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The main information that I got from the article is that the IMF is experiencing the same intellectual struggle in its ranks that we see here with the church of Almighty Austerity and its only child the Blessed Confidence Fairy arrayed against a shockingly ignored evidence based community.
“A great deal has been achieved in Portugal over the past 18 months in terms of structural reforms and fiscal consolidation, with great sacrifices and the determination of the Portuguese authorities and the Portuguese people,” Mr Selassie said.
“But debt remains high. To ensure full recovery the country needs to contain it.”
It has all the hall marks of the austerity cargo cult sermon, firstly an admission that the current approach is causing enormous suffering without any appreciable gains, secondly an imprecation to pursue it with more vigour. If they get government debt down and practice internal deflation Portugal could be the Somalia of the Iberian penisula.
It should not need repeating but I feel I have to. “Structural reforms” and “Fiscal consolidation” are not meaningful ends in themselves, they have to achieve something worthwhile. This focus on austerity and preserving the financial sector is the right’s version of Soviet farm collectivisation.
EU Summit Strife
Berlin and Paris Compromise on Bank Oversight
By Carsten Volkery in Brussels
Ahead of this week’s European Union summit in Brussels, Chancellor Merkel and French President Hollande staged a public battle over euro-zone reform. On Thursday night, however, the two quickly reached a compromise on the introduction of banking oversight. But difficult questions remain.
Things seem to have moved on from last night and the lady is turning and twisting…
“As Reuters reports:
Merkel said it would take time for the new supervisor to be fully
She made clear that would not lead to the bloc’s European Stability Mechanism (ESM) rescue fund taking over liability from member states such as Spain for past bank rescues, and she posed extra conditions that some diplomats said seemed designed to ensure there will be no capital injections before next September’s German elections.
“There will not be any retroactive direct recapitalisation,” Merkel told a news conference. ”
If recapitalisation is possible, it will only be possible for the future, so I think that when the banking supervisor is in place we won’t have any more problems with the Spanish banks, at least I hope not.”
Apparently the EU honchos are now scheming a new burden sharing deal for legacy debt but I cannot see that happening ahead of September next, if ever.
So it look like we will have to pay the 3 billion next march for Anglo
” “Structural reforms” and “Fiscal consolidation” are not meaningful ends in themselves, they have to achieve something worthwhile.”
They do achieve something worthwhile for those advocating them i.e the creditor countries and the financial, political and indeed intellectual elites. They push debts and losses away from their door and down the food chain.
Just how far down the food chain can be seen in Greece.
This is a war of wealth versus the rest and wealth has won every battle so far. But there is a long way to go yet.
Re Merkel’s latest well aimed crotch kick. Irish officials didn’t feel it, you can guess the reason.
“Officials at the EU summit in Brussels are trying to clarify comments by German Chancellor Angela Merkel that there would be no retrospective direct recapitalisation of banks by the permanent bailout fund.”
Merkel comments put Irish hopes of debt deal in doubt
German chancellor Angela Merkel has ruled out the possibility of using the euro zone’s rescue fund to deal with back-dated bank debt, delivering a major blow to Irish hopes of securing a deal on its legacy debt.
Re Merkel’s latest well aimed crotch kick. Irish officials didn’t feel it, you can guess the reason.
What could be a better sign of solidarity with our European Partners[TM] than letting ourselves be beaten repeatedly until insensate thus demonstrating our strong determination to meet our commitments under EMU?
You can be sure that Germany’s current government finds our continuing stoicism gratifying, entertaining and useful.
I think you can estimate the general level of gumption in European policy circles in Ireland by how timidly they took Jörg Asmussen’s stern lecture about doing exactly what we were told or facing unspecified consequences.
That programme is on track. Any deviation from that programme should be considered very carefully indeed.
Our silver haired Petainists are still at it today. Embarrassing.
Of course Merkel wants to humiliate Spain and force it into a bailout!
The prolongation of the European component of the global financial crisis and the bullying and humiliation of the peripheral states has served Merkel, her political fellow travellers in Europe institutions and Germany’s banking sector very well indeed - it will not stop until there are political, personal or financial costs to it continuing.
