Jörg Asmussen’s talk to the IIEA

This post was written by John McHale

Thanks to Eoin Bond for the link to the text of Jörg Asmussen’s talk to the Institute for International and European affairs (see here).    While it will undoubtedly be controversial, I think it is a balanced take on Ireland’s crisis and crisis-resolution efforts, and in particular the support that has been received from the eurosystem.

However, I do wish to take issue with the account of the recent efforts to restructure the repayment schedule on the promissory notes, something that has been receiving a great deal of attention here in recent weeks. 

Mr. Asmussen says:

I understand the strong desire of the authorities to minimise the costs associated with the banking sector rescue, including costs incurred to date, and those still to come. Let me make some comments in this area. When the programme for Ireland was designed, the costs of the banking sector measures already in place, including the promissory notes, were fully factored in. The annual cash repayments of promissory notes is thus financed by programme resources. That programme is on track. Any deviation from that programme should be considered very carefully indeed. The perceptions that have built-up around Ireland’s successes in the programme should not be jeopardised. It has been hard-won and it is worth fighting for. Therefore, the ECB remains of the opinion that Ireland should honour its commitments stemming from the promissory notes, as foreseen. This in our view is the best way to regain sustainable market access.

I don’t disagree that Ireland’s best interests are served by honouring its commitments to both market and official funders.   But there is a significant difference between reneging on a commitment and a renegotiation with official creditors aimed at the shared goal of resolving Ireland’s funding crisis through re-entry into market funding.    While there has been a sustained improvement in Irish bond yields, the extent of near-term funding needs will be a barrier to market re-entry.    The originally agreed repayment schedule on the promissory notes envisaged reasonably rapid repayment of the principal and interest – with payments of €3.1 billion beginning in 2011.   It is true that the resulting funding needs were recognised at the time of the design of the programme.   What was not known at the time was the how broader euro zone tensions would escalate, making it more difficult, despite significant progress in demonstrating the capacity to honour commitments, in bringing bond yields down to levels consistent with robust debt sustainability.   It is hard to see how a negotiated rescheduling of the repayment schedule based on the common interest in Ireland’s success would have any adverse reputational spillovers.   Indeed, the improved maturity profile on the outstanding obligations of the State should have a significantly beneficial effect on creditworthiness.  

Interestingly, Mr Asmussen appears supportive of a restructuring of the promissory notes that would involve paying them off through a long-maturity loan from the EFSF, and paying off the Emergency Liquidity Assistance (ELA) ahead of schedule.   This would improve the maturity profile.   But it would come at the cost of a higher interest rate given the very low ultimate interest rate on the ELA.   It is possible that the ECB thinks Ireland is asking for too much – a low interest and a long maturity.   (And we must recognise the ECB’s general discomfort with the ELA arrangement to begin with.)   But an overly purist position can be self defeating in terms of the broader goal of finding a route through the euro zone crisis.   The Irish authorities have worked steadily to make the necessary and hugely difficult adjustments and avoid a default that would be both damaging domestically and damaging to the euro zone.   Given the quite particular remaining challenge that Ireland faces in regaining market access, I do not think it is unreasonable to expect this particular targeted change in the negotiated supports in the common interest of euro zone stability. 

302 Responses to “Jörg Asmussen’s talk to the IIEA”

  1. The Dork of Cork Says:

    I remember the glorious summer of 1995 …… Ireland lost its soul that year … to credit opium.
    Take me back to 1990 please.

  2. grumpy Says:

    “I do not think it is not unreasonable to expect this particular targeted change in the negotiated supports in the common interest of euro zone stability.”

    Erm, I could not fail to disagree with you less!

  3. Ceterisparibus Says:

    @Grumpy
    We’re into the realm of unknowable unknowns.

  4. John McHale Says:

    @grumpy

    Thrown for a moment by the triple negative.

    Could you expand?

  5. Question Says:

    “avoid a default that would be both damaging domestically and damaging to the euro zone.”

    As a learning observer I have a question on this. The Greeks through their renegotiation effectively defaulted though the actual name wasnt given to it.

    The impact of that effective default on the EZ seems small and on the Greeks themselves their yields more than halved.

    Is it that a default is bad but holding a gun to the head and saying lets talk significant restructuring is not so bad?

  6. John McHale Says:

    @grumpy

    Ouch. I see now my botched syntax. It is fixed in the post.

  7. grumpy Says:

    “I do not think it is not unreasonable…” made about as much sense to me.

  8. John McHale Says:

    @grumpy

    You can do better than that.

  9. Ceterisparibus Says:

    “He also strongly defended the role of the ECB in Ireland over the period of the crisis, saying that the role of the Eurosystem (national central banks and the ECB) was often misunderstood, and has sometimes been misrepresented.
    He said that no country - relative to the size of the economy - has received more support from the ECB than Ireland, and at interest rates less than one third of those charged by the EU and the IMF for programme funding.
    He said even before the EU IMF programme, total support from the Eurosystem for Ireland amounted to 100% of GDP. “Our total loan provision now stands above €125 billion.”

    Eh, he forgot about the infamous letter.

  10. The Dork of Cork Says:

    What was so bad about 1990 anyway ? ( ok the credit opium machine was already 3 years a making but how could us innocent folk know such things )
    We had half( & smaller) the cars , less South Fork ranches to worry our little old heads over and plane trips were a real EVENT.
    http://www.youtube.com/watch?v=ourxHOuPk3c

    I do know we functioned less as a capital conduit and more of the people had value back then although in truth we had only minor control over our internal affairs even then.
    Still it was a measure of self respect.
    Now what do we have ?
    A society on the precipice.

    Gee thanks

  11. grumpy Says:

    @Dork

    Erm, I could not fail to disagree with you less. ;-)

  12. grumpy Says:

    @j mcH

    My 5.19 crossed your 5.18. Replies to your 5.13.

  13. John McHale Says:

    @grumpy

    I’m with ye . . . I think.

  14. The Dork of Cork Says:

    @Grumpy
    These guys either think the last 20 years of “progress” was somehow real which makes them completely insane or they think it was a method of extraction which makes them criminals.

    Me I think they are criminally insane.

    I would take the wet Recession Summers of 1985 / 86 over this darkness any day.
    http://www.youtube.com/watch?v=X8yR9mLXVao

    Ballinspittle or no Ballinspittle

  15. Ahura Mazda Says:

    oh I’m soo grateful to the ecb. they’ve kindly provided emergency funds to ensure safe passage of private capital out of ireland.

  16. Aisling Says:

    The interesting bit or me was actually (do I want to highlight this?) the tacit acknowledgement that payment on IBRC unsecured seniors was mainly about market stress, and only secondly about Irish reputation.

    “I know that the decisions concerning the repayment of bondholders in the former Anglo Irish Bank have been a source of controversy. Decisions taken by the Irish authorities such as these are not taken lightly. And the consequences of subsequent actions are weighed carefully. It is true that the ECB viewed it as the least damaging course to fully honour the outstanding senior debts of Anglo. However unpopular that may now seem, this assessment was made at a time of extraordinary stresses in financial markets and great uncertainty. Protecting the hard-won gains and credibility from the early successes in 2011 was also a key consideration, to ensure no negative effects spilled-over to other Irish banks. Determined action and a willingness to take tough, even controversial decisions, has placed Ireland’s financial system on a steadier footing.”

    This acknowledgement, while not shocking could change the dynamic in the discussions. I know its only a few billion, and less than the support that the ECB is providing the banking system, but here’s an acknowledgement that Ireland did “take one for the team” in respect of the payments. The Irish element is the “also” element. I’m not suggesting that it was mistaken, I don’t know and we’ll probably never know. But it should change the dynamic.

    If the ECB can acknowledge this today, it begs the question why were Irish Ministers suggesting that the reason for paying was to protect our borrowing costs? Surely tensions around Spain aren’t really all that better than they were when the bond was paid (unless a Spanish deal has actually progressed)?

  17. Joseph Ryan Says:

    @John McHale
    re “and in particular the support that has been received from the eurosystem.”

    What is the true interest rate and cost of the ’support’ from the eurosystem if one factors in the demand to pay all bank bondholders in full?

  18. David O'Donnell Says:

    @Jörg Asmussen

    Firstly, you are welcome in Dublin, and I wish you the best in bringing some much needed kantian pragmatism to ECB thinking.

    I note your comment on Irish Institutional and Policy Failures; I concur. I note that you did not mention Institutional and Policy Failures at EU level, and in the monitoring role, however implicit or explicit, of the ECB on capital flows. This is not a one-way strasse! The Irish Citizenry are expected to shoulder the German equivalent of €1.5 Trillion; this, in any language, is UnSustainable. Its resolution demands give and take on a number of fronts, elements of ‘quid pro quo’, and more than a modicum of pragmatic realism.

    http://www.irisheconomy.ie/index.php/2012/03/22/ireland%e2%80%99s-debt-burden-the-many-stages-of-grief/#comment-258042

  19. The Dork of Cork Says:

    @David
    You never NEVER never beg for anything.

    “He taught me a great deal…………… doing nothing , do absolutlely nothing”………..except print.

    http://www.youtube.com/watch?v=ImUIMCFx–w

    To be effective in this game you must come to point where you just don’t care.

  20. Livonian Says:

    I wonder if the Swedes (in the Irish Central Bank) and the the Danes (in the European Union) have decided that their countries can no longer risk sitting back and appearing indifferent to this whole Ireland/ECB insanity? :)

  21. David O'Donnell Says:

    @The Dork

    You clearly misinterpret my post above.

  22. DOCM Says:

    @ All

    By any measure, a very impressive speech which rebuts many of the arguments rehearsed on this blog about the presumed wrongs done to Ireland by the ECB. Indeed, the fact that it was made at all is also noteworthy.

    The most telling comment seemed to me to be the following;

    “The ECB is obliged and can be trusted to always fulfil its role and deliver on its Treaty mandate, and this is above all to secure price stability in the euro area as a whole, which consists of 17 countries. And there are clear limits to what the central bank is entitled or even able to do. It is impossible for the ECB to provide guarantees or assurances concerning future funding amounts or interest rates over the medium term. Certain tasks should and can in Europe only be dealt with by the Member States, and not by the ECB or the Central Bank of Ireland. Our common objective therefore must be to reduce over time the reliance of Irish banks on central bank funding and in particular on the emergency liquidity assistance”.

    Asking one’s opponent to do the impossible is never a sensible strategy. Is the government still intent on pursuing it?

  23. Mickey Hickey Says:

    I would rank George Soros up there with Willem Buiter. Interesting article on unscrambling omelettes.

    http://www.nakedcapitalism.com/2012/04/george-soros-eurozone-crisis-has-entered-a-less-volatile-but-potentially-more-lethal-phase.html

  24. Ceterisparibus Says:

    I see Dan O’Brien takes a downbeat view….

    “A senior European Central Bank member has played down the prospect of the debt burden arising from the State’s banking crisis being eased, saying that such a move would undermine confidence in the country.

    Speaking in Dublin today, Jorge Asmussen said that “any desire to offload this debt could have dire consequences”. He added that seeking to reduce the debt would signal that the current debt level was not sustainable.

    Mr Asmussen, a German national, said Ireland had “a very good chance” of borrowing normally by next year, thereby allowing it to exit its EU-International Monetary Fund bailout by the end of 2013.”

    Dire Consequences? Seeking to reduce the debt would signal that the current debt level was not sustainable.
    So don’t seek to reduce the debt and the markets will be fooled into thinking that 118% Debt/GDP is sustainable.
    With thinking like that……..

  25. The Dork of Cork Says:

    @David
    Perhaps David , there was spittle coming out of my mouth when I was reading the Sage Jorgs musings - so I guess I am not being quite rational.
    Certainly not as cool as the Great Oliver.

    But why all this fawning over Central bankers ? - what power have they….. ok don’t answer that question.
    They don’t PRINT money although you could argue they do under the Euro system. (we need to clarify just who has the power here)
    Print and tax and fly away…….. that is the power of exchequers.

    Their CB musings are a Joke.
    And since we are back in 1990 land perhaps we need to Spell it out for them one last time.
    http://www.youtube.com/watch?v=GKYcgMU-nJQ

  26. Colm Brazel Says:

    Re “The annual cash repayments of promissory notes is thus financed by programme resources.”

    oooohhhhh, thanks for lending the odious dough to pay off odious ¢3o.06 bn with ¢17 bn odious interest to help us save zzzeee euro ponzi scheme.

    Looks like we could be FIFO (First In First Out) :0: Whats that verboten phrase again, Debt Writedown? Soon as the world realised

    According to the German economist and politician, Jorg Amsusson, our meltdown was caused by the failure of Irish institutions and policies. Nahh, it had nothing to do with assets ploughed into the euro by Germany rather than from profit earned by the individuals or organization running the operation including Ireland Inc/Spain Inc etc.

    The Q is how long the ponzi scheme can continue without debt writedown? Bye Jorg :-)

  27. Joseph Ryan Says:

    On reading the article of Mr Asmussen, I believe that it should not be accepted as ’setting the record straight’ which he claims it does.
    There are a number of reasons for this.

    1. Several times in the article we are told that the ECB provides extraordinary support for ‘Ireland’. The author seems to equate the support for the banks with support for the State. This is a false and disingenuous premise.
    The banks are not the State. This is the utterly fundamental mistake made by the Irish State and by many European countries. It is a propaganda that has been accepted almost without demur throughout the world.

    2. Prior to the 2010 ‘bailout’ he claims that
    “By that time, we had already been standing for quite some time with Ireland, and that remains the case today.”
    Again liquidity support for banks is equated with ’standing with Ireland’.
    If the ECB really stood with Ireland, it would have urged that capitalism be let take its course in the case of the banks. Why didn’t the ECB urge that course of action. Why not set the record straight on that?

    3. “A necessary step for Ireland to emerge from this crisis will be to ensure the long-term viability of the banking system as a pillar of the Irish economy”
    Is this a truism? We have two pillar banks at present. Their main focus is extracting debt from customers in order to pay back bondholders. They are worse than a dead weight in the economy.
    I believe that the first Irish Minister for finance complained that the only role the Irish banks seemed to serve was as a conduit for money leaving the country. That is now the ‘role’ of the Irish banks, together with several European bank ‘deposit takers’ in Dublin.

    4. Ireland started the war argument:
    “I frequently hear in the Irish debate the sense that the debt resulting from the bank rescue is not Ireland’s debt. I can understand this sentiment and how many people feel about this situation. But what must be understood, is that in the run-up to the crisis, insufficient domestic policies (banking supervision and economic policies) played a major role in excessive credit growth and risk management failures in the Irish banking sector, the bubble in the housing market and the loss of competitiveness.”

    So the Versailles conference was correct in burdening Germany with its reparation after WW1, because Kaiser Wilhelm started the war.
    It is the same argument.

    5. What can the ECB and what can it not do:
    “It is impossible for the ECB to provide guarantees or assurances concerning future funding amounts or interest rates over the medium term.”
    No it is not. The ECB has provided a cast iron 100% guarantee for bank bondholders that they will get paid. Even at the expense of State bondholders and most certainly at the expense of ordinary European people or Irish people, very few of whom will even own a bond and the vast majority of whom, in Ireland at least, have no indirect bond holding through pension funds.

    6. No carrot, just a stick:
    “I am thus confident that Ireland will continue to fully implement the necessary adjustment and reforms, and that on this basis, Member States will continue to show solidarity towards Ireland.”

    ‘Support’ On that basis and no other.

    7. And worst of all the flawed economics:
    “The deep recession, high levels of public spending, a narrow tax base and the burden of supporting the financial sector have all have put stress on the fiscal position of the State. As a result, the fiscal deficit has surged. The government has therefore rightly embarked on a path of progressively cutting expenditures while taxes have had to be increased.”

    So we are to cut our way to success while the ECB protects the banks while they shuffle capital out of the country.
    You will go through a lot of economic books before you find those ingredients as recipes for success!

    There is only one lesson that Ireland can learn from the ECB support for the wealth owners of the globe at the expense of the less well off.
    Nie Weider.

  28. Joseph Ryan Says:

    That should have read
    Nie Wieder!

  29. bazza Says:

    This is all just beating about the bush.

    The 118% debt to GDP that ceteris refers to should more appropriately be measured as at least 140% of debt to GNP. IT IS UNSUSTAINABLE.

    Prolonging the repayment schedule, converting it to a loan from the EFSF, wrangling over a few bps on the interest rate, blah-de-blah-de-blah…

    Unless we have a restructuring where the total debt to GNP is brought down to around 110%, then our debt will remain unsustainable and we will remain dependent, perhaps sporadically, on official funding. This can be done relatively painlessly by reducing the NPV of the promissory notes by at least 50%. This should be the clear position of the government.

    Of course, our “partners” in Europe will choose the path of most resistance and I don’t expect any of this to be resolved until the existence of the Euro is threatened (again). A small step in this direction would be the rejection of the Fiscal Compact. A more promising scenario would be an escalation of the crisis in Spain.

    I’m not holding my breath.

  30. Livonian Says:

    “@Ceteris

    “Mr Asmussen, a German national..”

    I wonder if Dan meant to write “German citizen..” As far as I am aware Germany only recognizes two or three “nationalities” among its citizenry and one of them is the Danish Nationality.

    I am only speculating but even though the Israelis and Irish may be experts in utilising thier diaspora I am fairly certain it is not a “unique skill” .

    The Danes/Swedes (who are very possibly becoming increasingly worried about “dire consequences” ) might also know how to “practice that skill” especially if they sense that, as Dork says, the Irish may be coming to a point in the game where they “just don`t care” and the rest of the EZ has run out of road to kick the proverbial can..

    However as I say I am only speculating and maybe (depite Dan`s pessimism) the ECB/EZ really has “blinked”.

    Either way (to paraphrase Dork) what do I know I am only a Livonian:)

  31. Colm Brazel Says:

    oops “Soon as the world realised” -> leave out of above.

    The euro mess can only get messier.

  32. grumpy Says:

    @docm

    “…” Our common objective therefore must be to reduce over time the reliance of Irish banks on central bank funding and in particular on the emergency liquidity assistance”.

    Asking one’s opponent to do the impossible is never a sensible strategy. Is the government still intent on pursuing it?…”

    Are you suggesting that not reducing ELA is impossible? This part looks to me like a ‘preference’.

  33. Livonian Says:

    @Dork

    “Their CB musings are a Joke”

    No comment:)

  34. The Dork of Cork Says:

    @Livonian
    This requires action

    Credit every man & women over 18 with 10,000 Base Euros in their checking accounts while taxing the shit out of oil and the principle machines that use them.
    That should get the ECBs attention.

  35. DOCM Says:

    @ grumpy

    Not at all! The reference I had in mind was the sentence; “It is impossible for the ECB to provide guarantees or assurances concerning future funding amounts or interest rates over the medium term”.

    I do not have any mastery of the detail but, as I understand it, were ELA to be wound down, and with it the PN’s, it is the other governments that would have to put up the (probably more expensive) funds. But “assured” funding from the ECB is, if I understood Minister Noonan’s most recent comments, also necessary.

  36. Aisling Says:

    @DOCM I also read a very measured and more sympathetic speech than anything I think we’ve heard out of the ECB to date setting out their stool and trying to explain their position which we should take note of and try to work within rather than against.

    I think in their ideal world we should borrow off the EFSF, put the cash into IBRC which repays ELA and the cash exits the system.

    ELA is cheaper for us so our preference is to stay with the PN structure and try to find any wiggle room there.

    But, if we stick with ELA my take on it is that the timing of the cash leaving the system is preference once it is absolutely assured that the cash will leave the system, and the point so often missed, that the ELA is properly collateralized (being the issue with pushing out maturity and payment schedule and dropping the coupon all three of which will go to the value of the collateral).

  37. Colm Brazel Says:

    @ bazza

    Re “A small step in this direction would be the rejection of the Fiscal Compact.”

    +1

    The leverage in the ‘Compact’ is a definite move towards state annexation and political union with the ultimate goal being federalised ECB with similar powers to the FED. Political union is required for this. But this union is not built on statehood, its not a prototype along the lines of the EU, its rather quite another, a USSR prototype of socialism for the banks led by a new politburo of Merkozy and Bundestag.

    Project euro is quite different to project EU. We should support the EU, but this new entity currently emerging is quite different. Out of similar chaos in the 1920’s
    unexpected outcomes emerged; they risk emerging once again. Uncertainty in the political and economic failure to address the real problems of the euro only adds to these problems. As time passes, expect the extent of these problems to reemerge following the LTRO lull.

    Fixing financial institutions is not a substitute for fixing economies. Fixing broken financial institutions instead of allowing capitalism to burn broken financial conduits creates volatility and risk that is counter productive. This volatility and risk is not only financial but it is risk attached to the stability of democratic systems. Interesting times ahead.

  38. Bond. Eoin Bond... Says:

    @ John McH

    Sorry, at the beach this week so only lobbing occasional grenades from the Wifi in the Irish bar…

    “The Irish government has the capacity to further consolidate and implement the necessary reforms, so that there will be no lingering doubts about the sustainability of government debt. I am thus confident that Ireland will continue to fully implement the necessary adjustment and reforms, and that on this basis, Member States will continue to show solidarity towards Ireland.”

    Translation: as long as we stick to the plan and don’t do anything to worsen the crisis, they’ll keep giving us more and more relief as and when deemed necessary. We’ve had a reduced interest rate, we have longer term loans, we have easier collateral rules for banks, we have an entirely new regime leading the ECB, we’ll likely see a restructure of the PN in the near future. It’s in absolutely no ones interests to see Ireland fail.

    Sticking with the painful plan is, to me, still the best chance of getting out of this in one piece. We’re two thirds of the way through it already (we started our own IMF plan in 2008), and we’re closer to coming out the other side than many people care to admit.

  39. The Dork of Cork Says:

    @Aisling
    If we can credit bond holders with base euros we can credit citizens……… We have a balance of payments problem withen the rump domestic economy.
    Much of their Euros disappears from the internal economy as people live input / import heavy lives……….but you need a postive money supply to turn this Titanic around.
    You don’t reverse the engines………….. if you do the ship will cavitate and hit the Iceberg as the controls won’t work.

  40. The Alchemist Says:

    The banking system. The banking system. The banking system,.. endless prattle and waffle…

    One of the problems with the focus on the big ticket figures in the banks is the almost total ignoring of indigenous businesses - forget about the recent ‘credit event’ announced by Richard Bruton.

    There is a slew of Irish companies in examinership at any time and one of the consequences is that they find it hard to impossible to get other companies to trade with them on standard credit terms.

    There is a lot deficient with the existing banal system and possibly if the government spent more time on its problems rather than recycling ‘new’ initiatives, more could be achieved.

  41. Bunbury Says:

    @ Aisling (6.09pm)

    Well spotted. You may be the first one to have picked up this important admission (or slip) by the ECB. I’m surprised you’re not getting more acknowledgement.

    As you highlight, shoring up unsecured Anglo bondholders was a ‘lie back and think of Europe’ moment and this ECB admission must/should strengthen our negotiating hand if our politicians and their advisers, and senior civil servants are taking notice.

  42. Aisling Says:

    @Bunbury I don’t think it was a slip, I think it was openness from the ECB acknowledging publicly what many of us have suspected.

    My reference to a mistake was whether us paying has made a blind bit of difference to the Spanish banks given the subsequent events.

    But in acknowledging it, in a German ECB bod acknowledging it, it changes the focus a little. It gives us a number to point to that we’re bearing for the good of the team. A small number, but a number none the less.

    A huge part of the problem has been the inability of politicians in all Member States to actually talk honestly with their electorates. We get told we’re not to blame (pesky foreigners snuck in and stuffed our ballot boxes with votes for Bertie). The line that plays well in Germany is solely the line that the Irish were profligate (which we were). But this allows a small element of discourse on the cost of IBRC, that some or more of the IBRC bailout was to benefit others as much as, if not more than, ourselves. The AIB and BoI angle I think we have to live with, we had to stand over those. But if we can shift the debate, even a little, around the costs of IBRC being attributable to the EZ rather than just to Ireland, its a start.

    A lot of IBRC is ours in that we elected the Gov who appointed the regulator who failed to regulate the twin basket cases that were Anglo and INBS. But I suspect we could have allowed IBRC go without completely underwriting its debts. So this is a small step in shifting that debate.

  43. Ceterisparibus Says:

    @Bond Eoin Bond
    The beach must have put you in a wonderfully optimistic mood. I was at the beach today but I remain more cautious.

    You say we are two thirds of the way through the crisis….did you forget about the 50 million a day we are borrowing ( per Joan Burton) to keep the show on the road.

    Asmussen clearly has an exit strategy for the ECB…dump the PNs into EFSF
    And the ECB gets more of its money back. Poor oul IRl just has to pay more.

  44. Eureka Says:

    @Aisling
    Interesting point. Not sure it will gain much traction. Not sure that this speech is really that important. I stand to be corrected but it’s basically the ECB trying to encourage us to keep doing what we’re doing. There’s very little new in it.

    Interesting to note the deferential tone to this man in the lead in to this thread. As Mr Bond rightly pointed out on another thread - the sooner we grow a pair and start squaring up to these people the better.

    Do you know how many times interest rates are mentioned in this - once! In a piece that purports to explain the origins of the crisis the mismatch in interest rates during the boom is conveniently left out. I don’t like this guy much either.

  45. The Dork of Cork Says:

    @Ceter
    You can print 50 million a day just as easily as you can borrow it.
    I can’t understand how the exchequer seems to have given all power to the CB boys who just care about their pointless failed credit dreams.

    You can’t run a economy in reverse gear , print the euros and the debt will be repaid , don’t print the euros and the debt won’t be repaid. The debt is the money supply , you don’t F$£k with the money supply for private gain.(thats called treason)

    Its as simple as that in many ways as the investments were pointless credit sinks.
    Its not our fault the commercial banks don’t know how to finance useful stuff.
    We need to simplify this somehow & clarify the internal chain of command here.
    The Banks are only into sick credit incest games , its the treasury that makes the healthy money babies.
    Letters of comfort or no letters of comfort.

    This wheres my blankee routine is getting a bit tired these days as we took 4 years to grow out of the pram.
    We can print euros at will.

  46. Colm Brazel Says:

    @ Aisling

    Re ” ELA is properly collateralized ” Presume you mean by the PN’s, but not sure the point you are making re collateralisation through other means. If you’d like to develop the point more. One take I got on this is eg collateralisation of EFSF bonds whereby we are not expected to pay the collateral. Instead the EFSF through investment in long term bonds by whatever means, OTC, CDS, or any other form of investment eg in US TB’s can make a profit for its own investments. Those profits should be used to write down debt. This should form a significant portion of the ¢16 bn if not the total amount which could then be written off. Instead, the language of EFSF and ESM is turning into this ‘remedy’ where bonds are sold to distressed states on a for profit basis without debt writedown?? What I say here equally applies to the so-called bailouts? Surely ‘bailout’ is a misnomer. These schemes are digouts for banks, they are banking ‘for profit’ lending relationships that usoriously extract unpayable debt. This fact should become clearer as the stance against our debt position becomes harsher as evidenced by recent slapdowns re negotiation over PN’s. It may also evolve into a request for state assets to form collateral as a basis for transfer of wealth to lenders. This has already happened in regard to the current PN. It had to be directly financed by commercial paper of Irish banks. Bottomline is the viability and health of the Irish economy. Arguably it is further under the water with these bailouts than without them. The business sector is certainly under water with closures accelerating, mortgage default increasing, GNP is at minus and heading downward, unemployment 14.5% and increasing and the plan is to take more out of the economy with further austerity. But those who told us the IMF would never cross the doorstep appear unperturbed. Its unfortunate our banks were not in a worse state that would have pushed them beyond the reach of taxpayers suckered with the mistaken guarantee. Basically, the economy is screwed. Any evidence to the contrary?

