25 thoughts on “Ireland: Eleventh Review Under the Extended Arrangement”

  1. The section on reviewing bank profitability is well worth a critical read:
    Section 26:

    “Despite headwinds, the banks report that a recovery of operating profits is underway. AIB and BoI, and a smaller bank more focused on household lending, Permanent tsb (PTSB), together generated €92 million of pre-provision net revenue (PPNR) in the first half of 2013 (Table 10).10 This is sharply improved from the PPNR loss of €678 million in the corresponding period of 2012, though still not yet sufficient to cover credit provisioning costs and it partly relies on the accrual of income on loans in arrears, as provided for under IFRS. The recovery has been driven mainly by operating cost reductions coming through from the second half of 2012, the phasing out of guarantee fees starting this year, and some progress on raising net interest margins as rates on new deposits have fallen below the 1 percent mark for both households and corporations, and there have been some increases in variable-rate mortgages. The near completion of the balance sheet deleveraging process should alleviate profit pressures related to asset disposals going forward yet banks’ determination to reduce dependence on ECB funding may act in the opposite direction given the substantially higher cost of wholesale funding.”

    The last sentence above in particular is worth critically re-reading. My understanding of the two points made are as follows’:

    1. Deleveraging:
    Huge losses were forced onto the Irish banks by the ECB, through a policy of forced deleveraging of banks assets. These losses are loaded directly onto the Irish taxpayer, which the ECB knew they would to be.
    Forced fire-sales in other words, with the Paddys picking up the costs. The low hanging fruit has been picked by the vultures and there is now little left except messy mortgages. So leave those to the Paddys!

    2. “banks’ determination to reduce dependence on ECB funding may act in the opposite direction given the substantially higher cost of wholesale funding”.

    What an extraordinary admission. Irish banks are now so ‘proud’ that they refuse to avail of ultra cheap EZ funds, because the market might think they were on their uppers if they went for the cheap funding!
    What extraordinary nonsense from the Irish banks, or is it from the ICB, the DOF, or is the ECB in fact refusing funding?
    Better to borrow at 3%, 4% or 5% on the market rather than access ECB liquidity at .5%. Iosa Chríost.

  2. The IMF still believe that the ESM will prove a source for retrospective bank recapitalization although all of the political rhetoric from the EU creditor countries suggests otherwise. The ESM also appears to be what they have in mind when discussing a solution to the losses currently run by Irish banks on Tracker loans, with the idea that banks could use the better credit standing of another institution to fund these loans at a much lower rate. Hard to see that working in practice.

  3. @ Dan Mclaughlin

    FYI

    http://www.esm.europa.eu/pdf/FAQ%20Direct%20Bank%20Recapitalisation%20280620131.pdf

    The problem evidently lies with the sequencing.

    However, the fundamental problem is recognised in the Q & A.

    “This link between governments and banks (described as a “vicious circle”) has been widely regarded as a crucial destabilising factor for the euro area. That is why the leaders of euro area countries decided that an instrument was needed that would allow banks to strengthen their capital position without placing a large burden on the country where the bank is
    incorporated.”

    The dispute between the IMF and Berlin seems to centre on the latter’s suspicion of a version of a “strategic defaulter” at the level of EA participating states.

    An example close to home;

    “Revised troika MOU; Expenditure Ceilings

    23. Following the enactment of the Ministers and Secretaries (Amendment) Act 2013 on 23 July 2013 the authorities will publish, by August 2013, a circular specifying the operational details of the ceilings – including the circumstances under which they can be revised and on the correction mechanism.”

    Does any blogger know where this circular might be accessed?

    http://www.irishstatutebook.ie/pdf/2013/en.act.2013.0029.pdf

  4. Even at a low level, the prospect of some growth in the Eurozone in 2014 is welcome.

    The glacial progress in sorting out the bad loan situation in the banks will put a damper on the end of bailout no. 1.

    Its also too late to go to Europe and beg for some gifts.

    Non performing loans have risen to 26%, in line with Greece’s; 50% of SME loans banjaxed coupled with the Central Bank’s report this week that the value of mortgages in arrears for 2 or more years is at €9bn, shows that the facade is wobbly.

    We want EU moolah but Richard Bruton, enterprise minister, this week said he had “no apologies” for a tax rate of 0.2% on Google’s foreign income of $8.1bn in 2012.

