Dan O’Brien: Exaggerating Europe’s part in our woes serves no purpose

Dan O’Brien provides a useful analysis of the senior debt issue here.

93 replies on “Dan O’Brien: Exaggerating Europe’s part in our woes serves no purpose”

There is of course also the issue of the responsibility the ECB may bear for the original suicidal bank guarantee. Yes, there was an element of a solo run by the Irish government about it, but it still seems to have been in large part a response to demands that the ECB placed on the government about how it should respond to the crisis. It is at least as urgent that the ECB’s communications leading up to the bank guarantee should be brought into the public domain as that the famous later letter be published.

“People closely involved in decision-making in this administration and its predecessor have told me the disagreement with the ECB centred on seniors in the defunct banks only.”

This in itself is a huge story because it was a gross dereliction of duty at worst and judgment at best if these ‘people closely involved in decision-making’ were only looking for burning seniors in defunct banks. Who were these people? On what basis did they make that limiting call on the behalf of the people of Ireland? Is it possible that it was because of ECB threats that they only sought writedown on defunct seniors debt because it was the most they could hope for?

O Brien calls himself and journalist being satisfied for not having gotten to the bottom of these issues and not for the first time presents us with a back of the envelope figure that is always biased downwards when it comes highlighting what the ECB has imposed on this country…there is also the issue of the extension of the gaurantee that he always conveniently overlooks….why was it extended and at whose behest.

“The words in italics are, to my knowledge, the only on-record statement by any politician or official acknowledgment that the ECB threatened to turn off its liquidity tap for Irish banks – in response to the Irish proposal to impose a haircut on senior bank bondholders.”

How about

“In the meantime, we may have to come to the conclusion that it doesn’t really make sense for the ECB to keep putting €100 billion into Irish banks. What we are doing is actually illegal, but we have being doing it because we want to help Ireland. Maybe we might come to the conclusion that we should stop,” said the ECB source (Sunday Times inIreland– Sunday 19th June, 2011, not available online without subscription)”

I love the line “anger is rarely a productive emotion”.

Anger has lead to every revolution in history and consequently many of the great achievements of humanity. Anger lead to the French Revolution and the rebirth of democratic ideals in Europe. Anger lead to the Boston Tea Party and the birth of America. Properly dirscted anger is a good emotion. Poor Dan – repression is such a difficult thing to admit to

“I am not quite sure why the issue has recently sprouted legs again. ”

You can blame that Karl Whelan fella.

And his colleague in UCD, the other troublemaker, Colm McCarthy

Though in fairness, both Gavin Sheridan and the Independent did pursue the matter at the end of last year and start of this year.

It might be better if Dan O’Brien would directly debate with KW or CMcC on this topic, i.e. directly criticize their arguments, with references …

It might be better if Dan O’Brien would directly debate with KW or CMcC on this topic, i.e. directly criticize their arguments, with references …

@ yields or bust
If joe soap goes bust they send in the receivers, but certain companies fall under the heading of too big to fail. TBTF… such as Chrysler, GM or Big Banks etc., Letting them go under would bring too many others along with them.
It seems under Irish company law(?) there was some phrase which set the rights of senior bondholders parri passu (of equal rights) with depositors. Wish I could give you a reference to it but I can’t.
The upshot of it all was that if the banks had been allowed to go bust, the depositors would have had to whistle for their money along with the bondholders. After an event like this the Irish banks and government would have had to face an enormous credibility problem.
The Fianna Fail government used the blanket bank guarantee to
avoid this problem. Later once the EU advisors were here, the Lenihan admin actually sold the deposits of Anglo, opening up the opportunity to burn some bondholders (as legally there were no more depositors to be equal to) but the ECB kind of frowned on the proposal. I can’t guarantee the total accuracy of what I’ve written as the information is hard to come by. But in any normal country we would have a watergate enquiry to sort it all out in a few months.
Instead of the wishy washy hi fallutin expert reports (three of them) and hundreds of journalistic reports suggest

Sorry about that
Try again:
@ yields or bust
If joe soap goes bust they send in the receivers, but certain companies fall under the heading of too big to fail. TBTF… such as Chrysler, GM or Big Banks etc., Letting them go under would bring too many others along with them.
It seems under Irish company law(?) there was some phrase which set the rights of senior bondholders parri passu (of equal rights) with depositors. Wish I could give you a reference to it but I can’t.
The upshot of it all was that if the banks had been allowed to go bust, the depositors would have had to whistle for their money along with the bondholders. After an event like this the Irish banks and government would have had to face an enormous credibility problem.
The Fianna Fail government used the blanket bank guarantee to
avoid this problem. Later once the EU advisors were here, the Lenihan admin actually sold the deposits of Anglo, opening up the opportunity to burn some bondholders (as legally there were no more depositors to be equal to) but the ECB kind of frowned on the proposal. I can’t guarantee the total accuracy of what I’ve written as the information is hard to come by. But in any normal country we would have a watergate enquiry to sort it all out in a few months.
Instead of the wishy washy hi fallutin expert reports (three of them) and hundreds of journalistic reports suggesting this or that might have happened and so this might have been the best procedure to follow.

@ BeeCeeTee
Just in the past week someone has assured me that on the week of the Guarantee, Brian Lenihan was off at some socializing get together/ political knees up and could not be contacted by Trichet and appologised for it on the TV. O.K. could not be contacted for two days or so over the weekend. There are five other days in the week. But the communication between the ECB and the Irish camp leading up to the bank guarantee decision (and their own deliberations) would be very interesting to all of those who have to pay the cost.
Sorry for making a botch of the post.


“But, in return for that funding, the ECB demands that “we” repay all senior bondholders in Irish banks – €21bn of guaranteed, €20bn of unguaranteed secured and €16bn of unguaranteed unsecured. And the “we” is effectively the Irish citizen because the banks are bust and we are putting €70bn of “our” money into the banks.”

I (and others) have really lost patience with this. It is about time the Irish side put all the evidence for this on the table. That they don’t only encourages the view there isn’t much, and it was more a case of Irish sucking-up to the preferences of others and failing to make any meaningful attempt to negotiate.

