In the event of a NO vote

Michael Moore of QUB raised an interesting point with me last week.  A NO vote would not affect our membership of the IMF.  Presumably, Michael asked, we could still turn to it if/when we need a second bail-out?  And recall that the troika – the coalition of the willing – was just put together because it was considered demeaning for the EU that a member state should seek a bail-out from entirely external sources.  Given all the indications of how much the IMF has changed in the wake of the Stiglitz critique, they might even have a better deal to offer than our EU partners.

Michael, of course, likes to lace his stews with chili.  But still… 

Then, though, it would be up to our American partners.  A senior IMF official confirmed to me over the summer the veracity of Morgan’s account of the Geithner veto.  Soundings to be taken over St Patrick’s Day at the White House?

157 replies on “In the event of a NO vote”

This has been mentioned in the comments section numerous times over the last few weeks.

Aren’t the IMF legally obliged to provide funds if we have lived up to our end of the current bailout conditions? Seems pretty clear-cut to me.

The likelihood has to be that the IMF will huff and puff and presuade the EU to provide ex-ECM funds to Ireland, in the event that we vote No and require a second bailout.

Now, will one of you guys who is regularily on the airwaves spell this out in black and white and dispell the government fearmongering on the issue?

Bravo for at least raising it.

Neither would a no vote in itself legally impact our membership of the EU. In a recent conversation I had with the US based CEO of a large US MNC operating in Ireland, he wondered out loud whether it wouldn’t be better for Ireland /Irish society to exit the Euro, but stay in the EU…….Staying in the EU is still important. As pointed out on a previous thread, access to the EU is a (one) big factor in Ireland’s attraction as a US FDI location and is likely to be for others also such as the Chinese. Maintaining Ireland’s low CT policy is part of the equation too of course.

Not so easy though to contemplate without the restructuring /write-off of Ireland’s dizzy Euro liabilities.

@ BF Agree, a no vote would not compel exit from either the Euro or EU. However, what are the benefits, after a no vote, of staying in the Euro versus exit?

bazza these issues are seldom in ‘black and white’ and as O’Bama could tell his weekend guests that he can only ask Congress to increase the IMF’s quota and most Tea Partiers are unlikley to give a tinker’s curse about the Auld Sod.

Besides, O’Bama hasn’t had much luck these past times in getting the misogynists and neanderthals on the Hill to open the purse.

The IMF also wouldn’t create a precedent by facilitating Ireland.

There isn’t much of a leap from the bubbletime delusion that we had invented the free lunch to resting our hopes on the tooth fairy – – because that’s what’s on offer here.

Sorry for being the bearer of news from grim reality.

On a positive note, there will be a tooth fairy from Dublin at KL’s Hotel Istana on Thursday night. There will be no need to haul the Guinness from afar as we have a local brewery. All we need is for you good folks to pick up the tab!

If this is a genuine attempt to move beyond the current ‘dialogue of the deaf’ and to explore the potential ‘Boston or Berlin’ choice, then fine. But I doubt it. It looks like another academic parlour game.

@Michael H,

Is your local Guinness not very sweet? Coconut milk or such like? Anyway, enjoy.

@Jagdip Singh,

Broadly agree with your summary of the implications, but surely you haven’t swallowed this ‘fire sale’ of the ‘family silver’ nonsense?

With its typical “I know you own them, but we’re keeping the information to ourselves” attitude the Government has given no indication of how the assets it has listed for privatisation amounts up to this magic €3 billion. I have no real handle on the other bits’n’pieces, but the BGE Energy Supply Business looks like a very dodgy business proposition – unless it gets a big dowry from the ‘cash cow’ network business.

On the other hand restucturing, re-financing and privatising the network businesses of the ESB and BGE could generate well over twice the Government’s target on its own, provide an excellent business proposition for pension funds and the like, generate proceeds in excess of the current book values (no fire sales here) and result in lower network tariffs that would feed in to lower final electricity and gas prices.

Such a privatisation would have a major impact on the perception of ratings agencies and bond market participants.

But there are too many deeply embedded vested interests that would be discombobulated, so we’ll get this half-arsed privatisation exercise instead.

Michael Moore is right of course. But what will scare many people about the IMF-replaces-Troika scenario is that the IMF would very likely want Ireland to abandon the Euro in order to create the possibility of an export-led recovery as wages are redenominated in punts. This is even more likely to be a requirement if Greece goes back to drachmas.

Assuming IMF or IMF /EU funding is made available after a no vote, what are the main pros /cons of staying in the Euro versus exit? If you are given executive responsibility to structure the way forward between those options, what do you do? Anyone?


The IMF just approved a $36bn loan to Greece which is approximately 3.6 times the “normal” limit of 600% of the quota. If that were applied to Ireland we would be permitted cumulative borrowing of about $43bn.

If neither IMF or EU funds were made available to us, a chaotic and contagious default would ensue which would likely lead to the fragmentation of the Euro. There is no way it would get to that.

This discussion does not seem terribly based on reality.

At the moment, who funds the IMF? US, EZ, and Brics for the most part.

Does anyone foresee a problem with a situation where a small, wealthy EZ country, fresh from having asked for one of the largest fiscal adjustment programs in history, and then deciding to vote No on a pan-EZ set of fiscal rules, can no longer be funded by other wealthy EZ countries, and is now looking for less onerous terms on a currently, in relative historic IMF terms, modest austerity program, to be funded by a mix of poor Asians and South Americans, EZ creditors we’re about to default on, and a progressively inward looking US administration?

Someone started the Paddys Weekend drinking early i assume?

One more point concerning the perceived lack of funding sources in the event of a No vote.

If we vote No, it will then be in the ECB’s interest for us to exit the current bailout successfully. They will not like the prospect of a messy default, of bilateral IMF funding or ex-ESM EU funding. Therefore, it suddenly will become much more important that we get a deal on the prom notes.

If we got a deal on the prom notes that reduced their NPV from €36bn to €20bn, say, then our exit debt/GDP will be around 105% or 108%. The chances that we can enter the markets with such debt levels are far higher.

On the other hand, if we vote Yes to this treaty, the ECB can, without consequence, continue their current line of argument: impose further austerity and if that fails, there’s always the ESM. And on and on we go, ceding more and more sovereignty with each successive bailout.

@Paul W
With IMF/EU funding or IMF-only funding, it’s really for them to decide whether or not we stay in the EZ. The main consequence of quitting the EZ is that we rapidly reduce our costs in foreign currency, with the usual advantages and drawbacks.

The point you make is valid in the sense that an IMF package probably wouldn’t be very large. But AFAICT Michael Moore didn’t suggest that it would be.

So most here seem to say stay in the Euro….but if No is the vote, we don’t have the backstop. Then? Are we without any options? Is our fate one way or the other wholly in the hands of others?

Force a selective default on the bank debt side but maintain our Sovereign debt service obligations? IMF is supportive of the approach; the EU /ECB is not.

If Ireland voted “no” would the ECB do something dastardly like force a change in the law that governs Irish bonds to English law like they did in the case of Greece ?

Thank you, Mr. Bond. This is a ‘lesser of two evils’ choice and there can be no doubt that Berlin is by a long chalk the lesser. I had hoped that this post might have encouraged some rational consideration of Boston that would lead to a recognition that it is the greater by a margin even bigger than the one by which Berlin is the lesser.

Many people seem to think voting ‘no’ is a safe option on the basis that they can feel good about raising the two fingers and Official Ireland will muster encough ‘yes’ votes to protect them from their vainglory. I just wish people weren’t being asked to vote on something that will be hypothetical for some time, that is not yet ‘fit-for-purpose’ and that facilitates a ‘dialogue of the deaf’ and potentially dangerous posturing.

Paul W: “IMF is supportive of [bank-debt default]; the EU /ECB is not.”

That’s one big difference with being ruled by the IMF rather than the Troika. The other is exchange-rate policy.

Paul W,

What bank debt will there be left to “selectively default on” by end 2012? The PNs come to mind but you probably could not unilaterally touch that and stay in the Euro…yes/no?
It would be best to plan on a no vote resulting in an accelerated fiscal adjustment. Anything other than that would be a positive surprise.
As regards they contention that “they (ECB etc) would not do that, would they?” Well they might “pour encourager les autres”.

@ KD How do you think the markets would react in such a situation i.e. to the selective bank-debt default? Would the markets be there to assist the IMF fund the Sovereign Debt side? Afterall, without the bank-debt, Ireland is solvent? There would be a need still to remain in Euros to repay the Euro Sovereign Debt, presumably.

@ Kevin

so we say No, leave the Euro, default on our debt, and re-puntification? This is i assume why you believe there would be no need for a large IMF programme. Questions:

1. we’re buying imports with what now?
2. will there be a functioning economy left for the IMF to try and save?
3. surely there’s a downside to this? Complete annihalation of of the vast majority of our wealth perhaps, whether via banking run or via devaluation?
4. Given that we “chose” to do most of this to ourselves, i ask again, why on earth the IMF would seek to help us?

The IMF will not act as the main funder. They will mot lend unless they are assures that other funding from other sources will also be made available to the country under the plan sponsored or co-sponsored by the IMF.

Therefore, unless another source of funding other then EFSF/ESM/EU is found, the IMF will not support any further scheme.

Presumably, this means that unless the markets bail in as part of an IMF scheme there will be no IMF scheme in the absence of ESM/EU support.