Cue more bowing and scraping from Ireland no doubt.
“Angela Merkel has ruled out the idea of “legacy debt” being brought into the bank recapitalisation plan:There will not be any retroactive direct recapitalisation. If recapitalisation is possible, it will only be possible for the future”
A seismic change? The winning post has jost got lost in the fog again!
But ….. why should Angela do any differently?
Honestly Irish people are so grandiose sometimes. If you f*** up you can very easily get killed. That’s life.
The only way forward for us remains, default, de punt, and devalue. Tough path but better to do it now before oil goes crazy
I totally agree with you. I am sick to death of the big bad Germans made us do this I have taken out bank loans as I am sure everyone else has, strangely I never remember being asked “Sprechen Sie Deutsch”. This was 70% homegrown and the other 30% was also our own fault for being so stupid and giving a blanket guarantee of 440bn, renewing it, hiding the letter from Triche and continuing to this day with the folly of paying unsecured, unguaranteed debt.
Then of course having worked in Germany it is entirely predictable that they see the salaries being earned here, compare them to their own salaries and say. Es tut mir schrecklich leid aber nein danke!
You presumably have noted Stephen Donnelly’s accxount of meeting with the Troika, the relevant part being that they did not insist senior bank bonds be paid out in full - rathe, according to them that was an Irish government idea.
Got it. Michael thinks he knows whose in charge…
“Mr Noonan said that the next phase was for finance ministers to work out the criteria that would be applied in respect of bank recapitalisation by the European Stability Mechanism, including whether its recapitalisation will be retroactive in respect of Ireland.
The minister added that different countries will take up different positions, but that Ireland knows “who’s in charge” and that is the heads of States of the 27 European sovereign member states.
From an Irish point of view, Mr Noonan said that it had been a very successful summit because there was an “absolute commitment” to abide by the agreement signed on the 29 June in respect of bank recapitalisation.”
The issues at stake are wider than whatever the immediate negotiating uproar in the Irish media and blogosphere happens to be. The parameters of the problem have been known for some considerable time. The burden of debt affecting the Irish economy is not primarily due to legacy banking debt but to the continuation by the government of a policy of spending enormous sums of money beyond what it is raising in taxes.
This cannot continue. All the huffing and puffing in the world, and associated jumping up and down, will not change this reality.
A wider negotiation, with bigger players, is taking place and Ireland is caught up in it. It would be more productive to concentrate on the game on the pitch rather than scuffles on the terraces.
The problem is that the Irish government actually seemed to think it had got some sort of commitment to write off a significant part of over 60 bn when it was quite obvious to probably most contribute to this blog that they had done no such thing.
The “they shouldn’t tangle with me too often” stuff was bizarre.
They got elected on the basis the Irish high costs / high salaries model need not be disrupted because they were not FF and would get a lot of debt written off, go back to the market and carry on as before. They didn’t understand the concept of a balance sheet recession.
No hardball is or has been available while CP must be funded, and every player in the EZ knows this.
They are currently looking for something to spin.
By the way the gilt market is apparently convcinced the fix is in.
If you take 64,000,000,000 off the general government debt the debt situation would be less onerous. Yes, the day to day overspend will eventually have to be tackled. Depending on growth is not a good strategy given the European and world uncertainties but saying that the legacy bank debt is not the primary problem is disingenuous. It started the rot and needs to be excised.
Btw, Elderfield says the banks need higher margins…I’m puzzled. What happened to all the 1% money they got for three years. They must have stuffed it all into government bonds. Also, the banks appear to be mounting a concerted plan to drive down rates for deposits. Where are the Competition authorities ( EU and Local). Anyone any ideas on this area.
Merkel doesn’t give in and puts off banking union to 2014
At the European Council of 18 October, the EU heads of state agreed in theory on a union for 6,000 banks in the eurozone but which will not see the light of day until 2014. “The Chancellor’s has tied the appointement of single supervisor to the German elections,” writes the Madrid daily.