    There was no nuance either from Wolfgang Schäuble, current and expected future German finance minister: there will be no refund for the bank bailout and an ESM backstop will only be available in “extreme circumstances.”

    Irish Government says ‘no apologies’ for corporate tax avoidance in Ireland

    The Fund’s review as usual hopes for some progress on various areas that are overdue reform. There will be none of substance.

    Coupled with the Constitutional Convention’s proposed retention of multi-seat Dáil constituencies, the rejection of the Seanad referendum (as in any election, there were of course several factors at play here) is consistent with the Irish conservative mindset.

    Respond to a crisis, if at all, only if it becomes dire.

    There is no interest in significant change on both the right and left; with the peaking of foreign direct investment, a long period of low growth will see many who have talent and ambition moving elsewhere. As always, some groups at home will continue to prosper through boom and bust.

    Ireland today has the same per capita level of income as Italy’s; cargo-cultists may still expect Europe to pay for the upcoming big losses on SME loans and mortgages and maybe ‘rocket’ growth will return or maybe not.

    Long live the status quo!

    “The young Europeans: Hire them before they hire you.”

    It could be a good thing!

  5. @ All

    FYI

    Colm McCarthy sets out the conundrum with which European finance ministers are now confronted in the matter of the ECB carrying out banking stress tests without simultaneously bringing the house down.

    http://www.independent.ie/opinion/columnists/colm-mccarthy/banking-reform-must-be-high-on-ecb-agenda-29637604.html

    @ MH

    The problem I have with your perennial analysis is that it keeps mixing up apples and pairs i.e. linking issues that can only be debated in the context of whatever commitments have been accepted internationally and which bind all the parties.

    To take your two favourite examples.

    Transfers under the CAP are part of such arrangements i.e. agriculture in the EU is a managed market, with a common external tariff, by agreement of all the parties. The main recipients of expenditure under the CAP are Germany and France.

    There is no basis in the treaties for the harmonisation of direct taxes. What countries can agree to do to change this situation remains to be seen. In the meantime, Ireland’s tax arrangements are not in breach of any internationally agreed rules.

  6. @ MH

    For “pairs” read “pears”.

    On the wider issue of the outcome of the referendum, holding it seemed to me to be an exercise in the escapism with which the policy community in Ireland seems to be afflicted. Not so the ordinary voter.

    Ireland is clearly a country for old men, or at least middle-aged.

    http://www.independent.ie/irish-news/almost-half-of-civil-servants-are-over-50-4pc-under-30-29633330.html

    Doing something about the sclerosis that has been allowed to develop since the start of the crisis has to become the focus of attention. Drilling down to where the public’s money is being spent and deciding on the basis of fact-based analysis whether it is value for money, and abandoning the fiction that the public sector is a monolith that can be managed centrally, is the only way to go.

  7. @ DOCM

    I do not expect nor have I proposed harmonisation of rates.

    Austria and Luxembourg have for example been put under pressure to change bank secrecy rules that have facilitated tax avoidance/ evasion and the Netherlands has agreed to reform rules that facilitate corporate tax avoidance.

    Some tax authorities are more lenient with big foreign companies compared with domestic ones.

    It’s no longer about rates of tax and multi-billion euro charges are used to minimise taxable income.

    Big FDI companies in Ireland pay a very low effective rate.

    Moves are underway at the OECD to propose changes of the current system for approval, by the G-20.

    It’s appropriate to contrast the expectation of of a refund of bank rescue costs with a blind eye turned by Revenue to very large transactions with the EU.

  8. The ECB ‘stress’ tests will be so biased against peripheral banks, that they amount to a Soviet style show trial before execution of smaller peripheral banks.

    From the Irish Examiner about a week ago
    http://www.irishexaminer.com/business/ecb-wants-to-phase-out-loss-making-trackers-244317.html

    “Bank of Ireland, AIB, Permanent TSB and Ulster Bank have roughly €70bn of tracker mortgages between them which makes up two thirds of their mortgage books. ”

    Lets says €50 billion trackers, excluding Ulster banks.
    Now lets ‘stress’ those trackers in two banks, a large continental bank with full access to ECB .5% rate and an Irish bank, where the ECB refuses access to its low funds cost for tracker mortgages, so stressing ‘Irish’ trackers at perhaps 3%, or 4%. So much for a level playing field.