Any market supported programme might necessarily involve credit default events which the ECB/EU will not contemplate. Notwithstanding that it is in accirdance with the IMF’s raison d’etre, it is difficult to imagine the IMF facilitating a country defaulting on its debts in the teeth of opposition from the major EU powers.
(…except perhaps Germany who sometimes recognise that pain and default cannot be avoided without massive moral hazard???).

Also, let’s not forget that it was Geithner who vetoed haircust for senior unsecured bondholders of Irish banks…

@ zhou Remember, our Sovereign Debt is still EU /ECB funded and liquidity supported. We are now selectively defaulting on our bank-debt (“proportion”). The EU /ECB is furious. IMF and markets say Ireland is otherwise solvent so willing to refinance some or all of the Sovereign Debt.

How different is this to the recent writedown of Greek debt? Credit events were called on that, without a hitch……the Geithner interjection was at a different time, in a different overall context.

@DavidG Surprise, surprise. N Europeans will not restructure gratis…Did the Irish Govt really think they would? EU /ECB will have its money back and will sweat Ireland ad nausea until the debt is repaid. The Programme is debt collection; nothing else.

Nobody has been able to describe in clear terms how Greece would be able to leave the Euro .The same problem would arise with Ireland.Leaving the Euro would mean a huge devaluation of the punt with a corresponding reduction of the standard of living of the Irish consumer. The multinationnals will have no desire to keep their profits in the floating currency of a very small economy.
If the answer is “no” there will be a mad scramble by the politicians to explain that the Irish people did nor really mean it and to organize a second referendum .Asking Mrs Lagarde to intervene at that time is a little naive.

@ Myself One big difference with Greece of course after the bank-debt selective default is that Ireland’s Sovereign Debt is then sustainable (85% mentioned somewhere).

@ Bond

“4. Given that we “chose” to do most of this to ourselves, i ask again, why on earth the IMF would seek to help us? ”

Its called Capitalism, markets only concern themselves with the present and the future. Reevaluate, negotiate a debt writedown with lenders based on ability to pay, clean the slate, make the economy more competitive and recover from delusionary economics based on fantasy, penury, debt bondage and slavery, cleaning the slate. Ireland in that scenario has a lot going for it. I’d expect a fairly immediate recovery rate with employment coming down to under the 10% helped among other things by tourism and a drive towards import substitution and more self reliance. As you know, Grimsson and Iceland were held up as scarecrow, Armageddon when similar prophecies of doom were made. Iceland has unemployment rate of 7.5% and is not suffering the massive hemorrhage of its brightest and most able bodied that we face.

Re Frank Barry above, “Soundings to be taken over St Patrick’s Day at the White House?” Err no, wouldn’t tip off Geithner who won’t want to take the flak from Irish default anyway, Wouldn’t ask Sutherland, Dukes, Spring et al, the Irish banking fraternity, its called unilateral action a la Mariano Rajoy or what we’ll get from Francois Hollande, but not from the crew of the MAry Celeste.

@ Paul W

Re ” Sovereign Debt is then sustainable ”

Less than 3% growth rates reinforced by the damage of further austerity cuts, means ‘Ours?’ isn’t !

@ Colm

you can use, repeatedly, emotive, but pointless, words like penury, slavery, debt bondage, the Titanic, the Mary Celeste blah blah blah, but it doesn’t change the reality of the situation – the IMF is funded by people who are either poorer than us or who it is being suggested we go head to head against, either pre or post defaulting on them – we’re 4 mio people on the periphery of Europe and surrounded by some very large bodies of water. We have far more negotiation power within the EZ rather than outside it. Voting No on the basis that the Chinese will come to our rescue is naive in the extreme. The Icelandics tried it first with Russia, then with China, now with Canada, although they are now freely admitting that it’ll probably be either the Euro or something closer to home like the NOK. They are not the poster child for how a country can default and recovery, they’re the poster child for how capital controls mean you can go into stasis for a few years, before eventually having to figure out where you go next, even though “next” may be a very small list of not great alternatives. As soon as capital controls are brought down, whatever wealth is left in Iceland will start to flood out.

@ CB Yes, I was going to mention that (but was apparently blocked – my first censorship here!). How long should we wait for the Programme + pending FC to grind us down to the point where our Sovereign Debt is no longer fiscally sustainable? Can Ireland rebound within the Euro?

Besides the creditors being angry (unlike Greece, they will feel that we have plenty of flesh left to service their debt….but no one else will have sympathy, not IMF,not markets…, what other consequences?

At least the crs get paid in Euros on the Sovereign Debt.


“they’re the poster child for how capital controls mean you can go into stasis for a few years, before eventually having to figure out where you go next”

Substitute “capital controls” for “troika bailout” and you could be writing about Ireland. No matter what way you cut it, 115% public debt and 400% private debt is not sustainable and will have to be renegotiated.

We have a far better chance of renegotiating our debt by voting no to this treaty. A yes vote will simply mean ESM funding for the foreseeable future with no say in our own affairs, including taxation.

@ Bond

Re “As soon as capital controls are brought down, whatever wealth is left in Iceland will start to flood out.”

Blah, blah also from you on this pet theme of Icelandic capital controls. Iceland is in strong recovery mode by any index that matters, including unemployment levels. It has negotiated successfully debt writedown with its lenders.

From June 11 last year IT celebrates Iceland’s successful return to bond markets.

Re ” you can use, repeatedly, emotive, but pointless, words like penury, slavery, debt bondage, the Titanic, the Mary Celeste blah blah blah ”

I guess I’m more Boston than Berlin in calling a spade a spade, but apparently I’m in good company Prof Hudson above debt-slavery .

Apparently this is too close to the bone with you with this nonsense, ” We have far more negotiation power within the EZ rather than outside it. ”

Irish negotiators like to inflate their ego’s with this nonsense. What we’ve negotiated sofar with this mythical negotiating power sofar is nothing short of humiliating and an embarrassment apparently even to the IMF.

Keep deluding yourself though 🙂 But watch the Spanish pass us on the queue of debt joining the Greeks who’ve already passed us out, “Ireland will not be seeking similar concessions..” just announced by Enda Kenny…

@ Colm

after a 10 second google of Professor Hudson i find out his pet subject is “parasitic financing”. Its possible he has a one sided opinion on defaulting. Just saying.

On the Icelandic bonds, are the buyers of these bonds smart, or just good traders? Do you think they’d buy Irish bonds? Note: this could be a trap.

Summary of where I am:

(A) Ireland says yes and continues as it is, grinding along with high unemployment, low /negative growth, etc. Don’t expect (and won’t get) debt relief. Fine, vote yes, but then don’t complain and get on with it.


(as yet UNCHALLENGED here)

(B) Ireland takes this opportunity to say no, stays in the Euro (like Greece) but pursues and is prepared to selectively default on its bank-debt (like Greece)….Accepting that one must follow through as there is no halfway house “negotiation”possible on debt reduction /write-off with the EU. I cannot see how IMF and markets support will not be forthcoming, particularly as Ireland’s Sovereign Debt then appears sustainable. In short, there would appear to be feasible funding options /strategy, despite all the Irish “fears”.

Is it the case therefore that the Irish Govt(s) have put the Irish people through misery, etc. for the sake of remaining “friends”with the N Europeans, when such friendship is nothing these days but a debtor /creditor debt service relationship and not much else?

Is it not worth it to consider pursuing (B) as opposed to (A)? If it is, could the Govt and senior economists put the options to the people in a balanced way?

My piece is said.

I think worth considering that in the event of a yes vote any reasonable requirements from our side will be treated as contemptibly as Spain has been.

In that light are the consequences of NO any worse as they would be for Spain who is now cutting to the bone for what purpose exactly

@ Paul W

“but pursues and is prepared to selectively default on its bank-debt (like Greece)”

This is confusing. What bank debt do you refer to? What bank debt did Greece default on?

Question – what % odds do you put on Greece still being in the EZ in 5 years time?

We’re not trying to remain “friends” with N Europeans. We simply want to be as wealthy and affluent as them. We thought we got there in 2005. We generally want to try and do it again.

Greece will see a cumulative reduction in its standard of living of around 25% as a result of this crisis, and this will be made worse, and then crystalised, if it decides to try a course of action outside of the EZ.

As i said before, complete sovereignty and high standards of living may be mutually exclusive given out current structural economic dependance on the EZ. Trying to attain that standard of living outside the EZ, and without some natural resource find, would probably amount to a 20yr+ plan which may or may not succeed.
ollie Rehn has said no to any squelching of the Anglo notes
““I actually wonder why this has to be asked at all because the principle in the European Union and in the long European legal and historical tradition is – in Latin – pacta sunt servanda, respect your commitments and obligations,” he said.

“The European Union is a community of law and that assumes by definition that each and every member state respects the commitments it has undertaken and this is valid in the case of Ireland as well.”
Or as they say in Finland “Ota vaellus Paddy”

@ All

If Ireland votes no on the basis of some of the arguments advanced here, the country will wake up with the mother of all hangovers. BEB has advanced the reasons why this is best avoided.

For those dependent on the public purse for their income, in particular, the impact of a possible collapse in confidence and a return to high interest rates, in circumstances in which it would be unclear as to where the country might turn for assistance, can easily be imagined; immediate cold turkey in terms of the capacity of the government to fund itself.

Fintan O’Toole sums up the flight from reality prevalent in much of the debate. Pointing out the obvious may be taken as coercion by some. But that does not change it.

@ EB True, much of what was non-sovereign debt is nowadays refinanced as sovereign debt, but it should be possible nonetheless to numerically separate.