@yosef shompeter

“It seems under Irish company law(?) there was some phrase which set the rights of senior bondholders parri passu (of equal rights) with depositors. Wish I could give you a reference to it but I can’t.
The upshot of it all was that if the banks had been allowed to go bust, the depositors would have had to whistle for their money along with the bondholders. After an event like this the Irish banks and government would have had to face an enormous credibility problem.”

Not really. “Parri passu” comes from the bond documentation that defined what the bonds were when issued. The depositors would have to have taken a loss along with the bond holders, but then the state could have separately compensated them (not from wind-up proceeds). The practical question would have been where it would have obtained funds for that – it may have had to part compensate depositors by issuing them with government bonds instead of cash for example.

I disagree with Dan O’Brien’s analysis. Normally a central bank plays a key role as a ‘Lender of Last Resort’ for banks. Perhaps if we had known there was any doubt about this role we wouldn’t have joined the euro.

In any case, what the implicit threats make clear, and hopefully publication of the letter, is that the ECB has turned the Lender of Last Resort role on its head – i.e. threatening fiscal authorities to remove support, should they not make good unguaranteed bonds.

This is an extraordinary policy. First, it clearly breaches the traditional role of the central bank as a lender of last resort. Second, the ECB has longed preached the separation of fiscal and monetary policy. In this respect there is an asymetry, the ECB feels free to goad euro area governments into taking fiscal actions that increase their debt, etc etc

Many thanks for you clear and prompt reply… If I have this right the Irish govt would say: Banks are bust. sorry you all go equally empty-handed pari pass. But next sentence: All depositors get some money because they all have nice faces.
Fine by me as I am a depositor. But I can see the legal profession is so full of surprises that from now on I will never trust a document that uses the medium of words.

A separate issue (that gets confused a lot in the mainstream boards and press)
The reluctant calling in of the IMF … I can never figure out why we had to be strong-armed into calling them in. Why did we allow the ECB to be involved as well, why not solely the IMF.
I have heard that contagion was a reason. i.e. because our bond interest rate was rising on the seconary market that this might have had a knock on effect for Spain and Italy, so they were pressurising us to ask for a bailout.??
As I see it, if you’re broke, you’re broke. What is the advantage of pretending otherwise or hoping for a miracle to turn up.
appreciate if you could explain some of the backround.

Did Ireland have a bank resolution law in place in November 2010 when the two Brians went bowl in hand to the ECB? No? Why not? It was only two years since the crisis?

I say to the moaners about ECB and defenders of Lenihan that when it was time to put up or shut up the Irish government chose to shut up. Again, again and again. And the Irish people -partly through ignorance and partly through an “I’m alright Jack” attitude – acquiesced in that.

@Garo – it was three years, not two. This “ab urbe condita” Lehman’s analysis is plain wrong. You might as well say that WW2 started at Stalingrad.

Allocatining responsibility in a governance culture where responsibility/accountability is rarely if ever recognised is an inexact science.


HSE cuts to hit services for the elderly and disabled
PAUL CULLEN, Health Correspondent

Cuts affecting the elderly and the disabled feature strongly in a €130 million cost-reduction package announced by the HSE today.

Some 600,000 home-help hours are being cut, the second time this service has been cut this year, while €10 million will be saved through a reduction in personal assistant hours for the disabled. Another €1.7 million will be saved by reducing 200 monthly home care packages.


Who is responsible/accountable for these unconscionable cuts to the most vulnerable in society? Anger is a healthy emotion here –

@ David O’Donnell

Allocating responsibility in a governance culture where responsibility/accountability is rarely if ever recognised is an inexact science.


The buck simply stops nowhere, but when there is a foreign foe to lay the blame on, the outrage that was scarce on the ground when it was needed, is everywhere today.

There is of course blame to go around but those who are looking for a smoking ECB gun in late Sept 2008, should just wonder what triggered that fateful meeting.

Wonder how bad things were when FitzPatrick and Drumm were ushered into to the office of the Bank of Ireland chief to kowtow before an arch-rival and beg for help. To conspiracy nuts searching for scapegoats, the ECB maybe was a Svengali behind this abject dénouement for two preening peacocks of the Celtic Tiger hysteria?

It was 13 months from the start of the credit crunch; it was 19 months since HSBC had revealed huge losses on US prime mortgages.
Two weeks after the collapse of Lehman Bros., only fools could seriously have expected that large developers who had ceased paying even interest on their loans could be back in clover anytime soon.

The Wall Street Journal reported in 2010 that Ireland launched the guarantee that Lenihan would dub the world’s cheapest, guaranteeing every deposit and nearly all debt issued by Irish banks. Dublin hoped that would free others to lend to Irish banks, and Ireland would muddle through without shelling out a dime.

In early 2010, NTMA’s Brendan McDonagh’s team got a rude surprise upon diving into the books.

“We opened it up and said, ‘Oh, my God,”‘ McDonagh said in an interview. “What they are telling us is not the reality.”

The Journal said the banks had said they had loaned 77% of the value of a property, on average. The other 23%, put up by the borrower, would cushion a default.

Several times, a developer pledged future profits on other ventures. Many loans were riddled with flawed documentation, leaving banks without solid legal rights to the property they had believed was backing up the loans.
I said at the time that Brendan McDonagh must have lived a sheltered existence at the NTMA during the boom.

In the summer of 2010, months before the bailout, ministers bailed out for the summer holidays and markets wondered what was the ultimate exposure on Anglo.

Bond yields rose and that August, S&P cut its rating on Irish debt and on the saga proceeded…

It was clear that from the the initial announcement of NAMA in April 2009 to October of that year that the Department of Finance (DoF) had not insisted on hard facts from the banks.

However, an LTV (loan-to-value) of 75% was used to spin the official line.

It was slow-motion before end Sept 2008 and in its aftermath.

In an Irish Times article of Sept 05, 2009, Minister Brian Lenihan’s economic adviser, Alan Ahearne wrote: “First, the estimated average loan-to-value ratio of 75% will have to be verified by examining each loan individually, as required by EU Commission guidelines.”

I wrote on this blog:

“Alan Ahearne represents the Dept of Finance in the article but it’s unclear how much he knows about the loan situation.

There is anecdotal evidence that many residential mortgages were topped up with other loans. It’s likely that the same applied with commercial lending.