    The Examiner again:
    “One of the options the Government had put forward was to hive off the tracker mortgage books in special asset management units that would then be funded by a credit line from the ECB. The banks would put in place guarantees against future losses. However, the ECB has consistently ruled out funding tracker mortgages. An ECB source said it favours a domestic solution including the Government phasing out tracker mortgages over a five-year period.”

    The reality of what is going on at ECB/EZ level is a banking power play, with large EZ banks, aided by Germany in particular, vying to destroy small peripheral banks, and to take control of the remaining national deposits, through bank ‘consolidation’.
    Theses large EZ banks have no intention of paying take over price, and the stress tests will further weaken the peripheral banks so that they will be forced into more fire sales and have no options left but to ‘consolidate’.

    The ECB by refusing low cost funds for Irish trackers mortgages, while giving low cost funds to large EZ banks for exactly the same tracker mortgages, is aiding, abetting and even mandating the destruction of peripheral banks.
    Cui bono?

  9. @ Joseph Ryan

    The reality of what is going on at ECB/EZ level is a banking power play, with large EZ banks, aided by Germany in particular, vying to
    destroy small peripheral banks…

    Hopefully, you’re only afflicted with a temporary bout of halitosis of the intellect this Sunday.

    I doubt if Mario Draghi, ECB president, is the head of a conspiracy against Italian banks and those of neighbouring countries.

  10. @MH

    “I doubt if Mario Draghi, ECB president, is the head of a conspiracy against Italian banks and those of neighbouring countries.”

    Draghi is not head of any conspiracy but, then again, he is only in nominal charge of the ECB. In Ireland, we are very well versed in the definition of the word plenipotentiary. With that in mind, the following excerpt from the WSJ regarding the Cyprus ‘deal’ is worth considering:

    http://online.wsj.com/article/SB10001424127887323639604578366700444429538.html

    “He (Cyprus Finance minister, M. Sarris) went back up to brief the president and Mr. Anastasiades rejected the deal, threatening to leave. At that point, around 1 a.m. a small group—including Ms. Lagarde, Mr. Rehn, Mr. Sarris, Mr. Schäuble, France’s Pierre Moscovici, Mr. Asmussen and Mr. Dijsselbloem broke off into a separate room. It was then—as other ministers snoozed or played on their iPads— that Mr. Asmussen told Mr. Anastasiades that without a deal, Cyprus’s two big banks faced insolvency, since they would have no prospect of European funds to repair their battered capital buffers, said people who were present. In that case, the ECB would no longer be willing to fund the banks with central-bank emergency liquidity, Mr. Asmussen said, these people said. The implication: The island’s biggest banks might be unable to reopen after Monday’s bank holiday.

    Mr. Asmussen backed up the warning by calling ECB President Mario Draghi and letting him know the central bank might have to deal with the collapse of Cyprus’s banks. ”

    So who is in charge of the ECB. Draghi, the Eurogroup, the Executive Board, The Governing Council, or Asmussen who takes his instructions from Schaeuble.
    It was the practice of the previous head of the ECB, JC Trichet to ask ‘Jens’ what to do ( ref Colm McCarthy article in the Sunday Indenendent recently). The mechanisms now are a little more subtle and brutal, as Draghi is nobody’s fool, but is in charge? I don’t think so.

    Draghi has said himself, several times, that the monetary transmission is broken in the monetary union.
    The problem as far as I can detect is that the ECB itself is responsible for the breakage.
    If LTRO is available to all EZ banks, why are the tracker mortgages of a large EZ good collateral, worthy of funds at .5%, but the tracker mortgages of an Irish bank (eg AIB or PTSB) deemed unworthy of funds at .5%.
    The reality is that, it is the ECB itself through its own criteria, that has broken the monetary transmission channel. I am sure Draghi is fully aware of this, but the dominant narrative is against him. If he made the necessary decision, he might get another late night call from Asmussen.

    Banks, as you know, fund themselves from a few main sources.
    Deposits, other banks and bonds, and CB/ECB liquidity.

    1. Peripheral deposits have flown to large core banks, giving them a huge advantage. The ECB could address this, if it wished. Remember we already have capital controls in Cyprus. It will not be addressed, because it is not in the interest of the winners to address it.

    2. Bond lending and interbank lending are finished in the periphery, with ECB threats to shut down Ireland and Cyprus, having killed both bond and interbank stone dead.

    3. Liquidity, while provided in some instances at the same rate, is not provided in sufficient quantity, or has very restrictive strings attached, such as forced deleveraging. There is no level playing field in relation to ECB liquidity.

