Weidmann Interview Post author By Seamus Coffey Post date January 24, 2014 The Irish Times have published the full transcript of an interview Derek Scally did with Bundesbank president, Jens Weidmann. Related pieces here and here. Categories In Uncategorized 89 Comments on Weidmann Interview ← Inequality → Miriam Hederman O’Brien prize 89 replies on “Weidmann Interview” The following would appear to be the most salient elements of the full transcript. Q What, in your view, does the Cyprus programme, including debt write-downs, mean for Ireland? A I don’t think that you can equate the two cases, but the Cypriot experience showed that it is indeed possible to wind down a bank and bail in creditors, thus reducing the burden on taxpayers. Our regulatory efforts are geared towards making an orderly restructuring possible, which also means that deposits would be better protected than in the case of Cyprus. Q Is the Irish hope that it won’t be left alone with its legacy bank debt misplaced? A There was assistance in the past and I assume that Ireland, now out of the programme, will be able to meet its commitments without any external assistance. Q What about the ESM lifting away some of the burden? A The ESM is already involved, and at very favourable conditions. Taking over the debt burden of other countries was ruled out at the creation of the currency union, and for good reasons. And the agreements of the past weeks have made clear that legacy bank debt remains a primarily national responsibility. Q The euro zone door to debt write-downs, now open, was held closed by ex-ECB president Trichet for Ireland. Does this argument hold water here? A The Governing Council then was weighing bail-in versus financial stability risks, and its majority concluded that the latter were more relevant under the concrete circumstances. In that debate the Bundesbank has always considered it important to make investors bear the risks of their investment decisions and already then favoured contributions of investors in the event of solvency problems, especially for banks that are to be wound down. Our common goal is to be able in the future to wind down banks without endangering financial stability. Q Supposed monetary policy heresies have been pushed through before, such as the promissory note deal. You weren’t happy when Michael Noonan went on the radio to talk about the deal. Why? A I have no problems with transparency. I have a consistent opinion on this which I’ve expressed publicly in the past. Q Was a line crossed that has brought the ECB into a position of political dependency? A As you know, I viewed this transaction with great scepticism. At the end of the day, the central bank (of Ireland) largely has the debt on its books and is refinancing it at the main refinancing rate. This transaction is a blurring of monetary and fiscal policy that, from my perspective, risks being perceived as monetary financing. If the impression arises that monetary policy is handling fiscal problems, this would bring central banks into a situation where monetary stability is dominated by fiscal policy. Some might consider the transaction as a kind of a compensation for the Irish support to its banking system, but in my view such transfers should not be the business of central banks. Q A regularly-heard argument in Ireland is that foreign banks, and German banks, lent recklessly into a bubble and got away lightly while the Irish people carry the burden. What do you say to this argument? A There are two sides to this story. We had German banks linked to Ireland who were rescued by the German taxpayer. When banks go broke in future, those who are responsible for the decisions – managers, owners and creditors – should pay the price, irrespective of their nationality. I guess the Irish people share this opinion. Q Only if your opinion is applied retroactively, given that the whole euro area benefitted from the Irish rescue operation. A Arguing about who profited by how much and when from the currency union or who shouldered the greater cost of the financial crisis doesn’t bring us further. We have to talk about how to prevent this happening in the future. Q It’s not water under the bridge for Irish people shouldering a debt-to-GDP ratio of 120 per cent… A … But Ireland also experienced a strong boom after entering EMU, and other countries, too, have to bear crisis-related costs. My point is if you start down this path, things soon become unclear and unproductive. Germany’s federal debt rose considerably also because it had supported German banks with business in Ireland. What is more, Germany shoulders a large part of the euro-area rescue funds. Q Official reports on the collapse of SachsenLB, Depfa and other German banks in Dublin see blame on both Irish and German sides. A There has been a huge discussion here about the responsibilities and actions of German banks in the crisis. After its nationalisation, the HRE and its extensive Irish Depfa business was even looked into by a parliamentary investigative committee. However, finger-pointing between Germany and Ireland is not very helpful. Q There is a feeling going around in Germany, in Ireland too, of being a victim of a monetary union from which others have profited. What are the long-term consequences of this lingering resentment? A It’s essential to explain the benefits of the European monetary union to the public. And it is also key to implement the lessons learned to prevent a crisis like this one happening again. A strengthened framework of the monetary union, the banking union and financial regulation are part of the response. However, more is needed to sever the doom-loop of the bank-sovereign nexus. In my opinion, an open, sometimes controversial, discussion, such as we have in Germany, is ultimately raising acceptance of the currency union. Some argue that critical views of some ECB decisions, for example, undermine Europe. I feel that, on the contrary, citizens would find it worrisome if difficult decisions in uncharted territory were made without public debate, behind closed doors. With regard to Germany, you also have to see that citizens were given a promise at the founding of the currency union that the euro would be as strong as the deutschmark. This is a promise they demand is kept. The timing of the emergence these silent friends of Ireland is the most interesting aspect. It makes their silence when it mattered look like complete cowardice. Every players opinion should have been a matter of public record but no we find out their version of events years after. How completely undemocratic. So are we to believe Timothy Guetner and JC Trichet were the baddies in this Greek tragedy and that those who wanted to stand up for doing the right thing were to cowardly to proclaim or even leak their true opinions? Martin Wolfs comment in the FT last week is an indictment of the Euro Elites. “The rescue was necessary. But the belief that the powerful sacrificed taxpayers to the interests of the guilty is correct.” We know that the taxpayers who paid almost half of all those sacrifices to have been heaped unjustly comprise 1% of the total population and inhabit a small Island off the coast of Europe. The fact that the proportion of Ireland’s income tax has gone from 27% to 40% of total tax take between 2009 and now is a clear reflection of this. “But Ireland also experienced a strong boom after entering EMU…” Is this guy for real? “I’m sorry about you having to pay for the crash, but look on the bright side: you also had a spectacular bubble! Now don’t you be worrying your tiny brains thinking about who got burdened with what and who got paid. It’s all very complicated and lots of people ended up paying for lots of things. For example, I just bought a new AMG Mercedes. Look, out the window! It’s Halley’s comet!” @ eamonn moran “the taxpayers who paid almost half of all those sacrifices” Deficit-, debt- and expenditure-impacting banking measures “the proportion of Ireland’s income tax has gone from 27% to 40% of total tax take” Collecting more Income Tax? He is correct about Cyprus. Many pundits and politicians hung their hats on a collapse of European banking if senior creditors in any ‘bank’ no matter how insolvent, took a loss. Putting