WSJ Editorial on Debt Relief for Ireland


110 replies on “WSJ Editorial on Debt Relief for Ireland”

“At the end of the third quarter of 2010, not long before Dublin requested a bailout, German banks had $208.3 billion in total exposure to Ireland, according to data from the Bank for International Settlements. That includes $57.8 billion in exposure to Irish banks, an amount exceeding British and French banks’ exposure to Irish lenders combined.

Dublin campaigned to impose haircuts on banks’ senior bondholders to reduce the amount of money the state would have to pump into Irish banks. The ECB refused, fearing contagion.

This is how the “cheapest bailout in the world,” in the infamous words of the late former finance minister, Brian Lenihan, ended up among the most expensive. Dublin made its share of blunders in the bank-rescue process. But the Irish bailout’s total price tag reflects actions compelled by the ECB at the behest of German financial institutions. Ireland shouldn’t have to carry that weight alone.” [WSJ]



The Wall Street Journal, Sinn Féin, The International Monetary Fund and Blind Biddy cannot all be wrong! Frankfurt and Brussels take note!

The data quoted in this article are not reliable.

The biggest foreign risk for failure of domestic banks was in the UK – mainly RBS and HBOS – later Lloyds Banking.

In late 2010, the Bundesbank estimated the net exposure at €25bn and that appears to have included German bank units at the IFSC.

Deutsche Bank — Germany’s biggest bank — said at the time that its exposure to Irish banks was a net €400m after offsetting for hedging derivatives.

But the Irish bailout’s total price tag reflects actions compelled by the ECB at the behest of German financial institutions. Ireland shouldn’t have to carry that weight alone.” [WSJ]
This has been repeated so often that it is becoming the “official truth”. Unfortunately there is not a shred of evidence to support it .If the government can prove it why doesn’t it?

@Michael Hennigan

Deutsche Bank — Germany’s biggest bank — said at the time that its exposure to Irish banks was a net €400m after offsetting for hedging derivatives.

This is a bit weak MR H, and you would normally be rightfully dismissive of someone trying to explain that their financial sector risk exposure was actually quite manageable thanks to having tens of billions of derivatives involving financial sector assets. Who exactly was going to be paying out? The mind boggles.

The consequences for the core banking system of relying on the hedges might have been just as damaging as the loss on investments in Ireland. Hence the Irish solution to a European problem.

Do any of the academic economists involved with this site believe Ireland can escape the Hotel Bailout California without some form of debt relief ?


Debt relief, Bailout II, or some combination of the two are the most likely outcomes. My money is on door number three.

It is safe to say that there is an expectation of some debt relief. If this window is shut, I expect yields will rise and guarantee the need for a second bailout. Is this really the solution creditor countries want?

An excellent WSJ article, very clear and concise.

The ‘independent’ ECB does not come away from this article sounding very independent, does it?

” But the Irish bailout’s total price tag reflects actions compelled by the ECB at the behest of German financial institutions. Ireland shouldn’t have to carry that weight alone. ”

It has been clear from the beginning of this crisis that the ECB has to take its instructions from Berlin. How many other EZ parliaments has Mr Draghi felt it necessary to humble himself before, in order to do his job.

@ Shay Begorrah

Just querying the facts – – I don’t have time at present to spend time on the issue.

@ Joseph Ryan

So the story of 2010 is of the ECB cravenly taking orders from Berlin while standing up to the Bundesbank, its neighbours in Frankfurt on buying the bonds of Ireland and Greece in the secondary market?

Seamus Coffey has said: “Since the end of the original guarantee in September 2010 around €14 billion of secured unguaranteed bonds from the covered banks have been repaid. This is equivalent to around one-fifth of the €64 billion of recapitalisation funds the State has provided to the covered banks.

Anglo Irish Bank and Irish Nationwide Building Society account for around €4 billion of the total.

“It has been clear from the beginning of the crisis that the ECB has to take its instructions from Berlin”

@ Joseph Ryan

I would contend that the ECB is taking most of its instructions from the interests of the investment banking world. The every bond holder must be made whole benefited one group over any other. The owners of those bonds. Many of them may have been based in Berlin but its not the German governments bidding that the ECB is doing.

Some of that German exposure may be to non-Irish banks like Depfa, which used to be Irish banks, which the Germans might still be holding a grudge about ….


I do not understand what point you are making when quoting Seamus Coffey. Are you saying that haircutting secured paper would have reduced the 64bn by 14bn or a fraction there of. What do you mean by secured-covered bonds.

Your point escapes me.

thanks for the clarification. Still do not follow the argument though. What is the connection between us repaying seniors and the size of the bail out. Is he claiming that we voluntarily repaid the unguaranteed out of some sense of solidarity?

Michael is all over the news telling us we will save billions over the longer term.
I just don’t understand how ….particularily when we will be paying interest (which may be reduced somewhat) over a longer period.
The other big question is will the Troika still be in command of our finances while we still owe them (or components thereof) massive amounts of money?

RBS still has GBP 36bn in loan exposure to Suvn Oiland , I understand

and the bank is on a shaky enough scraw even though the share price is currently tantalisingly close to the level at which HMG bought in . Presumably les rosbifs would prefer not to see RBS lose another GBP5-10bn in the RoI , if instead some sort of a deal on stringing out the odious Anglo debt onto the deep future could be found.

Lots of interesting politics to play over the next few months.

@ tull,

The piece is six months old. The thrust was that repaying senior unsecured unguaranteed bondholders in the banks had little relation to the overall size of the bank bailout.

In the period after the end of the original guarantee, efforts were made by Brian Lenihan, and subsequently Michael Noonan, to burden share with senior unsecured bondholders in Anglo/INBS. These efforts were rebuffed. The point was that there was around €4 billion of such bonds in question.

When the WSJ piece says:

“Dublin campaigned to impose haircuts on banks’ senior bondholders to reduce the amount of money the state would have to pump into Irish banks. The ECB refused, fearing contagion.”

they are short on detail on how much was involved. The paragraph before tries to suggest the amounts involved were large:

“At the end of the third quarter of 2010, not long before Dublin requested a bailout, German banks had $208.3 billion in total exposure to Ireland, according to data from the Bank for International Settlements. That includes $57.8 billion in exposure to Irish banks, an amount exceeding British and French banks’ exposure to Irish lenders combined.”

but these numbers have very little relation to the liabilities of the covered banks. There was never a public suggestion that either government wished to impose haircuts on bondholders in AIB/EBS, BOI or PTSB.

The ECB did enforce the repayment of senior unsecured unguaranteed bonds in Anglo/INBS but the total of €4 billion is relatively small when compared to the overall bank bailout. Most of the money provided by the Central Bank to Anglo went to (large institutional) depositors.


I follow your argument. Still not clear on MH’s line of thought. But that is not your problem.

Would someone like to address the inconvenient fact that in 2010 any suggestion of haircuts to bank bonds was quashed by the Irish government and Ministry of Finance on the basis that any such move would undermine confidence in Irish sovereign bonds.

To many markets observers, this was logic-defying stuff, but it was the official line.

When, pecisely, and how, was this strategy abandoned? Or is there some evidence that it was just bull’ to be fed to the markets while all along Dublin had been telling the ECB that the bank guarantee would not be renued in late 2010 and bank creditors would be haircut – to which the ECB repeatedly communicated that if that happened they would implode the banking system (but knew just how to do it so that there would be far less contagion than if a few bn in bonds were haircut).