    Colm McCarthy poses the question in today’s Indo, indicating the supposedly chaotic nature of EZ banking, in relation to the forthcoming stress tests.

    ““… try this: ‘We have assessed Bank XYZ, it is bust and we have no plans to do anything about it.’”

    But lets move on a bit.
    Does Colm McCarthy believe that some of the top players in EZ banking and the ECB, have not considered this question?
    You bet they have.
    What happens next?
    Depositors lose, which does not bother me, and the national taxpayers get stuck with the residual bill, which does bother me.
    But the next step is bank ‘consolidation’, at a fire-sale price, with the fire-sale loss again being nationalised. After that, capital allocation, will be decided in a boardroom in Bremen. If there are any serious questions to be decided, Jens will available to take a call.
    Bank losses will have been nationalised, and future bank profits ‘bought’ for nothing. South Dublin will have more to worry about that the keeping the Seanad at that point.

    PS I am not a nationalist by nature, but I have had nationalism pushed down my throat in the form of ‘Irish’ bank losses. [Digesting them may certainly give rise to halitosis.]

    In fact on a trip to WW2 cemeteries in 2007, I brought back some acorns from the La Cambe German war grave in Normandy. Many grew and will hopefully grow into some fine oak trees.
    But the spirit of reconciliation that was fostered after WW2 is gone.
    That spirit is as broken as the monetary transmission system.

    The first thing that is needed in Europe right now is to admit that reality.

  11. Francis,
    Tens of thousands of irish born soldiers fought in Allied uniforms in WW2 against the last German project to destroy the Continent of Europe. Co-incidentally a few may even have fought on the Nazi side. A few were even smuggled in on U boats.

  12. Wieso, Francis?

    The last collapse of capitalism resulted in WW2. And more than a few Irish died fighting the Nazis.

    I visited the German graves at el Alamein once myself. So much to learn from history.

  13. @Joseph Ryan

    If LTRO is available to all EZ banks, why are the tracker mortgages of a large EZ good collateral, worthy of funds at .5%, but the tracker mortgages of an Irish bank (eg AIB or PTSB) deemed unworthy of funds at .5%.

    The problem is that the collateral is junk, or that there isn’t any left, due to the haircuts being applied. However the bigger issue is that really this is a capital loss/solvency issue being presented by the Irish government as a funding/liquidity issue (again). If all the trackers, for example, were shifted to an SPV a loss would have to be realized, as the return on the loans is too low, even if they are all performing (similar to a fixed income security losing value if interest rates rise). At some point the loss will have to be recognized.

    The EU, after two years, have still not approved the PTSB restructuring/ State Aid plan. Moodys have recently downgraded PTSB again. It now has an E+ for financial strength. It still has a A for capitalization, but is burning through its capital. If a bank doesn’t have a solid business model it doesn’t really matter how much capital you have. Here’s a section from the Moodys report:

    The standalone rating reflects: (i) the uncertainty and the risks surrounding the far-reaching restructuring of the bank; (ii) the challenges the bank faces to return to profitability; (iii) the still significant short-term funding pressure that the bank is under which results in a high reliance on external support and (iv) the still deteriorating asset quality in the Irish residential mortgage book. These issues are mitigated to a certain degree by the bank’s relatively high, although decreasing, level of capital (15.7% Core Tier 1 ratio at end-June 2013, down from 18.0% at end-2012), following the completion of the recapitalisation as required by the 2011 Prudential Capital Assessment Review (PCAR). As a result of elevated impairment charges Moody’s would expect the bank to report further losses in the second half of 2013 and therefore the objective of restoring the bank to profitability from its core mortgage lending activities, so as to be able to absorb the cost of its impairment charges, is not yet in sight.

  14. @ Joseph Ryan

    we blew up our economy by insanely increasing the size of our banking system. The EU and IMF have decided that we should therefore have a much smaller banking system, so we don’t blow ourselves, and perhaps others, up in future. While u can at times disagree with the way they have gone about getting from A to B in that regard, you can kinda understand where they are coming from on this.

    On ECB liquidity:

    Irish banks were using 35% of all ECB liquidity at the peak of the crisis, despite Ireland representing around 3% of Eurozone economic output. Does this not seem a bit outsized and unsustainable? The tracker mortgages are actually allowed to be used as collateral at the ECB, its just that the ECB does not want to be tied in to some sort of 30-year long SPV designed purely to access ECB funding. They dont mind lending to the Irish banks under the terms of their collateral framework, and on the same basis as other EZ banks. They do not want special one-off deals, or to be tied into something they can not get out of at a future date.