  47. The Dork of Cork Says:

    @Colm
    Philip had complex article that I could not really understand musing where the money is going when we are running a marginal current account surplus.
    Me thinks it is going to pay off debt on failed investments which is why the capital account is shrinking.
    However that is no reason to see a drop in the M1 money supply which is effectively the states money supply & not the bank credit supply.
    You see the money must come from some source originally be it a commercial bank or CB / treasuary.

    That famous BIS paper , the number escapes me now - the one that attacks the excess savings meme comes to mind.
    I did not produce my savings , I might have earned it but I did not produce the electronic & paper stuff.

    The money must come from somewhere………..

    You don’t I repeat don’t decrease the M1 in this sort of situation or indeed any situation.
    Its base Euros / punts or donkeys as the medium of exchange.
    It appears the banking system prefers we use livestock.
    Why do we allow this ?
    What money power have they got ?
    WTF do they think they are ?

  48. bazza Says:

    @Joseph Ryan

    +1
    Well said.

    @Eoin Bond

    What “plan” speak ye of?

    The plan to get our deficit undercontrol and restore “liquidity” to the Irish govt bond market, is it?

    The world has moved on since 2010. Successfully cutting our deficit to 0 without jeapordising growth will not restore credit worthiness (even if that is possible, which is very doubtful).

    The size of the public debt burden, a broken banking system, massive private debts and low levels of Irish, European and global growth will mean that we will rely on official funding for years to come, under the current “plan”.

    Even if, by some miracle, get away one or two auctions next year, the mildest of economic shocks will send our yields rocketing again.

    And to top it all, just think what the ECB will do with rates as soon as there is a glimmer of recovery and think about how that will affect the Irish consumer/mortgage holder.

    The “plan” was never designed to help the Irish economy. It was designed to kick the can down the road and we are rapidly running out of that road.

  49. Mickey Hickey Says:

    When the bubble bursts the blame game begins.
    1)
    The Irish Gov’t and in particular CBI, Regulator (reports to CBI !!!) DoF. All guilty on numerous counts.
    2)
    Irish retail and commercial banks devoid of anything that might pass for responsible management. Guilty on numerous counts.

    3)
    Major European Banks lending to the Irish Gov’t and Irish Banks. Reckless in the extreme and as guilty as the first two.

    4) Commercial borrowers overextended in the property market. Smoking or snorting mind altering substances. Guilty

    5) Retail borrowers, particularly for mortgages. Innocents egged on by the Gov’t and the media. Innocents at the slaughter.

    6) ECB enabling the Irish Gov’t to continue on its profligate ways. Guilty of self serving behaviour that has and is ruining Ireland.

    7) The Gov’t that was not capable of developing a deposit insurance scheme that would protect depositors without having to extend protection to bondholders, mega banks, hedge funds and institutions all over the world playing spread the funds to reduce the risk game.

    8) The Gov’t that today seems to have no understanding of the harsh reality and not the slightest clue as to how to manoeuvre its way out of the mess.

    In the real world in normal countries the losses would have been spread amongst the participants. In this case the Irish Gov’t, Irish banks including bondholders, Commercial borrowers, Foreign banks. So what do we have, Irish home owners drowning in debt with no relief, and the Irish taxpayer burdened for the next twenty years. Unemployment worse than we had in the dirty thirties, even in the fifties unemployment ran around 6%. Instread of facing the music and taking the shock our Gov’t opted to drag its feet while hoping and praying for a miracle. The miracle occurred and it is the stoic, complacent, placid behaviour of the Irish people.

  50. grumpy Says:

    @docm

    Assured ‘funding’, or assured ‘liquidity’?

  51. David O'Donnell Says:

    FYI

    Jörg Asmussen’s Bio.

    http://www.ecb.int/ecb/orga/decisions/html/cvasmussen.en.html

  52. David O'Donnell Says:

    CARTOON of the Day:

    http://www.presseurop.eu/en/content/cartoon/1792921-bad-deal-judas

  53. David O'Donnell Says:

    Finally,

    The Spanish Flu returns, with interest.

    http://www.spiegel.de/international/europe/0,1518,827099,00.html

  54. The Dork of Cork Says:

    “I think (John Bull) I am turning Japanese , I think I am turning Japanese , I really think so”
    But not in a 1990s way………… a 1970s / 1980s ? at least in the transport department.
    http://www.rail.co/2012/…/10/union-claims-rail-firms-have-no-idea-how-b...
    The power of monetary policey is awesome.
    Shame about their fiscal policey
    = overcrowding

    http://www.youtube.com/watch?v=gEmJ-VWPDM4

  55. Frank Galton Says:

    Another important sentence

    Moreover, from a market perspective, those debts associated with the banking crisis are not differentiated from other sovereign debt. With the guarantee of 2008, large parts of the debt of Irish banks became a debt of the State, and any desire to offload this debt could have dire consequences

    It was the original guarantee wot done it, recent deflection attempts by its apologists not withstanding.

  56. Michael Hennigan - Finfacts Says:

    @ Joseph Ryan

    Several times in the article we are told that the ECB provides extraordinary support for ‘Ireland’. The author seems to equate the support for the banks with support for the State. This is a false and disingenuous premise.

    The banks are not the State. This is the utterly fundamental mistake made by the Irish State and by many European countries. It is a propaganda that has been accepted almost without demur throughout the world.

    When the whole banking system is f…ed, then it surely becomes a state problem.

    Your point of view is common as a simple narrative — but for having to support the banking system, things would be almost alright.

    At the time depositors were given an unlimited state guarantee, the banks were already unable to raise funding from other banks in the wholesale market.

    In a currency union, where all the banks collapse, where does the funding for new banks come from? Hardly from private investors?

    How long would transferred euro deposits have been left in new banks without explicit central bank support?

    I have often asked in response to the also common narrative: ‘austerity doesn’t work,’ where foreign cash is needed to support day-today services, should there be any conditions attached in a post-bubble economy?

    As regards leverage with the ECB, when the banking system effectively failed, there was little as the State had guaranteed all debt.

  57. PR Guy Says:

    Vincent B won’t be getting a second crack@them

    http://www.independent.ie/business/irish/troika-may-cancel-press-meeting-to-avoid-questions-on-referendum-3080083.html

    @Joseph Ryan

    “1. Several times in the article we are told that the ECB provides extraordinary support for ‘Ireland’. The author seems to equate the support for the banks with support for the State. This is a false and disingenuous premise.
    The banks are not the State. This is the utterly fundamental mistake made by the Irish State and by many European countries. It is a propaganda that has been accepted almost without demur throughout the world.”

    Er, yeah, um, sorry about that. I was just following orders guv.

    Good spot Joseph it is a thrust of the PR but it could also be argued that the situation with the banks got so bad that it was a problem for the state because without that support the whole system would have come crashing down around our ears and we would be killing each other for tins of beans right now. Our so called ‘civilisation’ and its systems are just a thin veneer over something that is red in tooth and claw underneath that veneer. Survival is a funny thing and brings out the worst in people. I have seen threats to survival many times, both businesses and people, and boy does it get nasty.

  58. Geronimo Says:

    The take away message is much more profound than interest rates, bond spreads, notes, etc. Here’s what he is saying

    1. You elected politicians to run a system riddled with cronyism, petty corruption, jobs for the boys, look out for friends and relatives, who you know not what you know etc. etc.

    2. Fools ran the show, because that’s what you wanted.

    3. You (the Irish people) are stuck with the consequences.

    4. Grow up. Get real. Design a system where competence and not friendship/family/cronyism is the road to reward.

    That’s one tall order for Ireland.

  59. Gavin Kostick Says:

    From the speech:

    “The ECB has no supervisory responsibilities, despite claims to contrary.”

    ECB Press release 2010

    “PRESS RELEASE

    “23 July 2010 - ECB welcomes the publication of the EU-wide stress-testing exercise

    “The European Central Bank (ECB) welcomes the publication of the results of the EU-wide stress-testing exercise, which was prepared and conducted by the Committee of European Banking Supervisors (CEBS) and national supervisory authorities, in close cooperation with the ECB. The stress-testing exercise is comprehensive and rigorous. It confirms the resilience of EU and euro area banking systems to major economic and financial shocks. The exercise, therefore, represents an important step forward in supporting the stability of the EU and euro area banking sectors.”

    http://www.ecb.int/press/pr/date/2010/html/pr100723.en.html

  60. seafoid Says:

    All the encouragement to get real and join the real world. The irish use of english features a phrase that goes ‘the reality of the situation’. What is reality ? Spain and italy and france are in trouble. Risk free assets are not as fluirseach as they were in 2010. Things are going to get a lot worse before they get worse. The ecb will try to hold the line as long as they can . These are extraordinary times. Disequilibrium makes projection into a lottery.

  61. Bundesboy Says:

    John. You state
    “an overly purist position can be self defeating in terms of the broader goal of finding a route through the euro zone crisis.   The Irish authorities have worked steadily to make the necessary and hugely difficult adjustments and avoid a default that would be both damaging domestically and damaging to the euro zone”
    Might we not also question an overly purist ECB theological approach to ela? Might your second sentence not be also read as an urging to keep taking one for the team?

  62. DOCM Says:

    @ Gavin Kostick

    There is no contradiction between what Asmussen said and the press release. ‘Responsibility ‘ for regulatory supervision of banks remains with the national authorities. It is not shared with the ECB, although there is provision in the existing treaties to assign specific tasks to the ECB with regard to the supervision of credit institutions.

    The only ‘improvement’ has been to set up a complex series of ‘authorities’ nominally under the aegis of the European Systemic Risk Board (in respect of which the ECB had to fight long and hard to gain the lead role).

    @ grumpy

    An interesting use of the term ‘funding’ by Asmussen. It is clear from his other remarks that he means liquidity support which, by definition, cannot be assured and/or long-term. From the press release issued by the government, it is clearly a case of “game on”. To be continued…

  63. Bundesboy Says:

    Docm
    So…your policy is exactly what? Keep doing the same thing time and ago in hoping for a different o,utcome?

  64. Gavin Kostick Says:

    @ DOCM et al

    I think the relationship between responsibility an accountability is at the heart of this.

    I do not agree with John McHale’s “I think it is a balanced take on Ireland’s crisis and crisis-resolution efforts, and in particular the support that has been received from the eurosystem.” I am in general agreement with Joseph Ryan’s points above.

    Much emphasis is put on the mistakes of the Irish government, pretty much none on the mitakes of the ECB.

    I think it is a partial, self-serving and agenda driven narrative of events.

    Take this bit:

    “I would like to make it very clear that I by no means have the intention to lecture an Irish audience on the best way forward for Ireland as regards the fiscal compact. This is to be decided by the Irish voters in the upcoming referendum at the end of May.

    “From an ECB perspective, a crucial element in overcoming the sovereign debt crisis in Europe is to regain confidence of market participants in the sustainability of public finances. Therefore we believe it to be of utmost importance that all euro area members adopt – and implement – the fiscal compact.”

    This reminds me of an anecdote I am about to garble, to the effect of when the new off-side rule was introduced in football, it said that a player should not be considered off-side if he was not interfering with play. To which Bill Shankley responded, “if he’s not interfering with play - what is he doing on the pitch?”

    The ECB man is on the pitch.

    And another bit:

    “First, a return to growth, already in 2011.”

    I am painfully aware of the ease with which one can get things wrong, which is why I stick links at the end of my posts in case I’m looking at the wrong data or such.

    Now as far as I can see from the graphs on page 1 and 2 of the CSO report here this is only very superficially true, with GNP declining in 2011 and both GNP and GDP declining in the last two quarters of 2011.

    It would be at last as true to stand up and say, under the programme the Irish state has now entered the second dip of a double dip recession.

    At the end Jörg Asmussen says:

    “I understand that Minister Noonan has said that champagne corks will be popped on the night the Troika leaves Dublin. As long as Ireland continues to implement fully its programme and preserves its credibility as a State that honours all its obligations, I think that day will come in the not too long future, at the end of this programme in 2013.”

    Which is nice and clear, but offers no come back whatsoever for when it doesn’t happen. I expect this part of of the speech with be forgotten or put under ‘not our responsibility mate’, whilst the bits that are telling the government how to run its economy and the Irish citizens how to vote will have their impact now.

    The ECB man is taking the responsibility of telling a national government what it should be doing without offering accountability for the outcomes of such advice.

    For the moment, any chance of the IIEA asking Jörg Asmussen to come back at end 2013 for a review. Also, was this advertised? Perhaps I missed it, but I would happily have gone along and put a couple of questions in at the end.

    http://www.cso.ie/en/media/csoie/releasespublications/documents/latestheadlinefigures/qna_q42011.pdf

  65. Edward v2.0 Says:

    I don’t know why anyone would be surprised/enlightened by Mr Asmusen’s support for a restructuring/refinancing of the promissory notes. It’s a truism that the ECB would be in favor someone else (e.g. the EFSF) refinancing the notes and reducing their exposure to a shaky counterparty. The ECB’s primary concern is that the ELA is repaid promptly so that it can burn the money on schedule and protect ‘ze price stabilitee’ – they don’t care whether the money comes from Irish taxpayers or EU taxpayers or a particularly good run in Shelbourne Park by Chopper Chopra. Their opinion is not terribly relevant though, because the ECB does not speak with the same voice as the EU. The only Troika party that matters in this discussion is the potential new lender – the EU (read German voters) who are: (i) not very interested in what Mr Asmusen has to say; (ii) not very interested in what Mr Noonan has to say; and (iii) quite keen on holding onto as much of their money as possible until they are 100% sure it will be needed to avoid Armageddon.

    This situation is similar to BoI telling a problem customer that they would be open to having them refinance their existing overdraft with AIB.

    I have a different translation from BEB’s post at 8.55:
    “The Irish government has the capacity to further consolidate and implement the necessary reforms, so that there will be no lingering doubts about the sustainability of government debt. I am thus confident that Ireland will continue to fully implement the necessary adjustment and reforms, and that on this basis, Member States will continue to show solidarity towards Ireland.”

    Translation: Ireland has plenty of fat left to trim and can be saved by more austerity. You better stick to the plan though, because the ECB has washed its hands of you and it’s up to the Member States/EU to save you when this strategy fails.

  66. Colm Brazel Says:

    @ Michael Hennigan, PR Guy

    “it was a problem for the state because without that support the whole system would have come crashing down around our ears”

    :-) Glad I didn’t fall for that one.

    Olafur Grimsson stood his ground against that propaganda as well. The Greeks got their haircut, but we don’t. Sauce for the goose, is not sauce for the Irish gander well and truly goosed by this political propaganda of subservient sell out/sell off.

    Speaking of which Mar 12 last:

    http://www.guardian.co.uk/world/2012/mar/05/former-icelandic-prime-minister-trial

    Reminded of the ‘gross negligence’ of the ‘guarantee’ and subsequent negotiating disasters such as the ludicrous interest rate embarrassingly attached to the original bailout fanfared by Honahan et al, from above:

    “Geir Haarde, who was ousted after Iceland’s three biggest banks collapsed and the country’s economy went into meltdown, could be jailed for two years if found guilty of gross negligence in failing to prepare for the impending disaster. He denied the charges and claimed that “only in hindsight is it evident that not everything was as it should have been”.”

    Ireland has been well and truly ruined by its politicians whose ruinous record has the economy in tatters; but listening to the outpourings from Dáil Éireann you might be led to think we’re in the middle of a boom.

    Denial is the dominant force in Irish politics: if, “in hindsight is it evident that not everything was as it should have been”, then rewrite history and deny the present.

  67. Bryan G Says:

    There’s nothing new here that I can see. ECB Executive Board members feel compelled to “set the record straight” about once a week on average, so this tends to generate a lot of repetition.

    Providing liquidity support to banks to mitigate bank runs is something central banks have done for over 200 years. Forcing states to assume all solvency risk for all banks is a new central bank “function”. Somehow I don’t think this one will last 200 years. The intermingling of bank and state, and liquidity and solvency, pervades the entire speech.

    While the future path desired by the ECB (towards an ever greater fiscal union) and the future path desired by Germany (bank to Maastricht, this time sticking to the rules) are very different, there’s one thing they can fully agree on, which is the “nationalization” of all blame for the current predicament, as this tactic greatly strengthens their negotiating positions. We are all aware that there is plenty of blame to go around; however in the speech every element relating to “blame” is carefully delineated to an Irish context. The main failure was one of Irish banking supervision and fiscal policy (it appears the banks themselves don’t warrant any direct blame). The decision to pay unguaranteed bondholders was a local one taken by the Irish authorities; the contagion that was “avoided” due to following this ECB view, was of contagion to other Irish banks, not to the wider EU financial system. And so on.

    John McHale calls the speech “a balanced take”, but I do not share that view at all. A balanced take would be something more like Bernanke’s recent lectures on the financial crisis given to a George Washington Univ. class. There he outlines serious failures and vulnerabilities in both the private sector and public sector, however these are not intermingled in the way bank and state are intermingled in Asmussen’s speech. There the bailout of AIG is defended as unavoidable, but is discussed in the context of “this must never happen again” as a usage of taxpayer funds, and to avoid moral hazard. A similar concern for taxpayer funds is, unsurprisingly, totally absent from Asmussen’s speech. There the liquidity support provided for American financial institutions was portrayed as the Fed doing what it is supposed to do, not as a benevolent discretionary action for which everyone should bow down and give thanks.

    Bernanke also managed to be a lot less patronizing to his class of junior students than Asmussen was to his more mature audience.

  68. The Dork of Cork Says:

    @Bryan G
    The $ is a elastic currency the euro is not.
    We can fix that however - the domestic juristictions can credit base euros to peoples accounts and tax waste.
    Chiefly private car use , oil heating , road freight etc.
    For example we don’t need 1,800,000 + private cars on the road , in 1990 we got on just fine with 800,000 cars on the road.

    Y1990 : Irish oil use by sector.
    Total Irish oil use (TPES) :4,422 Ktoe
    Private car : 926 KTOE
    Road freight : 334 KTOE
    Int. Avi : 358 KTOE
    Residential (heating mainly ) :389 KTOE
    Commercial (heating again) :641 KTOE
    Industry :696 KTOE

    Y2010 : Irish oil use by sector (this after major declines since 2006/7
    TPES : 7699 KTOE
    Private car : 1,899 KTOE
    Road freight : 733 KTOE
    Int. aviation : 754 KTOE
    Residential :1,288 KTOE
    Commercial : 494 KTOE
    Industry : 731 KTOE

    We need a positive money supply , be it in Euros or Punts.

  69. Bryan G Says:

    Meanwhile not alone is Greece due to be issued up to €50bn of EFSF bonds by June to recap their banks, but it appears the EFSF is now guaranteeing new Greek bonds (and thus increasing their NPV) so that the capital shortfall created by the PSI is being reduced by about 25%. Seems this new-found EFSF flexibility can’t make it across the Irish sea.

  70. Eureka Says:

    @ Bond
    Not a great juxtaposition prescribing pain for others from the Irish bar on a beach (??not in Greece I hope)

    What is it about the guys we have at the helm in this country. They’re all Lilly livered supplicants - little altar boys in the church of the markets. Austerity is a new Euro religion. It comes complete with its corrupt clergy, it’s patronising sermonising, it’s use of praise and shame, and it’s use of fear of damnation (or default) to get the masses on side. It’s a nasty nasty movement brought to you by the nation that brought you national socialism and the holy roman empire.

    Now before Paul Hunt has a caniption austerity does not equal reform. The church of austerity is as corrupt as anything. What class did he fly? What hotel did he stay in (at what cost?). What did all this cost? And how about the reference to champagne - prosecco for us from now on!

    Common sense and thrift - fine. A programme solely designed to ensure the ascendancy of bankers - no thanks

  71. Eureka Says:

    Sorry - the questions about the flight and accommodation relate to this ECB man. Would like to know

  72. Joseph Ryan Says:

    @MH
    re I have often asked in response to the also common narrative: ‘austerity doesn’t work,’ where foreign cash is needed to support day-today services, should there be any conditions attached in a post-bubble economy?”

    There are two main policy platforms dealing with the crisis, austerity and deleveraging.
    Austerity in the form of living with our means is a necessary objective which should be implemented in the least damaging way to the economy. [Eg Get rid of higher earner tax breaks first before anything else]. I accept the requirement of living within our means and believed we should have moved more rapidly in that direction.

    The second major ‘policy’ is deleveraging, which is causing massive damage, is unnecessary and economic madness. This is policy plant that the ECB is forcing on banks throughout the EZ.

    “In a currency union, where all the banks collapse, where does the funding for new banks come from? Hardly from private investors?”

    This is the crunch question and it is where ECB thinking until Draghi had completely failed. Even recently (a few days ago) a new ECB board member Benoit Coeure said he wanted interbank lending to get back to ‘normal’.
    It is not going to happen. It is not even in the least desirable that it should happen. No economy should rely on an interbank lending model, where all lending can be pulled in a matter of months, weeks or even days.
    There is a simple solution, if the ECB thinks outside the box.
    Replace all EZ bank bonds with ECB medium term funding.
    Make LTRO an integral part of the liquidity system not an aberration, replacing the need for interbank lending.
    Stop deleveraging at once. A central bank insisting on rapid deleveraging is sheer madness.

    @Gavin
    re ”
    The ECB man is taking the responsibility of telling a national government what it should be doing without offering accountability for the outcomes of such advice.”

    Yes indeed. Europe is now in the throes of a double dip recession?. Ireland certainly is. Greece has been destroyed. Spain and Italy are on the brink. This is after four years of ECB crisis management.
    The ECB and indeed Germany and France should be asked to account for the failure of their policies.

    @Gavin
    Thank you for your recent comments re my apology on ELA.

    Thanks for your recent comments re

  73. Paul Hunt Says:

    As I mentioned on the previous thread when Mr. Bond drew attention to this speech, all one has to do is to change the nationality and Tom Macauley’s aphorism appears perfectly apt: “We know no spectacle so ridiculous as the British public in one of its periodical fits of morality.”

    I find the extent of delusion remarkable, but not surprising. Ireland is a flawed polity. All polities are flawed to some extent or other because the institutions and procedures of governance are designed, enforced and used by human beings. But there is considerable variation in the extent to which they are flawed. Whta sustains Ireland as a polity is the basic good sense of the vast majority of its citizens and the responsible behvaiour of the vast majority of those who provide public services - which is reinforced by considerable community and voluntary effort.

    As Conor Cruise O’Brien obce remarked: “Ireland is half-decent democracy”. The half that is facing towards the citizens remains in rude health and the vast majority of citizens are determined to keep it that way. And the judiciary has an excellent, if not unblemished, record. But these citizens have been ill-served by the political classes, by a number of senior appointed officials, by some influential business people, by many of their ‘public intellectuals’ (but with some notable exceptions) and by most of the media.

    And apart from a change in the identity of those around the cabinet table, of special advisers, of the composition the Dail and some limited senior official personnel nothing has really changed. The same dysfumction and flaws in the system of governance are evident.

    Yet most people adamantly refuse to see this and get all het up pointing out the politicial flaws and failings of external instutions and polities.

    The reason that the ECB has not been able to operate as a normal central bank is because elected politicans and their appointed officials refused to empower it to operate in this way. It is the height of chutzpah and hypocrisy to criticise a muzzled dog for fialing to bite.

    And there has been a generational shift in central Europe, in particular in Germany. The generation that was prepared to fund regional, social and structural tranfers to new poorer members has been superceded by those who’ve paid for unification and experienced the wage repression and paid the cross-subsidies to build a world-beating export sector. There was a hope and an expectation that the ‘peripherals’ who’d been helped out of dictatorship and backwardness would behave - and they gave their solemn signatures that they would behave. Both the hope and the expectation were dashed. And it should not be difficult to understand the reluctance to be gulled again. “Fool me once, shame of you; fool me twice, shame on me”.

    Ireland’s failures in the areas of fiscal policy, bank supervision and financial regulation constituted an act of economic war against the EMU. Irish people need to come to terms with this.

  74. The Dork of Cork Says:

    Man / citizen serf wakes up , he finds his bank account is credited with 10,000 Euros into his account.
    Absolutely fantastic he thinks.

    However his home heating oil has also been taxed.
    It has risen from 1.11 a litre to the car diesel price of 1.58……..
    He might decide to use some of that money to buy one of those wood gas stoves everyone is talking about , then again he might not.

    He also finds his car VRT tax has been doubled so he can’t even buy the smallest of cars.
    If he really needs a car he can just about afford one of those new A+ skoda fabia car thingies if he throws his meagre savings into the pot.

    He might also decide to drink the lot but at least this activity keeps most of this money internally withen the domestic system , much like a cruder form of the old French waiter system.

    The only potential leakage is if he decides to up sticks to Canada.but at least its one less mouth to feed.

    Its all about the stock & flow………. the bankers understand this but are corrupt , me thinks most of the politicians are mainly stupid.
    They actually think its about money !!! ,fiscal stuff and all that as if currency was a valuable physical good !!!

    YOU TAX THE MONEY SUPPLY.
    If the country needs base money to tax you create base money.
    The banks certainly will not make it - its been proven already, their activities destroy wealth.

  75. Eureka Says:

    Is nobody interested in the cost of this mans visit? Are bankers exempt from austerity? Are we afraid to ask? Did he travel economy class? Did he stay in a 3 star hotel? If he were a politician or public servant we would want to know.

    And this is the nub of the problem with “austerity”. It is a misnomer. It is a bank bailout.

    @Paul Hunt
    Dare you to turn some of your ire on European institutions.

  76. Paul Hunt Says:

    @Eureka,

    I use the appropriate channels in the EU to turn my ire on the empowering, resourcing and activities of EU institutions when I encoutner evidence that their behaviour is detrimental to the public interest.

    This is ‘Irish Economy’. Ranting here about the perceived follies of EU institutions is extremely unlikely to be of any use - and could even be counter-productive.

    But it provides convenient displacement activity to avoid consideration of the challenges that are in Ireland’s hands to address.

  77. V Barrett Says:

    In January 2012, Der Spiegel hailed Asmussen’s appointment as a man seen as an ‘international navigator and negotiator’ who would “keep an eye out for the interests of German taxpayers”. He remains a member of the Social Democratic party. This man is first and foremost a politician. Che Guevara was once head of the Cuban Central bank - are we to assume that when he took on that role he left his political baggage at the door. Such a suggestion is of course proposterous and no less so in Asmussens case so some of the reporting on this man this week as an all seeing/all knowing ECB sere is somewhat troubling and servile.

