Ireland to exit the EU/IMF Programme without further support Post author By Seamus Coffey Post date November 14, 2013 A Department of Finance statement is here and the Taoiseach’s statement to the Dáil is here. Categories In Uncategorized 147 Comments on Ireland to exit the EU/IMF Programme without further support ← HWS: Adjustment within the Euro Area → Honohan Prime Time Interview 147 replies on “Ireland to exit the EU/IMF Programme without further support” Wonder why it became an “emergency” when the euro group were not supposed to have it on the agenda…per MH at yesterday’s finance committee hearing. There’ll be two forms of criticism. 1. those genuinely worried that we might not make it 2. those disgusted that normal economic conditions might return meaning that the government has handled things well, on both meeting the fiscal targets and the diplomatic effort to assure international partners/lenders that we’re safe. Alas, certain commentators require national failure to prove themselves right. Let the games begin. It is to be the markets rather than the Bundestag! “Neither today’s decision, nor the exit from the bail-out in December, means the end of difficult economic decisions. There are still demanding times ahead. It does not mean any windfall of cash. It won’t mean that our economic and financial challenges are over. Alongside the bail-out exit in December, we will publish a new Medium Term Economic Strategy to set out a new sustainable economic pathway back to prosperity for the country. This will include a recommitment to bringing Government borrowing down to sustainable levels during the remainder of this Government’s term of office.” Just as well! A colder look at Ireland’s predicament than hitherto allowed by “politics as usual” will be essential to retaining their confidence; of the markets, that is. 10 year bond yields for Ireland are around 3.5%. 0.5% above the record low. Only 0.75% above the yields in US and UK – and if the trend continues we’ll not be far off those rates within 12 months. We are now 0.5% below Italian/Spanish yields. 2.8% below Iceland. Count me in 1 Sarah, in which case the issue is: would we have gotten better conditions now, or in 12-18 months time when by definition we would be in big trouble? @Sarah My prediction is the commentariat will spend way too much time worrying if the markets will lend us enough cheap money and not enough time worrying if they will lend us too much cheap money. It was the latter that got us into this predicament in the first place. It won’t be long before the ‘social partners’ are banging on the door again, looking for their place at the trough. The decision is, of course, big news in Ireland but the caravan moves on. http://www.bloomberg.com/news/2013-11-14/schaeuble-in-brussels-as-cdu-spd-vow-common-euro-bank-union-aims.html Were the Germans to concede, the hand would be out before you could say Newbridge Credit Union, or whatever would be the equivalent in other countries unable to provide credible backstops. The negotiation clearly hinges on how the ESM is to be involved at the end of the chain which may be rather short in a crisis. Directly seems out of the question for the Germans (the issue of historic or retrospective involvement being irrelevant). A possible outcome is some form of lending by the ESM with its implicit mutualised guarantee. There is form here. My hypothetical is that, had we embarked on a precautionary arrangement with our European friends, the next EU summit would have been dedicated to grandstanding on what eventualities would not be covered by the program for Ireland. Sean Quinn might have a policy available. Guardian reports: “Enda Kenny’s decision not to ask for a credit line will have one intriguing consequence — Ireland won’t able to sign up for the European Central Bank’s OMT programme (in which the ECB would buy a country’s bonds to drive down its borrowing costs). “Ryan McGrath, a Dublin-based bond dealer with Cantor Fitzgerald, told Reuters: “‘Not taking a credit line is a statement of confidence by the government. It bolsters the sense that Ireland is detaching itself from the peripheral countries “‘I don’t think the government is being rash. The big question is what are the implications for OMT access.’ Is that right? http://www.theguardian.com/business/2013/nov/14/eurozone-gdp-france-economy-shrinks-by-01-as-german-growth-slows-live I figured you’d be in 1 Kevin and keen to hear more. So either they think Plan A – we can stay out of trouble Plan B- if we can’t, we can get a better deal this way, but the conditions on funding were so onerous, it’s worth taking a chance on Plan A A question: – I’m trying to think ahead about these stress tests. Is there any link between potential further capitalisation and conditional funding? Does it make an application for recapitalisation funds easier if we’re technically out of bailout? ie it’s not a look back, but a blank slate? Or is that a different matter entirely? It’s going to be grand and what better than an ’emergency Cabinet meeting’ to drive home the message of lets call it: The New Departure. This precautionary credit line issue has been a bit of spin as there is a rescue fund that can be called on at short notice besides there is Draghi’s OMT, which he doesn’t want to use. The Eurozone grew 0.1% in Q3 while Japan’s annualised Q3 growth halved; US GDP largely depended on inventory. Nevertheless, barring a lot of things the mood music generally has improved. With investors in search of yield, there isn’t likely to be a funding problem in the medium term but the promised Medium Term Strategy is likely to be a promotional brochure. There is no Whitaker around to begin by honestly address the challenges. If that depresses Sarah Carey, I’m not going to preface anything with “all due respect.” I’ll produce facts if needed. Some of you may have seen a report this week that coincided with a summit in Paris on youth unemployment, that Ireland may not have funds to implement the EU youth guarantee and fix things like the banjaxed apprenticeship system. Now let me think, what sort of projects are lavishly funded that have a much less certain return? Enda Kenny said today: Alongside the bail-out exit in December, we will publish a new Medium Term Economic Strategy to set out a new sustainable economic pathway back to prosperity for the country. This will include a recommitment to bringing Government borrowing down to sustainable levels during the remainder of this Government’s term of office. It will be an economic plan based on enterprise, not speculation. Not speculation? The circular has likely gone out already appealing for ideas. There will be lots of S_O_ but any project that doesn’t recognise weaknesses and threats is going to be a failure. Karl Whelan: Re Ireland, given German political situation\ SPD shenanigans a PCCL was never going to be agreed now. It’s a lemonade from lemons situation. Have Denis and Peter okayed this? @Gavin No OMT access and no precautionary cash = ?????? Coupled with a caution ““I hope that serious investors know what they are investing in,” said Gunnar Hokmark, a member of the European Parliament who plays a central role in shaping the new law. “Everything is to be seen as bail-in-able. Depositors are, in the end, bail-in-able. If anyone would be surprised by that, they have been away from the debate for quite a long time.” I wonder! Condition 1 You will bail out your banks, again. Condition 2. You will bail out your banks, again and again. Precautionary line for whose benefit. The ECB as official bank creditor? This is one decision the government got right. If rates go sky high, lets take a real look at all the creditors this time, particularly the official ones. Why pay for a PCCL in an EZ ship that is listing and headed for the rocks? Exiting without backup is a smart option. If the US and UK economies reach escape velocity we will get a lift and muddle through. Or if there is another growth shock, the EU5 plus a few others will end up on the precipice requiring OMT/restructuring/Eurobonds or exit and default . Arguably restructuring or default is the better option . We need another crisis to get to the proper outcome for the periphery. @Tull: I think a logical implication of the decision today is that the Government needs to be thinking ahead to potential contingency plans involving default. @ MH: “The Eurozone grew 0.1% in Q3 while Japan’s annualised Q3 growth halved; US GDP largely depended on inventory. “Nevertheless, barring a lot of things the mood music generally has improved.” Barring a lot of things – indeed. I would classify the ‘mood music’ as a sombre dirge – bordering on the funereal. If that 0.1% is the measured value, what is the per cent error estimate around that estimate? +/- 10% ??? That 0.1% stat is a meaningless. And did I see mention recently of a 2.4% estimate for 2015? – 24-fold increase! That would be interesting. @ SC: Sarah, we are wading up to our necks, in do-do. If we ‘exit’ then all we have done is put on a pair of stilts: we are still wading through the do-do. Just pray to St Jude we do not slip! Kevin, I urge you to read Pat Leahy excellent book on this current govt. You will find reference in one chapter to the high level committee formed to game euro exit and default. So we know the plan exists and we can infer that it was not implemented for understandable pragmatic reasons. But times & circumstances change. Why would you sign up today to any agreement which commits you to extra policy constraint. If you have cash, are near primary surplus & are looking at a flattening out in the economy, you wait and