Dublin needs to convince the finanical community and EZ voters that it didn’t simply change its mind about bank bonds after the markets stopped beleiving what was coming out of Dublin, quickly saying to the ECB “Look, er, we actually would quite like to alter our strategy now and haircut these bonds” to which some ECB and other officials, some of whom would have the personality to have handled the occasional stand-up row with lairy traders said, verbally that is, “Are you fu*$ing kidding!” and looked really cross….and then the Dublin guys said “Steady on!… there’s no need to get cross, it was just an idea.”
….and that was about the size of it.

If that isn’t how it went down, it would be useful if Dublin would publish some detail and some evidence. That would put real pressure from international commentators and financial players on the EZ core and the ECB to back down.

We all know there will be some sort of deal to reschedule some of the debt because it suits all parties to prevent speculation aboput realistic possibility of default on Irish gilts, but if Dublin genuinely thinks it was “forced” against its will to pay out, shouldn’t it ‘put up’?

If the reality iis that people who it didn’t suit to have the bank bonds haircut kind of leant on the guys from Dublin a bit, then that isn’t quite the same as what is being claimed by some economists and some journalists, none of whom represent the Irish state.

@ Fiat

extending cheap EFSF loans instead of raising more expensive cash via NTMA issuance = savings in the billions. With even some conservative estimates i can get to 2bn. If i get aggressive and go “Greek” on any such deal, i reckon i can get to 14bn or so.

@ grumpy,

That seems to be pretty much how it went down.

Brian Lenihan, 28th November 2010:

“As far as senior bondholders are concerned, I’ve always made it clear that, as long as we were in the markets, that senior debt was fundamental for Ireland.

In the course of these negotiations I did raise the issue of senior debt and the unanimous view of the European Central Bank and the Commission was that no programme would be possible if it were intended by us to dishonour senior debt. Because senior debt … such a dishonouring of senior debt would have huge ripple effects throughout the euro system. ”

@ Fiat

“The other big question is will the Troika still be in command of our finances while we still owe them (or components thereof) massive amounts of money?”

To some extent yes. In the context of the EU money we will be in “post-programme surveillance” in the EU until 75% of the money drawn down has been repaid. This will entail review missions each year rather than every quarter as is currently the case.

The boring detail of what is involved is here.

@ All

Round and round we go!

I would suggest that the most significant point is the fact that Ireland is benefiting from changes agreed largely because of pressures coming from other countries in a programme, in this case Portugal. This is what has happened previously. Ireland may be special but, for the moment, Irish negotiators have negotiated nothing “special” for Ireland.

This can only happen when the two aspects specific, or special, to Ireland are decided (i) the PNs and (ii) retro-activity in relation to bank capitalisation. There are major difficulties of principle in respect of both issues as far as the creditor countries are concerned.

@Seamus Coffey
Thanks for that.

@Bond Eoin Bond.
Very vague. I note the first EFSF money raised for Ireland is due for repayment by the EFSF in July 2016 and apparently our cost of those funds is 5.9% and the coupon on the efsf bond is 2.75%. Has this been revised downwards. Seems like a massive margin. So the cost must be in the order of 3% to the EFSF which wouldn’t save us much if we got it at cost plus expenses.



bad cop as above, probably followed up by conversation with smoothie in corner of room:

“Look old chap, you’ve made promises at home and you’d look awfully silly if you couldn’t put your hands on the cash to pay for them, hmm?, that’s right isn’t it?… well some of us have told people things…and we wouldn’t want to let them down, you know.., too. It would be awfully inconvenient for all of us, and none of us would exactly come up smelling of roses if …you know, you had to let your people down, and we had to ….let down ours… all very messy you know…and the voters, well, they probably would be awfully annoyed…too…”

Is that why the ECJ haven’t been called in?

The principle of equal treatment of EFSF/ESM loans to bailout countries was agreed a long time ago. Greece’s debt has been restructured a number of times. I believe the latest terms are

– average maturity of 30 years
– 10 year grace period
– interest rate of 1%

At a time when the ESM can raise money at negative interest rates (thanks, Japan) it has taken a long time for this to come on the agenda for Ireland, though I suspect the timing is all part of the stage management of the “bailout success story”.

What I find most worrying about all the rumours about P Note restructuring is that they consistently mention something about a reduction in the interest rate, which is mostly meaningless, and fail to say anything about the seniority of the new arrangement, which is potentially the most crucial aspect of any deal.

@ Bryan G

Spot on!

The timing, however, has nothing whatsoever to do with Ireland but with the general assessment of the heavy-hitters that the situation has stabilised enough with regard to Greece that the risk of contagion can be ignored.

Key decision maker in this stuff in the near future …..

Generational Change: A New, Less Powerful Euro Group Head

Dutch Finance Minister Jeroen Dijsselbloem has been appointed as the new head of the Euro Group, where he is expected to lead with a different style than his predecessor. The politician is considered a tough reformer, but his message of fostering growth is likely to be welcomed in Southern Europe.

It takes a while before it is Jeroen Dijsselbloem’s turn to speak. Outgoing Euro Group head Jean-Claude Juncker is clearly taking great pleasure in tormenting the waiting journalists. At a Monday evening press conference following a meeting of European finance ministers, Juncker first holds forth on the decisions reached by euro-zone finance ministers. He then turns over the floor to European Commissioner for Economic and Monetary Affairs Olli Rehn, who turns things over to Klaus Regling, head of the European Stability Mechanism (ESM), the euro-zone bailout fund.

All three offer their congratulations to Dijsselbloem, the Dutch finance minister, on having been chosen as Juncker’s successor on Monday. But at first, he is left to merely laugh politely as Rehn stumbles over his unfamiliar name.

When it is finally the newcomer’s turn at the microphone, he says: “Maybe it would be easier if I said a few words. You have never heard me speak at all.” The 46-year-old member of the Dutch Labor Party (PvdA), analogous to the Social Democrats, then says that it is a great honor to succeed Juncker. He intones that 2013 will be a decisive year for the European common currency. He adds that something must be done to boost growth and combat unemployment. Periodically, he glances at the prepared statement before him.

@ Jeroen Dijsselbloem

Best wishes in the new job. Hope to see you in Musgrave Park again soon.

It is clear from Prof. Honohan’s testimony to the Oireachtas last week that the ESM is not being considered for the restructuring of the PNs – i.e. a Spanish-style solution. Reading between the lines it looks as if we’re back to the same arguments of a year ago, expecting a different outcome – i.e. ECB accepts long-term Irish bonds as collateral to fund IBRC, with the bonds being held by IBRC (i.e. circular interest flow).

This was the underlying arrangement on which Honohan gave testimony to the Oireachtas last March, yet was not the arrangement that happened. Instead it appears that in the last couple of days before March 31, the ECB threw a spanner in the works and decided that the bonds had to be held by a commercial bank (BOI). This meant that the spread on the interest rate paid by the government and that paid to the ECB was profit for that commercial bank, not recycled back into the Exchequer, greatly reducing its value.

A few months after that, Spain produced a very similar plan for recapitalizing Bankia – with long-term gov bonds being used as collateral for ECB funding. This was rejected by the ECB, and Spain ended up going the ESM loan route.

