wants is a second deal and more rope,” Prof Whelan says of the prime minister. That can only come from parking the promissory notes issued against Anglo-Irish debts in a long bond of at least 30 years at low interest, most analysts agree. The current total cost of these notes after interest, the government admits, is €47bn – “the difference between sustainability and non-sustainability”, says Prof Whelan. If these payments of €3.1bn each year until 2023 are not converted into “zombie debt”, the backlash against Europe that Ireland has so far held at bay will gather strength.

“No one in Ireland has a problem with Europe if it means more prosperity, but if it means we have to pay Deutsche Bank’s gambling debts then there is a problem,” says David McWilliams, an economist and broadcaster. Ireland, says one senior official, “took one for the team . . . protecting Europe from another Lehman”. Soon it expects a payback.

So where’s the smoke? The smoke is in the fact that looming global recession is likely to lead to decreasing GDP, which at the moment is only showing a faint pulse. The real smoke is in the fact our domestic economy, GNP, arguably a much better index re the health of an economy than GDP, is destroyed and already on a negative downward spiral. It will come under increasing pressure from increasing vat rates, higher numbers of business closures, unemployment and emigration.

So where’s the real fire and why can’t I see it better?

That’s because we are a member of the EMU tied to the euro. We are tied to a fixed exchange rate to the currency fluctuations that would otherwise show clearly a bankrupt economy, are not registering. That’s because we have hidden away our debt by taking it onto the shoulders of the state. Our banks are now part of public debt. Our commercial/residential property collapse is now part of public debt shouldered by the state.

Our state finances are in a state of Artificial life support only held together by deflationary austerity, lack of sovereignty over our budgets, and drip by drip financial aid from the ECB in the face of hoped for relief of our debt burden.

In truth our membership of the EMU has hidden the true state of our finances. The markets are keenly aware of our junk bond status. Therefore the word ‘growth’ is a misnomer.

When a state shoulders the amount of private sector debt represented by our banks. When it absorbs other institutional liabilities such as Quinn/Irish Life, when prices for commodities increase, the precedents are already clearly available. Look at similarities between Argentina, domingo Cavallo’s government 2001. Downward spirals begun with last years budget and continuing with this budget with profiles similar to Argentina generally take approx 3 years to fully unfold.

Don’t be fooled by gombeens touting returning growth or austerity that is working!

What will happen is that our economy will decline severely in 2012. We will forcefully use this to negotiate relief of our debt burden. But because we are but one of many Anglo’s across the ECB, its not likely the euro will last long enough for us to wait too long for them to give us the German jackboot as our answer 🙁

@ Paul Hunt

“So, is this the consensus of some of the principal contributors here, who were quoted in this article, that some sort of deal on these damned promissory notes and, hey, with one bound our hero is free?”

Sure Paul, with one bound, green jersey, person of standing, blah, blah, blah. Whatever.

Perhaps you think our situation is helped by paying €3.1 billion a year into a dead bank. I don’t and I’ve argued repeatedly as to how this can be avoided.

No one-bound-and-we’re-free about it — just a concrete suggestion as to how to improve our situation.

And for that we get insult and ridicule. You’re some character.

This is probably the best time to negotiate there will ever ever be. Fears of ex-terrorists in govt (sorry but that’s how it can be sold), Irish ambivalence about saving the Euro at all, Irish annoyance at the Sarkozy and his ridiculous posturing on the 12.5%.
It’s not all bluff either. We will leave the Euro if the b.s. continues. It sounds twee but I wish the negotiators luck. Time for balls of steel – the future of the country depends on how we play things now

The promissory notes are an abomination. 20% of income tax revenue next year. If Noonan does what he says then the Government might play this one well. Every little helps.

@ KW

What sort of an interviewer is David Gardner? Does he know his Irish stuff inside out?

@Karl Whelan,

Oh please. Why so prickly and quick to take offence.