    Asmussen’s message and demeanour in its delivery to Ireland, is underpinned solely by German interests and needs to be considered in that context. I do not want to hear our political leaders defending their failure to negotiate with the “ECB” a better deal for Ireland on the back of anything that man has had to say this week. Its time to start calling a spade a spade in international discourse - there is nothing to be gained from our sheepish approach any longer. If we are going to continue to honour “our commitments” anyway - then the lest we can do is highlight the grave injustices that is being perpetrated on us by these criminals as we hand over the cash because it will never be possible in any debate to defend a position that demands ELA’s to be issued to pay Canary Wharf and Frankfurt brokers, and that this in turn ought to be sucked out of the Irish economy for years to come.

    Some straight talking would at least allow us some dignity and maybe, just maybe get it through somehow to Mr. Asmussen and his ilk, who have all but conceded Ireland saved a potetnial contagion disaster this last few years, that fair play is good sport.

  78. David O'Donnell Says:

    Responding to Mr Asmussen, the Government said in a statement last night that it was still awaiting a draft paper being prepared by the troika on the debt issue.

    http://www.irishtimes.com/newspaper/breaking/2012/0413/breaking10.html

    Let’s have a stab at it - going on previous form, and the minor position of the IMF realists in the three-legged stool known as ‘deTry_ka’

    (i) PNs to Sov Debt from EFSF (Conflationist Fallacy goes Real_er
    (ii) Trackers to cross the floor to IBRC (gotta keep 2_of_7 busy for the next 30 yrs; and a grown up twin for NAMA
    (iii) Dash of Creative Accounting that neither of the Neu Real_er Reals will be identified as GrossGovDebt for Illusionary Fallacious Numerical Korset Purposes
    (iv) All of the above to be announced with Fanfare, Peace in our Time, Heralds singing etc in sufficient time to Somatize the Supine Citizen_Serfs into the soft addictive glow of YES, YES, OH YES, OH YES …..
    (v) An Taoiseach agus An Tanaiste pull rank on JedWard, Sing the Blues themselves, and win The Eurovision Song Contest
    (vi) Japanese replaces compulsory Gaelige on the school curriculum, junior infants to be able to count to 200%GDP before promotion to senior infants; Gov Ministers to be exempted
    (viii) All unemployed males and otherwise distracted females to be conscripted to finally ‘drain The Shannon’ @€3 per hour solving the unemployment problem
    (ix) All counties, bar Mayo, to be banned from this year’s football championship.
    (x) An Taoiseach lifts the Sam Maguire in Croke Park without a ball being bounced, let alone a goal being scored, or a kick to touch from Minister Noonan.

    Spose they’ll term it ‘The Thin Point Plan’.

  79. Shay Begorrah Says:

    @Paul Hunt

    Ireland’s failures in the areas of fiscal policy, bank supervision and financial regulation constituted an act of economic war against the EMU. Irish people need to come to terms with this.

    That is simply insane.

    A few posts were deleted last night (Eureka, me) for the sin of suggesting that a note of servility had crept into the dialogue between official Ireland and the representatives of the Troika. To Ireland’s long history of cultural cringing we can now add an economic variation on the same theme.

    It should be a source of serious dismay to anyone who sees a future for Ireland in the Eurozone that the European establishment could send a representative to a meeting in Ireland (I would be interested in knowing who exactly was invited) to threaten us with “dire consequences” for disobedience and then baldly reiterated a narrative of the European component of the financial crisis that is dishonest (or possibly deluded), almost laughably self serving and widely acknowledged as destructive.

    Complaining about the promissory note negotiations is entirely fair and I understand that John McHale might want to remain on good professional terms with Jörg Asmussen, but official Ireland needs to think whether the pretence that we, the ECB and Germany have aligned interests is worth maintaining.

    Begging for someone to stop using you as a punching bag is unlikely to be productive, and might make you an object of pity.

  80. Jagdip Singh Says:

    “Let me conclude, Ireland has received unprecedented support from other European Member States. The Eurosystem has, within the limits of its mandate, been very supportive of the Irish banking sector, and thus of the programme for Ireland.”

    “has received” - past tense

    In November 2010, Ireland accounted for 25% of the ECB’s lending.
    Today it’s €85bn out of an ECB balance sheet of €3tn.

    What’s the Latin for “Eaten Bread is Soon Forgotten” so that we might have a word with Olli and Mario.

  81. Colm Brazel Says:

    @Bryan G 8:51

    There the liquidity support provided for American financial institutions was portrayed as the Fed doing what it is supposed to do, not as a benevolent discretionary action for which everyone should bow down and give thanks.

    The obstacles faced by the euro are way steeper than those faced by the dollar. The former is a credit union system whereas the FED is a proper currency system. The FED has problems related to the nature of the fiat money system itself, but the euro doesn’t even fulfill minimum requirements for functioning as a full blown currency system.

    It is broken as a result of the economic collapse of many members of its currency credit union. It has not arrogated to itself the methods and procedures required to avert such a collapse. However, it is attempting to invent these powers in an ad hoc way that are proving to be more Frankensteinian as time goes by.

    The villagers are becoming increasingly unhappy. But Merkozy alliance with ECB have decided zzee new euro Frankenstein must be given blood by extracting it from the villagers and transfusing it into its banking system. This new banking ‘troika’ Central bank Bundestag system is designed to funnel debt extraction from peripheral members of the credit union safely back to the coffers of the core.

    Jörg Asmussen, messenger from the Bundestag, among others, in the face of the growing reality of the failure of this experiment become more absurd and ludicrous as the euro falls apart.

    The nonsense of the ‘troika’ bailout eg for Ireland grows; justification for it dissolves in proportion to its growing failure. Elsewhere LTRO is running out across EA but both German and French politicians hope it will get them across the line in coming elections…

    @Joseph Ryan

    “Make LTRO an integral part of the liquidity system not an aberration, replacing the need for interbank lending.”

    Suppose they do that. The value of the euro falls against the dollar and other currencies. The risk of hyper inflation is increased. It means normal ways of raising money by governments through taxation or borrowing have failed. It begins a race to the bottom and confidence in the currency goes. Its more bailout of financial institutions built on the bubble of financialisation anchored in a virtual world and not grounded in the world of real economic development based on jobs and production.

    Right now the temporary experiment with LTRO will be shown to have failed; a permanent experiment with LTRO would destroy the currency more quickly. The real problem with the economies of EA being eroded with a failed currency system are not dealt with; these problems show up viability deficits such as surpluses at the core vs liabilities on the periphery causing economic collapse in countries such as ours.

    We have a financial version of the foundation with the euro currency itself contaminated by pyrite:

    http://www.independent.ie/national-news/devastating-pyrite-epidemic-hits-20000-newly-built-houses-2073508.html

  82. The Dork of Cork Says:

    Rail energy use / traffic

    Y1990 : 45 KTOE
    Rail passenger traffic (000 km) :1,225,556
    Rail Freight(000 km tonnes) : 558,550 :

    Y2007 : 47 KTOE
    Rail passenger traffic (000 km) : 2,007,065
    Rail Freight (000Km tonnes) : 128,908

    So thats a 2 KTOE rise for a extra 800,000,000 ~ rise in passenger KM
    Although a massive drop by over 400,000,000 in km tonnes of freight in a BOOM.

    Y1990 : private car : 926 KTOE
    road freight : 334 KTOE

    Y2007 :Private car : 2070 KTOE
    road freight : 1,255 KTOE

    Hello Hello …… anybody home ……. think Mcfly THINK.
    http://www.youtube.com/watch?v=kh9PYtmVybU

    Its time we went Back to the Future.

  83. David O'Donnell Says:

    Seven_of_9 suggests that we go back to First Contact … pronto as most appear to have already been assimilated; and she should know, if’n u NO what I mean.

  84. Colm Brazel Says:

    @ Shay Begorrah

    A few posts were deleted last night (Eureka, me) for the sin of suggesting that a note of servility had crept into the dialogue between official Ireland and the representatives of the Troika.

    Speaking as a victim of such censoring in the past, sorry about disgraceful censoring of your posts there.

    Re ’servility’ creeping in, I’m not sure rather than creeping in, it has always been there. We’ve had puppet government from the beginning of this crisis, which has only served to deepen its problems. I doubt if this will change soon.

  85. Bond. Eoin Bond... Says:

    @ Shay

    “It should be a source of serious dismay to anyone who sees a future for Ireland in the Eurozone that the European establishment could send a representative to a meeting in Ireland (I would be interested in knowing who exactly was invited) to threaten us with “dire consequences” for disobedience and then baldly reiterated a narrative of the European component of the financial crisis that is dishonest (or possibly deluded), almost laughably self serving and widely acknowledged as destructive.”

    LBS did this all the time, and was far more on sided in his rhetoric. At least Assmussen is a politician and therefore less likely to be as purist in his outlook (ie the second last paragraph).

    Not sure what you dig about John McH wanting to remain on “good professional terms” is all about though. Silly.

  86. The Dork of Cork Says:

    @Colm
    We are the laughing stock of Europe
    All this talk talk talk……..for 4 years now.

    We don’t have oil but we have ideas , don’t we ?
    http://www.youtube.com/watch?v=XhWl-nKIlAw

    Maybe its more Merde Parler ?

    The goverment here has always functioned as a agent for absentee landlords….. the truth is out now and I guess the agents don’t like it.

    A goverment unable or unwilling to produce currency is not a sovergin entity.

  87. Yields or Bust Says:

    @All

    Earlier today Bredan Howlin suggested that ‘banging the table’ was largely a waste of time.

    I’ve suggested here before that our dream team that originally negotiated the EU/IMF agreement was anything but. I get the impression that we’re all a bit ‘nice’ with these EU types - perhaps the point has come to start banging tables and tell it as it actually is, and that is in banking the game always starts with the first loan.

    In the case of the first loans made to Irish banks a huge proportion of them originated in banks situated in Eurozone countries - what part of this is does Mr Asmussen not get ? - suggesting as he does that the problem was all home baked and deal with it, is simply wrong.

    Joe Higgins TD, if you remember suggested something similar to Mr Barroso in the EU Parliament some while back which saw Mr Barroso get into a near apoplectic fit as he tried to argue along the same lines as Mr Asmussen did yesterday. Sadly both EU mouthpieces were incorrect.

  88. David O'Donnell Says:

    @John McHale [This Kontext too shall pass!]

    Economics as a doctrinal discipline
    by Floris Heukelom on April 11, 2012

    In science, empirical disciplines such as physics, chemistry, history, and parts of sociology and political science, reason from facts. By contrast, doctrinal disciplines such as law, philosophy, and parts of sociology and political science reason from doctrines, or dogma’s. While doctrines must of course have a grounding in the empirical world, this relation is much harder to grasp. Moreover, to understand the doctrine and its derivation it is as much necessary to appreciate the context in which it was formulated, to understand the person first formulating it, and to assess the development of amendments subsequently made over time.

    In the nineteenth century, economists practiced economics as a doctrinal discipline almost without exception. In the twentieth century the doctrinal approach was tossed aside to similar universal acclaim. Yet, economists would do good in re-introducing a bit of doctrinal reasoning in economics. Sociology and political science could serve as examples in that regard.

    Dogmengeschichte, or doctrinal history, originates in German-language Christian theology. In theology, a doctrine or dogma is a foundation or essential element of a particular religion. Examples include the authority of the Pope, the trinity of God, Son, and Holy Spirit, or the liturgy during Sunday’s service. A doctrine is one element of what defines different individuals to belong to one religious group. Following the Reformation and the Renaissance, scholars of different Christian denominations began to investigate the historical origin of their dogma’s, and the social, cultural, and political contexts in which these dogma’s had arisen. As such, doctrinal history was a new form of Christian apologetics.

    During the nineteenth century, scholars started to employ this method of doctrinal history to describe the history of academic denominations, or disciplines. Not surprisingly, this included first and foremost those disciplines such as law, economics, mathematics and philosophy that, like the Christian denominations, were not understood as grounded in the new Renaissance methods of experiment and empirical evidence. Like the doctrinal historians of Christianity, these historians investigated and canonized the dogma’s of their disciplines through an investigation of the cultural, economic, political, and scientific contexts in which these foundations had arisen and had developed. As such, they provided an historical understanding of the discipline, but at the same canonized and defended a set of dogma’s upon which the discipline was and should be based. The most prominent doctrinal histories of economics undoubtedly are Joseph Schumpeter’s Epochen der Dogmen- und Methodengeschichte (1914) and History of Economic Analysis (1954).

    The reason that economists should re-instate some of the old doctrinal reasoning is that in addition to all the empirical fact-gathering, statistical analysis and model building, economics will always be partly grounded in doctrines. Convictions that greed is good (within limits), that demanding interest is ok (up to say 25%), or that all production in the world can be divided into Capital and Labor, are doctrines. They are connected to the empirical world somehow, but can only really be understood if assessed against their historical origin and development.

    http://ineteconomics.org/blog/playground/economics-doctrinal-discipline

    h/t nakedcapitalism

    Discuss with reference to the remit of the ECB. 2000 words only.

  89. Shay Begorrah Says:

    @Colm Brazel

    Speaking as a victim of such censoring in the past, sorry about disgraceful censoring of your posts there.

    Easy there. I do not think it is fair to call it disgraceful (it aint our blog) but I do think that it could be done more gracefully. What I primarily object to is the awesome beauty of my prose with its transgressive grammar, punctuation and spelling being lost to the world. John McHale does not share those feelings - but he might not be alone.

    @Bond. Eoin Bond…

    LBS did this all the time, and was far more on sided in his rhetoric. At least Assmussen is a politician and therefore less likely to be as purist in his outlook (ie the second last paragraph).

    Not sure what you dig about John McH wanting to remain on “good professional terms” is all about though. Silly.

    Absolutely, LBS was a profoundly unpleasant fool as well as an ECB enforcer and Assmussen has had some vaguely sensible things to say about bank resolution in the past. Assmussen is of course more focussed on going the full Minitrue and making the German narrative of the crisis into the historical truth which is a danger that was not as pronounced when we had Bini-Smaghi threatening us. Assmussen not only wants us to submit but to say that we were to wrong to to resist, this will create further political difficulty for us.

    The “good professional terms” was genuinely free of any pejorative connotations, it is not at all unlikely that if we sign up to the compact JMcH will be one of the people trying to persuade Assmussen or a colleague of his that our “structural deficit” is low enough to be allowed to enact a national budget a few years from now.

    It is a humiliating and awful vista but it might come to pass.

  90. tullmcadoo Says:

    JR
    Austerity in the form of living with our means is a necessary objective which should be implemented in the least damaging way to the economy. [Eg Get rid of higher earner tax breaks first before anything else].

    Most of these have gone or are inoperative. The only way to raise a seious amount of taxes is on the middle income earners who used pay tax up until Fr Sean went to Inchydonny and Bertie became a socialist. That requires a property tax as well but there is no sign of any willingness to pay. Top rates of income tax arguably need to be cut following the British move but that will not get anyone elected.

    The next issue is still pay and transfers particularly to middle income earners ie the bulk of the electorate. What you are proposing is an illusion of austerity.
    Our EZ overlords are merely spelling out the reality that the state’s expenditure exceeds by a large amount what it can reasonably raise in taxation. I suspect when we vote against the Fiscal Treaty, reality wqill dawn quickly that there is no more money.

  91. David O'Donnell Says:

    @Shay

    Winston is simply glowing after reading the Thin Point Plan, all is progressing Oh so swimmingly in Hiberno_Oceania at the mo, the beer ration has been increased and its price decreased, SOMA from another realm is now more readily available to medical card carrying members in good standing, and he simply cannot control himself from shouting YES, YES, OH YES< OH YES< YES YES

    Sad ol state of the supines …

  92. Shay Begorrah Says:

    @David O’Donnell

    the beer ration has been increased and its price decreased

    Oceania has always been at war with inflation.

  93. Michael Hennigan - Finfacts Says:

    Ireland hasn’t paid 1 cent to towards the EU budget since 1973; have we gained anything else besides cash?

    In cash terms the gain is over €40bn but in today’s euros, likely about €60bn.

    I just put that fact forward for those who argue we should have a big debt writeoff because for once in response to a disaster largely of our own making, we did a favour in return for Europe.

    I haven’t changed coats from boom to bust, unlike the president of Iceland who is now a hero to some. We are not short of chameleons ourselves.

  94. The Dork of Cork Says:

    @Tull
    Theres never never a shortage of money , and if there is, its treason.

    There is however a serious shortage of resourses because of the credit hyperinflation over the past 25 years or so.

    The solution to credit………… is base money , its more efficient then any other form of “austerity”.
    It will destroy the banks “assets” however.
    But thats a good thing is it not ?

    You are essentially accepting that there is no country called Ireland - its only function is act as a conduit for international credit flows.

    Me thinks that is not acceptable.

  95. David O'Donnell Says:

    @Michael Hennigan

    We have gained substantially from more progressive social/psychological legislation; this has probably been of greater import than the few bob which we are now p1ssing away due to [whatever].

    Good to hear that you were simply ’shaken’, but not really ’stirred’.

  96. The Dork of Cork Says:

    @Micheal
    You are looking at fiscal flows…….but that view is now obsolete.

    The state has guaranteed credit / interest income……..essentially the entire shadow banking sector parasite that feed off this cadaver.

    Fair enough we have essentially did this already , but reducing the M 1 is the base money supply -are you proposing to take money off people to service a compounding exponential function.
    Get a handle on this please.

  97. Paul Hunt Says:

    Wonders will never cease. I’ve been diagnosed as making the utterances of an insane person by our resident Sigmund Freud, Dr. Shay Begorrah. It’s definitely time to flee this asylum.

  98. Joseph Ryan Says:

    @TullMcAdoo
    re: “What you are proposing is an illusion of austerity.”
    You misunderstand me. I would have the deficit down to 3% next year.
    As follows:
    ~3 billion in tax breaks, mostly pension. Gone
    ~3 billion in cuts to PS pay and pensions, 30% in excess of 80,000 and max at €150,000. All pensions of recently retired to be cut in line with how pay was cut. The sweetheart deal goes out the window. All PS means all wider PS, incl Uni and semi state.
    ~2 billion
    ~10 million (or as low as one million but essential) special tax on rehired PS who got pension deal and lump sum. Like it or leave.
    ~1 billion in getting rid of universality. Medical Card, Children’s allowance
    ~500 million in getting rid of age related tax credits for >65.

    On the growth side, force NAMA, with its own funds, to finish all semi buildings under its remit. Force the finishing or confiscation of all partially completed buildings in the State.

    The country needs to get real. I am not in favour of the selective ‘austerity’ being implemented at present.

  99. Joseph Ryan Says:

    @Colm Brazel

    “re “Make LTRO an integral part of the liquidity system not an aberration, replacing the need for interbank lending.”

    Suppose they do that. ”

    I see no reason what LTRO cannot be managed more effectively and with much greater control than interbank lending. It is simply replacing the source of bank funding. There is no need to increase the amount of the funding.

    The status quo ante will not be achieved in relation to interbank lending. The big advantage that LTRO has is that it is medium term lending that allows should banks to make ’sensible’ decisions.
    Interbank lending on an overnight, weekly, monthly basis or even three monthly basis is foundation of sand on which no economy can be sustained.

  100. Gavin Kostick Says:

    Clearly I have a soft spot - but this is what I think a proper central banker sounds like:

    “Above all else, we must strive to maintain support for a market economy and an open world trading system. They provided the basis for the great prosperity experienced since the Second World War. The tragedy of
    the financial crisis is that those who have suffered most have been those who bear no responsibility for it, and who, whether employees or businesses, accepted the disciplines of a market economy only to find that
    others were excused that discipline because they were “too important to fail”. But the legitimacy of a market economy will inevitably be challenged if rewards go disproportionately to a small elite, especially one which benefited from the support of taxpayers. Those taking decisions on remuneration, in the financial sector and elsewhere, need to understand that a market economy rests not just on incentives, but on the acceptance
    that the distribution of rewards is fair. That sense of fairness underpins the commitment to a market economy. An even bigger tragedy would be to deny the prosperity that flows from a market economy to those who need it most.”

    Mervyn King, Jan. 2012

    http://www.bankofengland.co.uk/publications/Documents/speeches/2012/speech541.pdf

  101. Shay Begorrah Says:

    Even Dan O’Brien in the Irish Times, not a man prone to nationalist humours, has begun to wonder whether the ECB might just have spat in our face and told us to lick it up?

    For good measure he went as far as to describe comment in Ireland on the ECB’s stances and positions as “misrepresentations”.
    The last point is naive if not plain silly. The ECB is a very powerful supranational institution doing a job that is complicated even at the best of times. Europe has been in crisis for almost half a decade now. Different people are inevitably going to have different interpretations of how the ECB has performed.<…>Moreover, compared to some of the flak the ECB’s counterpart in the United States takes, almost everything said of the Frankfurt institution here is mild.
    ….
    Along with almost everyone professionally involved in the economics business (this one included), the ECB grossly underestimated the scale of the weaknesses and risks in the financial system – here and elsewhere.
    ….
    Like it or not, the ECB is a political institution.

    How about we settle on “Do not like that it is an unaccountable and ideologically extreme political institution and will not tolerate it.” instead of shrugging our shoulders and going “Well, we did sign up for economic imperialism - better learn to love German controlled economic policy.”?

    Still, I think Asmussen’s little address (he surely has political ambitions at home which the tone may be calibrated to please) may break the reverie in official Ireland - we are to be beaten until we behave.

    In fact the speech was so offensive I wonder if the plan in Germany is now to force the PIIGs out of the Euro as soon as the core has made its banks safe?

  102. bolshevik Says:

    @ Jagdip

    “What’s the Latin for “Eaten Bread is Soon Forgotten” so that we might have a word with Olli and Mario.”

    Try this - comedisti panem est oblivionem

  103. Bond. Eoin Bond Says:

    @ Joseph

    you are correct in theory, but ECB repo is a collateralised form of lending, which, if done with no-limit, would mean that unsecured debtors (depositors) would have absolutely nothing to claim against in the event of default (and subordinated debtors would only have intangible assets like goodwill etc). I’m not saying you’re off the wall, but having some limits in place on LTRO-style monetary tools makes sense, as does trying to get the interbank funding markets re-opened to some extent (ie as a credit signal on each bank).

  104. Michael Hennigan - Finfacts Says:

    @ David O’Donnell

    Thanks David!

    You’ve the knack of infusing humour into grim issues, while avoiding rancour.

    Long may it last!

  105. PR Guy Says:

    @Shay Begorrah

    “In fact the speech was so offensive I wonder if the plan in Germany is now to force the PIIGs out of the Euro as soon as the core has made its banks safe?”

    Some people would tell you this is the mission statement of the Frankfurt Group (well, to start with anyway… I believe global government follows hot on the heels of that and then we’re all going to get 666 stamped on our foreheads.).

  106. Shay Begorrah Says:

    @PR Guy

    Some people would tell you this is the mission statement of the Frankfurt Group (well, to start with anyway… I believe global government follows hot on the heels of that and then we’re all going to get 666 stamped on our foreheads.).

    End times man, end times! The Knights Templar are behind it all. And so on.

    It is more likely that an increasingly reactionary Germany, gifted with several right wing allies in large European states, has seen the crisis as an opportunity to consolidate its power over the EU and deal permanently with the annoyance of small states interfering in European policy making - finishing off what Lisbon started.

    We are unfortunate to have the Germany we do where the SPD are to the right of even Ireland’s Labour party. In truth both are now liberal parties - as I read recently the SPD have chosen the Christian Democrats over the parties of the left when they had the opportunity to forge an alliance with either and Howlin’s mutterings about the government having been engaged in counter cyclical spending by virtue of not cutting investment faster shows that todays Labour party is living a lie.

    Again the question arises is the government capable of articulating a plan B to the German consensus position?

    As long as our politicians are afraid to outline other paths and they rabbit the TINA line we will simply end up doing what is best for Germany, the Euro and the banks rather than Ireland or the EU.

  107. Ceterisparibus Says:

    @Bond Eoin Bond
    Cannot see the interbank lending market opening anytime soon. The reports today showing Spanish banks have taken 316 b LTRO wouldn’t entice any bank to lend to them. I see other reports that they have used up all the dosh buying their government bond…unfortunately for them, these bonds have lost value since purchased. Italian banks seem to be in a similar position. The LTRO medicine wore off quickly. Time for stronger medicine…..
    http://www.telegraph.co.uk/comment/9200173/Time-to-put-the-doomed-euro-out-of-its-misery.html

  108. grumpy Says:

    I note the continued non-appearance of documentary evidence.that Ireland was forced against it’s democratically elected governments wishes to guarantee it’s banks liabilities in the first place and then keep repeating the process in the second - as a result of specific threats.

    The ECB guys don’t seem to be behaving in a sufficiently sheepish way to suggest they think that evidence exists.

    If it does, why have mo phrases from the letter(s) been leaked? If it doesn’t, why did the Irish side not make sure it obtained same before doing as it was told?

    Maybe it wasn’t told. Maybe “partners” expressed preferences and the Irish side decided they would be rewarded for perverting the course of capitalism just to please the cool gang?

  109. Bond. Eoin Bond Says:

    @ CP

    1. interbank lending markets are better now than pre-Xmas, but its multi-tiered. The good banks can issue and borrow, the weak ones no so much. So its not a case of it being closed, just being closed for some and restricted for others.

    2. I doubt the Spanish banks have used all the dosh to buy Spanish govt debt. Most of it is probably being used to pre-fund wholesale funding maturing this year, and maybe even next. So there’s no funding crunch, but it means they wont be willing to use it for anything else until they feel they can fund themselves elsewhere.

  110. Eureka Says:

    @ Grumpy
    There is no letter. It was a very big mistake

  111. Eureka Says:

    @ Bond
    But is some of that collateral bonds?
    It seems to be all very circular. Can’t put it better than that but the quality of the collateral is dependent on the amount of money issued against it. That might not make any sense and I could well be completely off but the whole thing just seems profoundly illogical and destined to fail.
    Apologies for any offence caused earlier btw.

  112. Colm Brazel Says:

    @ceterisparibus

    excellent piece by Jeremy Warner http://www.telegraph.co.uk/comment/9200173/Time-to-put-the-doomed-euro-out-of-its-misery.html

    “Europe has long been divided into surplus and deficit nations: those that manage to pay their way in the world and those that have to borrow and import from abroad to sustain their standard of living. But since the advent of the euro, these imbalances have got very much worse.

    “Europe hoped the single currency would be an instrument of growth and political unity. Instead – as I and others have warned – it’s turned out to be a doomsday machine. The tragedy is that no one will admit it’s time to turn it off.”

    My 11:44am lugubrious paragraph vindicated by one source at least:

    “Right now the temporary experiment with LTRO will be shown to have failed; a permanent experiment with LTRO would destroy the currency more quickly. The real problem with the economies of EA being eroded with a failed currency system are not dealt with; these problems show up viability deficits such as surpluses at the core vs liabilities on the periphery causing economic collapse in countries such as ours.”

    Whats to be done? Answer, FIFO,( First In, First Out ) of our ‘bailout programme’. We have to recognise its not working. Can it be fixed with the solutions provided? No, its been made worse. Next up, default; negotiate on basis of what can be paid back. Support from neighbours and friendlies,IMF, UK, add your own, to unlock from the euro.

    Outside the euro underlying advantages we have as an economy can fix the problem through devaluation/new currency or attached to sterling or dollar. Our status as a member of EU should remain unaffected.

    Times will be tough, but we can replace current austerity with a healthier form of austerity designed to make things better, rather than make things worse.

    Either the above or wreak the economy more in order to fit it into the 3rd class hold of The Titanic.