So the obvious question is that if the new kinder and gentler Draghi-led ECB has twice rejected what seems to be the underlying proposal, then what has changed in the meantime? Maybe there’s some new twist in the proposal (merge IBRC with NAMA and declare it a “private” institution?) or maybe there’s a willingness to force a vote in the ECB (16 of 23 are needed) and abandon the search for consensus, but I don’t see why the outcome will be any different this time around.

@ bazza

I have great difficulty in viewing the WSJ in the role of White Knight in the matter of righting the wrongs of international finance. However, leaving that aside, the answer to your queries may lie in the editorial itself.


“So each March until 2020, the Irish government must pay the nationalized bank €3.1 billion, which it hands over to the Irish Central Bank. This would all amount to nothing—money-shifting between arms of the same government—except that the ECB insists that every cent of that €31 billion be paid back, plus interest. The Irish Central Bank then electronically extinguishes the euros it created to loan the money to Anglo Irish.”


“The EU has come out in favor of re-engineering the promissory note, but sources close to the German government tell us that some officials are worried that any debt relief for Ireland could be seen as compromising the ECB’s independence.

Yet this wouldn’t be anything the ECB hasn’t already tossed out the window multiple times since the crisis began. The ECB’s first bond-buying program, Mr. Draghi’s Long-Term Refinancing Operations and the ongoing manipulation of collateral requirements long ago blurred the line between fiscal and monetary policy.”

This has nothing whatsoever to do with the “independence” of the ECB but a bridge too far in the matter of “blurring the line between fiscal and monetary policy”. It is one, in my opinion, that Germany will not allow be crossed in any circumstances. No respectable central bank can simply allow the printing of money to suit the requirements of any government, still less by the central bank of a less than star pupil in a shaky monetary union.


Sealed with a Kiss: Treaty Heralded New Era in Franco-German Ties

Fifty years ago, German Chancellor Konrad Adenauer and French President Charles de Gaulle embraced after signing the Franco-German Friendship Treaty. Since then, the partnership between the two countries has become one of the cornerstones of European stability.

“The availability of ESM funding is an important part of facilitating our return to the markets as it provides reassurance to the financial markets. The ESM treaty sets out the arrangements for loan pricing. In summary, it will be the financing and operating cost plus an appropriate margin. It is not appropriate to speculate on the interest rate that would apply in the event that funding were to be sought from the ESM. However, the average cost of our current EU-IMF funding is 3.46%.” …M.Noonan in the Dail last may.

Are we going to see a big reduction on 3.46%?. What happens to the EFSF after it is due to finish in June next and be replaced by the ESM. How do they extend the loans and will the countries that gave bilateral loans also extend them?

@Michael Hennigan

Below is a quote from the article by Seamus Coffey in the Irish Independent

“All told, it seems there was something close to €19 billion of unsecured bonds which became unguaranteed in September 2010. A recent parliamentary question to Michael Noonan tells us that there was just €5.2 billion of unsecured unguaranteed bonds left in the covered banks by the middle of July 2012. ”

I am not going to dispute his facts, except to emphasise that the 19Billion was “unsecured unguaranteed bonds”. There was, in all probability, other ‘covered’ bonds in existence at the time, excluding those issued under government guarantee. These too should have been hit. Or these people offered the underlying ‘collateral’, which if they were lucky would have got them about 50%.

But even 19 billion is a lot of money. We need to ask a few simple questions.

Why would anybody in their right mind have agreed to pay 19billion of these bonds and pass the liability straight to the Irish taxpayer? What was the benefit for the Irish citizen in monetary terms?
Why would anybody in their right mind have agreed to ‘recapitalise’ banks without first insisting that unsecured creditors take a hit?
Who in the ECB came up with the ‘no bondholder get left behind’ and where is that person now?
On what basis was that decision arrived at?
Who benefitted from that decision and who lost?
Why are secured bonds still being issued by banks, in the process downranking depositors in the preferential queue every day?
Who is deciding that the decision to downrank depositors is hunky dory because ‘secured’ funding is need for banks.
Why did Draghi feel he had a need to prostrate himself in front of the Bundestag?
Why has no member of the ECB had to prostrate themselves or explain to Dail Eireann, why the ECB insisted that large bank creditors be paid, jeopardising Irish State bondholders, Irish bank depositors and the welfare of Irish citizens?

@Grumpy has argued, as far as I can see, that the ECB people merely said boo and the fighting Irish ran away. Maybe he is right. But at least one senior minister, John Gormley, was aware of the heat being applied.

Wikipedia ref below….

“ECB Connivance In Autumn 2011, former Green Party Minister, when pressed on the reasoning behind the bank guarantee, informed journalist Vincent Browne on his Tonight TV programme that the ECB had informed the government that in no uncertain terms were we to allow an Irish bank to fail….[citation needed] After initial official criticism of such a guarantee, within a month the ECB were advocating such guarantees as protocol for other member states in similar situations.[32] Whether or not the ECB knew about the guarantee, or even ordered it, it is in any case a matter of record that they have demanded the extension of the guarantee each time it was due to end its term”

I take your point re the bonds not being the sole cause of our problems, but they are a central part of it. They are very substantial in monetary terms, even 19 billion is not to be laughed at.
More fundamentally, there are odious debts, and have destroyed any national willingness or national solidarity to confront and bear the costs of this crisis.

As far as the PN note debt is concerned, that is worse than odious debt. The ECB knew full that in agreeing to the PN / ELA deal, they were engaging in the monetary financing of two dead banks. But they did it. Now having broken the ‘monetary financing’ rules, they want Ireland to adhere to a timetable that will not embarrass them. The fact that the timetable will destroy Ireland is utterly irrelevant to them, as it was when they dictated the ‘no bondholder get left behind policy; A failed idiotic policy that had one purpose and one purpose alone, to get bonds paid for very powerful people.

Why Berlin rather than the ECB?
Because that is German policy as evidenced by the Finlandia ‘Pronunciamento’ referenced by Colm McCarthy,
“This commission draft goes even further than the pronunciamento delivered in Helsinki by the finance ministers of Germany, the Netherlands and Finland on September 25 last, when the unravelling of the June summit agreement commenced in earnest. They ruled out assistance with legacy debts and said, ” … .direct bank recapitalisation by the ESM should take place based on an approach that adheres to the basic order of first using private capital, then national public capital and only as a last resort the ESM”. ”

We may not be awash with documentary evidence of what pressure was put on Ireland and where it originated from, but to use the advice of ‘Deepthroat’, ‘follow the money’.


“Wikipedia ref below….

“ECB Connivance In Autumn 2011, former Green Party Minister, when pressed on the reasoning behind the bank guarantee, informed journalist Vincent Browne on his Tonight TV programme that the ECB had informed the government that in no uncertain terms were we to allow an Irish bank to fail….[citation needed]”

Citation needed bigtime. Chapter and verse, transcripts, minutes, the lot.

Alan Aherne has made assertions too, but the problem with them is that at best they are their own, quite possibly incorrect or badly judged interpretation events, and at worst candidates for Mandy Rice Davies’s famous slapdown of Profumo:

“He would say that, wouldn’t he.”

@ Flj

The rules with regard to the transition arrangements from the EFSF to the ESM are in Chapter 7 of the ESM treaty.