There is no fairy godmother. We got up on a Spanish charger that fell at the first fence.
The irony in all of this is that there seems to me to be considerable sympathy for the Irish situation and I have no doubt that something will eventually be worked out. This will not be because Irish eyes are smiling but the fact that the Irish economy belongs in the developed North i.e. the First Division not the Second Division of the South, and the EA collectively needs an example of a patient emerging from the intensive care ward.
But we have to concentrate on the things that we need to do ourselves. The upcoming budget will force such concentration.
EU needs to get worse before it gets better (it will get better by the way). But for now there needs to be break up and absolute default with destruction of the sovereign bond market and crappy banking.
Once that is all out of the system it can come back together bigger and better and oddly with all of Angela’s budgetary ambitions.
A sovereign should never ever ever borrow again from debt markets. After 2-3 years of global turmoil we will hopefully eventually learn to permanently kick money lenders from the temple of what is dear to humanity.
Missed your last post.
We spent 800 years waiting for European rescues from the British. Never came. I for one will do everything in my power to ensure that the Irish nation does not make the same mistake again. I have children. They’re not going to languish waiting for Fritz to grow a heart.
Two choices - Iceland or a disgusting fawning little beggar worthy of nothing but the greatest contempt
EU leaders have decided to move forward with a banking union, but much more slowly than they had agreed last June. German procrastination and collective timidity are to blame, laments the Daily Telegraph’s Brussels correspondent.
“By the way the gilt market is apparently convinced the fix is in”
Maybe it is, Grumpy. Maybe Angie is just playing to the gallery. Maybe this austerity lark is f@#$ed and the market thinks the ECB doesn’t have the balls to stick to the pointlessness of it all. Maybe growth is more important than hairshirts. Maybe it will all come to a head with the funding cliff in the States. Maybe the 30 year bond rally is nearly up. Maybe it is all up in the air and nobody has a clue.
It is unconscionable that the present two-tier health system should continue another day. Do you expect “official lenders” to give us money on favourable terms to allow it to do so? Not to mention all the rest of the nomenklatura, either working or on a pension, being paid from the public purse well above the rates being paid in the countries of those official lenders.
That’s a lot of “maybe’s”! I think grumpy is right for the reasons I outlined above.
We are effectively back where we were before the budgetary belt-tightening to meet the Maastricht criteria started. The basic economic parameters impacting the countries involved have not greatly changed. The markets have woken up to this. They also understand the logic of the German position i.e. that of structural but non-permanent assistance to change those parameters.
However, as the Charlemagne item I linked to above illustrates, these are not the only countries that need to change. Rent seeking is as widespread in the creditor countries as it is in the debtor ones.
“You presumably have noted Stephen Donnelly’s accxount of meeting with the Troika, the relevant part being that they did not insist senior bank bonds be paid out in full - rather, according to them that was an Irish government idea.”
I thought it was Geithner’s idea . We’ll never know the full extent of what actually happened really, will we?
Last June it took Germany a few days, through Schaeuble, to start backsliding on the agreement. Today Merkel beat him to it. The ink literally was not dry on the document.
Clause 12 means nothing, because Germany has no intention of allowing it to be implemented either soon or at all if she can help it.
My heart is with you on this. The problem is that the Irish beneficiaries of current policy have no intention of foregoing any of their privileges, even at the expense of their children or grandchildren paying for them. Joyce had the correct measure of the Irish.
Either way we should put up more resistance than we are currently doing.
In my mind we should have declared a State of emergency a long time ago, balanced the budget mainly through tax increases, stopped payment to bank bondholders and ELA notes (EZ solidarity notes) and put ourselves in a position to talk from a standing upright position.
re: Economist article.
My view is that far too much damage has been done to any concept of a cooperative Europe to even remotely consider further European integration, as the article seems to hope for.
It is simply a non starter at this point. The best that could achieved is to stabilize the economies and country borrowing rates low enough to allow some kind of growth to return.