see. That’s logical Tull. But I wonder if the conditions would not be much tougher if we went back to the trough in 2015 or whatever: that is the potential cost. Would you not get a better deal if in primary surplus? Maybe by the next crisis, the penny will have dropped in Berlin that all this internal deval stuff is BS. The only way out is growth , restructuring or default not collective punishment of the periphery. Last weeks rate cut offers the hope that Jens veto over sensible monetary policy is gone. following Johnny Foreigner, in the last few months the Irish 10-yr yield spread over the US has come down from 2.4 to 0.8 %. Just extrapolating this a little bit further …., maybe that made the US Teasury a little mad : – ) OMT is contingent on an ESM programs, with strings and supervision attached. Dont you like to get those pesky IMF and german troika bankers out of your central bank? @Kevin, Tull “high level committee formed to game euro exit and default” I tend to analyse politicians as essentially ‘method’ actors. Its much esaier to sell a line if you convince yourself it is the only true path of enlightenment. How likely are they to be capable of analysing this properly whilst acting as salesmen for official policy? Also, what great minds comprised this committee? Given that real nerds wrt this stuff don’t seem to even be able to agree on the fundamentals of how floating a currency, printing and de-valuing would affect local bank solvency….. see this discussion for example: http://www.irisheconomy.ie/index.php/2013/10/28/the-anti-confidence-fairy/ ….. how likely would the Irish government be to actually conclude that anything other than an incrementalist policy should be followed? “We will exit the bail_out in a STRONG position” [An Taoiseach; emphasis added]. No comment on such simplistic her_men_u_thicks! Grumpy , I tend to regard them as life insurance salesmen who occasionally have to take grown up decisions . Some are good at it some of the time, some not so good. The committee was not staffed by rocket scientists but presumably the best brains available at the top level of the CS- probably not as clever as you. The choice was a simple calculation of the odds. A reasonable high probability that there would be chaos on Monday followed by non payment of SW on Thursday. A lower probability of it working out fine in the end. Facing these odds what would you expect the Sir Humphrey to recommend initially. @Tull, if you were in government you would get a better deal if in primary surplus. It requires credibly threatening to default, and perhaps also to leave the euro. Which is perhaps where we should be headed no matter what. Are our politicians radical enough to be able to credibly threaten such a thing? I would be worried that in such a circumstance they would still be terrified of what they would see as a leap in the dark, and thus accept who knows what. (And, given the size of our debt, the state of the Eurozone economy, deflationary pressures, and so on, I think this circumstance has at the very least a non-negligible probability of occurring.) Of course I could be completely wrong, and perhaps the prospect of a 2016 election might stiffen their spines if the eventuality arose. But how often have we thought things like this before, and not only in the Irish context, and been disappointed? “The first REAL SUCCESS in the Euro crisis …” [Dan O’Brien; emphasis added] Wonder was Dan dropped when he was small? @Kevin O’Rourke “It requires credibly threatening to default … Precisely. Kevin, I think our pols would not like to leave the euro and default. Too pro European, conservative and understanding that if they do their party will be out of power for a generation. Same with the CS who loves going to Brussels. However, any pol who survives a long time knows when the game is up. If things get as bad as you think it might, then more than one country will go overboard. At that point we will jump and only then. In the after life all the Periphs want to turn around to their own electorates and the rest of the world and say “we tried but those guys in Berlin…. And indeed if the whole thing is going to go belly up then it is optimal, perhaps, for us to default and leave at the same time as everyone else, in terms of reputation and so on. As usual, only Draghi seems capable of cutting to the political chase when it comes to pertinent commentary (as relayed on RTE just now). The Irish government “is to be congratulated”, which is true, and he expresses confidence, and leaves the government holding the baby in the process, “that the necessary actions will be taken”. These will have to include action on the remaining important actions stalled for political reasons. Where the troika failed, the markets will almost certainly succeed. Apart from the required reforms in relation to services (legal charges etc.) and the sorting out of the aftermath of the housing crash, especially BTL lending, the clear priority has to be sorting out health, including recovering medical cards which should never have been granted. However, as the Minister for Health underlined, the real difficulty is getting on top of the unjustified inflation in costs, both medical and administrative. http://www.irishtimes.com/news/ireland/irish-news/executive-top-up-payments-widespread-for-health-bosses-1.1541696 Fasten your seat belts! It is going to be a bumpy ride and not one in which a satisfactory re-electoral strategy can easily be devised. On the questions raised by Sarah Carey, FYI this WSJ commentary. http://online.wsj.com/news/articles/SB10001424052702303789604579195951236641842 DOCM The markets didnt give a flying fook about health inflation or anything else disfunctional in thr pre bailout era. Why would they change now? Here’s a question. The Department of Finance statement says: “The market and sovereign conditions are favourable towards Ireland with the country returning to the markets in 2012” Do we imagine people from the DoF phoning up the kind of companies that buy government bonds and saying, ‘hey guys, what do you think about us going it without a precautionary credit line’? fyi Archbishop appeals for food to alleviate hunger in Dublin Some children ‘so hungry they can’t learn’ as demand for wholesome food not being met ‘There are children in Dublin schools so hungry they cannot learn while some university students “don’t have decent nourishment” either, the Catholic Archbishop of Dublin Diarmuid Martin has said. It was “not exaggeration to say… the demand of people for simple wholesome food for themselves and their children is not being met” in Dublin, he said. He was “talking about LARGE numbers of people”. [Diarmuid Martin; emphasis added] http://www.irishtimes.com/news/social-affairs/archbishop-appeals-for-food-to-alleviate-hunger-in-dublin-1.1594923 AAh yes – the ‘strong’ tast of ‘Irish Success’ … @DOCM Spose you might respond – ‘The markets will provide’ or ‘Let them eat cake’! @ BL Is not the answer blindingly obvious? We seemed to be able to pay our way at the time. (Remember a certain minister who said that we did not need the stamp duty income from bubble era property prices!). We will still be about 10 billion euros short of the readies in 2014. No wonder the coalition parties, and especially the junior one, are looking rather bilious. Incidentally, the WSJ article is very interesting in that it makes rather obvious that the German political establishment, having confused the ECB with the Bundesbank, is now confronted with the political result of confusing the German constitutional court with the ECJ. @ BL Of course, there is always another point of view! http://www.irishtimes.com/news/politics/pivotal-moment-could-be-turning-point-for-coaliton-1.1594789 Especially this bit! “Both listed off all the statistics which give substance to their assertion that Ireland is in a position to exit availing only of the backstop of some €24 billion provided by the National Treasury Management Agency.” Some backstop! DoCM So were fully funded to the middle of 2015…its deja vu all over again @DOCM As you mention the German constitutional court…what happened to that major decision they were supposed to deliver in October? Flj Discretion being the better part of valour, the decision, I seem to have noted from somewhere, has been delayed. The point in the context of the SRM is that the insistence by Schaeuble that a treaty change is required for the Commission to be given the executive role is based on the view that he takes of the view that the German constitutional court would/might take. But the job of deciding what is legal under the treaties is a matter for the ECJ, not the constitutional court of any one country. If the latter were the case, the view of any one constitutional court would be as valid as that of any other. A cacophony, in other words. In fact, I think it is a negotiating stance. Who pays is the real issue. It seems to me that we will end up with the existing implicit ECB bond buying commitment balanced by an implicit mutual backstop via the ESM. When is the question. The New York Times (an important thought leader in the USA) gives the announcement of no credit line a positive spin in their news report http://www.nytimes.com/2013/11/15/business/international/ireland-to-end-reliance-on-bailout-lifeline.html?hp. Perhaps within a few days we will find out on the op-ed page what Krugman thinks of the decision. From my own limited perspective focusing on the banking side I am conflicted, seeing arguments on both sides. The macro stability risk argument clearly supports having the credit line in place. It is not such an easy call