It is assumed the average loan-to-value ratio of 75% based on the original value of the deal but it may be based on a more recent value. It’s hard to believe that 25% of the value of big deals in the period 2004-2007, was paid in cash – – in particular in respect of Anglo Irish deals.

Security is on both domestic and local property.

It is likely that many transactions involved complex tax shelters and other vehicles – – not a bog standard €75m loan on a €100m purchase deal.
What does AA know about such deals?

The DoF have had a 6-month lead time to check the facts.

Given AA’s public statements, there should be more clarity on the loans in advance of the Dáil debate and vote i.e. before Sept 16th. AA should state that he is satisfied that the 75% average applies to most of the loans on the basis of the original purchase price/stamp duty basis price and includes top up loans.

Simply, as a representative of the Minister for Finance, it’s his duty to provide clarity on this issue.

How confident can he be regarding the risk that the same security was not used for multiple loans?

Keep in mind, that many of the later deals were ego driven as the top developers competed for prime sites.

If they were paying 25% of the site costs in cash, were the banks providing 100% of the development costs?”

The Government had ample time to know what the state of the big developer loans were in the months after the credit crunch in 2007. After the guarantee was issued, there was a further 2 years of drift and uncertainty.

Will all this be revealed in an ECB letter?

Any government mismanagement does not exonerate the ECB from a care of duty…the government got their comuppeance at the ballot box. So the buck did stop somewhere there. Fitzpatrick is facing several charges that is likely to culminate in a buck stopping there too…Drumm is a virtual fugitive. Quinn and his family is learning where the buck stops too…its been all too slow from my liking but better to get it done late than not at all….but as i said, the ECB must be held accountable for its actions and if they have breached treaties and laws to do what they did and that has forced Ireland into an even more unpalitable position than we deserved for our own shortcomings, then they ought to be exposed too. I don’t think Irish people or dumb enough to think that FF or Seanie Fitz or even the people themselves shoulder much of the blame for what went wrong here simply because there is currently a spot light on the ECB and its role in the current debacle.

Ireland, had it 100% within her control to prevent our crisis. It was failed by bad policy/government. The bank guarantee was the obvious culmination of this ie a few TDs being able to lawfully strap Ireland to its banking system in a matter hours without so much as debate.

Having said that Dans article is nonsense. The ECB should not be able to blackmail any government in to anything. They’re a central bank, the tail doesn’t wag the dog. Furthermore, just because the crisis was 100% within our power to prevent doesn’t mean we caused it. The ECB and other players have some responsibility for the obvious imbalances that have occurred within the euro zone.

Dan should look closer to home–perhaps he might recall the sixty page Irish Times property supplements,stuffed with auctioneers puff pieces exhorting the public to get on the property ladder before they miss the bus. Great value–great potential–a one way bet–you can’t go wrong with property–it’s a no brainer., property propagenda etc etc etc. What about Irish Times chairman David Went and the destruction of Irish Life and Permanent PLC.

If anybody had told the Irish Times there was a property bubble, they would have ran an editorial immediately and alerted their readers;

@ All

This is all very entertaining but one wonders how pertinent it is. There is plenty of blame, as MH points, to go round and fingering one player or other from the mess may be a source of satisfaction for some but does not advance matters greatly.

There is an apparent consensus that Ireland suffered some prejudice from being first in the firing line. The question is how (i) to gain acceptance for this fact (ii) put a figure on it and (iii) organise for it to be paid.

Schaeuble now appears to be alone in querying (i). A plausible basis for (ii) has been advanced by Seamus Coffey and now Dan O’Brien.

The answer to point (iii) is still in the lap of the Gods but has to be set in the context of the present negotiation, not some fanciful barrack-room lawyering about bringing one of the presumed culprits to justice.

cf. my post from the other thread.

@ All



The stage is accurately set by the FT with regard to addressing the real question: is Germany willing to be bound by the rules applying to the euro on the same basis as all other participants? And the counterparty in the discussion is, indeed, the ECB both as an institution, as Draghi has pointed out, of the EU and as a forum of national representatives technically capable of coming up with the right answers.

cf. also this item from the office of the President of the European Council.


Report on letters between ECB and DoF:

I am simply amazed that Patrick Honohan’s role in all this is not examined more thoroughly.

In the run up to the bailout the Irish Central Banker offered no support at all in the face of extreme pressure from Trichet, even though the ECB was clearly acting outside its mandate in insisting on specific fiscal policies. Does anyone doubt for a second that the Bundesbank would stand idly by if put such enormous pressure was put on Germany.

Worse, we had Patrick Honohan actively undermining the government by declaring on national radio that a bailout would have to be accepted. Who does he think he is? The ECB’s viceroy in Ireland or Ireland’s representative in Frankfurt? That was a disgraceful event and is worthy of resignation in itself.

Next we had Honohan’s performance during the negotiation of the bailout. Here he dutifully agreed on the behalf of the Irish taxpayer to hand over billions of Euro to unsecured bondholders of bust banks as a “quid pro quo” for continued support of the Irish banking system – support that has since been extended unconditionally to banks in all over the Eurozone (particularly in Italy and Spain).

Finally, lets not forget the disgraceful 2 interest rate rises last year. Now, these rises were staggeringly ill-conceived, based as they were on fears over headline inflation at the time, and highlight the general poor judgement that characterised the Trichet ECB (recall the rate rise in summer 08). However, Honohan must have been acutely aware of the damage these rate rises would have inflicted on already overindebted and overstrected households (especially those with massive tracker mortgages) and the knock-on effect this would have had on the necessary fiscal adjustment. Was there any concern raised by Honohan at the time? I doubt it – he certainly didn’t vote against the rate rises. Does anyone doubt what Buba’s actions would be if an ECB rate decision affected Germany in this way?

Patrick Honohan has proven himself to be an excellent economist and seems to be an all-round decent guy. However, he has turned out to be an appalling statesman with poor judgement and negotiation skills. Let’s not let his likeability get in the way of entirely justified criticism.

Odd how Stephen Collins had sight of the documents following an FoI request, but does not appear to have possession of copies. Surely, if the FoI request was successful he should now have copies, and if it was unsuccessful he should not have had access to what are supposedly confidential communications from the ECB.

