The Euro Summit

The FT has a long editorial here.

Willem Buiter outlines various euro breakup scenarios here.

The WSJ reports on contigency planning by European central banks (including the Central Bank of Ireland) here.

117 replies on “The Euro Summit”

Is this the first semi Demi official rumor on punt nua printing? Expect a swift denial from dame street

@Philip Lane

A clarification please. I have just heard on RTE news that this is a meeting of the ‘European Centre Right’ party.
Is this actually a formal EZ summit for all EZ members or is it as RTE described?

Sounds like we have plenty of leverage to squash the Corporation Tax and labour market proposals.

@ Joseph

its a full EUROPEAN UNION summit, with IMF also attending. Possible that the ECR party are having a meeting beforehand seeing as everyone is in the same place at the same time.

I’m glad to see the central bank making contingency plans, I’d be surprised if the rest of them weren’t too.

Christian Democrat leaders meet today prior to the Summit.

The CB printing works in Sandyford still operates. Cash is the least of our worries. How do you use the Laser Card.

The very readable pro-European Timothy Garton Ash has an overview article in the Guardian here:

“The bond markets are like crocodiles; it takes elephants to drive them back into their river. The elephant in this case is a powerful, determined sovereign. It can do the one thing that financial markets cannot do but dream of at night: print money.

“Of course this has to be money that others will still accept as a strong currency – not threatening the “price stability” which is the Nibelung ring of contemporary Germany. Today’s ring is guarded by two Wagnerian giants, the Bundesbank (Fasolt) and the German constitutional court (Fafner), both singled out for special praise by Merkel in her address to the Bundestag last week. But the truth is that in current economic circumstances the ECB could purchase more government bonds than it is buying at the moment, print more money, and still not bring inflationary excess. As the Economist points out, price stability must also mean preventing prices going down. What is going to have people pushing their euro notes around in wheelbarrows, as they famously did their Deutschmark notes in Weimar Germany’s hyperinflation, is not, at the moment, inflation – it is a collapse of the eurozone.”

Is this the first semi Demi official rumor on punt nua printing?

Shane Ross reported 3 months ago that the CBI were secretly printing punts nua. You gotta hand it to the CBI, its ability to keep this a secret (except from Shane of course) is worthy of some sort of Nobel Prize.

I hope the WSJ article is just infotainment and a little spin.
If we are just at the preliminary stage and the following is true

The central banks’ planning is preliminary, according to the people familiar with the matter.

then it would represent nothing short of a serious dereliction of national duty.

Any central bank dealing with Ireland’s situation would have sufficient currency ready and stored since early 2009.
Making a contingency currency ready should have top priority on Patrick Honohan’s list on taking up the job.

I at least live in hope that we are ready to distribute a new currency at one hours notice. That is the point we should have been at for well over two years now. And we should not at any point have been shy about saying we were ready to distribute at one hours notice, not as a threat but as a statement of fact.

@ Joseph

have you actually read into the legal and practical issues surrounding leaving the Euro? And have you considered what would happen if a country was to print its own ‘contingency’ currency and the public/markets found out? I somehow doubt you really have.

@ Bond
We don’t have to leave when a perfectly good mechanism is developing whereby they will have to eject us
Thats a different legal situation

@Bond.Eoin Bond.

The reality is Ireland or other countries leaving the EZ and indeed the EZ breaking up has been a distinct possibility for two years now.
The public and markets are the very people that tell us this is so.

At present people believe that we may not have any currency, no ATMs etc and the wealthy have taken excess money into Germany or the ECB. The less well have nothing except what is in their bank accounts, if anything at all.
I believe it would be far better to reassure people that we have taken adequate and responsible contingency measures.
I would go further and say that depositors should be told that when push come to shove they will be fully protected -at the expense of all other bank creditors (bondholders).
It is time to reassess where the national interest lies.

@ Dan

they had a hedge fund manager on Morning Ireland saying there was rumours about that we were. Quite why RTE feels compelled to give air time to spiv rumours is beyond me.

@ Bond
Markets are not the only ones that can “generate” crises.
Timing is important here – clear message sent out – we can and we will if Sarkozy insists on being an idiot

It would seem that the CB has exchanged euro for punts last year. So there is an exchange rate in situ and a mechanism to print. It seems the punt never really went away.

@ Eoin

Rumours are fun and dramatic, not like those boring facts and graphs. I don’t have a problem with the CB being prepared but those who think it’s a matter of pushing print, heading off for a coffee and, hey presto, having a new currency in place a few hours later are ignoring a lot.

@ Eureka

“It would seem that the CB has exchanged euro for punts last year”

Why would it seem like this has happened?? Cos there’s a rumour going around a few pubs? Jaysus lads…

The ‘Wall Street’ Journal continues to add to its reputation for disinterested and responsible journalism.

One can, however, take comfort from the very useful, timely and accurate editorial in the Irish Times today. It should help to lay to rest at least one myth with quite a considerable number of believers; that a referendum is necessary in Ireland in all circumstances when there is a treaty change.

The key conclusion is the following;

“In reality, the commitment to hold referendums on EU treaties is now as much a political as a legal obligation, a hook politicians have impaled themselves on, and are understandably keen to get off. Whatever one’s views on “plebiscitary” democracy, and there are strong arguments against, an overzealous resort to referendums is clearly neither a constitutional necessity nor consistent with efficient management of the State’s affairs”.

On the legal point, the preamble to the TEU states;

“RESOLVED to achieve the strengthening and the convergence of their economies and to establish an economic and monetary Union including, in accordance with the provisions of this Treaty and of the Treaty on the Functioning of the European Union, a single and stable currency.”

Article 3.4 of the TEU states;

“The Union shall establish an economic and monetary Union whose currency is the euro”.