from the perspective of the Irish banking sector — whatever credit line is given could be swallowed by the banking sector without necessarily generating much broad-based positive value for Irish society. Then it subsequently must be paid back. So I am not sure. I don’t think the news is anything to crow about. “Met all the bailout conditions” may be true but there was no growth at the end of the rainbow so the debt loaded on at the front end is particularly heavy. EZ debt load was up to 96% recently and 5 countries incl Ireland are at or above the 120% danger zone per a recent FT. Meanwhile EZ growth for q3 is a miserable 0.1%. Austerity didn’t work. Kitchener would have just intensified it. Maybe they’ll give that a lash. The wrong road. @Gavin Presumably the DoF recommends that punters operating without a precautionary credit line in place use the rhythm method. Pull out your money in time and sure it will never happen twice. @ All FYI http://www.dw.de/germanys-social-democrat-spd-is-charting-a-new-course-for-the-future/a-17226927 The rank and file SPD will vote on whatever coalition deal is reached on 15 December, a vote with an uncertain outcome. The EZ may be in for a dose of deflation . US job growth is still poor. Will the UK pull the world economy for the foreseeable, Tull? @ Sarah Carey ….trying to reconcile your reference to ‘normal economic conditions/govt has done well’ with Diarmaid Martin’ s plea for food/ dry goods for citizens and their families…..a real unemployment rate of 20% +…..high involuntary emigration….a domestic economy in the doldrums….ever increasing tax demands on low/ middle income earners….etc Perhaps your reference group exists in other stratas of Irish society where ‘ the status quo is safe thank god…..we’re still in control….just a few casualties….’ Seafoid, For what it’s worth I think sensibly run economies such as the US & UK are doing far better than you think. The problem is the terrible governance of the core of Europe. We have been dancing to Wagner for too long. @Tull The global debt binge is going to take a long time to work out. The US is probably somewhat better than the EZ but it still can’t generate 250k jobs for 6 months on the trot. And interdependence means no economy is solely self propelling if the EZ is underperforming. It’s naive to think this crisis is anywhere near over. Seafoid, It strikes me that you are one of these clever hard sums typed who reads the Guardian and is far more intelligent than me, I bow to your superior knowledge. The real danger for Europe: banks unwilling/unable to lend to the private sector. Credit growth is stagnant. This is exactly what happened in Japan because the Government delayed the necessary and painful clean-up of bank balance sheets. The reverse is true in the U.S., where the problem was addressed quickly, thus largely explaining the gap in economic growth between Europe and America. @DOCM That wsj link is behind a pay wall and I am mean 🙂 Can you paste in some parts of it please? tx @Vinny I didn’t say we had normal economic conditions, but exit means we are on the slow return to them. (and you don’t know anything about my reference groups) The outcome is heavily dependent on how the government behaves starting Dec. 16th. Wasn’t it a party with plenty of Whiskey and Gin now on Dec 16th the hangover will begin. Will the focus be on re election or governing responsibility for the greater good or will the wish to restore the gravy train be paramount. The international jury on financial hardship will be watching closely. Any lack of resolve will be taken advantage of. The story will change from the troika made us do it to the market is shafting us. Plus ca change plus c’est la meme chose. Mudder market is wan tuff bitch. WSJ Behind the scenes, Dublin’s choices appear limited, anyway. Germany, along with Finland, has made it clear that it doesn’t want Ireland to ask for a credit line, according to officials familiar with the discussions among euro-zone countries. Berlin fears that even a line that is never deployed would be seen as a second bailout, making Ireland look too much like Greece, which has had to return to the euro-zone’s rescue funds for more money once already—and may yet have to a third time. There is also the fear that lawmakers in Berlin might refuse to approve additional aid if Ireland doesn’t increase its 12.5% corporate tax rate—a condition that is a no-go for Dublin. http://online.wsj.com/news/articles/SB10001424052702303460004579194030883286454 The Irish Times is impressed with underwhelming ambition: ‘Coalition to press on with reform agenda to ensure market backing: Priorities after bailout exit will be water charges and legal profession‘ Dramatic? ‘Analysis: Dramatic developments but bailout exit will give big boost to Government’ Stephen Collins is impressed by the spin: ‘Significant signal of sovereignty restored in Dublin: Big contrast with shambolic way entering the bailout began in 2010’ The real test at a time of low growth or stagnation despite the official Irish data, is to build an economy that creates durable jobs not just add more schemes not knowing which of the existing ones work or not, while claiming credit publicly for even 20 jobs over 3 years. Modern economies are complicated and comprise vested interests, chunks of engaged and disengaged coupled with the people who may vote but do not count, while leaders are better at winning elections than governing. Process is boring whether in Ireland, Germany, France or Italy but it’s what matters long-term. The current health reform in the US is potentially the greatest advance since former president Theodore Roosevelt advocated national health insurance in 1912 but while the Republicans have staged about 40 votes to strike down Obamacare, the biggest threat to the reform program has come from President Obama’s lack of attention to execution and over-promising. Sometimes prose is preferable to poetry. This from the financial times: “Irish property prices have been increasing now since June so the value of the collateral underpinning the loans in Ireland has been increasing in value,” Mr Noonan said. “As each month goes by, it seems to me, there is less and less likelihood of any additional capital required in the Irish banks.” The dogs on the street know how dysfunctional the Irish property market is. I hope it had no bearing on this decision. @ MH: “The current health reform in the US is potentially the greatest advance … …” Michael, are you certain about this. The US Healthcare system is one giant poly-monopoly (apart from one or two isolated cases). And no attempt whatsoever has been made – or is being made, to dismantle that monopoly. There is too much political resistance – like, from all those lobby critters with very large brown envelopes which they proffer to those congress critters. Its Upton Sinclair time! Text from Blind Biddy in Beirut: On the QT [Blind Biddy Hedge School Intelligence] – newz reached the Irish Gov late yesterday morning from a reliable source in Brussells that the friggin Spaniards were about to announce their exit from their banking bailout yesterday afternoon. Consternation within the Economic Management Quartet that the friggin Spaniards were about to grab the Gold Medal as ‘First out of the bail_outs’; Blind Panic as ministers were summarily summoned from the Dail (and other dens of ill_repute which shall remain nameless for legal reasons) for a very brief meeting – followed two minutes later by the Irish announcement that that they were OUT and not needing and conditional lines of credit. An Taoiseach is reliably reported from a reliable anonymous, if somewhat dodgy, source “No feck1n way – I didn’t get the Sam for Mayo but I’m damned if I’m letting the European Gold slip through my fingers”. @Stephen Collins BTW – The Sovereign is Dead; you must have been away (with the fairies maybe; lots of them about at the mo – and they are angry with spin). @Gregory Connor ‘From my own limited perspective focusing on the banking side … Give us a break! You are a professor in, and have published in, and with bankers in, the area. How much are we paying you to be ‘conflicted’?_Or has the demise of the Perfect Efficient Market Hypothesis passed you by? @MH Having any impact on the legal profession would be dramatic. Three years of troika rule seems to have escape their notice. Them and the pharmacists. A lot done…more….. @Frank hmmmmmmmmmmmmm So does that explain the part in the Taoiseach’s statement about how Angela recommended some German bank to help out with loans. It seemed odd. We can’t help you, but these guys might??? @David O’Donnell – I am a two-handed economist and there is a long tradition of them, stretching back to at least the Truman era in the post-WWII period. It beats being certain about everything. @all Anyone with an estimate of how much the ‘pillars’ will require after the ‘stress tests’ next year? fyi from Michael Taft … The ECB states that where banks fail the upcoming stress tests and they cannot raise capital in the markets, then national governments will have to pick up the tab. And now an argument is being put about some European capitals that the European Stability Mechanism will only be a last resort for countries with bank debt problems – only after individual governments have come up with the money. All this means that national governments will still be responsible for their own banks’ debt and capitalisation requirements; and if they get into fiscal trouble, they can use the ESM as a . . . bail-out mechanism. So breaking the link between banking and state debt may end up strengthening that link. This