Update on Ireland Post author By Philip Lane Post date December 18, 2012 FT interview with Enda Kenny here. IMF Completes Eighth Review Under the Extended Fund Facility with Ireland and Approves €0.89 billion Disbursement. Press release here. Categories In Uncategorized 16 Comments on Update on Ireland ← Update on Greece → Q3 National Accounts; Q3 BOP 16 replies on “Update on Ireland” Am I right in thinking that our debt is still growing? I’m no expert in these areas but it seems that all we are doing is changing the makeup of what we spend our tax take on i.e. more of it is spent on interest on debt and less of it on the citizens. If I were the proverbial Martian landing here for the first time I would wonder: Is this all part of a dastardly plot? “Because of the fact that the country that I lead politically was the only one that had a policy imposed on it from Brussels and from Frankfurt at that time – that a bank would not be allowed to fail – we’ve had to shoulder a unique burden from any other country in Europe.” Is that really true? How many EZ countries bailed out their banks also, with the implicit carrot of continuing ECB liquidity support. And what about other reasons for protecting national banks – the UK didn’t bailout and nationalise because “the ECB told them” Isn’t it astonishing though that after four years, An Taoiseach can make this statement and we still don’t have the record of communications from the ECB to back up the statement “they made us do it, sir” @ Jag And even more astonishing that Enda Kenny and his merry men boomerang between having Europe buy out the shares in Irish banks and relieve the debt that way or do a ‘deal’ on the promissory notes and relieve the debt the other way – either way will do, so long as poor ‘Paddy likes…the story.’ One might assume that the purpose of a 45 minute interview with the FT is to say something politically meaningful, either in respect of Ireland’s agenda for its EU presidency or how this government proposes to reconcile its EU responsibilities during the presidency with its (current) domestic political imperative of securing a deal on the PNs before next March. Instead we get another recitation of the fairytales with which we are becoming all too familiar. More spin, more blather, no substance. A couple of quotes from the IMF report: “Market conditions for Irish sovereign debt are much improved following the June 29, 2012 announcement that the Eurogroup is examining the situation of the Irish financial sector with a view to further improving the sustainability of Ireland’s well-performing program, and also of Outright Monetary Transactions by the ECB.” And from Mr David Lipton, Acting Chair: ‘”Ireland’s market access would also be greatly enhanced by forceful delivery of European pledges to improve program sustainability, especially by breaking the vicious circle between the Irish sovereign and the banks. By supporting medium term growth and debt reduction prospects, this would help avoid prolonged reliance on official financing.”‘ @ Jag It’s strong language, amounting to ‘Europe forced us to bailout our banks against our will’. It’s a shame he wasn’t challenged further on it. ‘So, to be clear, the ECB forced you to Gaurantee and bailout your banks?’ At least he is beginning to speak publicly about the issue. Hopefully a first step in moving things forward, even if it is very slowly. in the end though, a positive and meaningful result is the only thing that matters. Can-kicking has its limits…. “…forceful delivery of European pledges to improve program sustainability, especially by breaking the vicious circle between the Irish sovereign and the banks.” Per the other thread, the circle is virtuous rather than vicious sometimes. Last actual sighting of Irish vicious cycle was …? Exactly how a deal to transfer bank/sov tail risk somewhere else is structured should be thought about. Quarterly accounts are out. GDP is up a 0.1% year to date while GNP continues to defy gravity at +4.4% ytd. I have to say that if the tone of the article and the quotes from Enda are accurate and in context, then I think the line taken by him is the correct one. It is a pity that he wasted the last 18 months pretending that everything was going to be just fine, that growth was around the corner and that recovery could be manufactured through an exercise in marketing and spin. Could it be that the penny has finally dropped at Cabinet that the only way we we will recover is by forcing the issue of some form of debt restructuring? And not taking no for an answer. @Bazza The penny seems to have dropped alright …but at the wrong time with Angela in election mode. @Gavin The IMF appears to be supportive but they cannot write off debt. Only Angela has the power to coerce her compatriots into a deal. And that’s highly unlikely, at least before September. So it looks like we have to pay 6b in march. “He insists that his