Colm McCarthy on the summit

Colm’s latest article is available here.  The following phrase gives a flavour:  “The French and German leaders have created instead a damaging rift with Britain without delivering any worthwhile advance at all…”

165 replies on “Colm McCarthy on the summit”

This is relentlessly downbeat with no glimmer of optimism dovetailing well with The Sunday Independent’s line.

Even the defence of David Cameron is going against the flow in both the UK and Europe.

Contingency plans should be made for that Disney World theme park.

If there is to be a referendum and it is rejected speculation on an exit from the euro would hardly help an economy on a respirator that would be Albania without FDI.

Bottom line is that the Incompetent Deauville Duet has failed abysmally – time to vote it out of the X-EU-factors equation.

Super-fudge won’t last the coming week … Sarkozy and Merkel have to GO … and soon. I’m sick to the teeth of both of them …. and closer to the .. er .. Tory .. David Cameron on use of the VETO. This summit, basically, solves nothing of any real substance.

Let’s just filly-buster away until reality dawns …

@Michael Hennigan

This piece of super-fudge isn’t worth a referendum. It is purely a merkozian matrixsquidesque construction, with Geithner and Largarde, to buy more time for the Vichy_Financial System … with qualified majority costs (>85%) socialized for a generation on European Citizenry.

We should simply quietly “abstain”. We have more than enough restructurings to be getting on with locally without such useless and totally unproductive distractions.

Well written article. But I see deeper and more serious troubles, with a need for a broader view.

“monetary union was derailed, we are to believe, by a few small members pursuing irresponsible budgetary policies.”

Colm’s paper tiger. But the crises we are seeing today have much broader and deeper causes. I can remember reading reports almost some 10 years warning that budget deficits in the major OECD economies would reach several hundred percent of GDP over the coming decades, on the basis of demographics alone, if policies were to remain unchanged. And of course, the structural problems now facing the OECD area are far numerous than just that.

“there would still be a serious banking crisis in Europe today”

The causes of the banking crises are much more global and broader than just euro area governance. For example, the weak and performance and outlook for US housing continues to weigh heavily, and not just in the US.


“judged against one simple criterion. Would the present crisis have been avoided, or at least substantially moderated and easier to resolve, had the new measures been in place since the euro’s launch”

Yes this is a good litmus test. And yes, reasonable limits on budget deficits, along with peer appraisal and control over budget policies, would have largely prevented the euro-wide budget crises, even in Greece. Ireland was advised in Sep/Oct 2008 by the ECB, EU and large EU governments not to guarantee its failing banks. Hopefully stronger euro area controls (of the kind in the Troika MoU at present), along with the kind of bank resolution laws we saw being introduced at present in some countries, would prevent a repeat (too late for Ireland, I’m afraid, given that it has socialised most bad banking debts).


“The French and German leaders have created instead a damaging rift with Britain”

I don’t see why two countries are blamed for the UK’s decision. And remember the UK has a history of saying No initially, but rowing along later when It appreciates the cul de sac it finds itself in. To be appreciated over years, not on the spur.


“If you believe that the problems are all caused by budgetary excess, there is no need to contemplate .. clear procedures for bank resolution”.

I don’t know why one precludes the other. Some countries are introducing clear procedures for bank resolution at present. Why not Ireland too? Doubtless the euro area authorities will get around to ensuring all members sing from one sheet on this score in due time, even the laggards.


“the measures announced is a souped-up budget pact”

Another paper tiger. No one is claiming this is the miracle cure. The head of Eurogroup (Mr Juncker) clearly indicated more tough decision will be needed. But the euro area is on the whole taking decisions in the right direction.


“The phrase ‘fiscal union’ .. a conscious and deliberate abuse of language”

Yet another paper tiger. ‘Fiscal union’ here clearly means a currency union of members that adopt modest budget deficits. It is for Ireland and other member states to decide whether this idea of a union is for them. The term does not – and probably never will – mean a ‘fiscal transfer union’, given the obvious risk of moral hazard (Ireland stands out with a public deficit of some 10% to GNP in 2012 as current planning seems to indicate, and despite fully respecting the Troika MoU).


“a roll-back in the design of the European Stability Mechanism”

It is maybe not such a change as Colm makes out (and we still don’t have the texts). Any official buying / intervention would inevitably crowd out / subordinate existing debt holders in any case, as we already saw, not least in Ireland.


“Markets will be disappointed that .. the modest additional resources to be routed through the IMF cannot be used to support bond markets.”

Disappointed or relieved? This dissipates the threat of subordination of existing bondholders, plus the risks from crowding out and moral hazard. Check out what a rating agency like Moody’s has to say (e.g. in its 28 Nov. report) on the implications if more countries are in receipt of a loans package. Remember the impact in Ireland. See here for a bit more.
In sum, the eurozone’s travails will not be solved at all by some of the trite solutions that we see pundits marching out (three among them, … wider ECB objectives, more official bond buying, and transfers of cash from the thrifty to the spendthrift).
To repose Colm’s question, would the present crisis have been avoided by stricter fiscal controls ? No of course not, and we see the UK, the US and some CEE countries also facing considerable challenges, which governments are only just starting to address, and have yet to largely play out.
But by hell or high water, you can be sure that either of two roads lies ahead: serious deficit reduction, or substantial financial volatility. Both roads are very painful, with the latter giving rise to hard to predict consequences, and probably very dramatic and unjust shifts of burden.
Taking the pain on the chin now is probably in the long run the easier road. And particularly for an SOE like Ireland. Not only would less of its budget stimulus flow abroad, but it would give it more bargaining power within the euro area. Like we mentioned yesterday, Greece now has a near zero primary deficit, giving it clout. Ireland is still very far from that position.

Good article once again by Colm:

some comments:

Member states experiencing tough times (Germany ran a fiscal deficit at 9.5 per cent of GDP in 1995, due to re-unification costs) would automatically pay less to the central treasury, and receive more.

Yep, that’s the way the FED works. Plus Federal Open Market Committee(FOMC) meet throughout the year to decide whether to increase the money supply, or decrease the money supply both for the dollar itself and for individual member states. States in trouble get helped from a central fund that states in surplus pay into to curb inflation in their states and fight deflation and lack of money supply in troubled states. Plus FOMC has another oversight role in regard to Central Banks across the US. It can go in there and examine the books and force CB’s to weed out bad practice etc.

Nothing like the EMU ECB credit union with none of the powers of the above. ITs response to delinquent states like Ireland is to punish and
take revenge on their fiscal and budgetary malfeasance. Big stick, no carrot.

So where’s the big stick taking us?

The stealer budgets of Ireland designed to extract repayments to French/German banks will cripple the Irish economy in a GDP drop scenario. Fiscal deficit reductions are of course required but without debt relief on the banking debt, impossible to carry. Social unrest, inability in a number of years to appoint a majority government (Italy?),
a technical government led by Honahan and Aynesley?

How about the closure of the IFSC due to tax harmonisation proposals forced through by France with the raising of CT.

What about extra collateralisation of Ireland’s debt through the sell off of state forests, semi states, land, ports? Just to make sure the French get their money back and are worried due to falling tax receipts due to highe unemployment and emigration?

The penny drops and we find that NAMA was the huge mistake some of us already knew it was and we turn the whole NAMA mess into an SPV just in case the whole country goes bankrupt, and we give this to the banks to buy back a little debt and help us make repayments on the remainder.

Colm writes:

IMF involvement looks too small at €200 bn to make a decisive difference.

Show me the money 🙂 The ECB has yet to prove it can raise this money. Its unlikely to. EFSF funding was supposed to be AAA rated but with downgrades occurring by the day its funding is more aspirational and hypothetical than real.

The Brits have refused a ticket on the zeppelin.

Its hard for our gombeens to wean themselves from the government jet and languorous trips to the Halls of Europe to feed at its trough 🙂

Commentators seem to think any referendum would necessarily be on the Euro, not so:
1) There is no mechanism to expel a country from the Eurozone
2) Even if somehow we were, we would still be free to use the Euro,all we’d lose would be LOLR

Anyone who presents a referendum as:
A) What Merkozy wants vs
B) Exit Ez (or EU)

is presenting an unhelpful false dichotomy

EU Divisions
Questioning the Legality of a Separate Euro Treaty
By Christoph Schult

With the United Kingdom opposed to Chancellor Merkel’s plan for amending EU treaties to increase fiscal integration, Germany and France are seeking a separate agreement among the 17 euro-zone members. Many say that might be illegal, though.

Changes to the EU treaty, after all, must be unanimous.

Individual countries could only issue a “political declaration of intent,” …,1518,802678,00.html

@ Ciaran O’Hagan

There most certainly is a need for a broader view.

‘The causes of the banking crises are much more global and broader than just euro area governance. For example, the weak and performance and outlook for US housing continues to weigh heavily, and not just in the US’

While you are at it, why not mention the activities of the shadow banking sector. Here is what the staff of the New York Fed have to say.

‘Over the past decade, the shadow banking system provided sources of inexpensive funding for credit by converting opaque, risky, long-term assets into money-like and seemingly riskless short-term liabilities. Maturity and credit transformation in the shadow banking system thus contributed significantly to asset bubbles in residential and commercial real estate markets prior to the financial crisis’

‘Ireland was advised in Sep/Oct 2008 by the ECB, EU and large EU governments not to guarantee its failing banks’

Can you remind us of the evidence for that assertion ?

‘Taking the pain on the chin now is probably in the long run the easier road. And particularly for an SOE like Ireland’

I am tempted to alter that acronym, but I don’t want to be rude.


How many companies/MNCs would stick around one the corporation tax and various related loopholes are “harmonised” out of existence?

If you want this country to resemble Albania then giving away the only competitive advantage this country has left and hurting the only sector of economy which offers any glimmer of hope, then handing over what little remains of our sovereignty to Merkozy (who have hijacked europe for their aims) is the way to go.

aside: the word “harmonization” sounds awful totalitarian to me, in China the “party” loves the use of the word “harmony”! its a perfect word to use when speaking in doublespeak.

“The French and German leaders have created instead a damaging rift with Britain without delivering any worthwhile advance at all”

Th authentic judgement of West Britain. Cameron reduced British national interests to protecting the City of London- and failed even to acheve that.

He was not arguing against the highly damaging and irresponsible content of the proposed Treaty amendments but against Britiain having to sign up to them- because he cannot hold his own party together on any changes at all. Many of them call explicity for the disorderly break-up of both the Euro and the EU.

Why anyone in Ireland should adopt the outlook of the nutters of the Tory Right is a mystery.

That’s just a different way of saying: “Fog over the channel, the continent is isolated!”

Nice summary Daniel:

….It is purely a merkozian matrixsquidesque construction, with Geithner and Largarde, to buy more time for the Vichy_Financial System … with qualified majority costs (>85%) socialized for a generation on European Citizenry.

I think that the ESM has to be opposed on all account and I would think that the public at large in Ireland and other countries are not getting the full picture.

The very nature of the ESM is totalitarian and it is designed exclusively to implement an unaccountable and unlimited Instrument for the existing and future financial oligarchy.

Did anyone see Dalia Grybauskaitė, President of Lithuania, lecturing the Press on
the unity of the European states? This is a small taste of the European future they have on their mind.

Under the cover of the permanent smoke screen, this so called crisis, undemocratic forces are implementing political longterm changes.

The public at large is misinformed.

If a referendum in Ireland should be brought forward, which I seriously doubt, it would require the open discourse and much better information of the public than the deliberately flawed and targeted approach of Lisbon 2.0


The biggest potential threat to the Irish corporation tax regime is from the US Congress.

Microsoft has been upfront on routing foreign income through Ireland, Singapore and Puerto Rico.