another comment into an Irish context: “I feel that, on the contrary, citizens would find it worrisome if difficult decisions in uncharted territory were made without public debate, behind closed doors.” …and then relevent documents went missing.. I suspect a lot of the pressure to bail out the constituents of IBRC actually came from Irish investors. “The rescue was necessary. But the belief that the powerful sacrificed taxpayers to the interests of the guilty is correct.” They’ll never admit they were wrong. This video says it all even thought it is more than 30 years old http://www.youtube.com/watch?v=6xi-agPf95M “We have heard, for example, from Mr Bex Bissell – a man who by his own admission is a liar, a humbug, a hypocrite, a vagabond, a loathsome spotted reptile and a self-confessed chicken strangler. You may choose, if you wish, to believe the transparent tissue of odious lies which streamed on and on from his disgusting, greedy, slavering lips. That is entirely a matter for you. Then we have been forced to listen to the pitiful whining of Mr Norma St.John Scott – a scrounger, parasite, pervert, a worm, a self-confessed player of the pink oboe; a man, or woman who by his, or her, own admission chews pillows! It would be hard to imagine, ladies and gentlemen of the jury, a more discredited and embittered man, a more unreliable witness upon whose testimony to convict a man who you may rightly think should have become Prime Minister of his country or President of the world. You may on the other hand choose to believe the evidence of Mrs Scott – in which case I can only say that you need psychiatric help of the type provided by the excellent Dr Gleadle. On the evidence of the so-called “hit man”, Mr Olivia Newton-John, I would prefer to draw a discreet veil. He is, as we know, a man with a criminal past, but I like to think – ho, ho, ho – no criminal future. He is a piece of slimy refuse, unable to carry out the simplest murder plot without cocking it up, to the distress of many. On the other hand, you may think Mr Newton-John is one of the most intelligent, profound, sensitive and saintly personalities of our time. That is entirely a matter for you. I now turn to the evidence about the money and Mr Jack Haywire and Mr Nadir Rickshaw, neither of whom, as far as I can make out, are complete and utter crooks, though the latter in incontestably foreign and, you may well think, the very type to boil up foul-smelling biryanis at all hours of the night and keep you awake with his pagan limbo dancing. It is not contested by the defence that enormous sums of money flowed towards them in unusual ways. What happened to that money, we shall never know. But I put it to you, ladies and gentlemen of the jury, that there are a number of totally innocent ways in which that £20,000 could have been spent: on two tickets for Evita, a centre court seat at Wimbledon, or Mr Thrope may have decided simply to blow it all on a flutter on the Derby. That is his affair and it is not for us to pry. It will be a sad day for this country when a leading politician cannot spend his election expenses in any way he sees fit. One further point – you will probably have noticed that three of the defendants have very wisely chosen to exercise their inalienable right not to go into the witness box to answer a lot of impertinent questions. I will merely say that you are not to infer from this anything other than that they consider the evidence against them so flimsy that it was scarcely worth their while to rise from their seats and waste their breath denying these ludicrous charges. In closing, I would like to pay tribute to Mr Thrope’s husband, Miriam, who has stood by him throughout this long and unnecessary ordeal. I know you will join me in wishing them well for a long and happy future. And now, being mindful of the fact that the Prudential Cup begins on Saturday, putting all such thoughts from your mind, you are now to retire – as indeed should I – you are now to retire, carefully to consider your verdict of “Not Guilty”. ” background Weidmann appointed Feb 2011, now speaking of BUBU positions on ECB council in 2010. History being rewritten by an onlooker, but with a very definite current agenda. @Seamus Coffee. Ok Ill give the benifit of the doubt on the first stat, lets just say that even when all governments have paid out what they are going to for the financial crisis Ireland’s citizens will have paid much much more per head than the vast majority of citizens of central Europe. Surely you don’t disagree with that? My numbers for the second point are from here http://www.finance.gov.ie/sites/default/files/Report%20Card%20January.pdf Page 19. I am using the departments own latest figures. But over a period where wages have been fairly flat a growth from 27% to 40% in income tax as a % the overall tax take, while at the same time corporate tax has gone from about 14% to about 11% of our total tax take. What your post didnt mention was that although the absolute amount had not gone up much in 2011 (it has continued to grow since then ) there were fewer workers and so the income tax take per person had increased fairly dramatically to cover this. @grumpy I suspect a lot of the pressure to bail out the constituents of IBRC actually came from Irish investors. Everyone I knew who had savings in Anglo was upper middle class and above but the bondies complicate issues. We know it was EU policy, until the core thought they were sufficiently financially isolated from the unterländern, that no bondholder be left behind so it is hardly relevant just how socially connected the “savers” at Anglo were. It was EU policy until it was not and the false outrage about not being told by the Irish is sickening. If we had tried to burn anyone (as we found out later) it would not have been allowed. We jumped before we were pushed but when we tried to climb back out it was Germany and the ECB who stood on our fingers. Never forget that. As for Weidmann – I can not remember who said it but there is a quote to the effect that we should not forget that central bankers are still goddamn bankers. I also remember when central banker Asmussen came over to give an audience of Ireland’s silver haired policy elite a good telling off not being quite submissive enough (cue the desired toe curling embarrassing silence from the audience). “I suspect a lot of the pressure to bail out the constituents of IBRC actually came from Irish investors” Agree. Once the decision was taken to bail in pretty much all Anglo subbies, then all subbies in all banks were to be treated the same. And once the subbies were protected all those superior to them were also. Thats the crux. Who decided that these were to be protected, why, when. ” Central banks’ financing of states runs like a red thread through history, and the dangers of this are many and well-known. ” Ah yes. The danger of the 1920s; so lets repeat the mistakes of the 1930s in the 2010s to avoid the horrors of hte 1940s. Debt relief = Weimar = Hyperinflation = we dont still trust ourselves not to, yknow, Godwins Law and all that… Jens; its ok. We trust ye. @ eamonn moran Agreed re cost per head but that is a much different point to the one originally made. As for Income Tax. In 2009 €12.9 billion was collected between Income Tax and the Income Levy. Separately, €1.8 billion was collected under the Health Levy and paid to the Department of Health rather than into the Exchequer Account. The total of these was €14.7 billion. In 2011 the Income and Health Levies were abolished and replaced by the Universal Social Charge, with all USC revenue paid into the Exchequer Account. In 2013 Income Tax plus USC receipts were €15.8 billion. There has been an increase in receipts but the compositional change accounts for more of the increase from 27% to 40% you refer to. And as for the number of workers, did you not read all the way to the end? @brian lucey The auld “Inflation leads inevitably to the Holocaust” is a convenient lie and no one in Germany except schmucks believe it, Jens certainly does not and it is just cover. On the other hand if you looked at the twentieth century and said attempts to stick to the gold standard have always been doomed and counter productive you would have