Apart from the involvement of Portugal, which by now should be evident to all, the other key element is that identified by Minister Noonan i.e. that no member state had objected. In other words, the Berlin veto has been lifted.

Furthermore, if there is any doubt that our elected representatives are fully in command of the situation, the performance of the representatives of both the government and the opposition on Prime Time this evening should put their minds at rest.

Here you all go getting distracted by side issues like this piddling bank bailout business when even the dogs in the street know that the real issues are public-sector allowances and increments.

@ Fiat

“Has this been revised downwards”

Yes, in July 2011…Margin brought to zero, so just the cost of funding (plus some minor fees ndnwhat not). EFSF can currently borrow for 10ys at around 2.05% vs Irish NTMA around 4.5%…


I am aware they refer to two different events. My reference to Alan A was to highlight the nature of the detail and evidence-free sorts of assertions made about external pressure being to blame for actions taken by Irish governments.

Neither his nor Gormley’s accounts of this pressure make it over the Mandy Rice Davies bar.

That is not to cast aspersions on AA, its just that there is no reason for an outside audience to believe it without something concrete or at least specific and detailed to back it up. That’s just an inconvenient fact.

The argument for some debt sharing can be made in the context of the union and future debt sustainability without casting ourselves in the role of the victim.

The game was up when the music stopped for international credit markets in early August 2007 but apart from pervasive denial across the system, there were also political calculations involved in downplaying the seriousness of the situation.

Regling/Watson pointed out in their report: “The growth in short term borrowing was even more rapid, with securities of one year remaining maturity or less amounting to €41bn at end 2006 for the two largest banks, up from €11.1bn at end 2003. Rolling over such borrowings was predicated on the continuation of benign wholesale markets.”

Joseph Ryan is correct in saying that €19bn is more than small change but 2 years after a unilateral guarantee of debt, it wasn’t easy to sell the argument for write-offs when the ECB had then a major role in wholesale funding.

There is no credible/ reliable evidence that the State guarantee of bank debt of September 30, 2008, had been cleared with any EU institution. If there was it would be more than a ‘grassy knoll’ type myth at this stage.

There were two panic situations and the first was 13 months after the onset of the credit crunch. It was typical: respond only to a crisis when it becomes dire.

“Liquidity, not capital, is the main issue in the current crisis,” the financial regulator wrote to Kevin Cardiff, head of banking at the Department of Finance in early September 2008. A week later, days after the Lehman crash, Anglo executives were in Merrion Street with assurances: despite the cash crunch, the outlook was healthy: “Loan book remains strong,” they said

In the US, there was a full-scale panic with Treasury yields falling to World War 2 levels; two giant financial institutions AIG, and Citigroup, had to be bailed-out by the federal government. Yet, bizarrely the ‘soft landing’ was still the narrative in Dublin.

Early on September 29, 2008 — the longest day in recent Irish history – – a PricewaterhouseCoopers (PwC) partner emailed Kevin Cardiff saying Anglo “borrowed €0.9bn from the Central Bank and do not have any reserves left.”

It was a day to their year end and this was a seismic shock to the system. Regling/Watson had said the bubble “was in this sense at least a wide political and social phenomenon.”

Two months later, PwC said the banks didn’t need any new capital.

The Wall Street Journal said that in early 2010, Brendan McDonagh’s NTMA/ NAMA team got a rude surprise upon diving into the banks’ books. “We opened it up and said, ‘Oh, my God,”‘ Mr. McDonagh said in an interview. “What they are telling us is not the reality.”

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. The team found that banks often piled on “equity releases” that amounted to lending out 100% of the value, and left them fully responsible in a default. Worse, much of the collateral was shaky

The estimates of Anglo’s losses changed during the year and Panic 2 began in August with bond investors and ratings agencies getting twitchy. A month later, as the yield on the 10-year sovereign bond exceeded 7%, another final estimate was put on Anglo losses. The ECB began to panic too.

While Brendan McDonagh was shocked by reality in 2010, I wasn’t.

In response to a thread on an Irish Times article by Alan Ahearne, in September 2009, I wrote the following:

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 €75 million loan on a €100 million purchase deal.

What does AA know about such deals?

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

There really is a suprising lack of dicussion about the decision making process at the ECB in the media. The Wall Street Journal, whose customers and advertisers and made up of mainly financial instituions is prepared to say that the ECB is bullying countries on their behalf. RTE whose customers and funders are the Irish people is sticking to the line that the ECB is independent.
There are issues with decision making in the ECB which have been raised by respected academics, not only Krugman and Stiglitz, and how it favors central countires and financial institutions over perphiperal countries and everyone else. This directly realtes to Irelands economic situation.
The executive board is politically appointed which in fact runs directly against the charter of the ECB which Ireland signed up to. They should be appointed from a wider spectrum of society, such as trade unions etc, not just from financial backgrounds.
This should be discussed more. How about a paper from one of our Phds in Finance?

MUST READ on this Admin’s ‘fabled’ negotiating skills: or Greeks bearing Gifts followd by Portugese bearing Gifts:

Loan deal came about because Portugal is tanking

Dan O’Brien

Minister for Finance Michael Noonan yesterday said the deal reached in Brussels on Monday night recognised “the efforts being made by well-performing programme countries”.


Think back to July 2011. Better terms were granted to the euro zone’s three bailed-out countries on their European loans. The Government was quick to portray this as proof of its dynamic diplomacy. It was nothing of the sort.

Greece was sliding and something had to be done. To avoid singling Greece out and to maintain equality of treatment, all three bailed out countries were given easier terms on their loans.

The deal was reached because Portugal’s economy is tanking. However diligently the Portuguese government has been in implementing the terms of its bailout, the reforms are not delivering payback in terms of growth.

Worse still, some of the reforms are giving plenty of short-term pain and creating uncertainty, while a credit crunch, austerity, private sector deleveraging and slowing export demand are causing deep recession.

Portugal led the push for this week’s deal because its situation is increasingly desperate. Lisbon focused on the precedent set last November when repayments on Greece’s debts to the rest of official Europe were hugely stretched out. As happened in July 2011, Ireland has benefited from decisions designed primarily to help others.

course some of us know it was Minister of State Hayes wot swung it ….

Nice one.

Speaking of American attitudes to Ireland, how about a bit of inside insight into the recent bonds sales.

Here’s a Bloomberg interview video with a Hedge Fund Manager named David Tepper. You’ll want to skip to the 15:00 mark for Tepper’s candid discussion on his subordinated Bank of Ireland Debt holdings.

Personally, I found this difficult to follow, but it seems to have bearing on BoI’s recent debt issuance. Some choice excerpts follow.
David Tepper:
“You wanna hear a great credit story? … We invested in the Bank of Ireland… and we bought their bonds, subordinated bonds.
They [BoI] wanted to ‘cram us down’ … So we took them to court.
We were gonna go into the English and Irish courts to fight the Bank of Ireland, and fight the Irish Government for that matter.
We finally won at the beginning of this year… The debt was trading at 40/50 cents…..
So the Bank of Ireland this year, goes and issues a new issue, of the same debt…. a month and a half ago….the debt is now trading at 115.
The only reason it is worth buying, is because we fought it, and we won.”

