The Irish Economy
The referendum2012.ie site is now live.
I believe that its one-sided focus on ESM and potential future funding is open to legal challenge. The principle of impartiality has been breached imho …
@DOD You think that the Referendum Commission admitting that they can’t see into the future is open to legal challenge? Personally I’d be more worried if we had Mystic Meg as the Referendum Commission!
One thing for the Commission. The treaty isnt called the “Fiscal Stability Treaty”. Its called the “Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union”. The word fiscal is not mentioned in the Treaty apart from referring to a fiscal compact and Contracting Party action against exceptional circumstances not endangering fiscal sustainability in the medium-term.
One with a cynical mindset could believe that the impartial Commission is putting a fair amount of weight on the supposed “fiscal stability” emanating from the Treaty. Some people may believe that the introduction of this Treaty into Contracting Party legislation through binding measures will result in the exact opposite of fiscal stability.
The Commission need to change their website.
Strikes me as one-sided – surprised me. I expect to hear more on this one ..
I think Mystic Meg is in line to become Minister of State for Europe after the re-shuffle due to the perplexing stances in June. She is also considered to be a possible candidate for Minister of State in Finance. Not great options are they? Other minister of state have said nottin so they are probably safe enough …
Is Mystic Meg still going? I thought she was dead.
Back on thread…. this all seems very late in the day and there’s little real attempt to educate the electorate. Do they think that a couple of million people are going to hit this website without any real prompting. They are going to need to ‘push’ a bit more than they are…. but I guess they see no advantage in doing that. Better to just leave the masses wondering where they left the TV remote instead of going out and voting lest they vote the wrong way again.
@DO’D There is guaranteed cheap funding, should we require it, if we vote yes. There is no guaranteed cheap funding if we vote no. What is contentious about that?
That’s not to say that funding might still be available if we vote no, but neither its availability, nor its pricing, are guaranteed.
If one was being completely impartial you would characterise it as follows:
“There is guaranteed funding at a known rate, if we vote yes, assuming we decide we wish to avail of such funding. There is no guaranteed funding if we vote no and the rate at which any such funding might be acquired is unknown. That rate may be higher or lower, depending on extraneous factors, than the known rate on funding in the event of a yes vote.”
There is, for example, an argument that we would be better off voting no, defaulting on our debt and with a healthier balance sheet may either not need any further funding or investors may decide Ireland now is a sensible sovereign bet and we can achieve a cheaper international financing rate. Whether you think this argument is absurd or not, is irrelevant, if you are being totally impartial you cannot discount that proposition and as such the above wording would be more appropriate.
@V Barrett I have no problem with that.
As you suspect I think the proposition that we could unilaterally default on our debts given the proportion owed to official creditors, and then be met by the bond markets with open arms at rates lower than the ESM rates is absurd. But it is vaguely possible if a volcano were to wipe out Germany tomorrow or some such so leaving the door open on it with appropriate caveats would be fine. Once it is made clear, as it currently is, that only a yes vote guarantees access to cheap funding at known prices if we need it.
I have a problem with that. Why?
Because Mr Noonan told us recently that talk of a second bailout was ‘ludicrous’ so exactly why is access to an ESM bailout fund now oh so important.
@YOB I think that the possibility that I may crash my car later is ludicrous – doesn’t mean I’m going to get behind the wheel uninsured.
The chances of Ireland needing another bailout relate not only to things in Ireland, but also things relating to the broader global economy outside of our control. As things stand it looks as though we might avoid needing another bailout. But absent being able to predict the future we don’t know what the position will be in the future. So the insurance policy is useful.
“Markets welcoming back with open arms”….the market has no conscience, no memory, no sentiment….i think it is naive to assume the market would look so much more positively on a country with a debt/GDP ratio of 120% with the possibility of default constantly hanging around its neck over a country with a debt/GDP ratio of 60% that completely stabilised its finances and was engaged in fiscal expansionary policies…
I know which one i’d rather open my arms to when it was issuing sovereign debt.
…and when i say the market has no sentiment – i mean lasting sentiment….it has of course sentiment but it changes by the hour…
@V Barrett In order to get our debt to GDP to 60% we would need to either repudiate fully our debt held by unofficial creditors (and then recap our banks with more official borrowings so we can’t make the 60% test anyway) or leave the EU so that we could default on our official creditors. Lets assume we’re trying the former route since the latter route really would be insane. Suggesting that either would lead to our bond yields falling through the floor to being on a par with bunds is fantasy land.
The market has no sentiment, but the market does price in risk and if a country unilaterally repudiated all of their debt held by bond market participants, I would suspect said participants might view lending money to that country as a bit of a risky venture. In which case they would charge more, not less, to cover that risk.
@V Barrett Oh and lets not forget the Argentina element. While your previous creditors are suing you all over the world in respect of the debt you attempted to repudiate, it is very difficult to raise new debt.
Seamus Coffey to John Bruton and the missing link in the Referendum Commission on future funding …
The Principle of Impartiality is essential to Legitimacy of such a Commission.