On the reported comments of an anonymous German senior official describing the solution put forward by Van Rompuy as “legal tricks” and that Berlin was somewhat surprised; the surprise is not the proposal but the fact that he would dare to make it ahead of the two senior quacks with their mistaken blood-letting remedy for the patient.

Its strange that no consideration appears to be given to joining the Sterling area.

As the UK is a G7 country, we could redenominate all of our sov debt in Sterling and it would not trigger a default.

The stability provided by Sterling would surely be preferable to floating a new punt that would invariably get hammered in the market. It would probably be attractive to the UK too as it would increase the probability that their banks would get repaid on their Irish debt holdings.

Has anyone heard of this possibility?

@ Joseph

i noticed you didn’t answer my question on the legal and practical issues around leaving the Euro. The short version is that it is legally impossible, and disastrous (socially & economically) in practical terms.

I suspect many many people would support the govt if it did not agree to a new bad deal even if that meant a return to the punt and regaining our sovereignty.
Get us out of Merkozys awful weird dysfunctional alliance.

All manner of things are “legally impossible, and disastrous (socially & economically) in practical terms” but they happen anyway. Recall the infamous exchange between Richard Nixon and John Dean, captured on the Watergate Tapes:

Dean: We could do that Mr President — but it would not be legal.
Nixon: Legal schmegal.

I have little doubt that CB officials have contingency plans in place for issuing currency. At some point they must have been asked to justify maintaining the Sandyford printing works. The obvious answer is, you never know, we might need it someday.


A return to the punt would mean an instant balancing of the budget.How do you plan to do that?


I don’t think we will actually exit the Euro unless the ECB proves to be so inept that it leads us into an Italian default and global depression. But it is an interesting thought experiment.

I imagine that *if* Ireland did leave the Euro the new Punt would be tied to Stirling. (At least for a few years) But I also imagine that a Euro exit would be accompanied by large scale defaults and bank failures such that we would not have any real debts to worry about.

BTW why do we assume that a new currency would be called Pound/Punt. Maybe another name ‘The Irish Crown’ might indicate that we want to be a Nordic periphery country rather that be lumped with southern Europe periphery as we are now.

Really, just because Merkel has no legal mechanism for expelling Greece from the EZ, do you actually doubt that she can do it if she has to?

Buiter might not like it , but the only mechanism to save the Euro in its current form is to bid up the price of Gold to the M1 and make good the defecit in Banking since the Peels Bank act.
If not the $ wins again.
However In the final anylasis the Goldman boys will save the US treasuary and remove the competition which they have been doing very effectivally via their “Austerity” policies.
The only goal of austerity is to transfer the oil surplus created towards North America.

@Bond. Eoin Bond

To answer your question truthfully, I have not read into the legal difficulties of leaving the Euro, except that I have heard that ‘there is no provision’ for leaving and the California hotel syndrome…
However this is now almost upon us. It may not be of our making but it is virtually upon us nonetheless. We do want be to first into the water but the choices facing Ireland are simple.
Remain within the EZ and be impoverished through dictats from Merkozy and successors or leave and take our impoverished chances that we will survive better in the non EZ Anglo sphere.

But leaving the Euro, while difficult can be done and in any case may have to be done anyway if the EZ implodes.

Convert all currency at par on midnight and let it float thereafter or fix to sterling at a 30 % devaluation. All liability contracts convert to new currency at par and are paid in the Punt Nua, including the ECB 150 billion in the banks.
Maybe fold the banks and restart new ones if necessary leaving the the ECB to sing for its ‘liquidity’ money (in Punt Nua) at least until the whole of Europe had stabilised.
The first and preliminary step would be capital controls forcing back all ~80 billion pension assets to Ireland or Sterling cash funds in UK or outside EZ. Also force deposits back through 25% tax if not back before a certain date.

There will be legal and political argument for years to come, even worse.

That is what is in front of us now anyway whether we like it or not. I say this having read the preliminary budget figures. There in now no way out of this hole for Ireland. The numbers now that growth has gone will never add up.

It would be very difficult but there comes a point when it is better to dive into the freezing waters that to be pushed in. That point cannot be too far off now.

@PeterJ: BTW why do we assume that a new currency would be called Pound/Punt.

I assume it won’t be. Many of us hated it being called ‘the punt’ and the ‘Irish Pound’ is too cumbersome. But the ‘Irish Crown’? Certainly not. This is a republic. I’m sure there’s some mythical Celtic currency we could invoke. Gavin Kostick and Robert Ballagh certainly should confer on that.

@ KD

“Really, just because Merkel has no legal mechanism for expelling Greece from the EZ, do you actually doubt that she can do it if she has to?”

Your contention, when added to the Watergate example, seems to be, it doesn’t matter what the law says, stuff can still happen. Which, of course, it can. But no line of reasoning can ever be argued against such an opinion. If we all assumed absolutely anything was always possible or probable, we probably couldn’t lead our lives in any sort of rational way. We have to assume that rational actors will act in a legal and constrained way, or else we just play by anarchy rules, in which case a fiat currency is both impossible and the least of our issues.

its a strange time to float this. Of course they have contingency plans we assume, somewhere in the govt. Thats sensible. As for printing it,. thats not the issue at all. The punts in ones pocket are not a fraction of those in your bank account and so for the state.
Eoin Bond is right that there are horrific isuses with leaving and with the consequences. That however doesnt mean jack if thigns go to hell in a handbasket
This seems like a) loose lips b) the WSJ floating a baloon (why would they do that) c) some one in dame/kildare street leaking to show how tough we are
d) some combination of all of the above.
It is astonishing at this juncture how people will admit to not havign though the punt nua through. There have been dozens of blogs, posts, newspaper articles, learned journals referenced here to give but one portal on the legal and other implications. That said, ‘events dear boy, events’ should never be discounted.