I indicated that I don’t think this ‘one-bound-and-we’re-free’ notion is the primary consensus. But do you really think that Minister Noonan and the required resources of government are not on the case with sufficient enthusiam and this requires you to chivvy them along? The Minister was quoted specifically on this – which, as DOCM has pointed out, he expressed in a quintessentially Irish manner. There can be no doubt about the intent and determination. The primary objective of this government (as it is of any government) – re-election – is riding on reducing this excessive and egregious burden.

I realise that many of the issues I raise may not fall within your bailiwick – though they all relate to economic policy, but it continues to baffle me that, on this forum, among all fora dealing with Irish economic policy issues, so little attention is paid to these issues.

@ Seafoid

again, the PN’s by themselves aren’t the problem (we our paying them to ourselves), its the ELA/Anglo seniors that they are being used to repay that are the issue. So lets not confuse people into double counting the cost of this, ie “OMG, we have to pay for the promissory notes, the ELA AND Anglo Irish seniors!!”. For clarity, we are using PN’s to defer the short term physical cash funding cost of repaying Anglo seniors, via long term ELA.

@ Paul

Why in god’s name wouldn’t the annual €3.1 billion payment be a key issue to discuss with an international journalist trying to understand the challenges facing Ireland? And as for chivvying, the quote from DOCM perfectly illustrates that the government is being very low key about this issue — too low-key to my mind.

Anyway, it’s always the same with you. You repeatedly insult anyone who ever makes any point that is not the point that you wish to make, whatever the topic being covered. You ruin any positive impact you wish to make by the constant need to insult.

At this point, I’ve decided that you’re a troll and am adding you to JTO on my list of commenters that I will not engage with again.


Obviously not expecting a response, given my new ‘troll’ status, but if disagreement (or the desire to encourage those with ‘standing’, knowledge and competence to engage on issues in public policy that might, for some reason, make them uncomfortable) equals insult, then we really are looking at the closing of the Irish mind.

I see from the IT that they have reversed the cuts for disability payments to young people.
That has to be a record for budget measure reversal.
It has to make you wonder at the judgement of the Minister and DoF officials.
They must have realized that there would be a backlash against any such proposal…and for a mere pittance in terms of the overall package.
If this is the level of competence required of well paid advisers, oh well…

If these payments of €3.1bn each year until 2023 are not converted into “zombie debt”, the backlash against Europe that Ireland has so far held at bay will gather strength.

Agreed. If anything your analysis understates the backlash that has already happened.
Europe means nothing to Irish emigrants except a bloody bad memory. The vast majority of them flew over Europe on the way to make new lives for themselves. Whatever divided memories they will carry about Ireland they will carry nothing but contempt for a European banking hegemony run from Frankfurt.

“They must have realized that there would be a backlash against any such proposal…and for a mere pittance in terms of the overall package.”
Yes and yes.

What dominated the airwaves? Changes to inheritance tax? (Big money earner there, even in these times). Changes to CGT? Changes even to capitation grants and school transport? Nah, the big issue was one that was easily rolled back on with no overall effect to the budget.

The government listens to the concerns of its citizens and acts. Of course, we can’t roll back everything.

Job well done. PR Guy, take a bow…

@ Hoganmahew


Cynical, in extremis.

(Nothing personal PR Guy – don’t want to be starting a KW v PH thingy) 😉

Perhaps, but I cannot see them being that bright. This was a NAMA rescue budget ( as I flippantly flagged yesterday). I’m surprised that we don’t have more comment on this here given the opposition to that body voiced by many on here.
You could quite like Noonan with his folksy chatter ( as per DOCM above) and one liners,but as the Irish Times in its editorial today stated “The principal beneficiary of this budget however is Nama, the largest property-owning organisation in the State”

Slightly off topic.

Been away for a while, generating some export, and trying to catch up ( and as KW brought him up)

What happened to JTO? Last I read he was in a row with a poster with alegations of slander et al. Has he ‘legged it’ or is it all getting too much for him ? Taking ‘the Fifth’?

@hoganmahew/Ordinary Guy

It wasn’t me wot dun it guv! Honest!

I don’t and wouldn’t work for a politician (not even for €127,000 pa) – though I study their actions closely. As far as I am concerned, they are just egos with arms and legs sticking out, lying is built in to their DNA and they would stiff you at the first opportunity if it suited them (and most of them are pretty thick).