something. Tellingly Jens would dispute it. Signs Of The Gold Standard Are Emerging From Germany Weidmann stated that “Concrete objects have served as money for most of human history; we may therefore speak of commodity money. A great deal of trust was placed in particular in precious and rare metals – gold first and foremost – due to their assumed intrinsic value. In its function as a medium of exchange, medium of payment and store of value, gold is thus, in a sense, a timeless classic.” The Euro is of course a gold standard by other means and appeals to exactly the same set of reactionaries and a sad selection of useful idiots on the left who suffer from chronic affinity confusion. Do not trust Jens, not for a second. The German hyperinflation was between 1921 and 1924. The following parliamentary elections took place after the hyperinflation May 1924 December 1924 May 1928 September 1930 July 1932 November 1932 March 1933 By 1928 the Nazi party were still attracting less than 3% of voters. This increased and by 1932 their share exceeded 30% for the first time. It wasn’t the hyperinflation of a decade before that made them the largest party in the Reichstag; it was the deflation of the Great Depression. @SC Excellent point – I have been guilty of this oft quoted misapprehension myself until recently. @Shay “We jumped before we were pushed” Says who? It didn’t look lie that in 2008. Risk-free banking was a policy invented in Ireland and inposed on Europe by Ireland. People then made Ireland stick to it. I am willing to bet that not a single Irish government adviser, civil servant, academic pundit, op-ed writer or journalist who influenced the bank guarantee had actual experience of interracting with actual investors while actual senior bank creditors were taking an actual hit in bust banks. They were way more clueless than we thought, making it up, and malleable. Seamus – hmm. The growth of the right in germany dates from the post weimar period. They were a quarrelsome lot. And god love us all Herr H and his crew werent even the most outlandish of them. But they were the biggest gutties and slowly but surely took over the space occupied by teh likes of the National Party or the Center Party or the Peoples Party. Ironically, it was perhaps the deflation of the early 30s that gave the final kick to the NSDAP. Deflation…. hmmm…. Are ye listening Jens… ? @grumpy Risk-free banking was a policy invented in Ireland and inposed on Europe by Ireland. Am I missing some irony here? Please let me be. Please. No one could seriously suggest that Ireland imposed the next four years of ECB (and German) banking policy on the Eurozone. How could anyone think for a moment that Irish mistakes had any effect on the actions, preferences or policies of Eurozone governments and Institutions? Europe’s banks as a whole were in simply diabolical shape after the GFC and Eurozone policy was centered around protecting the banks (and monetary policy) until the creditor countries felt safe. The story of the European component of the Global Financial Crisis is largely a story about the fight over the allocation of losses from the banking crisis. The creditor states (and the financial sector) won, the peripherals got stuffed. This was at least partially because the political and administrative elites in the peripherals are hopelessly compromised by shared class interests with their creditor nation counterparts. While you and I may not be naturalized Eurozonians Patrick Honohan and Pat Cox certainly are. I do understand the point about the delay in hitting subordinated bondholders but the policy was effectively the Eurozone one until 2012 (wasn’t it?). Returning to the central issue, that of possible additional financial assistance, Weidmann had this to say. Q What about the ESM lifting away some of the burden? A The ESM is already involved, and at very favourable conditions. Taking over the debt burden of other countries was ruled out at the creation of the currency union, and for good reasons. And the agreements of the past weeks have made clear that legacy bank debt remains a primarily national responsibility. To be contrasted with what seems to have been actually agreed between governments. http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/137569.pdf This speech by and ECB board member is also of interest. http://www.ecb.europa.eu/press/key/date/2014/html/sp140122.en.html Notably; “We now need to have an agreement between the Council and the European Parliament on an effective Single Resolution Mechanism (SRM) and a Single Resolution Fund (SRF). Let me first say a few words on the institutional method chosen to set up the SRF. As a Union institution, the ECB supports, as a matter of principle, recourse to the Union method and thus to Union law. The recourse to an intergovernmental agreement should only be seen as a temporary solution. As regards the main features of a functioning SRM, we need lean decision-making, particularly in emergency situations. This should allow for taking decisions over a weekend, if needed. Robust and common resolution financing arrangements are also required: in this regard, the period of ten years for moving towards a genuinely common SRF is too long and should be shortened, possibly to five years. Also, adequate common backstop arrangements need to be established, both for the transition period and the steady state, to guarantee the credibility of the SRF and avoid a persistent or re-emergent sovereign-bank nexus. Finally, the assessment whether a bank is failing or likely to fail should solely be in the hands of the supervisor.” Time is running out for the outgoing European Parliament and the Council (member states) to come to an agreement (under the aegis of the current – Greek – presidency of the EU). @Shay In 2008 the EU were floundering around and would have gone with whatyever action Ireland took. Trichet would not have been able to do much if Ireland had applied the principles of capitalism. He would have looked ridiculous. That’s not to say he might not have let it be known he would prefer it if there was some banking nationalisation, or something as that would make things easier for him and the banking industry. The point is that to those outside Ireland, it appears that Ireland made a choice in 2008 that then forced Europe to row in behind that approach. The banks and the ECB were hardly going to complain, or be accommodative in 2010 when Ireland suggested it might have only been kidding when it guaranteed all the liabilities. If the 2008 guarantee was forced on Ireland people should be told and the culprits should retroactively recapitalise IBRC. “For me it’s not about banging on the table but about presenting consistent, clear opinions that reflect my fundamental convictions. It’s about going into deep discussions, assessing different views and about trying to convince.” The markets really scared the bejaysus out of them before Mario decided to do “whatever it takes™” http://www.youtube.com/watch?v=YoDh_gHDvkk Pressure pushing down on me Pressing down on you, no man ask for Under pressure that burns a building down Splits a family in two Puts people on streets It’s the terror of knowing What this world is about Watching some good friends Screaming, “Let me out!” @ Grumpy “If the 2008 guarantee was forced on Ireland people should be told and the culprits should retroactively recapitalise IBRC.” I think they lost the fag packet they wrote the plan on @grumpy The point is that to those outside Ireland, it appears that Ireland made a choice in 2008 that then forced Europe to row in behind that approach. “Europe set its banking policy for the next four years because of an Irish precedent” is a very tough sell, harder even than a DB derivative portfolio. The banks and the ECB were hardly going to complain, or be accommodative in 2010 when Ireland suggested it might have only been kidding when it guaranteed all the liabilities. With all due respect, utter bullshit nonsense. The parlous state of the banks was not fully known in 2008 and states are not morally or legally obliged to pursue a policy after it has failed. (“We said that we were committed to farm collectivization and though it has not worked out a commitment is a commitment”). This was the