It all sounds a bit Greek really. Absolute radio silence on this one in the Irish media at least. It would appear that Mr. Tepper was being a little overly-candid in the interview, so best grab this one while it’s fresh.

@ Rob S,

Yes the average maturity was extended and this was done by making the maturity of new loans longer. This followed the July 2011 EU summit.

The changes did not apply to loans drawn down at that time or loans drawn down before the changes agreed were implemented. The maturities on EFSF/EFSM loans currently range from 3 to 30 years (average c.12). The recent discussions have been about extending the maturities of loans drawn down before the extended maturities were implemented.

It was agreed in July 2011 that this would be done for Greece but it was never formally agreed for Ireland and Portugal. We got the lower rates on all loans and the extended maturities for new loans, but the maturity of existing loans was left unchanged.

In your IT link I think the October 2011 developments are being over-sold. The Ecofin statement says:

– Ministerial breakfast meeting
Ministers held a breakfast meeting to discuss the economic situation, as well as the lowering of pricing for the European Financial Stabilisation Mechanism (EFSM) and maturity extension issues with regard to Ireland and Portugal.

No actual decision was announced.


Many thanks.

I couldn’t grasp precisely what the opposition TDs were referring to in the article.

My take on it is that the Gov’t of the day wanted to keep the gravy train rolling. They got expensive expert advice from Goldman Sachs and others who told them what they wanted to hear. That was borrow as much as you can where ever you can. The ECB/IMF stepped up to the plate and delivered. The Irish Gov’t willingly signed all the necessary documents.

In my more generous moments I believe that our Gov’t did not have the foggiest notion of the extent of the immediate problem and certainly had no idea of the downside risk for the banks in the property market. A quick infusion of cash into the banks was expected to stop the depreciation slide. The rest is history, one should not look for complicated reasons that could not be understood by a jobber on fair day.

The gun to our heads leaving us with no choice is a crock.

Clearly there were people in DOF who had a grasp of reality and voiced opinions that were quickly and decisively shot down by politicians who were deathly afraid that the gravy train was going off the track. There is an old American saying; It is difficult to convince someone of the obvious when it threatens their livelihood.

@Mickey Hickey

“The gun to our heads leaving us with no choice is a crock.”

If that is the case, and the Irish politicians and officials sold generations down the Shannon so that they could get out with pensions and lump sums, we should look to ways of prosecuting those people and removing any State pensions from them.

There should be a penalty for destroying a country.
I would like to see the evidence that these people would produce in defense of the decision they made.

@Joseoh Ryan

We are collectively responsible. For generations we have elected politicians to deliver the goods from Dublin to our neighbourhoods. I know of no other country where it is routine to involve an MP in simple procedures like passport applications and many other simple tasks. My last foreign passport application was processed and delivered in eight days with an assurance it would be delivered in ten days and if not call them. Our TDs’ are like waiters and the Taoiseach is the head waiter. We even “tip” them for services rendered.

We do not have Government for the betterment of all. We have it sliced and diced into tiny ineffective units. We get what we vote for. Why then are we all surprised when it gets all bollocks’d up.

I agree with you that in a normal country those responsible would be held to account. In Ireland that will not happen until things get so bad that the IRA form a majority Gov’t and institute military tribunals complete with the death penalty. I do not see that in the cards.

There was a slip twixt mind and keyboard above. It should read Sinn Fein form a majority Gov’t and not IRA.

@Mickey HIckey

“We are collectively responsible.”

No, that is not a statement that I concur with. We need to be far more specific than that. There is no doubt that we have elected to Dail Eireann and allowed to develop a ‘follow the leader right-or-wrong’ party system that has done terrible damage. But there were specific decisions taken over the past five years and decisions and policies that are still being adopted that destroyed this country. The general public cannot be held responsible for the ineptitude or cowardice of those responsible for not making decisions that were in the national interest as opposed to their own perceived immediate self interest.
Despite all the history of poor management over 80 years, the response to the current crisis can be laid squarely at the feet of a small number of people and their failure to tackle a small number of critical issues in the national interest.

1. The bank guarantee on the night of Sept 28th 2008.
2. The unwillingness to impose losses on bank investors in October 2010 as a sine qua non of the Troika deal.
3. Th failure to liquidate IBRC and the continuing failure to do so.
4. The unwillingness to impose bank losses on bank investors as a sine qua non of bank recapitalization.
5. The failure to to force an owner to rent scheme as a solution scheme for mortgage distress.
6. The failure to tackle BTL mortgage arrears by repossession.
7 The protection of Senior PS staff, legal and other State supported professional staff while hitting employment.
8. The retention of increments for all PS staff.
9. The failure to contemplate tax increases for better off people.
10. The currying of favour with ECB/EZ powers through early repayment of NAMA bonds.

“We are collectively responsible.” in no way captures the true extent of the failure of a small number of Irish people from defending the interests of the country; a country under pressure from powerful European institutions; in particular the German dominated, Trichet-led ECB or our ‘partners’ as some people still like to call them.

@Joseph Ryan

You have a case and you put it well. But this is Ireland with its inbred politics, nepotism and cronyism which we have supported since 1922.

In a normal country the PS would have been subjected to an immediate pay freeze, no overtime, no pay increase, no increments, no bonuses, no hiring under any circumstances. Quangos with negative cash flow would have been put out of business immediately. Surviving Quangos would have been subjected to the same conditions as the PS. All the unpleasantness was avoided by borrowing from the ECB/IMF, thus prolonging the agony for the taxpayers. By now the PS should have been put on par with average EZ PS incomes. Do not hold your breath on that one.

The result of repossessing BTL properties in default would put an end to pretend and extend and shed light on the precarious state of our surviving banks. Likewise for owner to rent or repossession for private residences. The banks are not repossessing because it would expose the true state of affairs and drive property values into the ground.

As for Germany, Merkel, ECB and Trichet, they have injected liquidity into Ireland at the request of our government in amounts per capita that is simply astounding.

The ECB and IMF have kept our economy afloat, things would have bee much worse without their generosity. That is the short term, in the medium to long term there is no sign of a worldwide rebound that will lift all boats. The beatings will continue until morale improves. Of course the debt mounts on and on with no end in sight.

In Kerry we say to hell with poverty we will kill a duck. Sure you could fill a big bag in Stephen’s Green alone.

@ Joseph Ryan

Someone has a BTL mortgage, the government gave them section 23 tax relief and or other reliefs. The banks introduced BTL investment loans and told people that these investments would be their pensions for the future all that equity in their houses they would be mad not to buy. The banks told people that these investment properties would need to be valued by their professional valuers and engineers would need to sign off too on the structural integrity of apartments and houses. The financial product was regulated by Mr. Neary and his staff who shared accommodation with Mr. Hurley and his 3,000 soul mates down on Dame Street including the bold David Begg who sat on the board for 15 straight years until 2010.