The whole thing gives the impression of selective leaking for purposes of news management.

The impression I have is that these are small shots across the bow of the ECB prior to the mid-September debt restructuring decision.
The fact they’re doing this kind of thing means the ECB are putting up a fair bit of resistance. There is, however, nothing powerful enough in all this for the ECB to be scared of.
I would not be surprised if September brings a fudge regarding the bank debt. Problem is the real economy is beginning to tank again

My guess is that the Collins leak is as likely to be a shot by the DoF on behalf of the ECB. After all the fuss over the confidentiality of ECB communications, it seems unlikely that the DoF would simply show them to a journalist without ECB approval.

The issue of bouncing the Irish government into a bailout that was coming anyway is objectionable, but arguably had no long term implications. The much more important issue is the extent to which the ECB exercised influence over the government to force or induce it into bailing out bondholders, at all times from the run-up to the bank guarantee onwards. The Collins leak neatly diverts attention away from this.

Luckily the Irish Times has* a long-standing policy of applying a cui bono test to leak sources so that the readers can understand the motivations of the leak.

*or not.

“My guess is that the Collins leak is as likely to be a shot by the DoF on behalf of the ECB.”

It seems to me that the Draghi ECB is favourable to the leaking of this information, because it utterly discredits Trichet and the authors of such threats, many of whom are probably still within the ECB, and who were taking their instructions direct from the Berlin and Paris.

The current leaking has little to do with Ireland and everything to do with who calls the shots at the ECB itself.
But you are correct that it distracts from the imposition to pay bank bondholders. Nevertheless, having caved into the first threat from the ECB, thereafter it was a rout. Whatever the ECB ‘requested’, they got.


1. On the FoI – agreed. They were allowed see them but not publish them? wtf?Anyway, Gavin Sheridan is Mr FoI – and has been chasing this for ages. The claim it was all on FoI is very fishy.

2. On who and why. I haven’t been keeping a close eye on events in the past few months, but I’m with Eureka.

If the ECB was behind the leak you’d have expected it to come via one of the European or business reporters. Collins is a political reporter, and a government friendly one at that. A FG one to be precise.

When I saw the fuss rising about The Letter in the past few weeks I thought Noonan should publish it and be a hero, since we all want to see these bloody letters. I was perplexed when he said he’d give it to a committee : why give the chairman of that committee the credit? If Paddy wants to know – tell him yourself.

Someone else suggested he couldn’t publish it cos the ECB were against it because it doesn’t make them look good – threatening governments. There’s already a rising meme on the anti-democratic actions of the ECB and their ability through bond buying, or not, to change governments. And if we’re trying to make nice with the ECB – publishing letters they’d rather keep quiet isn’t the way to go about it.

No. This is domestic political stuff.

The suspects have to be:

Noonan or other Fger? gets it out but can deny it to the ECB. But – if so, silly in my view. “The public has a right to know” is a great argument to do it up front.

A civil servant – stealing a march on the government publishing it?

I dunno, but that’s where I’d start looking.

As for Dan”nothing to see here” O’Brien – where’s he getting this 3.75bn from? I thought we paid that several times over on the unguaranteed bondholders? And even if that is the maximum benefit, that’s the size of the “adjustment” this year. Don’t tell the home helps it’s a piffling amount. That’s a lot of pain and misery for a lot of people.

Did no one else find the week long Lament for the Wronged Germans series in the IT bizarre? Feck ’em I say. They’re getting their pound of flesh. oh but they LIKE us more than the Greeks!!! Is that really supposed to make us feel better? Eeeugh.

@ SC

I hate all ‘what they think of us stories’. It suggests to me a certain insecurity as a country. It’s like we indulge in what other people THINK about us to deflect from how we are. Which helps us avoid serious issues eg massive national scale alcohol abuse.

As for the letters, I think you’re bang on the money. Though why not the full letters? All they’ve done is wet the public appetite more for them, is that the point? The timing is suspect, has to be connected to on going negotiations.

The key question is how much of the €64bn or more in State bank support should have been paid by 13 other members of the EMU? (ex-new member Estonia and Greece, Portugal).

The ECB letters are a side issue.

Bond yields rose to near 6% in Aug 2010 and it was not until Sept — weeks before the original bank guarantee was due to expire – – that the Government announced its estimate of total Anglo losses. A bailout was inevitable as the Irish Central bank had to step in with funds in addition to ECB funds.

So the €64bn question, is how much should have been refunded?

Seamus Coffey has estimated that the Exchequer deficits (excluding repayments of Anglo promissory notes) between 2008 and 2015 will generate more than €100bn of borrowings. 

Ireland was the ONLY Eurozone country to issue a blanket guarantee of bank debt and a week later Denmark made a similar move.

Ireland unilaterally (that of course will never fit some narratives) took on a risk equivalent to 55% of GDP compared with Denmark’s 20% and low single digit levels in other advanced countries.

Brian Lenihan made clear after the approval of the bailout that the European Commission also resisted haircuts on senior bank debt:


Here we are, 4 years on, biting our entrails and no further on. There are no patriots (with access to th letters) in the government or dept finance, or they would simply put them out.

Exaggerating europe’s woes serves no purpose and anger is not a policy. There there. Trust the experts . It will be exactly the same for the next crisis. Going back to d’olier street shouting lager lager lager. And remembering nothing.

Duinn is eigean conai a dheanamh in arais o dhaoine a leagfadh cios ar an mbraon anuas.

@yosef shompeter

“from now on I will never trust a document that uses the medium of words”

That would be a very wise thing to do.


Now imagine the following scenario: Lenihan is being told by the ECB he can’t burn the bank bondholders and that he must lie about how many billions will eventually be pumped into the banks to ‘save’ them etc. What will he need to do for the serfs (Joe and Jane Deposits) to keep them happy over the years as all this reveals and becomes apparent? Promise them their money is safe? Guarantee it in some way? Possibly. Lenihan was many things but he was never a fool. He would have thought about he he would need to keep the proles happy once this can of worms was opened. I’ve often wondered if the stress he was under around the time these letters were flying around took him earlier than perhaps he should have gone. He certainly looked very stressed around this time.