There’s a downside to them too (hat tip Hunter S Thompson)!

“…don’t want to be starting a KW v PH thingy”

I’m sitting here looking for potentially negative messages in the marketing literature and terms and conditions for a personal pension at the moment… a tiff with another poster might be a welcome distraction! It’s the PR equivalent of watching paint dry.

A bit rambly.

I’d be delighted if the prom notes could be rescheduled to Ireland’s advantage, and by all means let’s go for it.

But, very generally, it’s part of a larger ‘who pays’ discussion. What I’m not really in favour of is just looking for national advantage – particularly where national advantage is really only sections of society. I’m more concerned that the working class of Europe as a whole aren’t left with the bill, whilst the wealthy, and in particular the financial sector win the game of pass the parcel.

Actually, I’ll cite this article from Iceland to show the kind of thing to which I would say, ‘down with this’.

Vulture Funds Gorge on Stricken Economies

Hmm, it’s hard to get a short quote and worth reading in full, but it centres around the fact that Icelandic ‘good’ banks were sold off at very low rates to vulture funds, which now, in spite of the intent of the government, are insisting on 100% and more repayment of mortgages – making a massive profit for them at the expense of the larger society.

Arnarson is “Author of “Sofandi ad feigdarosi” (the first book published about the crash in Iceland (April 2008)) and columnist at http://www.pressan.is.
Worked for Dresdner Kleinwort Benson and Lehman Brothers International in the City of London from 1998-2002.”

Hudson well known about these parts.

Tomasson former IMF.


The article is excellent insofar as it shows a unity of opinion amongst senior academics, politicians and officials on the point that IReland needs help with funding the bank bail-outs.

It as also excellent insofar as it communicates that we fgeel we have borne a disproportionate portion of the burden of bailing out the banks.

I am a abit wary of the message being put out insofar as it suggests that we will be willing to pay a price in terms of treaty approval in consideration for relief.

Our politicians can be very short sighted (e.g. re introduction of the Euro) and they have have proven in the past that they have a price, viz Albert’s €6b.

If the treaty changes ultimately went along the lines of what Merkel proposed to the Bundestag, i.e. procyclical policies given the force of law combined with a loss of sovereignty re governing law for sov bonds, then I would oppose the Treaty notwithstanding the relief being offered as a quid pro quo.

With that said, we are not the only country, and certainly not the biggest country, which will have a difficulty with those types of proposals. Therefore it is not necessarily wrong to indicate a willingness to make a concession that will never be demanded.

On vultures…I see that Lone Star are buying up distressed property loans from Llyods amounting to about a billion or so and the discount is expected to be 40%.
So where does that leave NAMA??????

@ Ordinary Man

“What happened to JTO?”

John the Optimist signed off here:


As you can see, he’s looking to set up his own website – which I hope he announces here, and is still reading.

I didn’t say it at the time but I appreciated his kindness in explaining a couple of technical statistical issues, and whilst his views were certainly singular and I can appreciate disruptive at times, I miss the clarity, force and robustness of some of his arguments. I also no longer have any notion of how Tyrone are doing.

Refer to my question to Eoin Bond regarding the 17 billion reduction in “loans for house purchases” from September to October.

Apparently this 17 billion was securitized but remains domestic debt.

My ameteur understanding of this is that somebody or something bought this stuff off the Irish banks at lets say 20 cent on the Euro, betting that some schmuck will pay lets say 50 % back on his mortgage before he blows his brains out in the attic.
I still have not got a response to this question.

The grim reality
“There is the ceding of sovereignty in the EU-IMF agreement, a surrender soon to be formalised in our Constitution by the approval by the people of a new EU treaty on a permanent fiscal oversight. We may not approve this on the first go but we will do so on the second time of asking, after the frighteners have been put upon us.”……Vincent Brown in the IT.

@ PR Guy

If their money is good – ‘It’s your boat, you row it’ !

@ Gavin

Many thanks for that (Hello JTO).

I agree with you. Blinkered and bonkers though some of it was, from my perspective. His was a contribution just the same, from his perspective.