The odds of Greece being in the EZ in 5 years time is low….because its restructured position is still unsustainable…..A classic case of the Creditors only allowing the Debtor the minimum “food” to live and work on while it pays off its debts…..Again, the N Europeans will give you nothing, and want you only to have sufficient to be able to workand produce to pay off the debts.

If you think Ireland is on the path to wealth and affluence again, please vote Yes.

Under (A) Ireland is heading for significant living standard reduction too…..just a matter of time, in my opinion.

Not suggesting living outside the EZ; rather fight one’s corner far harder within it. I agree with the various comments that Ireland’s negotiation stance has been and is an embarassment.

@ All

I see that Ollie Rehn has punctured one balloon which has had quite an airing on this blog.

What a surreal debate, I wonder why BEB bothers.

Vote No, leave the euro, default on our debts, trust to the IMF…nonsense, nonsense, nonsense, blah, blah, blah…

Why not vote Yes and default on our debts, boy would those fiscal debt brakes and deficit limits be easy if we simply don’t pay our debts.

Great to see Ollie throw a bucket of ice over this Promo Note joke. A lotta people are goin’ to have a lot of egg on their face when we ever get to the end of this one. Oh sure, there will be some tinkering around the edges but dare the government claim a victory? The likes of Morgan Kelly etc. will be down on them like a tone of bricks.

Ok – can I test these:
1: Is bail out the correct term? It’s not a bailout if I transfer my credit card balance to a new credit card. It’s a transfer of debt. Could we stop using bailout and use transfer of debt instead?
2: If we cannot transfer our debt to the ESM and the IMF don’t want it then where does it go?
3: Repuntification means that the value of the punt is set by the wealth generated in the economy – it does not mean zero value. Correct?
4: If I’m an MNC and Ireland goes punt – can I still buy raw materials in Euro and transfer them to my Irish operation?
5: If I’m an MNC and Ireland goes punt doesn’t the cost of labour fall too?
6: if Ireland defaults etc won’t there be a systemic shock to the Euro itself – i.e. who would sign a contract in Euros with Portugal (for example) if a precedent was set that it could be redenominated in Escudos
7: The rule of law is only a vague notion. It is a concept that helps us order our world. It, in fact, doesn’t exist. It is the rule of enforcement that matters. If a law cannot be enforced it doesn’t exist. This asks -so how do you enforce debt repayment on a sovereign apart from invading it?

@ BW II You clearly haven’t been reading the blogs properly…..The point was reached early on that Ireland would keep the Euro and stay in the EZ….”repuntification” was not pursued with any vigour.

What is otherwise argued is nothing too different to what has actually happened with Greece except that, after restructure /write-off, Ireland is left with a sustainable Sovereign Debt and some hostile (for awhile) crs, but with refinancing options.

ffs eureka “This asks -so how do you enforce debt repayment on a sovereign apart from invading it?”

You find traitors who will collect for you and install puppet regimes…

You make it so the ruling class are last to starve


I see that Ollie Rehn has punctured one balloon which has had quite an airing on this blog.

I think that the balloon that Commissioner Rehn (who is rather round and balloon like himself) has punctured is the fantasy of us having partners in Europe rather than imperial masters whose primary concern is debt collection and dictating right wing economic dogma for us to write into the statue book. These parties are ably assisted by the the EU’s fifth columnists in Ireland.

At every turn those who advised following the ECB/CDU line (protecting the bond holders, taking the bailout soup and now signing the fiscal compact) have made Ireland more vulnerable to advance their own financial, political and class interests.

The Latin that would best serve Ireland’s national interest would is a “Non serviam”, unfortunately Enda with his EPP allegiance is not the man to say it.

@ Garry
As I said – only testing them.
You’re right. Depressingly.
Still 6/7 left to go.
Ah – who am I kidding. This battle is lost

Something very strange and sinister is happening to this country.

Reading yesterday that Kerry county council is banning people from swimming near piers …….. charging for parking on beeches and quite extraordinarily preventing photographers taking pictures of sand and stuff.

Meanwhile the fine land on Durseys southern aspect is likely to turn fallow from the actions of the EU safety Gestapo.
If people continue to farm that beautiful Island they are much more likely to kill themselves on its treacherous sound.
I guess that won’t matter once we fill in the appropriate safety forms.

Our culture is under extreme attack – this is quite clear to see.
Its long past time we pick sides don’t yee think?
But most of yee want this macabre dance to continue for some funny reason.

Well … The Shannon Front Row are still holding that lil ol €20 billion note of comfort for Herr Geithner …. similar to the boys in Ravenhill they also have a taste for a half shovel of chilli in their stew …. and we could burn those prommie notes on The Ides – and at 50billion the Kiel Institure reckons that Hibernia would be .. er .. sustainable …and Ajai has also demonstrated some facility with handling the high slippery ball … and Ms Lagarde has a good bit of work to do for all those ‘porkies’ during her tenure as hostess for he who is soon to be consigned to the dusbin of vichy_european history …. as for Olli – well I didn’t know that the Brothers has ventured as far north as Laplan in their heyday … but what the heck … how many of us understand Latin these days anyway … Patricia the Irish Sovereign in Exile has been promised unqualified support from HRH … and if we give Wood Quay back to the Danes they will play ball … and the Spanish have been on side since 1607 and are staunch while the French are reconsidering their position ….

Options Options Options …. exist and remain extant.


Text from Blind Biddy: “Non serviam.”

@Bond. Eoin Bond: March 13th, 2012 at 4:32 pm
@ Kevin….

I’ve no idea why you address this comment to me. More appropriate would be:

@Voices In My Head….

Two excellent last blogs under What Would Change Under The Fiscal Compact? from Robert Browne and Bryan G. Guys, could you also please post here for everyone’s convenience and information. Highly relevant to this discussion.

3 and 4
The value of the punt will be set by exchange markets ,punts will be sold and euros purchased.
In Iceland the exchange rate went down 60%,the standard of living collapsed .Ireland is a bigger economy and will be more self-sufficient than Ireland ,still be prepared to pay a lot more for imported goods ,including energy and for Irish products ,like farm products whose price are set by foreign markets.
It is hard to pay back debts when your income collapses and that would be the case for a good many people since the level of private indebtness is one of the highest in the world.
The tax base would be strongly reduced and balancing the budget become very difficult.


David Stockman on ‘crony capitalism’ – an ‘insider view’ …[h.t b ritholz

Moyers & Company explores the tight connection between Wall Street and the White House with David Stockman, former budget director for President Reagan.

Now a businessman who says he was “taken to the woodshed” for telling the truth about the administration’s tax policies, Stockman speaks candidly with Bill Moyers about how money dominates politics, distorting free markets and endangering democracy. “As a result,” Stockman says, “we have neither capitalism nor democracy. We have crony capitalism.”

@ Kevin

Eh, ok. I’ll make it simpler, why do you, and/or Michael Moore, believe the post-No IMF program to be only a small one? The voices in your head may answer on your behalf.


while Olli Rehn may be correct, he’s also not – we have never suggested we would default or “not pay”, we simply want to explore the feasibility of delaying it. If not this payment, then some payment, somewhere down the line, whether principal or interest, is possibly going to be amended. Does this mean we have not fullfilled our obligation per Rehn?

Also, nothing smacks of Eurocrat creditor elitism than replying in Latin in regard to Ireland’s “obligations”. I’m pretty sure the government, both current and last, has been fairly good with meeting both our obligations, as well our non-obligations. You wanna give the No side a boost? Keep answering, angrily and scoldingly, in Latin, that Ireland needs to keep paying. Saying nothing might be more advisable. They’re their own worst enemey.

“….why do you … believe the post-No IMF program to be only a small one?”

Because the IMF won’t approve a large one.

@ Kevin

well, isnt that going to have pretty substantial negative implications for the economy? How is that different to the current austerity?

@ BEB “we simply want to explore the feasibility of delaying it. If not this payment, then some payment, somewhere down the line…”. You just don’t get the cultural difference, do you. In good company though…..the Irish Govt has again walked into a slap down, which was entirely predictable.

FYI Game Theory Mark_II

European finance ministers are discussing a proposed EU financial transaction on Tuesday, but the bloc is hopelessly divided on the issue. Not even Germany and France’s plan B, to only introduce the tax in the euro zone, has much chance of success. Key euro-zone members such as Ireland and the Netherlands are afraid of losing out.,1518,820965,00.html

& The SPD are linking this to support for Angela’s Corset in the Bundestag …

@Minister Joan

Nota bene!


Festina lente … but pay up ‘lente lente’ – which, mirabile dictu, you know very well is eminintly doable, feasible, sensible, and logical in an otherwise insane financial world.

@BEB: “…substantial negative implications for the economy?” Yes of course.


I agree that it is probably true that the government never sought, nor implied, a write-off. This is more than can be said for some contributors to this blog.

The phrase “pacta sunt servanda” is a commonplace in international negotiation. It simply means; “you make a deal, you keep to it!”. It is the basis on which the EU functions. (I wonder, in fact, if Rehn did not also have the Spanish, and Hollande, in mind).

Many contributors here, even eminent ones, appear to apply two standards, depending on whether the issue is being discussed in a national as opposed to an international context. In the national context, it is taken as read that everyone takes their lumps and “contractual obligations” must be met in all circumstances. In an international context, on the other hand, everyone is expected to be especially nice and cede to whatever demand we may make. Curious!

I should point out that you are talking through your legal rear orifice. Deals get modified all the time. Greece got rescheduled. Even Paul Hunt’s beloved Germania “defaulted” pre and post WW II.
This country managed to re- negotiate some of the adverse terms of the Anglo Irish treaty.
Civilised countries change the terms of deals all the time. Maybe civility is what is lacking in Central Europe as well as pragmatism.