“BTW why do we assume that a new currency would be called Pound/Punt.”

True, you’d want something snappy and irish. I propose the Gick with minor units of the Bert. So 1 Gick = 100 Berties.

@Kevin Donoghue

Many republics use a ‘crown’ or variation of it as a currency, Iceland, Czech Republic, and Estonia used to. I don’t think it indicates a monarchy.
But I understand how it might be seen that way.

So maybe ‘Shilling’ then. After all the devaluation it might be worth what the old shilling was worth.

@ Overseas Commentator
Look, it’s not the best solution. The best solution is reduction of debt burden, low interest credit stream, corporation tax untouched and keeping the Euro.
In terms of instantly balancing the books that would be painful but not impossible.
If we balanced them we can default as we don’t need the bond markets any more. So the balancing is that little bit easier. Also government will be paying salaries in a devalued currency which will also make it a little easier.

I don’t think you get the alternative – slow steady excrutiiating economic decline. Sometimes when you’re between a rock and a hard place you just gotta roll out from under the rock.

Apparently the oldest surviving celtic coins were imitations of the Macedonian stater. Staters and cents sounds all right to me. ‘An Stater’ has a reasonably Irish ring to it. (The celts used ring-money too, but I don’t like the sound of ‘An Fainne’ as a currency name.)


There is another possibility. The CB could finance the deficit br printing new currency. Or it could be a combo of cut and print.

The constitution provides for the declaration of a state of emergency which allows the govt to pretty much do anything. It could even draft people servants into the army, issue orders and then shoot if the disobeyed.

@ Bond
The legal issues are messy. How do countries impose laws on each other without entering into conflict? The old way was war – its just very hard to do.
Bad laws should not be enforced. And a bad law is one which had unintended consequences or that is dangerous

I totally disagree with the view of the FT that the euro must be saved. On the contrary, I believe the euro has a terminal disease and it must be allowed to die in an orderly and peaceful way as possible.

Therefore I believe the following quote is pure rubbish:

So badly have European governments undermined their own credibility that the only
way to shock markets back to confidence is by putting hard money on the table. The
straightforward way would be to use the European Financial Stability Facility to
the hilt. The EFSF would raise a large warchest to support the prices of new bonds
issued by any sovereign that is solvent, at the lowest rates it can afford to

I do agree the ECB under Trichet has been badly managed from the outset crippled with the inability to intervene in sovereign markets and turning a blind eye to housing bubbles and reckless spending.

However, that’s not my main reason for wanting to see an end to the euro, some patients are not doomed to die as the euro is.

Fixing it now is like trying to fix a jet airliner over the Atlantic whose engines have failed!

I strongly encourage readers to see the excellent “The Inside Job” reported here in The Guardian re BBC2 reshowing last night

Highlighted is the number of academic economists who had conflict of interest with the hedge funds, banks, and the pyramid that fed on the financial derivative bubbles that brought about the Lehman’s collapse and, I believe, will bring about the collapse of the euro. So watch from out of the timberwork hordes of tiny tims, financial bottom feeders, market analysts, government spokes persons whose interests lie in the financial Coup d’état currently being attempted by banks and financial institutions against democratic government at the present time.

What do you mean by that paragraph above?

Here is an example of what I mean?

J.P. Morgan Chase & Co. put out a report Wednesday that advised investors and companies to hedge against a collapse of the euro zone—though the bank said the likelihood of that happening was just 20%. It said many corporate clients were buying currency derivatives to place bets against the euro.

Unfortunately since 1971 the world has been afflicted with a growing derivative market that threatens the stability of all fiat currencies including the dollar. Trillions of dollars of investments are riding on financial instruments such as CDS, OTC, forex swap markets; combined with the lack of regulation governing the rules of trade in these markets, combined with massive over leveraging by these investment banks and financial institutions, such investment lines have undermined currency to such an extent that along with housing bubbles due to unregulated OTC’s, currency failure is now inevitable.

Failure of the euro will go a long way to liquidate losses and clean up currency markets. Currently the euro is not in a state of collapse due to housing bubbles alone. Primarily it is in a state of collapse because its losses in the casino markets due to failing subprime OTC’s in the US; EMZ’s over leveraged investment banks who’ve been failing in these markets since 2008 in europe, have not owned up through adequate stress testing, to their losses.

The euro has become through lack of regulation a huge casino making fortunes for the corrupt financial markets. The speculators in the insurance funds, the investment banks, the bonuses and profits in the millions, billions and trillions, are at stake if the euro casino gets burned.

Pouring more money on this fire will be disastrous for democracies in Europe and disastrous for the people of europe. It will make more profit for banks and financial institutions, but even for them, gain will only be short term.

We need to return to national currencies that will fairly measure and promote fair trade between nations. Industry and manufacturing, enterprise, creativity and innovation, should no longer be set aside in favour of chasing paper, virtual profits in financial instruments that smother real development.

Pouring more money into the euro now is to pour it into a toxic financial system whose main players should be in jail on charges of incompetence and corruption.

Let’s take down the euro. Get the G20 together for a new Glass Steagal that will outlaw wanton speculation and corruption in the derivatives market. Get national governments to police their banking and currency systems with adequate regulation.
Introduce proper stress testing on a global basis. The 6 largest banks in the USA control 60% of US GDP and are responsible for the plundering of manufacturing of the US middle class and disappearance of manufacturing in the US.

If we stay in the Euro, we are turkeys for Xmas! We can say goodbye to democracy in Ireland, wealth in Ireland and the nation’s health!