  113. Ceterisparibus Says:

    @Bond Eoin Bond
    The headline number (net position 316b) looks daunting but apparently is only 6% of Spanish banking assets of 3.67 trillion. Didn’t realize they had such a large banking sector. It would take some bazooka to sort that if things go really sour.

  114. Paul Hunt Says:

    If the Irish CB (as part of the ESCB) and the financial regulator (both of whom had the primary responsibility) either didn’t know that the domestic banks were effectively insolvent at the end of Sep. 2008 or convinced themselves that they weren’t, how on earth could the ECB be expected to know? It was presented with a liquidity support problem in Ireland, the principal tool it had was liquidity support (with limited scope to provide bank or sovereign solvency support) - and it provided liquidity support in spades. It has extended the provision of this liquidity support because politicians throughout the EU refuse to accept that there is a continuing bank solvency problem. Most have their fingers tightly crossed that their banks can somehow deleverage and trade their way out of difficulty.

    Ireland was one of the first in to the firing line because its banks were so hugely exposed, its fiscal policy was imbecilic and its bank supervision and financial regulation were almost non-existent. The government panicked and tried to pull a fast one with the blanket guarantee - ‘the cheapest bali-out ever’, but it couldn’t pull it off. Greece is a border-line ‘failed state’; Portugal is not that far behind. But Ireland is just a deeply flawed polityin terms of governance institutions and procedures. It is being saved, and will be saved, by the sound good sense of the vast majority of ordinary citizens.

    Politicians in other countries have been able to duck and dive to avoid comfronting their voters with the extent of insolvency in their banks. The jury’s out on whether or not they’ll be able to pull it off. But people wax indignant here because these politicians are trying to pull off something - and might have a sporting chance of success - that Irish governing politcians and their appointed officials spectacularly failed to do. Fortunately I doubt that these folk represent the majority popular sentiment of sensible Irish citizens

    It is probably time, though, for these sensible citizens to say enough is enough and demand better service from the political classes and the denizens of Official Ireland.

  115. Colm Brazel Says:

    @Paul Hunt,

    Re “how on earth could the ECB be expected to know?”

    That would be the role of the FOMC under the FED. Have a google and look at their methods and procedures.

    Due to political sensitivities, ECB used a design where CB’s were local black boxes that only had to keep to general guidelines, the Stability @ Growth Pact framework. The problem was, because the ECB was politically prevented from violating the integrity of local sovereign authority, the only real prudential control of local CB’s was the governor of local CB’s sitting on the committee of the ECB.

    Loose regulation of this kind compounded by industry wide liberal interpretation of Greenspan’s the market will take care of itself, led everyone to bend/ignore the rules.

    FOMC…..what they do, eg compare Fed’s discount window to LTRO?

    http://www.youtube.com/watch?v=Kj9-kRv0e6s&feature=player_embedded#!

  116. paul quigley Says:

    @ Paul Hunt

    ‘I’ve been diagnosed as making the utterances of an insane person by our resident Sigmund Freud, Dr. Shay Begorrah. It’s definitely time to flee this asylum.’

    Dr Begorrah doesn’t think you are insane at all. He just thinks you are inclined to say the odd mad thing. Sanity is a collective project after all, as the social constructionists will tell you. This board can help to keep us all sane in these trying times.

    Anyway Cuchuainn used to have a jet of blood coming out of his head when he was enraged. We are so much milder these days.

  117. DOCM Says:

    @ Bundesboy

    No; that is seemingly the policy of the government.

    I have argued consistently that the only basis for participation successfully in negotiation is an accurate assessment of the strengths and weaknesses of one’s opponent. Arguments based on concepts of “fairness” or “taking one for the team” are simply irrelevant. You will note, incidentally, the manner in which Asmussen roped in the Irish Central Bank in setting the limits of what can be done by central banks. It is often overlooked that it is the ESCB (European System of Central Banks) that constitutes the management of the euro, not solely the ECB.

  118. paul quigley Says:

    @DOCM

    ‘I have argued consistently that the only basis for participation successfully in negotiation is an accurate assessment of the strengths and weaknesses of one’s opponent.’

    The is one central question about Herr Asmussen. What interests does he represent ? Insofar as he may be considered to represent the general interest, it is clouded by other, tacit and less respectable interests.

    The securitised subprime mortgages were given AAA ratings. As Nassim Taleb, Pablo Triana and others have shown, the models used were complete BS. Following the debacle, the big banks were then bailed out at taxpayers expense, including ours. That emabrrassing narrative of private sector megafailure doesn’t really mesh with the neoliberal politics of post unification Germany.

    It follows that ’strengths and weaknesss’ have to be interpreted in the broadest possible way. Herr Asmussen, and his local allies, do have to be seen to seek some sort of political and social consensus for their stance, but the point is well made above that he was playing to a domestic audience. We have to take their views into account, but we’d be nuts to take them at face value.

    We have seen enough here. Notwithstanding the manifest need for PS management reform, and the contribution of the FDI sector, the notion that the ‘business world’ is going to be Ireland’s salvation lacks a certain credibility.

    It’s not all job creation. Big Pharma takes plenty out of Ireland in medication costs. Ryanair’s busines model depends heavilly on state subsidised perihperal airports and shifting costs to stafff and customers. Less said the better about Eircom.

    The perception of fairness most certainly matters. Absent that, there can be no meaningful negotiation, just the exercise of power. I don’t think Herr Asmussen would like that label applied in Dublin.

  119. John Kennedy Says:

    @ Aisling

    I think what was even more interesting is that there were disparities between officially published speech, and spoken speech of Jörg Asmussen on 12th April 2012.

    This is the first time since the onset of the crisis where anyone from the ECB has officially publicly stated that the reason senior bondholders in Anglo were honoured in full, was in part to prevent spill over effects to banks in other European Countries. It is at the very least noteworthy that in the officially published speech by the European Central Bank, there is no reference to other European Banks, however in the spoken speech Jorg Asmussen recorded in the above link, he clearly states that the reasoning behind forcing Irish government to honour Anglo Senior Bondholders in full related to concerns of spill over effects to banks in other European Countries.

    “The decisions concerning the repayment of bondholders in the former Anglo Irish Bank have been a source of controversy, decisions taken by the Irish authorities such as these are not lightly taken and the consequences of subsequent actions are weighted carefully, it is true that the ECB viewed it as the least damaging cost to fully honour the outstanding senior debt of Anglo however unpopular that may now seem, the assessment was made at a time of extraordinary stress in financial markets and great uncertainty, and protecting the hard won gains and credibility from the early successes in 2011 was also a key consideration and the main reasoning was to ensure that no negative spillover effects would be created to other Irish banks or to banks in other European Countries.”

    http://www.iiea.com/event/download_podcast_file/223 @ 27.30

    “I know that the decisions concerning the repayment of bondholders in the former Anglo Irish Bank have been a source of controversy. Decisions taken by the Irish authorities such as these are not taken lightly. And the consequences of subsequent actions are weighed carefully. It is true that the ECB viewed it as the least damaging course to fully honour the outstanding senior debts of Anglo. However unpopular that may now seem, this assessment was made at a time of extraordinary stresses in financial markets and great uncertainty. Protecting the hard-won gains and credibility from the early successes in 2011 was also a key consideration, to ensure no negative effects spilled-over to other Irish banks.”

    http://www.iiea.com/documents/jrg-asmussen-speech-transcript—the-irish-case-an-ecb-perspective

  120. paul quigley Says:

    Some relevant considerations for Herr Asmussen
    Fairly clear with Google translate.

    http://blog.zeit.de/herdentrieb/2012/04/11/wollt-ihr-die-totale-blase_4615

  121. paul quigley Says:

    Methinks we won’t be seeing many more high ranking visitors They will be too busy digging through the Spanish rubble. Reading Orwell’s Homage to Catalonia makes one hope that the financial collapse won’t turn into something worse.

    ‘The structure would create a huge moral hazard. It will represent again the traditional “privatisation of the profits, socialisation of the losses” approach (an approach, unfortunately, quite commonly used in Spain). Bailing out people that took stupid decisions has only one consequence; it fills the country with fools. It seems to us that the government, the regulator and the banks are failing to grasp one simple truth: some institutions need to disappear. We understand that shutting down an institution is expensive and has social costs but equity holders (first) and bondholders (second) need to take the pain before taxpayers (or private investors from other companies) foot the bill.

    As we repeatedly say; people behave as they are remunerated. A Fiscal amnesty (with a 10% tax and no legal action) versus a 52% marginal tax rate in income taxes= incentive to commit fraud. Bail out of insolvent banks with other people’s money = you can be a reckless lender and be bailed out…and it doesn’t matter if you took the right decisions…you are going to pay anyway. The comments from one of our clients become truer than ever; “In Spain there are two types of people. Those who live from the pelotazo and those who pay for it”.
    http://www.facebook.com/notes/edward-hugh/spanish-banks-and-accounting-alchemy/431267070233651

  122. paul quigley Says:

    Graph above

    http://www.facebook.com/pages/Edward-Hugh/103632406357698?v=wall#!/photo.php?fbid=331150176939252&set=a.108266929227579.17717.103632406357698&type=1&theater

  123. Aisling Says:

    @DOCM you’re missing why any acknowledgement of “taking one for the team” is relevant. I agree that we need to understand the other sides’ position in negotiation but the position in relation to the PNs is largely guided by Art 123.

    Taking one for the team acknowledges that cash which could have been used to repay the ELA went out of IBRC to protect the European banking system, not to finance the Irish State while leaving us on the hook for the ELA.

    I want to be clear here, this acknowledgement only relates to the payments on IBRC senior since we’ve been in programme, payments on junk bonds by a zombie bank which could not realistically have caused any direct issues for the Irish banking sector.

    It’s a tiny number in the scheme of things, even if IBRC could have paid 55c in the € its what - about a billion. But a billion could be wiggle room on negotiating pushing out a repayment schedule, and the ECB has cover on the 123 issue.

    I don’t think that the ELA shouldn’t be repaid. It should. But an inability to renegotiate the timetable at all based on 123 concerns cannot be applied if you acknowledge that a portion of the monies were used not to finance the State in question, but to protect the European banking system, at your suggestion, and indeed in keeping with your legal mandate.

    As John McH stated at the top of the thread, it is in the ECB’s best interest that we are the success story. This small acknowledgement actually gives them a little bit of flexibility here.

  124. The Dork of Cork Says:

    @Paul

    Germany has only a “sustainable” economy because its costs of capital are low relative to all other countries in the eurozone.
    But we must remain in monetary hibernation for this to continue which strikes me as a bit unfair and a simply terrible allocation of resourses.

    It seems to waste much of its resourses pursuing mercantile games that does not increase the wealth of the place to its full potential.

    i74.info/german-car-makers-continue-riding-luxury-boom

    Despite the above headline its car Industry like all car industries is in deep decline.
    Given the uneven structure of global capital ownership its Boutique high quality over engineered vehicles do very well for the moment.
    But its Gross car reg numbers are negative in the EU
    Y2011 Jan & Feb sales
    VW Group Y2011 : 446,315
    Y2012 :.442,517…….A decline of just - 0.9% but much more of it sales are probally smaller cars such as the UP which is getting fierce competion from the KIA picanto (overall Kia sales are up 30.7% in the EU for this year)
    http://www.youtube.com/watch?v=xnkrE0mKJX8

    With only the higher end Audi (+1.7%) and practical Skoda increasing sales (5.2%) while it owns SEAT ( its sales have collapsed by -15.2% ,the pain in Spain I guess)

    BMW group sales also declined by - 3.9 %
    BMW cars : -6.7 %
    with only the Mini putting a gloss on the figures : +9.9 %

    Although Mercedes car sales are up by 6.3% to 79,916 while its smart sales are down by -8%

    The figures paint a picture of a Industry being the best of a bad lot but being a dying Industry nevertheless - dependent on mercantile games outside the European continent which can change in a economic instant if currencies somehow go even more mental then they are now.

    I really am not impressed.
    I would be only investing in countries putting down thousands of Kms of railway track to be honest.
    Cars are so 20th century.

  125. David O'Donnell Says:

    FYI

    Eurozone crisis
    Schadenfreude, mon amour Fernando Vallespín
    13 April 2012 El País Madrid

    The financial crisis is at Spain’s doorstep, and all the other European countries can do is rejoice that this fate has not befallen them. This sentiment, so well expressed by the German word Schadenfreude, puts Europe itself at risk, warns a Spanish political scientist.

    Now that all of Europe is speaking German, learn this word “Schadenfreude”. It means the “malicious enjoyment of someone else’s pain,” and because it has no translation in almost any other language, the other languages have adopted the original. This feeling is clearly not unique to the Germans. In fact, it is dominant throughout this sad Europe these days.

    http://www.presseurop.eu/en/content/article/1798971-schadenfreude-mon-amour

  126. The Dork of Cork Says:

    sorry change that to “it seems to waste much of OUR resourses”

    http://www.youtube.com/watch?v=ZUvHzvqp0W8

  127. David O'Donnell Says:

    Au Revoir Nikki … we won’t really miss you! Has Ms LePen passed you out in the polls yet?

    France
    Merciful executioners
    13 April 2012 Le Monde Paris

    http://www.presseurop.eu/en/content/cartoon/1800491-merciful-executioners

  128. David O'Donnell Says:

    FYI State of the Nation Home Rule back on d’Agenda

    As was to be expected, the chief topic of conversation in Dublin yesterday was the Home Rule scheme. It was discussed in all its moods and tenses, and from every point of view. Still, it might surprise the casual visitor to the city to note how calmly the citizens as a whole took it. There was nothing in the nature of excitement or tenseness of feeling, such as prevailed on the occasion of [Merkozy's] first Home Rule proposals [in 2008]. The normal routine was not deflected; nor were the ordinary topics of conversation banned or barred. It may be that we as a race have got quite into the groove of “momentous crises,” and that a further installation of that condition only maintains the normal. Or it might be that the people were more indifferent to the occasion than it would suit certain interests to own. Or, again, it might be that there is little expectation of the [Fiscal Corset] ever becoming the law of the land at all. The last-named is a view shared by a large section of the community – not, by any means, exclusively Unionist. (slightly edited; DO’D)

    http://www.irishtimes.com/newspaper/opinion/2012/0413/1224314680717.html

    Back to 1912! Think I’ll wait for 1801; or maybe 1607 …

  129. clintideal Says:

    @Joseph Ryan 1.34pm post

    on how to cut the deficit spot on !

    @All
    what we have here is a broken system when banks are downsizing in a depressed market where we the system is not working banks are hoarding what money they can with no avenue for where they can get their next fix as the system is broken the ECB are telling everybody that there are no systemic problems even thou the periphery EZ countries are finding it incredibly difficult to roll over debt and are being made insolvent because there is no back stop from the central bank and here we have Angela Merkles man telling us all is fine follow the program everything will be ok
    i think its time we call the bluff !

  130. grumpy Says:

    @John Kennedy

    Nice catch.

    I suspect that could be made to look quite damning for the ECB if documentary evidence of Ireland being forced under threat to unwillingly pay out senior credits. All it would take would be a bit of basic PR competence and an feel for the international financial press and investment community.

    But this is Ireland, a country in which a brief and accidental visit to the main Friday night TV discussion show on the state broadcaster revealed the main topic to be an interview with some model whose husband had tweeted a picture of her backside during the week, plus said husband.

    The public gets what the public wants, as the song says.

    Why should the Germans give a monkey’s?

  131. DOCM Says:

    @ Aisling & Paul Quigley

    The point that I am making is that the conduct of business in the EU, or in any other international context for that matter, is not a matter of sentiment but of hard facts. I am not arguing that the ECB has never made errors. That would be ridiculous. What I am saying is that knowing this and pointing it out does not alter the facts surrounding a particular negotiating situation e.g in relation to the PNs.These were expertly delineated by Asmussen.

    On the Herdentrieb article, the title will have a resonance for those who have a knowledge of German history (or, at least, are devotees of the History Channel). It makes the convenient assumption of homogeneity in the various economies involved. But this is quite simply totally at variance with the facts. In Germany’s case, what one has is a not very efficient economy, with many protected sectors, but with hyper-performing industrial and international sectors which are, quite literally, swamping their neighbours. The answer is not a “bubble” in Germany but a freeing up of the economy in parallel with the same action in other economies creating a level playing field which will demonstrate who, where and what are genuinely competititive.

    Monti is the only leader who grasps this. All the rest, Cameron included, wish to continue to dine a la carte at the EU menu.

  132. David O'Donnell Says:

    Ben Chu of The Independent comments on the Speech by Jörg Asmussen

    Ireland ruined its public finances mainly by guaranteeing the debts of its lunatic financial sector in 2008. This emerald crash was a result of wayward private sector behaviour, not reckless state spending, despite what the blinkered euro policy-making establishment likes to argue. Dublin was actually running a budget surplus in the years leading up to the meltdown.

    Of course, Ireland couldn’t bear the cost of bailing out its banks and had to be rescued itself by fellow European states, the European Central Bank and the IMF in November 2010. But those loans have come at a punishingly high price. Dublin has to commit to paying back the funds it borrowed over a very long period and is also being required to inflict extreme austerity on its population. This medicine has now served to push the Irish economy back into recession.
    …………..
    What nauseating self-righteousness. And what hypocrisy too. For where is the punishment for the creditors of those Irish banks – many of them German financial institutions? If Asmussen is so keen that sinners pay for their mistakes, why is he apparently content for those profligate lenders (of other people’s money) to get off free of charge?

    The Irish people will hold a referendum on 31 May on whether to accept the new “fiscal compact” that Mr Asmussen’s compatriots are so keen on. The assumption is that a majority will vote yes, and avoid instigating another European crisis. I think Mr Asmussen’s bone-headed comments alone should be reason enough for the Irish people to reconsider.

    http://blogs.independent.co.uk/2012/04/13/the-european-central-bank-shows-its-true-colours/

  133. DOCM Says:

    @ Aisling & Paul Quigley

    I should add that, insofar as the concept of “fairness” can be pinned down in the context of the EU it must be found in the governing treaties and the respect that member countries have for the rule of law; “pacta sunt servanda”, to coin a phrase.

  134. DOCM Says:

    @ David O’Donnell

    “This emerald crash was a result of wayward private sector behaviour, not reckless state spending, despite what the blinkered euro policy-making establishment likes to argue. Dublin was actually running a budget surplus in the years leading up to the meltdown”.

    This sentence alone invalidates the entire article.

  135. DOCM Says:

    @ All

    FYI

    http://www.ft.com/intl/cms/s/0/3ef57440-8568-11e1-a394-00144feab49a.html#axzz1rxfEVTdY

  136. Aisling Says:

    @DOCM but figuring out what the other side’s red lines are, and why they are so, is an integral part of any negotiation. I agree that ignoring them is pointless.

    Acknowledging them, and then trying to find wiggle room around them, never has been in my experience.

    Distinguishing between what is clearly legally necessary, and what is dogmatically preferable is crucial. Getting the cash back out of the system as quickly as possible is clearly “preferable”, but so too is Ireland being a success story. So it gets taken to value depending on negotiators if it’s “preferable”, if it is necessary then nothing can be done.

    This changes a small element from the first basket into the second.

    In relation to “fairness” I’m currently struggling to reconcile the TEU with TFEU Arts 123 and 125 so I’ll get back to you on that!

  137. Aisling Says:

    @DOCM as a ps given the actual cost of IBRC I’m not actually 100% comfortable that the ECHR couldn’t also be invoked. Just to complicate matters.

  138. David O'Donnell Says:

    @DOCM

    Minor point: pls add a short header to your FYIs …

    On Portugal wearing the Korset - they will need significant write down on debt and serious assistance on institutional reforms. From the FT

    High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/3ef57440-8568-11e1-a394-00144feab49a.html#ixzz1rxxfQbyE

    Portugal is expected now to write the new rules into law, passing special “shielded” legislation that can be changed only by a two-thirds majority in parliament.

    However, the Socialists, who negotiated Portugal’s bailout package before losing a general election last June, have refused to support a government proposal to enshrine the fiscal compact in the constitution. ‘

    On my Independent FYI - my direct reponse to Jorg is above. My views on PD/FF insanity are well known …

  139. David O'Donnell Says:

    @FT
    Oops. Humble apologies … slip of the constitutional digit … pls don’t sue the blog - like the rest of us, it is broke if not yet broken!

  140. David O'Donnell Says:

    PAUL GILLESPIE

    WORLD VIEW: Voters are entitled to a well-argued campaign, but is the political class capable of providing it?

    IRELAND CAN move from the new periphery towards the developing core of the EU during the forthcoming referendum on the fiscal compact treaty if the debate we need on the euro’s future and our interest in its survival is conducted effectively.

    http://www.irishtimes.com/newspaper/opinion/2012/0414/1224314727669.html

  141. David O'Donnell Says:

    In contrast Dan O resorts to the Politics of FEAR

    If the scalpels come out for Greece, it is not unlikely that some will make the case for more extensive surgery. Why not cut out all the bad bits in one fell swoop? Might that not improve the chances of the patient making a more rapid and fuller recovery?

    Portugal would almost certainly be a candidate for the chop. As one of the countries already bailed out, Ireland would too, despite its economic fundamentals making it better suited to monetary union than the Meds. But consideration of which countries are causing the euro zone’s problems is unlikely to be based on economics alone. The rejection of the fiscal treaty next month would make Ireland very problematic.

    While being the only one of 17 not to implement the new rules need not be a calamity for the euro zone, it would raise many questions that do not have ready answers.

    Sticking out like a sore thumb is not in Ireland’s interests. It could be very dangerous if the knives come out for Greece.

    http://www.irishtimes.com/newspaper/opinion/2012/0414/1224314727659.html

    I go with Gillespie - deliberative democracy. I’m voting NO.

  142. The Dork of Cork Says:

    Some 2008/9 rational fixed capital investment coming on line.

    Montpellier tram lines 3 & 4 are now operational (April 7) .
    Line 3 is a very long by tram standards ,19.4KM.
    From the railway gazette
    Described as the first circular route on a new tram network in France, Line 4 runs for 8·4 km on sections of lines 1, 2 and 3 from Saint-Denis to Place Albert 1er, serving 17 stops and expected to carry 14 000 passengers a day.
    Rolling stock for the new routes has been supplied by Alstom Transport, with Line 3 operated with a fleet of 19 Citadis cars, each 43 m long. With services running every 7½ min during the peaks, Line 4 has 12 cars each 40 m long.
    The new lines have cost a total of €530m, of which €369·4m has been provided by the Greater Montpellier authority and €82·6m by the French government. The Languedoc-Roussillon region has contributed €50m and the département of Hérault a further €28m.
    April 7 also saw the extension of Line 1
    http://www.youtube.com/watch?v=IOqm-ZO5bhE

  143. Robert Browne Says:

    @ Joseph Ryan

    “on how to cut the deficit’ . You have distilled the lot into a few lines a GREAT synopsis! The only question is can common sense trump vested interests before we are forced into a humiliating default?

  144. PR Guy Says:

    @Shay Begorrah

    http://www.irishtimes.com/newspaper/finance/2012/0414/1224314729248.html

    So when the big exit/reverting to Punt comes, I guess more of the fallout from it is going to be an Irish problem. I suspect that this movement of Irish bonds to Irish bondholders is also being ‘encouraged’ by the core.

  145. Bond. Eoin Bond Says:

    @ All

    This is where the Irish interpretive centre should be built if NAMA/AIB turn out to own it. John McHale will run a competition to see which commentor on here will man the front desk alongside Joe Higgins and Vincent Browne…

    http://www.irishtimes.com/newspaper/frontpage/2012/0414/1224314731504.html

  146. David O'Donnell Says:

    Dan O’Brien and the IT appears to have lost the plot …

    De Paper


    Michael Saunders, head of European economics at Citigroup in London, said he expects the Irish economy to contract this year and that missed fiscal targets and weaker growth may require it to seek a second bailout.

    “I think Ireland will miss its fiscal targets this year, next year, the year after that and probably the year after that as well,” Saunders said. “More cuts would be counterproductive as it would just deepen the economic hole.”

    Read more: http://www.irishexaminer.com/business/state-risks-missing-deficit-target-190501.html#ixzz1s0GlhUvO

    AusTerrity - doing just what it says on the tin. Vote Yes for more of the same …

    @Bond
    Well, it is certainly close enough to the seat of Irish Power - The Bundestag is just down the road. Could open a swinging NiteClub - Call it CheckPoint Charlie Charvet’s, and the other Pirates are also doing well in Berlin these days.

    @all
    I’m still open to persuasion - simply need someone, anyone to demonstrate any plausible social scientific validity whatsoever on the 0.5, 60.0, & 1/20 in political economic terms. Otherwise, I must strenously object to placing arbitrary, and potentially dangerous, NONSENSE into Ireland’s Constitution.

    This challenge remains OPEN to May 30.

  147. The Dork of Cork Says:

    Zee Germans are getting ready……. what are we doing ?
    Bombing them with Love Bonds I guess.

    “GERMANY: The Mayor of Mannheim officially reopened the city™s main marshalling yard on February 27, following a 100m project to increase throughput by up to 20% and cut maintenance costs. As well as renewal of the 170 km of track and 550 turnouts, modernisation has included full automation including remote-controlled locomotives. Improvements to efficiency mean the yard can now handle 150 wagons/h. The federal government provided 65m for the project. The Mannheim marshalling yard is one of the largest in Germany and one of the most important in Europe™, said Hansjrg Hess, Production Director at DB Netz AG. Our investments create improvements for our customers. We speed up the process, thus expanding capacity for more traffic on the rail.”

    http://www.youtube.com/watch?v=BrPOPjHIU9Y

    Listening to the Labour party conference “sad person” - they really have been Duncan Stewartised.
    They are equating carbon emissions directly with energy policey - when its only a tertiary relationship.
    Have my doubts about home insulation cost effectiveness over a certain basic level.
    Our ancestors burned Turf……… but our masters don’t like that so……

    We will buy VWs to save the envoirment.

  148. Paul Hunt Says:

    @D O’D,

    I’m afraid that you, like so many here, are unpersuadable. I’m placing my faith in the sound good sense of the vast majority of Irish citizens. They may have been ill-served by many of those they have elected - and continue to be ill-served - and by some of those appointed by those they have elected, but they could only choose from among those put in front of them.

    I am confident the time will come when they will demand better service. And when they do and, inevitably, when they will receive it, this will register with politicians and decision-makers in the heart of the EU.

    This will be far more effective than all the ranting that goes on here and elsewhere about the perceived iniquities of politicians and officials on the continent.

  149. PR Guy Says:

    Germany as usual setting a good example:

    http://www.irishexaminer.com/breakingnews/world/german-ship-transporting-arms-to-syrian-regime-547482.html

    I recall a few years back working in a couple of countries where sales of certain US weapons technology were banned. There were Germans all over the place flogging it at greatly marked up prices.

  150. Shay Begorrah Says:

    @Paul Hunt lays it down for @David O’Donnell

    I’m afraid that you, like so many here, are unpersuadable. I’m placing my faith in the sound good sense of the vast majority of Irish citizens. They may have been ill-served by many of those they have elected - and continue to be ill-served - and by some of those appointed by those they have elected, but they could only choose from among those put in front of them.

    Faith seems to be a big thing for you.