ECB’s call, and again and again they have made decisions for the core, effectively setting financial policy for member states and placing themselves in a political role totally inappropriate for an unaccountable club of central bankers. The amount of pressure on Ireland in 2008 is up for debate but that the ECB had more concern for the financial sector than countries for the next four years is really not. @ grumpy There is a pattern early in a crisis for authorities without experience in dealing with a crisis, fearing that default of an important player would trigger contagion. Recently a Chinese local government organised a bailout of a shadow financial system trust loan to a coal mine, that was about to default. In the US, Lehman was allowed to collapse after rescues of the two federal mortgage guarantee firms and another investment bank. Then after the collapse of Lehman, there was panic and AIG and Citigroup, two giant financial firms, were publicly bailed-out. Public funds were also provided to other banks. These developments appeared to have had a big influence on the ECB and as the Greek crisis bubbled, fears of contagion were high. Denmark, outside the euro, in 2011 forced haircuts on senior bondholders in two failed banks, which led to problems for other Danish banks in finding international funding. The Danish government then introduced a package that reduced the risk of having to wind down troubled banks. It also changed the state guarantee scheme, making it possible to extend the guarantee for individual banks to as much as three years in the case of a takeover. Authorities should be better prepared for a future crisis – unless it happens when the current one is forgotten. @Shay Spot on. @grumpy Why would we have had to run the “we were only kidding” argument. The guarantee expired in 2010…the joke was in renewing it. @Shay The bank guarantee wasn’t a policy, it was a legal obligation. All the mobile funds basically pencilled in 2010 when it ran out as time to be out. It generated a completely predictable funding cliff. By that point it was a stand-off between the government and new investors who took the view – if you want bank funding, guarantee it. At that point the ELG took over – an Irish decision, necessitated by an earlier Irish decision, sold on the basis that it would underpin gilt yields. It was an Irish decision in 2008 to box the country in to bailing out the now IBRC creditors that made all financing of Irish banks government guarantee dependent from then on. The idea the guarantee could not be replaced with something similar, once it was put in place, was fancifull – unless the market had been totally wrong in 2008. It was an all-in bet against the market and if someobdy or an organisation or a state forced it on Ireland then they should be offering a refund. @grumpy I am sort of stuck on the fact that Ireland’s idiotic solo run was also Eurozone policy for the next four years and I find the legal obligation argument unconvincing. Who makes the laws after all? @Shay Irish law, sovereign default so far as investors are concerned. Back in the days when Morgan Kelly was allowed to write op eds in the IT he did mention once that the guarantee was such a stupid idea (like whatever Paulson did the first week post Lehman or during Lehman) that it should have been easy enough to revoke it. I think the problem at the time was that Trichet and the rest were clueless when it came to the markets. Mario is an old pro- just feed them dopamine and they’ll eat out of your hand http://www.youtube.com/watch?v=ikYEftuuA3c But back in 09 they were floundering around as much as FF. http://www.irishstatutebook.ie/pdf/2008/en.si.2008.0425.pdf and related You had 5 weeks to shoot the guy between announcement and signing, but now , ho , ho, ho, they “lost the documents” in the meanwhile (5 Oct 2008) it took Merkel and SPD Steinbrück great pains to convince the german Savers, that their money is secure, without actually saying or god forbidden signing anything, that anybody could sue Germany on for a nickel. errrm, I forgot: http://www.spiegel.de/wirtschaft/merkel-und-steinbrueck-im-wortlaut-die-spareinlagen-sind-sicher-a-582305.html “but now , ho , ho, ho, they “lost the documents” ” yeah , right… and the dog ate their homework. and their kid sister needs an eye operation. Nobody actually thinks the doccos are lost. Do they? The Weidmann interview in IT is taken in a very narrow context. Reporting in the Irish media on the crisis and Germany’s role in it is severely lacking. Weidmann, Asmussen, Weber, Ackermann….et al have a much wider agenda. Some issues are the subject of hearings in the German constitutional Court in Karlsruhe; next instalment due late Summer 2014. Sorry Derek, but you haven’t provided the type of relevant information over the last 5 years. or is it an editing problem with the IT? Anyway, here’s the wider Weidmann picture via @Welt: http://www.welt.de/themen/jens-weidmann/ Spent the last few days in Stuttgart, Dresden, Leipzig, Duesseldorf, Dortmund, Nijmegen and Amsterdam with teams of Financiers/Contractors/Consultants. In Germany: not one Irish member with experience/language skills. Not one woman on any team. The mouthpiece IT does not present an accurate assessment of the overall situation. Links to Handelsblatt; FAZ and die Welt are much more informative…..and free. For people who don’t speak German, pop them into Bing translate, that really gives a far more informed report. Sorry. @ DJ The problem with the Irish media is not that there is no narrative relating to the euro crisis but that there is no continuous, sequential and logical one, the national broadcaster being the worst performer. Derek Scally cannot be held responsible for this. Indeed, without his contributions, and those of the other European correspondents of the Irish Times, and some of its domestic business reporting staff, the “euro debate” in Ireland would be a game of blind man’s buff. The academic staff of the universities, in the disciplines of economics and political science, carry a particular responsibility for rectifying this situation. However, without some dedicated media outlet, such as exists in other Euro Area countries, it is difficult to see how this can be done. In the meantime, events are conspiring to push the country in the right direction i.e to a recognition that it is a country for old men (and insiders) and that this simply cannot continue. Rereading the Ir Times article and the full interview transcript, I wonder how did the so called paper of record conjure up the headline: “Bundesbank backed move to burn Irish bondholders” Reading the article by Seamus Coffey we find: “When speaking both Weidmann and Asmussen are giving the views of their employer. At the time of the decision in November 2010 they did not work for the Bundesbank or the ECB.” Still, the article will help Derek Scally to get the latest from official Germany, whether the latest be spin or more spin, what matter. The private banking debt is now on Ireland’s account, and ‘we’ are being rewarded with low interest rates, by the markets, and feted by the EZ elites and carpetbaggers as examples of how much little pigmy samsons are prepared to shoulder for the great Euro dream. Keep spinning it your way, Jens, with a little help from the Ir Times. @ All FYI http://www.spiegel.de/international/europe/bundesbank-president-weidmann-stands-opposed-to-euro-rescue-measures-a-945348-2.html @ Joseph Ryan What is the point of looking a gift horse in the mouth? The markets will do what the markets will do. If we do not like it, we should simply stop borrowing from them. We have currently persuaded them that we wish to continue to borrow and that they can expect to be paid back. Just be clear what Jens is now saying, he is a speech from a few days ago. The Cyrpus model, it seems. Does ECB liquidity constitute ‘private funds’ or are they preferred creditors, again. http://www.bis.org/review/r140122c.htm “Before the launch of the single supervisor, a comprehensive balance sheet assessment will be conducted for the 128 “significant” banks that will, in future, be supervised directly by the ECB. If this assessment reveals that recapitalisation is needed, this is to be remedied before the