@ Overseas Commentator
The Irish have been lauded for their pragmatism in accepting austerity.
Europeans mistake it for docility. It’s not it just weighing up the options.
Have you noticed the thing that’s missing here regarding this discussion – panic. It’s not that people are unaware of the potential consequences it’s just that they hate being governed by bondsters and their puppets. We’ve had enough of that thank you very much.
Europeans should remember pragmatism allows you to ditch the Euro as easily as it allows you to accept austerity.
If Sarkozy touches our Corporation tax we will go. If things don’t get better for us economically we will go. Whether the Euro survives after we go we really don’t care. We have our little spot in the Anglo-American commonwealth and we’re perfectly happy to return there.

@BEB: We have to assume that rational actors will act in a legal and constrained way, or else we just play by anarchy rules, in which case a fiat currency is both impossible and the least of our issues.

You can hardly expect rational actors to act in a legal way if it is irrational for them to do so. If it’s in Germany’s interest to force Greece out of the EZ, of course it will happen. ‘The heirs of Bismarck and Richelieu’ are not going to let legalities constrain them. And fiat currencies have often remained in use during wars and major civil upheavals. In fact such events have often been the spur to a sharp rise in the demand for money.

Germany does not have to kick Greece out of the euro to force it out. It just has to stop funding Greek deficit spending, a course of action which is not just but permitted but explicitly favoured by the relevant treaties. Unless some other player stepped in, Greece would have virtually no option but to introduce its own currency.

So…after dithering and fudging Merkozy may be ready for ‘a deal’…but note their hysterical savagery towards the UK (which,regrettably Ireland appears to be party to).

Merkozy want ‘their deal’ – and Noonan et al have agreed that they should be followed. No imagination, no nod to the bilateral loan from the UK. The Irish strategy remains ‘keep the head down’…even though our politicians are amongst the highest paid in Europe. Ireland has essentially abrogated her rights.

You could get Sterling in a Berlin Bank up to 1916 so perhaps the war has been going on for 2 years now – at least between the Treasuries with the CBs having a mad laugh although the Christmas card sent to Ackerman from his ECB friends may have set a dangerous precedent.

Perhaps a innocent game of football on Christmas day may sort it out.


@ Frank

given that a lot of media and market types read this, as well as Joe Duffy listeners, can you tell me where you saw that? Found nothing on multiple different search outlets. Im assuming you’re joking for the moment.


One can, however, take comfort from the very useful, timely and accurate editorial in the Irish Times today. It should help to lay to rest at least one myth with quite a considerable number of believers; that a referendum is necessary in Ireland in all circumstances when there is a treaty change.

When the property boom and way of the PD suited the wealthy the Irish Times was in favour of it, now that austerity and eliminating the pesky interference of ignorant citizens in their own rule is the top priority of the well off the Irish Times is in favour of that too.

Nauseating and predictable in almost equal quantities.

Also, when an anonymous poster claims that an editorial in the Irish Times is accurate, timely or useful (useful to whom, useful for what?) when the only things we are certain about them is that that they are a multilingual lover of financial capital with a lot of time to read newspapers and an interest in maintaining the EU status quo there might be a little scepticism about the even handedness of the judgement.

The only expectation I have of this summit is a muddle through – enough to get past Christmas with no major disasters.

I’m not expecting to see the Punt (or the Groat or whatever) reintroduced. I’m not expecting a referendum to be called in Ireland. I’m not expecting the collapse of the Euro. I’m not expecting the UK to do much more than blather and bluster. I’m not expecting our Corp. tax rate to increase.

In fact, I’m not expecting very much from it at all. Past performance is an indication of future returns in this case.

I am expecting a rate cut from the ECB though! Come on guys.

In terms of outcomes from this summit, don’t be surprised if it looks like a Carol Vorderman advert: “want to consolidate all your sovereign and bank debts into one easy IMF loan repayment based on loans to it from various CB’s, Fed, Brazil, Wayne Rooney? Want to replace current debt with more debt? etc.”

I shall still watch it all avidly though!! 🙂


Parody has gotten more difficult.

For now the unions will stick to complaining about other people’s bonuses while defending their own.


‘… The constitution provides for the declaration of a state of emergency ..’

I was looking for one of those three years ago … in combination with a ‘national gov.’ … the concept was beyond Fianna Fail’s comprehension – the idea that any entity was more important than Fianna Fail was simply unthinkable … failures to date are essentially ‘political’ as distinct from economic … and such failure are not confined to Ireland


Minister Lucinda took a break from playing with LOGOS, and on Patronising Pat, informed the nation that she is on top of the German deflation problem, and seeking a FIREwall up against which she can build loads and loads of LOGOS … minor point that the ‘interest rate cut’ that .. er .. […..take your spin…..] into the laps of the Irish is … er .. RETROSPECTIVE …. {any iinformed source confirm this?}

Sure hope the Special Branch didn’t leave An Taoiseach travel to Marseilles on his own … The French Connections U know …. BTW Which Senior Ministers are with An Taoiseach at the mo?

@ Shay

“when an anonymous poster claims”

Irony alert in place i hope. I assume you’re a communist, obviously.



Jeez Frank
You just caused gold to spike at +1000bp – and the Euro is now worth half a mars bar. Careful man!!
BTW does the city of London have more to fear from a consolidated Eurozone complete with transaction taxes etc or from an Irish default?

@Bond. Eoin Bond

Now Now!!! You are usually better than this! Reds Under the Beds is so 1950s and McQuaid_ish … get back to what you’re good at …

The economic consequences of a eurozone breakup would be absolutely devastating. You can read the Economist Intelligence Unit or William Buiter or pretty much anybody.. the way in which people suggest we should leave as if it’s some sort of dull Christmas party is scary.

I’m still happy that, should it come to it, our central bank are thinking about how it would happen. You don’t want a puncture but you still keep a spare tyre.