    If any of the would be Eurocracy in the Irish establishment had the means they would have being trying to persuade the population with facts, projections and widely accepted economic reasoning about the eminent sense of the Fiscal Compact. Here in a blog about economics it would have been the major topic of discussion - there would have been much toing and froing, the swapping of forecasts, the referencing of economic history and major debates. Yet there is no such debate, not here, not elsewhere (occasionally some wag might mention Latvia and hope no one looks it up).

    The reason the economic rationale of the Fiscal Compact is not a major topic of discussion is that the matter is settled - even the treaties most ardent supporters say that its benefits are that it might lead to other useful policy initiatives in the EU and that not accepting it will make our betters (and largers) in Europe angry, and that they hope that the treaties procyclical elements never lead to disaster (it is not like procyclical policies in the EU have caused any trouble recently, right?)

    Meanwhile outside the Eurozone there is continued amazement that Germany, with ECB and financial sector collusion, has managed to frame a crisis in capitalism worsened by a badly flawed monetary union as a failure of democracies to be sufficiently capitalist friendly and “efficient”. It is a terrible indictment, and it might be on the gravestone of, the EU that its response to the European component of the global financial crisis was to pretend that it was a incidental effect of a problem that did not exist (our friend fiscalization is to blame). Our Teutonic Thatcher and her fellow travellers certainly bears much of the blame for that decision but the European Council decided insanely that bad policy was worse than none - better to be wrong collectively and share the political blame than individually right and have to fight.

    The dishonesty and self serving nature of this argument is awe inspiring but then the lesson has always been to go with the big lie and that will be the establishment tactic in Ireland. Expect blue and yellow wrapped pablum about being at the heart of the Europe (look at a map fools) and nonsense about partnership with governments and institutions who are actively threatening us.

    I hope the people of Ireland realize that they are being bullied into swearing perpetual allegiance to a fringe economic position held by the the exact same class of marker fundamentalists who got us into this mess. Have faith in principles, apply reason to the Fiscal Compact.

  151. Bond. Eoin Bond... Says:

    @ PR Guy

    In fairness, we’ve had some Irish guys caught doing that of late too…

  152. Bond. Eoin Bond... Says:

    @ PR

    Although, relatedly, Greece is the 20th biggest spender on defence (up €900mn this year), and, I believe, the fifth biggest importer of defence equipment. Though a lot f us probably knew that already.

    What even i was surprised about though, was that Portugal was the 32nd biggest spender on defence. Who the hell are they worried is gonna invade?? (note: it’s possible some of this relates to foreign operations in former colonies. Although I also read a fascinating article recently about how former colonony, and now oil rich, Angola, was busy buyin up chunks of Portuguese assets).

    http://en.m.wikipedia.org/wiki/List_of_countries_by_military_expenditures#section_2

  153. Robert Browne Says:

    @ Bond. Eoin Bond

    They were made to carry through on German and French defence contracts or else they would not be bailed just the same as Irelands MOU was made contingent on German and French bond holders being paid in full. There is a certain perverse similarity.

    @ Paul Hunt

    I love your new found optimism. Personally, I believe the only reason why we are being asked to sign up to this is for another bailout from ESM funds. What’s this Enda calls it? “Ireland’s insurance policy”. How come, when everybody else buys an insurance policy it is not the next generation that pays for it? What will Irelands debt to GDP rise to if we accept another bailout? 140% - 160%? What about the OBS stuff? NAMA, pensions?

  154. paul quigley Says:

    @ Paul Hunt

    ‘I’m afraid that you, like so many here, are unpersuadable. I’m placing my faith in the sound good sense of the vast majority of Irish citizens’

    David is not at all unpersuadable, and you get more good sense on this board than most places, which is why you persist and long may it remain so .
    Everyone rants some of the time, because even rhetoric has its reasonable limits. Even if someone were to accept the label, a bit of ranting doesn’t make the rest of what someone is saying wrong. This is a search for a shared agenda, surely. That and a bit of crack along the way.

    Diversity can be a great strength, and people have different styles, analyses, preoccupations, targets, and priorities. Here is Bourdieu in defence of sociology and free thought.

    ‘ The opposition established by Kant between the two categories of faculties, the first subject to the temporal order which they serve, the second free of all social discipline and limitations, finds its culmination, and reaches its limits, in the relation between the juridical disciplines and the social sciences which, in allowing the liberty or even the irresponsibility characteristic of the temporally lower faculties into the private terrain of the higher faculties, have gradually come to challenge their monopoly of legitimate thought and discourse on the social world;
    on the one hand we have knowledge in the service of order and power, aiming at the rationalisation of the given order; on the other hand we have knowledge confronting order and power, aiming not at public affairs in order but at analysing them as they are, at analysing the nature of social order and the state, by reducing the established order and the state, through historical comparison or speculative transposition, to the status of merely a special case of gamut of realised or realisable possibilities. This is an operation less anodyne than it might seem, since it supposes a withholding of support for the status quo, which, for the guardians of order, is already a critical break, or even evidence of irresponsibility’

    http://www.amazon.com/Homo-Academicus-Pierre-Bourdieu-al/dp/0804717982#_

    By that reckoning, both you and David fall into the first category, namely very able and persistent critics of the status quo. Motor on, as they say down the country.

  155. Eureka Says:

    @ Robert Browne
    Any link on that

    And this from the OECD
    http://www.irishtimes.com/newspaper/breaking/2012/0413/breaking8.html

    When do people just accept they’re wrong?

  156. Shay Begorrah Says:

    @Bond. Eoin Bond

    What even i was surprised about though, was that Portugal was the 32nd biggest spender on defence. Who the hell are they worried is gonna invade??

    Portugal’s still high defence spending (even in the throes of austerity) can be seen as part of the military welfare arrangement that many post military dictatorships go through where the army is kept placid by being showered with gifts and given high status. Many of the other high spenders in the EU are recent additions to Nato in Eastern Europe where the peace dividend still ended up going to arms manufacturers….

    Check out the same thing on a world wide basis, you will see former military dictatorships Chile spending above its weight too.

    http://data.worldbank.org/indicator/MS.MIL.XPND.GD.ZS?order=wbapi_data_value_2010+wbapi_data_value+wbapi_data_value-last&sort=desc

  157. Gavin Kostick Says:

    @ Eureka

    It’s a good article, but is that the link you meant to post?

  158. Bond. Eoin Bond... Says:

    @ Robert B

    You can point to the pressure to follow through on German and French defence contracts if you want, but they made their own decision to spend around €60bn on defence expenditure over the last peace-filled decade themselves. Without wanting to resort to cheek gags, the Greeks are their own worst enemy.

  159. Ceterisparibus Says:

    Excellent article from Jeremy Warner…
    http://blogs.telegraph.co.uk/finance/jeremywarner/100016196/only-a-matter-of-time-before-ecb-is-forced-into-massive-quantitative-easing/

    A flavour….
    “. For the good of the whole, it’s right that the ECB should be inducing a boom in Germany.
    Germany, of course, doesn’t see it this way. But then the eurozone isn’t just Germany. Monetary policy has to be run for the benefit of Europe in aggregate, not just the Rhineland and her dominions. European solidarity is about to suffer its biggest test yet. A battle royal is promised over the months ahead, as these rival calls on monetary policy fight it out. One size never did fit all, and now it’s again busting apart at the seams.”

  160. paul quigley Says:

    Compare the content of this central banker’s speech with the pap which we have heard in Dublin this week. The content here reflects, IMHO, the increasing influence of the blogging community, as well as the openness of US society. We have the Governor of the Fed, no less, acknowledging that the shadow banking sector ran amok. Ain’t that the truth.

    http://www.federalreserve.gov/newsevents/speech/bernanke20120413a.htm

  161. Eureka Says:

    @ Bond
    It’s a very unstable part of the world. The volatile Balkans to the north and a menacing turkey to the south and east.
    Also there’s all kinds of government backed corruption (from purchasing and selling governments that go with these things).
    Not as clear cut as you would like to believe.

  162. paul quigley Says:

    This is a slippery bit.
    ‘Bagehot advised central banks–the only institutions that have the power to increase the aggregate liquidity in the system–to respond to panics by lending freely against sound collateral. Following that advice, from the beginning of the crisis, the Fed, like other major central banks, provided large amounts of short-term liquidity to financial institutions, including primary dealers as well as banks, on a broad range of collateral…………………
    ‘The acquisition of Bear Stearns by JPMorgan Chase was facilitated by a Federal Reserve loan against a designated set of assets, and the provision of liquidity to AIG was collateralized by the assets of the largest insurance company in the United States. In both cases the Federal Reserve determined that the loans were adequately secured, and in both cases the Federal Reserve has either been repaid with interest or holds assets whose assessed values comfortably cover remaining loans’

    Same assets now marked to a market bounced up by QE, which gets no mention anywhere in the speech, but was the real basis for any ’stability’.

  163. paul quigley Says:

    @ DOCM

    ‘In Germany’s case, what one has is a not very efficient economy, with many protected sectors, but with hyper-performing industrial and international sectors which are, quite literally, swamping their neighbours.’

    Food for thought. Thanks.

  164. Eureka Says:

    @ Grumpy
    You’re right - apologies
    http://www.independent.ie/business/oecd-warns-more-irish-cuts-may-be-needed-3080905.html

  165. Gavin Kostick Says:

    @ Eureka

    You’re having a bit of an off-day.

    Yours,

    Non-Grumpily

  166. paul quigley Says:

    Re Bernanke above

    He also avoids the biggest elephant in the room, namely the fact that the VaR models used by the players are outright BS, rendering the market inherently unstable.

    But the core EZ banks didn’t buy toxic derivatives of course, and if they did it would be nothing to do with our predicament, and so none of our business. According to Herr Asmussen.

    http://www.amazon.com/Lecturing-Birds-Flying-Mathematical-Financial/dp/0470406755

  167. Paul Hunt Says:

    @Robert Browne (and Paul Quigley),

    It isn’t optimism; things don’t happen until the time is right - until the ebb and flow of history coincide with a particular roll of the dice by the fates. I’ve been on this beat for the best part of a decade. I’ve done the full gamut of the government-machine, the Dail, the media and our ‘public intellectuals’ and, bar a handful of notable exceptions, they’ve all proved to be a waste of space.

    I think it was Morgan Kelly who observed that the last general election wasn’t remarkable; but the next one could be. The only remarkable thing about the last election was that it had taken so long for a decisive majority of citizens to recognise that that been gulled for so many long years and to decide to do something comprehensively effective about it.

    The current governing factions weren’t elected by choice; they were elected, and convincingly elected, by default. And because they secured such an overwhelming majority, coupled with the fact that a number of backsides had been aching for 14 years to occupy ministerial seats, they are now even more arrogant and complacent than the lot they replaced. They are oozing a hubris that FF, even during the peak of the double bubble, rarely surpassed. Nemesis, inevitably, in some shape of form - and most likely in the form of ‘events’, awaits.

    If one closes one’s eyes, one can hear the same laboured, turgid, weasel-worded, mealy-mouthed civil service speak being intoned with the same mix of boredom and contempt - and the same taking umbrage at the slighest hint of being held to account. They’ll run their course, but, once it’s run, I can’t see a majority of voters settling for more of the same. I don’t know, and can’t know, what alternative, or alternatives, to the ’same old, same old’ the voters will demand - or indeed what will be offered to them. But most certainly I can’t see a majority of voters falling for any attempted rejuvenation of this sad lot. They will have served their purpose - simply by virtue of not being FF. But, as currently constituted and deployed, they will have no futher purpose in government.

    And as for this needless referendum (needless because it wouldn’t be required if we had a properly functioning parliament - and, in any event, an overwhelming majority of the current Dail would endorse the ‘fiscal compact’), I remain convinced that the sensible majority of citizens will give their assent. It may that this ‘fiscal compact’ is closely linked to Chancellor Merkel’s desire to be re-elected and to her longer term plans for the EU and EMU, but it’s primary purpose is to re-assure central and northern EU voters, enraged by the ‘peripherals’ reneging, with such calamitous effects, on their sovereign signatures, that every effort is being made to prevent it happening again. And yes, much is made in Ireland of France and Germany being among the first to break the previous S&GP (while the ‘peripherals’ generally remained compliant), but this is nonsense because the results were more beneficial to the EU than damaging. And if even to some extent damaging, these were insignificant compared to the effects of the peripherals reneging on their sovereign signatures.

    I suspect most voters, to some extent, recognise this and that Ireland’s destiny is fully within the EU. But, more importantly, I suspect they recognise that, whatever fiscal constraints might be imposed by this ‘pact’, Ireland, in the future, will have to exercise even tighter fiscal discipline - similar to all other small, increasingly regional, economies. And I also suspect that they realise that an extension of the current official support programme will be realised.

    The naysayers may have their arguments, ranging from the perfectly rational to the wild, specious and self-serving, but individually or collectively, they do not and cannot outweigh this emerging, and increasingly apparent, reality.

    So I’m perfectly at ease leaving Ireland’s fate in the hands of the sensible majority of the citizens and increasingly confident that they will demand better service from the political classes and the rest of Official Ireland.

  168. paul quigley Says:

    In fairness to the current ’sad lot’, they have received a poisoned chalice. Absent the big bust, they would be forever in opposition. As you and others have often remarked, I think, their role is limited to preserving as much of the economic status quo as they can. That means looking after their own stakeholders, hence CP and no UORR revision etc.
    As it’s a dwindling resource, all they can do is boil the frog as slowly as they can, and pray for deliverance. Chances of that are slim, and getting slimmer by the day. You say:
    ‘I suspect most voters, to some extent, recognise this and that Ireland’s destiny is fully within the EU. But, more importantly, I suspect they recognise that, whatever fiscal constraints might be imposed by this ‘pact’, Ireland, in the future, will have to exercise even tighter fiscal discipline - similar to all other small, increasingly regional, economies. And I also suspect that they realise that an extension of the current official support programme will be realised.’
    OK but ’small regional economies’ can be chronically declining. Northern Ireland’s status as part of a larger entity, for example, is hardly a guarantee of a bright future, as many other parts of the UK are also in dire straits. Polese is interesting.

    http://www.amazon.com/The-Wealth-Poverty-Regions-Cities/dp/0226673154

    A wastelands is a wasteland, whether it is in the EU or not. The prospect of slow strangulation/extinction is what troubles people, and it will have unpredictable conseqiuences for voting patterns and more .

  169. hoganmahew Says:

    @John Kennedy
    That’s an astonishing find. Thank you.

    I note with disappointment that only grumpy picked up on it. Perhaps the rest are too busy pursuing their agendas.

    That the ECB press office has resorted to airbrushing the reasons for the repayment of senior debt: “the main reasoning was to ensure that no negative spillover effects would be created to other Irish banks or to banks in other European Countries.”

    Given that the Irish banks were already basket cases, what remains of the “main reasoning”…

  170. PR Guy Says:

    @Bond Eoin Bond

    “What even i was surprised about though, was that Portugal was the 32nd biggest spender on defence. Who the hell are they worried is gonna invade?”

    Wasn’t the fabled lost city of Atlantis supposed to be somewhere nearby? Perhaps they’re worried they will rise up.

    I must admit, I also thought it was ironic when I read about Angolan interests buying up chunks of Portugal. He who laughs last eh?

    @All

    I backed Neptune Collanges in the Grand National at 40/1. Na na na na na.
    I will be suspending austerity in the Minervois this summer.

  171. David O'Donnell Says:

    @Paul Hunt

    I’m still open to persuasion - simply need someone, anyone to demonstrate any plausible social scientific validity whatsoever on the 0.5, 60.0, & 1/20 in political economic terms. Otherwise, I must strenously object to placing arbitrary, and potentially dangerous, NONSENSE into Ireland’s Constitution.

    This challenge remains OPEN to May 30.

    OK Paul; let’s focus on the substance/content of this so called ‘Fiscal Compact’ or, following Der Spiegel, ‘Fiscal Corset’:

    If you are incapable of doing so, and let’s stay local for the mo, name me One, just One, serious economist around here who is willing to strongly defend, even in a 6-pack journal let alone a 5*journal, the social scientific validity of what I consider to be highly dubious, dangerous, and arbitrary constraints within said Corset:namely, 0.5, 60.0, 1/20.

    And I’ll eat it!

  172. Eureka Says:

    @ Gavin
    I should probably give up now….

    But hopefully better luck this time
    This is a good link (I hope)
    You can generate tables of arms imports per country and see the actual cuts in Greece’s spending in 2011

    http://www.sipri.org/databases/armstransfers

    This is a really interesting area actually. The pattern repeats itself - cheap credit to the periphery to buy goods from the core. Banksters, bondsters and arms traders all working together. Now there’s a pleasant thought

  173. Bryan G Says:

    @John Kennedy, hoganmahew

    That was indeed well spotted. I figured something was wrong when I saw two disconnected arguments on exactly the same topic, now I know why.

    I have emailed the ECB and pointed out the error in their transcript. I trust it will be corrected first thing Monday morning…..

  174. PR Guy Says:

    @Eureka

    “Banksters, bondsters and arms traders all working together. Now there’s a pleasant thought”

    Same as it ever was. I am pretty sure I’ve been in a room with all three present at the same time… more than once.

  175. Bryan G Says:

    @paul quigley

    That Bernanke speech matches very closely with the set of lectures I referred to earlier. His view is not without some distortions - I’d liken it to looking at an image in a warped mirror - the reflection of reality is essentially sound, but some features are too long or too short. Asmussen’s view is like a reverse Dorian Gray mirror - the image is a complete misrepresentation of reality. The narrative he promotes, as viewed by himself, is perfect. Its true grotesque nature is plainly visible to many others, but not to himself, or indeed large parts of “official” Ireland.

    To take just one element of his argument that is illegitimate - the idea that because there were regulatory failures the taxpayer has an obligation to make creditors whole. There is no legal or logical consequence of the latter from the former. I would like to see Asmussen go to the US and make the argument that US taxpayers should pay for all the supervisory failures of the Fed. He would likely be chased out of town by a pitchfork-wielding mob. It is an absurd argument, yet when made in an Irish context this element is ignored at official level and by its small army of media cheerleaders.

  176. paul quigley Says:

    @ PR Guy

    Congrats

    http://thedailyedge.thejournal.ie/watch-horse-trainer-tells-live-tv-how-hell-celebrate-success-mildly-nsfw-340883-Jan2012/

  177. paul quigley Says:

    @ Bryan G

    Very well put. We have a republic, but I am not sure that the citizens have arrived yet. The absentee landlord tradition dies hard.

  178. Livonian Says:

    @Jagdip@all

    “In November 2010, Ireland accounted for 25% of the ECB’s lending.
    Today it’s €85bn out of an ECB balance sheet of €3tn.”

    Yes I definitely get the feeling that the ECB may have “blinked first” in relation to Ireland especially as events in France,Spain,Greece, Italy, Belgium, Portugal and elsewhere are going to provide a lot of interesting results even before we get around to voting.

    Two questions Irish voters may also have ask themselves before the referendum date are:

    1)Can Ireland actually afford to remain within the Euro?
    or
    2) can the Euro actually survive outside Germany and Luxembourg?

    Orderly transition may actually be one rationale the Irish Government used when choosing the May 31st date (with the possibility that the referendum may produce a “No” result) since “orderly” large currency transitions usually only have a better chance of avoiding “dire consequences” if carried out over a minimum 18 Month time frame.

    IMHO Europe urgently needs less “noise ” from policy makers/experts in Brussels and Frankfurt and more solutions which actually reflect the ideals of the European project as well as more democratic accountability in return for additional authority.:)

    Best…. @LivonianGoose

  179. hoganmahew Says:

    @Bryan G
    +1 on the second paragraph too.

    It’ll be interesting for sure to see if a correction does happen…

  180. Shay Begorrah Says:

    @Bryan G

    To take just one element of his argument that is illegitimate - the idea that because there were regulatory failures the taxpayer has an obligation to make creditors whole. There is no legal or logical consequence of the latter from the former. I would like to see Asmussen go to the US and make the argument that US taxpayers should pay for all the supervisory failures of the Fed. He would likely be chased out of town by a pitchfork-wielding mob. It is an absurd argument, yet when made in an Irish context this element is ignored at official level and by its small army of media cheerleaders.

    This is the biggest of the lies - so expect that the blogs resident market fundamentalists to remain eeerily silent.

    The idea that there is a legal obligation on Ireland (or any country in the EU) to protect private investors in financial institutions from their own greed and incompetence. The enforced continuation of the banking guarantee in Ireland when the dishonesty of the banks became clear was as blatant an example of interference in Irish political matters by the agents of wealth and foreign political interests since the act of Union - and it is ongoing and defended by many here.

    The German right, the ECB and their enablers in Ireland have sunk into a deep pit of self deception and immorality. Do you imagine that if BP had not been able to pay for their light greasing of the gulf of Mexico that there would be many voices insisting not only that the British Government or American governments were the chief culprits for insufficiently regulating them but that they needed to reimburse BP’s investors to maintain confidence in the Energy sector?

    I think I understand the new EU fully now: It is the fault of the alienated and poor for rioting and theft but the responsibility of the state and the citizen that the financial sector were many times as culpably greedy, dishonest and damaging as any ordinary criminal. Perhaps we should imprison a Gardai every time a murder is left unsolved. Crime is their responsibility after all. Is my reasoning faulty?

    The government is guilty for the failures of the market and the solution is less government and more market. This is the ideologically driven madness of the Fiscal Compact.

  181. Overseas commentator Says:

    @Shay Begorrah
    Whether it is legitimate or not, not paying back the Anglo-Irish debt today will be perceived as a default of the Irish State .If the sovereign defaults, the financing of the budget deficit ,which is huge and impossible to reduce in the short term, will become unfeasible.
    The Irish tax-payer is a victim ,but the culprit is the government which guaranteed the banks. This is not a very moral tale ,but the ECB can hardly be expected to act any differently than it does.

  182. DOCM Says:

    @ Bryan G

    The comparison that you make is invalid because the ECB is not the FED. It does not have a supervisory responsibility in relation to credit institutions, a point made by Asmussen. I linked to this document on the latest state of play at an EU level when the topic came up on another thread.

    http://register.consilium.europa.eu/pdf/en/12/st08/st08468.en12.pdf

    Attributing powers to the ECB that it does not have has been a major failure on the part of many participating in the debate. Because of regulatory failure by successive FF governments, the taxpayer was left between a rock and a hard place; rescue the banks or witness the collapse of the entire banking system and the economy with it. This is the difficult choice that faced many Western governments post Lehman. Ireland had the biggest asset (property) bubble, the genesis and mismanagement of which has been exhaustively documented at this stage, and the biggest bill.

    The capacity of the economy to carry the burden, not the responsibility for it, seems to me to be what is really in question. The extent to which the country can obtain assistance is not, and will not, be helped by a distortion of the facts.

  183. grumpy Says:

    @docm

    You say

    “Because of regulatory failure by successive FF governments, the taxpayer was left between a rock and a hard place; rescue the banks or witness the collapse of the entire banking system and the economy with it.”

    In my view you are being inappropriately binary. A very strong case can be made for the state rescuing AIB and BOI in one way or another. Anglo and INBS were not required to be rescued in quite the same way - maybe they could have been allowed top go under with the state stepping in in a limited way. Anyway, you are painting with too broad a brush and being too emphatic.

  184. Bryan G Says:

    @DOCM

    None of my arguments have attributed supervisory powers to the ECB, and all are still valid.

    The ECB’s argument on taxpayer liability for failures of regulation is illegitimate. Shay Begorrah’s example of the BP oil spill is a good one, as it captures the essential structures and relationships involved. Another example is if someone crashes a car and injures someone as a result of driving too fast, should liability for damages rest with the driver, or with the local county council for poor road signage, or the guards for failing to stop the speeding driver before the crash, or the driving test examiner for approving the driving licence?

    I’m well aware that the legal environment for handling defaults of insolvent banks was very sub-optimal, but the idea that the only possible outcomes were (a) exactly what we got or (b) system-wide collapse, is false. For proof look no further than what is happening in Greece right now. The EFSF appears to be guaranteeing newly issued Greek bonds to boost their value and reduce Greek bank recapitalization needs. It is likely that the EFSF bonds that will be used to recap the Greek banking system will have very long maturities, and low interest rates, though I have been unable to find out the details of Greece’s repayment schedule. These bonds are being created out of thin air, not via funds raised on the markets, so there is no need for investor roadshows and trips to China and Japan to source the funds. A total sum of about €120bn bonds is being created in this way.

    With the right political will, “creative” solutions were possible that at least reduced the burden, and distributed the costs more evenly over those who benefited. Instead what we got in Ireland was a zero-sum game, driven by an overly-simplistic, ideological, “moral” narrative.

    I note that not all ECB council members are as extreme as Asmussen. Some (such as Coure) are calling for a “Financial Compact” to sit alongside the fiscal one, that includes an EU-wide bank resolution scheme. Implementing a solution whereby some of the elements of such a scheme are retrofitted back Ireland’s situation, is hardly beyond the capabilities of the great and the good. It appears, however, that Asmussen, Wiedmann and others are doing their best to create an environment where any such “creative” measures will not be considered for use outside Greece.

    Also Draghi has indicated that not all Greek banks will be treated in the same way - some will be resolved rather than recapped, though what this means in practice is unclear. As grumpy points out there was no need to treat all Irish banks in the same way - a bank with 5 branches that was not involved in general commercial payment systems did not have to treated in the same way as AIB or BOI.

  185. ciaran Says:

    @Overseas commentator
    that’s speculative. At present we cant borrow in any case, surely there’s a case to be made that anything that improves our debt figures also ease or transition back to normal borrowing on the market. certainly the current strategy of attempting to impress “the markets” with our masochism hasnt exactly been a roaring success.

    from the speech:”Furthermore, to suggest that debt-relief should be considered risks undermining the programme by inferring that it is needed…” its actually the tinkerbell strategy live and in colour

    Also he alludes to the ecb warning about imbalances in the run up to the crisis, is this the case? did they spot the problems we were having? cause certainly i seem to remember a post on here of jc trichet, for one, touting pre crisis ireland as a success story.

  186. Gavin Kostick Says:

    Sunday reading

    ‘Ireland’s grievance over ECB tactics is totally justified’

    Colm McCarthy

    http://www.independent.ie/opinion/analysis/irelands-grievance-over-ecb-tactics-is-totally-justified-3081122.html

  187. DOCM Says:

    @ Bryan G

    I note your first point. (I evidently misunderstood your sentence; “I would like to see Asmussen go to the US and make the argument that US taxpayers should pay for all the supervisory failures of the Fed”).

    My opinion of the blanket guarantee is the same as yours. But analysing how, why and when the guarantee was given is not very helpful at this stage.

    Colm McCarthy returns to the theme. The nub of his argument is in the following sentences.

    “There is no provision in the Maastricht Treaty, in the ECB statutes or in any EU directive which says that states must pay bank bondholders without limit and to the point of state insolvency. The policy will, of course, be abandoned if a large member state gets into trouble, since a sovereign debt crisis in a large state will collapse the European financial system. The policy is “no bank bondholder left behind”, but only at the cost of smaller states and their sovereign bondholders. All banks are TBTF (too big to fail), but only some states are SETF (small enough to fail)”.