But the analysis of the problem as being one of too much debt will have to be discarded, in particular the SGP 60% will have to be raised to ~100%, in the medium term. The debt may be too much debt in normal times. But these are not normal times. At the end of the day, is it better that a relatively small percentage of relatively well off financial people lose some of their wealth, or, that a very large percentage of people are confined to an angry scrapheap for years to come.
Europe is faced above all with moral dilemmas, nationalist agendas versus the common good, old versus young, and rich versus poor. Once again Germany is right at the centre of these moral dilemmas.
Europe is on fire. It is one thing to refuse to pay for the fire engines to put out the fires. It is quite another to block the fire engines from arriving or to delay them until all buildings are destroyed save the one you are in yourself, because you believe the fire enough away not to harm you.
That is currently what Germany is doing.
The point that Charlemagne was making is that the euro may be having the opposite impact to that which it was expected to have with regard to the single market, a fact which the countries in the EA need to wake up to; especially Germany.
If this were to happen, it might also be the one development that will keep the UK in the EU, a matter to which we can hardly be entirely indifferent.
WORLD VIEW : A new balance must be struck between states, markets, corporations and civil society
FIGURES FOR the growth of worldwide financial markets in recent decades give a startling picture of how the sector has come to dominate economic activity in many parts of the world. Estimates for the value of financial assets (excluding derivatives) rose from 108 per cent of annual gross world product (GWP) in 1980 to 400 per cent in 2009.
I am sure that there is. But it is not the main issue, rather a distraction. Anyone who has any doubt about the fact that the health service, such as it is, is in the iron grip of various organised factions, defending their interests and, of course, front-line services, should go through the ordeal of having someone in the family experience it.
Not so fast… I have had someone in that position.
The case was a bit complex but the treatment was top notch. The docs did their job. But the outpatient clinic was chaos (management), the bed situation dire forcing cancellation of the procedure twice and hospital barely coping.
Let’s analyse this problem systematically. Simple question (and I don’t know the answer) but what proportion of the health spend is wasted on management? And what is the skill set of management? I have a brother working in a health care field - 100% private who often comments re this but I want to know the stats. Breakdown healthcare spending
That was also my experience. You will have to address yourself to another for the stats. I do not have them.
My point is threefold (i) the overall levels of pay, relative to working hours, are too high (ii) the system is inefficient because of demarcation issues e.g. the fact that the ambulance service is now clearly divorced from the control of those actually in charge of patient care and, most importantly, (iii) the system of access is discriminatory and unfair.
I do not disagree with your point about excessive relative expenditure on administration. I simply do not believe that correcting this will correct the system.
Agree on most things. That’s an excellent piece of an analysis you linked to.
My difficulty is this : the people most responsible for inefficiency and wast during the boom are actually doing better now than before it.
We need to look at the skills people have and the quality of jobs they do and start supporting those who deserve it. Before you say the private sector does this well I think it’s worse than the public sector in some ways. If you think of bankers as being the managers of money flow to the private sector you can see that they have messed up too but there isn’t any sense of a clear out at that level.
Lets protect and encourage people with skills (both private and public sector) and lets start targeting those who are not doing a good enough job. It’s a simple idea but the problem is that those who were incompetent during the boom have positioned themselves to oversee the adjustment in the bust and unsurprisingly are protecting themselves.
The realisation that nope, there is no Frau Dr FairyGodmother is galling. But at least now we know. I have long suggested we adopt a palmerstonian perspective. What are in Irelands best interests now? I suspect few would include the repayment of the wretched Anglo pronotes as being high on that agenda.
What people say is one thing. When what they say is backed up exhaustively by persuasive fact is another. It is a pity that there is not more of it about.
Incidentally, in terms of what posture might be taken, the one that occurs to me as far as the academic community is concerned - following your suggestion - is that it should set up a shadow cooperative equivalent of the Congress Office of the Budget, or whatever it is called, to provide forensic and unbiased options for the budgetary arithmetic. The FAC, of course, has now come into existence but it lacks the necessary firepower in terms of administrative back-up.
One could then see where Lord Palmerston might fit in.
Correct , burn the PNs & balance the primary budget in Dec by cuts in public pay , transfers and bringing forward tax increases.