launch of the SSM, primarily using private funds. Or, if that is not possible and the bank has a sustainable business model, by the respective government. Ultimately, it is a question of who is responsible for past failings in banking supervision – and that was the individual member states. “ @DOCM “What is the point of looking a gift horse in the mouth? The markets will do what the markets will do. If we do not like it, we should simply stop borrowing from them.” From my perspective in retrospect, even as late as 2011, when the new government was appointed, we should have burned whatever bondholders were left and all deposits in all banks in excess of about 20,000. Burned them to the point where banks had sufficient to write down all mortgages in standard houses to current market value, and were forced to do so. We should have bitten many bullets and reclaimed a republic from financiers and insiders. It would have been painful. Instead we wrote more cheques and we hosed the country with the Taj Mahal of Irish Water, that together with a myriad of quangos, semi-states and the financial elite were given carte blanche to continue to rape the country. @ Joseph Ryan With all due respect, saying what we should have done does not alter by one iota the situation in which we find ourselves; to the denying of which an enormous amount of energy is devoted by some. By the way, thanks for the link to the speech by Weidmann. It demonstrates that he is no lightweight or bush in the gap, rather the sheet anchor for the euro, or, at least, the German vision of it. “if we are to maintain the balance between control and liability, we essentially need to opt for one of two paths towards a more stable monetary union framework. Either we proceed towards deeper political integration – a fiscal union, say – or we develop the existing framework further and bolster the individual national responsibility of the individual member states as a constitutive feature of monetary union. However, a fiscal union must not simply mean extending mutualised liability, because that would merely be a transfer union. A fiscal union that is worthy of the name would instead require member states to transfer national sovereignty to the community level, say by giving the community the necessary right to intervene in the event of unsound public finances. Blending mutualised liability with decentralised decision-making powers on debt would be the wrong way forward. Policymakers might see this as an attractive “quick fix” for the crisis, but it is anything but a sustainable configuration for a monetary union. In fact, it provides an additional incentive for member states to run up debt without providing any effective control instruments. So anyone can get into debt at someone else’s expense.” As I understand it a lot was made of the fact that depositors in Irish banks bore risks equeal to bond holders. No legally separate deposit insurance fund as is usual in most developed countries. The fact that Portugal, Greece, Spain and Italy were on equeally shaky ground as ourselves seems to have gone unnoticed in Dublin. The Portuguese made no bones about voicing their opinion that Ireland was being used to set precedents that would be costly for taxpayers of weak EZ economies. No attempt was made to put together a coalition of soon to default and come up with a consensus approach. As a matter of fact it was clear that the Portuguese Gov’t was hopping mad at what they considered to be the stupidity and incompetence of the Irish Gov’t. So where was our Gov’t? In bed with US bankers and even worse paying them to give advice to Ireland. Advice that would be helpful to bankers in the US, Germany, England. We scored a number of own goals of our own volition. Nobody put a gun to Ahern’s head or Cowen’s head they were primed for failure before taking office. Dorothy Jones I agree with you on the appalling lack of experience/language skills as it relates to the EU/EZ in Ireland. Even today absolutely nothing is being done about how we can function in Brussels and Frankfurt. The expectation is that youth should be prepared for work in New York, Sydney and Toronto. What a bunch of backward navel gazers we have become. fyi Text from Blind Biddy in Davos: http://www.irishtimes.com/news/ireland/irish-news/blind-man-asks-to-be-charged-with-cannabis-possession-to-challenge-law-1.1666863 As Jimmy J. put it: ‘Me methods are strange, they may cause surprise To make the blind see, I throw dust in their eyes.’ p.s. the one-eyed Shia Sheik is roightly miffed at the Oirish Gov insult to Iran. [ so is Biddy, ed.] @Jens . In the US and Canada Cannabis has been partially legalised after human rights challenges which claimed that government did not have the right to deny a patient medication prescribed by an M.D.. Some judges gave the gov’t a year to amend the law or they would declare defendant innocent. The gov’ts caved and it is now legal in most jurisdictions for doctors to prescribe Cannabis and for growers to grow and distribute it. It is popular in Kerry without a prescription, safer than alcohol and a cottage industry that is pumping funds into the local economy. Legalise and tax it I say. @Dorothy Jones +1 It’s selbstverständlich. “Speak Fahkin English” doesn’t work as well as it used to. Ochón agus ochón ó. @DOCM I didn’t mean to over-criticise Derek Scally. He has a very good insight into the German psyche and I have always enjoyed reading his articles. I just meant that there is a level of analysis missing in the Irish media in relation to the wider EU agenda, in particular in relation to Germany. Working part-time with engineers and architects in UCD, I see that most emigrate to English speaking countries such as Australia and Canada these days. Virtually none to Germany where there are employment opportunities and where it is a mere 2hr flight to most cities. @MH Language skills are improving but nobody seems to want to learn German 🙂 ! German people in the main love Ireland and Irish people. Ah well, having spent 50% of my time there for the last 20 odd years, I’m probably biased…… I like Jens Weidmann from BUBA and also Asmussen from ECB. However, they are merely fronting a battle in the constitutional Court in Karlsruhe which is directed from their old masters from University: Weber, Ackermann and so on. All of this is about Deutsche Bank, USB and so on. None of it is about Ireland. Because, despite what we may think, this is how Germany sees Ireland: http://www.johnhindecollection.com/ireland1.html “It was an Irish decision in 2008 to box the country in to bailing out the now IBRC creditors that made all financing of Irish banks government guarantee dependent from then on.” Yes Grumpy but there was no help, was there ? When the plague reached the gates of Paris they got busy http://www.youtube.com/watch?v=oPQ3o14ksaM You are right to point out all the flaws in the PTB excuses (as Will Rogers said “Go in on promises and come out on alibis”) but Sarko did say he wasn’t elected so that la Republique would suffer the indignities that Ireland did. It has been all rather beggar my neighbour from the start. Like some erudite NHS brain surgeon who got the first 3 lobotomies wrong and retired but doesn’t do accountability. @ DJ “I just meant that there is a level of analysis missing in the Irish media in relation to the wider EU agenda, in particular in relation to Germany.” I could not agree more! What can be done about it is another question. Journalists attempting to weave a coherent narrative, locating Ireland correctly in the wider context, will, almost inevitably, be outflanked by sub-editors looking for the headline that will sell. This includes instructing journalists to avail of press briefings abroad to button-hole ministers from the Taoiseach down on whatever the “scandale du jour” happens to be. Who cares what is going on in the conference room? That and, of course, and asking the standard question assumed to be the one the electorate wants answered by Irish politicians ever since the country joined the EU; can we get the money? http://www.independent.ie/opinion/columnists/john-downing/legacy-bank-debt-could-dent-endas-hope-of-five-more-years-29949105.html As to Irish emigrants, they will always head for the traditional