@ Stephen

correct, although i’d liken it more to being in an aeroplane and someone putting on a parachute. If its really needed, then i’m glad its there, but its not going to help matters if someone is putting it on “just in case” as some above are suggesting. Either way, the parachute may not end up saving you.

“You don’t want a puncture but you still keep a spare tyre.”

Given the terrain, a tracked vehicle might be more suitable. The eurozone breakup will be devastating. But as Paul Krugman remarked recently, it’s getting hard to see a scenario in which it is avoided.

They’ve got a fast communications team.


Via Bónapart Ó Cúnasa, I see that Ezra Klein is making an interesting point. It’s not in Germany’s interest to ease the pressure:

Look how much it has already gotten them. Greece, Portugal, Italy and Ireland are working their way through stringent deficit-reduction plans. The widely disliked governments of Greece and Italy, which proved unequal to the task of fiscal reform, have been toppled. There is a good chance that the euro zone might become what Germany has always wanted it to be: a fiscal union, in which the members meet their deficit targets and reform their labor markets. And none of this would have happened without the markets making their run at the European periphery.

<Self absorbed offtopic digression>

@Bond. Eoin Bond

Irony alert in place i hope. I assume you’re a communist, obviously.

My original paragraph started “As one anonymous poster to another can I advise” but the inherent contradictions in leaving it unsaid were simply too delicious. DOCM does fascinate me, in a way he seems as conflicted as Schauble, caught between enthusiasm for an idealized, cold, ultra-rational market discipline while troubled by the gnawing worry that the last thirty years indicates that rationality and discipline are not really characteristic of modern markets. What if Adam Smith was wrong?

Also, though I am flattered you think I am communist, I lack that faith. I simply distrust unregulated markets and think that competition is over rated, cooperation is under used, and planning and preparing for maximization of the future common good is the central role of government.

What we have now instead is an EU where decisions at government and EU institutional level are made chiefly on the basis of best serving the interests of a wealthy and mobile elite, unfortunately the Euro project has fostered an increased solidarity among these same European elites while at the same time putting the hoi-polloi of each state at each others throats.

</Self absorbed offtopic digression>

@Kevin Donoghue

Via Bónapart Ó Cúnasa, I see that Ezra Klein is making an interesting point. It’s not in Germany’s interest to ease the pressure:

Enthusiastic market liberals see shockingly large international failure of market liberalism as opportunity to legally mandate more market liberalism shocker.

Not enough scorn is heaped on German conservatives.

We’re all ELA now…


Another extremely messy aspect of this is we don’t know the full state of the banks across the EMZ, Lagarde at one point was talking about Basil 111 stress testing for these banks, but worryingly these proposals have now been watered down.

It wouldn’t surprise me at all at all, the Armageddons hauled eg onto RTE news, the sames who were hauled out re Iceland, are not wanting to save economies across the EMU, but rather to save and divert rescue money into the arms of their banking puppet masters.

FYI excellent info here:

Beware the fear mongerers who use smoke and mirrors and the politics of fear and lies to once again profit banks at expense of taxpayers.

Go on, Enda, ask the Merkozy, if Moody’s et all will be allowed to proper stress test their investment banks, so we really know what we are faced with and what they want us to sign up to!

@Bond Eoin Bond

Ireland and ICB needs to be very clear re ECB latest above. The ELA (as I understand it) from Karl Whelan’s post is not covered by the ECB but normal monetary policy ops are.

So if BNP goes bust the ECB picks up the tab but if AIB goes bust Ireland pick up the tab because it has ELA funding??

Can all ELA now be swopped for the new three year deal proposed above.??

Germany has been backed into a corner with its worst nightmares coming true. There were plenty of warnings in Germany, right from the beginning of the EZ, that countries with a long history of irresponsible government and serial debasements of currency would pull down the house on Germany. Now that there is significant risk of that awful event overwhelming them, Germany is in a fight for survival. Trying to unscramble 17 scrambled eggs is a much more difficult task than unscrambling one egg and that itself is impossible.

Up until the fateful day when our two buckos bought something in a poke the Irish were held in high regard in Germany. The Switzerland of the western fringes that was us.

Germany is divided between the “We told you so’s.” and the “We must save the EZ, to save the EU.”. The latter in order to be successful have to be able to point at some willingness on the part of the transgressors to be part of the solution. Giving blank cheques to the PIIGS which is what the ECB/IMF has been doing is preventing the PIIGS from dealing with their problems in a timely fashion. In other words kicking the can down the road as it becomes heavier and heavier.

Germany will make strenuous efforts to rehabilitate the EZ, they will not however continue to fruitlessly flog dead horses.

Willem Buiter is a man of proven judgement and integrity and is well worth heeding.

@Lord Coe and Steve Ovett and DUP/SF and OCI

Dublin will be on the torch relay route for next year’s London Olympics with the Irish capital hosting the flame on June 6th, the International Olympic Committee and organisers LOCOG said today.

Nice one!

Wonder could we set up a Seb Coe/Steve Ovett rematch prior to the Whelan/Sinn bout?


Neat CORE_E_ography from Draghi …. spose we figue out what it all means later on

@Bond Eoin Bond

“They’ve got a fast communications team.


You missed out the next line….. “TO SAVERS” !! 😉

I must admit, I was started to believe my own spin that we were going to get a bigger cut than that so was disappointed. Mr Draghi clearly isn’t in the reckless category.

What’s all this talk of plane engines failing over the Atlantic, spare tyres and parachutes. If we’re looking for a transport analogy, surely we should be thinking €urostar? Or for a more seasonal slant, a sleigh with blind reindeers (no-eye-deer).