is what passes for common-sense in the Eurozone. […] The responsibility for paying for this crisis lies with those sectors that created the crisis. And this crisis started, and continues, in the financial sector. It has had a devastating impact on the productive economy and public balance sheets. To break the link means putting the responsibility back where it belongs – where it originated. http://www.irishleftreview.org/2013/11/08/breaking-link/ @Sarah Subscription to the WSJ is tax deductable for self_employed fine gaelers. @Gregory Connor ‘I am a two-handed economist …. Such ambidexterity – on the one hand AND on the other hand … Little wonder that you are ‘conflicted’. Glad that you do not refute the factual nature of my comment on your finance/banking milieu. Tis a grand ol country shurely – as you once put it to Krugman – Life on the dole in Oirland is great – one can have a few points with one’s pals and a vacation a year … BTW, have you met Stephen Collins? Scenes from the big picture: ‘Swiss divided as 1:12 executive pay referendum nears’ “The so-called 1:12 campaign is part of a broader drive for wealth redistribution by the Swiss left that has won wide popular support. “Long-standing rumblings about executive excess were fuelled by the banking crisis and the precarious position of the Swiss bank UBS. But the debate was supercharged this year when the Swiss drug group Novartis agreed to pay its outgoing chairman, Daniel Vasella, SFr72m (£49m). The payment, to persuade Vasella not to use his knowledge to help rival pharmaceuticals, was described as a “golden gag”. “There followed a huge public and political backlash, with the Swiss justice minister, Simonetta Sommaruga, saying the payoff was “a huge blow to the social cohesion in our country” and that payouts on such a scale “undermined public trust in the entire economy”. “Novartis was forced to cancel the payout.” http://www.theguardian.com/business/2013/nov/14/swiss-divide-1-12-executive-pay-referendum ‘Spain to exit bank bailout without credit line’ Looks like the Government dived over the line first. http://www.telegraph.co.uk/finance/financialcrisis/10450994/Spain-to-exit-bank-bailout-without-credit-line.html ‘Markit: eurozone economy still 3% below pre-crisis peak’ Post at 11.26am “In terms of GDP levels, the Eurozone economy is still 3.0% smaller than its pre-crisis peak. “Of the largest member states, only Germany has exceeded its prior peak, with GDP up 2.6%. The French economy remains 0.3% smaller, while Spain and Italy are also 7.4% and 9.1% smaller respectively. “By comparison, the UK economy is still 2.5% smaller than its pre-crisis peak while the US is 5.3% larger. Japan has edged 0.1% up on its prior peak.” http://www.theguardian.com/business/2013/nov/14/eurozone-gdp-france-economy-shrinks-by-01-as-german-growth-slows-live @ Sarah Carey If you cut and paste the title to Google Search, it should get you past the WSJ paywall. Reading these comments reminds me why i don’t frequent here too much anymore. Sarah Carey is right, the (2) constituency will see what it wants to see. I hope Noonan is right on the bank capital thing. For the moment the bond yield is grand but the markets can be very capricious. And prices are all CB dependent 5 years into the crisis. @ Brian Woods Snr Overall the US healthcare system is a costly racket. In the existing system, for under 65s health insurance is tied to jobs and with little competition, rates are too high for the jobless and poor people. Besides, even for those with insurance, a person who has a serious illness, risks going broke. The new system is attractive for low-income people as it’s subsidised while the aim is to have better risk sharing with fines on those who do not get coverage. A Republican governor implemented the system in Massachusetts. OECD data on health care statistics for Canada and the United States shows that as recently as 1965, the cost of those two systems similar. That year, Canada spent 5.9% of its GDP on health care. The United States spent 5.7%. But Canada was transitioning to its current single-payer system. Over the next four decades, the growth of health care costs slowed in Canada while they accelerated in the United States. Today Canada is spending 11% of its GDP on health care – – and covering everyone. The United States is spending over 17.0% of its GDP and leaving 45m uninsured. @ Bond. Eoin Bond Reading these comments reminds me why i don’t frequent here too much anymore. Sarah Carey is right, the (2) constituency will see what it wants to see. Even the weird views of people (ex Internet cowards) can give a sense of what way groups thinks. Cynicism should be balanced if possible. It is however necessary – – were there too many cynics during the bubble? There is seldom a statement from ministers and officials that can be taken at face value. In fact much of what is presented including misleading data is taken by the media as fact. If you think what you see here is depressing, the comments on a recent Bloomberg profile on Feargal O’Rourke of PwC surprised me. I assume they came from staff in the financial industry and many of the anonymous anti-tax, ant-government comments would make Tea Party folk seem reasonable. http://www.bloomberg.com/news/2013-10-28/man-making-ireland-tax-avoidance-hub-globally-proves-local-hero.html @ Sarah Carey This new Reuters comment covers the same ground as the WSJ article. http://blogs.reuters.com/macroscope/2013/11/15/taking-the-union-out-of-banking-union/ Also this item by Derek Scally which underlines the fact that any spokesman for the SPD this side of the membership vote on entering a coalition is unlikely to say anything comforting. http://www.irishtimes.com/business/economy/spd-rules-out-deal-on-banks-legacy-debt-1.1595352 Incidentally, only Miriam Lord picked up the nugget in the middle of the Taoiseach’s statement; “It does not mean any windfall of cash.” One has to ask one’s self why a prime minister would feel constrained to insert such a statement. In my view, it reflects a probably unconscious attempt to end the hand-out mentality which has plagued the country’s involvement with the EU for decades. @ Sarah Carey re ‘economic recovery’ comment….not directly said but strongly implied… re your reference groups – ‘ah heah…’ @ David O’Donnell WSJ comment to SC – ‘ah heah…tee-hee…’ @Michael Hennigan Reply to EB very accurate…. @ Sarah Carey FYI http://www.irishexaminer.com/business/german-bank-to-help-with-funding-of-smes-249751.html SME’s in the countries that in German eyes are failing to introduce the necessary reforms, notably Italy, have much higher lending costs for their SME’s as a result. This approach seems to be a way around this roadblock to assist those that are making the necessary changes. @ Sarah Carey FYI http://www.irishexaminer.com/business/german-bank-to-help-with-funding-of-smes-249751.html SME’s in the countries that in German eyes are failing to introduce the necessary reforms, notably Italy, have much higher lending costs for their SME’s as a result. This approach seems to be a way around this roadblock to assist those that are making the necessary changes. Wonder what the opposition has to say bout it,why bother at all…..pathetic. WTF has an LC got to do with public services,so it’s a good thing then,what a fu**ing joke off a political party. “Sinn Féin President Gerry Adams welcomed the move, but said the Government should not applaud itself for decimating public services and leaving families across the State in poverty.” http://www.rte.ie/news/2013/1114/486631-bailout-exit/ Eh thanks for that Gerry,leaving and decimating families…….indeed Gerry indeed. If you have to ask the price,you can’t afford it.It was never on the table to start with,the timing is off. @DOCM Thanks for links. Enlightening. Espec on FTT issue. So vetoing on the legacy issue and making FTT a condition for the future. Perhaps we need Gavin Barrett in to tell us more about the politics. How much is coalition negotiation grandstanding and what will fall out in the end….Hopefully they throw shapes with the intensity of politicians everywhere, even if they are Germans. @DOCM-FYI http://www.ecb.europa.eu/pub/pdf/other/accesstofinancesmallmediumsizedenterprises201311en.pdf?65033bdbb73e053e9747cc91ce22b1dc @ DOCM I wasn’t alone in seeing the Kenny ‘game changer’ claim as another fairytale. The communique suggested a future desire to end to the link between the sovereign and banks. If retrospection was implied, the fact that other countries should be treated equally suggested that most of the EMU countries could claim compensation. It just goes to show how spin becomes reality. Did any journalist ever have the chance to press Kenny on who made this post-midnight commitment? The prime minister of Luxembourg of course didn’t have any cheque book in his pocket. If Chancellor Merkel made such a commitment, the obvious thing to do is to publicly press her to comply with it We can safely say that she isn’t part of the fairytale. I would be wondering if we spurned the line of credit because it would entail us having to sit down with Europe and talk about the Double Irish. The elephant in the room. @DOCM One has to ask one’s self why a prime minister would feel constrained to insert such a statement. In my view, it reflects a probably unconscious attempt to end the hand-out mentality which has plagued the country’s involvement with the EU for decades. Since Ireland has pissed away sixty five billion euro and counting for the pleasure of making the Eurozone a safe place for German savers I think Enda is trying to spin utter surrender to his EPP masters as