Another question could be: why is limited information about these letters being aired now (and you can bet these weren’t the only communications – letters like these beget all sorts of other correspondence e.g. between ministers and public servants/advisors/supporters/friends musing on motives/potential responses/etc. – it would be interesting to see the whole bundle but most will have been destroyed by now) ? You don’t let newspapers like the Irish Times ‘see’ things like this without some agenda. Guess it’s to do with ongoing negotiations to try and get some scraps or a bone back from the EU/ECB. FG are desperate to be able to hold something up as a success at the moment after recent fiascos.

I think BeeCeeTee is on the money when he (or she) says: “selective leaking for purposes of news management” – to which I would add “and a pathetic attempt to influence ongoing so-called negotiations against much more powerful (for want of a better word) bodies than our little government.” Unfortunately, Ireland isn’t Greece otherwise we would probably be getting a lot more back in order to stop the boat rocking.

@Sarah Carey

Do I detect an air of the cynic growing about you since I’ve been away? Good post.

@Joseph Ryan
“The current leaking has little to do with Ireland and everything to do with who calls the shots at the ECB itself.”

Central Banks are acutely aware of the whole house of cards. In this case the core concern was the DB and CB in Germany and Generale and Paribas in Paris. A little country like Ireland could not be allowed to topple the banking giants of the EZ by setting a precedent that would force bondholders and lenders to take losses on privately owned Irish banks. The weak sisters were causing a great deal of anxiety within the ECB and it was imperative that Ireland set good example.

So here we are today going deeper into debt with each passing quarter. Ministers making statements that the overtaxed middle class (all wage earners and residential property owners) cannot take it any more. The ten year bond interest rate rising in response to the Gov’t’s reluctance to cut spending and/or increase taxes.

A few sacred cows will be gored in the coming months, the low corporate rate amongst them.

Irish politicians are lovably incorrigible. Even Merkel is not perfect.


@ All


The solvency of financial institutions is, and remains, a national responsibility. If a country cannot fulfill that responsibility – through a failure of financial oversight which also, mistakenly, remained a national responsibility – in the context of a monetary union, it is clear that the subsequent negotiations with regard to financial assistance from the other parties to the union will not be a kid glove affair.

The discussion otherwise is beginning to resemble a game of Cluedo.

@ All

The Sunday Business Post can no longer be linked to but the following quotation from Cliff Taylor cannot go unremarked. It sums up admirably the current situation.

“Like it or not, the ECB must concede that it had a part in creating the mess that was the Irish bailout. Hopefully it can now be part of a deal to make the whole thing more sustainable. However, we shouldn’t fool ourselves. A deal will be done only if the various parties – the ECB, EU, IMF and member states – feel it is in their own interests. Any notion of fairness or making up for what happened in the run up to the bailout simply won’t enter into it. Nothing personal, just business.”

The IMF, of course, just wishes to pack up its gear and go home (to Washington).

The omens are not particularly good. (Google Translate does a reasonable job).


If the solvency of financial institutions is a national responsibility, it is also a national choice. Once outsiders intervene to shape the choice, they take on a share of the responsibility.

@PR Guy

I would say…suspicion rather than cynicism. I’m composing a speech to the FG parliamentary party in my head. (that’s where it’ll stay no doubt).

Men lost their lives to win our sovereignty.
You might lose your seat to win it back.
Big deal.
So just calm the f*ck down, tell the turf cutters to sod off and govern with authority, not fear.

I haven’t been away, just watching 🙂

Spot on. Compensating a bunch of gobs•••es for stopping their illegal activites is not governing with authority. What next, sheep smugglers and green diesel washers. More of them will lose their seats unless the start governing. Start with CPA, move on to a proper property tax, cut the Local Authority gravy train.

@Sarah Carey

“govern with authority”

Yes. I like that.

Unlike you, I have been away….. and I haven’t been watching (well, not much). Just having a great summer, doing what I want to do for a change. Time to get back down to some business though from tomorrow 🙁
Little seems to have changed in the last two months.

Just been catching up with a few banking wallahs.

Lots and lots of money flowing out of Spanish banks…. and Italy to a lesser extent. Spain may be even worse than some officials are actually letting on? Fears the same is going to happen in France next.

I’ve already moved my money to Switzerland. I guess my next book will be “Europe: My Part In Its Downfall”

@ Tull
FG are not doing too badly. Remember there will be poor co-ordination over the summer. They are well positioned. Labour want to make a stance on consultant pay and feel that they would be reasonably well placed going into an election on that basis. Reilly has rightly said that it’s not just consultants but the whole CPA that needs to be looked at. This means that labour would face into an election not as champions against consultant pay but as defenders of the dysfunctional CPA. It’s real easy for FG. They can say Labour don’t have the courage to re-assess CPA (apart from where it applies to consultants (whose trade union probably doesnt pay alot to labour coffers)) and they don’t have the courage to reform social welfare (preferring to distract instead with this consultant pay issue).

Labour are the party that tax self-advancement. They are the party of middle class underachievers who resent success in others. FG and FF could decimate them. If I were FG I’d do a little bit of thinking – respin everything as a disagreement over the CPA and bring on the election

@ PR Guy
Spain is a set-piece for the ECB and EFSF. They’re ready for this and will contain it reasonably ok.
The medium to longer term risk is the burden placed on economies by these bailouts. What most people seem to be missing (strangely) is that food prices are set to rise (along with energy). That’s the tipping point. They’ll save the financial sectors but have a lot of discontent in the streets. I actually think that bankers are too dumb to see that – and that’s the problem


Labour do seem to have very predictably painted themselves into the role of standing for nothing except the CPA (minus clause 1.28 obviously).

It would be very easy to characterise them in POR terms as the political wing of the public sector unions and nothing more than a middle class lobby group.

There are yet no threads for Sunday’s stories but I feel compelled after much of what I have read to HIGHLIGTHT this directly from the CROKE PARK CARTEL AGREEMENT: Paragraph 1.28

“The implementation of this Agreement is subject to no currently unforeseen budgetary deterioration.”