    On the first point, the mandate of the ECB, as part of the System of European Central Banks to maintain price stability is absolute and a provision such as that to which Colm McCarthy refers could hardly exist. On his second point, one must hope that he is correct i.e. in the same manner that developments elsewhere resulted in a reduction in the punitive interests being applied to EFSF loans.

    The attitude of those defending Ireland’s right to its grievance vis-a-vis the ECB, the sincerity of which I have never called into question and the grounds for which are considerable, reminds me,for some reason, of the besieged admonishing the besiegers “to come out with their hands up!”. Not very likely.

    On the reference “to the point of insolvency”, I seem to recall Minister Noonan mentioning a figure of 20% for the role of the banking crisis. Responsibility for the failure to cut the deficit lies elswhere.

  188. DOCM Says:

    @ Bryan G

    For the avoidance of any misunderstanding, I would add that my reference to analysis in relation to the blanket guarantee is solely in the context of the negotiations on the PNs and related ELA issue.

    I am with the over 80% of the population that considers that there should be a full enquiry in the matter.

    http://www.independent.ie/national-news/probe-into-dark-night-of-bank-guarantee-3081247.html

  189. Paul Hunt Says:

    We keep going around in circles here. But this stridently argued and explicitly assumed integrity of Ireland’s grievance with the ECB runs the risk of drowning out everything else. It is convenient for many in Official Ireland because it provides a single focus on an external ‘enemy’ and allows them to evade any consideration of badly required reforms at home. And it is beginning to assume the aspect of Churchill’s ‘dreary steeples of Fermanagh and South Tyrone..’.

    It also conveniently ignores the reality that we are living in an era of major shifts in economic and political forces and struggles between these forces. At the heart of the shifts and struggles in the EU is a recognition of two requirements. The first is to unwind the Faustian pact between governments and banks that was broadened and deepened during the quarter century prior to 2007 - to the point that too many banks had become TBTF. The second is to reduce the power of sovereign bond market participants over democratically elected governments.

    These two struggles (or challenges) are intertwined. Politicians, particularly those who have previously misled their voters, when confronted with two challenges that are intertwined will seek to separate them and will always focus on the one that might be easier to address.

    The first challenge is far too difficult for most EU governing politicans. The detrimental impact of this Faustian pact has varied considerably across the Euro Area. In the ‘peripherals’ it varied from a basically solvent sovereign (Ireland) becoming an appendage of gloriously insolvent domestice banks to a seriously insolvent sovereign (Greece) having a handful of dodgy banks as an appendage. In the ‘core’ the bank problems were viewed as ‘manageable’ - or, at least, every effort was made to convey the impression that they were manageable. And securing senior bank bond funding was viewed as the first major step to establish this ‘manageability’. LTRO is just another effort to attempt to sustain this ‘manageability’.

    Having secured this, how ever tenuously, the focus has shifted to the struggle between sovereign bond market participants and sovereign governments. And so we have the ‘fiscal compact’. Core EU governing politicians have decided, given that they have two hard things to do, to do the easier one.

    It is extremely unfortunate that Ireland had managed its affairs so badly, put itself in the firing line and desparately required - and continues to require - the Euro Area bank solvency crisis to be addressed first and foremost. But governing politicians in the core have absolutely no stomach for this. It is the sad, unfortunate, but perfectly understandable, reality.

    In this context, rather than railing impotently at the perceived perfidy of EU governing politicians and officials, the public policy thrust in Ireland should be focused on every measure that might be used to counteract the inevitable detrimental impact of the required programme of fiscal adjustment.

    However, there are far too many in Official Ireland who are comfortbaly ensconced and any consideration of thrse policy measures could discomfit them considerably. So let’s all rail instead at the perfidy of the ECB.

  190. DOCM Says:

    @ Paul Hunt

    I share all points of this analysis.

  191. paul quigley Says:

    @ Paul Hunt

    You have, IMHO, correctly assessed the significance of the broader EZ banking issue, and the stance of the core politicians, but I cannot see how you can conclude as follows:

    ‘In this context, rather than railing impotently at the perceived perfidy of EU governing politicians and officials, the public policy thrust in Ireland should be focused on every measure that might be used to counteract the inevitable detrimental impact of the required programme of fiscal adjustment’

    Where on earth is the ‘railing’ ? The current stance of our government and public servants is one of acquiescence, bordering on servility. As you yourself often point out, their objective is to preserve as much of the status quo as possible. The local pecking order would be threatened in the event of a real standoff with Europe, so it can’t be contemplated.

    I can only interpret your stance as one which reflects an excessive attachment to the European ideal, (as opposed to the reality of Europe today), and/or an anxiety about what might transpire in an Ireland which went another road. Given your generally critical orientation, this seems a bit of blind spot.

  192. Paul Hunt Says:

    @DOCM,

    Thank you. I suspected you might agree, but it is kind of you to express it.

    What worries me a little is that this continuous railing at the perceived perfidy of the ECB by a number of opinion-formers will confuse many voters when they come to consider the choice before them at the end of next month. On one side, Official Ireland, presumably, will be doing its best to secure the people’s assent to the ‘fiscal compact’. But, on the other side, we will have this continuing rumbling grievance about the PNs, ELA and the bailing out of Anglo and INBS senior bondholders.

    On one side, people will be told it is imperative to vote ‘yes’ to the ‘fiscal compact’, even though there doesn’t seem to be a leading economist in the land who is capable of making a convincing economic policy argument in its favour that resonates when account is taken of Ireland’s economic circumstances. It may make perfect sense from an overall EU governance perspective, in the context of this struggle with sovereign bond market participants, and it might be more honest to assert that Ireland in the future may have to exercise even tighter fiscal discipline than any imposed by this pact, but this is unlikely to get voters rushing to the polling booths to vote ‘yes’.

    Given the noise that’s being made about the perceived perfidy of the ECB - and its reluctance to amelioate the fiscal impact of the PNs - it’s perfectly possible that many voters will view the ‘fiscal compact’ as just another EU imposition that might be even more damaging than the current PN burden is. And vote accordingly. And there will be no shortage of people telling them that it is - for all sorts of specious, self-serving reasons.

    A bit of honesty all round wouldn’t go amiss, but it’s probably the last thing we’ll see. It would be far better for Official Ireland to come clean with voters and tell them that, while the it is not of pressing relevance to Ireland at the moment, the ‘fiscal compact’ is required to secure the solidarity of Ireland’s EU partners to support an extension of the current support programme - which is almost inevitable. It would also be wise for Official Ireland to accept that deep-seated, menaingful reforms are required to restore economic recovery - and to give the country a sporting chance of emerging from the current programme without an extension. But that’s probably a bridge too far.

    We have a Government that, after just a year, looks and sounds as out of puff and ambition as FF was when Mr. Cowen became Taoiseach. Their primary focus is on securing, for the first time, re-election of a two-term FG/Labour coalition. They, and Official Ireland, may find that this is what a large share of voters do not want. As the domestic economy continues to be ground down, due to Government inaction and pussilanimty and the resistance of much of Official Ireland to structural reforms, we could rapidly approach a situation of conflict between a majority of voters and Official Ireland. Certianly not violent disorder, but a growing resolve, similar to that built up prior to the last election, to do to this government what voters did to the last one.

    And a bit of honesty on the part of the economists commenting on public policy mightn’t also go amiss. Rather than pronouncing with such precision in very narrow areas and so selectively, it would be good to hear an admission that much of mainstream economic analysis that bears on public policy - in particular macroeconomics and microeconomic industrial economics - was subverted over the last 30 years by this burgeoning Neo-con hegemony sailing under a neoliberal flag of convenience - and that serious efforts are being made to repair this and to advance relevant and useful policy analysis.

    The IMF, to its credit, seems to be leading the charge. And I know that resources in Ireland are very limited. But if there ever was a time for our ‘public intellectual’ to rise to the challenge - particularly economists - this has to be it.

  193. Paul Hunt Says:

    @Paul Quigley,

    I wouldn’t call it a ‘blind spot’. It’s just that the alternative ’spot’ is very empty and quite frightening. Once this referendum was announced I commented here and elsewhere that it presented an existential choice for the pople of Ireland. It was a new and pressing version of ‘Boston or Berlin’.

    A perfectly valid case may be made, recognising Ireland’s geographical, economic and cultural location between the US and Britain, for an alternative course. Beyond the usual ’sound-sites’, chest-beatig and doses of economic illiteracy, I haven’t heard it or seen it presented in any constructive or sensible manner.

    Given a US House of Representatives in hock to Tea Partiers and fundamentalists of all varieties, a Senate likely to follow and an administration that might fall to them - plus a strategic shift from the Atlantic to the Pacific - and given a heavily Eurosceptic Tory Party in Britain, it looks like very choppy waters for Ireland to be paddling its little canoe having cast off from some EU moorings.

    If or when I see such a case, I will give it consideration. Until then, I fear it is a case of ‘Holding tight to nurse’..even if she has some attributes of a Wagnerian Valkyrie.

    Despite resposing faith in the good sense of a majority of Irish voters, I fear that a combination of the confusing noises emerging from some corners of Official Ireland, the economy grinding impact of the Government’s ‘one club’ fiscal adjustment policy, the continued pampering of much of Official Ireland and failure to pursue reform and the arrogance and complacency of the Government could lead a large number of citizens to vote ‘no’ without properly considering the implications. When combined with the ‘naysayers in all circumstances’, this could lead to rejection of the fiscal compact.

  194. tullmcadoo Says:

    Paul Hunt,

    There you go again, tilting at windmils and defending the “rotten heart” of Europe. I will still be voting no in the hope that it bars our road to the ESM and forces us to confront our flaws. This will of course probably involve radical action on the public finances, reforms of the way we deliver services, chucking out a discredited pro-European world view. It will probably also involve exit from the Euro and some kind of Sovereign Defualt.

    Give me Boston over Berlin anyday-over 200 yers of democracy,an emphaisis on personal freedom, a questioning attitude to goverment, most of the great technological developments of the last two centuries and an outstrectched hand of welcome to our huddled masses. If it was not for Boston in the first half of the 20th Century, where would we be. Lets just leave it at that.

  195. Overseas commentator Says:

    Colm Mc Carty writes:”When the ill-advised bank guarantee was introduced in October 2008 the banks were believed to be illiquid rather than insolvent, and the guarantee was expected to have no cost to the State.”
    Some error! The regulator, the central bank and the ministry of finance thought the banks were illiquid when in fact they were insolvent!
    I do not believe any of it, in fact the banks ran the government and they perfectly knew the real state of affairs. The dumping of the whole mess on the taxpayer was perfectly conscious and organized. The fact that nobody has been brought to justice about it is scandalous and inexcusable.

  196. paul quigley Says:

    @ Paul Hunt

    The US is a bastion of neoliberalism. ‘Boston’ gave us a private sector malinvestment debacle and a ‘Boston’ oriented government, advised by Wall St, issued the fatal bank guarantee.
    ‘Berlin’ is now giving us the Fiscal Corset, and a ‘Berlin oriented’ government and civil service is advising us to wear it.
    Your logic is difficult to fathom. The local establishment want a yes for their own reasons. It is clear that you have not the slightest respect for those reasons, yet you call on people to get with the programme anyway.

    Maybe ‘Boston’ and ‘Berlin’ have both run their course as development models for Ireland, and something new is required

  197. paul quigley Says:

    @ OC

    ‘The dumping of the whole mess on the taxpayer was perfectly conscious and organized.’

    I’d say the Dork is not too far off the mark in his perception that the Euro is an extraction tool. Peripheral governments, including our own, were thoroughly gamed. If you want to pull off a really big scam, do it through the government. With all those EC flags waving in the breeze, it was pretty hard to follow the money.

  198. Eureka Says:

    @ Tull
    No vote -> govt having to meet Troika commitments anyway but Irish people looking bad. I can’t see how a no vote works - what are the steps?

  199. Joseph Ryan Says:

    @Paul Hunt/ @DOCM

    re “But this stridently argued and explicitly assumed integrity of Ireland’s grievance with the ECB runs the risk of drowning out everything else. It is convenient for many in Official Ireland..”

    I agree with your analysis up to a point. Certainly the focus on the ECB responsibility and PN issue has allowed the army of rent seekers to get virtually scot free, and the focus has allowed the deferral of tackling the plethora of home grown issues.

    But there is more than one area that the ECB has got it badly wrong.
    Draghi has improved the situation by LTRO for the banks. But lets dwell on that for a minute.
    The ECB now rightly believes that it must save the banks by pumping liquidity into the system but at the same time the banks are required to deleverage, thereby starving the real economy of liquidity and credit.
    So why is right that banks must have overpowering liquidity, so they can be saved but the general economy must be deleveraged?
    The only conclusion I can arrive at is that the ‘banks/financial sector’ is the only economy that matters at the ECB.
    I think this is a real issue not only for Ireland but all European countries at present. It seems to me that the deleveraging policy is damaging, illogical and contradictory.

  200. clintideal Says:

    @tullmcadoo

    +1

  201. clintideal Says:

    @tullmcadoo

    +1

  202. Robert Browne Says:

    @ Paul Quigley

    On our beloved friend Paul Hunt I fear for his sanity.

    “the local establishment want a yes for their own reasons. It is clear that you have not the slightest respect for those reasons, yet you call on people to get with the programme anyway.”

    I cannot figure it either. We are being swamped “with the same turgid weasel words” and being told that all reasonable people will surely vote yes for ESM and for even more unsustainable debt.

    Read Constantin’s column in today’s Sunday Times the graph of debt, says it all. It is extraordinary. The worst this, biggest fall in GDP/GNP, longest historic decline and still people that know all this want to cede more money into their hands to divvy out amongst their loyal supporters.

  203. Paul Hunt Says:

    @Tull,

    It may not be as QEDish as you seem to think. I don’t think it’s wise or desirable to advance the economic trauma the prospect of which you seem to relish. My preference is to wait for lesser ‘events’ that might compel the intrusion of rationality. But I accept that, once Official Ireland is set upon a course, similar to their counterparts everywhere, it will take one hell of an ‘event’ to compel them to reconsider and change course.

    The blow-out after Sep 2008 should have been an ‘event’ with much deeper and wider repercussions. Yes, the political factions implicated were put to the electoral sword and some personnel changes were made at the top of the bureacratic tree, but every effort was made to confine the stable-cleaning to the banking and finance sectors. Fiscal adjustment was presented as an inevitability. And very little else has changed.

    One does wonder what it will take to compel Official Ireland to confront the reality of the domestic economy. But I would hope it would be something less than what you seem to think - and apparently desire.

    @Paul Quigley,

    “…something new is required.”

    Completely agree, but it will only emerge from the shifts and struggles that are currently taking place. There never was and never will be an ‘ideal’. Beating back the Neocon hegemony, that has burgeoned towards dominance over the last 30 years or more, will take some time. Ironically, it was allegedly progressive, centre-left politicians (Clinton, Blair, Schroeder, Prodi, Zapatero) that succumbed most completely to the Neocons wiles and threats. And, with the possible exception of France, it will fall to centre-right governments, not instinctively disposed to do so, to beat them back.

    Still I would rather be aligned with, and endeavouring to have some influence among, centre-right governments in the EU seeking to achieve this - and hoping that the centre-left eventually will cop itself on and cease alienating the liberal centre whose electoral support it requires to secure election to government, than to be subject to the whims of flaky Eurosceptic Tories and the lunacies of Yankee Tea Partiers.

    @Joseph Ryan,

    As I mentioned earlier, core EU governing politicians are focusing on the easier of the two hard tasks they have to perform. They will only seriously tackle the harder task when they are compelled to. At the moment the necessity isn’t obvious in their own jurisdictions.

  204. Colm Brazel Says:

    Colm McC writes today “When banks go bust, the shareholders take the first hit. If this is not enough the division of losses between other categories of creditors and taxpayers is a political decision, as in Denmark. In the Irish case this political decision was usurped by the European Central Bank. Unelected European executive agencies have no mandate to behave in this manner.”

    He’s referring to the 41% Amagerbanken writedown applied to senior bondholders.

    http://www.bloomberg.com/news/2011-02-07/amagerbanken-senior-bondholders-to-suffer-losses-in-bailout.html

    We should be heartened at news PAC(public accounts committee) are to proceed with investigating exactly how the so-called ‘guarantee’ came about. If this were not a banana republic, we would already have answers to these questions and the charges of criminal negligence currently being faced by Geir Haarde, could be made against the authors of the guarantee. At the minimum a Garda investigation should be made into the disappearance of minutes covering up the facts required to uncover the source of the ‘guarantee’.

    According to the Independent today, “present at the meeting were Mr Cowen and members of his cabinet; former Finance officials Mr Cardiff and his predecessor, David Doyle; the four banking bosses who visited government buildings that night, Eugene Sheehy and Dermot Gleeson of AIB and Brian Goggin and Richard Burrows of Bank of Ireland; former Financial Regulator Pat Neary; and former Central Bank Governor John Hurley.”

    Michael Fingleton of Nationwide and Sean Fitzpatrick of Anglo are, it should be to everyone’s surprise, missing from the above list. Were they excluded because they knew the true state of their own banks who could tell everyone present this was a solvency crisis and not a temporary liquidity crisis? Was the schenanigans designed to float the boats of Anglo and Nationwide? Has the failure to have a proper investigation of these matters anything to do with the bill for IBRC through the Promissory Note mechanism being shafted onto Irish taxpayers to cover up involvement of the ECB and the role of the players above, in particular the role of the Regulator and FF cabinet members?

    So, what’s to be done. Ironically, policy so far has been to concentrate on ‘the kindness of strangers’. Actually, ’strangers’ is a bit of a misnomer as the term refers to the ‘troika’ EU, ECB, IMF, who ought to be sympathetic. However as we see through Jörg Asmussen’s talk to the IIEA, and with our experience of the interest rate attached to bailout, the stance against burning senior bondholders, has been especially unsympathetic by the ECB, though ECB failed to regulate its Irish Central Bank in ways that would have prevented to property bubble it fed through unbridled lending practices endemic among Irish banks.

    So, whats to be done? NAMA has been an abysmal failure foretold by its critics form the beginning. EFSF has done nothing to address Irish private debt levels. I’ve noted the possibility in the past of an EFSF SPV or similar bond instrument designed to bailout Irish mortgages in default, nothing there so far! Neither ECB nor Irish Govt are interested in Joe Soap unless he’s a bank.

    Ronald Quinlan in today’s Indo reports on a private SPV from “international financial-services group IFG”. This would involve a debt for equity swap handover of a share in homes to a private trust.”IFG ..is listed on the Dublin and London Stock exchanges”.. This is a good idea.

    What else can be done? Lets just apply the laws of capitalism and declare a default for Ireland and exit from the eurozone mess that is increasingly becoming a Titanic mess for Ireland and the rest of Europe. The benefit of this would be FIFO(first in, first out) where because we were at the cusp of the euro meltdown, we lost out as we were forced by Europe into the position to no bank allowed to fail meaning we did not benefit from the Denmark approach above; but, being first out, we can return to the employment and growth figures of eg Iceland and do a lot better than that if our banking problems get dealt with through default as they should be.

    Through default and the consequent turbulence of dealing with matters arising from default, we would need international allies to support our position. It appears to me that it would make good sense to return not to PuntNUA, but to sterling.

    A return to sterling could make the economic benefits of peace in the North forged over past decades a benefit to our economy, rather than a hindrance due to our membership of the euro and the north’s membership of the sterling zone.

    The UK remains one of our greatest trading partners. Sterling has great challenges and the UK economy shares these challenges, however, it is more fit for purpose than the euro whose faultlines are making the euro increasingly problematic and unsafe for members of EMU.

    Unfortunately, there is little appetite for the above. Europhiles will condemn this view regarding such a view as insanely dumb, rather than the insanely smart view of driving this economy under austerity into the 3rd class hold of the Euro Titanic for the foreseeable future to the point of compromising the independence of our economy through the dreadnought !!!’Compact’!!!(NO)

    Neither insanely dumb, nor insanely smart, to me, rejoining sterling, is, simply, plain common sense. We’ve more in common with The British Chancellor of the Exchequer George Osborne, than with the Easter Parade of Jörg Asmussen’s et al looking at the constitutional annexation of this state in order to pay back the debt of casino bankers of Irish Nationwide and Anglo to German and French banks :-)

    http://www.huffingtonpost.com/2012/03/05/geir-haarde-trial_n_1320682.html

  205. Colm Brazel Says:

    oops “lot better than that if our banking ” should be “lot better if our banking…

  206. Colm Brazel Says:

    @ Paul Hunt,

    “Still I would rather be aligned with, and endeavouring to have some influence among, centre-right governments in the EU seeking to achieve this”

    We are constantly peddled this ’some influence’ view. Its got us nowhere. Read Jörg Asmussen, Ollie Rehn, Trichet, Sarkozy’s message to Ireland. Look at the bailout ‘interest rate’; even the IMF were appalled there was no debt writedown for Ireland allowed by ECB.

    Read ‘The Compact’, Lisbon 11 we got the same ’some influence’ regarding our entitlement to appoint a commissioner and have a say in Europe. The ‘Compact’ is a treaty designed by the core, for the core; it excludes the peripherals. Majority voting is the agenda, not participatory veto politics.

    Look a little deeper at majority voting and you find its not even that its Merkozy voting; look further, and you see France’s debt profile is pretty dodgy, so its Merkel’s voting; look further and you see, its Bundestag. They get to look at the Irish budget before we do :-)

    Look at the flawed euro currency system: its a failed credit union system trying to reinvent itself as a currency union by embarking on a transformation that has more in common with the USSR rouble system than a dollar currency system!

    We’re constantly being peddled this partisan, participatory, self aggrandising, grandiose, inflated, egoistic, boneheaded :-) blockhead, flat footed nonsense by europhiles who love the great Halls of Europe and get off on the delusions of power it gives.

    Fact is, they constantly return with slap downs and empty handed from the monolith of the ‘troika’; I’m convinced, they’re told to peddle this nonsense, with ‘binn beal i do thost’ imprecations that complex negotiations taking their views into account, are afoot; then they’re told, to peddle more nonsense about ‘growth’ and ‘confidence’.

    EU is a great political endeavour that is being currently suffocated by the poor design of the euro. We shouldn’t confuse the euro project with the EU project. We need to get out of the former.

    Re “flaky Eurosceptic Tories” not so flaky with eg Martin Wolf agreeing UK was lucky not to purchase a ticket on the Euro titanic. Denmark and Sweden were right to keep away from the euro. Unfortunately, debate around this topic constantly mixes up the EU question with that which has done most done to the EU project,
    the eu(seless)ro

    http://www.financedublin.com/debtclock.php

  207. David O'Donnell Says:

    Oh Dear ….

    I was expecting a posse of economists to be on here today in support of Paul Hunt with reams of academic discourses on the social scientific validity [with load of lovely stat_sigs to the nth degree] of the constraints within the Fiscal Corset …. and I skipped breakfast just in case I had to eat a few ….. with trembling insides I arrive on the blog … and .. er …

    Narry a Wan, not even Wan …. not a single one. SILENCE is golden … and probably Significant :lol: *****************

  208. David O'Donnell Says:

    NO.

  209. Colm Brazel Says:

    euro has done most damage to EU project..

  210. Paul Hunt Says:

    @D O’D,

    If you toggle back a few comments to my 8:07am and 9:46am you might get my take on this silence - it’s also the weekend. Surely you don’t expect them to be on the case all of the time.

    Ireland wants the Euro Area to provide some more help to solve its problems; governing politicians in the core of the Euro Area are tackling the problems they’ve chosen to tackle. If they were to provide some relief to Ireland they’d open up a can of worms on which they’d much prefer to keep the lid firmly closed.

    It’s a tough old world. If you p1ss everyone off by claiming you are managing your affairs much, much better than anyone else and then land yourself in a hole so deep that your neighbours risk damaging themselves if they were to help you out, and you snarl at them when they try to provide the help they can manage, then you have a problem.

    Yes it would be wonderful if all the rescue equipement were in place, but the whole exercise was based on the assumption that none of the party would be so stupid as to fall in to such a deep hole. And everyone promised that they wouldn’t be that stupid. And there was no need to enforce the prevention of such stupidity, because, sure, nobody would be that stupid.

    Yeah, right.

  211. Ceterisparibus Says:

    “The Fiscal Council has calculated that, had no fiscal cutbacks been pursued, the deficit in 2011 would have been no less than 20 per cent of GDP, so the current unsustainable position is not due to a lack of effort by successive governments. It is due to the direct impact of the banking crash which has added more than €60bn to the State debt, and to the indirect impact depressing the overall economy and government revenue.”

    The current unsustainable position….. That is a strong position Colm adapts in his article.
    Paul Hunts says we need honesty from official Ireland …..it’s going to be difficult for them to tell us we must vote yes to an unsustainable debt position which is getting more so every day (by 50m euro).
    If you accept Colm’s bluntly stated analysis ( which I do)….then why would you vote yes in a referendum.

    Our only hope is that an “event” occurs which will be so dramatic the the required changes in Official Europe will have to be taken….and it is on the way.

    http://www.telegraph.co.uk/finance/comment/liamhalligan/9204702/Eurozone-crisis-roars-back-to-savage-Spain.html

  212. Frank Galton Says:

    I hope everyone is paying attention to Colm McC’s discussion of how Asmussen’s speech as delivered differs from the ECB advance version on a critical point.

  213. PR Guy Says:

    Colm Mc Carty writes:”When the ill-advised bank guarantee was introduced in October 2008 the banks were believed to be illiquid rather than insolvent, and the guarantee was expected to have no cost to the State.”

    Anyone who thinks for one minute that the people in that room didn’t know the banks were insolvent are off their rockers.

    Especially when you see ‘being on message’ means lots of people repeating phrases such as: “this is a liquidity crisis, not a solvency crisis,” you can bet money there’s a PR Guy behind those words. The politico/banker chaps don’t come up with those things. And if there’s a PR Guy behind it, count on a certain masking of the truth….. First thing a half decent one is going to ask is if you don’t want that word (e.g. ‘insolvent’) coming out, what do you want to replace it with? This is a classic ‘word switch’.

  214. Brian Woods II Says:

    Colm McCarthy highlights our horrendous 10% fiscal deficit and then states that this wouldn’t exist if we did not have the 60bn bank debt. I don’t know how he works that out.

  215. David O'Donnell Says:

    @Paul Hunt

    I read both your comments @am Paul. As noted above, the challenge remains open to May 30 on the specifics/substance/content/constraints of the Fiscal Corset wrt its social scientific validity.

    In the interim, by Hypothesis stands:

    The Fiscal Compact is Nonsense.

    Ergo, and I rarely draw on Popper, I very strongly oppose its inclusion in the Irish Constitution.

  216. hoganmahew Says:

    @BW II
    “I don’t know how he works that out.”
    +1

    @PR Guy
    “Anyone who thinks for one minute that the people in that room didn’t know the banks were insolvent are off their rockers. ”
    +1 too or +12 or something.

    Basic liquidity is that sustained illiquidity = insolvency whatever the balance sheet looks like. Basic property crash = balance sheets will look like poo. Add the two together and you get both cash-flow insolvent and balance sheet insolvent. Perhaps that was what was so confusing. Two wrongs make a spoof, right?