Did I say that they were not?

The issue is whether the principle is accepted as the basis on which the EU functions or not (as the Spanish and the Hungarians are presently finding out).

The Greek situation is not a good example to be followed. And it will not be.

@ Tull Totally agree although, unfortunately, DOCM’s and BEB’s “strategy” seems to be the stance of Irish Govt… what end? Existing Irish debt levels are unsustainable (Ireland is a bankrupt). In these circumstances, debt write-off would usually be par for the course. It is in Ireland’s best interests that it happens. So why not now, with this referendum as a beginning point for a shift in strategy /negotiation.

@ Overseas
Thanks for that.
Those markets again – what did we do to deserve them?
Loads of interesting little hiccups along the way. I’ll emigrate and finance the revolution from abroad!

@ Paul W

Quite a few assumptions on your part!

As I have no information on the strategy of the Irish government, and have some difficulty in even guessing what it is from the cacophony of ministerial statements, I can only say that I hope you are correct.

I saw the Rehn clip. It looks like the usual pompous “ballsology” from a mid ranking bureaucrat who has no control over events. You make a deal you keep to it…until you can’t meet your commitments. In which case civilised states renegotiate. In each step of the way, the Gemano centric powers have set out to punish the miscreants against the advice of the IMF who is used to handling these situations. At the next step the “Germans” have been forced to recognise reality. The rates for programme countries have been cut, the deficit reduction profiles changed, sovereign bonds have been bought, emergency liquidity programmes institituted. It has always been a dollar short and a day late.
I don’t know how you can say that the Greek example will not be repeated. We probably came within days of italian default at Christmas and given the ineptitude of EU policy makers we will probably revisit the cliff edge again, particularly if Weideman keeps writing letters and trying to undermine Draghi.

Paul W,
A no vote is probably a vote for accelerated fiscal adjustment at the end of the programme. That is why, I am tempted to vote No. It forces us to recognis that we have no friends in the Central Powers of Europe and to live within our means and reform our own economy to wipe out PH’s famous gougers.
It might also mean,in certain circumstances leaving the euro, although that is not a given.
Since the Euro is not guaranteed to survive, given the ineptitude of its managers, we might be better off exiting anyway.

@ DOCM I agree that a fundamental difference between the “sides” here is based on the divergent views on whether Ireland’s debt levels are sustainable or not. The Govt clearly says they are sustainable and will be repaid in full (and yet childishly looks for rescheduling from people who predictably will never give an inch unless it clearly is in their interests to do so); the creditors obviously say so also (but they would, wouldn’t they).

Interesting debate although I still can’t make up my mind on voting yes equalling long and deep austerity with high emigration, run down of services, continually falling living standards for 10 years at least, or voting no with possible Euro exit and all the dire circumstances that may bring about.

I’m veering towards voting yes and hoping/expecting the whole Euro edifice will collapse anyway due to economic and political pressures in the bigger economies. That way, if we keep our heads down and suck up every patronising comment from our Troika overlords we may benefit from an orderly wind up of the Euro. My fear though is that it may take years of widespread austerity in Europe before some rough beast slouching towards Bethlehem finally leads to decisive action.

@ Tullmcadoo

Weidmann is out in force these days in the context of the Bundesbank making extra loss provisions and giving an interview to the FAZ on the Target 2 issue, underlining the point that the problems causing the build-up of balances can only be solved by governments, not the ECB or central banks. On the last point, he is simply echoing what Draghi is saying. Crucially, he backs away completely from the fundamental plank in the idiosyncratic Sinn view;

According to reports, he does not consider that the balances “represent an independent risk because I consider a breakup of the monetary union as simply absurd.”

@ Paul W

you seem to be confused – im a massive believer in a restructure of the prom note and have repeatedly noted that this is an ever moving and changing crisis, with solutions therefore ever moving and changing. Thats why staying within the current EZ institutions gives us the best position overall. You seem to think thats its possible to do all four of the following: Vote No, default, get a sole-IMF program, stay within the EZ. I’d argue you can potentially do one of those, maybe two, but no way three. Suggesting all four would make me question your general sanity.

@ Bunbury It’s also about whether Ireland takes an active role in directing its destiny, or whether it’s “safer” to allow the Troika look after us…..That in some ways boils down to National Confidence as there is no easy way forward, yes or no. That said, there has been no proper public debate thus far – the yes side has not been dealt with……little hope then that the no argument will get a proper airing.

As has been said in earlier threads, many don’t simply trust Irish Govt any more and so would rather embrace EU rule. Is that a reflection also that people have little confidence in the Irish Govt strategy thus far? Do the Irish people believe that the country’s debt levels are sustainable? Are the people in capitulation mode?

Terrific debate folks. Spitzenqualitat. Paul W has added a lot of pace to the forward line.

Whether it’s yes or no, the matter is being well aired. You might be surprised at the readership of this board.


‘According to reports, he ( Weidmann) does not consider that the balances “represent an independent risk because I consider a breakup of the monetary union as simply absurd.”

He ought to read a few history books. Honestly.

@ Bond

Can I lend you a copy of Hudson’s 1972 Trade Development and Foreign Debt ? Unputdownable.

Better still David Graber’s ‘Debt: The First 5000 years’. That’s what I call the long end of the curve.

@ BEB My blogs suggested IMF + markets funding “some or all” of the financing /refinancing needs…so room in there too for the EU (likely anyway). Never said sole-IMF.

If you don’t believe that Ireland’s debt levels are sustainable, then it is very difficult to believe that the country /Govt should continue with existing strategy. As Robert Browne’s blog on the other thread earlier said, voting yes is therefore a vote for continuation of same/the status quo. If voting no is otherwise, is it as the Govt says a vote to exit the Euro? Absolutely not….certainly not necessarily.

Again my point is that there are alternatives /options. What I am suggesting, at least for consideration, already has “like” precedence in the case of Greece. You say that this is not possible (as does the Govt without actually trying) and yet you claim to be “a massive supporter of the restructure of the prom note….”. Very contradictory….you are in words but not perhaps in action?

Yes, the country can of course vote no. That implicitly brings up the possibility of selective default….but you can’t do that unless committed to seeing it through if that is how it turns out. Just as with Greece, it is difficult to contemplate lack of funding for Ireland…IMF and EU would have to come to the table. The fact that Ireland’s underlying Sovereign Debt level is sustainable could facilitate markets’ participation. Finally, how exactly will Ireland get thrown out of the EZ…..hasn’t happened to Greece (albeit ref again my answer that Greece’s restructured position is still unsustainable…Ireland’s wouldn’t be).

If the Irish people have lost all confidence……that’s another matter. Has the country the confidence to try an alternative strategy? (is there a better one than my outline?). The alternatives do exist,albeit not easy. However, are they any less easy than years of grind under the status quo?


Herr Weidmann is in a frantic ‘damage limitation exercise’

He got educated from within The Bundesbank by Jens Ulbrich & Alexander Lipponer

By Professor Karl Whelan – unquestionably Europe’s leading expert on Prommie Notes, who for some reason remains in the Trappist monastery in Clonskeagh

By his mentor Axel Weber – who, a reliable source informed Blind Biddy, was furious at such a damaging error of “fact” from his protege …

& By his experience with Herr Professor Sinn on the dangers of taking zenophobic and roight error-prone celebrity deutsche economists seriously ….

Most damaging, PaddyPower.kom now has him out to 27 to 1 from evens as the successor (sic) to Herr Draghi. Silly man …. tut tut tut …


I hear you neither confirm nor deny that you have been short_er_listed for the IdesMatrixsQuideque Spinner award this Thursday? Tull doesn’t even get a mention …


Eurozone crisis
Spain disappointed by Eurogroup deficit demand
13 March 2012 Presseurop El País

The European partners are insisting on the credibility of the policy of budget cuts to calm the interminable euro crisis. Europe has made it clear that there is nothing more important than austerity […] and responded to the challenge of Rajoy. […] Spain is the new frontier of fear in the EU: too big to fail, too big to be bailed out and too big for the markets to forgo a lynching for violation of 2012’s deficit targets. […] The punishment is in line with the challenge: everyone was expecting a reprimand [while acknowledging the target of 5.8%], and the Commission has demonstrated that it will not make concessions.

The IMF are legally obligated to do everything possible to protect Ireland’s major (as in too big to fail) creditors.

In the event of a No vote to suggest that we will find refuge under the merciful wing of the IMF is the ultimate in wishful thinking. Without the ECB and its 1% interest rates we are a well cooked goose.

Left to the tender mercies of the IMF we are guaranteed 20 years of poverty as the IMF squeezes the life blood out of Ireland and sends it to the banking capitals of the world. Please look at the IMF record in Latin America and pay careful attention to how Cristina Fernandez de Kirchner, President of Argentina treats the IMF.

Bargaining power is lacking but it should be possible to create some. There was blood on the streets of Athens with politicians being rescued by helicopters and armoured personnel carriers. In Madrid the crowds were impressive but not yet violent except for isolated instances.

Enda and da biis are busily placating the populace instead of riling things up in a way that will give us 20 days of headlines around the world. The headlines we need are . Is Ireland headed for economic meltdown due to austerity or will they go straight to civil war. Major European banks tottering due to Irish crisis, Germany’s Chancellor Angela Merkel addresses the Bundestag in extraordinary session at midnight tonight.