The banks went bust, the country pretended it was a liquidity crisis but it turned out to be an insolvency issue, the country went broke, the banks got bailed. Out one of the first things they did with the money from the NPRF and bailout money was to rescue their own bank pension funds so that pensions of up to, and over and above, 500,000 could be honoured. The BTL investor many of whom are public servants got royally screwed, the apartments they bought are worth fractions of what they were valued at and paid for many management committees are in crisis and are “insolvent” with many people not paying their management fees and basically leaving it up to a few people to prevent many of these eye soars from being closed down altogether, some of these BTL investments were secured with loans from peoples own principle private residences which are also in substantial negative equity and some of these individuals also went guarantor for their children on loans. You are screaming consistently for them to be foreclosed on? This is why we had Croke Park I and why we will have Croke Park II and why we will have Bailout II in jig time unless the ECB takes a bath on behalf of the Irish Tax Payer which is not going to happen.

Here is what will happen. They get together with their personal insolvency practitioner who fills in the funny form and they hand it to their banks who immediately spot that they work for the government and are in one of those secure jobs with secure pensions. They are told to get stuffed! How do you go bankrupt when you have one of these jobs? The banks will get an attachment order against their earnings and they are on the hook to be screwed again forever!

Now, as you know I don’t work in the PS but know many who do and I would like to know what your solution to their predicament is?

@Mickey Hickey

“As for Germany, Merkel, ECB and Trichet, they have injected liquidity into Ireland at the request of our government in amounts per capita that is simply astounding.”

Michael Taft gives the breadown here in comparison to other Europeans. We are off the scale! Excellent graphics as usual from Michael …

For instance:

Ireland makes up 0.9 percent of the EU population
The Irish economy makes up 1.2 percent of EU GDP
Ok, we’re small. So how much of the entire European banking debt have we paid?

The Irish people have paid 42 percent of the total cost of the European banking crisis

ON PS and Quangoes +1 (but this is not a ‘normal’ society

“The European banking crisis to date has cost every individual in Ireland nearly €9,000 each. The average throughout the EU is €192 per capita. I really don’t know what you can say after that.

So, Ireland is a really, really special case. We require a really, really special solution. The Government (and we must always remember that this mess wasn’t created on their watch) has a real challenge in the negotiations over bank debt. But there is a bottom-line here.

If any deal does not qualitatively alter these dismal statistics, then it won’t be a deal worth applauding. ” Michael Taft

Anyone else noticed there are a couple of posters who pop up on here occasionally who seem to have all the breadth of vision of a laser beam?

Fingers crossed that the January exuberance in the financial markets persists and that all the money piling into trash for a bit of yield isn’t all pulled out similtaneously.

The idea that the world economy is set for a spurt of growth is a great bunch of lads but does a 4% or so return on Ie sov bonds over the medium term reflect the risks that may materialise between now and then?

“We are collectively responsible.”

“No, that is not a statement that I concur with.” Nor would I. Our political predicament is a tad more complex.

There is a ‘system’ (God help us!), which is actually a collection of diverse individuals embedded within a tightly coupled organizational structure. Most folk in these types of organizations (hospitals, prisons, schools, political parties, trades union and the PS) are risk-averse functionaries and just do whatever is required and are somewhat careful about what they say. You must behave in a steadfast manner: enthusiasm is not welcomed. Promotions (to senior positions) are not given to anyone who is likely to display any smidgen of original, innovative or anti status quo thought or idea. You ‘read the manual’, you follow the agenda, you get promoted. QED.

Hence, the critters you have to nail are the ones who secretly and silently set the agendas and control the decision making processes. Good luck!

This wittering about our need for some special ‘debt relief’ is surreal. Debts can either be paid: in full, in part or not at all. Whichever of these three options depends on how much disposable income you actually have left after all taxes (and other charges) and the costs of your living necessaries have been deducted. What’s so hard to understand here? A lot it seems. This obviously applies only for individuals – governments can ‘print’ their way out, or devalue the currency.

Our economy is regressing and will continue in this mode unless or until we (individual citizens) rid ourselves of our unpayable debt burdens; to the point where we can actually fund them, without sliding into poverty and destitution. What’s so hard to understand here?

You can stop the regression with a debt Jubilee. [Some debts would remain, some would be written down, others would be written off.] It would leave our economy in a situation close to the 1950s – 1960s. And with some very good luck (and pro active political policies) we should be able to lift it up a decade or so. But that might be it. We would have to reduce, and to hold down, the costs of living necessaries. Very tricky.

We can continue with this – “we must honour our debts and get back into the markets” – charade and we will more than likely end up in a not dissimilar situation – just a decade later! No ‘market’ will lend to an insolvent government. But they will, as long as there is the possibility of a steady income stream guaranteed by a sufficient number of solvent taxpayers, whose government will use legal Force Majeure, to extract the debt payments on behalf of the ‘market’.

So, whom will you believe. Those who assert that future disposable incomes may increase? Or those who assert that future disposable incomes may be less? Or will you believe your own eyes? – just make sure to wear laser certified protective goggles!

Things look very rosy in the markets now 3 weeks into Jan with yields on a notional 10 year down to 4% or so. Special novena to St Jude that that all the money piling into trash for a bit of yield isn’t all pulled out simultaneously.
Say for 3 days and promise publication.

The idea that the world economy is set for a spurt of growth is a great bunch of lads but does a 4% or so return on Ie sov bonds over the medium term reflect the risks that are likely to materialise between now and then?

9k if only…closer to 15k, although some of it may come back in levies and gains.

However, why do we not have 200 post threads hyperventilating about the 20k per person racked up in budget deficits since the bust. Indeed why no threads on the mountain of contingent liabilities behind thar in unfunded pensions and SW. One could be cynical in surmising that most of the posters in here are on the public shilling.

@Mickey Hickey

“The banks are not repossessing because it would expose the true state of affairs and drive property values into the ground.”

That has certainly been the case until now. I believe they are starting to get itchy trigger fingers though – especially on BTL – because some people within the banks think they are smarter than everyone else (not much changed there then) and they think they have seen the bottom of the housing market crash in 2013 and that maybe now would be a good time to …. etc. Personally I think they are wrong and a wave of repos this year would have a very bad impact on house prices.

It should be noted that many of the (overextended) core BTL people are in the legal and accountancy professions (I have seen some stats on this), work for banks, are some other sort of ‘professional’ or fairly high up in the public sector….. and some have been or are currently ….. politicians.

It’s a mess. A real mess…. and that’s just the BTL bit. Hard to believe on the residential/home side that arrears aren’t going to continue to climb further either.

I am of course now talking from my lofty heights in the UK and no doubt i am completely out of touch with what’s really happening in Ireland. These Swiss people I’m currently working for gave me some very odd looks when I asked them where my Davos ticket and hotel booking has gone astray to. The don’t seem to have much of a sense of humour.

Are we going to get a thread on Davos?

Davos is a bit old hat ,isn’t it, after 4 years of masters of the universe austerity that is not working. I think the Montreux jazz festival is a much better template for a swiss gathering than davos.


9K “to date” – b patient on the 15K

Agree – I would like to see the deficit graphs and its dispersion.

btw FG will “pay every cent”

@ Ernie Ball

I am warning what will happen to many Public Sector workers unless the government and unions wake up and smell the corruption. The trouble with being paranoid is that when you are drowning and someone throws you a flotation device you immediately think it is a trap and end up drowning.

Unlike you I can see that CP is inherently bad why it has been described as economic apartheid, but I would still like to thing that I’am capable of understanding the many reasons why such agreements have been foisted on the rest of society. I look at the logical, psychological, sociological reasons other than just believing that it is the normal inevitable pathology associated with being in a fully paid up member of the PS.