spots because that is where there is an existing network of emigrants that will ease their insertion into the local economy; and everyone speaks English! On the constitutional court, having followed its actions for years, I agree with the view that is widespread in German legal circles; it barks but it never actually bites. The circle of influence in Germany is too small for any element to be allowed to shoot it in its collective foot. As to the popular image of Ireland in Germany, we should be so lucky! @ Dorothy “German people in the main love Ireland and Irish people.” So true but not enough people in Ireland know that. It’s all WW2 and that Fawlty Towers episode about the Germans and penalties against England. Very few people know about Heinrich Böll. Cultural understanding is always tricky. Here’s an example in the other direction. James Hansi Last live at the Rose of Tralee – I think it was in summer 1983. Cork had dumped Kerry out of the Munster championship. Second year in a row that that great Kerry team didn’t win anything. The crowd go nuts when he starts the theme tune to the Sunday Game, known to Germans as Jägerlatein. The Kerry punters probably even forgave Seamus Darby – they associated the music with winning all Irelands . http://www.youtube.com/watch?v=zjieoLrQkm0 About 5 minutes in The German commentator didn’t get it. He explained it to his listeners as “Stimmungsmusik von James Last” , mood music. No clue. fyi European Central Bank president Mario Draghi told global leaders in Davos yesterday he favoured an “accelerated time line” in breaking the link between euro area sovereign and bank debt. http://www.irishtimes.com/business/economy/europe/draghi-favours-quick-break-in-link-between-sovereign-and-bank-debt-1.1667497 Wonder has The Shannon been drained yet? off thread On The Baron http://www.irishtimes.com/news/politics/former-street-preacher-and-agitator-now-full-of-years-and-of-self-satisfaction-1.1667394?page=1 Now we have Jens, Mario & Ian. Where’s Wrongway_Corrigan these days? “Luke Kelly came out and sang ‘Rocky Road to Dublin’ while playing the banjo and then he put the banjo down like a rifle and sang quicker and quicker. Nobody understood a word, but the place went bananas, and he took the banjo up and he played a few chords and he sang in the most melodic, beautiful tone, ‘Peggy Gordon’, and the place erupted again. When he was on form there was no folk singer better than him — either today or then. Nobody came close.” http://www.irishexaminer.com/lifestyle/artsfilmtv/artsvibe/luke-kelly-remembered-a-force-of-nature-on-stage-256309.html @ DOD http://www.youtube.com/watch?v=ze8TTOYInhc Brian Cody on Jimmy Barry Murphy. “Never flustered. He was where he was supposed to be” Sport is mostly honest. Political economy isn’t Laochas is for the little people. The thread has taken a turn for the pathetic. * It does not matter whether Irish people and Germans get along personally because Germany’s interests in EU economic and monetary policy and Ireland’s are opposed. Germany is currently an opponent of the Irish state, and indeed most of the countries not tightly economically coupled with them in the Eurozone. No amount of simpering and kowtowing from Enda can align Ireland’s interests with Germany’s. * Focusing on understanding the psychological make up of Germans to help analyze the malign influence of Germany on European economic and monetary policy since the GFC is almost a category error. It is similar to thinking of the Vietnam war as a interesting expression of the United States belief in manifest destiny, and therefore somehow excusable. Germany does what it does because it is are self interested (as all nations are), homogeneously neoliberal (cultishly so) and exceptionally powerful in a European context. Outside of Europe Germany’s behavior is seen as unforgivably selfish and historically and economically ignorant (which it is) – lets not forget that the Eurozone under German leadership (with European Commission assistance) has been an oasis of failure in a global dessert of recovery. * Irish people do not learn German because it is not globally useful and since we are not really Europeans our horizons are a little wider. (we would be better advised to learn Arabic). —  Many of the Germans who settle in Ireland are what I would think of as cultural refugees so it is a mistake to extrapolate the makeup of German society from them. This is true of all cultures. The people you meet who do not emigrate by necessity are often people leaving something behind.  Ireland is also pathetically small from a German perspective Since we one seventeenth their size we can expect one seventeenth of their influence in Eurozone economic and monetary policy – which is fair enough and why EMU will always be a problem for us.  I know Derek Scally does good work but his attempt to explain Germany’s appalling behavior since the start of the European Component of the Global Financial Crisis through romantic literature was an embarrassing mess (Faust’s theory of hyperinflation). German politics and state institutions are dominated by neoliberals and goldbugs. End of story. On a lighter note, Retro-Crazed German Youths Invade Poland. @Shay I agree with you, which has me worried. The most important part is to understand that all nations are (or at least should be) self-interested and all the rest is sentimentality. I have no problem with the way Germany is behaving, Ireland signed up to all this with open eyes and let foolish sentiments about European solidarity dominate our true interests. Contrast that with the UK which has learned the hard way about the reality of Europolitics. The facile comments about Irish people learning German reveal the same mindset that got us into the Euro in the first place. A strange longing for Ireland to become the equivalent of Denmark or Luxembourg, a small happy European country, snuggling in the warm embrace of benevolent French and German politicians, and laughing from s safe distance at the Brits with their mad monarchy, irrelevant language and strange affection for independence. We’re actually one of the luckiest nations on Earth if only we’d wake up, accept our history and get on with grown up nationhood. I like the cut of Ruari Quinn these days – he seems like one guy who is happy to ditch the sentimentality for Irish and religion in the classroom for example. @ Dorothy Jones / seafóid An official report on Irish entrepreneurship this week had this gem: “With English now the primary language of today’s world economy, learning a programming language has arguably become more important than learning a second spoken language.” James Last showed how to connect with a local audience with his Irish pieces and donning the Kerry jersey. This is where language and understanding culture can count. There is a story that ‘Irish Mist’ whiskey did not takeoff in Germany as mist means manure. As for learning a programming language, some day the penny may drop that what would be good for Ireland is lots of new companies using modern technology not dependence on tech companies that seldom grow beyond the micro level. David O’Donnell, no matter how often you claim the false opposite, the public opinion of Germany is excellent with the people in most other countries, see especially the PEW 2013 http://www.pewglobal.org/files/2013/05/Pew-Research-Center-Global-Attitudes-Project-European-Union-Report-FINAL-FOR-PRINT-May-13-2013.pdf but also BBC 2013 http://www.worldpublicopinion.org/pipa/2013%20Country%20Rating%20Poll.pdf Germany page 19, views by large EU countries large and rising, and especially in France at overwhelming 81% fascinating numbers given the substantial anti-German hate mongering by many media. If the CRC didn’t think — on foot of legal advice — that they could haircut Paul Kiely 5 years into the crisis, how was the system going to overcome the same mentality in 2008 when a stroke was still seen as an option? @ Michael That was very impressive at the end with the jersey. He went to Ireland looking for new music according to the video . I think The Gloaming really nailed it http://www.irishtimes.com/blogs/poplife/2013/12/30/the-gloaming-moment-to-moment/ How to get that kind of awareness of excellence , of how