a new flavour of self reliance. “We are giving in completely to German blackmail, without any kind of a fight, but at least we will do it ourselves. Ireland can be proud of its new found servility and finally put away foolish thoughts of self determination. (starts singing) A colony once again, Ireland shall ever be a colony once again.” Keep building that bridge over the River Kwai. The government didn’t want a two-front war (Troika and Market). They could have gone for an O’Schlieffen Plan with a quick strike to secure the precautionary line and then be ready to absorb an incursion from the markets, but if they got bogged down on the Troika front, they’d be exposed on the other side. So it was better to concentrate fire power on one side only and assume that the kind of shock that would necessitate another bailout would be Euro-systemic and hence could be a package deal with others in a similar situation. @Frank Galton I am inclined to agree and one hopes that the government has the good sense to plan to help any accident that befalls the Euro area financial sector to become systemic. Missed payments, that kind of thing. Could happen to a saint. Contagion is our friend, unless the rich fear the illness there will be no pressure to develop a cure. The people in Ireland who lets the country be quarantined should make sure not to be stooges for the core economies and banks again. Karl Whelan’s take in Forbes. “There is, of course, a narrow political benefit to the Irish government from this “clean” exit, because it allows them to triumph about the full restoration of “sovereignty.” However, I don’t think they are so cynical as to have made this decision purely for that populist reason. Instead, my assessment is that the precautionary credit line could not be arranged now because it was politically impossible and that the Irish government are merely putting a brave face on what is a bad outcome.” http://www.forbes.com/sites/karlwhelan/2013/11/15/ireland-exits-bailout-with-no-backstop-a-good-news-story/ He also refers to the slightly odd argument Michael Noonan made that things might not be so benign in a year so it is best *not* to take a precautionary line now. Can anyone untangle that one? @MH: Thanks for that update. “The United States is spending over 17.0% of its GDP and leaving 45m uninsured.” Says it all! A (protected) racket indeed! @GK: “By comparison, the UK economy is still 2.5% smaller than its pre-crisis peak while the US is 5.3% larger.” Gavin, my take is that US ‘growth’ since 2008 is something of a mirage. You would have to minus out the billions of QE stimuli to get to a real figure. Some commentators put US G*P in the negative range. I think I saw a comment recently which suggested that the waged-labour employments total, in the US, is the same as it was in 2005. If correct, that’s real bad news. There is an awful lot of spin going on. @FG “O’Schlieffen Plan ” 🙂 🙂 @GK Re Michael Noonan, well doesn’t that go back to KO’R’s point – under which set of conditions would we get a better deal? MN would seem to be arguing that if things implode, (and perhaps with the contagion issue mentioned above) then we get a better deal next year. Does this FTT issue merit a separate thread? Will that not prove to be a serious stumbling block post stress test if we have tied ourselves to the Brits? (or have we done this already but I wasn’t paying attention?) @Gavin “He also refers to the slightly odd argument Michael Noonan made that things might not be so benign in a year so it is best *not* to take a precautionary line now. Can anyone untangle that one?” That was an interesting public observation by Noonan. What does it mean? Given the growth rate in the EZ, it could be interpreted as being that the EZ as we currently know it is not going to last, with the stress tests being the flashpoint. The German position that bust countries can pony up for bust banks, is so illogical and nonsensical that nobody believes it, least of all its proponents, Germany. If the Germany holds its line on this issue, then some countries will go, Italy clearly being in the front of the queue. This time next year, therefore, with the banks stress tests flagging billions to be paid, and nobody to pay them, would not be a good time to be asking anybody for a sub. The precautionary line of credit would have committed Ireland now to a further apprenticeship in a company whose future looks very shaky and one in which apprentices are barely tolerated. Before going into the bailout in late 2010 we were funded until mid-2011 but couldn’t access the markets. We’re currently funded ’til mid-2015 and can access the markets (indeed that’s partly why we have billions ‘stuffed in a sock’) @ Sarah Carey et al Some weekend reading. http://www.imf.org/external/np/res/seminars/2013/arc/pdf/hoshi.pdf http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/139613.pdf @ Sarah Carey What’s the point of a 1 year backstop when there’s a kitty of over €20bn? So it does seem more practical to keep that option available until the kitty is exhausted unless the wise men see merit in keeping a cash buffer at a cost in additional interest equivalent to what the bewildered Dr Reilly is trying to squeeze out of the health budget. Those distant days when Reilly was representing the IMO thumping the other side of the big table in Hawkins House, must seem like halcyon ones. @ Sarah Carey et al Euractive has a good pre-meeting report on the politics. http://www.euractiv.com/euro-finance/germany-opposes-rescuing-ailing-news-531713 The relevant extracts. “At the euro area level, ESM instruments may be used in the appropriate sequencing, according to their respective agreed rules and requirements: First, the ESM can provide through its normal procedures financial assistance for the recapitalisation of financial institutions in the form of a loan to a Member State, after appropriate bail-in, in full respect of EU State Aid rules. Second, the direct recapitalisation instrument with its €60 billion ESM exposure limit, for which the October 2013 European Council called on the Eurogroup to finalise guidelines, could also be used when adopted according to Euro Area and national procedures, in line with the June 2013 Eurogroup agreement, following the establishment of the SSM.” I wonder would Qatar have lined up a few billion in contingent funding via Denis in return for support for the World Cup. You never know with these international mystery men. Is Morgan Kelly still under house arrest? “Council statement on EU banks’ asset quality reviews and stress tests, including on backstop arrangements” http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/139613.pdf I’m loving the way the lobbyist here is feeding information to the journalist. En toute innocence, s’entend. @Seafoid he he. You never know indeed. Don’t write it off 😉 @ John Gallaher I posted your link earlier with the extract I thought the most relevant. The wording is seemingly simply a repeat of language which has already been agreed but which nevertheless suggests that the train is inching forward, despite the hard line statements emerging from all concerned, especially the CSU which is causing the most trouble. http://www.spiegel.de/politik/deutschland/koalitionsverhandlungen-csu-will-pleitelaender-aus-dem-euro-werfen-a-933462.html The spotlight seems certain to move increasingly to France. Hollande’s ratings are at a historical low. I find the choice of KFW as the provider of SME assistance interesting. I was at a gathering of KFW economists, engineers and accountants a few years ago where the main topic of conversation was their bad bet on US CDS. I have known people who worked for them in South and Central America for a long time. There is in depth knowledge there across a broad professional spectrum. They will probably work through Irish Banks by first teaching them how to evaluate proposals. The influence of TDs’ Ministers’ and Taoiseach will have a very low weighting. A refreshing cold shower of reality is about to fall on the ruling clique. As Martha says that is a good thing. @Ernie Ball I’m loving the way the lobbyist here is feeding information to the journalist. En toute innocence, s’entend. More than one lobbyist here Ernie, though obviously one of them is dissembling for foreign interests incognito, with the apparent blessing of the proprietors. As for Miss Carey, well I think she probably knows that the important thing about propaganda is not its content, but its purpose. There are many stories to the European component of the global financial crisis, and many ways of pursuing them. Something that Spain understood and Ireland did not was that the national government has to remain solvent at all cost. The Spanish gov’t ring fenced itself from bank liabilities while the Irish gov’t put their taxpayers necks under the creditor’s guillotine. One of the big questions of our time is what is it in the culture that causes us to act like we do. Contrition, confession, mothers’, schools, the bar in the Dail…. @SB Gallantry! Hurrah! @DOCM-it will be interesting how the stress tests treat banks holdings off govt. bonds….that 20B could be burned up quick enough. The problem with it is that any major reduction will have a major negative impact on investor sentiment,in that hold on they spent/used half it already! “So first, government bonds should be adequately backed with capital, and second, banks should hold loans to individual sovereign debtors only up to a certain level. In a nutshell, over a medium-term horizon, government bonds need to be treated just like other bonds or loans to enterprises. From a financial