U advocating unilateral default on sovereign obligations?
I dont have a problem with that position btw provided the costs and consequence laid out by its advicates.

Our men in Davos say possibility of offer of second bailout to avoid second bailout.

‘Troika raises possibility of ‘comfort funding”

“The EU-IMF troika has raised the prospect of a new line of “comfort funding” for the Government to ensure there is no disruption to the public finances at the end of the bailout.”

‘comfort funding’ is such a disturbing phrase.

Also in Davos, Christine Lagarde puts equality at the centre of the IMF’s vision:

“What does it mean for economic policymakers? It means that we need more fairness in economic life, more inclusion. This has numerous dimensions.

“At its core, it relates to growth. Surely we have all learned by now that it is no longer enough to focus on growth alone. We need all people to share in rising prosperity—and, by the same token, share fairly in any economic adjustment needed to achieve or restore prosperity.

“”As Franklin Roosevelt once said: “The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.”

“Inclusive growth is certainly a top concern of policymakers. The message is resonating widely.

“I was not surprised, therefore, to see that the World Economic Forum’s most recent survey puts “severe income disparity” at the very top of global risks over the next decade. Excessive inequality is corrosive to growth; it is corrosive to society.

“I believe that the economics profession and the policy community have downplayed inequality for too long. Now all of us—including the IMF—have a better understanding that a more equal distribution of income allows for more economic stability, more sustained economic growth, and healthier societies with stronger bonds of cohesion and trust. The research reaffirms this finding.”

More equal societies do better – I wonder what she’s been reading?

@Robert Browne

re BTL mortgages/ Your post above
I take your point re a bull in a China shop approach to BTLs, but I thinks it still needs to be done.
I will outline my thinking (over the weekend, hopefully if I get a chance) on need for repossession of BTLs and the safety parameters that should be surround such a policy.
In fact we could with a complete thread on the issue of BTLs.

@ GK: “More equal societies do better – I wonder what she’s been reading?”

I could offer some suggestions, but why bother at this stage? If you know, your know; if you do not, you display no interest.

I formed the opinion that the entire thing was a ‘Maternalistic Smoothie’. The ‘we’ pronoun crops up quite a bit. There are a few other clues embedded within the text: “thought leaders” – wtf are they? “Pivot points” – ditto. “everybody wins” – sanctimonious claptrap!

I had to read 33 paras (some are one-liners) until I got to the ‘growth’ word. A little further on came “inclusive growth” and “job-rich growth”. Those Permagrowth and Waged-labour paradigms are alive and … well, just looking a little peckish? “Not to worry. Mummy and her little band of IMF helpers are at hand.”

For an example of pure, unadulterated, Tincture of Laudanum fueled gobbledgook, go to final para of Section 2: Stronger Inclusion. This has a little competition further on; 12th para in Section 3: Better Accountability – ” we need a financial sector that is accountable to the real economy – one that ADDS VALUE (my emphasis), not destroys it.” In the name of God, since when has any financial sector EVER added value?

Thanks Gavin (and RB). Made my day it has.


“”As Franklin Roosevelt once said: “The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.”

Talk is cheap for Madame L. Is she for real? Perhaps the ECB could target Euro area GINI coefficients rather than worship JCT’s “strong vigilance” on inflation .

@Gavin Kostick

There may be more to “comfort funding” than meets the eye.

“Comfort women” is what the Japanese called the Korean women they forced into sexual slavery during WW2.

The FANG get the comfort and the Irish get the shaft.

If the PIIGS do not turn the tables soon their young people will finish up selling themselves on the streets of Berlin, Vienna, Amsterdam and Helsinki.

I just read the local paper and I do not know whether to laugh or to cry.

FF making comeback in North Kerry, gearing up for local elections 2014.

Trying to recruit well known footballer.

This is very serious, nothing has been learned from our very expensive recent lessons.

The organisation representing middle-ranking gardaí has pulled out of talks on an extension to the Croke Park agreement.

The national executive of the Association of Garda Sergeants and Inspectors (AGSI) met this morning and decided it would be best not to continue with the discussions.

The association is the first representative body to pull out of the talks, which began early last week and aim to extend the Croke Park agreement between unions and the Government.

The Government is seeking to generate savings of about €1 billion on its pay and pensions bill.

General secretary of the association John Redmond said today he did not think it would re-enter the talks. Members were being asked to “give and give”, he said.

They had attended five meetings and there was nothing being given by officials, he added.

Members worked for 60 hours before they were allowed a day off, Mr Redmond said on RTÉ Radio’s News at One. He said they had already given on issues including pay, allowances and extra working time. The association would not be involved in a process that reduced premium payments given in recognition of the “24/7” frontline nature of the role played by gardaí, he said.

Fianna Fáil justice spokesman Niall Collins said today’s development must act as a “wake-up call” for Minister for Justice Alan Shatter.

“He cannot continue to dismiss the genuine concerns of gardaí and of communities. He needs to curb his enthusiasm for demonising and dismissing those who disagree with him, and start recognising the damaging impact of the cuts he has handed down.

@ Joseph Ryan

Over at BOSI (Lloyds UK) they are selling off portfolio’s of properties at less than 10 cent in the Euro, without even offering investors the option of selling these properties on for 40% or 50% of their loan values. I think short sales should be legalised immediately as should sales whereby purchasers can continue with Interest only loans. Investors should be able to mark to market and they should be able to transfer loans to would be investors who are in a better position to take on risk. The governments so called solution is essentially black and white . The banks like you or they don’t.

Certus is running down the loan book here in Ireland. Certus is run by the people who gave out the loans in the first place who had the foresight to see that things were going to go belly up on loans and that there was a lot of money going to be made from running down loan books. Anecdotal evidence suggests that deals are being done at individual, case by case basis, but there is no coherent solution to the problem.

Selling off loan books to venture capitalists who then terrorise clients to pay back loans and make life as miserable as hell for debtors. for as long as possible. is just another cowardly manifestation of government policies. The personal insolvency has been described by Damien Kiberd as, “the government making a snowball for the banks to fire”. I would agree with him. The government want to be able to say we tried this but the banks they are not implementing this as envisaged. The truth is they will be doing exactly as what was envisaged.

On a practical level how is the hit for these BTL’s going to be assimilated. Banks are going to need additional capital and who is going to buy these properties in an economy that is now mired in stagnation. Our nearest neighbour UK is suddenly realizing they are on the verge of a triple dip recession and they are our biggest trading partner.


Your interpretations of other’s comments and projections onto your own world view are awesome. Were you to seek help for this conditon I imagine the neo-Freudians and the Jungians would compete for could be an award winning case-study!


A Bazooka-less Blind Biddy presenting you with a bowl of Apples and Oranges.

Comment –

A more simple question – what would be the impact of a debt write down of the loans which fall due in November on the economy?
And can someone verify the FT’s figure of €67.5 billion falling due in November?

Thanks for the replies, as ever.

The situation develops. When is a second bailout not a second bailout?

‘IMF deal on table if no bank debt agreement, sources say’

“Details of the Government’s strategy to win a bank debt deal and exit the bailout emerged yesterday in Davos. Government sources said Ireland is prepared to accept a new, conditional IMF programme if bank debt talks do not deliver optimal conditions for returning to markets.”