Now we have bargaining power, bankers running to their politicians for bailouts. Portuguese politicians thanking us profusely for our new found cojones. Our pathetic surrender to Geithner and Co. overshadowed by the new developments.

Personally I think we will have to wait for an election and hope for the best.

Has anyone else a practical, viable (albeit no doubt not easy), better alternative strategy to the Irish Govt’s present status quo approach?

Appreciate the blog, Mickey Hickey. Yes, bargaining power…..including the idea that a situation could be /may be improved…

““I actually wonder why this has to be asked at all because the principle in the European Union and in the long European legal and historical tradition is – in Latin – pacta sunt servanda, respect your commitments and obligations,” he said.

“The European Union is a community of law and that assumes by definition that each and every member state respects the commitments it has undertaken and this is valid in the case of Ireland as well.”

Eh, just wondering about those Greek bondholders that had retrospective legal provisions inserted into their contracts on their greek sovereign bond holdings?

Interesting that some are reported to be going to court in jurisdictions where the principle quoted by Ollie really apply.

Really, we have listened to so much sh1t from Ollie throughout this crisis that anything he says should be treated with the utmost disdain.

theres always the option of leaving the EU and applying for membership of ASEAN or NAFTA

@ Paul W

you seem to be mixing up a lot of different moving parts, and conferring on them the title of some sort of “strategy”. More worryingly, you seem to be suggesting we “do a Greece”. For clarity, Greece’s economy is facing complete implosion in the short term, followed by a 10-15 year Troika rebuilding process, which no one is particularly sure will even succeed. There’s probably a 50% chance they are not even in the EZ in 5yrs time. And this is the example you want us to follow?

On the promissory note, a term-extending restructure of a quasi-QE instrument, originally created to rescue a failed bank, is completely different to Greece applying a hard-haircut on both the principal and coupon of its outright sovereign debt. To compare the two as being alike suggests a deep misunderstanding of the differences.


A point of information on the above:
“On the promissory note, a term-extending restructure of a quasi-QE instrument, originally created to rescue a failed bank”

Was Anglo still ‘functioning’ as a bank at the time the PN note was originally issued i.e Was it formally a failed bank at that stage?
In other words was a recovery envisaged at the time the PN was issued?
Or was the PN always to a dead banks, being a direct transfer from State funds to private individuals?
I am not fully clear on the timeline at this point. The timeline has faded into the mists, the PN regrettably has not.

@Bryan G (4.01 am)
re EC statement on Greece, July 2011.

“Fiscal discipline and privatisation receipts will achieve sustainability ”

March 2012: EC again
‘pacta sunt servanda, respect your commitments and obligations’.

Would the EC statement on Greece constitute a ‘commitment’ or on ‘obligation’, or was it merely the ‘Tagesordnung’ in the battle to destroy Greece.

@ Paul Quigley et al

FYI. Derek Scally does an excellent job of explanation on the Target 2 issue.

David Murphy did an equally good job of explanation on the PNs on RTE just now, including making the obvious point that if there is a deferment of the schedule of payments, the total repayment will be higher. The commonsense nature of this, he illustrated with the example of a normal household mortgage. On the “bonfire of the monies”, he could have been a little more definitive but nevertheless does get across the point that ELA cannot be viewed as a get out of jail card for the governments. He also held open the slight chance that the March payment might be deferred.


“including making the obvious point that if there is a deferment of the schedule of payments, the total repayment will be higher. The commonsense nature of this, he illustrated with the example of a normal household mortgage.”

One of the ongoing arguments is whether, and to what extent, governments are like households. Sovereign states with their own CBs and currency are certainly not.

In this instance my take is if, say, a bank and a household agree to restructure mortgage payments the household buys breathing space to try and improve their income so that when they go to pay more later, they are in a better condition to do so. The bank gets the more later. But there is no strong link between the reduced mortgage now and increased ability to pay later.

On the other hand, if the ECB suggests the Irish government defers payments now and agrees to pay more later, it is possible that the money not being paid now will be beneficial in the domestic economy, encouraging growth, so that although the repayments are more when they come in absolute terms, they are a smaller proportion of GDP and thus more manageable. In this case there is a stronger link between the relief now and the generation of additional funds for the future.

It depends on the concrete proposals which, one day, it would be nice to see in the technical paper being prepared by the Troika.


The Bundesbank below have a deeper interpretation. They structure the nature of ELA. As I’ve stated before, ELA is not ‘magicked out of nothing’. Target2 balances view the creation of debt through ELA as a the creation of a liability in the Target 2 system by CB’s that must be accounted for and paid back. Our central bank generated liquidity for our banks in return for the PN’s and the debt is structured to be repaid through repayment to the central bank

Posted by Izabella Kaminska on Mar 13 16:11. For anyone who fancies a little Target2 controversy on a Tuesday afternoon… we present, straight from the horse’s mouth, the Bundesbank’s own thoughts on the problem of Target2 imbalances via its annual results report:

“Examples include the provision of short-term liquidity assistance (ELA). What is new is that in December 2011, the Governing Council adopted option for national central banks to accept units under certain conditions, bank loans as collateral. Again, the risk-sharing is excluded, and any losses would be borne solely by the respective national central bank.”

ITs clear to me PN’s according to Ollie Rehn et al represent a debt to the ICB and through it to ELA and the Target 2 system and his understanding is this debt must be repaid.

Next note from me will categorically state why it should not be repaid.

Incredible photo in yesterday’s Irish Examiner, Biz Pages, of the Luxemburg Finance Minister with both his paws around the neck of the visibly startled Spanish Finance Minister with the Dutch Finance Minister eyeballing the Spanish Finance Minister …. [ a must for the upcoming Referendum Campaign … and I hear McGahon and Alex (no, not the weber fella) has offered a new short-term contract to John Hayes and The Claw to keep an eye on Michael while in U-Rup …

A suitable Latin phrase simply escapes me …. but doubt I’ll find one in Ovid .. must re-read Virgil … Cicero, of course, finds this sort of behaviour appaw_ling … and the Ides are tmro … littel wonder all the local politicos are gettin outa town ….

Ho Chi’s revolution this Sunday in Rathmines at noon ….


Patience ….

@An Taoiseach

Next reshuffle, might I humbly suggest that you appoint The Claw to the Senate, and then Appoint him as the New Minister for Europe ….

FYI [h/t Delusional Economics

Professor Sinn strays off target

‘He does however appear to have a fairly weak understanding of how the central bank operations occur, at least he writes as if he does, which, given his position, makes me wonder a little about his motives. In addition he make statements that appear intentionally divisive yet have no basis in economics. For example:

Today, the Bundesbank converts the “GIPS euros” into “German euros”, which then crowd out the “refinancing-credit-euros” issued by the Bundesbank and instead of foreign currency or foreign assets, the Bundesbank just receives claims on the Eurosystem that it will not be able to convert into anything.

… So does the TARGET2 system provide evidence that Germany is funding the periphery current accounts and is therefore a risk to the ability of the German banking system to perform ?


Is the imbalance in the TARGET2 system a concern?

Yes, but not for the reasons specified by Professor Sinn. What the TARGET2 imbalance shows is that there continues to be capital flight out of the periphery banking system towards the core, and this in itself is a very destabilising and dangerous.

Should we be listening to Professor Sinn?

Probably not.

@ Colm

ELA is magiced “out of nothing” in the sense that it is not cash borrowed, and a liability is simply “created” on the Eurosystem target account. There is nothing to limit its creation (other than someone ok-ing it). However, i agree it cannot be magiced back “in to nothing” via non repayment, unless we’re going down the full-on QE printing route here.


“making the obvious point that if there is a deferment of the schedule of payments, the total repayment will be higher”

Yes, but it is not getting higher at an 8% rate, given the circular nature of that transaction. Its really getting higher, using market rate assumptions, at a rate of around 3% per year over the next decade. Prolonging it at a rate likely to be close to inflation does not seem like a bad option.

Should we be listening to Professor Sinn?

Probably not. Although I do agree with him about the root causes of the Europe’s financial crisis, his diagnosis appears to contain either mis-information or lack of understanding of the functions of the monetary system. This suggests he is either working to an ideology or doesn’t truly understand the subject matter. Either way , his proposed solutions are therefore likely to be more dangerous than constructive while the unnecessary attention given to TARGET2 balances is distracting Europe away from solving its problems.

@Michael Moore

Now look what you started!

Ollie Rehn, “I actually wonder why this has to be asked at all because the principle in the European Union and in the long European legal and historical tradition is – in Latin – pacta sunt servanda, respect your commitments and obligations,” he said.”

Let me try to answer Ollie’s question plus our noble Taoiseach’s sublimation of the question of Irish sovereign debt as a debt of honour, which must be repaid. The frequent assertions by politicians aided by some economists, that there is no question the debt will not be repaid, we’re merely asking for extension of maturity dates, or similar ‘light relief’, is ludicrous. This is simply not sustainable debt.

Also, it is delusional to think the debt burden we have will not have similar deeply toxic and deeply damaging consequences that have befallen in history economies that have fallen into the debt trap, google Haiti after French rule and effect of debt reparations on economies such as Ecuador, Mexico, more recently African countries, Latin American countries, eg Colombia, Venezuela. Debt has enormous political and social implications that can destroy the infrastructure and political systems of those who fail to adequately to address its challenges.

Ollie’s high stool of moral unctuousness will no doubt appeal to supplicants wishing to be groomed with confidence and moral high ground, the usual suspects….

But pacta sunt servanda is a baseless deception and does not apply to the Irish case for setting PN
to nil and having the funding instead set as a liability against EFSF; or, indeed, even against funding of PN’s ¢31 bn through some form of SPV set up to leverage LTRO funding for IBRC.