As for Tyrone news


Thanks again.

BBC News reporting that Merkozy have come out with suggestions for harmonizing corporate tax rates as part of the deal

I hope that’s a negotiating position – otherwise it’s an almighty blunder.

Martin Wolf on the ongoing euro mess

His point is that the Germans won’t face up to what caused the crisis
so their solutions to date won’t solve it

“I am not sorry that Germany failed to obtain yet more automatic and harsher fiscal disciplines, since that demand is built on a failure to recognise what actually went wrong. This is, at its bottom, a balance of payments crisis. Resolving payments crises inside a large, closed economy requires huge adjustments, on both sides. That is truth. All else is commentary”

Can anyone recommend a good book on the steps immediately after the property market tanked that led to Japan’s lost 20 years ? I think the EZ is on the same path.

“Perhaps, but I cannot see them being that bright.”
*They* don’t need to be that bright…

@ CP/Ordinary Man


its the standard follow through from S&P decision to put EZ on neg credit watch on Monday. A bit like a subsidiary getting downgraded a few days after the parent. KFW, the German public financing agency, downgraded today as well.

@ Zhou

The boxwallas in ireland have to get out and say that this is not a tax crisis. It’s a balance of payments and banking crisis.


So despite all the assurances we are to be decimated…first through protecting bondholders and secondly through destroying our industry and it’s official.
Hopefully Davis Cameron will be able to protect us…

Most likely Merkozy will simply use the tax issue as a bargaining chip; here’s the price of reducing your debt burden through maturity extension or whatever.

@ Paul Hunt
Both Karl and yourself are persons of standing.

I don’t see any trolls about, but he is upset with you.
‘You ruin any positive impact you wish to make by the constant need to insult’

You made excellent points, IMHO, but maybe the ‘green jersey’ dig wasn’t the best one in this context 🙁

A wee bit of good news for Ireland and a bit of bad for bond markets in Europe..from a Bloomberg survey
“Those questioned are almost unanimous in saying Greece will default — as they have been in past polls — while the number of those predicting the same fate for Portugal rose to 63 percent from 56 percent. One-third forecast Ireland will be unable to pay its bills, the lowest number since June 2010. Only 9 percent choose France and 4 percent pick the U.K. as likely defaulters.

More than four-fifths of investors see the euro-area economy deteriorating, with slightly more than half saying they plan to cut exposure to the euro and its region’s debt in the next six months. Deutsche Bank AG, Goldman Sachs Group Inc. and Citigroup Inc. have joined Draghi in warning the euro area faces its second recession in three years as the debt woes undermine confidence and force governments to cut budgets.”

It is very aggressive politics from Merkozy. It is consistent with their zero-sum approach to the crisis to date.

@ Seafoid,

“If the programme were truly to rescue the German banks, why not keep the funds in Germany and directly inject them into that country’s financial institutions?”

The author is mistaking funds for capital.

@ Paul Hunt

– 1

There can be no doubt about the intent and determination. The primary objective of this government (as it is of any government) – re-election – is riding on reducing this excessive and egregious burden.

Sorry I gave you + 1 in relation to your previous post 10:32 on this topic. In that post you dwelt upon the feeble ‘optics’ of government and ‘window dressing’ but then in your 12:52 you come up with your extremely luddite and delusional attack upon Karl.

Karl has done great work on exposing promissory note/ ELA sneaky undercarriage to our budget by exposing the ¢3.1 bn repayments contribution due to jump to 20% of our tax take next year.

What you say up there is pure gombeenism. You’ve seen the budget. You’ve seen the heaviest burden placed on the weak, you’ve seen the VAT which will impact the weaker sections of society according to the ESRI at a ratio of 2:1 compared to its impact on the richer sections of society.

But I must be dumb ass blind not to see evidence of your paragraph above.

Could you point me to the section in the budget flagging a reduction in our debt burden specifically a haircut to the promissory note repayments advocated by Karl?

This was a bankers debt extractor budget pulling the teeth of taxpayers! Its an ugly exercise in hypocrisy that disgracefully should have extracted the teeth of our penal lendors and those more able to pay, rather than openly attacking the most weak.