good things can be, into the PS is the question. Doesn’t have to be den scoth but has to move away from complacent mediocrity. @ Francis “the public opinion of Germany is excellent with the people in most other countries, ” ausser de Schwiiz I don’t like the SVP. Very anti German. http://www.svp.ch I was thinking of a tshirt “SVP- die Schluchtenscheisser mit den schmelzenden Gletscher. Schweizer Qualität, ja ebe” And a few Swiss flags around the words Long one here. @Johnny Foreigner A strange longing for Ireland to become the equivalent of Denmark or Luxembourg, a small happy European country, snuggling in the warm embrace of benevolent French and German politicians, and laughing from s safe distance at the Brits with their mad monarchy, irrelevant language and strange affection for independence. The Danes might disagree with you there, they still have their own currency and are not at all keen to join in European homogeneity. There are a couple of reasons why Ireland was infected with the Europhilia which then blinded us to the problems of misaligned national interests with the Deutschse bloc countries (Ireland is not Greece, quite, but we will never be Germany – different scale, different national resources, different history.). The first was that membership of the European Union occurred simultaneously with our 130 year recovery from the famine and a generous disbursement of structural funds and agricultural subsidies. The structural funds kept coming long after they should have started going to Eastern Europe. Europe paid us handsomely for membership for quite some time. and we most definitely had our snouts in the trough. Why raise taxes to help Limerick when we could get EU money? The second was liberal affect – there was a mistaken belief (especially in the generation who were educated in the eighties and nineties) that there was a civilized and civilizing European elite that Ireland could be a part of. We simply had no grasp of how different and reactionary much of continental Europe is (armed police, far right parties and identification papers all around thanks!). Ireland has plenty to blame the UK for in the past but the relationship between the state and the individual is generally healthier here. You will not like the third one. Class interest. There is a commonality of interest and ability to organize internationally among Europe’s wealthy and large corporations that does not exist among regular citizens and this has allowed them to better lobby for and control policy decisions. Capital bargains internationally, labour locally. Fourthly, and I think we will agree here, there was an issue of conflicting incentives in the civil service and the Dail. Pre European Union Irish civil servants and politicians could only aspire to a local role in a very small country with, by international standards, low status and influence (though we did our bit in the past) or at best a UN post (strictly for idealists). The European Union has changed that completely. Irish officials can now compete for highly paid, high status jobs which influence hundred of millions of people (I have no doubt Ireland is overrepresented in the various EU institutions). For example Olli Rehn is paid a quarter of a million Euro each year for his incompetence, Marco Buto is paid a slightly lesser amount for his excuse making and while Enda’s unseemly genuflecting to Merkel might raise hackles here he has a shot at being the EPP’s choice for President of the European Council. Imagine that, a man from Kerry as the figurehead for the European Union! So our political and technocratic elite have conflicted loyalties that do not exist in larger countries (France’s finance minister is a genuinely high status job). Personally Irish politicians and civil servants would be giving up significant opportunities for financial and professional advancement if they represented Ireland’s interests in an un-European way to our “partners”. Thank you for reading. I thought Enda Kenny was from mayo!!! I thought Enda Kenny was from mayo!!! Nary a mention of all that glistery stuff – that seems a tad difficult for the Fed to locate and ship back home to Buba! Not a problem? Well it might if you hypothecated those bars at $12,000 each and had to fork out $24,000 to get them back! Think Jensy would accept ‘paper’ instead? 😎 @Shay I agree with that list. I don’t agree that they are all malign forces – I certainly want Irish businesses organising themselves and aligning themselves with other international businesses if that helps them grow. I’ve no problem with the EU as a free trade organisation. Just on the IT and going deeper into stories. 4.5 m people. There are 2.5 non tab dailies . How many people are interested in the bigger picture ? How many have read Joe Lee ? Take out most of the MBTI “S” people. Ask Vincent Browne. What’s the circulation of the Phoenix? The IT is a jack of all trades. It depends on advertising. Biting the hand. Talk to the hand. Eoin Hand. The Indo is in Denisheen’s orbit. You get thrown the odd scrap every so often. Sam Smyth was hounded. Budgets are tight. RTE’s job is to keep everyone thinking things are normal. It is very hard to change a system that many people benefit from. What publication do people think does a better job in a country with a similar population ? I know from CH (8m) that the NZZ caters to a better educated slice but a lot of it is mediocre. You really have to join the dots yourself. The UK has Private Eye and The Guardian (on occasion) and LRB and France has le Canard and some others. But much bigger populations. What’s the circulation of the FT? 629K. Not a lot, really. New York Review has 135K. Media is a big part of the problem. @ Joseph Ryan Says: January 24th, 2014 at 10:16 pm Your completely right, and as to whether they have gotten away with not doing this, is still very much in doubt. Wait until the borrowed money runs out in 15 to 18 months time and it will be game on! The more things have “changed” the more they have stayed the same. JW. “Looking ahead, it is crucial that the low level of interest rates does not delay reform efforts in the financial sector and that fiscal policy and the banking system will be able to cope with a normalisation of interest rates.” Normalisation of interest rates? If interest rates increased by just 1% Ireland’s banks would see mass defaults in the mortgage market, never mind SME loan books. Can anyone honestly say that we have reformed anything? I see nothing reformed, only more of the same and worse being spawned. I am still waiting patiently for this government and it’s spinners to be found guilty of mass public deception. Expect a general election before the money runs out and the public realise they have been spoofed. Notice too that this is on politicians minds, Kenny alluding to, liking another 5 years and Noonan referring to economic cycles and “electoral cycles” coming into play. All decisions have been political first and foremost with the economy coming in second or third place, the benefit of the majority treated with disdain. The Irish Times should let Morgan tell us what is actually going on in the country. Their policy of donning the so called green jersey and banishing the most prescient is deeply offensive and misguided. I was watching Das Rheingold (Wagner) this evening. Wagner is the darling of the German upper middle class.To understand Germany better one could do worse than watch the 3 1/2 day (15 hour) performance of the Ring Cycle. Tristan and Isolde is based on Celtic mythology with Die Meistersinger von Nurenberg a comedy. Das Rheingold to me is the most German of what could be described as a very German body of work. Now to what do the Germans know about Ireland. The ones I know in Frankfurt in banking circles know a hell of a lot more about Ireland than 99% of Irish people. That can be good if we are up to snuff.They know we are great organisers abroad and have produced people like Patrice MacMahon General and President of France, Henry Ford, Commandante O’Connor in Argentina, Bernardo O’Higgins in Chile, JFK in the USA, The Irish political machines in the USA the last of which was run by O’Daly up until a few years ago. Joyce, Wilde, Shaw, Yeats, Beckett, Heaney. In Ireland do we know