Do you believe that a system where Goggle pays Ireland corporation tax on its earnings in one of its biggest overseas markets, the UK, and pays the UK nothing, will last forever?

@Desmond Brennan

“Commentators seem to think any referendum would necessarily be on the Euro, not so:

1) There is no mechanism to expel a country from the Eurozone”

a) Don’t you think it would send out the wrong kind of message if a member through a referendum decided it wanted out, that a mechanism to enable this would not be created?

b) Implicit in proposed Treaty changes are ‘punishment clauses’. Its perfectly conceivable an ultimate sanction would be ejection.

c) Does it not make sense that changes will be made to facilitate countries like the UK and Ireland to leave; in the case of Ireland, as part of negotiated and structured IMF aided default?

d) In the fact of a) + b) and absence of c) should you not be worried?

Agree almost 100% with Colm McCarthy’s analysis. This fiscal compact does not tackle the core issue of the banking problems overhanging the sovereigns, is anti-growth and does not even mention correcting the structural or trade imbalances that gave rise to many of the problems in the first place.
The debt and deficit reduction agenda will cloak Europe in austerity, recession and depression for years. It is a Depressing Debt Collectors Agenda.
I think he is a little hard on Draghi. I like to think that Draghi did sent a signal but he was corrected by Weidemann the following day. Draghi then bottled it and backed down. So much for the independence of the ECB.

I am somewhat alarmed by his elucidation the effect of the 85% majority ESM vote which can be imposed on a member.
In effect either France or Germany or Italy could block assistance to any country until they got what they wanted. And guess what Sarkozy wants in relation to Ireland.

The treaty provisions often quoted by @DOCM will not provide much protection when ESM gets up and running.

And well done Cameron. You may have opted out for the wrong reason but it was a good decision anyway. In the word of George Bush:
This sucker is going down.

The Congress will make alot of noise but at the end of the day both democrats and republicans get alot of their funding from these companies, wasnt Google one of the largest Obama donors

At the end of the day thats all it will remain, noise.

And yes there will always remain tax havens of all sorts for as long as sovereign states and territories exist (about 200 on last count).

Anyways now that we seen how UK was “dealt with” and this crisis is not being dealt with but made worse every time Merkozy open their mouths it has become very obvious that Europe as we know it and envisaged is dead.

RIP Europe

@ Michael Burke

“The French and German leaders have created instead a damaging rift with Britain without delivering any worthwhile advance at all”

Th authentic judgement of West Britain. Cameron reduced British national interests to protecting the City of London- and failed even to acheve that.


Why anyone in Ireland should adopt the outlook of the nutters of the Tory Right is a mystery.

Mr. McCarthy was a PD fellow-traveller. The question then of why he would be such a fan of the Thatcherite legacy answers itself.

interesting article.

I love that it appears in the Sindo. A newspaper that represents all the is cronyistic, inner circle and crass in Ireland. Must see if there is a Wille o’Dea or Celia Larkin article or just find out what particular angle Anto Reilly is pushing this week.

The EU has 27 members. One member, the United Kingdom, could not persuade the others to grant it even greater exceptions, so it vetoed the preferred outcome of the 95% majority. Yet, this piece presents the ‘rift’ as something imposed on the UK. Is this really credible? Browsing the UK media this morning online left me with the impression that Cameron has little support for a stunt that even at her most colonial Thatcher avoided.

The more important and worrying outcome, I believe, is that yet again there is another initiative to promote more layers of complexity as a ‘solution’. Part of the sickness in Europe, and Smart economy Ireland is a poster child par excellence, is that the over layering of complexity has produced too many non-market institutions, consolidated powerful marginally accountable bureaucracies and distributed decision making so broadly as to denature its fundamental character, a locus of responsibility.

If the European project is ultimately reduced to spendthrift management, major components of its political rationale will have disappeared. Schumpeter’s worried that bureaucaracy would kill entrepreneurship and ultimately capitalism. In the case of European capitalism, his views may appear exaggerated but they have an unpleasant ring of truth.

@Michael Hennigan

ON the local, as distinct from the European, much that I agree with on your 1.06. To take just one of your points …

On Trade Unionism – local union upper_echlelons effectively split the Irish labour movement with Croke Park – allowing Minister Bruton to push ahead on formation of p1ss poor paid secondary labour market for the serfs, and downgrading of many apprentice trades to minimum wage standard – we might call this the ‘political construction of skill’ or ‘scalp the spalpeens’ as it used to known in the laizzey faire days of the 19thC

On completion of the p1ss poor secondary labour market (totally unsuited to a SOE), the PD neo-kon influence within FG will turn on Croke Park (of fiscal necessity) but again will protect the public service upper echelon to ensure implementation of cutz on the mid to lower segements. By then, Labour Party will be on verge of joining the Green Party on the sidelines.

We essentially are now subject to a FG/FF Administration. Time for the longest courtship in Irish History to be properly consummated …. let them screw themselves, the spalpeens have been scalped enough ….

The euro has become a Frankenstein, its time to go. The summit has failed to deal with the key issue of debt. We needed a debt resolution mechanism that would work for europe. Instead we had the promise of more debt handouts piled upon austerity that can only bring recession and deflation.

The euro itself is not even working for the core. France is complaining of lack of competitiveness brought about by the high euro. Lack of competitiveness, lack of growth, deflation, austerity and impossible debt burdens make the Euro project a liability for growth in Europe.

The summiteers have capitulated to the bankers and the money lenders whose needs have expropriated the rights of taxpayers in their countries.

There is a crisis in leadership, ‘the center cannot hold’, we don’t even have a decision on whether we will have a referendum, never mind what the language for it will be, its a mess.

The markets wont buy any of this rubbish.

Our own GDP will not enable even our own commitments be kept to the falling house of cards.

@ All

The first point that should be made, it seems to me, is that the term “fiscal union” has had its day and the vaguer description “fiscal compact” is now in vogue.

The essential point that Colm McCarthy is making, that the institutional initiatives currently being undertaken are irrelevant to the real problem, is correct but, as Ciarán O’Hagan points out, the broader context cannot be lost sight of. If we want room to manoeuvre, we have to get rid of the albatross of the deficit of €12 billion in ordinary current spending, a point with which Colm is on record, if I am not mistaken, as supporting.

One myth, however, has been clearly debunked by the goings-on prior to and during the recent summit and that is that Germany favours the Community method against the inter-governmental one. If this were the case, the compromise proposal by Van Rompuy would not have been dismissed out of hand by Berlin on the eve of the meeting. This should not come as a surprise as Merkel is on record in her Bruges speech last April as favouring a curious hybrid animal that she called the “Union method”. Indeed, the curiosity is that the agreement reached is an expression of it. And the elements of the Community method in it are winning hands down simply because there is no alternative. It is a pity that Cameron seemed unaware of this.

The weeks ahead will see a scrambling back from the mess that Merkel and Sarkozy have created, especially when even the dimmest Continental leaders recognise that they risk become monthly bit players in Sarkozy’s re-election campaign. They might also try to get a bit of their courage back.

P.S. I would alert readers to the contribution by Kevin Walsh on the other thread on the possible, and it would seem hitherto unconsidered, consequences of putting a debt brake in the Constitution for the annual budget procedure.

@David O’Donnell

@Michael Hennigan

ON the local, as distinct from the European, much that I agree with on your 1.06. To take just one of your points …

That post has ceased to be, it has gone to meet its maker, it is an ex-post.

Did Michael Hennigan reconsider his language and delete his own 1.06 or was it done for him?

@ paul quigley
We’ve talked about this several times before … see e.g.
So while it is fashionable to blame others for the fateful 2008 bank guarantee, Ireland alone must bear responsibility. And not just the government at the time, but everyone who facilitated the decision. And not just on the night, but over several weeks.. right up until the bank guarantee law was signed into law (26 Oct.). So there were some weeks for reflection. That point is often missed.
While foreign governments, the ECB and ECB were all opposed (if only on fears of “beggar thy neighbour”protectionism of domestic banks by the Irish authorities), you could argue that it was just lukewarm, and they should have taken a more affirmative stance in support of EU principles and law.
Still, it was the Irish government that finally signed the guarantee in, leading to the socialisation of most Irish banking debt.
I’ve yet to see a good write-up.. I suppose it is still too recent an event for the parties involved.

The left / liberal or whatever they call themselves now seem to completly miss the point.
The Euro was hatched in the City baby , the IMF was invited into the UK by the labour party both in the 60s and during the 70s administrations destroying even its Hi tech Boffin industries , although the Heath Goverment started the derivatives mess they do not have a Monopoly on sin.
Gordon Browne facilitated the Euro entry by selling the treasuries Gold reserves………. the list goes on & on & on.

The tradional Tory belt boys are not in control – they are merely functionaries that have awakened because of their proximity to the beast.
We are in dire need of some nutters that will loose it.

@ All

An absolutely brilliant article by Philip Lemaitre of Le Monde which goes to the very heart of the problem confronting Europe and the euro.


“Mais ce modèle est-il reproductible à d’autres, notamment à la France, premier client de l’Allemagne ? Peter Bofinger est convaincu du contraire. “Si l’on écoute les discours des décideurs politiques allemands, on serait tenté de croire que le bilan du pays est proche de la perfection. Permettez-moi d’émettre quelques doutes. Au cours de la dernière décennie, la demande intérieure n’a pratiquement pas évolué en termes réels, alors que les exportations ont augmenté de plus de 70 %.

“Cette évolution doit-elle réellement former la loi fondamentale pour l’ensemble de la zone euro ? N’est-il pas surprenant (…) que les décideurs politiques restent incapables de comprendre que le modèle allemand ne doit sa réussite qu’au fait que les autres pays prenaient une direction totalement opposée ? La modération salariale telle que pratiquée en Allemagne ne pouvait porter ses fruits qu’en tant que stratégie isolée. Si tous les autres pays lui avaient emboîté le pas, la zone euro aurait immanquablement fini par affronter une spirale déflationniste”, expliquait-il en avril lors d’un colloque de la fondation Notre Europe”.

Peter Bofinger is one of Merkel’s most reputable economic advisers, nominally, as member of her economic advisory council.

A country in which domestic demand is stagnant for a decade and which increases its exports by 70% in the same period cannot, by definition, export its model of economic management to other countries. The introduction of the euro has simply compounded the problem. Either it is addressed or Europe will fall apart.

Peter Bofinger is a Kantial Pragmatist … this wing is presently in a minority, but increasing … and am 95% certain that this wing sees fiscal fudge as fiscal fudge … and nothing less than fiscal fudge …

I am in favour of moves towards a functioning fiscal union in the real sense

@Gray, Germany

Any insights on kantian pragmatism within deutsche political economic thinking …. ? (pls don’t mention sinn or issing – I’d like to enjoy a late brunch (-; )

Colm: Which officials in the French or German finance ministries came up with this now-abandoned wheeze? Has anybody been sanctioned for screwing up the sovereign bond markets of several European countries to no useful purpose?

Said officials are likely being prepared for nomination to an EU body or perhaps to a senior executive position at a European SIFI.

Cameron is way out of his depth. The FT said as much on Saturday. The EZ is going through an existential crisis where big decisions have to be taken and he goes off on a me feiner solo run.

The IMF’s Olivier Blanchard has described the EU summit as “progress” whilst pointedly not describing it as a solution

And Ken Rogoff speaking on Sky News today gave his view that certain EU countries including “probably” Ireland should be outside the EuroZone.

Anyone for a bet that Spain’s 10-year bond will be 7%-plus at the end of this week?

@ Paddy M

Some anonymous member of the thought police deleted the post.