And it would have helped had Gov Exec taken account of the previous report of RefCommission on the lacunae in the previous Oireachtas Committee NO vote and the importance of providing sufficient time …. when a ‘precious’ poltroon of 8 AGs, most of whom would have had to appear before such an Oireachtas Committee, can frighten an electorate at the 11th hour then something is lacking somewhere in our democracy …..
if you do not ratify the treaty, you do not have access to the ESM. This is what the Ref Commission states, and this is correct. There may be other funding made available, per the EU statements in the past, but they will not be via the ESM as it currently stands. I fail to see what exactly the Ref Commission is being one sided on here.
I think of a straight forward $30bn no ones going to be coming after us unless its Patrick Honohan, that would take current ratio from about 115% to 95%.
I’m not talking about blanket default either – once you make it clear what is going to happen, no one is going to throw their prams out of the cot and walk away with nothing…everyone is going to sit down nicely and come up with something called “restructuring”….IMF have beend doing this for years…so have the big guns in Europe – look up the Paris Club. Our government lacks the kohunas to talk tough in public or private. We have options, we are willing to be reasonable….if that is met with continued to resistance however, then we are willing to be unreasonable too….you will soon see a change in demeanour then from the likes of Amudssen and co…the people waiting to be repaid will sit down and talk when they know there is no alternative….if our government won’t doing the scream for us, at least a “no” vote from the Irish people might raise at a least a whimper and put a bit of spine into our own boys.
I don’t want the safety net of MORE DEBT – we will only need more because our current situation is unsustainable…..we need DEBT WRITE DOWN on private creditor bailouts….when we get that, we won’t need ESM. The insurance and car anologies is a bit like the ridiculous household analogies that keeps getting peddled about public finances……if the insurance money is used to simply patch up and put back on the road a car that is falling a part….then that is not insurance worht having. We need a proper revamp of the car, like XHibit does on MTV or the car ads, and then put the thing back on the road….and proper revamp means debt write down (or in the alternative, leaving the euro and defaulting)!
🙂 sorry “prams out of the cot”!…was of course meant to read…
They fail to mention other sources of funding – that programme countries delivering will not be left out in the cold …. there is a subtle, but powerful psychological bias evident here which favours the YES side … and this is what I’m picking up on … part of the ‘plot’ is missing …. what is unsaid is often as powerful as what is said ………. and it has a detectable flavour of agenda setting slanted towards one side of the discourse ….
what do other sources of funding have to do with this Treaty? They say plain and simple what this Treaty will do – allow access to the ESM. Saying anything other than that would be beyond their remit.
@V Barrett This is a lot more complicated than many commentators would like to believe. First off we have to separate out our debt into that owing to official creditors including bonds bought by the ECB as part of the SMP, bonds owned by Irish creditors who we would have to make whole, and other.
We cannot default on the first lot. Just cannot. Any act of the Oireachtas purporting to do so without us leaving the EU would not be valid. This includes the PNs by the way.
In so far as we default on the second lot we have to make them whole again because that would amount to the Government taking the assets of the Irish people.
Which leaves only the third lot to take the pain and that group are probably not significant enough to get our debt to GDP down to 60%, even if we wiped them out entirely depending on the amount of debt bought by the ECB/ owned by Irish institutions. And this from a starting position of us being able to pay, but just not wanting to pay, which guarantees litigation.
The Paris club has never dealt with an EU law default which is the complicating factor here. Look at Greece. Only Private sector investors took the pain, not official creditors. Greek banks were made whole again with additional Greek debt. And the amount of public debt which could be tapped in the next default has shrunk.
All of which has resulted in Greek bond yields falling to bund levels? Not a chance!
to follown on DOD’s point…
Which do you think (and i don’t know) would have a biggest effect on the voter:
1. If the treaty is ratified Ireland will have access to ESM funds
2. If the treaty is not ratified Ireland will not have access to ESM funds
…now i suspect there is something in DoD’s point…don’t forget this thing might only pass by a whisker…so the pyschology of the presentation could be very important even if its effect is marginal – in paritcular if it goes to TV ads. I suspect the latter wording would be more compelling in terms of generating a YES vote.
on what basis would default on the PN require us to leave EU? That’s a pretty isolated and extreme view I would suggest and I’d be interested to hear on what grounds it is founded?
@Bond Eoin Bond
Just heard someone from RefCommission on radio taking this ‘narrow interpretation’ ….
Yet the Strategy of FF/FG/LP appear to be to focus ‘solely’ on the Funding issue as distinct from the ‘Fiscal’ CONTENT of the inter-governmental treaty …. which is, as they are wont to do as politicos, agenda setting … and it permeates a Strong, if False, impression that NO funding will be available if Citizenry votes NO.
The Referendum Commision, perhaps inadvertantly with its narrow remit, are supporting the Latently Strategic Morphing of the Fiscal Compact Referendum by FG/FF/LP into an ESM/Funding Referendum – which it is not.