Maybe we won’t have to worry too much…..

“But while Paris voiced determination, a senior German official gave a deliberately downbeat assessment of prospects for an agreement in an apparent effort to jolt partners into accepting Berlin’s terms and restrictions.

“I have to say today, on Wednesday, that I am more pessimistic than last week about reaching an overall deal … A lot of protagonists still have not understood how serious the situation is,” the official told a pre-summit briefing.

“My pessimism stems from the overall picture that I see at this point, in which institutions and member states will have to move on many points to make possible the new treaty rules that we are aiming for,” he said, speaking on condition of anonymity.

The euro slipped, European share prices turned negative and safe-haven German bond futures rose after the official dented investors’ hopes of a comprehensive solution.” from Reuters?

Der Spiegel International Today – worth a read but I xpect super-fudge

4 Ideas to save the Euro

Part 1: Four Ideas to Save the Common Currency
Part 2: A Super-Bailout Fund
Part 3: A Banking License for the ESM
Part 4: Euro Bonds After All?
Part 5: National Debt Funds


(haven’t read Gardner yet – busy on FT trying to set up the Whelan-Sinn match, now moved to The National Stadium due to popular demand; Mick Dowling will do referee, and Krugman, Habermas and Feldsteen will be the judges; paddypower has suspended betting on a majority verdict; bloomberg leading offer on TV rights to be paid to the 16-24 Education wing of the blind biddy hedge fund)

@ Colm

Two things:

1. Could you stop using the word “gombeen”. You’ve overused it to the point where It’s becoming an eyesore
2. Could you stop coming on here and throwing insults left, right and centre? All you do is rant and rave at what you perceive as others failings or opinions you don’t agree with. A bit of manners might see you and your views taken a bit more seriously. At this juncture, tey are not. You have to earn the right to throw sh1t around on here, and you certainly haven’t yet.

I wouldnt bet on it. What are we at now…17 Summits I think and they remain unable to sort anything. Now the latest is to have treaty changes agreed by march and ratified before the end of 2012.
So we are supposed to have at least two referenda by end 2012.
And that’s before the Brits scupper it anyway.


I agree and logical enough.

But would you agree their nominal asset valuation is closer to realisable than NAMA’s?

NAMA was only going to work if there was also a credible plan to share the pain on the bank bonds and that never happened. So now it’s like tits on a bull as they say in Gnieveguillia . NAMA should be taken out the back quietly and shot. Or else buried in a 2009 time capsule along with Joe McElderry’s Christmas number 2.

@ Ord Man

If you’re referring to their zero valuation, than no, the foreign stuff alone would probably get us past the 50% mark of the ~31bn they paid.


How should the government play the new Merkozy proposal for harmonisation of tax?

Assuming that this is a deal breaker for us, and assuming they know its a deal breaker for us (both assumption being somewhat questionable), how should the government play it?

I think the best way may be to simply say through back channels that we’re simply not moving on this – and try to avoid any sort of public spat that could erode our political capital and shake market confidence.

I think its irresponsible to make proposals like this when you know that they can’t be accepted.


A Minsky Moment from Bard College: Marshall Auerbach

Toward a Workable Solution for the Eurozone

Although it didn’t originate with an economist, the malaprop “It’s déjà vu all over again” is invariably what springs to mind in the aftermath of virtually any euro summit of the past few years, all of which seem to end with the requisite promise of a so-called “final solution” to the problems posed by the increasingly problematic currency union. But it’s hard to get excited about any of the “solutions” on offer, since they steadfastly refuse to acknowledge that the eurozone’s problem is fundamentally one of flawed financial architecture. Today’s crisis has arisen because the creation of the euro has robbed nations of their sovereign ability to engage in a fiscal counterresponse against sudden external demand shocks of the kind we experienced in 2008. And it is being exacerbated by the ongoing reluctance of the European Union, European Central Bank, and International Monetary Fund—the “troika”—to abandon fiscal austerity as a quid pro quo for backstopping these nations’ bonds.