I deleted a reference to Kevin O’Rourke’s point on austerity and violence, assuming that this was the offending point; deleting a full post from a named individual merits at least a brief advice for the reason. If the secret censor deletes again without explanation, I won’t bother returning. That would of course be welcome by some.

@ David O’Donnell

Whether we return to the British stable or stay with Europe, we have to eventually face a reality that the bubble gains that are still in the sytem will have to be eliminated.

Where are those damn trade union leaders in this recession but along with the lawyers defending priviliges while a dual workforce is in the making as is now a reality in Japan?

Trade unions are important and we can see what happens in the US when there is no countervailing power to the owners of capital.

Colm McCarthy’s mandate from the Sindo is to produce commentary on the debt crisis every week rather than the Irish economy.

We can wail and lament about the shortcomings of this or that agreement but we do not matter and WE are mainly responsible for this terrible situation.

It’s clear that we can shoot ourselves in the foot given all this negativity and in the process destroy many more lives.

There are people who have to go out and sell every day. People need a reason to continue. In the invisible world of the Irish SME many jobs are hanging by a thread.

Who has a clue where new jobs will come from and how many of the 85% really care?

Thanks for an excellent link.
It looks like another fault line is developing – right down the middle of the Franco-German axis.
The French are due to implement austerity measures soon too. It will be interesting to see how that goes down.

There’s another school of thought which says when a project is failing and is unsalvagable the political thing to do is to walk away. David Cameron’s move was a statement of no-confidence in the Euro. The path Britain will ultimately ckhose will come down to this:
Will the City of London lose more through disorderly break up than it gains. My calculation is short term mega losses but if the Euro goes Frankfurts position as a rival is greatly weakened. They’ve done the contingency planning

So, who wants to live in Cowslips warren, with the food set out each day by the ECB that we can all get fat on?

To remain in that warren, we’ll ignore the snares set out by the farmer, the Compact Treaty; unemployment, emigration, diminishing sovereignty, CT snares, financial services snares, ‘harmonisation’ snares?

The French banks get to slowly eat through our rabbits behind their firewall of debt repatriation? We facilitate this because fear of the unknown, default, euro exit, is greater even than the fear of death by any of the above snares.

Farmers are doing well by it. The Croke Park means plenty more are doing well by it. Who cares if emigration, unemployment, anonymous taxpayers, the economy, sovereignty get snared on the altar of debt?

The ECB laying banking snares in our budget will take care of us.

Indeed…….we’ll see 🙁

(Above from Richard Adams, Watership Down…a very useful economic treatise)

@ All

Correction. The Le Monde article is by Frederic Lemaitre.

All the French cabinet “heavyweights” , i.e. those that are intimates of Sarkozy, have been out on the airwaves puffing the outcome of the summit. They are, in all likelihood, whistling past a triple AAA graveyard. A one notch reduction is viewed as possibly tolerable (an additional annual budgetary cost estimated at €5 billion) but anything more is likely to be catastrophic both for Sarkozy’s electoral prospects and the French economy.

Antenne 2, one of the main TV channels, on the evening before the summit, took a 100 euro bill and, stacking the equivalent of the French national debt on pallets, came to a structure the equivalent of the size of the Arc de Triomphe (including filling in the space under the arch). To paraphrase Wellington, I do not know what this illustration did to French viewers but it certainly impressed me. Á suivre!

@Michael Hennigan

Just to be clear: I’m not advocating rejoining UK at the mo (and I’m open options minded); I’m simply surprised that others did not veto such a feeble fiscal fudge in the midst of a financisl system/sovereign debt crisis. But I think I’ve made my positon on this fudge clear enough over past few days …

I have already responded to one of your points in the nietschzian post that has just recurred … from a functioning productive labour market perspective!

“He also acknowledged that the EU’s policy during the crisis in Greece of making private investors assume losses of their holdings of Greek debt was flawed and had been scrapped.

This policy, which he admitted had had «a very negative effect on the debt markets» was «officially over,» he declared.” ?..Von Rompuy as quoted here…

curious…are they still going to scalp Greek sovereign bondholders in the knowledge that it a flawed policy. I see you can buy them for 22 euro and

Ciaran O’Hagen above….” Like we mentioned yesterday, Greece now has a near zero primary deficit, giving it clout. Ireland is still very far from that position”

It may be technically correct but a deficit is a deficit whether it is structural or primary and the fact is Greece is in dire straits with an increasing deficit month on month and yoy.

What clout has Greece got other than to default…which in the view of most commentators is inevitable.
We have the same clout if we choose to exercise it.
We have the same



@Michael Hennigan,

We should seriously examine a return to sterling. Total madness the Newry sterling/euro exposure. agree with all your points re unions and deficit reduction.

WE are mainly responsible for this terrible situation

Actually, I think the WE can be narrowed down to a small group of bankers, developers, FF politicians, Dept of Fin officials, NTMA and regulator.

The rest of the population if they benefited indirectly in any way from it, they sure as hell get to pay for it now!


Good link. Thanks. It is good to know that there is at least one view beyond the haus frau mantle of austerity doctrine. But she still wears the apron even though I suspect Schauble decides what is on the menu.

@David Kant doesn’t apply. Each nation is different from the others, with it’s very specific strengths and weaknesses. In Germany’s case, one weakness was the very high hourly wages, which had grown to a point where exceeded even the high productivity gains. Since Germany, as a low resource, high import economy, is very dependent on exports, it couldn’t afford to continue with the negative current account of the 90’s and HAD to do something to correct that. The high unemployment, together with a far-sighted approach by the unions, resulted in a period of de facto wage stagnation that improved German competitiveness. We sure did overcompensate, this can’t be denied, but form the German point of view, that sure was better than falling short.

Another German weakness was the inefficient (much too manpower intensive) social net. The welfare part encouraged fraud and didn’t provide enough incentives to find employment, while the insurance part established a misguided sense of entitlement to a specific income and kept unemployed from applying for positions with a lower salary. This sector had grown into devouring a critical share of the budget. This problems was addressed by the Hartz4 reforms, which, all in all, are better than their reputation and, after a lot of initial problems, simplified the administration.

Those two major corrections enabled Germany to improve its current account again. And imho all those nations who ridiculed us as “the sick man of Europe”, while doing nothing to correct their own systemic mistakes, have exactly no standing to complain about us now. They begged for a German response, so their complains about the outcome sounds hypocritical. Coming back to Kant, I don’t think his “categorical imperative” can be put to good use when the others simply aren’t in the same circumstances. Their hourly wages were low enough in European comparison alright, but they lacked productivity, and suffered under a hodgepodge of other shortcomings.

In the case of Ireland, you folks sure know much better than I do what could and should have been done. Imho the severe crash would have been evitable, if the government had cooled down the financial sector and the construction sector in time. Relying solely on the luck of the Irish was a bit overly optimistic. Imagine tough regulation would have prevented the need to bail the banks out! Then Ireland wouldn’t be in the bad company of the SPIGs now. It’s tragic.

@ Michael Hennigan 4.14

@ Paddy M

Some anonymous member of the thought police deleted the post.

I deleted a reference to Kevin O’Rourke’s point on austerity and violence, assuming that this was the offending point; deleting a full post from a named individual merits at least a brief advice for the reason. If the secret censor deletes again without explanation, I won’t bother returning. That would of course be welcome by some.

At best, your original comment involved a careless use of the word “should”; at worst it could have been construed as incitement to violence against certain groups. I suspect if you’d made the comments about any group in Malaysian society, you’d be in rather hotter water.

I have mixed feelings about it in that I think people should be allowed to show themselves in their truecolours on comment boards if they wish to; it at least gives the rest of us a clearer idea of where they’re coming from.


We have the same clout if we choose to exercise it.
We have the same

The link to Von Rompuy is a clear message this is not the case. They are clearly signaling there will not be any further debt write down for anyone else apart from ‘special’ Greece.

This is just another reason we need to walk away. Either that or just agree to annexation, get rid of unnecessary civil service and Dail Eireann, outsource the lot.

Maybe have appointed a propraetor or proconsul or governor to run a chapter 11 for the ECB on the late Ireland Inc?

Colm, after decades of slowly but surely building your economy up, with the help of the EU, you propose to jump ship after the first (ok, desastrous) setback? Imho this apparent lack of toughness is quite disappointing…

@ Gray, Germany

Colm, after decades of slowly but surely building your economy up, with the help of the EU, you propose to jump ship after the first (ok, desastrous) setback? Imho this apparent lack of toughness is quite disappointing…

Yes, it could seem like that, see link below for an enjoyable take on ‘toughness’ and ‘weakness’. However, I’m a capitalist pragmatist. Examining the patient, ECB, and the EMU, my conclusion is, its terminally ill. If we stay, it will drown us as well.

Plus I don’t think it edifying to see Ireland treated as an outcast by the ECB and set to the wolves by penal and unforgiving and repayment obligations. Also, I view it as a signal of weakness, rather than strength by political leaders in the EMU.

I’m hugely disappointed the ECB and banks have wielded a death blow against the EU whose political aspirations and democratic lights I believe cherish as well.

Au contraire, I ramble on about it here as well,

You will enjoy the following 🙂

@Gray, Germany

Ta for update – not much to disagree with on internal Deutsche matters. Nor on idiocy of Irish bank guarantee; which, by the way, remains unsustainable, and sustained due to ECB imperatives.

Corporatist industrial relations and skill formation system in Germany are in no way comparable to Ireland – or to France either for that matter. Europe remains a set of heterogeneous regions, which demands flexibility within limits – and all now know the flaws in original EMU design, yet no one seems to wish to take responsibility for not monitoring capital flows (especially the ECB) – and capital flows are what has brought much of it down.

I disagree on Kant – Europe is esentially founded on a Kantian principle, and without the categorical imperative [or preferably Habermas’ or Apel’s more refined version of Discourse Ethics] or other strong principles, as distinct from rushed short-term ill-thought out rigid rules, it will inevitably collapse.

Right now, Europe has been captured by the Financial System, its leaders Merkel and Sarkozy have proved to be inept, Geithner and Lagarde are deemed more important than 25 other EU states, and nowhere in the original Treaty of Rome is it written that European Deomocracy be subservient to the dodgy derivatives wing of Capital.

Tomorrow is Monday morning – the EU Debt Crisis will be much bigger than it was on Friday afternoon.


“Anyone for a bet that Spain’s 10-year bond will be 7%-plus at the end of this week?”

Closed friday at 5.68% so I think you are wrong. How about a pint of D&N best?

Taking a step back, and thinking deeper…I’ve been gripped by why France+Germany don’t seem to be admitting to the Financial Stability crisis…the real reason why is that they are seeking a major re-alignment. Take the crisis domains:

1) Sovereign: several countries clearly underwater
2) Banks: reckless lending by some, reckless investing of their Tier 1 capital by more
3) Monetary: closer economic integration hasn’t happened,with result that mon policy crisis fighting tools not available
4) Real economy: investment fleeing Europe/being delayed

Now if you consider the Franco-German response:
1) Sov: some vaugue pact to prevent recurrence…but no fix to present crisis
2)Bank: pressure the EBA 2deny crisis scale,then move very slowly
3)Monet: no change/policy yet
4)Real econ: no change/policy yet

Based on the above one might think Merkel/Sarko are way underperforming…but instead what they’re looking for
a) Boot out the UK: on the way
b) Closer political integration: looks likely
c) Harmonized taxes: next demand
d) Fiscal union: in the offing
e) Assault on free market: see below

Now none of those are really relevant to the pressing crisis, but so long as the PIIGS are propped up by ELA, bailouts and bond buying – Merkel and Sarko have space to get their other aims.