It is a baseless deception because “pacta sunt servanda” represents ODIOUS DEBT. If you speak Greek, there is a documentary exploring Greece as a debtocracy; if you dont, commentary on its contents available here:

It explains the concept of odious debt.

This part (which does not correspond to the beginning of the film) explains the concept of Odious Debt, how it is used politically, and also recounts how Ecuador managed to escape this trap in 2006.

The story begins in the 1920s with Alexandre Sack, Minister of the Tsar and a law expert. After the revolution of 1917, Sac began lecturing in European and American universities. In 1927, he put forward a brilliant discovery: the notion of Odious Debt.

For a debt to qualify as Odious Debt, three conditions must be present, namely:


It must be incurred by leaders without the consent or approval of the citizens.


The funds borrowed must be invested in assets from which no benefits accrue to the citizens or the country.


The creditor is perfectly cognizant of these facts but nevertheless contracts the debt in total indifference.

IBRC debt obligations fall 100% under the above criteria for odious debt.

We should simply refuse to make the repayments before the March 31 deadline and refer the matter to an international court of settlements. Perhaps, that court can appoint a team with authorization to look at the IBRC records re B@B loans, share manipulation, criminal deception of the taxpayer, director loans, political negligence, negligence by the NTMA, the Irish Regulator, the ICB and the ECB.

“Hugo Arias, President of Ecuador’s Court of Auditors: “It was simply a permanent sum that Ecuador had to pay to the countries of the North. For example, from the 1980s until 2005, debt interest payments accounted for 50% of the state budget, reaching 3 to 4 billion US dollars annually, whereas spending on health accounted for only 4%. So we had a situation where 4 billion was going towards debt interest payments, but only 400 million for health! 800 million for education! We were killing our own people.”

“The example of Ecuador has shown that the illegal circumstances in which debt has been generated can be revealed by a commission of enquiry conducted by economists.

“Why doesn’t someone tell us clearly what the debt is made up of? What is the exact amount? And how was it generated? And who do we owe? In order to respond to these questions, it is urgent and vital to set up an audit commission to focus precisely on the nature of this debt. This is why I have said that we cannot be satisfied with lies from the banks, government or the “parrots”, who are paid to repeat the same empty rhetoric.”

“Eric Toussaint: “Above all, do not be afraid, as Greeks, to demand your rights within the EU, in relation to the Greek government…

In Ireland, we can’t even find out in a proper banking enquiry what procedures, processes, data led to the meltdown of eg Anglo. Developers are cocooned by NAMA in a veil of secrecy and NDA. Economists have mounted no great campaign of research to assess the depth of the effects debt
will have as to its sustainability on Ireland’s future.

The whole question is brushed under the carpet and consigned to secret negotiations too complex to describe currently ongoing in Kafka’s castle at great expense to EU taxpayers.

Eoin Bond
Agree re the QE implications : should however that not now be back on the table?


I know I shouldn’t rise to the bait, but I shall anyway since I suspect the sentiments you express so pithily resonate with quite a few people.

As for my ‘beloved Germania”, I have enormous respect and much affection, but I would never presume love – as, almost certainly, it would be unrequited. I dearly wish there were competent successors to Helmut Schmidt and Hans-Dietrich Genscher governing Germany, but, alas, that is not the case – and little prospect of it happening. We have to deal with this centre-right hegemony that, by hook or by crook, is bent on extending it.

Thumbing our nose by voting ‘no’ might, in some way and for some, validate atavistic republican urges, or a grudging acceptance of some of the time-hallowed virtues of Anglo-Saxon law, economics and governance (in contrast to European utopianism) or some deep-seated prejudices, but it would be totally counter-productive – unless people were to inform themselves of the full imploactions of a ‘no’ vote and give their free consent.

Voting ‘no’ to kick-start the implementation of the deep-seated structural reforms so badly required is equally foolhardy. My ‘famous gougers’ would become even more determined and bloody-minded in defence of their share in a much redcued trough.

There is no pressing requirement for Ireland to ratify this ‘compact’. For goodness sake, we are in an official support programme that over-rides, and should be, but probably isn’t, more stringent than any restraints proposed in, this ‘compact’.

Let’s sit this one out until we see (1) how this ‘inter-governmental v Community method’ wrangle is sorted out, (2) the political fates of the Merkozy twins, (3) how the economies to which it will applied deal with it – and the modifications that will be required and (4) how likely it is that ireland will exit from the current support programme – or, more likely, the shape of an extension.


I agree with you on one point. We should schedule the vote for September. BTW, Schmidt and Genscher were around 30 years ago. That was roughly the last time Leeds Utd had a good footbal team. Few enough call them a big club nowadays. This was probably a well governed country at the time as well.

@ Observerstatus

completely agree, though im not sure how feasible it is given the German cultural belief in its place next to Santanic worshipping and child sacrifice. It may require a really severe hit to the German economy to get them on board, and growth rates for Germany actually revised up this morning by Kiel Institute. So QE will only happen IF there is a massive periphery default, not as a preventitive measure.

@Bond. Eoin Bond.
As the PN note is QE with all the attendant hazards of QE, how can the payment of this QE in 2031 negate the hazards of QE in 2010 or 2011?

What then do you call a trillion of LTRO, if it is not massive QE ? Surely the distinction is a metapyhsical one.

@ PQ

it is a step in the right path, but, as per the LTRO & Sovereign Debt thread, it still relies on banks to channel the money where the ECB intends it to, and this may not always happen. Looks at the tenor of the UK and US QE programs – very long dated bonds are being bought, so the whole yield curve is pushed down and flattened. Italy’s problem is not in the 2yr area, its problem is in the 5-10yr area where its still reasonably expensive to borrow. The LTRO was thus as much about restoring the monetary policy transmission channel of the ECB (ie short term rate setting), and not about QE stimulus which could be felt much further out.

@ Joseph

as per the above, the ECB seems keen to unwind this quasi-QE as fast as it reasonably can, as soon as things have even remotely stabilised, where as the extention idea would suggest unwinding it after the crisis has fully abated, ala US/UK QE.

@ Bond

Re ” it still relies on banks to channel the money where the ECB intends it to…”

This is rather a naive assumption. ECB wanted banks to purchase sovereign bonds and get 2 birds with the one stone. Replace money that had dried up from US and elsewhere including fears re interbank lending and concerns re holes everywhere. It went where the ECB intended.”

I’m curious how there is such a benign interpretation of the role of the ECB whereas in the US there is distinct and widespread distrust. Its now through Ollie achieving a level of moral hiatus that approaching an epiphany.

So, when will the Irish reach this glowing state of epiphany and realise the orca is playing with the Irish sea lion ? Alas, the brightest who can figure this out seemed to have left our shores for better climes.

We are more familiar with the meaning of Ole than with ELA or as it should more properly be known as, the Irish Bank Heist. We still do not know the collaboration, if any, but assume lots, that took place between ECB and the Irish Government on the sickener ‘guarantee’. We now now the substantive meaning of ‘??bailout??’ gave ¢31 bn through ELA for IBRC payback through the PN’s.

They stuck us for the bill for IBRC, gave us a loan to pay them back at an extortionate interest rate and we happily complied with the dictats from the ECB to pay back debt that wasn’t ours to begin with.

Now perhaps fearing that Ireland, Belgium or Greece might figure out similar heists, through the Compact they are making sure any future grievances will be settled through their own appointed court of the ECJ.

If you vote ‘Yes’,

you’ll have to take your complaints to the ECJ, don’t be expecting fairness from any other court eg Bank for International Settlements,

Expect the spring loaded trapdoor to close quietly behind you.

@Paul W
Sorry I missed these questions you put to me yesterday (maybe they got stuck in moderation?): How do you think the markets would react in such a situation i.e. to the selective bank-debt default? Would the markets be there to assist the IMF fund the Sovereign Debt side? After all, without the bank-debt, Ireland is solvent? There would be a need still to remain in Euros to repay the Euro Sovereign Debt, presumably.

Obviously I’m thinking in terms of Michael Moore’s scenario, where the IMF is calling the shots with minimal EU input, so any default would be at the behest of the IMF. (A ‘disorderly’ default is a much ghastlier case.) Past form suggests that the markets would be pretty sanguine about that. It’s mainly our EU ‘partners’ who would be having fits. I’m not sure what you mean by the need “to remain in Euros” since the Euro would very likely be a foreign currency in that situation. But I don’t see any reason to doubt Ireland’s ability to earn sufficient foreign currency to pay whatever debts the IMF wants us to pay.

@ BEB As I have said, Greece’s restructure was not big enough and has left it in a continuing unsustainable position. Restructure for Ireland should have a different result, given the sustainable underlying (non Odious Debt – really like that blog CB) Sovereign Debt.

“On the promissory note, a term-extending restructure of a quasi-QE instrument, originally created to rescue a failed bank, is completely different to Greece applying a hard-haircut on both the principal and coupon of its outright sovereign debt. ” Yes, they are quite different (unless you take the global, less hair-splitting view that it is nowadays all Irish Sovereign Debt)…..but there is now (Greek)precedent for the possible orderly mechanism for debt reduction (the final aim). The former does not appear to be working (as per Karl Whelan’s blog)…..The EU responses here (forget it!) are so very,very predictable….Ireland on the road to nowhere with that Govt strategy.

So, it looks like as if Ireland and the Irish will have to wait for the Spanish or other to sort something real out. Is that it?

