It’s make your mind up time

Like many people, I suspect, I usually check in on Sunday night to see what Wolfgang Münchau has said this week. This week’s article was a cracker, and it’s hard to see where he’s wrong. Either governments decide to make the radical reforms that are needed, or monetary union collapses: the news from Brussels this morning suggests that they are not going to do the necessary any time soon. The Government and Central Bank have had a long time now to get contingency plans in place, and it would be nice to think that they had actually done so.

Update: for similar views, see Sony Kapoor here, and Karl Whelan here.

26 replies on “It’s make your mind up time”

The cheque is in the post!

Joking aside, this is another very welcome indication that there is a growing realisation that the running sore of the conditions attached to the Irish banking bailout has to be healed if the patient is to be held up as an example of a “successful” intervention by the governments of the EA.

Of course, the hospital may well have closed won by then, if the increasingly apocalyptic predictions of Munchau are borne out.

Lets also hope our economic planners will not engage in a great 5 year drive to inflate houses so as to dramatically increase the countries economic capacity………….

Its that pent up demand you see………..I love that phrase.

1. Credit bank account with base money to pay debt

2. Tax the shit out of discretionary oil use.

Its a Fiat currency rememeber ?

Issue ….tax……
Do not tax our biggest import = possible currency failure.


Any agreement to discount Irish debt would have to cascade through to the Spanish and Italian (and Portuguese) banks.

It may be the case that the Euro pointy heads are trying out a bit if indirection. Focus on Irish debt relief but bear in mind the mind to substitute Spain, Italy etc. for Ireland.

Moreover, if debt discounting (write-offs) is on the table, and I very much doubt the Merkel constellation would approve it, when does a discount become a default will arise.

Il Sole24ore is reporting this morning that the significant developments from the summit are agreements for a direct injection to Spanish banks and that the ECB will act as a ‘banking agent’ and buy up bonds in the secondary market to keep the spread between Spain/Italy and German bonds under control.

Also Hollande is reported as wanting to move France towards a German style social welfare system. Can’t beat power.

Munchau..and Kevin also need to take a break from their incessant anti-Euro arguments…either they are academic fools who don’t understand the role of an academic (ie. provide policy alternative(s) not ideological fodder) and (also) not fall prey to their personal ego like IFO’s boss (Munich).

The fact of the matter is that those who are making the policy decisions inside EZ have declared their politcal goal: ie. there is no way back from Euro.

How come good intentioned academic economists have the fallacy to propagate their own fool-hardiness without recognizing the political economy of the decision-makers – irrespective of their penchant for muddling along.

@ The Alchemist

I do not think that the solution developed for Ireland will have much bearing on what is agreed as a general solution.

On the general solution, the only thing that is clear is that a tug-of-war is still going on with regard to the mutualisation of debt, with Berlin not in a position to make any open concessions – assuming it wishes to make any at all – prior to the outcome of the consideration of the ESM by the German constitutional court.

Courtesy the FT (Alphaville), this is what two of the major players have had to say on the topics of direct recapitalisation and bond buying.

Schaeuble, quoting the WSJ

“We expect that the final liability of the state will remain” even once the banking supervisor is up and running, he told journalists. He added that what mattered was that the bank support wouldn’t add to a country’s debt—something that he said would be possible even under a scenario where the government retained liability for potential losses”.


“I signed an agreement with the president of the ECB according to which the ECB will act as faciliation for the EFSF as proposed by the euro area summit. This is for secondary market operations. The ECB will be able to intevene in the bond market for and on behalf of the EFSF. The ECB’s balance sheet will not be affected… it will be on EFSF balance sheet.”

In sum, there is no sign of the broader political tug-of-war between concessionary lending by the creditor countries in return for the debtor countries getting control of their budget abating.

By the way, France has just borrowed short-term at negative interest rates. This is clear evidence that markets have concluded on which side of the fence France intends to end up. Ireland has still major difficulties in deciding with the AAA countries making every effort to tip us in the right direction.

So according to the WSJ, Germany’s Finance Minister says bank support wouldn’t add to a country’s debt … even under a scenario where the government retained liability for potential losses.

Even after all the nonsense we’ve seen in recent years, idiocy of that order surprises me. Maybe my default assumption should be that these guys are on a par with Bertie Ahearn, until they actually prove otherwise.

It seems to me that much of the analysis on how to resolve the Eurozone crisis is premised on the assumption that the EMU has the full political support of Germany. It is assumed that when push comes to shove they will act and implement the technical decisions that are required for the Eurozones political survival. This can no longer be assumed.