What on earth does that mean? It reads plain and simple to me but I obvioulsy have missed the nuances it is supposed to entail. From the time of this FF-inspired agreement was implemented there has been a MASSIVE unforeseen, budgetary deterioration…yet not a single union member or government representative acknowledge or state this FACT when they skirt around the CARTEL agreement. Its all about industrial peace (a.k.a. Blackmail), its all about what has been delivered. Its a national disgrace. If a couple of shopkeepers get together and fix the price of a can of beans they can be prosecuted and face criminal charges – yet almost 200k people can come under the banner of a “union” and fix the price of labour even in a country that is going down the tubes and they spin nonsense about social justice and workers rights…ask the teachers union about how much they cared for newly appointed teachers and the complete lack of solidarity they got from their “UNION” when it came to the extremely low basics they had to start on while their colleagues took huge pensions on salaries way above their European peers. Disgusting.


Re- FG figures. You are right. Their figures are holding very well, which makes some of the political gamesmanship all the more annoying – because it’s unnecessary. Anyone who voted FG knows they weren’t promised a rose garden.

@ Eureka/ V Barrett

As always, the younger generation (outsiders) are getting a raw deal, but lets have a little balance here. Labour has no monopoly on rent seeking, which is endemic in our economy, and takes a myriad of obvious and not so obvious forms.

Take a look at Elaine Byrne’s Political Corruption in Ireland. The parties of ‘enterprise’ do not have very clean hands, and FG has its own very substantial set of vested interests to service. The turfcutter deal is just one slice of a complex, historically rooted, electoral pie.

The CPA will fall in the end, but there will be more trouble and dysfunction in remaining state services, because simply cutting pay will not resolve any of the management issues which have accumulated over the years. Changing faces in the organisational leadership will solve little as long as they same from the same pool.

Breaking the Labour party will also lead to a more volatile political and unpredictable political nlandscape, and that’s one reason why an Taoiseach will be trying to keep Humpty Dumpty together for as long as he can.

@ V. Barrett et al

Margaret Thatcher is often quoted as having said that “there is no such thing as society”. We seem intent in this country on proving the truth of this axiom.

The elephant in the room is not solely the CPA but the Coalition agreement which is, in effect, an agreement to maintain the status quo in terms of how the country is governed, taking this to mean – in a narrow sense – how various vested interests are dealt with. The people can be said to have voted for it.

The question is, therefore, to what extent circumstances will force all concerned to confront unpleasant realities. One of these is the existence of not just an informal but an officially sanctioned nomenklatura which has become so entrenched that the public generally seems to be unaware of it. Ineptitude on a major scale has finally revealed it by cutting allowances to carers while appearing to leave excessive salaries paid to consultants untouched. This is not intended to be a criticism of consultants, many of whom may well be being paid the market rate for their skills. But are they all equally skilled? That is the question. As Brendan Keenan remarked on Newstalk some days ago, why cannot we have simply doctors and lawyers, as is the case in most other countries other than the UK? Do these professions have to remain stuck in the 19th century to the corporatist benefit of their members? More importantly, can the country afford it?

Colm McCarthy spelt out the correct choices in the Sindo. There is, however, more than a “suspicion” with regard to the reported disparity between salaries in the public and the private sector and the choice of a particular job on offer from the HSE might best have been avoided on the simple principle that if individual comparisons are drawn, it is a recipe for division. Whatever emerges in the budget will have to be a package deal that is perceived as fair.


Meanwhile, a rather familiar story is being played out in Spain.


“The elephant in the room is not solely the CPA but the Coalition agreement which is, in effect, an agreement to maintain the status quo in terms of how the country is governed”

+1 on that.

No tax increases, increments still being paid, universality sacrosanct and intact, high earners sacrosanct and intact, quangos untouched or simply merged, the legal profession still laughing all the way to the banks with State money, the medical profession still coining it, and a coterie of professions suckling gold from the NAMA teat. The PS retired and retiring and lauded onto gilded chariots for having rendered the State into this mess.
All being paid for with borrowed money and by consigning marginalised workers and the younger generation to a hopeless future.

@Joseph Ryan

Down here in Kerry when I ask why the voters support the likes of Haughey, the Tipperary rascal and the Mayo cabal the answer is “Shure Mike bi doeshnt dey all be hopin dat wan day, dey demselves will get a piece of the action.”.

I am in full agreement with what you have stated above. The nub of the problem is that this is Ireland with its own unique if somewhat perverted culture. Even the rescues are structured as clever scams. The governing model is the candy shop on Kildare street. We elect TD’s to operate the shop to give us all our share of free or discounted candy. God forbid that they would rein in excesses by the unions, professions, clergy, finance,……. They would protect incumbents that are contributing to the cause against competition. Our gov’t will fumble, bumble and stumble along by borrowing as much as they can wherever they can until the tap is turned off. Then it will be dem furriners stabbed us in the back, ’tis outrageous how dey have betrayed us. Of course the voters will swallow the swill whole and vote in another bunch of chancers. The dance will go on even after the music stops.

The ECB must be getting an inkling of what they are dealing with in Ireland.

Dan certainly does take his role as a member of the financial sector feudal hierarchy seriously, the disingenuity of the article nicely highlighted by the incredible line Jagdip Singh noted“I am not quite sure why the issue has recently sprouted legs again.”.

Indeed why would anyone still be upset about the usurping of national sovereignty and the 65 billion Euro and counting bill for making private investors whole. The article is mind blowing, though it is interesting that Dan O’Brien appears to be clearing the way for the Europhile right to retreat from their position that ECB threats and machinations were not behind the bank guarantee and the ensuing bailout.

@grumpy on the Labour Party

It would be very easy to characterise them in POR terms as the political wing of the public sector unions and nothing more than a middle class lobby group.

While it is easy to make fun of the Labour Party for their lack of class solidarity Fine Gael’s undisputed role as an upper class lobby group (the role of all EPP parties) is probably not something they want to fight an election on, especially with Fine Gael grandees Sutherland, Bruton and Dukes all up to their necks in the banking sector.

Also, the trolls for the financial sector on this blog and in the media would have you forget the primary cause of the European component of the global financial crisis.

This crisis was caused by the excessive power and influence of the private sector (in particular the financial sector) and has been made worse by German self interest and reactionary politics and the twisted ideology of the ECB.

Hospital consultants, overpaid as they might be, save lives and we would do well to keep our rage focussed on the bankers and the right wing who enabled, triggered and are prolonging this crisis.