    “Bond lending and interbank lending are finished in the periphery, with ECB threats to shut down Ireland and Cyprus, having killed both bond and interbank stone dead.” – BOI and AIB are issuing bonds at the moment…

    “Peripheral deposits have flown to large core banks, giving them a huge advantage. The ECB could address this, if it wished. Remember we already have capital controls in Cyprus. It will not be addressed, because it is not in the interest of the winners to address it.” – are you advocating capital controls here so that deposits stay in the Periphery??

    “Asmussen who takes his instructions from Schaeuble” – Asmussen is Merkel’s guy at the ECB, Weidmann is really more the Schaeuble guy. And Asmussen is very close to Draghi, and relatively moderate/prgamatic. Asmussen is, at least in relative terms, one of the good guys.

  15. Where did the idea of tracker mortgages come from? They seem to be very similar to the bank guarantee. “Sure it couldn’t happen” is the new normal and the cost of the option is so much in the money that it far beyond the scope of the institution to fund it.

  16. @Bond. Eoin Bond

    Asmussen is Merkel’s guy at the ECB, Weidmann is really more the Schaeuble guy. And Asmussen is very close to Draghi, and relatively moderate/prgamatic. Asmussen is, at least in relative terms, one of the good guys.

    Weidmann is definitely the more fanatically right wing of the two but I would have to disagree with you on Asmussen, he is just the more pragmatic and sane of the bad guys (in as far as the word “sane” can ever be applied to ordoliberals).

    And here I mean “bad” purely in the sense that the policies he insists on further German national interests which are are at odds with Ireland’s while Germany has a conservative government.

    The EU and IMF have decided that we should therefore have a much smaller banking system, so we don’t blow ourselves, and perhaps others, up in future.

    I remember well the day Ahern got rid of the Glass_Steagall act. People just do not understand how central a role Ireland played in the GFC.

    In other words “Dear sweet spirit of Bismarck spare me!”. If you view the political and economic machinations in Europe as anything other than a cynical and ruthless effort by the creditor countries to minimize their losses from the European component of the global financial crisis you will end up ascribing them motivations they do not have. The state of Ireland’s economy and financial sector only matters to the German bloc as in as much as it improves the state of their own economy and financial sector and minimizes their losses from the banking crisis.

    A crisis, in case you had forgotten, that originated in the private sector but has paid for by the public one.

  17. @ Bond. Eoin Bond

    I really like your characterization of Jens & Jörg.

    Weidmann represents the Bundesbank and some constitutional rigidity and Schäubles millennial visions.
    Asmussen is the pragmatic, social democrat, we need some workable solutions now, Merkel guy.

    Good cop, bad cop.

    Like the 2 roman consuls in the good times of the Roman republic,

    The Siemens Doppelspitzen (technisch / kaufmännisch)

    And Schäuble / Merkel at home in my republic.

    @ Shay

    You will never give up on your “neo-liberal”, do you?

    Ordnungspolitik / Soziale Marktwirtschaft is consensus here, from the right to communist Plattform Sarah Wagenknecht

    Bismarck introduced universal health care in 1885, 130 years before “Obamacare”

    And Volkswagen does introduce german style unions and apprenticeship models to the US South : – )
    http://www.handelsblatt.com/unternehmen/industrie/vw-werk-in-den-usa-demokratie-endet-nicht-am-werkszaun-seite-all/8894120-all.html

  18. Under liberalism, when you subvert an entire economy to the needs of its banking sector, as hs been the case with Ireland, then investors profit greatly.

    Liberalism was the era of investment choice based upon credit and carry trade investing.

    Ireland’s Bank, IRE, has been the investor’s carry trade darling, In the last year, Ireland’s Bank, IRE, stock market performance has soared 118%, compared to Lloyds Banking Group performance of 100%. And in the last year Ireland, EIRL, has outperformed its nation investment peers, Finland, EFNL, Netherlands, EWN, and Germany, EWG, EWGS, by a huge margin rising some 43%.

    In contrast, Authoritarianism is the era of diktat based upon debt servitude.