It should be noted that a key aim is authoritarian /autocratic. By their language and demands it is clear neither leader trusts the ‘free market’ – neither is laissez faire – in fact they far rather a different model to the open market. They’re used to a small number of private banks making the deals – witness how the German banking sector makes its decisions (sudden unanimity after closed door meetings). Merkel and Sarko hate open markets, hedge funds, high frequency trading and above all: international banks. Hence their joining Stiglitz and the loons in seeking this Financial Transaction Tax.

Ireland has always subscribed to the Anglo-Saxon model of ‘open markets’ , the continent, especially autocratic France, has always preferred banks which the government can privately influence. We really need to think about what we are willing to give for France/Germany to solve the crisis. We have plenty of options,legally we cannot be ejected from the Eurozone…and if folks want to abrogate our rights…well then we needn’t pay back ELA !

There needs to be a serious public policy debate in Ireland – else we’re just walking into an Authoritarian EU state run by autocrats

@Desmond Brennan

‘Ireland has always subscribed to the Anglo-Saxon model of ‘open markets’ …

The Limerick Soviet objects to such flagrant ‘abuse of language’.

The Oirish branch of the Squid weighs in in today’s Observer…
“Adding a tone of scepticism regarding the treaty’s chances of success, Jim O’Neill, chairman of Goldman Sachs Asset Management, said the most important thing that happened this week is not “this bungled European deal”, but the release of data that showed a slowing trend of growth in China, the world’s number two economy.
“The problem in Europe, this isn’t really a debt crisis, it’s a crisis about the structure of leadership … Europe needs to organise itself properly and show proper leadership,” he said.
“Everything around the world is being driven by some idiotic statement from some policymaker in the EU.”
But he added that now might be the best time in 20 years to invest in Europe, saying, “Never let a good crisis go to waste.”

Euro zone deal only partial solution – IMF

An agreement reached by European countries for deeper economic integration was a step in the right direction but not a complete solution for the euro zone’s debt crisis, International Monetary Fund (IMF) chief economist Olivier Blanchard said today.

“I’m actually more optimistic than I was a month ago, I think there has been progress,” Mr Blanchard told the Globes business conference in Tel Aviv.

“What happened last week is important. It’s part of the solution, but it’s not the solution.”

He did not say what further steps were needed.

No need for deconstruction here … and I still consider that notion of the EZ/IMF version of the Shawnee-Spectacles shuffle as a highly dangerous precedent …

To be fair, the banking/financial industry itself requiring accountability/transparency and massive overhaul especially the period 1971 – 2008, shares far more of the blame than any individual or group of politicians.

On that note, though it may sound contradictory always been a huge fan of Merkel, even though sadly in the ‘compact’ the bankers have stitched her up with a solution unworthy of her stature.

Act of Desperation?

BERLIN (Reuters) – Higher involvement by the International Monetary Fund (IMF) in the euro zone’s efforts to stem its debt crisis would be an act of desperation, outgoing European Central Bank chief economist Juergen Stark said, calling for a quantum leap by the currency bloc.
“It would be an act of desperation,” he was quoted as saying by Sueddeutsche Zeitung due for publication on Monday.
Stark said he envisaged an informal panel of experts to check on member states’ budgets. “That would be the nucleus for a future European finance ministry,” he said.
(Reporting by Annika Breidthardt)

You miss the point , it is simply about who gets to print / create money.

This talk of “free markets” is vacuous and misses the mark entirely.

A state without money power is in a state – its a choice between Henry 1 and the free bankers.
Competition in the production of credit is the most insane concept imaginable.

PS. competition in this monetory envoirment………. if the M1 was on the CBs books we would not be in this mess today and banks could compete to see who the F$£K lost the most term loans.
What a mess this sorry western world is in.
Hedge funds me hole ………. I can’t get to create legal credit in my town why can these guys get a credit licence ?

”The French and German leaders have created instead a damaging rift with Britain without delivering any worthwhile advance at all…”

Nonsense! They’ve saved the ATMs. No price is too high!

@ michael burke

“Many of them call explicity for the disorderly break-up of both the Euro and the EU.
Why anyone in Ireland should adopt the outlook of the nutters of the Tory Right is a mystery.”

You may not be aware of this but almost 2/3 of voters in the UK think that Cameron was right to walk away from the agreement and a slight majority (52%) say that “say the euro crisis is an ideal opportunity for the U.K. to leave the EU”. So while you listening may attribute his behaviour to pandering to ‘nutters on the Tory right’, it looks to me like he his one of the few politicians that are actually making decisions that their electorates support. 

@ Gray, Germany

Unfortunately, as you say, Germany “over-compensated” and the resulting statistics do not lie. This over-compensation has given rise to a level of trade imbalances which the euro system is incapable of dealing with. Martin Wolf, almost alone among economists, who generally have an unerring talent for missing the wood for the trees, has dealt with this conundrum on numerous occasions, and quite recently.

As to Hartz IV, your view of it is hardly likely to be shared by those who are affected by the reforms. cf. second article by Frederic Lemaitre.

The result is a widening social divide in Germany and increasing levels of poverty. The explanation for the phenomenon is the same as in Ireland; an unholy alliance between government, business and organised labour.

Gray one leaving the Titanic is a good idea before it left Queenstown, even if one profited from the building of this Titanic at Harland and Wolff in Belfast

@Peter Stapleton

So what if the UK leaves the EU

Financial Transaction Tax (FTT) would make IFSC less competitive and its ¢1.25 bn CT tax plus 30,000 jobs in financial services suffer a huge exit with proposals to gather CT at point of sale rather than at source. Expect all those jobs and loot to head for CoL City of London.

Euro has been making us more uncompetitive not only because of the ¢30 bn of ELA we are committed to paying back at ¢3 bn/yr, but the general failure to give us a regime of debt renegotiation to include the ¢150 bn ’emergency’ funding we got from ECB to prevent our banks going bust.

Our lack of competitiveness will lead to lots of FDI travelling across the border as foreign investment assesses damage to our economy. We were also forced to pay back approx ¢70 bn to bondholders and have not been given opportunity to give that one a haircut(figures from Dan White, Sindo today.)

Uk being our main trading partner surely its only daft nutters on the above terms can conceive of us staying with the euro.

Our own electorate believe bondholders and sovereign debt should be renegotiated. It wasn’t and given a choice between the purging of Ireland in the euro, and seeking better trading conditions and a purging instead of our debt, they also will choose to leave the euro.

The penny that we must leave the euro hasn’t dropped for some. But they’ll believe it when things fall apart and gombeen political leadership is exposed for what it actually is, a betrayal of the Irish electorate.


Re Martin Wolf ->saw him on BBC’s Newsnight recently confess that in his view it was a good thing UK hadn’t joined the euro. But here he’s worried about EU breakdown and hyper nationalism, but believes democracy is the way sophisticated economies should be run:

Listen here:

“Greece and Italy are now being run, not by democratically elected leaders, but by appointed technocrats. The Financial Times’ chief economics commentator, Martin Wolf, argues that at times of such financial turbulence, it’s competence, not charisma, that’s needed. But he warns that the job they have to do is potentially unachievable, and the biggest threat to the survival of the Eurozone is that they
fail and hyper-popular, nationalistic regimes come to power.”

2012 also brings an election in France.
Just read that Dominique De Villepin will run. Interesting kind of politician who does not seem afraid to stand up to international movements (remembering the Invasion of Iraq speech). Think this guy could tap into a kind of patriotism.
This could make things very interesting.

Discussion on europe approx 28 mins in above, MW believes in the superstate/federalist Europe model, but Italy was a democratic plutocracy which failed democracy, Greece has a history including ‘the generals’.

He believes in the importance of sophisticated democracies but wants them under a federal flag, doesn’t say how this can come about, and, worth repeating, I did hear him, on another occasion, put the view that he was glad the UK not part of the euro!

Michael Hudson doesn’t like it.

“Europe’s Transition From Social Democracy to Oligarchy”

“This appropriation of the economic surplus to pay bankers is turning the traditional values of most Europeans upside down. Imposition of economic austerity, dismantling social spending, sell-offs of public assets, de-unionization of labor, falling wage levels, scaled-back pension plans and health care in countries subject to democratic rules requires convincing voters that there is no alternative. It is claimed that without a profitable banking sector (no matter how predatory) the economy will break down as bank losses on bad loans and gambles pull down the payments system. No regulatory agencies can help, no better tax policy, nothing except to turn over control to lobbyists to save banks from losing the financial claims they have built up.”

@ Colm Brazel

“Financial Transaction Tax (FTT) would make IFSC less competitive and its ¢1.25 bn CT tax plus 30,000 jobs in financial services suffer a huge exit with proposals to gather CT at point of sale rather than at source. Expect all those jobs and loot to head for CoL City of London.”

I have heard this point made a number of times over the weekend and I have to say it does not reflect the reality of the vast majority of IFSC entities.

The IFSC is not the city of London. London houses the front office booking desks of much of the major banks, hedge funds and insurance companies operating in Europe … i.e. each trade / investment is booked in that jurisdiction and is taxed per that location.

While, it is true to say that at the height of the ABS boom Dublin (’03-’07) was a major direct trade origination / profit centre, the vast majority of these desks are now either closed or effectively closed in zombie non active portfolios. Where the IFSC is especially strong today is in a distinct niche in fund management and middle and back office services. The introduction of the proposed Financial Transaction Tax would not impact many IFSC operations as those trades Dublin administers are, in the main, booked elsewhere.

Looking at Fridays events and in particular the actions of the UK, my immediate reaction was that there is a real opportunity for the IFSC here to continue to grow as a niche financial centre within the EU.

I think an Irish referendum would be fantastic. Not a snowball’s of being passed. Quid pro quo required. Getting something back from the team.

@ Seafoid
They let Britain walk.
They wouldn’t think twice about letting Ireland go too.
Wouldn’t bother them. An inferior nation being let go – big deal!

There seems a lack of awareness about the failure of energy policey in Europe since the 80s.
The slow privatisation of State utility companies meant that there was no vector for core domestically sourced long term investment that did not depend on outside energy inputs and this redirected almost all new surpluses back into consumption again via bank credit lending.
Also large European countries halted completly their nuclear programmes which dovetailed into the neoliberalization of the banking sector as it was as always concerned with making profits now from future wealth which will soon not exist.(fiscal spending is about spending money now , bank credit is all about future wealth bets)
The Spanish Socialists halted their nuclear programme in 83 , the Italians used the excuse of Chernobyl and the British completly ran down their large industry.
These are very big countries with massive energy inputs that need to be serviced.
So we also got the rush for Gas – a low capital input policey which suited the banks needs perfectly.
Here at home there was no more capital intensive Moneypoint projects , just enough to keep things going with new modest Peat plants and a absolutely crazy throw of the dice – a all in stratergy for NG with wind for optics.
Why ? – because they can make profits in a natural Utility until of course it becomes ruinously expensive through depletion ,then the utility externalises the losses on to the wider society.
The decapitalisation of banks and the energy Industry is a mirror image phenomena.

Flow of energy for electricity generation 2010 :
Gas : 3024 Ktoe
Coal : 868 Ktoe
Peat : 490 Ktoe
Wind : 242 Ktoe
Fuel oil:103 Ktoe
Biogas Etc : 73 Ktoe
Hydro : 52Ktoe
Imports :40 Ktoe.

61% of our fuel inputs for electricity was NG !!!!!!!!!!
4704 KToe was our total gas use last year , so only 1680 Ktoe was used for heating ,cooking etc – its best use.

Electricity transformation / transmission loss : 2727 Ktoe.

Do not believe the spin ……… yes NG power plants increases the end use efficiency but it is a extremely high value resourse – it should not be used for base load power under any circumstances other then when Nuclear or coal is offline.