This disaster was not triggered by the public sector, except as in they were too in thrall to the private sector. This is a PD disaster, not a Labour Party one.

Not many of you have not already grasped the significance of not having an Erin go Bragh Central Bank with its own note printing press instead of the ECB and the Euro. It is put quite plainly in the article linked below.



CMcC’s Sindo article yesterday was fair and refreshingly lucid but there was one element that was missing from the analysis: the household balance sheet. I do not think it is fair to treat all universal social benefits, such as child and old-age benefits, as the same.

A family of 4 with a total gross salary of 100k may be considered wealthy but they are also very likely to have a largish mortgage or other liabilities. The large headline gross salary, subject to a 52% marginal tax rate, can mask a very small amount of disposable income and any cuts or taxes on child benefit could lead to a large deterioration of the household balance sheet position. The end result could be an intensification of the mortgage arrears crisis.

On the other hand, a well-off couple in their late 60s may have pensions with a total gross value in excess of 60k per year, will likely have very few liabilities and may even have substantial savings. Cuts to free medical care or free travel will, of course, impact their standard of living but are unlikely to jeopardise their home.

Of course not all pensioners are well-off and there are many families with a large amount of disposable income. The solution to this kind of inequity is to introduce some form of asset tax or wealth tax. If individuals are asset rich and cash poor, the tax liability could be deferred to a later date. Such a tax is in force in other countries, why not here?

@ Mickey Hickey

The interesting element, which is constantly being overlooked/avoided, is that there is now, for the first time, in a series of self-inflicted economic disasters since the country became independent, a tap; and it can and may be turned off.

@ bazza

As a member of the older generation in question, I agree completely with your analysis but see little or no prospect of the solution you suggest being accepted. Sweden, for example, has abandoned its wealth tax.

The government is at sixes and sevens and the only solution that I can see is that advanced by Colm McCarthy, with the measures being suitably adapted to take account of extreme cases (assuming that this can be done, which is a big assumption).

The CPA has also to be revisited and the entire erroneous basis on which it is posited i.e. that there is such a thing as a homogenous public sector with a cast-iron and immutable system of relativities, abandoned. Governments in Ireland, of whatever hue, can run but they cannot hide from the unsustainabilty of the current system, notably because of the “pensions cliff” arising from unfunded public sector pensions.

Even a country such as Germany, supposedly capable of carrying the Continent on its shoulders, is facing difficulties. There is a major controversy at the moment in response to a study by the relevant ministry that one in three workers will not have a pension keeping them above the poverty line under present arrangements. Doctors are also threatening to go on strike because of a dispute with the sickness insurance agencies on their fees.

The discriminatory treatment between existing and new employees is, of course, also a scandal and in all likelihood contrary to EU law. But those in the lifeboat have no intention of moving even an inch to make life for new boarders equate to theirs.

Of course, it has yet to be accepted in Ireland that, as an elementary social justice, that everyone is entitled to a decent pension.

@ Shay
Labour are beginning to look very green. After their hollow threat of going to the country they’ll be forced to backtrack and probably vote confidence in OReilly.
Their leadership has never stated what it believes in. Apart from this bull of resisting social welfare reform at every turn.
Labour’s goose is cooked

@ bazza

By way of addendum, there is one point which I omitted and that is the rather obvious one that the Troika has no interest in micro-managing the Irish programme despite the best efforts of a truly pathetic collection of politicians to pass the buck to it. The Troika want the savings. How they are acihieved is is a matter for the politicians.

I fail to understand why the Coalition endures death by a thousand cuts – with all the political consequences that these entail – because of a mutual insistence on keeping their hands tied behind their backs, as CMcC correctly puts it, with regard the the broad policy decisions that it needs to take.

The state provides a subsistence level pension for all. After that, you are well incentivised to augment that by saving out of your current income. This should be more than enough for your needs. If you want more, I suggest you obtain a position as a High Court judge or equivalent. Failing that, maybe your German friends would look after you.
I do not see it as the duty of society to provide anything beyond the payments and incentives that have been promised to you.


Labour’s goose is cooked

That may well be the case but it seems more likely that their weakness will be for lack of principle rather than lack of compromise.

Colm McCarthy’s Sunday Independent article is mostly harmless but notable by its omission was any mention of the contribution of the repayment of bondholders in the IBRC (nee Anglo Irish Bank) to the current budget deficit. Is it fair to say that repayments to seniors in IBRC this year would comfortably have covered the deficit? It seems somehow pertinent.

The central issue remains the allocation of losses from the European component of the global financial crisis and Labour is at guilty as any Irish party of avoiding that fact as they suffer from the same weakness of Europhile affect as much of the European left.

Going back to Dan O’Brien’s article hasn’t the difficulty of preventing a credit bubble in the current iteration of EMU been done to death now? It is quite something to see only government failure in the global financial crisis as if the private sector somehow lacked any agency of its own.

The last paragraph of the article seems politically significant. I sense an impending “We have always been at war with Eastasia” moment.


“I fail to understand why the Coalition endures death by a thousand cuts – with all the political consequences that these entail – because of a mutual insistence on keeping their hands tied behind their backs, as CMcC correctly puts it, with regard the the broad policy decisions that it needs to take.”

Your analysis, and that of Colm, is in my view fundamentally correct. I actually think it is quite obviously so. I don’t though expect this particular column of Colm to get a thread of it’s own with either “cracking” or “agenda setting” in the introduction.

A few years ago it was possible to analyse the banking and “investing” industry and firmly conclude it wasn’t sensible to view it as sustainable – so why not do something proactive and start reigning back. The response was generally ” you can’t prove it, so get out of the way of my short-term incentives”.

Here it’s not much different, though there are particular length-of-time-in-office hurdles to be negotiated for ministerial pensions.

Some banisters were just along for the ride and weren’t that bright. Others questioned the wisdom of what was going on but breaking ranks would have been very costly. It was always possible to argue they were behaving appropriately and that “reasonable doubt” defense

The banisters may also be culpable but we should probably reference the mindset of bankers instead.

So called predictive text is probably to blame for political short-sightedness in some way I haven’t managed to fathom yet.

The.context for that above comment will have to be left to your imagination as a fascinating and insightful predecessor with a typo has been eaten by the blog gremlin.