@ PR Guy

‘Ordinary Man Says:
December 7th, 2011 at 4:05 pm
@ Ceterisparabis

That should convienently (sic.) drop the price of the sale.


That must have been some mind numbing stuff you were proofing today. 🙂

See BEB & CP above.


Just been watching bbc2 storyville and hit the Rioja – get back to you tomorrow.

The leader of the opposition, at least for matters European, is Shane Ross. He was the only “leader” who bothered to ask about the upcoming summit today, the others being much more interested in petty point scoring over the budget than anything to do with a potential new treaty or loss of decision-making power over national budget measures.

Ross asked very pertinent questions about Van Rompuy’s fast-track proposal and how it could be used to bypass all Euro parliaments. He was met with the usual Enda Kenny stream-of-consciousness reply, which totally avoided the question – but we were informed that we needed a firewall, that there’s a new Prime Minister in Belgium, that confidence is important and that certainty is important too. Thank you Enda.

I think Kenny is prepared to sign on the dotted line with a fast-track proposal. Luckily I think the Germans will scupper that effort, and insist on more formal treaty change, which should have the effect of ensuring that any treaty change gets the discussion, and referendum, that it deserves in Ireland. The Germans called the fast-track proposal for what it is – “typical Brussels legal trickery”. If only the Irish government would do the same.

@zhou enlai

“It looks to me like these guys want us to exit the Euro.”

I strongly suspect that the €xit of Greece, Ireland and Portugal may be a desired outcome for some.


I had a look at NAMA’s PDF on the assets they hold (I am no expert mind you, so don’t waste your time but bear with me if you can) but it just looks like a bundle of houses, pubs, farmland – classic CDO.

No real potential to add value to anything this side of the next twenty years.

All this talk of invigorating the ‘Construction Industry’ is non-sense to me. The country is full of building projects, off all sorts, OPP, half built, built and empty, half full and emptying etc.

My questions are which, with your knowledge and judgement, of the two’s asset books would you rather be holding i.e. which has the most chance of realisable value?


Some thoughts on the government’s decision to do a u-turn on banning upward-only rent reviews(uorrs) in existing commercial leases.

Ireland has the most anti-tenant commercial lease law in the world .i.e upward-only rent reviews(uorrs)tied to long leases with no exit strategies/break clauses. In the Irish retail sector lease lengths are 25/35 years with no breaks and ratchet uorrs every five years. We are alone in the eurozone with these ruinous leases. In all other eurozone countries lease lengths are 3-10 years with break clauses and rents reviewed annually with ref to the CPI. In France and the Benelex countries they have three year rolling leases where very three years you have a break clause. Our own government endorsed this ruinous lease law and copperfastened it for all commercial tenants, and wasted hundred of millions of its citizens money.

In 2008 Grafton Street became the fifth highest rented street in the world.
Reckless Irish banks lent tens of billions against these ruinous leases not against the properties. If Ireland had regular eurozone lease law it would have been nearly impossible to have a commercial property bubble and bust. In europe the guiding prinicple in valuing commercial property is the quality of your property ,in Ireland it’s the quality of your tenant.

The government’s u-turn yesterday is a spectacular own goal and will destroy tens of thousands of sustainable Irish businesses and jobs.
To create a healthy property market it requires a healthy economy with real prices/rents not rigged rents. This decision will continue a very damaging two-tier rental market which will delay and prevent the economy recovering.

The vested interests have prevailed over the public interest. The property interests that destroyed the economy are now trying to prevent it’s recovery. The horror story goes on.

@John Corcoran

I think the way auctioneers and estate agents interpreted rent review clauses and struck massively high rents on review, and how they also negotiated deceptive terms for other leases (secret rent free periods and concessions) in order to keep the review of adjacent units high, also needs to be looked at.

Whereas UORRs were agreed to be tenants voluntarily they were based on reasonable expectations of a functional economy and currency and did not reflect the dangers of the Euro straitjacket.

The national economic crisis, the currency dysfunction and the flawed logic of Auctioneers in interpreting rent review clauses justify reform of this area.