Then if necessary leave the euro. I aspect we would be followed by 3 or 4 others.
I have never understood why, if your primary deficit is zero you need to keep the money lenders onside at all. Total default is a real option. Sovereign debt is like heroin - Troika is methadone, Iceland is cold Turkey. Cold Turkey is best
If you are a saver - and that includes you if you have a funded pension fund - then you are an investor.
If you then invest entirely in equities, physical commodities or “real” assets like real estate, paintings etc, you are not a “money lender” but if you invest in debt/deposits, whether short or long term, you are a “money lender”.
The argument for a State accessing debt markets is in theory about allowing the State to borrow if necessary to fund increased current spending during a cyclical downturn, or to invest in capital projects.
Currently the borrowing is being used mainly to fund unsustainable non-cyclical current spending along with some cyclical spending. The very predictably, capital spending which might make sense has been reduced significantly in order to window dress the national accounts and avoid significant reductions in unsustainable current expenditure.
I wonder if 1) ministers, TDs and senior civil servants had to use a unitary health service themselves, would it take a decade of shovelling money into the dual system during a bubble, and then another half-decade after the start of an global downturn, to still find the ‘world class’ health service elusive;
2) ministers, TDs and senior civil servants didn’t have a lavish personal scheme (a TD gets a 50% annual payout after 20 yrs of service; Between them, attorney generals who had spent on average possibly less than 3 years in office; David Byrne, Dermot Gleeson, Anthony Hederman, John Murray, John Rogers, Peter Sutherland and Harry Whelehan received pensions of €367,015 last year, regardless of other earnings each ), would the system available for a minority of the private workforce with an occupational pension, be in such a parlous state?
3) absent the euro, ministers, TDs and senior civil servants would have more fire in them to address a serious emergency rather than waiting for favours from others?
The Government this week was reported to have found €55m to plug the hole in the pensions fund of airline workers at the Dublin Airport Authority. Nice for them but it’s mouldy bread for others.
Before some idiot cries ‘class warfare,’ I have in the past noted the contrast in the treatment of taxi drivers a decade ago and farmers for decades. Meanwhile, two ministers, in Justice and Health, are expected or not, to be radical in reforming the very systems that made each of them very wealthy.
@ brian lucey (@brianmlucey)
Your suggestion is akin to the Chinaman burning his house down, to roast the pig.
Why not at least try to roast the pig in a conventional way first before pushing the nuclear button? After all, the record of project and crisis management leaves at lot to be desired.
It is likely that there will be agreement to reduce the short to medium term debt burden. However, several Eurozone countries, besides the current struggling ones, injected public funds into banks during the crisis, including Germany, France, the Netherlands and Belgium. So this issue of ‘legacy’ debt is not as simple as it may seem.
The economy had no sustainable growth in the past decade and anyone with cop-on knows that the country is living beyond its means. There is no Irish fairy in the ether, or magic wand that will soon be waved.
Judges, themselves former lawyers, have expressed outrage about legal fees that the central bank itself found acceptable. Medical consultants still think they’re on ‘mickey mouse’ money and so on.
The State pays lawyers about half a billion euros each year.
So we’ll default (maybe, I would say) but why is there so much silence on radicalism that wouldn’t risk burning down the house such as happened during De Valera’s economic war?
Collect signatures from colleagues for a radical budget, that would obviously involve personal sacrifice — but isn’t the problem that this is more painful than assuming there is some free lunch by sticking it to foreigners?
Meanwhile, Minister Bruton is on the US West Coast begging for jobs.
It is classic Merkel as the fund would be funded by an FTT and, presumably, only those signing up would qualify. She also has taken up Steinbrueck’s idea that any banking resolution fund must be funded by the banks themselves (an entirely logical one if the “vicious circle” is to be broken).
Another curious point with regard to commentators on the FTT is that most fail to note that two of the founding members of the EU, the Netherlands and Luxembourg, have failed to sign up. The prospects for its early implementation are not rosy. However, it sells well on the political hustings.