The.context for that above comment will have to be left to your imagination…

I wish I had know that before I searched my own posts for errors of style and spelling, particularly since I found several.

@ Tull

Surely you can do better than this! We had, I hoped, moved beyond the idea of a subsistence existence to that of a decent minimum level of income for all.


Bad drafting…should have written “duty of government”. The duty of that august entity is to do as little damage as possible at the least possible cost.
Giving the goverment power over anything only encourages them.

You choose to ignore the full para. SW provides a minumum income. The tax system encourages you to augment that by long term saving.
Now if you want to change that to something else, I suggest you a) have the honesty to run for the Dail on a platform to change or b) become part of some unelectable self interest group and horse trade for change. The odd favour b).

By the way how much higher than minimum is decent, how will you fund it and who will you take it from.


When a politician or commentator talks about ‘society’ I feel a quango or a tax rise coming on.

@ Tull
You’re getting a bit side tracked. There are lots of different versions of how government and society should work. That’s why we have political parties and elections.

There is an honesty about the political divide in America that doesn’t exist in Europe. Europe is kind of overcompensating a bit. It knows the harm states can do all too well. As a response to that harm it set about building “decent” states with “decent” governments. And if kinda worked – Europe is now almost 70 years without a major war. If all European governments had spent within their tax intake and kept investment banking separate from deposit banking there would not have been a crisis.

So I think we are close to the model for a decent world. Most people know it. But one element that will have to be confronted is parasitic amoral banking

@ Bunbury

You are right there!

Maybe the Oxford Dictionary should be called in at this stage.

“the aggregate of people living together in a more or less ordered community”

The fact is that the most successful economies in the world are democratic communities that are more rather than less ordered. Aspiring to be “the best small country in the world in which to do business” is insufficient.

There can be little doubt but that the political debate in Ireland has hit its GUBU moment. Our political representatives now behave like inebriated guests at a wedding before the free bar closes.

The unsettling feeling that one has, however, is that a majority of the electorate are at least tolerant of this situation and will only cease to be when the roof falls in.

@ shay b

The gremlin seems to have belched-forth comment 71. Maybe it tasted too sour or garlicky, or was just indigestible.

ah the hoary old left wing concept of relative poverty so beloved of the tax loot and spend brigade. By that token about 50% of the traders in Goldman Sachs are at risk of relative poverty.

So you want to raise welfare levels from above the levels of our main competitors
*by borrowing-can’t be done
*taxing the rich who will flee
*taxing the higher paid who already MTR above the EZ average-not good for competivitiveness
*taxing the squeezed middle class battlers so creating poverty traps
*taxing everything that moves until it moves to the black economy.
Of course you would never ask the electorate as you would find that your First pref % would be inversely proportional to your proposed MTR.

AMke up you mind whether your fiscally sound or just another European Social Democrat who does not know that the game is up.

@ Tull

You will confuse those on this blog who seem to think that I am to the right of the right. I am simply observing that the most successful economies in the world – notably in Scandinavia – are those which I describe. It seems reasonable to me that (i) they must be doing something right and (ii) they should be the example which we might suitably follow.

They would not, incidentally, include Germany in respect of which you also seem to think I exercise a certain favouritism.

Never put you on the right. I just had you as an uncritical Europhile. The Nordics did some things right, like staying outside the EZ. Norway has oil, a huge SwF and a humongous RE bubble and high personal debt. Oil better not fall. Denmark and Sweden have overleveraged banks, high personal debt, the majority on I/O mortgages. Hopefully interest rates do not normalise.

Well one thing I know for sure is that a decent society isn’t based on unchecked money lending and usury.
Why does the bible have Jesus throwing money lenders out of the temple? Why does every major religion have rules on money lending? The Romans even had jubilees. Every society has to control the creation of debt.

Now now Eureka. JC had an unfortunate demise after he beat up on the Temple banksters and critiqued the religious leaders. 8-(

Anyways we are not a real democracy. Our government is an elected dictatorship and all the opposition can do is shout Niet! Niet! at every turn (until its their turn to divide the spoils of office). That’s why our voters behave they way they do. Stands to reason.

Someone mentionioned poor ould Labour. Never the same after partition left them stranded in a deeply conservative, right wing state. Apart from the first two inter-party coalitions they grabbed office as soon as they were in a position to do so. The idea that they are socialist reformers is utterly ludicrous. Pure political tripe.

If Labour abandon the coalition my guess is that Mikey Dee might do a Mrs Robinson and ‘decline’ to agree the dissolution of the Dáil – make FG coalesce with FF. That would be fun!

For many Irish people, the purpose of “exaggerating Europe’s part in our woes” is pretty straightforward. The innocent taxpayers of Ireland were somehow forced to repay the bondholders and we can’t get the money back. But we might still be able to force the innocent taxpayers of Germany and Framce to pay in our place. The hypocrisy is slightly bothering. The exaggeration helps.

We’d be better off sticking to the argument that by helping us out, they would also be helping themselves out. That way we might all end up feeling good about ourselves.

“All powers of government, legislative, executive and judicial, derive, under God, from the people, whose right it is to designate the rulers of the State and, in final appeal, to decide all questions of national policy, according to the requirements of the common good.”
Article 6
Note “Rulers of the state”….. Are these now the Troika? When the government says “The troika made us do it..” are they acting unconstitutionally?
Are the dictats of the Troika unconstitutional?
Remembering that the troika has no legal jurisdiction in this state whatsoever (European things maybe?)

If they are unconstitutional shouldn’t the government all policies implemented as a result of troika instructions are challengable in the courts as the government is not acting as “ruler” of the country.


“When a politician or commentator talks about ’society’ I feel a quango or a tax rise coming on.”

Unless you put ‘big’ in front of ‘society’ – then it’s cuts to services in the hope that volunteers will perform it for free.

A couple of months ago Sheila Colleen Bair predicted that the slow motion run on peripheral banks would accelerate. Today’s news out of Spain and Greece lends credence to her forecast. Massive intervention by the ECB could still arrest the run but political paralysis at the core and the unwillingness of Ireland and other Gov’ts to face facts stand in the way of a long lasting solution.

Sheila is an ex head of the FDIC (US) and is highly credible in my eyes.

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