government will push the burgeoning list of unfinished EU business – next steps towards a eurozone banking union, finalising laws giving Brussels more authority over national taxing and spending policies, a deal on a new seven-year EU budget – through the EU’s Byzantine legislative process.” Maybe the govt can find the time to drag the local legal system into the first half of the 20th century . You wouldn’t want to rush it and all. @ Jag It is not strictly true, but my read of the sense in which could be true is: Ireland chose to guarantee its banks on September 28th, 2008, without realizing the extent of what it was guaranteeing. As the full extent of what had been guaranteed emerged in time, over the following months and years, successive Irish governments tried to make the case for burning some of the bondholders. However the ECB and Commission vehemently opposed this and prevented it from happening, arguing that it would lead to a contagious collapse in confidence in the entire European financial system. As “good little Europeans”, and reliant on official funding from the Troika, we stuck to that. The Taoiseach is now saying, given the fact that the problems of Greece, Spain, Portugal and Italy have now revealed us as the insignificant little problem we always knew we were anyway, the logic that burning those bondholders will unleash Pandora’s box does not stand up. And, Ireland has put enormous effort in to reaching sustainability on the real sovereign debt side. So it deserves to be rewarded. The graph that accompanies the piece shows growth and debt as problems – Unemployment is a third , not to mention private debt in 4th – what chance does Ireland have of exiting the bailout next year and going back to the market for good? The Irish Presidency website, which is now live http://eu2013.ie/ puts the role of the presidency in the following terms; “When holding the rotating Presidency, the presiding Member State to some extent gets the chance to influence the EU agenda, provide impetus to the EU system and strengthen public support for the EU in the Member States.” That seems to be about it! As the FT points out; “In some respects, the rotating EU presidency Ireland takes over in January is a relic of a bygone era. Before the bloc’s new treaties came into effect three years ago, the presidency’s prime minister chaired EU summits and its foreign minister represented the 27-member bloc internationally. Those tasks have since been taken over by permanent, Brussels-based figures. But the presidency still plays an outsized role in striking the back-room legislative deals that make the EU work, and how national leaders play on that international stage can shape their image indelibly.” In other words, a major burden falls on the ministers chairing the technical councils that actually adopt legislation. Two that come immediately to mind are ECOFIN, dealing with the unfinished business of the budget 2014-2020 which is to agreed in early February, and agriculture. There seems to be a lack of awareness generally that the presidency involves a delegation quite separate from that of the national delegation, the latter being perfectly entitled to pursue national positions with all the necessary vigour. Were the presiding Irish minister try to do so, however, it is difficult to see how this could be reconciled with his/her impartial role as chair. It is also difficult to see what other line the Taoiseach could have taken as the impression that Ireland was going to put its case on the back burner during the period of the presidency had, one would assume, to be definitively knocked on the head from the outset. The website, incidentally, gets high marks in terms of content and presentation. On the subject of what might influence events during the Irish presidency! http://www.reuters.com/article/2012/12/17/deutschebank-politicians-idUSL5E8NH9EG20121217 “They made us do it”! They did not make us do it. We did it to ourselves. We have been doing it to ourselves since 1922. The Gov’t of the day no doubt gave a cursory glance at Anglo and the other suspects and for a few milliseconds contemplated on letting them go tits up. Then they discovered that what passes for depositor insurance in Ireland ranks with the Bank creditors including the much commented on bondholders. So they retained “consultants” the most notable of whom was Goldman Sachs. The advice was borrow whatever you can where ever you can. Waiting in the wings were IMF and ECB, understandably eager to rescue the big banks in the EU and USA. And that Sheila darlin is how you go from a debt to GDP ratio of 28% to 128% in a mere four years. We, the Irish peeple, humble and obedient then decided that more of the same was good for us and we put the siamese twin party into office. We get what we vote for, tis a shame but tis true. The real Irish problem is what you see in the mirror every morning. Comments are closed.