    Please consider that Fiat money died Friday September 20, 2013, with World Stocks, VT, Major World Currencies, DBV, and Emerging Market Currencies, CEW, trading lower, as Jesus Christ is operating in dispensation, as presented by the Apostle Paul in Ephesians 1:10, that is in administrative oversight of all things economic and political, and has pivoted the world out of liberalism and into authoritarianism, and as such the stock market has turned from bull to bear with the Too Big To Fail Banks, RWW, and Regional Banks, KRE, trading lower in value. Those ETF sectors which rallied over the last year and countries which rallied, from late June 2013 to late September, 2013, seen in this Finviz Screener, will be trading lower from the Tuesday October 1, 2013 rally, on competitive currency devaluation and on the exhaustion of the world central banks’ monetary authority, as investors come to greater realization that the US Fed’s monetary policies have crossed the Rubicon of sound monetary policy, and have made “money good” investments bad.

    Friday, September 20, 2013, was liberalism’s day of investment instability that marked an inflection point that pivoted the world from the paradigm of liberalism into the paradigm of authoritarianism, and from a moral hazard based prosperity into a debt servitude based austerity. With the financial markets turning from risk-on to risk-off, as indicated by the Market Off ETN, OFF, trading higher, and the stock market turned from bull to bear.

    The Yahoo Finance chart of the EUR/JPY, and the Google Finance Chart of the EUR/JPY, and the Forex Trading chart of the EUR/JPY, and FXStreet chart of the EUR/JPY, show a close at 132.45 on October 3, 2013; from which a trade lower, will soon propel Eurozone Stocks, EZU, and European Financials, EUFN, as well as World Stocks, VT, lower, as The Great Bear Market of all time commenced Friday, September 20, 2013, and envigorated Thursday, October 3, 2013.

    On Friday, October 4, 2013, currency traders took the Japanese Yen, FXY, slightly lower to a new weekly rally high, at 100.30, its dark filled candlestick suggests that the rally in the Yen, is at its zenith. And the Euro, FXE, even more slightly lower, to a new weekly rally high of 134.12, forcing the EUR/JPY, to lower to close the week lower at 132.04, yet Eurozone Stocks, EZU, rose to close near their all time high.

    When the Euro Yen currency trade unwinds, Ireland, EIRL, and Ireland’s Bank, IRE, will be leading Nation Investment, EFA, and Global Financials, IXG, lower.

    The modern money system is broken and bust; the age of speculative leveraged investment, is done, over, and finished. Liberalism’s democratic fiat money and banking system is being replaced by Authoritarianism’s diktat money and regional governance and totalitarian collectivism system.

    Insolvent sovereigns, such as Ireland, EIRL, cannot govern, and insolvent banks, such as IRE, cannot provide seigniroage, when trust in the IMF, Mario Dragi, and Ben Bernanke fails.

    Revelation 13:1-2 presents the concept that The Beast System, with its ten horns and its seven heads will rule over mankind in the last days.

    The Beast’s ten horns are ten regions of economic and political power and authority.

    The Beast’s seven heads are mankind’s seven institutions; these being 1) Education, 2) Banking, Finance, Commerce and Trade, 3) Body Politic, 4) Military, 5) Religion, 6) Media, 7) Science and Technology. Each of these seven institutions will increasingly be integrated with each other, in totalitarian collectivist regional governance, in each of the world’s ten regions.

    This monster will emerge out of Financial Apocalypse, that is a global credit bust and financial system breakdown as foretold in Revelation 13:3-4, and more specifically out of sovereign insolvency and banking insolvency of the southern European periphery nations of Portugal, Italy, EWI, Ireland, EIRL, Greece, GREK, and Spain, EWP, that is the so called PIIGS, to become a European Super State, which is based on the Euro Currency, FXE, whose economic rubble will be seen in the devastation of the Eurozone Stocks, EZU. Across the Atlantic Ocean, a growing intertwining of institutions will eventually produce a North American Continental Government, that is a North American Union.

    The First Horseman of the Apocalypse, that is the Rider on the White Horse, who carries the bow yet without any arrows, Revelatin 6:1, is effecting coup d’etat globally to transfer the baton of sovereignty, from democratic nation states to nannycrats, as they rise to rule in regional governance and totalitarian collectivism.

    Thus it will be leaders from each of the seven institutions who will increasingly be working in statist public private partnerships for regional integration, as they oversee the factors of production to manage regional commerce and trade, to establish regional security, stability and sustainability.