“If Ireland were to enter a conditional programme with the IMF, it would have the effect of depriving the European Union of a much-needed economic success story.” [that’s a big punt on the power of narrative]

Article by Derek Scally and Tom Hennigan worth reading in full, but negotiating position seems to be: ‘give us a deal on bank debt or we’ll get a loan from the IMF.’ To which one can readily imagine the answer, ‘fair enough’.

@Ernie Ball
In response to the comment that it took 50 comments to get to the PS.

What happened to the PS in Ireland during the CT has happened elsewhere. It is the inability to bring PS salaries and benefits back to earth that makes us unique. William J Baumol and William G Bowen described it fifty years ago in what is now known as “Baumol’s Cost Disease” or “Baumol effect”.

We need a PS and they should be treated with respect. However, when things get out of whack corrections have to be made. The pain should be spread as evenly as possible across all professions and throughout the whole country. The molly coddled professions and others such as John Corcorans landlords should not get off scot free.

The govt will fall if it attempts to pay the 3bn at next instalment. Time to but US$ as next instalment of crisis begins.
If EZ does nit federalise or monetize then default is the only option.

Let’s try again:


A bozooka-less vivacious Blind Biddy, in a flowing gown, presents you with a bowl of apples and oranges.


p.s I’d keep an eye out for the one-eyed Shia Sheik!


It is rather a case “if wishes were horses etc.”

In any negotiation, the essential talent is to be able to see matters from the opponent’s point of view. An example;

Has the banking bust already cost Germany 40 billion euros?

In a union made up of sovereign states, political problems stay where they can only belong; with the sovereign!

“The ball is now back in the Irish court,” one source involved in the deliberations said. “This is an issue of principle. There is a real concern in the Governing Council because you can create precedents when you do things for one country. Then others may say ‘why not for us?’ We must be sure the solution doesn’t open a window in terms of monetary financing.”

Any suggestions for scores out of ten for all that noise the Irish made about insisting Ireland must get the same deal as Spain.

Hint, these words are End-tangled: pull aim foot trigger at

Anyone want to buy an unused Gateway, Pathway or Stepping Stone to Eurobondland?


‘In a union made up of sovereign states, political problems stay where they can only belong; with the sovereign!

Balderdash! What about the banking union? The Remit of the European Commission? Police cooperation And the moves towards greater EU integration? Many more ….
Or are you really a Euroskeptic as well as a disciple of LBS?

@ grumpy

If one looks at the situation of the euro objectively, it is clear that the legal ban on monetary financing constitutes its keystone. It has also been clear from the outset that there is no way, novel or otherwise, that the parties to it are going to agree to said keystone being removed and risk pulling the entire edifice down.

Does the Bank of England have an equivalent ban on monetary financing? Does the Fed? Does the Central Bank of China?


I do believe I was one of those on point duty regarding the printing nature of the promissory notes and associated Germanic problems certain to be encountered in response to ‘lets just not let the Irish Central Bank burn the money’.

Nobody said “Gee! Thanks for pointing that out.”

RTE now reporting ECB denial of Reuters story. I assume first source spoke In German accent but subsequent source spoke a Rolmance language or English.


I do believe I was one of those on point duty regarding the printing nature of the promissory notes and associated Germanic problems certain to be encountered in response to ‘lets just not let the Irish Central Bank burn the money’.

Those who now cackle about Ireland being trapped by the the implacable and eternal shackles of EMU were the same people most indignant that we would consider stiffing Deutsche Bank and friends.

Now it is absolutely fair of you to bring up how unlikely the German bloc was to allow printing money (aka: polluting their precious monetary fluids) to allow states to deal with the financial sector crisis but it has to be borne in mind that they are the exact same set of interests who opposed any kind of losses to bond holders in order to protect their own states and institutions from the banking bailout costs we now have to bear (the contagion we foolishly avoided was actually “burden sharing”).

So in 2010 we needed cash to push down the gaping maw of the banking sector and used the promissory note finagle to deal with it – our other option was pleading for a larger initial bailout (which would have come with more onerous and wrongheaded conditions).

We have certainly allowed ourselves to be taken advantage of, but we need to focus on the threat from the EU now rather than arguing over how poor our initial defence was.

@Gavin Kostick

Article by Derek Scally and Tom Hennigan worth reading in full, but negotiating position seems to be: ‘give us a deal on bank debt or we’ll get a loan from the IMF.’ To which one can readily imagine the answer, ‘fair enough’.

Olli Rehn must be quaking in his palatial drawing room. The “threat” to go to the IMF would only be meaningful if the conditions for this alternate funding caused financial pain in the German bloc.

Is it too much to hope that the IMF would insist on the ending of private sector protection for the IBRC as a condition of a bailout part two? It would be a way to end the phony war between the pragmatic neoliberals and the goldbug ordoliberals that currently control policy making in the EU.

Who ever thought the EU would become so reactionary and right wing that the IMF have ended up far to the left of them?

I’d say its likely there is factional briefing going on, with the Germanic side attempting to diffuse any sense of excitement in case it gathered momentum – which would make it more difficult for them to counter if the market started to pick up on it . They would then be running the risk of causing a sell-off if they only agree to the rolling fudge I have been predicting.

They want the minimum they can get away with, followed, if absolutely necessary, by another one, etc etc.


Anglo should have been let go before 2010 and given that it wasn’t, if the claims about EZ threats have substantial truth to them they should have been made public so it would have been clear it wasn’t the Irish that wanted to keep it in business. You want it – you fund it, could then have been the tactic.

Publishing everything on the “threats” now is better than nothing. If true, it would put the German wing on the run.

What are the Irish side waiting for, or is it a figment of revisionist imaginations?


Good suggestion, start with the Nov 2010(?) letter from the ECB to Lenihan that is supposed to be secret. Now would be a good time to leak its contents.
In your earlier post you rightlly identified the German relucatance to print money or indeed agree to a transfer union. If that is there immutable position then there will be no future for the EZ or perhaps even the EU.

As regards the rejection of the Irish preferred solution by the “Continuity ECB” one hopes the Irish aimed high and asked for something like 75bn for 75 years at 0.75% issued to a IBRC nua to kitchen sink everything (including trackers and SMEs) and repoed to the ECB. Work down from there but not very far.
Otherwise “Slan Leat”


Great newz – Blind Biddy has persuated the One_Eyed Sheik not to issue that ‘fatwa’ against you for your ‘slight’ on her woman hood. Lucky man!

@ grumpy

Indeed! But one must also assume that there is a general awareness of this fact which raises the question of why it is not having a bigger impact in terms of the negotiating approach. (Many words come to mind, but coherent is not one of them.)

The latest news with regard to Cyprus suggests that the eyes of the main players are directed elsewhere.

If the head of the ECB and the German finance minister are in open conflict as to whether Cyprus does or does not represent a systematic risk to the euro, repeated plaints from Ireland are unlikely to get an audience, especially if the political high jump that the parties in the coalition are facing is of their own joint construction.

@ All

The judgement of the ECJ in the Pringle case is worth a reference, clarifying as it does (i) the rights of the ECJ itself with regard to the admissibility of the case and (ii) the content of the ESM treaty and the right of member states to sign up to it.

@DOCM [aka Donie McCarthy

Are you really Donie McCarthy from Montenotte? how u doin?

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