EC Summer Review

A draft was leaked a few weeks ago but here is the Commission’s Summer 2012 Review of the Economic Adjustment Programme for Ireland which was officially published this morning.

21 replies on “EC Summer Review”

This is the mechanism to shovel another €1 billion liability onto Irish taxpayers to make a further payoff of private bank liabilities?

Some of the financial sector policies really stick in my craw, particularly no 5 Page 65;

“We will continue to phase out the ELG Scheme in an orderly manner. This important measure helped preserve financial stability through a tumultuous period but could be phased out gradually as the stability of the banking system becomes increasingly assured, which would also enhance bank profitability. An inter-agency working group led by the Department of Finance will by end-2012 develop a roadmap for weaning the banking system off the scheme while preserving financial stability and respecting fiscal deficit targets.”

So ELG is to be phased out ‘gradually’ because among other things it ‘would also enhance bank profitability’.

In a nutshell this is the EZ powers telling Ireland that it wants profitable banks back with no liability attaching. No liability attaching for damage done. The damage being the destruction of the State. A destruction that was aided, abetted and mandated by the EC/ECB and as is now clear particularly by Germany.

I would refuse this piece of chicanery. Is it completely beyond the capability of Ireland to show some liathroidi? Every cent should be recouped either by means of ELG or a special bank levy, until every cent or pingin of the €64 billion and counting is paid back.

Point 4, page 65 says that ‘deleveraging is progressing well’. Indeed it is.
It is progressing so well that virtually no funding is available to businesses.
AIB, according to anecdotal evidence, is in lending shut down mode.
Except of course for the ‘scam’ of withdrawing overdrafts, converting them to term loans, and calling it new lending.

And what is this gem, Point 5 Page 65;
“In parallel, we are actively working towards another rigorous stress test. In preparation for the stress test, and in order to further refine future loan loss forecast estimates the CBI is developing credit data and documentation remediation actions for the PCAR banks as part of their risk mitigation plans. The risk mitigation plans will be updated by end September 2012”

You cannot be serious!! Another stress test. The last one cost the State what, ?, ~20 billion. Another stress test is code for more cash. We are about to be mugged again. Presumably after the next €1 billion of unguaranteed bond money is paid.

Meantime Angela Merkel has sent our ‘technical negotiators’ off with fleas buzzing in their ears. Not a pfennig. Not a pfennig. Not a pfennig.
Not now. Not ever.

@Joseph r, seamus, Eoin B

Probs with posts disappearing.

Regarding this wheeze from the other day:

“With the lower short term rates, is there scope or benefit for Ireland to issue short terms bonds and use them to pay off some of the higher yield longer term bonds issued in the 2008/2009/ early 2010 time frame?”

My scepticism might have been right:

“We will only buy the debt with the remaining maturity of three years and part of the conditionality will be that the maturity structure of the debt may not change so that they (governments) cannot put all the new debt in the short end of the market,” he said. “And after the three years this debt matures, maybe we will buy new debt but there is an implicit limit on the amount of bonds we will buy through that programme.”

Happy Birthday Wolfgang!

Germany’s Thwarted Statesman

Wolfgang Schäuble Turns 70
A Commentary by Gerd Langguth

He was a confidant of Helmut Kohl, almost became chancellor and was struck down by a gunman’s bullet. Not many German politicians can look back on a life and a career as dramatic as that of Wolfgang Schäuble, the German finance minister who turned 70 on Tuesday. Here’s a critical appraisal of an exceptional politician.


My question re swopping expensive bonds in the lead to the the ‘bailout’ was not couched in terms of a wheeze. Ireland is holding a high level of cash reserves. Why pay >5% ? on medium term (?) bonds, when holding such reserves and when short term rates are now low.
Or are we forever until doomsday bound, even to such rates such as the final PN tranche rate.

On a slightly different topic, are agreements with the EZ/EC or whatever two sided agreement or just one way dictats.
The EZ committed to get an Ireland bank deal by end of September?
Ireland committed to pay an unguaranteed bond in October (1 billion)?
Ireland is expected to pay up. The EZ, a la Angela Merkel, can renege on its committments at its leisure.