  217. David O'Donnell Says:

    @Jörg Asmussen & All

    Michael Hudson Live: The Politics and Economics of Restructuring

    ‘And the problem is that there’s not only the real problem of the debt overhang that was mentioned, there’s a problem of economic theory, and the illusion that all debts can be paid. The illusion that banks lend only to customers only for projects that are going to enable the customers to actually repay the loan; the bankers make a calcuation of what the customer can repay. But that’s not what happens at all.

    http://www.nakedcapitalism.com/2012/04/michael-hudson.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

    Hmmm ‘the illlusion that all financial system debts can be paid’ ….

  218. David O'Donnell Says:

    Oh, and this is interesting:

    [11:30] I want to get into the possible remedies for all of this. The basic approach to remedies I think was put forth about three hundred years ago in the state of New York when it was still a colony of England. And that’s something that’s still on the books of New York law, the fraudulent conveyance principle.

    [11:52] British sharpies would come over and make loans to– they wanted to get into their own hands the rich farmlands of upstate New York. They would make loans to farmers that would be more than they could repay, and at that time you could ask for repayment of the debt whenever you wanted. So the British creditors would ask for payment before the crop was in.

    [12:14] So the colony passed the fraudulent conveyance law. And that law said that if a lender makes a loan to a debtor that cannot be repaid in the reasonable course of business, the loan is declared null and and canceled.

    I find the focus on history and real operations — as opposed to diagrams — very refreshing. Don’t you?

    Hudson’s paper is very rich. Listen to the whole thing!

  219. Tullmcadoo Says:

    Hogan,
    Read the previously disclosed documents to the PAC. These show that some in the room believed Anglo to be insolvent.

  220. Tullmcadoo Says:

    One then is forced to ask what difference that knowledge/conclusion would have made. We know both the US, Brits and Europeans would have gone ape at that stage if seniors had been touched at that time.

  221. Ceterisparibus Says:

    @DOD
    His earlier paper is coming to pass….I think it’s from June last

    “Financial lobbyists are turning the English language – and economic terminology throughout the world – into a battlefield. Creditors are to be permitted to take the assets of insolvent debtors – from homeowners and companies to entire nations – as if this were a normal working of “the market” and foreclosure was simply a way to restore “liquidity.” As for “solvency,” the ECB would strip Greece clean of its public sector’s assets. Bank officials have spoken of throwing potentially 150 billion euros of property onto the market.

    Most people would think of this as a solvency problem. Solvency means the ability to maintain the kind of society one has, with existing public/private checks and balances and living standards. It is incompatible with scaling down pensions, Social Security and medical insurance to save bondholders and bankers from taking a loss. The latter policy is nothing less than a political revolution.

    When the economic surplus is pledged to bankers rather than invested at home, we are not merely dealing with “insolvency” but with an aggressive attack

    But the tables are now turning, from Icelandic voters to the large crowds gathering in Syntagma Square and elsewhere throughout Greece to oppose the terms on which Prime Minister Papandreou has been negotiating an EU bailout loan for the government – to bail out German and French banks. Now that nations are not raising money for war but to subsidize reckless predatory bankers, Jean-Claude Trichet of the ECB recently suggested taking financial policy out of the hands of democracy.

    At issue is sovereignty itself, when it comes to government responsibility for debts. And in this respect the war being waged against Greece by the European Central Bank (ECB) may best be seen as a dress rehearsal not only for the rest of Europe, but for what financial lobbyists would like to bring about in the United States.”

  222. Colm Brazel Says:

    http://tgr.ph/HAP1CJ

    “The euro is not in the interests of the Dutch people,” said Geert Wilders, the leader of the right-wing populist party with a sixth of the seats in the Dutch parliament. “We want to be the master of our own house and our own country, so we say yes to the guilder. Bring it on.”

  223. hoganmahew Says:

    @Tullmcadoo
    “Read the previously disclosed documents to the PAC. These show that some in the room believed Anglo to be insolvent.”

    Yes, I have. That’s what makes the situation so distressing. The idiots committed hari-kari with their eyes open.

    “One then is forced to ask what difference that knowledge/conclusion would have made. We know both the US, Brits and Europeans would have gone ape at that stage if seniors had been touched at that time.”
    Yes, they probably would, but presented with a “we’re going to do this” scenario, we might have seen some up-front deliverables from Europe and a greater concentration on appropriate resolution mechanisms. The government would, for instance, have been pressured to call in people who really did know what they were doing earlier.

    My suspicion, though, is that the blanket guarantee was chosen in the knowledge of its danger, purely to serve party and personal interests.

  224. paul quigley Says:

    @ hoganmayhew

    ‘My suspicion, though, is that the blanket guarantee was chosen in the knowledge of its danger, purely to serve party and personal interests’

    + 1. They thought they were simply doing the usual thing, and putting the resources of the state in to bail out some troubled private sector cronies. But they needed a bigger boat.

    http://www.youtube.com/watch?v=pmLP0QQPqFw&feature=endscreen&NR=1

  225. David O'Donnell Says:

    @ceterisparibus

    Yes - I’ve become a fan of Hudson’s clarity since relaunching me apprenticeship in political economy in 2008.

    @hoganmahew
    Your ’suspicion’ is probably sound; the main driver was to protect Fianna Fail and its upper-echelon circle of insider gouging fellow-travellers. This circle is still around and most in situ.

    @Tullmcadoo

    Blind Biddy took her wolfhound for a stroll the other morning in Merrion Square around dawn: she wants to know if you were the milkman wearing the dark blue suit and the Boston Red Socks caipin?

    @Colm Brazel
    Pls desist from giving that nasty little fascist man any exposure around here.

    @economists

    Relax! As Genghis Khan put it: ‘only a fool goes into a battle he knows s/he cannot win’. Do the state some service instead: Recognise NonSense for the NonSense that it is - and communicate said fact to the Citizenry.

  226. jmg Says:

    Scala mobile for ECB bankers.
    ECB employees want inflation protection for their pensions.
    LINKS:
    http://www.faz.net/aktuell/wirtschaft/inflation-kleinglaeubige-ezb-beamte-11717693.html
    http://www.spiegel.de/wirtschaft/soziales/0,1518,827681,00.html

  227. Eureka Says:

    I’m beginning to wonder if the ECB want us to vote no to this treaty.
    Sending Mr Assmussen and then forcing people to pay for their own water meters.
    If we did vote no it would solve a lot of problems for them. Ireland would become responsible for its own failure (and let them off the hook)

    The inquiry would not be set up if the conclusion was not already certain. It will exonerate the ECB. The blame will land on Brian Lenihan. If there is a letter now is the time for its release…

  228. David O'Donnell Says:

    @paul quigley

    Quint being the Citizenry and Jaws the Financial System - a Metaphor for our times? Neatly adds to Hudson’s video talk above …

  229. Tullmcadoo Says:

    Hogan,
    Spot on, if you are going to take one for the team you take out life, disability and health instance. The two Bs do not appear to have signed the policy.
    It would be interesting to know who was whispering in the ear of the pols. The role played by some well known faces off stage would be interesting to explore.

  230. John Corcoran Says:

    The Guardian’s Larry Elliot reckons the eurozone has three choices?

    http://www.guardian.co.uk/business/2012/apr/15/single-currency-three-pronged-fork-road

  231. DOCM Says:

    @ John Corcoran

    No mention of Ireland! Given the tenor of economic commentary in Ireland, and notably on this blog, there must surely be some mistake.

    @ Paul Hunt

    You may be interested in the attached.

    http://tinyurl.com/dyzxw4m

    Our views evidently coincide on numerous points. However, if you will forgive me for saying so, I think that I take a less dystopian view of our situation. Were there to a be a rejection of the TSCG, the sky would most certainly not fall but the hangover would be significant. I doubt that this will happen as the ordinary citizen - in whom you still place some confidence - is very good at figuring out which side his/her bread is buttered on.

    It is also notable that Larry Elliot takes the same simplistic view of the economies involved in Europe as many others do. Both Italy and Spain constitute a series of regional economies and many of the ills that plague them are, as you have often pointed out in the case of Ireland, the result of years of living with skewed economic incentives, if not outright corruption.

    I think almost anything could happen at this stage. I would not rule out an improvement in Ireland’s economic circumstances that none of the experts will cotton on to at the time it happens and maintain afterwards that they had.

  232. The Dork of Cork Says:

    I get the creeps ever time I listen to Donal Donavan.(Marian Finucane today)

    Its not up to the IMF or the ECB to print money.

    Goverments / treasuries print money.
    The IMF & ECB are not goverments ……at least not officially

    This monetary battleground (Ireland) between the US Treasury and the BIS is none of their business.
    IF the Irish goverment does not now print money it is committing treason.
    Its the duty of the goverment to print money under these circumstances - It is not a option.
    The debt cannot be repaid.
    Printing is obviously the most effective method to reduce the credit waste.

  233. PR Guy Says:

    @hoganmahew

    “Two wrongs make a spoof, right?”

    Shurly you mean, “shtrong denial.” Hic!

  234. Shay Begorrah Says:

    @Paul Quigley on Paul Hunt’s rather curious use of the word “railing” to denote “complying with completely”.

    @paul hunt
    In this context, rather than railing impotently at the perceived perfidy of EU governing politicians and officials, the public policy thrust in Ireland should be focused on every measure that might be used to counteract the inevitable detrimental impact of the required programme of fiscal adjustment.

    Where on earth is the ‘railing’ ? The current stance of our government and public servants is one of acquiescence, bordering on servility. As you yourself often point out, their objective is to preserve as much of the status quo as possible. The local pecking order would be threatened in the event of a real standoff with Europe, so it can’t be contemplated.

    +1

    The biggest weakness of the Fiscal Compact , and possibly why the lobbying for it has so far been restricted to “journalists” and establishment mouthpieces, is that its supporters are linked in the public’s mind either with being compromised by association with the financial sector (Bruton, Sutherland, Dukes) or the housing bubble and the free market fervour that led to it (Fianna Fail, The PDs, The Irish Times). Its’ remaining supporters seem to drawn from the ranks of those whose allegiance is somewhat torn between European Institutions and the Irish state. There is no railing being done by the Irish establishment and certainly no resisting. It has been humiliating submission all the way.

    The government is now faced with a quandary over the Fiscal Compact - given that the economic rationale of the fiscal compact is so weak as to be taboo to discuss in polite society (finally) and that the political rationale behind the Fiscal Compact is a strange mixture of unjustified fear and starry eyed optimism how can the referendum be sold? It is no easy job and all the opinion pieces in the world from friendly journalists may not do the trick, as Paul Quigley notes the suspicion has to be mounting that the public will wonder whether the political class is placing its own interests ahead of the states.

    It could therefore not be more ripe that just as Ireland’s ever obedient establishment has been publicly told off by a ECB emissary that Sarkozy has cracked and suggested that the same ECB can not remain purely an enforcer of German monetary policy and economic dogma.

    Sarkozy breaks silence over ECB role

    That end of May date for a referendum is yet another Irish government own goal - if Labour has any survival instincts left they will seek to delay it.

  235. Bryan G Says:

    I think many are missing the point about why it is important to call a spade a spade, whether on Asmussen’s narrative, the PN non-deal, or whatever. There is a deep anti-intellectualism at the heart of the Irish government, the so-called Economic Management Council, that acts as a cabinet within a cabinet. These four individuals are more suited for a 1950s-style domestic politics than complex 21st century institutional relationships. They are not playing the game in the way that it needs to be played to better further Irish interests. One element of this is that there needs to be a coherent intellectual framework that is constantly being pushed and evangelised to give a broader context for individual demands, positions taken etc. in EU negotiations.

    The ECB understand how the game is played, and spend a lot of time developing and reinforcing their intellectual framework that gives justification for their individual policy decisions and actions. There is a constant stream of ECB speeches and interviews to promote and evangelise this. To counter this there is a need not just to try and negotiate on individual point issues, but to tackle the framework mismatch head-on. Ireland needs to articulate a vision of how the EU should work in the future, the institutional changes that are needed, the basic principles that should be applied to policy choices, the boundaries and limits that must be enforced for each institution etc. This is an aspect of the battle that Ireland is simply not turning up for, but on which other countries spend a lot of effort to promote their own interests (i.e. they are doing their job).

    In the absence of such a coherent framework, the Irish government often ends up holding two contradictory positions at the same time (second bailout is ludicrous + need PN/ELA relief to facilitate return to markets) making it trivially easy to counter.

    This is why I think CMcC’s article is timely and relevant. It is not about “impotent railing at the perfidious ECB”, but about engaging at the “framework” level - directly challenging the illegitimate aspects of opposing frameworks, and setting out the economic facts and projections that should form the basis of future policy decisions. In contrast the original post that started this thread in effect says “Asmussen’s view is a reasonable and balanced one, but there’s one point I would take issue with…” . This basically cedes the framework debate and jumps straight into an individual point issue, making a successful resolution of that point issue much more difficult, since the entire debate will be held in the context of a framework biased towards an opposing view. Asmussen’s view isn’t balanced - whether on the taxpayer liability issue or his view on the authority of the ECB to tackle solvency issues - it is hugely biased. This needs to be challenged and countered, not silently accepted. And it isn’t about the past, it’s about the future. Sarkozy eventually figuring out he backed the wrong horse is a sign of this.

  236. Gavin Kostick Says:

    Very good arguments above and I hope to pitch in later - for the moment and for the record:

    Mr Sarkozy used a key speech at a rally in Paris yesterday to pledge to seek a new role for the ECB if he wins a second term.

    “Sarkozy focuses on ECB role in boosting growth”

    ‘Mr Sarkozy used a key speech at a rally in Paris yesterday to pledge to seek a new role for the ECB if he wins a second term.

    ‘“I want to discuss . . . the role of the Central Bank in supporting growth. This is a question that we cannot avoid. Because if Europe doesn’t want to lose its footing in the world economy, it absolutely needs growth. If Europe is not going to sink in the international economy, it must renew itself through growth.”’

    http://www.irishtimes.com/newspaper/world/2012/0416/1224314763451.html

    And, also today:

    ‘Spain has accepted mission impossible’

    “News coverage seems to suggest that the markets are panicking about the deficits themselves. I think this is wrong. The investors I know are worried that austerity may destroy the Spanish economy, and that it will drive Spain either out of the euro or into the arms of the European Stability Mechanism. ”

    Wolfgang Münchau

    http://www.ft.com/intl/cms/s/0/7d5b5910-8555-11e1-a75a-00144feab49a.html#axzz1sBBekPmV

  237. John Corcoran Says:

    Yes, exiting euro can be smoothFrom Dr Desmond Lachman.

    Sir, Wolfgang Münchau berates European policy makers for their macroeconomic illiteracy (“The Wolfson prize for European political illiteracy”, April 9). Yet by asserting that macroeconomists do not have a model for monetary unions he reveals his own macroeconomic illiteracy. In particular, he seems to be blissfully unaware of the vast economic literature on optimum currency areas as well as of that on the appropriate use of fiscal policy and monetary policy under different exchange rate regimes.

    More disturbing yet is the highly legalistic approach that Mr Münchau brings to the issue of the possible exit of a member country from the euro. This is all the more surprising in view of the recent assurances from senior German policy makers that, were Greece to choose to leave the euro, Europe would not throw the legal book at it by insisting that Greece would also have to leave the European Union.

    The legalistic approach that Mr Münchau takes on the issue blinds him to the possibility that an exiting country’s European partners could smooth that country’s departure from the euro in a number of important ways. They could contribute to the large international financial support package that would almost certainly be needed to build confidence in the newly introduced currency. They could also replicate the present trade preferences as well as the structural funds that an exiting member country presently receives within the EU.

    European policy makers would do better to plan for the possibility that a number of countries might choose to leave the euro than heed Mr Münchau’s counsel of despair that little can be done to smooth the process of the euro’s unravelling.

    Desmond Lachman, American Enterprise Institute, Washington DC, US

  238. David O'Donnell Says:

    @Bryan G

    ‘There is a deep anti-intellectualism at the heart of the Irish government …

    You are being too generous; to be anti-intellectual would suggest some, however vague, understanding of intellectualism. It reflects more of a supine parochial protection of localist power relations, a patronising attitude to the citizenry, and an abject deference to perceived superior powers so as to ruthlessly protect local elitism.

    Brian Hayes, Minister of State at Finance, provides an exemplar in Today’s Irish Times where the content of the Fiscal Corset is not even, not even implicitly, addressed. Rather, the sheeply wooly concept of ‘confidence’ substitutes, in the apparent Gov and establishment tactic of resorting to the politics of fear, to detract from any real discussion of ’substance’.

    http://www.irishtimes.com/newspaper/opinion/2012/0416/1224314762073.html

    Civic Republicanism, which places interests of the Citizenry first in deliberative democracy, is a general framework well understood throughout the EU, if not in this particular ‘republic’.

  239. David O'Donnell Says:

    @John Corcoran

    Lachman is so far to the roight of Genghis Khan, and so steeped in failed neo-kon ideology, that even the Ayn_een Randites do not take tea with him. He simply wants US and Dollar hegemony throughout the known and unknown universes - the poor dear. IF we had a bin on the blog I’d put him there with the post on Wilders. Course there are a few AmEntInst fans on the blog and around here - dangerous pee_dears!

  240. John Corcoran Says:

    @DO’D

    You have my permission to bin it.

  241. David O'Donnell Says:

    European Economy - Good Graphical Update

    Unemployment, Youth Unemployement, GDP per person, DEBT

    http://www.ritholtz.com/blog/2012/04/european-economy-guide/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29

  242. Colm Brazel Says:

    Euro weakens ahead of the Spanish bond auctions tomorrow

    http://community.nasdaq.com/News/2012-04/euro-weakens-ahead-of-spanish-bond-auctions.aspx?storyid=133856

    Mario Draghi will make a speech following the auction.

    Looks like the Spanish bulkhead on the euro Titanic could be in for a pounding(pun).

  243. paul quigley Says:

    @ DO’D

    Many thanks for that interesting Hudson link. That INET conference is choc a bloc with papers and slides which illustrate the limitations of Asmussen’s thinking. Here’s Richard Koo:

    ‘The creation of the euro was truly one of mankind’s greatest achievements. It was also recognized from the beginning that some unusual restrictions would be needed to make the currency zone work. But when negotiations surrounding its creation were taking place in the 1990s, no one outside Japan had heard of balance sheet recessions. Nor had anyone anticipated the pro-cyclical and destabilizing capital flows that are unique to the eurozone. Now that both glitches have been identified, some modifications to the original design are necessary.

    Although many argue that fiscal union is the first-best solution to the problem, politically nothing would be harder to achieve than such a union. The recently proposed and highly mechanical Fiscal Compact not only signals a drastic loss of fiscal sovereignty for member countries, but addresses only the first macro problem—that of fiscal profligacy. It makes no provision whatsoever for the second macro problem of balance sheet recessions and is likely to be highly counterproductive for countries suffering from this rare type of recession. All talk of firewalls or bazookas deals only with symptoms and ignores the underlying problems’

    http://ineteconomics.org/sites/inet.civicactions.net/files/koo-richard-berlin-paper.pdf

  244. DOCM Says:

    @ All

    FYI

    http://www.independent.ie/business/european/irish-government-bonds-stable-amid-latest-euro-crisis-3081498.html

  245. Paul Hunt Says:

    We are still going around in circles here, but I did detect one chink of light in Gavin Kostick’s response to Bryan G’s “‘There is a deep anti-intellectualism at the heart of the Irish government …

    “You are being too generous; to be anti-intellectual would suggest some, however vague, understanding of intellectualism. It reflects more of a supine parochial protection of localist power relations, a patronising attitude to the citizenry, and an abject deference to perceived superior powers so as to ruthlessly protect local elitism.”

    It does not diminish economic analysis - indeed it enhances the necessary application of political economy - to recognise that Pres. Sarkozy will say or do almost anything to secure re-election, that Chancellor Merkel will trim and twist to secure the ability to have a free choice of coalition partner in next year’s Bundestag elections and that the Government here will batten down every hatch, pander to every sectional economic interest that is able to wield some power and influence and seek to maintain a course of ’steady as she goes’ to secure re-election. It that means swallowing 6 different contradictory things before breakfast, they’ll do it and crank up the spin-machine to put a gloss on it. Minister of State Hayes’s op-ed in today’s IT is a perfect example.

  246. Paul Hunt Says:

    Apologies had to split comment…

    The almost impossible task for any of those seeking to advance some sensible public policies, particularly in the economic sphere, is to seek to craft and couch these proposals in a manner that will dove-tail with some aspect of this naked and blatant political self-interest.

    That is why any advocacy here or elsewhere of meaningful structural reforms is totally futile. Only ‘events’ will force the Government’s hand. Because all the key policy decisions are made behind closed doors and away from public scrutiny the ‘public intellectuals’ who might be able to exercise some influence, apart from some notable exceptions, are forced to keep a low public profile and murmer suggestions and muffled critique ’sotto voce’ in the ears of those who formulate policy and decide.

    The few who do take a more public stand are forced to be extremely careful and selective and often are compelled to conceal their messages in ‘code’. Much of this goes over the heads of the public, but those ‘in the know’ get the message and. occasionally, these messages filter in to the policy ’sausage-making’ machine of government.

  247. Paul Hunt Says:

    and again…(when will I ever learn!)

    It is gloriously inefficient and, more often than not, totally inneffective - as well as being profoundly anti-democratic. But it suits government perfectly and those whose messages might secure some limited traction are able to bask in the reflected glow from the exercise of power - and a grateful government always has numerous sinecures in its gift.

    This goes on everywhere, but in Ireland, with the practice of extreme executive dominance, the centralistion of power and resources and the absence of alternative locations of power, it has been perfected as an art form.

    There is absolutely nothing anyone outside these charmed circles of power and infuence can do to change this. Bringing it to the attention of the wider public may be of some use, but one is forced, utlimately, to rely on the impact of ‘events’.

    The shifts and struggles that are taking place in the EU will continue. It is for Ireland to decide whether or not to try to understand and adapt to these developments. If it is the former, it needs to build its resilience and flexibility. If the latter, the path will be much harder.

  248. Bond. Eoin Bond... Says:

    @ Paul Hunt

    At 245 or so comments, I think it’s fair to say no one rouses a rabble quite like me…

  249. David O'Donnell Says:

    Bruce Arnold’s Aesthetic Turn in Political Economy - View as CounterPoint to Brian Hayes’ Non_Intellectualism

    We are about to strip ourselves of all remaining control over our sovereignty and our money. We should think again

    The rule of EU law is not operating properly. Most notably, it cannot lawfully give us the ESM now and we cannot change the Constitution on a promise. We have already made the sovereign change, in 1972. It binds us still now. The ESM stands outside the EU framework. It has not been universally ratified as it should have been. Not only is it something that we have yet to approve, it is also open to question whether the approvals in other countries conform to constitutional acceptability under EU law. The casualness is astonishing.

    One example will suffice. Whatever happened to ESM Treaty Number One? The previous ESM Treaty was signed in July 2011 by Michael Noonan and by other eurozone finance ministers. It was never sent round for ratification. That ESM Treaty said bondholders should be “burned” before eurozone states could draw on the proposed stability mechanism. Treaty number two has abandoned that provision. This was signed by eurozone ambassadors on February 2. Are we due yet another version?

    I view Enda Kenny and the Government he leads as dedicated, honest and sincere. Yet they are woefully bound by duty and loyalty to our rulers in the EU and to other governments bent on our subjection, if not our incidental further destruction. They are moving on this issue in the wrong direction and our ruin is the likely outcome.

    http://www.independent.ie/opinion/analysis/we-are-about-to-strip-ourselves-of-all-remaining-control-over-our-sovereignty-and-our-money-we-should-think-again-3081487.html

  250. Gavin Kostick Says:

    @ Bryan G, etc

    Very good post at 4.33am.

    I operate by the principle - which I got from Mannix Flynn - that no opposition is tacit acceptance. The persistent objection as foundation for change is in the Irish Declaration of Independence: “In every generation the Irish people have asserted their right to national freedom and sovereignty.”

    That is why I also objected to, “I think it is a balanced take on Ireland’s crisis and crisis-resolution efforts, and in particular the support that has been received from the eurosystem”.

    But my reasoning isn’t as complex as yours. It does make me think that perhaps the thinking from the Irish side is still too influenced by Aquinas - point scoring on small details, the illusion of thought, basic uncritical acceptance on a large scale. Hayes’s cited article in the IT today, cited above, contains all of this.

    But where else shall we look? The Gitane chomping Mr quigley would have us read Bourdieu and I’ve found that very useful and look forward to reading more. David O’Donnell suggests Habermas - any offers on essays to read David?

    In terms of improving thought processes - the ‘framework’ approach - any more suggestions, from any perspective, on on who is worth reading?

  251. David O'Donnell Says:

    @Gavin Kostick

    The definitive text - deliberative democracy, law, political science, and the relations between Systems of Money, Power and Citizen Lifeworlds is:

    Jurgen Habermas, Between Facts and Norms, Polity, 1996 … but heavy going.

    The Swiftian Introduction:

    Jürgen Habermas is angry. He’s really angry. He is nothing short of furious — because he takes it all personally. He bangs on the table and yells: “Enough already!” He simply has no desire to see Europe consigned to the dustbin of world history.

    http://www.presseurop.eu/en/content/article/1242541-juergen-habermas-last-european

  252. David O'Donnell Says:

    A quiet coup d’état

    “Zur Verfassung Europas” (”On Europe’s Constitution”) is the name of his new book, which is basically a long essay in which he describes how the essence of our democracy has changed under the pressure of the crisis and the frenzy of the markets. Habermas says that power has slipped from the hands of the people and shifted to bodies of questionable democratic legitimacy, such as the European Council. Basically, he suggests, the technocrats have long since staged a quiet coup d’état.

    Habermas refers to the system that Merkel and Sarkozy have established during the crisis as a “post-democracy.” The European Parliament barely has any influence. The European Commission has “an odd, suspended position,” without really being responsible for what it does. Most importantly, however, he points to the European Council, which was given a central role in the Lisbon Treaty — one that Habermas views as an “anomaly.” He sees the Council as a “governmental body that engages in politics without being authorized to do so.”

    VOTE NO TO THIS BLEED1N COUP D’ETAT

  253. Gavin Kostick Says:

    @ Paul Hunt

    “We are still going around in circles here, but I did detect one chink of light in Gavin Kostick’s response to Bryan G’s “‘There is a deep anti-intellectualism at the heart of the Irish government …”

    Sadly not me guv, that was David O’Donnell.

    @ David O’Donnell

    Thanks for that.

  254. David O'Donnell Says:

    Debate
    Jürgen Habermas: democracy is at stake

    The Eurozone crisis has raised calls for greater political integration of the EU. However, Jürgen Habermas argues that the tactics adopted by European leaders have sidelined what should be their main priority: the well-being of citizens, established within a democratic framework. Excerpts.

    http://www.presseurop.eu/en/content/article/1106741-juergen-habermas-democracy-stake

    … the well-being of citizens …

  255. David O'Donnell Says:

    @Jörg Asmussen

    Have you read Habermas?

  256. Paul Hunt Says:

    @Mr. Bond,

    Indeed. And I know I allow myself to be roused more easily than most.