I see we are now forecasting EZ growth of -0.4 to 1 per cent for 2012. Draghi’s comment, “a significant downward revision from earlier projections…. substantial downside risks to growth too” is PR speak for “only if we get really, really lucky – so take these projections with a big pinch of salt.”

@ Joseph

there will still be some rules around the ECB collateral framework. To be released in half hour, but imagine loans will have to be performing, and may include some sort of clause around something like a promissory note. But some of the current ELA might be able to be transferred in.

@ Colm

does Russia have any oil or other valuable commodities per chance? Reckon they’d have survived as well if oil was still around $15 a barrel? Long term future of Russia is relatively bleak as well.

Re Argentina, slight difference between leaving a currency peg and leaving a currency union. Trade barriers being erected and treaties having to be agreed would be one, for instance. And Argentina has fallen massively behind the rest of the South American boom of the last decade, so again, if that boom hadn’t occurred, how much worse would it possibly look now?

@ Shay Begorrah

Adam Smith did not support unregulated capitalism.

He did highlight the importance of self-interest in human relations but his emphasis was that you serve your own self-interest by serving the self-interest of others, in the context of a community.

As to competition, it’s only fools believe that the public interest has primacy over self interest in monopolies.

RTE ‘stars’ ended up with exorbitant salaries by chance unlike bankers!

Just getting to review this fast moving thread. Interesting the paper of record supports Von Rumpy in his quest to railroad us into treaty changes with the bother of consulting the people.
As I understand it Germany wants a debt brake written into each and every Eurozone constitution…and I would venture, rightly so as ordinary legislation can be changed too easily.
That is why Gilmore is accepting the need for a referendum.
Interesting that a core country, Austria, yesterday failed to get the necessary two thirds required for their constitutional change but passed ordinary legislation limiting debt.
Be very wary of the likes of Von Rumpy.


Second, to increase collateral availability by reducing the rating threshold for certain asset-backed securities (ABS). In addition to the ABS that are already eligible for Eurosystem operations, ABS having a second best rating of at least “single A” in the Eurosystem harmonised credit scale at issuance, and at all times subsequently, and the underlying assets of which comprise residential mortgages and loans to small and medium-sized enterprises, will be eligible for use as collateral in Eurosystem credit operations. Moreover, national central banks will be allowed, as a temporary solution, to accept as collateral additional performing credit claims (namely bank loans) that satisfy specific eligibility criteria. The responsibility entailed in the acceptance of such credit claims will be borne by the national central bank authorising their use. These measures will take effect as soon as the relevant legal acts have been published.

At this rate even the Irish Glass Bottle mortgage would be accepted as collateral.

Does anyone have an inside track on the size of the flight of capital from Italy so far in Q4? I would be interested to find out.

Also, has tiny Tim gone back to the US yet or is he still in meetings down in the south of France?

@Frank Galton

“At this rate even the Irish Glass Bottle mortgage would be accepted as collateral.”

+1 I was just thinking the same thing.

That should be..without the bother…

And it looks like it is dead in the water in any event…

“In Berlin, however, the response was frosty. A senior German official dismissed the initiative as a piece of “typical Brussels legal trickery” and said it would not fly. This has fanned concern that Dr Merkel will insist on full-blown treaty change, a laborious process with unpredictable political consequences in many countries.”. From IT breakingnews

@ Mickey Hickey,

“Giving blank cheques to the PIIGS which is what the ECB/IMF has been doing is preventing the PIIGS from dealing with their problems in a timely fashion….”

I haven’t seen any blank cheques. Have you? We’ve had our budget policy debated in the bundestag, Greece has been brought to the brink at each cash injection and along with Italy seen its government toppled, and now we’re talking about selling our souls (sorry treaty change – hic) for some paper bullion.

“Germany will make strenuous efforts to rehabilitate the EZ, they will not however continue to fruitlessly flog dead horses.”

I’m sure they will, but you’re looking at this the wrong way. Germany’s economic policy is an indulgence no-one can afford, not even an entire continent.

A snippet from Colm Mc Carthy “Let’s cast our minds back to, say, October 3rd. 1990. An asymmetric shock (re-unification) struck the unsuspecting Bundesrepublik. The deficit, on the Maastricht definition, stayed below 3% until 1994 and then hit, hmmm, 9.5% of GDP in 1995. Gott in Himmel!”


@ Mr Bond

I may be out on a limb here, but based on previous comments – is it possible that Irish banks have already sold on domestic mortgages to other financial institutions?

@Michael Hennigan

Adam Smith did not support unregulated capitalism.

Perhaps I should have said what if the modern disciples of Adam Smith are wrong? There’s many a market liberal who tries to pass off their commitment to greed and indifference to human suffering as an inevitable implication of enlightenment thinking.

“The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.” – J K Galbraith

As for RTE’s highly paid “stars”, don’t they explain the amounts paid as the result of market competition for celebrities attractive to advertisers? Why TV3 might snatch up Ryan Turbidy otherwise and all of the advertising for house insurance and chair lifts might go with him, and though you might want to compare Mr Turbidy’s absurd remuneration with that of a banker he has still cost us a lot less than sixty billion Euro and our sovereignty.

@ Eoin Bond

You missed my point there. Whether you cite Argentina, Ecuador, Russia, Asian meltdowns, the point I was making was that currency meltdowns are a regular occurrence.

Re Argentina, it has achieved growth rates of 8% 2004-2008. I agree with your point it hasn’t been a party for them. But after a meltdown shock, it wasn’t going to be.

I’m saying whether Iceland or anywhere there is light at the end of a tunnel after a currency or financial meltdown. Competitiveness returns, import substitution is stimulated.