@ V Barrett
“on what basis would default on the PN require us to leave EU? That’s a pretty isolated and extreme view I would suggest and I’d be interested to hear on what grounds it is founded?”
I don’t think we’d have to leave the EU, but it would be very hard to stay in the Eurozone having effectively defaulted on the ECB. I think the ECB would see it that way anyway.
Its not a default on the ECB…not even technically. IBRC debt was paid for through ELA’s issued only by the Irish Central bank with no claims or liabilities through the ECB – QE by any other name – it was QE at the behest/request of the ECB, true…the ECB did not lend us money to pay Anglo bondholders…..we printed it. Yes they want us to deprint it but that not doing does constitute a default on the ECB. Why do you think they woudl rather see PN notes morphed into real debt issued by the ESM? because they now they have no real claim on it through current arrangement. They don’t like that – they had their opportunity to veto the issuing of ELAs when they were issued….they have no technical or moral grounds for complaining now the horse has bolted….we are only paying off this debt to keep them “happy”….if we make them “unhappy” all they can do is b*tch about it but they can’t say they didn’t get paid back something they were owed.
….I think this has been gone over and over by Karl Whelan et al so don’t want to go down that road necessarily again
“and it permeates a Strong, if False, impression that NO funding will be available if Citizenry votes NO”
I think your part of the No Campaign neede to identify where the funding would actually come from in the event of a No. There is a possbility that we might find 15bn down the back of the couch or that Bill Gates might sub us a few billion. But there is not really a guarantee of any cash for a country in a programme that has ceased to be the “best bou in the class”.
Noonan is right to spell out the consequences of a negative vote. “Vote No and There is No cheque in the post”. In any event, I think it will be a Nil. At that point we can start to change things.
see link above to the Funding thread opened by Seamus Coffey … where possible options are identified …
My part of NO is primarily based on the ‘nonsensical’ economics of TSSG – which will lead to a path dependent slide into continuous depression around here. I’ve made this clear enough since April 1 when I decided on NO having failed to find any economist prepared to back up its scientific validity … it is simply a dictatorial imposition from failed merkozianism since Deauville ….
At a European level an Irish NO may, I repeat may, provide some ammunition to those who demand a change in direction at EU level …. EU PMI of less than 45 and still decreasing should be evidence enough.
At the mo – result remains open but I suspect that the FearMongering spin places the YES side in a very, very strong position – particularly with the meedja on side and the influential gougers out in force.
@V Barrett in order for the ELA not to constitute illegal monetary financing of a bank owned by a Member State it must be repaid. So nothing we can do in our domestic law can change this. It must be repaid. If we don’t honor the PNs then IBRC can’t repay the ELA and we’re on the hook for trying to do something which EU law expressly prohibits.
The only way we can not repay it is to get ourselves out from under EU law such that TFEU Arts123 & 125 no longer apply. The only way we can stop those provisions from applying to us is to leave the EU.
Sure once the ELAs were issued, permitted to be issued and encouraged to be issued, 123 did not apply. Incidentally did article 126 apply? If it did would we need a stability treaty? These things are movable feasts as we all know and as the germans taught us. Wouldn’t it be manna from heaven to be taken to court to defend an alleged breach of those articles for not repaying Anglo debt!…we should be should be so lucky. I’ll help prepare counter claim!
Transcript of a Press Briefing by Gerry Rice, Director, External Relations Department, International Monetary Fund
QUESTIONER: And just a separate follow up. For Greece, in the review, or actually as part of the new EFF agreement, the Fund made it clear that any financing gaps that developed, Europe had given assurances to the IMF that they would cover those financing gaps. But are there similar assurances from Europe on Portugal and Ireland for any potential financing gaps there?
MR. RICE: Well, I think really the question is best addressed to the Europeans, but I think at several points over the last several months the governments of the Euro zone have made clear their commitment to the stability of the Euro zone, including providing resources as needed to program countries, provided the programs are being implemented effectively.’
… including providing resources as needed to program countries, provided the programs are being implemented effectively.
MR. RICE: I won’t get into the specifics of the different programs, but again, just to repeat, and I think if you look at some of the declarations made by the European governments, public declarations over the past several months, they have made clear their commitment on the financing side to program countries. Again, provided the programs are implemented effectively. So you know, I didn’t mean to be flippant by saying ask the Europeans. But it’s just I think it’s a matter of public record.
Time to bury the spin_dummy that NO funding will be available should the Citizenry, in its wisdom, decide to vote NO, for whatever reasons.
Thanks for the IMF link. This is basically what Seamus Coffey was suggesting in his post the other day and as a result the spin in relation to the non availability of the ESM fund if we vote no seems on the face of it to be a complete red herring.
Yes – the No funding discourse if Citizenry votes NO of the FF/FG/LP troika is as nonsensical as the economics within the Fiscal Compact itself.
Two Nonsenses do not make a Sense.
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