stability perspective, particular problems are posed by the fact that banks often only hold government bonds issued by a single country in their books – those of their home country. The consequences of this are two-fold. Not only do banks have no capital backing for these government bonds; their risk is also concentrated in just one country. This will need to change to give credence to the no bail-out regime.” http://www.bundesbank.de/Redaktion/EN/Reden/2013/2013_11_11_weidmann.html @Mickey KfW is chaired by Wolfgang Schauble…..so don’t expect too much! Still, it’s positive that Germany is stepping up to (attempt to) help Ireland. Interesting too that Deutsche Bank is increasing its Irish presence. That clearly had German political support (Implies German Govt support for the12.5pc tax rate?). The LC clearly wasn’t available for the reasons set out by the WSJ…..political reasons. Still, who knows…..but that’s the point. Nobody does. One must however assume that there will be German and EU support for Ireland if required. In that sense, LC /proxy support may be implied so not a big deal even if “in ordinary times” the LC would have been sensible. More pertinent is the comment above as to whether the Irish Govt can govern properly in the run up to the next election or will the politicians revert to the Norm of trying to buy votes. We’ll see. It’s unlikely to be “perfect” in any event. Still, little negative for Ireland this last week. @Mickey Hickey “One of the big questions of our time is what is it in the culture that causes us to act like we do. Contrition, confession, mothers’, schools, the bar in the Dail….” I would start with the bar in the Dail… A constitutional article stating that the pay and pensions of politicians, PS, and all paid from the public purse, be set at a maximum of no more than three times the average industrial wage, would go a long way to enlighten some decision making. @John Gallagher Thank you for link to Weidmann speech. http://www.bundesbank.de/Redaktion/EN/Reden/2013/2013_11_11_weidmann.html “So it is now mainly up to the Commission to make the next move. The first time the Commission applied the new rules, it showed itself to be very elastic, granting Spain, France, Slovenia and Cyprus longer deadlines to make adjustments than those actually envisaged in the Stability and Growth Pact.” To put it not too politely, one would be inclined to question his sanity. A way so bemused that I looked him up, to see if he had been born into this plant. Wikipedia does the rest. http://en.wikipedia.org/wiki/Jens_Weidmann http://en.wikipedia.org/wiki/Monetarist If the EZ is looking to looking for somebody to finish the euro off, this is the man for the job. All one has to do is leave him where he is, and get on with it. Of more interest in the KFW situation is that to me it suggests a clear lack of confidence in the pillock, sorry pillar, banks to do banking things. But, dont worry, they wont need much more cash. Just a wafer thin mint…. @ Mickey Hickey, a) any more information on the KfW involved in CDS ? That would interest me. b) Spain had the advantage to have decide on the banks more than 3 years later than Ireland. So I would not give them too much credit in relation to Ireland. @ Paul W Schäuble is head of the board of KfW in his function as finance minister, like Dr. med. Philip Rösler, economics minister and vice chancellor, as the deputy. So we will soon see SPD Gabriel somewhere there : – ) @Joseph Ryan,oh people questioned Friedmans and Fama’s too:) He has a very valid point off view,articulates it rather well I try to read most his speeches.Maybe the Euro isn’t suitable for everyone…. @brianmlucey LOL at the wahffer-thin mint… BL, My bet is that BKIR will raise any capital from the private markets in 2017. Not so sure about AIB or Permo. But then, I do not have your expertise. After all you were the sub prime sceptic. @francis Will it matter…..? Germany’s Finance Ministers tend to be a zealous lot! @ Paul W ‘KfW is chaired by Wolfgang Schauble…..so don’t expect too much! Still, it’s positive that Germany is stepping up to (attempt to) help Ireland. Interesting too that Deutsche Bank is increasing its Irish presence. That clearly had German political support (Implies German Govt support for the12.5pc tax rate?).’ Wonder why Deutsche might need to avail of our cozy 12.5 % rate ? http://online.wsj.com/news/articles/SB10001424127887323893004579055072846761060 ‘SPD requirements for approval of a credit line included raising the corporate tax rate and introducing a financial transaction tax’ http://www.forbes.com/sites/karlwhelan/2013/11/15/ireland-exits-bailout-with-no-backstop-a-good-news-story/ See above 1.34pm. QED. This is more and more like some kind of 21st c. financial assets game. More and more distant from the real economy. Cannot end well. @francis pg 37. http://www.finance.gov.ie/documents/publications/reports/2013/reportcardnov2013.pdf @PQ Financial assets eventually have claims on the real economy so the former have growth constraints when the latter stagnate. That great rotation is likely to be delayed. @PQ Don’t understand the DB logic at all. Tax rates unlikely to be addressed for now I would think…….but it will happen in the end. Must. @francis this chap is rather good,links in his piece to irish press,they already outsource govt. lending to the SME sector-hence link above. http://trueeconomics.blogspot.com/2013/11/15112013-beware-of-german-kfw-bearing.html @JG Very interesting. Edna Kenny makes it sound as if there will be free lunch. They won’t get “steam off piss”. How hard is that to understand. @ John Gallagher I am reading. Thanks a lot ! as usual @ Paul W I have full confidence, that it doesn’t matter one bit : – ) Maybe it is worth to mention here, that it was a red/green coalition which designed and executed Agenda 2010. After reading his speéch about the flood financing, I would not be afraid either of the present communist prussian finance minister to maybe head the finance, and therefore the KfW as well, 2017, 2021, who knows? 1. view from Europe The Eurogroup confirmed on November 14 that Ireland will exit the bailout programme on December 15 and that the assistance programme for Spanish banks will end in January. Good news that needs long-term confirmation, writes the European press. Ireland, the first country due to leave the EU-IMF-ECB’s three year supervision programme, announced that it had chosen not to request access to an EU credit line of up to €10bn when it departs the bailout programme. Prime Minister Enda Kenny describes the move as a “clean exit”. “Coalition to press on with reform agenda to ensure market backing”, reports the Irish Times, before speculating that the decision not to utilise any EU credit facility was mostly due to German reluctance at the idea. http://www.presseurop.eu/en/content/press-review/4323881-music-ears-angela-merkel 2. Der Spiegel take http://www.spiegel.de/international/europe/end-of-bailout-programs-in-spain-and-ireland-signals-euro-crisis-recovery-a-933650.html#ref=nl-international @francis Die Linke coming to a city near you …. [btw who is in power in Dresden at the mo? The far-left Left Party has long been a pariah in German federal politics. But the latest elections have confirmed it is not going away, and leaders of the Social Democrats now openly regard it as a potential coalition partner in the future. http://www.spiegel.de/international/germany/social-democrats-show-new-openness-to-left-wing-coalition-a-933519.html#ref=nl-international @Paul W,hard to get good terms sitting on 20 billion cushion with the 10 year below 4%..curious why the NTMA is stockpiling such a war chest,yet decided recently in a very low rate and liquid environment to take the fall/winter off ! Bubble in art prices and NY RE maybe time to ease off on liquidity… That templeton fella is buying Ukraine these days,maybe he should have a chat with JM from LTCM-what could possibly go wrong ! @francis the DofF report is quite good,true economics is always worth reading. @francis Germans trying to make Irish Celts & Pagans more “Germanic”……ah, the simplicity of that plan! It’ll never happen of course, but more German /Irish babies would be welcome! Jesus would Gurdgiev not clean up his links a little,in all fairness @JG Yellen says only moderate positive impact on asset prices…..and up go the stock markets! Rich people have made 65pc + just sitting on their hands according to a wealth management friend of mine. Still some way to go before the party ends. NTMA stockpiling has been costly and unnecessary, given the proxy LC support. However, the PS economic distribution mechanism needs to be sustained, not to mention all those pension and welfare payments. On balance, probably ok /reasonable……what are the chances of some external shock in the short to medium term? So easy for economic accident to happen. The recent Telegraph article re sovereign funds having the put option on world stock markets is what registers with me. Who will blink? Not “comfortable times” for “money” is all I can say. Nothing much has changed on moved on positively in the financial world….people continue to keep their heads down and are afraid of the “unknown” next blow-up. Few believe that we are out of th woods, bar central bankers who believe they can control the world (they cannot). @francis I wonder what a Joan Burton /Angela mix would look like. Even more interesting would be a Mayo or Cork /Angela mix……and there I had you thinking that it would be Bavarian beauties getting it together with Celtic Myths (Micks)…! A bit like this Euro experiment, don’t you think?! fyi Statment from