The Spanish alliance having failed, the French have now stepped into the breach. But one wonders how productive it will be as it could be read as rather helping the French to make Merkel look bad than aiding Ireland’s case. She is evidently not going to budge in her management of affairs with France until Hollande is much further into his mandate - even until after the November 2013 federal elections - and the performance of the French economy can be assessed or, rather, the action the new government has taken towards getting the French budget in order.
Lastly, the next seven-year multi-annual framework is supposed to be agreed in November and Cameron is already limbering up to use the UK veto. This is a matter in which the rotating presidency is intimately involved (unlike the European Council and the Euro Group that are under independent appointed chairs; Van Rompuy and Juncker).
While the resolution of the euro crisis can be said to be still on track, failure to agree on all other fronts can hardly help her election prospects.
From rte ..
“In a statement, he said: “The Chancellor has used several opportunities to reiterate strong support for the efforts made by the government and the people of Ireland for a full return to the markets.
“The European Council has just taken important decisions to advance the project of a Single Supervisory Mechanism, it is now our common task to complete the legal framework for it by the end of 2012 and to work on its operational implementation in the course of 2013.
“The later process of recapitalisation of the banks will be a complex one with negotiations at each stage to address important issues.
“Ireland and Germany will continue to cooperate closely in order to improve the sustainability of the Irish programme and ensure its successful outcome.”
“the later process….. After 2013?
In other words…Germany will ensure that you cut and tax sufficiently to pay back ever cent and then Germany will look at how much money you need for a further recapitalization of the banks which is inevitable around 2014.
Or as Ollie famously said…
Pacta Sunt Servanda
Kenny lacks leverage in his dealings in Brussels with Germany and Finland. Leverage has to be created and Germany has handed him a good case on a silver platter surrounded by parsley and cherry tomatoes. It is clear that Germany is putting sand in the EZ and ECB gearbox. Ireland is one of many countries that are negatively affected. Ireland should now be rallying the affected countries to make the EZ a confederation of the willing. The unwilling would be presented with terms and conditions on a take it or leave basis. France would then become the lead partner in a nouveau Euro regime.
We could start by apologising to Portugal for setting bad precedent by entering into an unlimited liability agreement in backstopping our banks. To ask our Gov’t to apologise to the Irish people for burdening us with debt over 100% of GDP and increasing would not be fruitful. We could demand that they stop digging the hole deeper immediately. But then what would the people peeping out from behind the lace curtains think. Respectable poverty is something that does not frighten us.
off topic, but this “sand in the gears” expression people use is a bad idea. Originally, when engineering tollerances were wide by necessity ,throwing sand in gears was something engineers did to keep them working smoothly - a sort of damping function. It appears in historical contexts, but in a modern context it suggests quite the opposite.
It is, nevertheless, very significant that the two of the naysayers are founder members of the EU which underlines the fact that the difference of opinion on the introduction of a FTT is deep-rooted. None of the countries you mention would accept your description of them. Of course, it is all in the eye of the beholder.
We may, no doubt, expect a tsunami of the usual fixated coverage in the Irish media tomorrow. One would imagine that they could deal with more than one topic at a time, especially when they are inextricably interrelated.
It is interesting to note, for example, that France and Germany are already agreed on the global envelope for agriculture for the period 2014-2020.
Scariest thought this Halloween is that you might be close to government thinking.
You have no joint up thinking, no positive vision for the future and are completely fixated on he politics of envy. You’re not Pat Rabbitt - are you?
Actually that was a stupid last post. You’re thinking is more aligned with a sect in FG. It’s kind of like a tea and scones party. It’s neo-con in outlook but hides behind a veneer of centre rightism. And the neo-con movement has simply one underlying tenet - nobody deserves any money apart from me and people like me and people I like. It’s grand and all that but it’s just the political expression of base human motivation. It’s not clever and not new. It has been around for thousands of years
You say the nicest things. Question, do you think the current model is sustainable- running a day to day deficit of 4-5% of G.. Or put another way 20% of households pay in while 80% draw out. Or put another way those with Job and pension security earn more than those without on a like for like basis.