It is highly possible that the conservative German government would opt out of the Euro as a higher order preference to ensuring its survival. Why would they implement policies (outlined by Munchau) that will potentially undermine their trade surplus, and competitiveness that has been built up over 15 years? A game of thrones is taking place in Europe, and rather than risk being unseated by a European political-banking union, Germany might act to keep the status quo as it is, until Italy or Spain pull out.

There is no political or electoral support for increased European integration even if it is technically neccessary to solve the crisis. This is particularly the case in creditor countries.

@hari naidu

How come good intentioned academic economists have the fallacy to propagate their own fool-hardiness without recognizing the political economy of the decision-makers – irrespective of their penchant for muddling along.

To recap:

Europe’s political class have set themselves on a dangerous and quite possibly economically unworkable path and it is the economists warning against it who are foolish because…because…because…they just do not understand whats at stake!

What is at stake of course is the vanity and self importance of Europe’s political and elite administrative class and their need to construct a Europe with which they hope they can throw their weight around. State making as self actualization.

The Americans will take them seriously then. The EU flag will strike terror into the hearts of the BRICs. It will be glorious.

Truly pathetic.

Once again the leaders of Europe’s largest states have let their need for grandiosity overcome their powers of analysis, as a result we have a bizarre situation where
intergovernmental solidarity and the appearance of policy implementation success trumps concerns of the collective good of the peoples of the European Union.

Watching the Zero hedge Spanish cat fight between Krugman and a Austrian.

This economic belief system bitch fight can be broken down pretty simply on one level.
Krugman & indeed the MMTers wants “growth” to maintain the artifice of debt (otherwise it will implode society)
Although of course the MMTer have a better understanding of the effects of exponential interest rates and methods to counter this.

The Austrian wants to throw people under a Bus so the remaining savers can maintain the now smaller & smaller surplus.
His hypothesis will of course be proven correct but at the cost of society and thus money breakdown.
Of course most Austrians ignore the bank credit creation process itself and concentrate on the visable rather then invisible goverment.

But there is another way.
We need to divorce banks from the money supply.
The waste real will manifest itself pretty quickly.

Hari response to this problem is interesting.
It proves the Euro can never become a Republic
Its a aristocratic paradise.

The whole thing reminds me of US negotiations with North Vietnam during the war they had, each came to the table to bide time for victories to happen in the field to improve their negotiating position, no real solution is sought, by analogy, the debtor countries like the US are sitting at the table opposite the markets (Viet Cong), the longer they sit the more they hope to win when in fact they are loosing, leaving the Euro (Vietnam) will be their last card and I have no doubt they will play it and leave the South Vietnamese (Ireland etc) to their grissly end. Looking forward to the post match analysis and to ‘interesting times’

@Kevin Donoghue

“Even after all the nonsense we’ve seen in recent years, idiocy of that order surprises me.”


Maybe they should forget about summits altogether, stay at home and save the expense.
Just ask Schauble what the result was.

It is realistic to not expect a grand bargain.

Even if the left of centre was to win the next German general election, I doubt that policy would be any different regarding mutualisation of debt.

I doubt also that if Angela Merkel had been more active in promoting a solution of debt forgiveness and stronger firewalls that it would have changed the dynamic in Germany.

Four years after Wall Street almost engineered a second Depression, a wealthy corporate raider with hidden wealth in tax havens such as the Cayman Islands, Switzerland and Ireland, is poised to take the White House bar a positive result from a demonisation campaign by the Obama campaign.

Wonder how hard it is to sell health care reform in the US?

In 1965, Canada spent 5.9% of its GDP on health care. The United States spent 5.7%. But around that time, Canada was transitioning to its current single-payer system. Over the next four decades, the growth of health care costs slowed in Canada while they accelerated in the United States. By 2009, Canada was spending 11% of its GDP on health care – –  and covering everyone. The United States was spending 17.4% of its GDP and leaving 45m uninsured.

Whatever about a 20-year horizon in Europe, there can be little doubt that the next decade will be grim.

German trade with the emerging economies is helping some EMU economies.

In Ireland 10 years is too long to think about and today Minister Richard Bruton has announced a new manufacturing forum to give him some tips.

Policy makers and experts are in fact clueless as to what to do.

What would be too much to hope for until the wolf is outside the door, is a realistic assessment of the challenges.

One option at least would be to live within our means.


The idea that the rest of Europe “needs” Ireland to be an example of a successful bail-out is very widespread in Ireland but does not seem to be shared by many people outside of Ireland .If it were the case it would mean that you can “succeed” in a bail-out without any structural reform . This would be a bad example for the Greek, the Portuguese, the Spanish ,etc.