    This topic certainly brought out all the angst. The navel-gazing and empty posturing is remarkable, but, perhaps, understandable. There is negligible recognition of how all this perceived by senior governing politicians and officials in the EU. Having agonised for a long time about the challenge of bringing in the 10 former Warsaw bloc economies (plus the two Med island states) it is ironic that the real problems manifested themselves among existing founder members with governnance issues (Italy and Belgium), a long-standing member lifted from a low stage of development (Ireland) and three almost as long-standing members that had emerged from dictatorship (Greece, Portugal and Spain).

    The EU’s Grand Panjandrums were confronted at one extreme with a deeply flawed state, but with a generally cohesive, sensible and resilient populace (Ireland) and, moving along the spectrum with the others located at various points, at the other, Greece, a polity that had the potential to be a ‘failed state’. It should not be surprising that they have focused their efforts at that extreme and have tried to work their way back along the spectrum.

    It is unfortunate that ireland manifested problems that the EU’s Grand Panjandrums do not have the stomach to address - in particular while they are trying to address issues of governance in states that are far more fragile. And, indeed, the steps they are taking to address these problems seem to tie their hands even more when it comes to addressing Ireland’s particular problems.

    All the more reason that Ireland should make the effort to shift for itself rather than rely excessively on external relief. The EU’s Grand Panjandrums implicit assessment of Ireland’s resilience is not incorrect. But there seems to be far too many people intent on proving them wrong - and who prefer to wail at them.

  257. John McHale Says:

    @Bryan G

    As I don’t know who you are, I can only piece together your world view from what you write. Maybe I’m wrong, but it would seem that your world view is one that has little difficultly in identifying power relationships. I then find your idealistic focus on “intellectual frameworks” puzzling.

    The stronger members of the euro zone – most notably Germany – have a clear view of their interests. The want the euro to be a hard currency; they want to minimise the net transfers they make to weaker countries; and, uniting the first two interests, they want to avoid the monetary financing of governments using the shared currency. On the other hand, although I would bet that they wish they could turn the clock back and never embarked on the euro project, they now want to make it work (but not at any cost). A realist perspective then looks for arguments based on common interest in order to make improvements that are in Ireland’s interests, with a clear-eyed view of the power imbalances that exist – especially those between creditors and debtors. We have better chance of making progress with a dose of realism.

  258. Eureka Says:

    @ DOD
    I think we have got to conceptualise this as a long war. Voting no would be akin to a poorly planned and easily defeated uprising. It would be easily put down and would leave us worse off.

    History shows that we are really too small to overthrow empires on our own. The guys of 1916 calculated that catching Britain when it was caught up in a European mess was the best way to go. Ultimately independence came because of the damage done to Britain by the First World War.

    We should wait for the ECB to become damaged by Spain and Italy before making our dash for it. The wisest thing, I think, is to hold steady. A yes vote does very little that could not be undone further down the line. A no vote is emotionally and in fact correct but in longer term strategic thinking is probably not wise

  259. Shay Begorrah Says:

    @John McHale

    A realist perspective then looks for arguments based on common interest in order to make improvements that are in Ireland’s interests, with a clear-eyed view of the power imbalances that exist – especially those between creditors and debtors. We have better chance of making progress with a dose of realism.

    Surely the problem is that our interests and those of Germany’s current establishment are directly opposed?

    On the strength of the Euro, on austerity vs growth promotion, on autocratic tendencies versus democratising ones in the EU every advantage to Germany as she now stands is a loss to us. Germany has no reason to negotiate - this is more in the manner of a war than a diplomatic negotiation over achieving mutual goals.

    I mean there should be no need to even say this - we have had no success whatsoever in negotiations and after having suffered repeated rebuffs Jorg Asmussen effectively came to Dublin to tell Ireland’s establishment not only that our economic priorities were secondary to Germany’s/the ECBS but that the crisis of the Eurozone was just a series of failing in national character and governance in countries not bordering Germany. It was condescending nonsense as well as an attempt at interference in Irish politics.

    It is therefore not realism but extreme naivety to suggest that this will be resolved on the basis on common interests unless we attempt to allign Germany’s interests more with ours/the wider EUs. We can make a start on this by “denationalising” and “defiscalizing” the narrative and effects of the European component of the global financial crisis. The continuation of the bondholder bailout, the emphasis on national fiscal solutions to European structural problems and signing the Fiscal Compact do the reverse.

    As mentioned above by both myself and Gavin Kostick even Sarkozy has now cracked due to the tension between German interests and European ones and there may be an opening for a counter attack on Germany’’s remarkably successful attempt to take control of EU economic and monetary policy using the levers of the ECB.

  260. John McHale Says:

    @Shay Begorrah

    “We can make a start on this by “denationalising” and “defiscalizing” the narrative and effects of the European component of the global financial crisis. The continuation of the bondholder bailout, the emphasis on national fiscal solutions to European structural problems and signing the Fiscal Compact do the reverse.”

    Can you outline how you see things evolving from there?

  261. David O'Donnell Says:

    @Eureka

    The final thing a fish discovers is water!

  262. David O'Donnell Says:

    h/t Steve

    http://www.spreadbetting.com/news/2012/04/14/ecb-caught-changing-embarrassing-transcript/

  263. David O'Donnell Says:

    Correct Transcript:

    “The decisions concerning the repayment of bondholders in the former Anglo Irish Bank have been a source of controversy, decisions taken by the Irish authorities such as these are not lightly taken and the consequences of subsequent actions are weighted carefully, it is true that the ECB viewed it as the least damaging cost to fully honour the outstanding senior debt of Anglo however unpopular that may now seem, the assessment was made at a time of extraordinary stress in financial markets and great uncertainty, and protecting the hard won gains and credibility from the early successes in 2011 was also a key consideration and the main reasoning was to ensure that no negative spillover effects would be created to other Irish banks or to banks in other European Countries.”

    ECB Transcript:

    “I know that the decisions concerning the repayment of bondholders in the former Anglo Irish Bank have been a source of controversy. Decisions taken by the Irish authorities such as these are not taken lightly. And the consequences of subsequent actions are weighed carefully. It is true that the ECB viewed it as the least damaging course to fully honour the outstanding senior debts of Anglo. However unpopular that may now seem, this assessment was made at a time of extraordinary stresses in financial markets and great uncertainty. Protecting the hard-won gains and credibility from the early successes in 2011 was also a key consideration, to ensure no negative effects spilled-over to other Irish banks.”

    No comment.

  264. Shay Begorrah Says:

    @John McHale

    Can you outline how you see things evolving from there?

    I presume you mean what happens after Enda says words at the next EU summit to the effect that “Ireland’s commitment to the Eurozone is second only to its commitment to the health and well being of its citizens.” and starts asking similar questions to Sarkozy/Hollande/the rest of the world about whether the ECB is of equal benefit to the whole EU?

    Once the argument becomes public and we enter the realm of democratically driven international politics there are two routes:

    (a) Germany adds up the losses from a Eurozone disintegration and agrees to the monetization of debts related to the crisis. Choose your poison here it can be nouvelle-ECB monetary financing of states with an equal amount being divied up among creditor countries (the babysitting tokens), Eurobonds/Eurosafe bonds, whatever - it can be “fair” in some sense if you think that mercantilism in a currency union was fair to start with. There would be the feared inflation and some sinful lack of price stability but the Eurozone economy would function again, the creditor countries would still be comparatively more financially secure than the sinning periphery. We would even achieve Germany’s professed end state of no market funded deficit financing - if not quite in the way they had longed for….

    (b) Germany refuses to compromise in the face of international opposition and the Eurozone slowly fragments or completely disintegrates as the political arrangement becomes impossible for the peripherals to stomach. It would be in our interests for Germany to exit in disgust with a multiple-mandate European Central Bank replacing the current one but a total collapse will do fine too. Our least best option is the one the ancienne-ECB is focussed one - perpetual austerity with the constant worry of a forced exit from the EZ with huge Euro denominated debts.

    For path (a) we would ideally have had a lot more contagion (or “realism” if you will) in the Eurozone financial sector, preferably starting three years ago but that is 45 billion under the bridge now. It remains the case everything that protects the core Eurozone’s financial sector from the peripheral economies tanking is a big no for us.

    It is not as hopeless as it sounds, the failure of the Fiscal Compact (which we can help along if not guarantee) would either undermine hawkery in Gemany politics or make exiting the EZ a matter of national pride. Here German realism works in our favour, the effect on an extremely strong national currency would not be a net gain.

    You mentioned before that Germany eventually has a choice between the existence of the Euro and the strength of the Euro - the peripherals need to help make the political atmosphere so fraught that the decision has to be taken soon before the current Germany can make itself safe from the consequences of a messy EZ breakup.

  265. Aisling Says:

    @all ECB speech amended to reflect John Kennedy’s point and the inclusion of “European” after Irish banks in the version on their website. Guess you guys pointing out the mistake was taken on board.

    http://www.ecb.europa.eu/press/key/date/2012/html/sp120412.en.html

  266. Livonian Says:

    @Shay@John Mc

    “……after Enda says words at the next EU summit to the effect that “Ireland’s commitment to the Eurozone is second only to its commitment to the health and well being of its citizens.” and starts asking similar questions to Sarkozy/Hollande/the rest of the world about whether the ECB is of equal benefit to the whole EU?”

    Wow almost 265 ( or more ) comments on this thread after a relatively slow start! I wonder if this is a reflection of nevcousness in ECB/EZ that “noise” from there cannot conceal the real political and economic facts which are unfolding across Europe and those “facts” are what will really determine the outcome of the referendum.

    IMHO by May 31st (date of referendum) voters will really only need to be asking themselves two questions:

    1) Can Ireland afford to remain in the Euro Zone
    and
    2)Can the Euro currency really survive outside of Germany and Luxembourg?

    Without satisfactory answers to those questions I wonder if we may well be looking at a referendum scenario where TINA changes her surname from Yes to NO.:)

  267. Paul Hunt Says:

    Wow. So they’ve admitted it and changed the transcript. We’re home free. Obviously heads will have to roll at the ECB. There can be no question now of repaying all that ELA. When will Minister Noonan announce that the GGD has been reduced by X billion? - with X being a very big number.

  268. DavidG Says:

    http://www.spreadbetting.com/news/2012/04/14/ecb-caught-changing-embarrassing-transcript/

    Thats a definite NO to the FC from me. We are being taken for fools and our government are doing nothing to stop it.

  269. Aisling Says:

    @ Paul Hunt :-)

  270. Livonian Says:

    “Aisling@Paul

    +1

    @DavidGl

    re your link to spread betting etc…..

    IMHO it looks increasingly like:

    “THE REFERENDUM WILL BE TWEETED”.

    Best….@LivonianGoose :)

  271. paul quigley Says:

    As they say down in the Royal County, it’s not over til it’s over.

    http://www.bloomberg.com/news/2012-04-15/merkel-seen-turning-to-euro-bond-backing-spd-to-secure-2013-win.html

  272. Robert Browne Says:

    @ Eureaks

    “…but in longer term strategic thinking is probably not wise”. No fear of that in Ireland.

    However, you are really saying is, the right thing to do is vote “no” but the strategic best course of action is to wait and let Spain and Italy force the agenda.

    While I disagree with this approach and will be voting “No” I would remind you that your approach is strategic.

    Btw found several links to show that Merkozy were behind the blackmail of Greece but no link that could be used in a court of law as absolute proof. I might have read the original article on Yanis Varoufakis site.

  273. Robert Browne Says:

    @ Eureka

    Sorry!

  274. hoganmahew Says:

    Yes, bokonon on the ‘pin sent an email and got a response - http://www.thepropertypin.com/viewtopic.php?p=588099#p588099

    @Paul Hunt
    In five years time, there will be only the documents on the ECB website. They will be the official history. It is important that they are accurate. As others have said, it is the first official admission from the ECB that the bond repayments were to protect other european banks as well as Irish ones (not much mention of sovereign reputation…).

  275. David O'Donnell Says:

    @all

    Intergalactic text from Seven_of_9:

    Do we have First Contact?

  276. Bryan G Says:

    @John McHale

    It isn’t a question of idealism vs realism, but of having a framework that generates coherent and consistent positions, and that can adapt to changing circumstances. It is a “contest of ideas” that requires engagement at many levels simultaneously. This requires attacking the flawed underpinnings of arguments, as well as seeking points of common interest.

    There are many divisions and faultlines within the ECB and EU institutions in general. Ireland should be doing a much more effective job of creating and maintaining alliances than it is currently doing to promote its interests in these areas. Micheal Martin constantly, and correctly, points to the lack of engagement by Enda Kenny in EU matters, and his overall passivity - he has hardly had any meetings with other leaders outside the formal EU Council meetings. Instead what we get are some random speeches that are totally different depending on the audience (”You are not responsible for the crisis in a state of the nation speech, and then in Davos a few weeks later it was all down to mad borrowing by a bunch of Paddies). Hayes is a total lightweight, and Noonan has been reduced to deliberate misrepresentations of various issues (e.g. no cash payment on PNs). I certainly would not want to be allied or associated in any way with such leadership - you would never know what to expect and you would rapidly be trying to reconcile contradictory positions.

    On the other hand if politicians and “official” Ireland in general were constantly making the case for certain future developments linked to an analysis of the past (e.g. along the lines of Chopra’s Kenmare speech) it is my view that the scope of alliances and common interests would significantly broaden and would help shift debate away from the extremely self-serving zero-sum game analyses that have dominated to date.

    There is a very unhealthy uneasiness and awkwardness in engaging in these “contests of ideas” at official level, as if it would upset or offend our EU “partners” in some way. Instead what we get (e.g. from Bruton, Sutherland etc.) are condescending, fawning and deferential speeches that are just an embarrassment. There is no such reluctance to engage in many other countries. It is not that there is some sort of magic wand that can be waved to dramatically improve things in the short-term, but there is a compelling need to broaden the areas and arenas where the country is effectively contesting the issues and promoting its interests.

  277. Livonian Says:

    @hogan@Paul Hunt

    “….official admission from the ECB that the bond repayments were to protect other european banks as well as Irish ones (not much mention of sovereign reputation…).”

    It is not surprising the stitch up (sorry “bailout”) part of the Troika are reluctant to hold a press conference after this months quarterly”visit”.

    If I remember correctly Ireland`s “reputation” made an appearance in at least one of the answers at the January press conference. :)

  278. Aisling Says:

    @hogan The “admission” relates only to the post programme payments to IBRC senior unsecured. It’s wiggle room in terms of a repayment schedule. Nothing more. It’s worth a billion odd, which is peanuts in the grand scheme of things/ our debt.

    It’s also as many suspected at the time, there were no particular stresses in the Irish markets at the times of those payments, there were acute stresses in the Eurozone markets. The inclusion or absence of wording relating to European banks in the second part of the sentence does not change this. The admission is the inclusion in the first leg of “extraordinary stresses in financial markets and great uncertainty” which one can easily infer is European rather than Irish.

    Seems to me Asmussen tried to trust us with the truth, and as I pondered at raising the issue earlier on this thread, we really shouldn’t have been entrusted with that truth. We’d seek to blow it out of all proportion.

  279. John McHale Says:

    @Bryan and Shay

    Thanks for the interesting and measured responses. It looks like we will have to agree to differ. I see Ireland as being in a very vulnerable position, and will remain so as long as we have a large primary deficit, a large debt that needs to rolled over and are in a position where we cannot fund ourselves. Grand gestures to shake up the European debate and narrative of the crisis, say by rejection of the compact, seem to me to involve risks we cannot afford to run — with the costs of miscalculation falling widely across the population.

    Thanks to all for a long but helpful thread.

  280. Shay Begorrah Says:

    @John McHale

    Thanks for the interesting and measured responses. It looks like we will have to agree to differ.

    It is a shame that my powers of persuasion do not match my love of invective, eh?

    Good luck in our great game Professor McHale.

  281. Eureka Says:

    @ John
    In summary - we’re fubbard and we don’t have options. I agree. That’s the real politik of this.
    The ultimate non-logic is this:
    Why do you need to placate the bond markets by paying off their debt if you reduce the deficit to zero anyway.
    That just does not make any sense.
    If you are on a path to zero deficit you can default.
    The purest and simplest solution to this is to pursue zero deficit but to default too.
    I just don’t get it…

  282. David O'Donnell Says:

    Breaking Newz

    Mirabile dictu: Patricia the Irish_Sovereign_in_Exile has postponed any decision on abdicating, in favour of her daughter, until early June.

    Blind Biddy is thrilled, and has her imprimatur to invite Jörg Asmussen to take up an advisory position on her council of state. Biddy to follow up with Jörg over afternoon tea next time he is in Dublin which Jurgen, holder of the Ulysses award from Dublin, also hopes to attend. Jurgen, of course, is a trusted advisor of long standing.

  283. David O'Donnell Says:

    @Aisling

    ‘truth’, however contested, is a rare commodity these days - credit all round where credit is due!

  284. David O'Donnell Says:

    C’mon Guys and Gals

    Let’s break the 300 - and I’m not referring to Sparta (well, maybe not ..

    Key Question:

    How does one alter the remit of the ECB? Democratically.

  285. David O'Donnell Says:

    Fintan joins the Debate:

    I WAS listening last week to RTÉ’s economics correspondent, Seán Whelan, analysing his own very interesting interview with one of our rulers, Joerg Asmussen, the German member of the executive board of the European Central Bank.

    Whelan explained that the strategy of the powers-that-be in Ireland is not to tell the ECB that bank debts are crippling the economy. It is, rather, to suggest, in relation to easing the burden of the promissory notes, that “things are grand but if we had this as well they would be even grander”.

    After I’d stopped weeping at this perfect expression of an old, wheedling peasant mentality (“Ah sure, I’m right as rain but I’d be on the pig’s back altogether if I had a sup of gruel now and then and a few bits of straw to stick in the hole in the wall to keep out the wind”), I tried to remember where I’d read a brilliant anatomy of this mentality. Appropriately enough, it was in a book that Herr Asmussen, as an educated German, may well have read. It is the Irish Journal of the German novelist Heinrich Böll, published (in the English translation) in 1957.

    Böll, who spent a great deal of his time on Achill Island, saw something germane to Irish culture but visible only to an outsider: the profoundly fatalistic mentality of those who shrug off every misfortune with the consolation that they could be worse. “Things are grand but they would be even grander” if we weren’t shackled to debts contracted by private banks is a truly terrible pitch for debt relief – it makes us sound like we’re lying by the pool in perfect sunshine wishing that the vintage champagne we’re sipping were just a degree colder. But it makes complete sense as a variation on an old Irish theme: ah, sure, things could be worse.

    “When something happens to you in Germany,” Böll noted, “when you miss a train, break a leg, go bankrupt, we say: It couldn’t have been any worse; whatever happens is always the worst. With the Irish it is almost the opposite: if you break a leg, miss a train, go bankrupt, they say: It could be worse; instead of a leg you might have broken your neck . . .”

    http://www.irishtimes.com/newspaper/opinion/2012/0417/1224314822905.html

  286. Chris Says:

    Mr. (Not Doctor) Asmussen’s appiontment to the executive board of the ECB has made a mockery of the independence of the ECB.
    First of all there is a ‘gentlemans’ agreement’ that 4 of the 6 executive members of the ECB are from Italy, Germany, France and Spain. This immediatly made the ECB a political orgainisation and that is why this system is not included in any offical agreement.
    So stictly is this ‘gentlemans agreement’ adhered to that Berlisconi joked that France were prepared to go to war over it.
    Now Germany have floated in someone from their finance ministry with an MBA. That is really bad and disrespectful behaviour. They are much more impartial and qualified people out there who should be sitting on the exec board of the ECB.
    This ‘gentlemans agreement’ should be scrapped and appiontments should be made on merit as envisioned in the origional charter of the ECB.

  287. David O'Donnell Says:

    @Chris

    I pasted a link to Jörg Asmussen’s Bio up above. It is impressive.

    Get real on your idiotic credentialism - some of the most dangerous people in the world are neo-kon economics professors with credentials to the nth degree.

    The Governor’s Bio, our local lad, is also impressive.

    Not so impressive is the actual narrow remit of the ECB in the midst of a shocking financial system crisis.

  288. DOCM Says:

    @ All

    A link to the article by MOS Bryan Hayes in the IT for the sake of completeness.

    http://www.irishtimes.com/newspaper/opinion/2012/0416/1224314762073.html

    Notably;

    “And central to the debate about debt is the question of inter-generational equity. Borrowing for current spending is in effect this generation taking from the future to maintain today’s lifestyle.

    It is the workers of tomorrow who will have to pay back this debt and the interest payments on it. Equity demands that we not shackle our children with an unjust burden of debt. We have an obligation to live within our means.

    Those who advocate even higher levels of spending must answer some very simple questions. Who will lend us the money and how will we pay it back? And if we cannot borrow the money what new taxes and what extra cuts will they impose?”

    As to Fintan O’Toole, one could only say that, while he has his finger on the cultural pulse of the nation, his grasp of economics seems decidely shaky.

  289. Chris Says:

    @ Daivd
    My point was about the politicisation of the ECB, not many can argue with that.
    The side-point that there are many more qualified people than Mr. Asmussen stands, having seen his bio beforehand. Perhaps I should have left the side point out.

  290. Chris Says:

    @David
    For changing the remit of the ECB it would seem that all 27 countries would have to agree to any changes unanimously.
    Also using words like idiotic is unnessicary.

  291. John Corcoran Says:

    @John McHale

    Hi John
    Would you consider putting the An Taisce report published yesterday on a separate thread. The report “State of the Nation A View of Ireland’s Planning System 2001-2011″ is I believe the first of it’s kind and might help with our understanding of how our politics work and how we managed to create the greatest property bubble and crash in the history of mankind.

  292. grumpy Says:

    @Chris

    What exactly is the shortcoming in Asmussen’s qualifications for his post at the ECB?

  293. David O'Donnell Says:

    @DOCM

    I referred to Minister of State Hayes’ heavyweight intellectual tome above:

    http://www.irisheconomy.ie/index.php/2012/04/12/jorg-asmussen%e2%80%99s-talk-to-the-iiea/#comment-268073

    As to Hayes’ grasp of economics?_well, I couldn’t find any hint, not as much as an angstrom, on anything in his piece related to the substance of the Fiscal Corset.

    Wonder has he read The Owl and the Pussycat?

  294. Livonian Says:

    @John McHale

    “…..rejection of the compact, seem to me to involve risks we cannot afford to run.”

    I am sorry John I know this is your thread and I welcome the opportunity to read, be informed by, and participate in this discussion but IMHO that statement is unacceptable.

    I agree the Irish people have a right to ask themselves can they “afford” to pass/reject this treaty which is their right alone.

    Consequently they have the right to ask themselves the two following questions:

    1)Can Ireland “AFFORD TO STAY” in the Euro now that we can see some very serious impending “car crashes” in several EU countries?

    2)Can the Euro survive with the ECB (now that we have witnessed further examples of their attitude) at the helm?

    The way I currently see it, if considering “affordable risks” alone the referendum result would probably be NO.

    IMHO just because “scaremongering” worked in the second Lisbon referendum does not mean it will work this time. The electorate are a lot more informed and angrier than previously which is why I cautioned against “scaremongering” by all sides after the Government announced the (correct) decision to hold a referendum.

    It is also my very strongly held opinion that we need to start introducing some respect for the electorate in this debate by recognising that the break up of the EU (which Ireland would have a much better chance of surviving than most other countries) is now more likely than it has ever been before. A breakup of the EU could have “disatrous consequences” throughout most of the continent.

    The European Project including itś survival is about a whole lot more than a dysfunctional (but hopefully “fixable”) currency and the attitudes/opinions of a few unelected technocrats who we occasionally hear from in Brussels, Frankfurt etc.

    Without appropriate information/debate(instead of attempts at trying to tap into peopleś fear of the unknown) a NO vote will be, IMHO, the obvious cautious and understandable result.

    Thank you for the opportunity to comment and ,as always, you may rest assured that I retain every respect for your personal and professional integrity.

    Best….@LivonianGoose

  295. Livonian Says:

    @David O`Donnell

    “How does one alter the remit of the ECB? Democratically.”

    Interesting question.:)

  296. Bryan G Says:

    Since the ECB has been acting outside its remit, it is not necessary that there be a formal change in the ECB’s remit as a precondition for any behaviour changes by the ECB.

    Fiscal policy decisions are outside the scope of the ECB’s authority. How taxpayers’ money is spent is fiscal policy, so by requiring those funds to be spent in a certain way (e.g. to recapitalize insolvent banks) the ECB is acting outside the scope of its authority.

    As far as I’m aware, the ECB has no “emergency authority” like the Fed. It should be noted however, that the Fed used its “emergency authority” to support failing financial institutions (e.g. Bear Stearns) using newly printed money instead of taxpayer money, as the emergency authority does not extend to determining how taxpayer money is spent. The Fed basically used its emergency authority powers to extend loans to financial institutions that were not traditional deposit-taking banks.

    So the first initiative should not be to change the current EU treaties, but to apply them.

  297. Livonian Says:

    @BryanG

    “…. the ECB is acting outside the scope of its authority.”

    If the Irish do not do what they are told : “we will huff, and we will puff, and we will……” :)

  298. Bryan G Says:

    @Livonian

    Sadly there was no Pig No.3 in the Irish version…

  299. Mickey Hickey Says:

    @Geronimo

    Reality is for people who cannot face up to excessive alcohol consumption.

    You are asking for the impossible.

  300. David O'Donnell Says:

    Ann Cahill in De Paper:

    “Nobody ever had doubts that there could be a contagion effect — no one can measure and describe it exactly — but we all know it exists especially after Lehman [Brothers, the US bank which collapsed and set in motion the chain of events leading to the credit crisis],” the spokesperson said, adding that Mr Asmussen had spelt it out clearly.

    “The EU has provided help to Ireland in return,” he said. This point was made by Mr Asmussen several times during his speech when he stressed the amount of day-to-day funding the ECB was giving the banking sector.

    While the IMF was willing to allow Ireland burn bondholders, the ECB and European Commission were adamant that all investors must be repaid in full, including hedge funds that picked up the bonds at a fraction of their face value. They have argued that not to do so would undermine the country’s credibility among investors and make returning to the markets to borrow for state spending more difficult.

    Read more: http://www.irishexaminer.com/ireland/ecb-insisted-taxpayers-repaid-anglo-debts-190863.html#ixzz1sNwCsAr0

  301. Chris Says:

    @Grumpy the point is not to have a go at Asmussen personally even though his profile would seem less qualified than the Swedish guy appionted to the Irish central bank recently or Dr. Honahan himself.

    It is to point out that he is a political appiontee, firstly there because he is German, secondly because he came from the ministry of finance and thirdly, beacuase he is seen ‘mallable’ by the Germans .

    Lets leave it to Derspeigel to sum up his new role.

    “But in his new position, Asmussen can also do what he does best: navigate the international stage, negotiate and network. In doing so — such, at least, is the hope — he will also be able to keep an eye out for the interests of German taxpayers.”

    http://www.spiegel.de/international/business/0,1518,807069,00.html

  302. Livonian Says:

    Chris@Grumpy

    “do what he does best: navigate the international stage, negotiate and network.”

    I agree it is not appropriate to have a go personally at anyone and IMHO Mr Asmussen may be also inclined to agree that recent events have provided him with a valuable “learning curve” in what he apparently “does best”.:)

    Best…L

    PS
    @John McHale

    Congratulations despite a “slow start” this thread seems to have attracted a lot of attention and discussion. I wonder if over 300 comments is some kind of record on this excellent site.

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