  19. @Francis

    I understand that there are subtle but important differences between ordoliberalism and neoliberalism but I think they do not matter at a European Union economic policy level.

    http://www.irisheconomy.ie/index.php/2013/09/20/ethical-reasoning-and-economic-thought/#comment-450514

    This is not a flaw of the social market economy in a national context (even if you think that German economic growth has been despite ordoliberalism and not because of it) but I hope it explains why it does not work in an international one.

    On Germany’s early and far sighted adoption of a universal health care insurance system I saw the tweet storm, and so I presume did you.

  20. @ Shay,

    I did miss out on your ethics/ Higgins debate here. I was busy with german elections at this time. And I try to restrain my “loses Mundwerk” (loose mouth) to core things, when I feel I have something relevant to contribute.

    I did also not notice any tweet (twitter?) storm about health care, maybe you could provide some reference?

    But I do reject all those attempts to make “liberal” a dirty word, coming from the GOP or some illiberal greenies, with their “holier than you” attitude.

    I am a conservative, a liberal, and a social democrat.

    And I firmly believe that social market economy / stable money / unions / universal health care / apprenticeships works everywhere on this planet, not just in core Europe.

    Both FED and the BoJ have fixed to the 2.0% target in 2012.

    wiki/Liberalitas_Bavariae also stands for a Bavarian King, who gave refuge to a gifted composer, Richard Wagner, who was on the run for staging an armed revolution here in Dresden, and from his creditors : – )

  21. It’s possible we’ve found the craziest post in Irisheconomy history just above there. And thats really saying something.

  22. @Bryan G/ Bond Eoin Bond

    That you both for the temperate replies.
    I do understand that ‘Irish’ banks may not be flavour of the century in Frankfurt. Equally Frankfurt should attempt to understand that their preference for certain creditors, paid for by the Irish taxpayer, will form a significant part of the history of this crisis.

    But a few points:

    1. ECB Collateral. One would have thought that bank financial statements actually meant something when considering adequate collateral. Clearly they don’t. It seems, particularly in the case of Permanent TSB, that the assets valuations produced in the financials are taken with a grain of salt when it comes to collateral adequacy. So how far have we really come from the Ernst & Young audit of Anglo Irish.

    2. Capital Controls: “are you advocating capital controls here so that deposits stay in the Periphery”
    Absolutely yes, from my point of view. The corollary question, post Cyprus, is who thinks that hitting the laggard’s deposits over 100,000, is an equitable basis for winding up a bank.
    An even more important corollary question, is how many EZ governments could stand over deposits under 100,000, that are ‘absolutely guaranteed and sacrosanct, as per Madame LeGarde.

    3. The only bank bonds being issued, not only in Ireland but also I suspect EZ wide, are covered bonds. The issue of such bonds in the current fragile situation throughout the EZ is very questionable legally. Such bonds displace deposits in preferential ranking and if a bank had to fold within two years under Irish law, there is a possible claim by those depositors under Irish company law.

    4. ECB liquidity usage on ‘Ireland’ of 35%. I think this is a disingenuous argument that the ECB has used. In a monetary union, if funds flow from one area to another, the provision of liquidity will rise in one area and fall in the other. In any case, if collateral is adequate, neither the % used by Ireland or indeed the amount should matter.

    One final point.
    I took the opportunity today to have a quick look at PTSB balance sheet.
    It is not a pretty sight and prima facie the level of provisioning seems very low. With net interest income of a mere €93 million for the first six months of 2013, there is a strong argument for putting the bank into resolution, so that the general public will no longer have to subsidise these low yielding trackers.
    NAMA on a similar asset base is able to generate almost €500 billion net interest & fee income on a 6 month basis.

  23. @Joseph Ryan

    …there is a strong argument for putting the bank into resolution…

    The question is who would take the losses. Given that

    – there are no outside equity holders to hit
    – there is almost no subordinated debt
    – bank bonds are either covered by collateral or under the ELG scheme
    – ECB & interbank deposits are also collateralized
    – deposits under 100,000 are “guaranteed”

    Thus it would appear that depositors >100k are first up to face the firing squad.

    Even though the details were very complex, the PN deal had a very simple premise – the ECB extends the ‘unprinting’ period from 10 year flat to 20 year backend-loaded and in return the Irish government converts the PNs into normal sovereign debt.

    It is hard to see what the simple premise is that would underlie any tracker deal. After two years there has been no apparent progress.

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