@Overseas commentator

The idea that the rest of Europe “needs” Ireland to be an example of a successful bail-out is very widespread in Ireland but does not seem to be shared by many people outside of Ireland

Well no one apart from Paul Krugman, Rehn, Barosso and so on and so forth. Ease off on the crackwurst.

Ireland is the Eurozone country where austerity works.

Where “works” is defined only with regards to the creditor states and agents of course.

Sorry Kevin – my post was wiped from Stephens communist bulletin board

This is a approx of my response to DOCM and others as I rememeber it

Who will pay for the banking losses.?

I would pose a slightly different question – where will the remaining wealth be transfered ?
The wealth does not somehow disappear in a instant as debt is not wealth.
At the moment the consumption is in Germany and Turkey as that is where the oil is
At any given time it can get transfered.
Both Italy & Spain are operating with chronic shortages as a result of a metaphysical debt problem.
Which means if and when they break from this debt vice they are likely to get at least some of this ration back.


Collateral is a banks problem
Not a sovergin

A sovereign is a sovergin for 2 reasons.
1.A clear juristiction

2. The ability to print unbaked fiat.

Now Ireland is not a land of Puritans and Quakers so a deal will probally be done with the local banks under the nation state debt model.

The picture of Mario & Micheal says it all really (diary of a economic hitman Volume 2)
Micheal does not seem to understand a Treasuary is more then a tax collector – it is a chequebook. (or maybe he does ? letter of comforts ?)

This further externalisation of chequebook control to more distant banking parts via ESM is following a post war pattern.

A collapse of the Euro will be good for the average European animal.
A collapse of the Euro will cause a implosion of world trade as it is currently structured.
It means China will most probally implode.
It means that Chinese oil must go somewhere else.
However If things get really bad it will remain in the ground but thats a different question.

The banks created the USSR , they destroyed the USSR
The banks created China , they will destroy China.

Remember in the final anylasis Europe is their base of operations.
Its a interesting political and sociological zoo but it is merely a zoo – its not a real ecosystem.
The Euro itself had nothing to do with Europe really.
It was merely the geographical location where the bomb was constructed – Ok It has wrapped the continent and made it sterile but it still lives.

The video Seamus posted is part of the entertainment – the Circus.
My favourite clown – Ollie

@ Shay Begorrah
I concede Rehn and Barosso (how surprising!) ,Krugman states the exact opposite .

@Overseas commentator

I concede Rehn and Barosso (how surprising!) ,Krugman states the exact opposite .

Krugman’s position is that austerity does not work but that Ireland, and poor Estonia, are falsely being used as examples of where it does. It is arguable whether either Rehn or Barosso really believe that austerity can work in rehabilitating Ireland’s economy but they see the need to promote that position to enhance the credibility of EU policy making hoping that displays of “strong determination” will do in place of a working economic theory.

There are of course sincere proponents of austerity but they are at least one of fools, bankers, right wing sociopaths or advocates of austerity for other people only.

@ Shay

“Krugman’s position is that austerity does not work ”

Lots of people made money out of it.
It worked for the bondwallahs. It works for anyone betting on a breakup .



Krugman’s position is that austerity does not work ”

Lots of people made money out of it.

Absolutely, austerity’s beauty is very much in the eye of the bondholder.

If you followed the stereotype case of Baden Wuertemberg’s TD Stefan Mappus and Morgen Stanley Germany CEO Dirk Notheis, you will know that politicians are managed entities. It was not the exception but rather is the rule.

Meanwhile on the beach….

The average Joe Sixpack will swallow what the controlled media dish up, and J.6pack is the 99%.

What J.6pack does not see is the reality behind the smoke screens, it is the re engineering of societal structures. This is not driven by politicians, of course not! New sets of what Bill bLack rightly so calls “Accounting Control Fraud” are designed to continue this game, the ESM is just one in the tool box, it is just not finished yet.

The people in charge right now, of course, they will not solve this crisis, they are here to stay, and so is this “crisis”, which is not crisis at all, but a coup d’etat by the financial capitalist Industry, and it is a permanent installment now.

The daily dose of “threats and fear”, on purpose to justify new measures to be put in place that will deeply change the very core of our societies, turning more totalitarian and ultimately dehumanize our citizens.

Oh, and there is a little television set on this beach as well, but it does not work anymore and stands there disemboweled under a palm tree. Peacocks had made a nest in it, they are now the 24/7 program to be watched. It is a strange happening,the inhabitants of this beach gathering there every evening in front of the TV, watching peacocks….

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