We are wasting this resourse – just like when we wasted it on Fertiliser in the NET plant during the 80s.
This is another criminal waste of resourses.
This is happening all over the European continent and indeed the planet for short term gain via deferring capital investment.
This defered capital investment went into nearly useless consumer durables such as cars and holiday houses creating a massive malinvestment.
But the externalties have now arrived.

Excellent article from Michael Hudson. Just what the No campaign need for the upcoming referendum. I see Gilmore hedging his bets…if we need a referendum we will get on.
But Leo is the star performer…
“Earlier, Minister for Transport Leo Varadkar said fiscal coordination among European Union countries alone will not be enough to solve the sovereign debt crisis.

“What will probably happen is that events will overtake us,” Mr Varadkar told RTÉ’s Marian Finucane  programme.

While fiscal coordination is a good idea, “it is not going to be enough to solve the problem we have”, he said.

The European Central Bank must adopt a different role in the crisis, he added.

Mr Varadkar warned that increased power within intergovernmental institutions in the European Union is not in Ireland’s interests.

“We are increasingly moving towards an intergovernmental union, which is particularly always what France wanted, and that is not in our interests as a country,” he said. “We need to get the [European] commission back at the centre.

“What has emerged since Lisbon really hasn’t worked out very well, where the commission has been downgraded if you like; the commission was there to represent Europe as a whole and all the member states,” he said.”

In other was a mistake to vote for Lisbon second time round.

And. ” what will probably happen is that events will overtake us” such as a big European bank going down?????

@D o C

seems to be that everybody has their own way of muddling along in the great repression

but you strike me as a crazy Diamond full of vision and also taking the p**s i never realy know which is which at times may be its me i`m a slow learner?

Robert Fisk: Bankers are the dictators of the West

Writing from the very region that produces more clichés per square foot than any other “story” – the Middle East – I should perhaps pause before I say I have never read so much garbage, so much utter drivel, as I have about the world financial crisis.

Time Robert got a mention around here …

contd. Robert concluded:

The Irish Taoiseach, Enda Kenny, solemnly informed his people this week that they were not responsible for the crisis in which they found themselves. They already knew that, of course. What he did not tell them was who was to blame. Isn’t it time he and his fellow EU prime ministers did tell us? And our reporters, too?

This BANKING crisis is always described as a sovereign crisis. I suppose that by shifting the focus from the BANKS makes the correcting actions more easily directed towards the sovereigns.

Strange twist in history, earlier it was that sovereigns didn’t disappear if they overborrowed but instead the lending banks disappeared. Now the proposal from the eurocrats is to remove the sovereigns by merging sovereigns into an unwanted superstate (run by eurocrats) & while the banks are to be untouched. I suppose that could explain why eurocrats and heads of governments are at odds 😉
I suppose that it could be interpreted as that the banks interests and the eurocrats interests are very well aligned. Coincidentally, I do believe it is easier to sell european integration than a bail-out of banks run by overpaid incompetents 🙂

On the matter of topics for summits: What seems to be lacking appears to be a process for dealing with big banks that are in default. I hope that a process for dealing with big banks has been worked on for the last couple of years. Should be easier to agree to a bank resolution regime than to agree to a new treaty, or?

The Tobin-tax: Will it be taken out of bank-profits or will it be a situation similar to VAT (banks collecting the tax from consumers on behalf of revenue)?

Also, some of the solutions that have been offered to resolve the banking crisis in the euro area has been tried in the dollar area.

Centralised bank supervision – did it work?
Printing money – has it worked?
Transfer-union – is it working?

And a question: The Swedish word for ‘tax’ is the same word as is used for ‘treasure’ (skatt). How would the people that believe that the fact that the word for debt & guilt (schuld) is the same in German implies something about the German psyche interpret that fact? Swedes treasure their taxes? Or is that fact irrelevant?

re Spiegel article.

Francois Hollande is going to play the nationalist card against Sarkozy on this. Netherlands having doubts too.

Apropos the article, the 85% majority also means that Germany, France or Italy can veto any deal they don’t like.

McWilliams is right. This is no longer the EU as we knew. Small European nations are to be vassel States Franco/German hegemony. The EU is in the process of being smashed up.

I’m coming to the conclusion that this “Compact” may die an unnatural death. Manchu says much the same in an FT article tonight.
CNN have this
“It remains to be seen whether national parliaments will fully swallow this loss of sovereignty. If credible this fiscal compact should lead to a massive improvement in the rating of sovereign debt in the euro area. A first test might come soon, when the ratings agencies have to decide whether to follow through on downgrade warnings issued before the summit.”

Sure ………. I am a nutter – but its a perfectly rational responsive twitch when economists pretend to not understand the opportunity cost of burning such a high value fuel in electricity generation where so much energy is lost in Transformation.
Its the equivalent of the burning of oil in electricity plants before the first energy crisis.
The problem now is the capital cost is so high – given so much money was destroyed on frivolous consumption.
However be very wary of energy economists who want you to go on a energy diet but claim there is no money for capital investment.
That essentially means your sacrifice is being used to sustain another persons consumption , probally working in the Financial sector.

The prototype of the modern banking system only made money from 3 things – windmills & dykes , tulips and war.
The first capital creation thingy is hardest but the other 2 are easy if you can externalise the cost on someone else.

It’s falling apart already…
“Andreas Dombret, a Bundesbank board member, said Germany’s central bank cannot take part in any form of covert funding for EMU states in trouble through the bank-door of the IMF, saying further money can be used only to support the normal operations of the Fund.
“The money cannot migrate into some sort of special pot that is used exclusively for Europe. That would be a clear breach of the prohibition of monetary financing of states. The German Bundesbank has explicitly ruled this out,” he told the Handelsblatt newspaper.
Mr Dombret said the Bundesbank’s share of any such IMF package would be €45bn and is “inherently risky”. It would require an indemnity of some kind from the German parliament. This in turn would breach the €211bn ceiling already set by the Bundestag on EU bail-outs.”…. From an article by AEP in the Telegraph.

“Triple-A Germany is an illusion: German abandonment of the euro is a default, if Germany does nothing it is also a default because the others will abandon the euro leaving Germany holding the bag. The first rule of Ponzi schemes is to be the first out the door. The Germans are caught in an ‘instant morality’ trap they have set for themselves! Germans represent themselves as virtuous and the ‘best of Europe’. They dare not be the first out the door, so they are set to be the fool in the market(s).

The crisis emerges from a false narrative: that economic problems are the consequence of too-high labor costs rather than too-high energy costs. The heavily-promoted solution has been outsourcing and wage arbitrage, the breaking of labor unions, the use of child labor, unrestricted immigration, ‘right to work’ laws, reducing employee benefits along with neo-liberal ‘banks first’ policies and automation. These policies intend to shift the earning capacity of labor to the leverage provided by petroleum amplified by credit. High wages and skilled labor are exchanged for sweat labor wages plus the cost of international shipping with the skill taking residence within the machines.

Unfortunately, the narrative is wrong: the proposed cure is the disease. Output demands are made of human workers that are never made of the machines.

Nobody demands that automobiles or other ‘marvels’ pay for themselves. Diminished labor is required not only to pay for itself but also pay for everything else as well including the profits of the bosses. Labor must buy the cars, the fuel that is burned up in them, pay the interest on the loans that are taken out by everyone in the chain of manufacture and support that are needed to put them into service. The managers have to be paid for, the governments and the banks that lend to the governments. No wonder the credit system is broken, it’s too stupid to survive.

That so much is demanded of labor and so little is required of machines that are set to replace the labor is one of the absurdities of modernity. Now it’s going, gone, blah, blah blah. ”

Steve from Virgina on fine form.
Unfortunetly now one is listening to the Dorks of the world.
Such is life.

@ ceterisparibus

Some years ago, Dr. Eric Schmidt of Google warned that the web would be a ‘cesspool’ of disinformation without the mainstream brands of journalism.

We can see here and on other threads that coincident views of others sourced from Google News become the mainstay of many contributions. So the overwhelming focus is on the shortcomings of this or that European plan.

What is avoided is how a small economy that is facing a decade of high unemployment and that is dependent on American firms for most of its tradeable goods and services exports, should be doing?

Well run small economies such as Austria, Finland and the Netherlands are not in the control of puppets of Germany and France.

We are not totally at the mercy of external forces. All the breastbeating and handwringing will not get us very far.

If you don’t quite know what to make of the fiscal compact you are to be part of, here are a few suggestions. Clarifies things no end I think:

Lac Cam Cop Fist
Facts Lac Cop Mi
Calm Pact Sic Of
Calf Cam Cops It
A Calf Tics Comp
A Fact Sic Clomp
Calf Cam Cop Tis
Fact Claim Cops
Fact Scamp Loci
Fact Pal Comics
Fact Slap Comic
Fact Alps Comic
Clamp Acts Foci
Clap Sac Comfit
Clap Fats Comic
Clap Fast Comic
Claps Fat Comic
Cat Flaps Comic

Analyse this
Energy inputs 2010
Oil : 7373 KTOE
NG : 4704 KTOE
Coal : 1167 KTOE

I suppose we have got some turf to counterbalance these imports :791 KTOE
and don’t forget the mainly cold but occasionally hot air that passes those monuments erected to the memory of Don Quixote : 242 KTOE
Disappointed ? don’t be………. Ardnacrusha and its sisters – the symbols of Independence will save us : 52 KToe
Guys like you promoted the open to the 4 winds economy – the liberal trade economy.
The extreme export to afford imports model.
The must remain competitive model.
When the Imperium breaks It will lead to a mass famine.

on Colm’s original article. how does it make sense to say that europe destroyed the relationship wi the UK but then say that what they did negotiate would not have prevented the crisis in 2008. all true, the 08 crisis is a bank/debt crisis not a fiscal one.

the UK demanded a cast iron guarantee that banks would not be regulated/ taxed and while we knw that the fiscal constraints would not have prevented the last crisis, better bank regulation would have.

Nobody said this was going to be easy and Merkel herself said that the new Euro system will take a decade to thrash out in negotiations. the UK excluded itself because it ruled out new banks regulation.

The Anglo countries led by GB and USA are in favour of casino capitalism. Private Equity has been the flavour of the past few years with its buy, strip, sell, enter receivership and bankruptcy cycle. In GB and the USA with their highly financialised economies this is looked at as creative destruction Schumpeterian style. In the non Anglo countries it is looked upon as immoral, destructive, lacking social conscience and must be outlawed.

If GB wants to proceed along the road of continued financialisation of its economy while pushing out manufacturing, increasing unemployment and further indebting the population at large then it is opting out of the EU of its own accord. The privatisation of profits and socialisation of losses so valued by the Americans and British has hit the rocks in Germany and is losing favour in other EU countries. Over the next few years left wing gov’ts are likely to be elected in Germany, France and other countries. This will lead to a change of emphasis from austerity favouring the banks and bondholders to stimulus favouring workers and more productive endeavours.

The EU and EZ are living organisms driven by politics which always adapts to accommodate the needs of the majority. People will say that change is occurring too slowly for Ireland and they are correct.

In GB the gov’t could fall within a year and in Ireland at some point in the near future Labour will have to reconsider it prospects. Life goes on.

The year of our Lord 2007
Oil : 9047 KTOE.
Although the new car tax policey has been a great success reducing waste the primary driver for reduced oil consumption is reduced activity and consumption with little investment to counter the entropy.
If NG spikes or indeed is not available at any price we are goosed as that is the only thing replacing some of this energy void.
Thats some strategic plan we have got there.
I can remember some Goverment energy thingy with Journalists present maybe 5 or 6 years ago – they confidently gave future energy predictions for stuff that was not even tested properly such as wave crap.
God help us & save us.
And now they are increasing fares on Public transport that will achieve the goal of reducing the average number of people on buses & trains and therefore reduce the energy efficiency of public transport and its central reason for existence.
Jesus Mary & Joseph.