Whereas NAMA will lose a couple of € billion if UORRs are abolished, the fact is that UORRs are once of the sources of pressure in the economy that could move public opinion towards euro break-up.

NAMA’s losses with abolition of UORRs may be miniscule compared to NAMA’s possible losses on euro break-up with leases in one currency and NAMA obligations in euros.

Also, the beancounters in DoF/NAMA do not seem to ascribe any value to having a better functioning economy and an imporved environment for business survival and thereby expansion and additional employment.

@ Ordinary man

“My questions are which, with your knowledge and judgement, of the two’s asset books would you rather be holding i.e. which has the most chance of realisable value?”

Who are “the two’s”, are we not talking about NAMA and S&P?

Also, re “houses, pubs, farmland” – so they have no commercial property, residential investment property, hotels, shopping centres etc, both inside and outside this country? I won’t check if you don’t think its worth it, i’ll take your word for it…

@Minister Noonan

“We’ve identified one of the risks to a successful outcome to Ireland’s [recovery] programme: that is the overall level of the debt … We’ve made it clear we will negotiate as the opportunity arises.”

Unit labour costs reduced. But what about UNIT CAPITAL COSTS? How is CAPITAL contributing?

@ John Corcoran
Yep in a nutshell.

The efforts the government is going to in order to prevent a free market is unbelievable.
The downside of allowing the market to correct itself is that more developers go to the wall and and there are bigger losses in Nama.

The upside is that it would have huge positive impact on the domestic economy.

All this money going to Rentiers is unproductive capital. Every cent saved is a cent that could the invested to increase GNP.

But all that money also makes them a powerful lobby. The law stacks the deck completely in their favour.
The retailers need to unite (not usually in the psychological make up of entrepreneurs) and take em on.


“Who are “the two’s”, are we not talking about NAMA and S&P?”

Sorry Eoin, NAMA and KFW I was refering to.

‘Also, re “houses, pubs, farmland” – so they have no commercial property, residential investment property, hotels, shopping centres etc, both inside and outside this country? I won’t check if you don’t think its worth it, i’ll take your word for it…’

You are right Eoin, they do have such propertries but they are not adding enough value or margin to cover original costs of the package as a whole for NAMA (never mind the Irish taxpayer) and are unlikely to ‘wipe their faces’ for quite some time to come.

My amatuer opinion on the whole debacle is pretty much reflected by John Corcoran and Zhou above – back to the future.

You are demonstratively intelligent enough yourself to know that.

I don’t even want to start about Auctioneers and property letting agencies.




Some thoughts on the mistakes the Auctioneers/Valuers made.

The valuation model the Irish valuers used was profoundly flawed and this flaw combined with our reckless banks created the residential bubble.

An asset/property has only two values one the price you can get for it by selling it or the net present value(npv) of the stream of income which derives from the asset.

For example say if an auctioneer on Grafton St. auctioneed a one euro note. A foolish bidder outbid everybody and paid 5 euro for this one euro note.
A valuer would now value all one euro notes as 5 euro notes. Even though we all all know that the npv of one euro is one euro.

So if a foolish bidder agreed 1 million euro for a house all other similar houses in the same estate would be valued at I million euros, even if the npv of the rental income was 200,000 euro.

Likewise in the commercial rental market if a foolish tenant on Grafton Street agreed a new world record rent all other tenants would be obliged to pay the same world record rent using our ruinous commercial lease law.

The exception was the rule. The banks lent tens of billions against these valuations. The auctioneer’s valuation was like the card used to get the money from the ATMs. Ruinous Irish commercial lease law combined with reckless irish bank lending to create the commercial property bubble.

@Bond. Eoin Bond… Says:

Spare me the fascetious pedantic, avuncular and fascetious troll gombeen postings and you’ll get less of the gombeen terminology from me.

Your ad hominems are in proportion to your erudition 🙂

Don’t be fooled by gombeens touting returning growth or austerity that is working!

I use the term gombeen in the following senses:



Perhaps with a narrow lexicon unfamiliar with its meaning you find the term ‘gombeen’ too pejorative? 😉 🙂


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