Personally I would draw a line at this point. I would not pay that bond on the basis of the EZ failure to keep to its agreements.
Life is a two way street.

@ All

I found this article by Charlie Fell in the IT to be of great interest.

If there is no improvement in the prognosis for the international economy, does this mean that, whatever the IMF thinks or does, the prognosis for Ireland, as a “small open economy” must be even worse?

On the other hand, if the more accurate description is that of “an entrepot economy”, which MH suggests it is, might not the situation, counter-intuitively, be the reverse in that internationally firms will be seeking niches where they can best weather a seemingly unavoidable down-turn?

Developments in German policy will obviously be a key factor cf Derek Scally on Merkel’s press conference.


“Her own government – on track with its “debt brake” fiscal consolidation – has presented a new budget easing up on the austerity pedal ahead of the election, just as the economy shows unmistakable signs of cooling off.

“If we saved too much it would affect domestic consumption and Germany would have an imbalance again in too-high exports,” said Dr Merkel, acknowledging a common criticism of Berlin’s neighbours. Plans to cut pension contributions and reform taxes would, she said, “boost consumption and reduce imbalances”.”

The distortions in the German economy as a result of the policies introduced by Schroeder are now so evident as to begin to have political consequences. The SPD, however, seems incapable of profiting from the situation because, as in Ireland and other countries it is compromised by its dependence on organised labour whose only interest is to look after its own members. It can also not decide which of the troika of leaders in charge should stand as candidate against Merkel. (It has been noted that Merkel has more talent than the three put together).

As to her comments on Ireland, the media reaction was predicttable. She could hardly have disowned her own finance minister.

@ JR: “Life is a two way street.” Yep! But which is UP and which is DOWN?

@ DOCM: The knowledge and understanding of the switch from a Production-Consumption economy to a Financial (credit and debt) economy is slowly gaining traction. Like dry rot. Takes a while until you notice the ‘smell’: then its too late!

You cannot ‘adjust’ (as in tweak) a Financial-based economy without a recognition (in principle) that accumulating debt will eventually stifle it. Its getting past that principle bit that has everyone is a blu-fit tizzy (and with ample justification). God knows what sort of ‘event’ will need to happen to get folks to act decisively. We have had Lehman, AIG and a few others but these were insufficient. If only as much effort been applied to a genuine resolution not shoring-up the status quo. maddening!


I didn’t want to over-complicate things, so I assumed you meant what you said.

If you want to keep the thousand allowances, the bond will be paid. It’s a two way street.



The last thing we need is another “event”. The indebted West got itself slowly into this situation because of a crisis of rising expectations. The only solution is to exit the situation slowly by reducing expectations and in as equitable a fashion as possible. With regard to the latter requirement, could there be any more damning indictment of the approach of our present excuse for a government than the debacle in relation to public sector allowances.

My question, however, related to the true nature of the Irish economy and the possibility that it may be a great help at this present juncture.

A thread ought to be started on Micheal Hennigans piece published today on the governments on going ‘cowardice’, discrimination and abject failure to tackle the unemployment crisis where the cost to do so would be to expend some political capital with what ought to be an illegal cartel that continues to blackmail the state….errr…sorry, i mean contiinues to afford us the gift of ‘indsutrial peace’!


True to form – the subtle attack on social democracy – this time of the German variety. Yes DOCM, we know, twas the Social Democrats wot caused the Financial Crisis – shur the Fianancial System had nattin to do with it …..

@ DOCM: I might buy the ‘gradualist’ approach to our intractable economic (or more correctly political) mess. It did indeed take 4 decades to reach this impass, but debt/insolvency ‘events’ tend to be (relatively) short and brutish in character. So I am advocating a short and brutish exit. The ‘gradualist approach may lead to the same outcome but I have grave experiential doubts about that. If the Titanic could’a stopped quick – history would have been different!

Just on the principle of things. I am opposed to the public sector or ANY sector getting ‘allowances’. I’d strip those zombies in the Oireacteas of all their allowances – except a Free Travel Pass. You get a wage (or salary) and you make do with that. Take it or leave it. “You no likee: shag off!” “Get yourself another employment – if you can!”