France and Germany did not “create a rift” with the UK. The UK’s isolation was entirely self-inflicted. If you look for the financial services section in the Fiscal Compact you won’t find it, because it isn’t there. Cameron tried to reopen and change the Lisbon Treaty itself, and to change the voting procedure for some issues away from QMV back to unanimity. This was opposed by almost everybody, since nobody wants to go back and renegotiate Lisbon, and if you allow one country to roll back some things they don’t want, 26 others are sure to follow.

Also all the provisions in the Fiscal Compact apply only to the Euro Area states – the UK would not have been obliged to run a balanced budget or to submit to new Commission oversight. Notwithstanding this Cameron blocked both the Protocol 12 route, and the full treaty route, since both required unanimity. This left the option that was taken. However Cameron has gained nothing, since Lisbon is exactly the same this week as it was last week, and the new treaty simply doesn’t address any aspect of financial services legislation. This has got to be the biggest diplomatic EU blunder in years, and quite frankly I don’t think Cameron will recover from this. He didn’t protect anything since the old rules are the same as they were and the new rules don’t address the area of financial services.

What I think would have been in Ireland’s and the UK’s best interests was that high-level teams from both countries spent the week before, in Belfast, say, carefully working out a co-ordinated strategy that would have seen both adopt a Protocol 12 baseline position, and then allowed Germany to offer sweeteners to bring them both over to the full treaty side. Before the summit this would have allowed Ireland to bring some realism to the UK’s insane negotiating position, and at the summit the UK (maybe) could have shown some solidarity with the Irish government’s demand for debt reduction. It appears that Mr. Kenny’s negotiating position was “We want some debt reduction, but if we don’t get it we’re not going to block anything or cause any trouble”. I’m sure Van Rompuy replied “Thank you very much for your comments, Enda, your position has been noted”. There was really nothing to loose with this approach, and both countries might have gained something.


That Telegraph story is interesting. Draghi did a fairly convincing job last week of explaining that the ECB would adhere to both the letter and the spirit of the treaty, in that the ECB would not fund government debt. He explicitly ruled out both timing secondary market purchases to coincide with primary market auctions, and funnelling money through the IMF.

Then the EU Council declared the IMF would be given €200bn, funded from central banks.

The two positions don’t square up. One possibility is that Draghi is just another smooth-talking Italian, who will say one thing, and then do another. Another is that the EU Council took their decision without the approval of the ECB. There has been almost no reporting on the IMF aspect of last week’s deal so far, but this warrants much more scrutiny.

@Colm McCarthy

“Should a referendum be needed in Ireland to implement any new treaty, a reassuring visit from the president of France is unlikely to help.”

It might not help but it would be great fun to have him come here during a referendum to give a public speech somewhere in Dublin… that’s assuming he’s still in power by the time we get any referendum and you can bet there are plenty of people out there who want to find a way to avoid that.

So, what can we expect this week:

Bank and/or Sovereign downgrades?
Bond yields in vulnerable countries spiking?
The silent run on various banks stepping up a gear (already happening)?
Even more volatility in the meerkats?
All sorts of legal problems with latest proposals coming to light?
Various EZ PM’s finding out that their MP’s don’t like what’s going on at all?
The latest Greek bailout deal or PSI talks falling apart?
EZ politicians all knocking off early for holidays and not around when the next big crisis hits before Christmas?
Our debts continuing to mount up….

So on ad infinitum.

@Bryan G

“One possibility is that Draghi is just another smooth-talking Italian”

That is a distinct possibility.

@DoC: “The crisis emerges from a false narrative: that economic problems are the consequence of too-high labor costs rather than too-high energy cost.”

Not to worry. Folk only ‘hear what the want to hear’.

Later, these same dorks (the faux sort) loudly proclaim, “But no one saw this coming”. Correct, ’cause it was a verbal warning, not a visible one.


@Mickey Hickey

re “The privatisation of profits and socialisation of losses so valued by the Americans and British has hit the rocks in Germany and is losing favour in other EU countries.”

To my knowledge the fiscal compact explicitly rules out any PSI involvement. That is now what all Europe must sign up to. So any losses will be paid by the taxpayer, whether he or she likes it or not.
Germany has talked the talk about PSI but the bottom line is Germany and German banks want their money back. If that means socialising the debt then that will be done.

As I understand it the proposal by Germany, France and others was for PSI in Greek gov’t bonds in return for an agreement by the bond holders that it was a voluntary arrangement and they would take a 21% Net Present Value cut. The 21% NPV cut would have been absorbed largely by German, French, British and other banks. Private Equity firms ( largely US owned) who had bought their bonds on the after market at reduced rates sued to make it an involuntary arrangement in order to rope in CDS default compensation. Since the structure of the PSI deal was crafted to avoid bankrupting US banks who held the CDS liability the deal fell through.

My interpretation is that PSI is alive and well but it cannot be structured to force bondholders into relatively small voluntary haircuts if they have bought CDS (largely issued by US banks). This eliminates voluntary haircuts on bondholders who bought CDS, presumably the vast majority. The outcome is that the PIIGS can still formally default individually or collectively and that is the implosion that will send shock waves through banking systems world wide.

The whole focus is to protect banks in the US and EU as a whole from contagion. Thinking in the EU/EZ has to be that involvement with Anglo (US, GB) institutions including gov’t is toxic as they are an impediment to progress. Germany is on record as being opposed to the sale of CDS, insisting that they are weapons of financial destruction and risk should be compensated for by yield not by buying CDS from institutions which are highly likely to default on their obligations. Geithner’s visit to Europe to jawbone Europeans out of voluntary or involuntary haircuts on bond holders because it would lead to major bank failures in the US, lends credence to the idea that CDS are useless.

The foregoing is the austere protect banks at all costs scenario. As political pressure mounts in EZ democracies the focus will shift from protect the banks at all cost to protect the workers at all cost. Instead of throwing workers under the bus, gov’ts will be forced to throw banks under the bus. I am assuming that unemployment will continue to increase and social supports will continue to erode and this will cause repercussions at the ballot box and possibly before.

The world is frighteningly close to a world wide epidemic of bank, brokerages and Private Equity collapses. I heard the President to Iceland on the radio yesterday describe how only the Chinese had an expert grasp of the problems facing Iceland at the time of its banking failures. He said the country’s so called friends the British and Americans were more than willing to throw the Icelandic people under the bus and only the Chinese worked on a realistic plan and offered material assistance. Maybe Kenny and Noonan should be taking Mandarin/Cantonese language lessons. The pay back should be better than the Goldman Sachs consulting fees.

The Interview is at the 19:00 mark.
At the 59:00 minute mark there is a forum dealing with the latest EZ Agreement.

@thrifty, a cheap shot.

@Mickey Hickey +1 I believe CDS to be worse than useless… they provide an illusion which is dangerous…

Some time ago, I floated the idea of an alternative to the tobin tax…. CVAT… a contract value added tax… basically should be calculated as a very small % of total contract value and it gives the paying party the right to sue the other in the juristiction they pay the tax in.

No CVAT pre paid, contract is worthless….. I know there are major implications of this, major difficulties and serious work to make it real but I believe it would be better than trying to simply tax transactions. Introducing the possibility that a contract is worthless unless the CVAT is paid should provide incentive to paying and not trying to come up with ways to avoid it.

@ EP

Where the IFSC is especially strong today is in a distinct niche in fund management and middle and back office services. The introduction of the proposed Financial Transaction Tax would not impact many IFSC operations as those trades Dublin administers are, in the main, booked elsewhere.

Depfa and Hypo

investigation clearly show German concerns at the activities of German subsidiaries at the IFSC drawn there by the ‘light regulation’ .

Its fair to say ‘tax harmonisation’ proposals would close the attractive loopholes being exploited by those banks taking advantage of ‘fund management’

There is also a large and indeterminate level of mailbox CT companies routing funds through IFSC. See the Google 2.4% Double Irish in this bloomberg piece:

Other posters on this thread have drawn attention to the likelihood of closure of this loophole by the US if Germany doesn’t do it.

@ Colm Brazel

“Its fair to say ‘tax harmonisation’ proposals would close the attractive loopholes being exploited by those banks taking advantage of ‘fund management’”

Eh, thats not ‘fund management’ that you’re referring to, you have completely misunderstoof the term. Depfa was not a fund manager, it was a public sector financing vehicle. Hypo was a property financing bank. ‘Fund management’ is the likes of State Street, BNY, some of the Italian asset management companies based here, JP Morgan, Invesco etc etc. They’re real companies employing Irish accountants, lawyers, administration staff etc.

@ Bond

Eh, thats not ‘fund management’ that you’re referring to, you have completely misunderstoof the term.

Actually, you’ve narrowed its meaning to suit your own particular definition. I use it in the wider meaning defined here:

“Funds management can also refer to the management of fund assets.”

So I use it in the more generic form of managing and routing a companies profits through clearing house mechanisms as described by Kathleen Barrington and Bloomberg links.

Read more:

Never said Depfa or Hypo were not real companies employing Irish accountants, lawyers, administration etc. I did infer mailbox entities and certain other companies taking advantage of these loopholes have limited footprints. Its worthy of investigation.

I welcome corrections if I’m wrong, but not if i’m right!

Actually, I did use the term ‘by those banks’, it should have been better stated, ‘those entities’, so thanks for opportunity to clarify. I should say the links I gave above speak for themselves!

@ All

With regard to the blame game, the honours are equally shared between Cameron, Merkel and Sarkozy. Quentin Peel has a particularly good assessment from Berlin. However, he obviously has not paid sufficient attention to the speech made by Merkel in Bruges.

That from Paris is more colourful

What unites the three leaders is the fact that they put domestic, and notably electoral, considerations ahead of the broader interests of their peoples in a European context. In short, they are national politicians, and very mediocre ones at that, but not the statesmen needed at this critical juncture.

Id be interested to know why people are so sure that ECB involvment could resolve the Eurozone crisis. Wev had a lot of these ‘potential solutions’ that have turned out entirely underwhelming when implemented. Or by not being implemented, (burning the bondholders, no bank gaurantee, taking an apocolyptic position with the EU in negotiations), have become the solution that never was.
Also the idea of following Dave Camerons political ineptitude strikes me as bordering on insanity. We have to deal with reality as it is, not as wed like it to be. Perhaps a better policy in the future would be to actually have some foresight and prevent ourselves, as much as is reasonably possible, from getting into such situations. (Ie lets not join another monetary union anytime soon, agreed?)

“I believe it would be better than trying to simply tax transactions.”

Isn’t taxing transactions the point – i.e to eliminate fraud due to high frequency trading, and not to be an income generator. Rather analogous to the suggestion some time back to have a tiny charge per email, which would be negligible for most normal traffic but would virtually wipe out the plague of spamming.

@Amac yet Gmail managed to virtually eliminate spam entering peoples inboxes without charging for it and are making a profit out of their service.

There is a moral in that story for you and how free markets operate.

Oh and if any email operator started charging even 1cent per email, then everybody would move to those that dont (as would happen when this financial tax comes in)

BTW textmessages are expensive to send yet doesn’t stop some companies sending out text message spam…

Now think again about the stupidity of financial transaction tax.

Is the prospect of any FTT somewhat distant if only the EZ countries are talking about introducing it? They would just be shooting themselves in the foot if it wasn’t brought in worldwide, at the same point in time? I should think the chances of that happening are somewhere south of nil?

@Michael H

What is avoided is how a small economy that is facing a decade of high unemployment and that is dependent on American firms for most of its tradeable goods and services exports, should be doing?