General reading here on meltdowns:

We’d probably need the IMF, and talk to George Osbourne re sterling link/opportunity as we may meed it as a buffer in choppy seas. The Brits are doing a good job facing up to problems in their banks, but Greece will whack them. Capital requirements and other financial problems are going to further exacerbate problems in banking with the euro,

EMU a financial hulk filled with Anglos the banking industry are trying to hide. Full stress tests on banks should be done before the wool is further pulled over the eyes of summiteers. More EFSF is more casino chips for banks, less money for defrauded taxpayers led by gullible and gombeen politicos led a merry dance.

Euro is extremely dodgy re the banks. Its time to GO.

IMF treated Ecuador very badly. I like the south american comparisons because of their currency relationship to the dollar that went bad for them. They were somewhat autonomous in governance and were not regulated by the FED, just as Ireland/Greece similarly were left to make their own mess, which they did.


token effort!

@ Gavin

they’ve sold some on via securitisation vehicles, but not enough.



400 billion sounds about reasonable to me based on what we don’t know, but strongly suspect, about the size of the BIGBLACKHOLE in the German financial system …. derivatives, sov loans to others, landesbanken, the little deutsche stroll into wall street etc

On a CBA, from their ‘unique’ perspective, half a trillon from the Bundesbanke might seem to preferable to Three Trillion from the ECB to ‘Others’ –

… course it would Doom Nikki and France to BBB … hell hath no greater fury etc ….

It won’t run – we are beyond German unilateralism …

Looking kinda dire out there today with risk off….Swiss 10yr will get you 0.69% and Swedish 10 yr 1.62% . Italian MIB off nearly 5%. What’s up Eoin .

@ CP



Or equally:

Some traders are American.

Some traders are under 35.

Draghi has told them to wake up, and he is ensuring pressure on the politicians.


Aren’t the results of the reassessed capital requirements due out at 5.30pm today?

Maybe they’re getting ready to recap other EZ banks too? Who knows what deals are being struck behind closed doors this week. You sort out the banks (on attractive commercial terms of course) and we’ll set the IMF up to sort out the PIIGS (on less attractive terms) while you get on with those treaty changes.

Alternatively, they could be putting the safety net in place for their banks, to cover a Greek exit (or even some other bigger country) and all the ripples that will cause?

Just looking at your comment again. Anything could happen I suppose and I wouldn’t rule out Germany leaving the Euro if things don’t get sorted this week and the meerkats are all over the place next week. Though all options are likely to be painful if things did end up going whatsits-up, you have to assume that someone in Germany has done the sums on the back of a fag packet to assess which option might end up being the least painful.

If it’s just for their own banks, Commerzbank is the likely first candidate I guess.

I keep hearing rumours in bank circles of some horrendous job losses being lined up for Q1 2012 to cut costs back to the bone.

A recap, credit crunch and a jobs shedding – sounds like the banking equivalent to a ‘back, crack and sack’ (male waxing – not that I have any first hand knowledge of such procedures I hasten to add)?

I see Sarkozy is cranking up the rhetoric this afternoon. I wish someone would put a plug in him.

Does anyone know how the PSI discussions in Greece are going (i.e. whether they are going backwards)? It’s all gone very quiet over there.


It bewilders me that, after witnessing the farce of the American debt ceiling negotiations, anyone would conceive of the idea that debt ceilings were a good idea.

SAN FRANCISCO (MarketWatch) — U.S. financial stocks led the broader market lower Thursday after the head of the European Central Bank underscored that the body cannot be a lender of last resort for the euro zone.

At a news conference in Frankfurt, European Central Bank President Mario Draghi said Thursday that the European Union treaty prohibits “monetary financing.”

looks like that one is finally nailed unless the Treaty is changed to allow monetary financing. Angela is not likely to agree.
So what is next?

On the one hand, its a great gift to those who walked into the mortgage ambush 2004-08

“A special rate of 30% for the tax years 2012 to 2017 is introduced for first-time buyers who took out mortgages in the years 2004 to 2008”

On the other hand, its another bailout for the banks paid for by taxpayers.

I wonder at the total cost of this re budget 2012.


EBA report is out. See FT’s Eurozone Crisis: live blog. Capital shortfall of German banking sector tripled

Commerzbank shares fall 11% in late trading.

@Colm Brazel

“On the other hand, its another bailout for the banks paid for by taxpayers.”

Yes. So too is the mortgage interest supplement currently a ~500 million subsidy to banks on behalf of borrowers who cannot pay.

Integrity and trust are vital to the operation of the financial system
But when things fall apart nobody is responsible for anything
Corzine deflects blame for MF Global demise

WASHINGTON (AP) — Jon Corzine will tell a House panel Thursday that he doesn’t know the location of client money that went missing when MF Global failed. And he will argue that he inherited a firm doomed by the risks his predecessors took.

L’Oreal. Because you’re worth it.

Proof,were it needed, that the Ez crisis directly hampers decision making and damages the ‘real economy’. Tesco are reducing exposure and making contingency plans:

Since July/early August it has been apparent that the day of Ez leaders ‘fudging and muddling through’ was firmly over. Yet Ireland has failed to speak out, instead opting to ‘keep the head down’. Doubtless this lack of courage is proportional to the lack of competence of Merrion St’s economics people – largely the same people who stood by as the property bubble and banking crisis developed.

Ireland hasn’t even shown the appetite to strike the banner for solutions to part of the problem (e.g. something like ESBies), yet our politicans and senior public servants are amongst the highest paid in Europe.

@Kevin Walsh

Yes – idiotic at the mo to ‘speak’ of debt ceilings.

Twenty five years ago from the mo it would have been a great idea, however, to place debt ceilings on a rogue exponentially transmutating financial system. It is so large now it is simply turning back on itself and eating itself and in the process destroying its host.