the Communist Party of Ireland [worth a Die Linke scan] On the Irish government’s “precautionary credit line” and “exiting the bailout” – The Emperor has no clothes November 14, 2013, The Communist Party of Ireland today warned Irish workers not to fall for the latest ruse by the bankrupt political establishment with its announcement that this failed state will leave the “bail-out programme” — which is in fact a restructuring programme — by 15 December with or without a “precautionary credit line.” This will not mean an end to any of the current or planned cuts in health, education, or social welfare, nor end the drive for privatisation. Nor will it prevent the need for continuous cuts in the future. The servicing of the debt is costing the Irish people nearly €9 billion per year — similar to the annual education budget. Austerity will be a permanent feature of the lives of working families far into the future. http://www.irishleftreview.org/2013/11/14/irish-governments-precautionary-credit-line-exiting-bailout-emperor-clothes/ [h/t irish left review @ BL, John Gallaher Another way of looking at the situation might be to attempt to do so from the point of view of Berlin. The IMF paper I linked to above spells out a plausible explanation of, and links between, banking and sovereign developments in Japan, the US and Europe. The only way to restore the so-called monetary transmission mechanism and create standard credit conditions across the EA, in the German view, is to get the major economies, other than Germany, i.e. France, Italy and Spain, to sort out their banks and face up to the structural measures that they have to take nationally; on a par with those adopted by Germany under Schroeder under Agenda 2010. In the meantime, direct credit assistance through the KfW to deserving candidates makes perfect sense, especially if they prove the point that sorting out one’s banks and making the necessary structural changes actually works. Spain seems well on the way to achieving this. How the larger issue will play out between the big beasts in the jungle remains to be seen.The next joust will be a hurried affair, or may not take place at all, as the new government in Germany will not take office until mid-December, assuming that the SPD rank and file approve it. But the general direction has been set by the level of agreement reached up to his point. @rf when you that good,recently the wife was taking way too much interest in economics and VB…..some wag once called him ‘constantly gorgeous’.. But fair play to him on the fantastic work with mortgage mess and his efforts to date. @francis from yesterday,i think your NPR or RTE… http://www.wdr5.de/sendungen/profit/eurolaenderuecki100.html @DOCM soros in NYT other day…hes always interesting! “Mr. Heisbourg is author of a recent book, “The End of the European Dream.” While he is pro-European, he said the euro was not viable without a major shift toward a more federal structure. But that, he said, is not politically feasible. As a result, Mr. Heisbourg said, European officials should begin to “look actively at the possibility of unraveling the euro in an orderly manner,” he said. “I’m not saying it’s a great option. I’m not saying it’s easy to do and it’s not traumatic. And I do say it’s dangerous, but what are the other options? The federal option is not on the table, and what is currently occurring, the transfer of major liabilities to the creditor countries like Germany, is economically and politically corrosive.” Mr. Soros largely agrees. He said that an orderly division of the currency zone into northern and southern parts “could cure the disparity in competitiveness much faster than sticking together.” http://www.nytimes.com/2013/11/12/business/international/skeptics-see-euro-as-working-against-european-unity.html?pagewanted=2&_r=0 @DOD here ya go..we may have change those models after all:) http://www.businessweek.com/articles/2013-11-07/economists-discover-the-poor-behave-differently-from-the-rich jg he is gorgeous though, in fairness, isn’t he? @rf its very easy to dislike him yeah:) But again his work with David Hall is very impressive,thankfully TV3 has signed some weird deal with “roko” or something..VB is no longer freely available in NY…w/o making your IP,which is beyond the better half’s tech skills phew! @francis Here what happened. http://www.cmavision.com/images/uploads/docs/Liquidity_Signals_in_the_CDS_Markets.pdf Here is a good overview of KFW at that time. web.mit.edu/urbanupgrading/upgrading/resources/organizations/KfW.html What struck me at the time was that they did not blame the person who pushed the send button in accordance with company policy. Up until that time they trusted and treated long standing US institutions as if they were German or Swiss. That has all changed now. The German banks and government rallied around KFW and it continues to prosper today, a very well managed company. Wagner was heavily invested in Celtic mythology. Germans know more about Celtic mythology than the Irish, they may not know it is Celtic. Wagner love him or hate him is a giant of German culture. jg don’t tell me she fancies VB aswell? Jesus tonight ; ) though being serious, I wish I had a way of not having access to VB @rf no that be me…it was free over here on their player now you have buy some cable box thing or something. I used to follow “namawinelake” NWL was a big fan off VB,so I started watching it,enjoyed it but we do have the Daily Show,Colbert and Charlie Rose so I don’t miss it that much…now don’t spoil love and hate for me ! I did watch the prime time thing last night have say the “govnr” was excellent. I’ve been rather critical off his performance but was very impressed last night. The Telegraph gets out one of its many photos of melting euros as: ‘EU uses new budget powers to demand more austerity in Italy and Spain’ “Despite disappointing growth figures and mounting concern that eurozone austerity policies are killing off recovery and locking southern European countries into protracted slump, the commission ruled that “further consolidation in euro area countries is necessary”. “For the first time, the EU’s Brussels executive has reviewed draft national budgets before national legislatures have voted on them, flexing political muscles aimed at preserving stability for Europe’s single currency and at preventing a future eurozone debt crisis. “”This a historic moment,” said an EU diplomat. “One has to ask whether the eurozone’s voters yet appreciate what a huge shift in sovereignty this is away from national parliaments to conclaves of finance ministers and commission officials.”” http://www.telegraph.co.uk/finance/financialcrisis/10452968/EU-uses-new-budget-powers-to-demand-more-austerity-in-Italy-and-Spain.html Looking at the Forbes reference, which references the Irish times on 15th October, which also questions, whether one Carsten Schneider really reflects the “position of the SPD”, I just want to repeat, what I have said earlier on this blog with a quantitative screening of German media, which make him look pretty isolated. For myself, I have made clear, that, while I think that should be a little bit more harmonized in the long run, it definitely should not be part of the present German coalition talks. Being the result of convincing, and done in a way benefitting Ireland, and not by some alien diktat. It reminds me somewhat of certain American economists, who have zero impact at home, and then try tell other countries what to do. The SPD lost the elections, after all, 42% CDU to 26% SPD. I prefer that Ireland now goes that by itself, and I like to see OMT as a kind of “flexible response” like the NATO strategy. Making it clear, that there is always a way to escalate in response to the aggression at hand, denying any possible path of lasting adversary gain, without committing oneself to any specific, calculable if then else or but specifics. It worked wonderfully in this case, preventing war without wasting too much of our own resources. The KfW is the result of the Marshall Plan funds (1.448 b$ in 1950), Germany got, and recycled and grown to a balance sheet of 512 b Euro (666 b$, the number of the beast, it has to be some sinister conspiracy : – ) in 2011. A CAGR of 10.6%, even when subtracting a US inflation of some 2.5%. This bank was not used for undue subsidizing or hidden enrichment of politicians. CAGR of capital “Gesamtkapitalquote” 7.7%, again my favorite saying 8% pre tax and inflation : – ) While “Global Finance rated KfW as the safest bank in the world in its “World’s 50 Safest Banks 2009” rating”, German views are somewhat more skeptical “Bild, subsequently called KfW “Germany’s Dumbest Bank”, for wiring Lehman on Monday 9/15/2008 morning 0.4 b as collateral coverage, but not as CDS as I understand it, and Mickey Hickey claimed. Misunderstanding on my side? The MIT link is pretty outdated, still in deutschmarks. As far as I know, at least Soffin learned, and it was only the Dutch and English, who got shafted by the Icesave banks, on 10/8/2008 : – ) “ Dabei sind sieben Bundesminister kraft Gesetzes Mitglieder. Der Vorsitz wird im jährlichen Wechsel vom Bundesminister der Finanzen und vom Bundesminister für Wirtschaft und Technologie wahrgenommen“. Schäuble is ending this year head honcho by law! And not as a personal fiefdom. I believe, that the KfW as an additional provider of credit improves the function of European SME credit markets, and, given the modest sums discussed for outside Germany, does not distort them. Our view of Ordnungspolitik. @John G I feel again, that I am missing out on something you wanted to tell me with your