It is essential to avoid this question. The purvey of all commentary is entirely dependent upon its avoidance.

The latest CSO figures today show unsurprisingly that employment is falling and unemployment rising. The rise in young adult unemployment should raise hackles but instead the signs are that the airports will be busier than ever in the New Year.

The government has no radical workfare plans. I suggested here in the past that a scheme involving work in exchange for the dole and mortgage paid, or interest only should be explored. Instead, the latest bout of talk at some distant convention of trenchermen has captivated the literate.

An observer looking in might ask why a small country with so many pressing social problems is still tossing about in the rainements of complex policies and responses, from the Smart economy, Croke Park Agreement, bank guarantees, credit guarantees, etc., that have gone nowhere near achieving their targets.

But rather than face the up to the consequences of major policy failures, the entire focus, almost, is directed at how the Continental trenchermen are doing. The house is burning down but the main preoccupation is guessing from which direction the fire brigade might come and how much bunting to have on hand when it does.

@ PR Guy
Eurozone politicians have demonstrated a boundless ability to shoot themselves in the foot, the head, their neighbour’s feet etc etc… at this stage nothing would surprise me.


Let’s start the week on a positive note …

‘What unites the three leaders is the fact that they put domestic, and notably electoral, considerations ahead of the broader interests of their peoples in a European context. In short, they are national politicians, and very mediocre ones at that, but not the statesmen needed at this critical juncture.’

Fully agree.

@Kevin Walsh

Rock and Hard_Place … not great choices, are they?


‘… a moral in that story for you and how free markets operate.’

free markets???? morals???? I love dark humour on a bleak afternoon in financial_system occupied EZ. Thank you for sharing such a deeply penetrating insight … much depreciated.


Winston informs me that he is delighted that the Treaty Negotiations with West Oceania and General Geithner went so “swimmingly”; and chuffed that the beer ration has been increased and that every third blue soma pill will be exempt from the 2% increase in VAT.

The poor eejit – and there are probably a lot more of them around.

Well? IsItSortedYet? IsItSortedYet? IsItSortedYet?

Didn’t expect so …


FYI [h/t blindbiddyhedgefund

* IMF Research Bulletin — December 2011: The Q&A in this issue features seven questions about about Large Fiscal Consolidation Attempts in the Past and Implications for Policymakers Today (by Fuad Hasanov and Paolo Mauro). The research summaries are “Booms and Busts” (by Roberto Piazza) and “Did Export Diversification Soften the Impact of the Global Financial Crisis?” (by Rafael Romeu). The issue also provides details on visiting scholars at the IMF (mainly from September through December 2011), as well as recently published IMF Working Papers and Staff Discussion Notes.


From a capitalist viewpoint, this socialism for the banks experiment is a disaster for us. Austerity is not working. Unemployment and emigration and debt that cannot be repaid plus democracy itself and a future technical government seem to be the future mapped out for us.

The government drive against unemployment touted in pre election promises has been a fail. We need to deal with our competitiveness and debt problems.

As Olafur Grimsson points out in the mp3 link above democracy itself is at stake here.

Plus very interested to hear how well he got on with the Chinese. Perhaps Olafur The Great 🙂 could send on some connections to us to help some smart people in government, if there are any, open up a dialogue. Our fishing/agri industry could benefit as well.

Though gordon Browne was no friend of Iceland, I’m certain George Osbourne and Cameron could be our friends, a medium term link to sterling?

Euro is finished and band aid compact rubberstamping to try to hide/avoid debt wont work and is unworthy of Merkozy who’ve been codded by the banks.

Long term the G20 need to come up with a currency solution that works.

DoD sarcasm doesn’t suit you, I have provided clear examples of transaction taxes/charges not preventing “negative” behaviour.

Anyways it was not millisecond trading that got us here, but incompetence of political and ruling classes. Every time Merkozy open their mouths this crisis gets worse.


Blind Biddy is taking up a “short” term position as ‘visiting scholar’ at the IMF .. Ajai, apparently, is a fan … Christine, apparently, is not amused.

They would just be shooting themselves in the foot if it wasn’t brought in worldwide

Exactly it faces the same problems as carbon taxes (China and US not giving a damn) not working until implemented world wide

And for that matter same problem as communism not working 😀 unless implemented worldwide

Which tells us that its a stupid idea 🙂 in a long list of stupid ideas
Oh and Irelands low corporation tax didnt get us here either, I dont understand Merkozy’s fascination with it, while they are barking on about it Europe continues to burn.


Irony, dear boy – Irony. Don’t do sarcasm … if casino capitalists wish to casino – no problem – simply transaction tax them at .. er .. 85% – gettin into this “qualified” majority stuff …. and you are ‘qualified’ I assume.

DoD please do paint to us how millisecond trading has caused any of the issues that led to the current crisis, and if a financial tax on transactions would have prevented this mess from occurring,

Do I need to remind you that here in Ireland large stamp duty did nothing to prevent the housing bubble if anything it made it worse by filling the government coffers with once of revenue which they then proceeded to piss into the public/welfare blackholes in return for votes.

Do you disagree with my assessment? or did you live in a different country for the last few years.

That was a really thought provoking interview with Mr Grimsson. It is about time this forum devoted another thread to Iceland where the reality of Iceland today can be compared with the dire predictions of a couple of years ago.
A couple of things struck me in particular:
1. The IMF has departed and commented that dealing with Iceland had been a learning process for the IMF – not the other way round. Can some of those lessons be applied in the EU?
2. His comment about the employees of the collapsed banks in Iceland. Basically that financial services had sucked all the SW engineering and other talent out of the rest of the economy during the boom. Now the IT sector is thriving due in large part to the redeployment of this talent.
A very similar point about the hoovering up of talent was made regarding the City of London in a BBC2 docu yesterday “How the West Went Bust”. All the talent is sucked into socially useless hedge funds etc. in the City to the detriment of other sectors. The point was also made that if the nr of employees in the City relative to GB population was proportionate to Wall st/US it would be 1/6th its size.
The IT sector in Ireland is finding it impossible to recruit at home and is forced to bring in thousands from India and Eastern Europe, Yet somebody posted the the IFSC employs 30,000. Something is rotten.

“There is a moral in that story for you and how free markets operate”

I appreciate as much as anybody the success of gmail in the elimination of spam. I don’t think that it proves anything about markets other than that there are numerous ways to skin a rabbit.
I’m not sure that DOD or anyone was suggesting that high frequency trading was the cause of the current crisis. Neither is the current EU compact adressing FTT as MickeyHicley points out – but rather that Cameron rather clumsily tried horse trading his support for the compact for the rolling back of part of Lisbon.


Its not ok for Cameroon to be “trading” and “banging on” key issues important to his electorate he represents

Yet its ok for Merkelozy (TM to moi!) to pander to their electorates fears of inflation or PIIGS doing them the Greek style and not compromise or negotiate on their positions.

@Amac A CVAT would have the effect of eliminating high frequency trading and I believe it would be much more effective than just trying to frame a tax law…

It would allow the other side of the trade a way to not honour the trade if the CVAT wasnt paid…. and so would be self policing…. As opposed to a tax which clever people on both sides of the trade want to avoid….. as its in both their interests… In this case, both sides want/need the protection of the legal framework if either side doesnt play fair.

It could also definitevely answer which set of regulators problem it is to resolve issues… CVAT had been paid to Ireland so its Irelands problem if that bank is engaged in fraud.

Major implications of it… but its worth exploring.

Yeah, the aim is not to raise money, imposing a very small but guaranteed % up front would break most of the models of ‘something for nothing’ which the finance industry specialise in.

And unlike a Tobin tax, I think it would be possible to introduce without global approval…. Ireland couldnt host a rouge IFSC (just take it as an example) as by removing protection from contracts that hadn’t paid the CVAT, there would be no point in trading. (The losing side simply says, try to sue me…. oh.. you didnt pay the CVAT… too bad)

Garry just like credit default swaps (a form of insurance) were supposed to protect bondholders only for the whole thing to be shattered by continued meddling from incompetent politicians?


For most people the clear implication of the global financial crisis and its European component was that the level of market regulation and transparency has been insufficient. Transaction taxes are only a partial cure for this but they would serve to make the financial market more fit for purpose.

It might help you to think about the financial market situation if you think of a Tobin tax as like a speed limit on a motorway. Car crashes will of course still happen without speed limits, and they mean that that expert drivers sometimes get home more slowly – but they make the road network useful and safer for everyone, and they reduce the cost of cleaning up huge crashes…..

Now obviously quants and Austrian Schoolers feel differently but they are composed of the overlapping sets of dangerous amoral tools and market religious fundamentalists.

Shay Begorrah
I am sceptical in the light of transaction taxes here in Ireland not only not preventing the bubble from growing but if anything made it worse.
Also I am sure of its failure since for this to work it needs to be implemented globally, and there’s no chance of that happening. All europe will do its make itself even more uncompetitive.

This is a pro-cyclical policy, whether one is an Austrian or Keynesian, that much is obvious.

And since when is taxation == regulation? A dozen people actually doing what they were paid for in our CB would have caused less issues if they actually “regulated” the likes of Anglo than any stamp duties of property taxes would have done.

@ Colm Brazel

1. “Funds management can also refer to the management of fund assets.”

Great. Depfa didn’t manage a ‘fund’. It managed its own portfolio of assets for the benefit of its shareholders. No one else. It was either a bank or a public sector financing vehicle or just simply a highly leveraged ABS vehicle.

2. The link to investopedia does say it all. If nothing else you’ve added an extra ‘s’ onto fund, and therefore gotten ‘funds mgt’, which is a different term to fund management. Here’s what a fund manager does.

Fund management refers to the management (whether by investing or just administering) of other peoples funds. As EP noted, it is now what most of the jobs in the IFSC are involved in. There is nothing dodgy or risky or immoral about it, it is a triving industry that can in almost no way be compared to Depfa or Hypo, nor are these companies based here just because of cheap taxation. As i said, you have to have a complete misunderstanding of the term to do this.

All insurance in my opinion encourage moral hazard – but CDS is unregulated compared with normal insurance, and – unlike say HFT – it is easy enough to make a case for CDS being a major, if not the main, cause of the current global crisis, originating in the US with the potential collapse of AIG. OK there is a case to be made that it was not the collapse of institutions which was the cause of the problems, but the subsequent bailing out -amounting to interference in the markets – which was the problem and I have some sympathy with that view.
Sorry – I probably misunderstood the CVAT concept you were proposing – sounds interesting?

To add if the proceeds from this tax were channelled into a fund for a “bad day” then maybe it would be useful, since this fund could be tapped if (no when!) there is another boom and bust. But that is not being proposed either.

Europe’s Suicide Pact [h/t nakedcapitalism

So, as far as I can tell what was announced on Friday night was nothing more than an agreement to push mass austerity into Europe while attempting to manage the servicing of the existing debts. The issue is, of course, that these two things are mutually exclusive.

There were three credible options that would satisfy these circumstances, outside of a true fiscal union, and all have large side-effects.

1) write-down the debts to a sustainable level pushing the losses onto private sector creditors.
2) Allow the ECB to “print” and fund nations to pay down their exising debts with the new financial assets.
3) A mix of one 1) and 2).

See Excellent Table of EZ Deficits 2000-2010 at the end ……

Germany broke the 3 on 7/11
France broke the 3 on 6/11
Italy broke the 3 on 8/11 (similar to Portugal)

(and we want to give any of these 3 a VETO!!!!!!!!!!!)
Ireland broke the 3 on 3/11 since 2008 …. similar to Spain
Greece broke the bank on 11/11

@Bryan G
On that IMF deal requiring more scrutiny….look what Sarkozy is saying today..
“In the Le Monde interview, Sarkozy said that actions announced by the European Central Bank last week to support banks will help keep credit flowing and avoid a “depression.” The ECB plan should also help ease tensions in sovereign debt markets, Sarkozy said.