Our diminishing cohort of taxpayers are not money trees. Its one thing to pay for welfare services for those who are in real, and desperate need. Its another thing entirely to ‘Blow-job’ those who are un-needy. And ‘getting back’ to the market is simply an excuse to continue with fiscal deficits – ad infinitum! Its shameful the lack of outrage from our econs. They either don’t know – or care not to know! Which is it lads?

So. “Who will tell the people?” Looks like there is a deficit of applicants – with the necessary testicular equipment. Do we have to leave it to the Grannies of Ireland? Females have this nasty proclivity for gelding their adverseries!


“If you want to keep the thousand allowances, the bond will be paid. It’s a two way street.”

Personally, I am not in receipt of any allowances. Not only that but the ‘State’ pension, in my case, is now gone out to 67, if I make it.
By that time I will have worked 17 years longer than many of my old school classmates who joined the Garda and who have long since retired on pretty good pension. Even now I note that the Troika want to cut the State contributory pension. Why have they not proposed to cut the State employee pensions?

Perhaps the Troika get one of the 1,000 allowances?


But to the more substantial point.

What are the plans to recoup the bond money from the financial sector? And if there are no plans, why not?

We all know that the EZ can impose odious debts on the country, even without one line being written on any piece of paper.
But can they then ring fence the financial industry from bearing the cost?
Or is this another unwritten imposition from on high?

Further what is the purpose of the next stress test. Who is to be stressed as a result? I understood that we had the most comprehensive test in the whole wide world. Why on earth would we need another one?


“you” refers to the country, not you individually.

There will be a looking-down-the-nose by many at the publicity generated in the msm by the allowances fiasco on the grounds that it was only €75m and only economic illiterates would make a fuss about it.

But the reality is that it demonstrates, to any foreigners who had any doubt, that Irish governments are a joke as an opponent in negotiations – they don’t even have to be openly threatened with anything when faced by powerful groups, they don’ t want the potential embarrassment if they loose. It would look bad, almost as if they aren’t really incharge.

Any mystery still about why those bonds have all been paid out?


No problem. I understood that the reference to ‘you’ not personal. But it gave me a chance to vent on a ‘retirement’ issue that is close to my heart.

The allowances issue says it all about the ‘government’ and who they govern for.
So, no mystery on the bond repayment.

Still the additional stress test etc, why ELG is being given away!!!!


‘On the other hand, if the more accurate description is that of “an entrepot economy”, which MH suggests it is, might not the situation, counter-intuitively, be the reverse in that internationally firms will be seeking niches where they can best weather a seemingly unavoidable down-turn?’

I found this old paper from none other than PH, in which he more or less endorses MH’s view:
‘We suggest that the activities of these sectors can best be seen by making an analogy with the activities of entrepôts. In the entrepôt, warehousing, logistics and other activities are applied to valuable physical cargoes which in turn are shipped in and out on costly vessels and aircraft. But the entrepôt does not actually produce or substantially modify the cargoes or the ships, and these are not included in the export or production data of an entrepôt.

In much the same way, the activities of these unusual Irish manufacturing sectors do require the intangible technological and other resources that are paid for through royalties , license fees and profits to parent companies; but the intangible resources are not substantially modified in the process and can be seen as analogous to the cargoes passing through the entrepôt, or even to the ships carrying the cargoes’

The TNCs will no doubt continue to use Ireland for creative accounting purposes, with a positive knock on to GDP and so to debt/GDP ratio. All pretty good for ‘market’ spin, but you’d have to wonder how long it will take for the SME credit crunch, the steady PS shrinkage, and the inexorable rise of skilled emigration to bring our domestic sector to its knees. The rising proportion of long-term u/e is a foreboding metric, and the post-Croke Park landscape is unlikely to be pretty or peaceful.

@Paul Quigley

The next agreement must not be held in Croke Park. Such shennanigans are bringing the GAA into disrepute.

Let’s hold an open contest as to where the follow up ‘talks’ (which presumably will exclude private sector workers and private sector workers with no work, workers leaving the country, new entrants to public sector on yellow pack salaries, etc) will be held. Such solidarity is awesome and deserves a more suitable and Convenient Public Venue!

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