pg37 reference. On page 38, some FDI is clearly a good sign of competitiveness, but too much of it (my feeling > 60% GDP) would make me uncomfortable. @ francis Don’t listen to the mildly anti-German sentiment on this blog. Ireland has given something to Germany in recent years that has improved the lives of ‘ordinary’ Germans. You have repaid us twice over with a German invasion that has brought benefits to every city and town in Ireland. Your gifts have allowed us to continue eating smoked salmon and sipping champagne and generally lead a lifestyle more akin to much wealthier countries. We gave you Ryanair and you blessed us twice over sending us Aldi and Lidl. Has anyone tasted those Irish-made multigrain yoghurts in Aldi? They are to die for! Don’t forget Lidl are doing a promotion on Irish artisan cheeses at the moment. You can stuff your foreign camemberts, goudas, and fetas. @francis-SME sector irl-govt attempting to mirror spain-that pg illustrates efforts to date via JV’s with private equity. https://www.kfw.de/Presse-Newsroom/Aktuelles/News/PDF-Dateien/Deutschland-und-Spanien-unterzeichnen-Kreditvereinbarung.pdf decent discussion here http://www.rte.ie/radio/radioplayer/rteradioweb.html#!rii=9%3A20473784%3A11988%3A16%2D11%2D2013%3A second link may be dodgy-it was on RTE 1 at 1 pm -exiting the bailout brian dowling etc. podcast available, mbl. apols linking complicated. RTE radio 1. @ John Gallaher Heisbourg, by his own admission, I read somewhere, does not know much about economics. That does not mean, of course, that he is wrong. FYI Colm McCarthy this morning. http://www.independent.ie/opinion/columnists/colm-mccarthy/colm-mccarthy-clean-exit-bets-on-no-more-crises-29760661.html His conclusion on the lack of progress on euro zone reform seems to me to be unduly pessimistic. The four outstanding key questions in relation to banking union appear to be (i) involvement of ESM (ii) legal basis (iii) extent of coverage of banks and (iv) role of Commission. As Germany now seems to have agreed a wording on (i), it would be surprising if some reasonably meaningful deal fails to emerge if the principals can find some common political ground. The core problem lies with the failure of Hollande to come to grips with the political cum economic crisis in France and to face up to its implications in France’s relations with Germany; coupled with the precarious situation of Italy. Spain has seen the light. http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/139580.pdf Ireland is in a much more exposed situation which only biting the bullet on taking the steps that are currently blocked by political considerations and vested interests (are they really different?) can help ameliorate. @ DOCM Progress on EMU reform and more credit for business would help but Eurozone growth is likely to remain subdued for some years at least: 1) Outside of Europe, the global recovery in the short-term will be held back by reduced demand in the emerging markets and a bumpy recovery in the US; 2) Public capital investment in the US is at the lowest since 1947; 3) Debt problems will restrain public capital investment in Europe; 4) There has been a trend over the past decade for big companies to increase cash balances and over 40% of European capex goes ex-Europe; 5) Even if there was a better backdrop in Europe, the credit growth and capital flows pre-2008 will not return; 6) As you highlighted, France and Italy may remain a drag on growth. @ MH A gloomy prospect indeed! And the risk of being dragged back into a crisis not of our own making – as underlined by CmC – is shared by the Observer. http://www.theguardian.com/business/2013/nov/17/deflation-ireland-eurozone-crisis @DOCM I haven’t read La Fin du Rêve Européen yet,but… Great sindo column,small point of disagreement-again-the banks are benefitting from the carry trade. http://www.ft.com/intl/cms/s/0/1ceb7c36-42e1-11e3-8350-00144feabdc0.html#axzz2kuFCqwWd http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100025855/ DOCM: Banking union needs rather more than the four points you list. It needs a resolution system that removes the contingent liability on bust treasuries, or indeed on all treasuries, and it needs centralised deposit insurance. The genie was consciously, expertly and definitively released from this particular bottle in Cyprus. The uncovered risk for Ireland is not so much a renewed Eurozone, eg Italian, crisis, which will be fixed, but an Ireland-only hiccup in the bond market. who’s not benefiting from rate cuts again/fragm….. “(Reuters) – Banks will next week return 3.59 billion euros ($4.8 billion) of crisis loans early to the European Central Bank, the ECB said on Friday, a lower than expected total as a recent rate cut makes it more attractive to hold on to the funds for now.” http://www.reuters.com/article/2013/11/15/us-ecb-banks-repayment-idUSBRE9AE0HE20131115 NYT had excellent piece on youth unemployment,this just has to get fixed. http://www.nytimes.com/2013/11/16/world/europe/youth-unemployement-in-europe.html The ongoing combined Yahoo Finance Chart … http://tinyurl.com/kwfvrx7 … of Ireland, and other EU nations, reflects that Ireland, EIRL, and its Bank, IRE, as well as Seagate, STX and Ingersoll Rand, IR, have been liberalism’s currency carry trade and debt trade darlings, largely on the guarantee of the Troika’s economic governance and implementation of austerity. Great, in fact, awesome financial rewards came to those who trusted that the Troika would lord it over Ireland and risked nation investment, banking investment and corporate investment in Ireland. Yes awesome financial rewards came to those who trusted that the Troika would lord it over Ireland and risked nation investment, banking investment and corporate investment in Ireland. The Grand Finale of liberalism’s finance is seen in the Finviz chart of Ireland, EIRL, and its Bank, IRE, racing higher in an investment crack up boom, while Greece, GREK, and its Bank, NBG, trade parabolically lower, on the falling EURJPY, and the higher Interest Rate on the US Ten Year Note, ^TNX. Booms are always followed by a horrific bust; such is the nature of the business cycle. Great was the investment boom; how horrific and gruesome will be the bust. Ireland was simply the test bed for evolving Eurozone regional governance. Now, EU nannycrats are beginning EU fiscal rule, by exercising in policies of diktat in regional governance and schemes of debt servitude in totalitarian collectivism. The Telegraph reports The EU Uses New Budget Powers To Demand More Austerity In Italy And Spain The European Commission has exercised historic new EU powers allowing it to revise national budgets for the first time. Regional nannycrat pooled sovereignty, in particular the sovereignty of regional governance and totalitarian collectivism, and its debt servitude and diktat seigniorage, is underwriting regional security, stability, and sustainability. The beast regime of regional governance and totalitarian collectivism, with its seven heads occupancy mankind’s seven institutions, and its ten horns ruling in the world’s ten regional zones, Revelation 13:1-4, is rising from sovereign insolvency and banking insolvency of the nations, and is making landfall in the Eurozone, occupying with feet of a bear in EU banking supervision in Frankfurt Germany; with mouth of a lion in NATO headquarters in Brussels; and camouflage of a leopard in the statist, collective experience of not only Obamacare but strong ongoing technocratic governance in Greece. @ CmC I do not disagree. But we have to make do with what we have got. The four elements I listed are the likely basis for the trade-off at the European Council in December unless the unexpected occurs, the most likely being a vote by the rank and file of the SPD not to endorse the emerging coalition deal. Evidence that the supposed master strategist is getting worried is her weekend explicit acceptance of the SPD proposal for a country-wide minimum wage. I have made the point before but it needs to be repeated i.e. the major players decide the agenda. They all, at this point, seem to be collectively boxed in. Either they agree a banking union deal in December or they drift into 2014 with other forces doing so. http://www.economist.com/news/europe/21589894-marine-le-pen-and-geert-wilders-form-eurosceptic-alliance-monster-called-europe @ CmC FYI http://www.spiegel.de/politik/deutschland/ost-ministerpraesidenten-der-spd-pochen-auf-einheitlichen-mindestlohn-a-933889.html Germany also does politics! “the major players decide the agenda. They all, at this point, seem to be collectively boxed in.” Some investment wallah in the FT a while ago at the height of the last panic said, and I paraphrase “that’s the thing about Europe. They’ll go right to the edge of the cliff and peer over it before making the right decision” I think it’s positive. By which I mean, it’s the less smellier poo in the park. It’s the poo that might just get washed away eventually. Importantly, it also opens the possibility for a full sovereign default of it all, writing off both bond holder and EU debt, and paving the way to exit the smelly EU/Eurozone once and for all. Our own banana republic currency and the possibility of a second chance at booming the right way at some far distant date. A painful road ahead, but they may have actually taken the right turn this time. Hope so.. Oriol Junqueras leader of a coalition party in the Catalonia Assembly (Spain) dropped a bombshell in Brussels at a youth gathering. Pressure from youth unemployment? ccaa.elpais.com/ccaa/2013/11/17/catalunya/1384707957_520300.html Comments are closed.