Corzine is just another tip of one of the many tentacles … he simply tried to outtentacle his previous tentacle training and failed. Thousands of others suc_seed

Heard a guy on news at one talk about Ireland converting to Sterling post Euro.
How does that work?
Does the CBI just print s fixed amount of Stg?

“The constitution provides for the declaration of a state of emergency which allows the govt to pretty much do anything. It could even draft people servants into the army, issue orders and then shoot if the disobeyed.”

Yeah! If it comes to that I’ll even come back from overseas to offer my army officer experience.

@ Disgruntled Observer
Germany has always done what needs to be done in a timely fashion. The GDR was absorbed by what was known as West Germany. The GDR’s old markets to the East were closed to them. Societal collapse was imminent in East Germany. Unemployment was over 30% and underemployment was rampant. The German government ramped up massive infrastructure projects and incentives to invest in E. Germany. The results are evident today in the roads, railways, public transit, electric generation and distribution and many other projects. Germany paid for all this by manufacturing and exporting not by going cap in hand to foreigners and making the country beholden to its creditors. Yes, they ran deficits but to invest in productive assets not to fritter it away on vanity projects and entitlement programs that the country could not afford. Productivity in the PS is on par with the private sector as are wages.

Germany did not stoke a property boom, Ireland did.

Germany did not allow financialization of its economy, Ireland did.

Germany adopted policies that kept manufacturing wages competitive, Ireland actively priced manufacturing out of the country.

Germany raises interest rates and makes policy changes early in the inflation cycle, Ireland adopts policies that jet propels the lunacy. Not only that Ireland accuses people who question the lunacy as being begrudgers, unpatriotic, under miners and advises them to commit suicide.

As for blank cheques from the ECB, Ireland asks and Ireland gets, it does not get any better than that.

I ask myself what has the government of Ireland done to promote productivity in manufacturing and boost labour intensive exports since 2007, very little beyond gab.

@ Mickey Hickey
Ireland’s solely responsible for this European (sorry Global) financial crisis.
Is that what you’re saying, really? Really?
I mean come on now…tell it to the tooth fairy



Draghi is doing a fabulous dance of the seven veils. Even better than Salome at the Gate.

@ Mickey Hickey,

“Germany raises interest rates and makes policy changes early in the inflation cycle, Ireland adopts policies that jet propels the lunacy.”

Do you not see the problem here? When we had our own monetary policy we did precisely what you ascribe to the Germans. Then along came EMU and poof, gone.

Yes, there is a lot about German economic governance that I find admirable. I agree wholeheartedly with the infrastructural investments that they chose to make as opposed to our insane driving of an asset bubble. But you still don’t get it. Germany when faced with a demand problem, didn’t solve it by turning to its internal market of 80million, paying it’s workers wage advances alongside productivity advances, etc, etc. Instead, it exported it’s products at uber-competitive rates, and then alongside it’s products it’s demand problem. Germany’s industrial policy would not have been possible without a) a German euro, and b) peripheral bubbles.

Granted, our politicians are one trick pony’s, but that’s only part of the issue. German politicians are equally one trick pony’s. But they think they’re the better pony, the more virtuous, the more moral pony. Quite frankly, they’re not. They’re bigger, better organised, and I used to think, smarter, but utimately, they’re in the same mess that we are. They need to get over it.

PS. None of this is to excuse our miserable excuse for politicians, and I include the current shower.


… dance of the seven veils!

I hear Flatley has offered him a retainer – would go down great on Broadway as he acts the part of Geithner nationalizing the entire American financial system, while dancing a hornpipe, in order to ‘save the Euro’.

PaddyPower lays odds that it could outlast The MouseTrap.

Far from causing anything Ireland is a minnow amongst sharks and must tread carefully if it is not to be eaten. It is of the utmost importance that a little country like Ireland be a member of a federation. On its own it is a cork bobbing in the wake of super tankers. Hence, competent gov’t is a necessity.

@ disgruntled observer
When we had our own monetary policy we were at the mercy of the Bank of England and the US Federal Reserve to protect us from speculative swings. In return for that protection the Central Bank of Ireland followed their advice on setting interest rates. From 1932 up to entry into the EU we lived in poverty behind high tariff walls and high interest rates relative to the US and UK. After entry to the EU in 1973 we were forced to modernise trade and business practices. In 1999 we entered the EMU which entitled us to lower interest rates than we could obtain ourselves alone (Sinn Fein). Instead of treating this privilege like the life saving gift from God that it was we embarked on a spending spree that ended in inevitable disaster.

There is a lot of talk about independence and sovereignty in Ireland. Unfortunately being independent and sovereign must be accompanied by a sense of responsibility or it leads to failure. We voted to send representatives to the candy shop on Kildare Street with instructions to deliver the goodies. They did exactly what was expected which is not surprising. Ireland is not the only country where the politicians were elected by Martians, it is a widespread phenomenon. We get what we vote for and we show no signs of becoming cognizant of that fact.

The EU and EMU brought prosperity, a modern miracle in Irish terms. We must have been yearning for poverty because that is what we engineered.

Having said all that I think you are reasonable men and I understand your viewpoint.

Just in case anyone is under an illusion….
From Ambrose..
“Mario Draghi, the ECB’s president, said the bank had not agreed to any sort of “Grand Bargain” with EU leaders to act as lender of last resort for sovereign states, insisting that it does not have a legal mandate to rescue sovereign states in trouble.
“We have a treaty and Article 123 prohibits financing of governments. It embodies the best tradition of the Bundesbank. We shouldn’t try to circumvent the spirit of the treaty,” he added, warning against the use of “legal tricks” to bend the bank’s mandate.
The comments caused consternation on trading floors, where expectations for a “shock and awe” action by the ECB have been running ahead of reality”

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