“I’m confident that the ECB, in the future, will set the right strength of intervention,” he said.

Sarkozy said “not a cent” of state support will be needed by French banks.”

And all the markets go south!

@EIS…. its completely different, and addressing a different problem….
It’s a way to impose very small but guaranteed % cost to the trade whether the trade is a buying a share, an option, CFD, whatever…. All these trades depend on a legal framework for enforcement. Why should a hedge fund, a bank or anything else have a free ride on the states legal and commercial infrastructure?

A HF trader has the same legal framework protecting each individual trade as the person who buys a house once in their lives. Yet the house buyer pays per transaction.

Imposing a very very small cost or loss per trade would not hurt those buying or selling for normal business activities…. But it could be a way to stop the needless multiplication of side trades which often dwarf the original assets in total contract value… And whose unwinding is threatening the entire system.
It would significantly reduce the trading and force the finance industry to refocus and priotitize.

And by charging the finance industry a small % for the protection and use of the states legal system, it could automatically stop all evasion.

And on the transaction taxes in Ireland, one of the big problems NAMA is facing is the weakness of the securities on loans because the banks, developers and politicians colluded to provide and exploit loopholes for their evasion.
Which encouraged/facilitated some of the worst lending of the boom but the trades were seen as advantegeous to all parties as they were tax efficient… Making the clear case, No CVAT = No Legal protection would stop all that nonsense…

There are downsides and implications to it…


And since when is taxation == regulation? A dozen people actually doing what they were paid for in our CB would have caused less issues if they actually “regulated” the likes of Anglo than any stamp duties of property taxes would have done.

A financial transaction tax is a way of better regulating financial markets. One of its beauties of such a regime is that, in its own way, it is light touch. Introducing a regulation that trades had to be restricted to a certain frequency would be a huge technical and legal burden, charging .25% tax per trade is a trivial accounting exercise.

I understand your worry that capital mobility might make the regulations useless but there are strategies that would encourage the regime to spread (something like the proposed CCTB) by making the governments in other markets profit from a proportion of the trades. The behemoths of the financial industry are powerful, on the other hand governments globally are growing tired of the power. The time is ripe.

Lloyd Blankfein might cry, but he would get over it.

The time is ripe for European states to commit a collective hara-kiri!

the same states that have spent several years using leeches to “heal”, then attempted to cut their vein. But forgetting that the root cause of their obesity disease was overeating.

@EIS some lite readin

Bailout: Response to CriticsL. Randall Wray | December 10, 2011

most of that $9 trillion cumulative borrowing can be attributed to just five “drunk” banks, as shown in the following table from Felkerson’s paper:

Five Largest PDCF borrowers, in billions

Source: Federal Reserve

Borrower Total
Merrill Lynch $2,081.4
Citigroup 2,020,.2
Morgan Stanley 1,912.6
Bear Stearns 960.1
Bank of America 638.9

Clearly, these were troubled institutions—two (Merrill and Bear) disappeared as independent banks, Citi came perilously close to the cliff, and Morgan and Bank of America remain in some distress. Doesn’t the cumulative lending by the Fed contribute to our understanding of the depths of their problems?

Minor update: The Shannon Front Row has been stood down; General Geithner did not re-fuel in Shannon – probably wise; the U Owe US €30 billion stands – peanuts really ….

@ Amac

In 2005, the chameleon/spoofer President Grimsson was serenading the buccaneers who later brought his country to the brink of ruin:

With this unique track record, it is no wonder that young entrepreneurial Vikings have arrived in London full of confidence and ready to take on the world!

Of course, many factors have contributed to the success of this voyage, but I am convinced that our business culture, our approach, our way of thinking and our behaviour patterns, rooted in our traditions and national identity, have played a crucial role. All of these are elements that challenge the prevailing theories taught in respected business schools and observed in practice by many of the big American and British corporations.

We are succeeding because we are different, and our track record should inspire the business establishment in other countries to re-examine their previous beliefs and the norms that they think will guarantee results. The range of Icelandic success cases provides a fertile ground for a productive dialogue on how the modern business world is indeed changing.

@Bond. Eoin Bond

Enjoyed your post there, no wish to enter an epsilon on the pin argument with you 🙂

You do realise that we are now number 3 in the world on the list of tax havens. You are disingenuous in not referring to points I made re CT mail boxes 🙂

I’m sure a great deal of the business of the IFSC is a shining example of success and best practice in the financial services industry.

But a great deal of it is not and globally this sector is in great need of further regulation and control :

Merkozy wan’t to clean up a lot of the worldwide abuse that happens in that sector through changes to FTT and instituting new regulations for the affairs
of the Financial Services industry.

I’m a supporter of reforms to the murky
side of the financial services industry :

Note that the main protagonist in this tragedy is MIA and the chorus has also gone AWOL.

@ Alchemist

The ESRI published striking research report earlier this year which showed that long-term unemployed who were referred to agencies such as FÁS, where less likely to return to work compared with people who had no State referral assistance

Overall, the study says that those who are assisted by the State while unemployed were less likely to return to work than the average welfare recipient. The researchers say that welfare recipients may have learned “as a consequence of the process, that they were unlikely to face monitoring or sanctions as a result of failure to search actively for, or obtain, employment, leading to some decline in job search intensity.”

Brendan Keenan reports in the Indo today that Bank of America analysts say a new punt is likely to rise rather than fall because Ireland is more competitive than other struggling economies.

This wisdom from well-paid fools was before Friday’s report that Irish industrial production in October 2011 was 7.3% higher than in September 2011. On an annual basis production for October 2011 increased by 13.4% when compared with October 2010. The jump was mainly from the pharma sector.

One can wonder how much local processing goes on as employment has been almost static since 2004.

No fear of a dawn raid on Pfizer, responsible for 10% of merchandise exports!

So, magic again; unit labour costs dip again!

@Michael Hennigan
It is to distort the thrust of that speech and to miss the point, to imply that the remark highlighted referred to Bankers only:

and even the bold bit is taken out of context:

“Each time Britain sent the Navy to stop us but each time we won – the only nation on earth to defeat the British Navy, not once but three times. With this unique track record, it is no wonder that young entrepreneurial Vikings have arrived in London full of confidence and ready to take on the world!”


“Many examples can be cited to illustrate how our business leaders have managed to establish themselves on foreign markets. In previous decades we saw the success of our seafood marketing companies through their sales networks in Europe, the U.S.A. and Asia, and the remarkable achievements of our airline companies from the 1960s onwards when Loftleidir – now Icelandair – became the first low fare airline in the world, enabling the hippy generation to cross the Atlantic cheaply. These experiences provided an important training ground, but no one could have predicted the extraordinary success in recent years, a success which does indeed raise challenging questions about prevailing business strategies, theories and training in modern times. Let me mention a few success cases.
Baugur is indeed well known here in Britain, playing a major part in the retail sector, not only in London but also in Denmark and Sweden.
Avion Group, the specialised airline, is now the largest of its kind in the world. It recently opened its European headquarters in Crawley, close to London.
Actavis has become the fastest growing pharmaceutical company in the world, with production facilities in Bulgaria, Malta, Serbia, India and elsewhere.
Össur, the largest prosthetics company in the world, was created by an unknown Icelander who worked on his innovations in small rooms in the oldest part of Reykjavik.
Kaupthing Bank, which only six years ago opened the first branch of an Icelandic bank abroad, is now among the largest financial institutions in the Nordic countries, with operations in Europe and America.
Bakkavör, which a decade ago started in a garage in my home municipality, is now the largest producer of fast food in Britain. It recently acquired Geest, so expanding the scope of its operations.
I could go on to mention many other examples: companies in transport and food processing, machinery and software production, telecommunications and other fields.”

Your link didn’t get me the speech btw but here it is – quite a good one overall I would say:

Its been my experience that most of these Guys & Dolls would gladly work in Fruit of the loom type enterprises but they have been a victim of the credit / oil labour arbitrage / pump & dump model
See the Steve from Virgina quote from above which gets to the heart of the matter in my opinion.
There is something wrong with global accounting I am afraid – blaming slightly vulnerable damaged goods for this mess is out of order although there are clearly scumbags in any community.

I wonder if any body else thinks that this is interesting
It’s about Bretton-woods and how it seemed to work better than what we have at the momentl.
Sometimes its possible to connect too many dots but could a post Euro world look a little like this:
All different countries printing their own money and it pegged to an IMF currency.
I don’t know enough about Bretton-woods to understand it in more detail. If we had Bretton-woods in place over the past 10 years how would it have changed the growth of the credit bubble and how would it have facilitated our fix through it (can you devalue, for example, in the Bretton-woods system?)

Can agree with all of that article. Although a proper enforcement mechanism for the Stability and Growth pact is desirable -it is scarcely worth establishing a new organisation without the UK. It definitely won’t do anything to prevent future crises. Indeed, I have already written elsewhere how I believe it will actually make future crises worse.

However, I do not see a way to reform the Euro without a full fiscal (read transfer) union. Anyone that does not want to see that (including myself) must either come up with an alternative (I certainly can’t), or else advocate a break up of the Euro.

Therefore, right now, against all my instincts, I feel that a break up of the Euro is the best long term solution. Of course, it’s impossible to do anything like that immediately as it would effectively end our attempts to forestall the present, looming disaster, but long term, it’s either break up or cough up. I say we should be looking at how to achieve eventual break up of the Euro. The EU will survive such a change, contrary to dire warnings from interested parties that an end to the Euro will be an end to the EU.

The euro debt crisis is a 1 trillion euro problem that is growing at 50 bn a week. There is nothing in last weeks waffle summit that means anything other than the 200 bn they are giving to the imf, the question is how soon can they get the money back to partially bail out Italy and why route it through the imf?. The solutions are
1. Print money and inflate away debts – The Germans have said Nein
2. Line up the senior bondies for some serious haircuts – The French have said non
3. Bring down the interest rates by eurobonds or something like it were the credit rate of the germans is tarnished sligtly to pay for the PIIGS.

Austerity at this stage is no solution although I accept that each country needs to look for realistic savings that will not cause serious GDP deflation like what is happening in Greece and about to happen in Ireland

There was a element of final payment under the original Bretton woods system but it was pretty diffuse.
A SDR reserve currency fills me with dread because it would give ultimate power to a group of people completly divorced from nations executives.

There is a definite division between the US treasuary / NYFR system and the symbiotic European Treasury / CB continental culture
With the Washington FED & ECB forming a sort of higher echelon under the BIS system (remember the FED was refused official membership of the BIS by the US treasury in the 1950s)
But they are all highly corrupted by the power of the debt money system.

To get a feel for how the “Americans” view us and the rest this is a good example.
IRA Analyst – The Fed as the New Global Aristocracy: Walker Todd

Its on this website :
Institutional Risk Analytics
Creative Risk Management Solutions

Anyhow the Anglos are fighting a good game this week but I suspect the Sterling rise against the Euro today was orchestrated.
But if the Euro boys want a full credit based system with not enough money either Goverment or private to pay down debt then they are surely doomed and the $ will rise again.
But as for Ireland – I cannot but not see us in the Anglo sphere of influence , the deal has already been sealed with the French I imagine.

@Mickey Hickey

That interview with the Icelandic President was superb – oh to have leadership like that.For those who did not tune in it really is worthwhile – posted 9.41 AM today. Agree absolutely that there should be a thread devoted to Iceland’s response – while they were not spancilled as we are by the euro, their position in relation to bank debt and their respect for democracy contrast with our reaction.

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