@ KD Thanks for that latest reply. The point though is that there is no mandatory requirement to exit use of the Euro (assuming orderly restructure), just as is the present case with Greece. More importantly, there is no “gun to the head” to “re-punt”.

@ Kevin Donoghue

Obviously I’m thinking in terms of Michael Moore’s scenario, where the IMF is calling the shots with minimal EU input, so any default would be at the behest of the IMF. (A ‘disorderly’ default is a much ghastlier case.) Past form suggests that the markets would be pretty sanguine about that.

Sanguine indeed — but fantasy stuff. What does minimal input mean?

Why would the executive board of the IMF assume primary responsibility from Europe and set a precedent?

The reality is that the leprechauns with their sacks of gold will remain in the ether.

I’m inclined to accept Colm Brazel’s assertion that it is naive to assume that the banks will channel the LTRO money anywhere other than where it will benefit the said banks. Just look at the US today with Jamie Dimon giving the two fingers to Bernake and increasing the value of his personal holding by 15 million dollars overnight with a huge stock buyback. And the Golden Sacks saga is illuminating..especially the bit about the “muppets” they have for clients.
It seems nothing has changed.
Btw, what has happened to the bank recapitalization programme. The only one that seems to have complied is Unicredit and the are now valued at less than half of the market cap prior.
Funny old world.

@ Colm

there’s so much to pick apart from that link, but i’ll go through it bit by bit

“This might lead towards a large devaluation, but the devaluation itself would be helpful to provide a strong stimulus to the economy by making it competitive.”

How many jobs do reasonably expect to be created in the first two years? Bear in mind that you’d need to build factories, find new employers, train new staff, create new organisations, as well as deal with a fluctuating currency. Is it reasonably possible that there would be an immense lag between devaluing and actual job creation?

“Allow the new currency to trade freely on foreign exchange markets and would float. This would contribute to the devaluation and regaining of lost competitiveness. This might lead towards a large devaluation, but the devaluation itself would be helpful to provide a strong stimulus to the economy by making it competitive.”

Can you simultaneously have capital controls as well as a freely floating currency???

Hmmm, i’d love to pick apart the issues surrounding foreign reserves or the huge increase in imports, particularly those which cant be replaced in the next decade, like oil, but there is no mention of that….

re “This is rather a naive assumption. ECB wanted banks to purchase sovereign bonds and get 2 birds with the one stone”

Huh? This was the point made by De Grauwe – only around 25% of the LTRO has gone into sovereign debt.

@ MH At times, you seem to be in a very negative place in your head….

Assume a No vote. Ireland does not have the backstop facility. EU is threatening no further funds….but is in a bit of a jam as Ireland will default on all debt without liquidity and refinancing. The IMF is more sympathetic. Not unlike recent Greece situation. However “Ireland is noot Greece”. You are in the hot seat with executive power to direct the way forward. You must make decisions.

What would you do? No fudging now….

@ Paul W

if i may…

You tell Ireland to cut its public sector and social welfare expenditure by 25% overnight and balance the budget. The IMF will then provide a limited liquidity facility for a 2 year period. The EZ simultaneously makes life very difficult for us and only extends absolute minimum in ECB support (we will have massively deleveraged ECB reliance at that point). If after the new two-year program debt servicing is still not sustainable, the IMF then look for PSI, which at that stage will be solely focused on non-official sovereign debt (there will be no banking debt covered by a guarantee at that point). So we destroy out sovereign rating, go down the whole hyper-austerity route, and become a hyper-periphery, with no one sure of our LT place in the EZ. Sounds like a plan.

@ BEB However, that is not what happened recently with Greece (although again, I stress that Greece is still way overleveraged). A blow out like that would indeed be severe on Ireland….but would blow the EU, Euro, etc apart. I don’t see that as inevitable /being allowed, and it isn’t what happened recently in the case of Greece.

@ Paul W

eh, whats missing in the current Greek program??

1. hyper austerity leading to economic implosion
2. Sovereign debt severely haircut
3. Massive flight of wealth and capital
4. Society on the edge of complete breakdown
5. Major question marks over Greece’s continued membership of the EZ

Like i said – you are suggesting we “go Greek”, and end up like this??

The assumption that a no vote will result in a sudden funding stop ignores a number of relevant points:

There is a political agreement (dating from last July) that Ireland will continue to be funded until market access is regained, if it continues to meet the programme terms. Enda Kenny has said in the Dail that the July agreement supersedes the Fiscal Compact.

According to the programme, Ireland will have a primary surplus in 2014. Unlike Greece, Ireland has a tax administration system that can actually collect large amounts of tax.

So, core countries would be faced with a choice in 2014, if Ireland cannot return to the markets. They can either make money, by lending money to Ireland at interest, ensuring that Irish taxpayers can servanda their pacta. Or they can lose money, by allowing Ireland to default, recapitalize their domestic banks as needed, handle the global fallout of allowing an unnecessary default, explain to the ECB that they won’t be getting all their ELA money back on time, lose the leverage they have over the minutiae of Irish budgetary policy, and direct their PR guys to deflect from the inconsistency of continuing to fund the worst boy in the class, while expelling the best boy in the class, and to generate some spin to obscure the fact that they are not servanding the pacta that they made in July 2011.

Why would they take a course of action so counter to their own interests? From their viewpoint – if the Irish taxpayer can pick up the tab for everything, why not let them do do?

@ Bond

Re ” Can you simultaneously have capital controls as well as a freely floating currency??? ”

Surprises me you ask that. The deregulated freely floating era of self regulating markets has led to where we are. Capital controls are a feature of every currency switch to prevent abuse of the switchover. Arguably the lack of in the deregulated EZ led to the problems we have.

” In the Bretton woods period governments were free to have both generally stable exchange rates and independent monetary policies at the price of capital controls. ”

discussion of issues here:

@ Colm

eh, that was my point – you cant have free floating currencies and capital controls at the same time. Bretton Woods was a fixed exchange rate regime. So the link you provided seems to have a rather large inherent flaw.

@ All At least we seem to be getting to the kernal of the debate at last. I for one cannot agree with the nuclear wasteland scenario. However, I understand that many are “fearful”.

@ BEB I’m not saying that Ireland is in the same economic position as Greece. It is not. However, Ireland seems well on its way on points 1, 3 and 4 in any event as it currently stands. How bad things get depends on one’s view of whether Ireland’s debts levels are sustainable /serviceable, as I have said before. 2. is what is sought. 5 is simply not inevitablle /pre-ordained.

If one deletes CB’s Odious Debt element, Ireland is in a sustainable position. IMF and the markets should support that…..

@ Paul W

but what do you mean “this didn’t happen in Greece’s situation”??

@Paul W: there is no “gun to the head” to “re-punt”.

With the IMF calling the shots I think there would be. The IMF’s economics guru, Olivier Blanchard, attributes the strong performance of the Irish economy in the 1990s to the competitive edge which came from the 1993 devaluation, coupled with moderate wage increases. What quicker way to turn the country into a machine for generating a hard-currency surplus than to require the sheltered sector to get by on devalued punts? You may not like that way of thinking; lots of people don’t. But the IMF, even “in the wake of the Stiglitz critique”, is very likely to be pushing that approach.

@BEB: you cant have free floating currencies and capital controls at the same time.

That’s a puzzling claim. Lots of countries have had capital controls with floating currencies; in fact it was the norm in the 1970s, when, for example, Germany imposed restrictions on short-term inflows while allowing the D-mark to float against the dollar. The UK also had exchange controls well into the floating era.

@ Bond

RE ” you cant have free floating currencies and capital controls at the same time. ”

True, but you can’t have free floating currencies without capital controls at the same time either. So its a moot point going nowhere. If you disbelieve what I say, all you gotta do, dude, is look back on the points in this thread re ELA and Ollie Rehn’s Pacta Sunt Servanda crap coverup of odious debt. That’s a form of capital control imposed on our economy? Sure, use the term, freely floating currency if you like, but a little probing under the surface and out pops Wall St, Deutchbanke, Ollie Rehn, Merkel and other ‘capital controllers’ who design the so-called ‘free market’ in their own interests !

@ BEB You are incorrectly implying the same economic analysis for both countries, I am not, based on the present (i.e. I do worry that unless Ireland takes an alternative path to the one it is now on, it will be ground down to a bad economic place). I am simply looking at the orderly default mechanism as it was applied in Greece’s case and suggesting it as a basis for a revised Irish strategy and a debt reduction mechanism for Ireland. Don’t know whether I can be any more clear….

@ KD Greece has not been forced to go back to the Drachma (now don’t all say that it will…again, it might based on its still unsustainable position). I don’t think it’s inevitable…..However, yes, let’s consider all angles….but nuclear wasteland scenario as espoused above seems a remote possibility.

@ Kevin

i suppose the capital controls im referring to and what are being envisaged here would appear to be near ‘total’, ala Iceland. Your examples would seem to be moderate short term controls designed to manage certain particular flows. And would you not call all capital controls to be part of a managed currency regime of some sort?

@Paul W, the EU is still ‘supporting’ Greece so I don’t think that’s comparable to the scenario Michael Moore is envisaging, where Ireland is dealing with the IMF alone instead of the Troika.

@ Paul W

you said, “this did not happen in Greece’s situation”, but all the points above did indeed happen, and would potentially happen in Ireland’s situation. You seem to be tying your plan to an improved “debt sustainability” automatically conferring market access to Ireland. This may not be the case. It would quite likely take years post-default to regain access. If this occurs, we end up like Greece. It would appear to be an “all eggs in one basket” approach.

@BEB, of course you can reserve the term “free floating currencies” for cases with no controls at all, if you want to. Then your contention becomes true by definition.

@ Paul W

At times, you seem to be in a very negative place in your head…The IMF is more sympathetic.

I used be an I’m alert to the Irish weakness for delusions and fairytales.

The State began with a civil war, effectively over symbols.

You shouldn’t confuse the IMF staff with the 24-person executive board representing the members.

I think it’s naive to assume that the IMF would create problems for Europe and encourage other countries to opt for the ‘soft touch.’ Besides, the ECB would be in hock for €100bn from Irish banks.

@KD After a no vote, the EU is still Ireland’s main creditor. They would have to come to the table, with IMF and markets as said before.

@ BEB I believe that in restructuring to “debt sustainability”, Ireland will regain access to the markets, yes. Plenty of examples e.g. Iceland. Not perfect by any means.

My overriding point is that alternative (to EU) source funding would be available. I think it a remote possibility that there will be no funding available. That simply wouldn’t be in the crs’ interests….and they will continue to do what is in their best interests.

@ MH “I think it’s naive to assume that the IMF would create problems for Europe and encourage other countries to opt for the ’soft touch.’ I have never suggested this. After a no vote, everyone involved is simply faced with a factual situation and must deeal with it. Selective default is an option at that point, and the IMF is already sympathetic.

“Besides, the ECB would be in hock for €100bn from Irish banks.”. Exactly. So they will be part of any solution but have less influence over the outcome (unless Ireland “blinks”). My assumption is that they will prefer Ireland to stay in the EU and Euro….just as with Greece….as they will want Ireland to at least continue services the Sovereign Debts (in Euros). Accepted as per KD above – IMF and others may want to influence it otherwise……This is not an exact science! (which is why many of course will vote yes…simply for certainty).

Brian G,
Interesting post at 4.10. If we vote no, I am not sure that the AAA nations might honour their part of the existing programme MOU, even though it pre-dates the FC treaty. Are you sure they would not default on their obligations?

Paul W,
Regarding us doing a Greece. Pension have been cut in that country by close on 50%. Do yu want to discuss that with our Golden Oldies, who so far have remained relatively unscathed in the crisis. GGBs are not the only Sovereign Obligation that has been haircut. Greek hospitals have not paid for their drugs so more than one pharma company has cut them off.

@ Bond

‘as per the above, the ECB seems keen to unwind this quasi-QE as fast as it reasonably can’

OK. So you accept it is a variant of QE. You had earlier stated :

‘So QE will only happen IF there is a massive periphery default, not as a preventitive measure’

The reality is that QE has already happened in the EZ, which is why the zone is not breaking up just yet. We are in far deeper waters than is generally appreciated.

@ Tull Yes, there will also be those who vote yes because it is in their own personal self interest. Basically anyone dependent on Govt money /funding will likely prefer to have the FC backstop.

@Paul W, you are most likely right that the EU wouldn’t walk away after a No vote. It would be silly of them. But it could happen and that’s the case that Michael Moore was discussing with Frank Barry, so I’ve taken that as given in my comments.

@ PQ

we’ve had a less efficient, and less powerful variant of QE, i agree, but its impact has also been differently focused than its UK and US cousins. First of all, it has been aimed directly at the banking sector, and only indirectly at either the sovereign debt markets and the real economy.

As i noted above, initial analysis seems to suggest 25% of the 1trn in LTRO has been gobbled up by the “carry trade”, which is a mix of short to medium term sovereign debt and bank/corporate bonds. Add in the SMP, and you’re looking at probably 400bn working its way into the sovereign debt market. The UK have put in around €300bn into their QE program, despite being around 15% the size of the EZ.

Secondly, its tenor has been limited due to the structure of the LTRO, so where as the US and UK are able to significantly push down the term funding curve, the ECB’s versions have been mainly focused at the shorter end, and, anecdotally, the SMP never touched anything beyond 10yrs in duration.

Thirdly, the ECB’s QE has been negated somewhat by the twin track austerity and deleveraging drives (which are required, but therefore a bigger QE was also required, again ala US/UK).

Fourthly, the ECB’s QE has been about two goals – helping banks deleverage and recapitalise, and helping restore the ECB’s monetary transmission mechanism. These may or may not have then had positive spillover effects into growth and the real economy, but they were never the primary goals, and so the impact of its QE has been massively stunted relative to its apparent nominal size.

Europe is a union for Germans and for bankers. A no vote will speed up it’s collapse.
I would much rather capital controls than relentless export of people.
Don’t forget – if Ireland goes the whole thing begins to wobble…So the punt might actually be a better bet as a currency than a Euro nobody believes in


“Interesting post at 4.10. If we vote no, I am not sure that the AAA nations might honour their part of the existing programme MOU, even though it pre-dates the FC treaty. Are you sure they would not default on their obligations?”

They would have no legal or justifiable basis for terminating the existing MOU, since the MOU does not reference the FC in any way.

Separately any failure to ratify the FC would not represent reneging on a commitment, it would simply be a commitment not made.

Of course there’s no way to be 100% sure – however the most likely outcome can be predicted by looking at who ultimately gains and who loses from the money flows involved (or that are stopped, as the case may be). Ireland’s efficient tax collection administration is an important “natural resource” as it were, as seen by the core, and being the good capitalists that they are, is one they want to exploit.

Brian G,
Your faith in the rationality and the honour of our partners is touching.

Rather faith in the rationality of our creditors to behave in their best interests in any given factual situation, including No vote plus committed select default scenario.

Thanks to Brian G for having my back again. Great 4.10 blog also, but I must say that, for me, Blog-Of-The-Day today goes to Colm Brazel 10.53 introducing Odious Debt. (Brian G had already secured Blog-Of-The-Week, as selected by John McHale).


“Your faith in the rationality and the honour of our partners is touching.”

Honour has nothing to do with it. Rationality (e.g. will I make money or lose money) does.


‘The neoliberal ideology, as an ultra-right utopia as defined by Pierre Bourdieu in his book Acts of Resistance: Against the New Myths of Our Time (1998) does all in its power to legitimize the gap between the social and the economic factor in the historical development of the human society, to reduce again the human nature to homo economicus (or,as Marcuse would say, a one-dimensional man), and to subdue the social to the forces ofstructural violence of the so-called free market, that is, the interests of the mega capital
forces and their uncontrolled hegemony in the contemporary world. Let us remind ourselves that such reductionism and illusions were once criticized by Karl Polanyi in his study The Great Transformation (1944) pointing out that the source of catastrophe lies in the utopian effort of the economic liberalism to set up an automatic market system’

@PQ Nice one.

However, Troika: We want our money back, in full…..unless we can’t, unless the Irish taxpayer can’t…or won’t….or both. Overpaid Irish…the Irish taxpayer can pick up the tab for everything. Stupid Irish, we will get our money back.

@ Bryan G: “Separately any failure to ratify the FC would not represent reneging on a commitment, it would simply be a commitment not made.” Another excellent point.

@ Paul W

they’re not “blogs”, they’re posts. And ur fawning a little too hard there, no matter how good some posts may or may not be.

@ Eureka

“Europe is a union for Germans and for bankers”

Possibly a bitt OTT.

We’ll see how it pans out. Goldman’s Draghi has never seen such a muppet-fest. They’re an awful shower of tossers. I’m sure Ollie Rehn stole my bunk when I was on holiday last year.

The Achilles heel of the creditors is that social unrest if allowed to get out of hand would lead to a revolutionary change of government coupled with economic collapse. This would mean that instead of giving 50% haircuts they would reach (god forbid) 100%.

The last use of Imperial Power to collect debts was when British warships sailed (192s’) into Tunis harbour as the Tunisian Parliament was debating on reneging on or repaying debts (bonds I believe) owed to British citizens.

As long as our school teacher and the biis keep on acting as one would expect there is not going to be a scintilla of fear instilled in our creditors or their governments.

No fear, no bargaining power. As to the morality, respectability and reputation aspects. If it was moral for our government to bail out the debtors of privately owned failed banks and other financial institutions, then dooming the country to twenty years of poverty is also moral. To me it is very plain that what our gov’t did was a perversion of all that is right and to continue on the wrong course is to rub salt on the wounds. Even worse it is a grievous mortal sin, where are the parish priests on the pulpits now when we need them.

Picture of the Month – and a must_read

Luxembourg Prime Minister Jean-Claude Juncker (right) with Spain’s Economy Minister Luis de Guindos at the finance ministers’ meeting on Monday: Despite recent progress, the euro crisis isn’t over yet.

The other euro-zone governments have at most a few more months, perhaps only a few weeks, before the situation in Greece worsens again. They must use this time to make clear that Greece is the exception within the euro zone, not the rule. The other euro states must quickly arrive at a point at which the fate of Greece simply isn’t relevant for the future of the euro — which of course doesn’t mean that the Greeks should be left to their fate.

That means that Portugal, Spain and Italy, the three other problem countries in the south of the euro zone, must perform the magic trick of stimulating growth while reducing their budget deficits. That can only succeed with a lot of pragmatism — austerity without growth is as pointless as growth without austerity.

That pragmatism also means that the other European finance ministers should keep calm in reaction to the news that Spain has revised up its projected 2012 budget deficit to 5.8 percent from a previously forecast 4.4 percent. Spain, too, is in a deep recession. It is an impressive feat even to have reduced new borrowing at all — in 2011, Spain’s budget deficit was 8.5 percent of GDP.,1518,821404,00.html

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