Boll, Schiller (inscribed in stone in Listowel along with McMahon and Keane) Busch, Grass, Goethe. Do we know that Hitler was popular because he pulled Germany out of depression by implementing major public works all across the country under the slogan Arbeit Macht Frei. Would we adore Kenny if he brought unemployment down to 4% within 3 years. There are many people in Brussels that speak 3 and 4 languages and have broader support than their single language counterparts. Hence they get the “good” jobs. Could we stop whining about incompetence in Brussels until we have cleaned up our own act. Economic and institutional convergence have been enduring aspirations in the EU but absolute convergence rarely happens. Wouldn’t the truth be better? Martin Wolf, ‘There is no sunlit future for the euro,’ FT, October 18, 2011: True, if creditworthy members were to transfer resources to the uncreditworthy on a large enough scale, the Eurozone might be kept together. But even if such a policy could be sustained (which is unlikely), it would turn southern Europe into a greater Mezzogiorno (Southern Italy). That would be a calamitous outcome of European monetary integration.” Pierre Wunsch, director of the National Bank of Belgium, asked in a 2012 presentation: “Why do we typically expect the Baltic countries, Slovakia and Slovenia to converge towards core EU countries in terms of GDP per capita… while we have gotten used to the fact that the Mezzogiorno is not converging to Northern Italy?” Economic convergence is a myth in Europe and in emerging economies @ Michael Hennigan: “Economic convergence is a myth in Europe and in emerging economies.” Print the myth, not the truth. “Convergence-rate parameters are important to pin down…” They surely are. They’re exponential, not arithmetic. @ Mickey H: “Could we stop whining about incompetence in Brussels until we have cleaned up our own act.” Are you accusing us of NOT being ‘world class’? Shame on you! Significant political re-structuring (reform is a very flaccid term) MAY occur during periods of strong or rapid economic expansion (income growth). The likelihood of re-structuring during an economic downturn is low. Except, if the downturn is especially severe, like now. Fingers crossed! @ All FYI http://ftalphaville.ft.com/2014/01/24/1751462/ubs-at-davos-weve-swapped-global-imbalances-for-domestic-disequilibrium/ Also worth consideration, the views of Weidmann in his recent speech linked by Joseph Ryan above. “This shows that the willingness to cede fiscal policy powers to Europe on the part of policymakers and the public at large in the member states simply isn’t strong enough to take the step towards greater integration and a bona fide fiscal union. All the more so, given that this would also necessitate far-reaching constitutional amendments in the member states. So from a fiscal policy perspective, it looks as if toughening up the existing Maastricht framework is the more realistic way forward. In the long run, only a coherent operational framework can reliably ensure that the monetary union is a union of stability. And maintaining a stability union is also fundamentally important for the single monetary policy. Otherwise, it might prove permanently ever more difficult for the Eurosystem to fulfil its mandate, particularly if it is increasingly being forced to act as the lender of last resort for governments. That’s why it’s all the more important for the Eurosystem to eliminate any doubts that the central bank’s task is to safeguard price stability. At the same time, sustainable public finances are a prerequisite for price stability which the Eurosystem itself cannot bring about. This is where the onus is on governments and parliaments.” And; “In order to break the disastrous nexus of banks and governments, the regulatory treatment of government bonds will, however, also have to be changed. Currently, banks can invest unlimited amounts in euro-area government bonds. Under the current capital rules, a zero risk weight applies to these assets, which means that these government bonds can be fully funded with borrowed money, in other words, they do not require any capital backing. This constitutes preferential treatment, and has been a factor in banks in several peripheral euro-area states, in particular, raising their exposure to domestic sovereign bonds during the crisis; they have thereby tied their fate to that of their national government.” He is right on both counts. Minister Rabbitte circling the golden Semi-State quango wagons right now. 11 billion of asset and all that rubbish. ‘Creating’ a new utility, like ESB…… Rubbish. Nothing is being created. Just an administrative shifting of current lines of responsibility, or lack thereof. The private sector worker and outsider are being ever more marginalised, as all the largesse of a bankrupt State is being reserved for those in that inner State and semi-State circle. What they have, they hold. Up yours to everbody else. Since the discussion is bubbling here, I dont think I divert the attention too much, with mentioning that I did enjoy a chinese paper on the classical question, why did the technological revolution take off in Europe, and not in China. http://marginalrevolution.com/marginalrevolution/2014/01/unified-china-and-divided-europe.html It makes a couple of interesting points (unidirectional threats, low tax rate) that they sucked in silver. More emphasis on the terrain, than on mere distances, like Diamond, and quoting Montesquieu 1748 : – ) I haven’t seen Lagrangian Multipliers for quite a while, and skipped over that during my sunday morning coffee : – ) Maybe interesting for some folks here as well maybe interesting for some as well German Employers AND Unions together welcome immigration ‘ausländischen Fachkräften zu zeigen, “dass sie in Deutschland willkommen sind und dringend benötigt werden” ‘ http://www.zeit.de/politik/deutschland/2014-01/einwanderung-zuwanderung-sommer-kramer and Wolferl Schäuble http://www.spiegel.de/wirtschaft/soziales/schaeuble-zur-zuwanderung-wir-sind-auf-arbeitskraefte-angewiesen-a-945613.html I choose the german link for 2 reasons: a) “Im übrigen gibt es auch Deutsche, die Sozialleistungen missbrauchen oder Steuern hinterziehen. Das kommt selbst in den edelsten Kreisen vor.” b) “1914 herrschte in Europa und Deutschland eine große Zuversicht, und dann kam diese unglaubliche Katastrophe. Daran kann man sehen, wie schnell man Glück verspielen kann.” Dauerhaft Frieden auf dem Balkan Vor diesem Hintergrund begrüßte Schäuble den Wunsch Serbiens, Mitglied der EU zu werden: “Das sorgt für Stabilität und dauerhaften Frieden auf dem Balkan.” Reminding Germans, in the dominant tabloid “Bild” that some folks here are also no altar boys, and supporting to get Serbia into the fold as well. Somewhat different to Cameron / UKIP / Telegraph @francis you may not be familiar with a favorite irish pastime… “The object of the game is for players to strategically move around the game board (representing the rooms of a mansion), in the guise of one of the game’s six characters, collecting clues from which to deduce which suspect murdered the game’s perpetual victim, Dr. Black (Mr. Boddy in North American versions), and with which weapon and in what room.” http://en.wikipedia.org/wiki/Cluedo @ francis Your argument would be valid if Germany (and Austria) had thrown open their borders to immigration from the moment that the new countries of Eastern Europe joined the EU. They didn’t! This resulted in the rather anomalous situation that the two countries that benefited most economically did they least in terms of opening up their labour markets (by availing of the various derogations negotiated as part of the enlargement process). Now that the period of derogations has ended (the maximum was seven years), a different tune is being sung but the calculation remains exactly the same i.e. both countries want only qualified immigrants to fill labour gaps in their economies. But that is not the principle underpinning free movement of labour in the EU. The yje political parties in the UK have woken up rather late in the day and are going about dealing with the problem in precisely the wrong way i.e. concentrating on supposed welfare tourism (erroneously taken as motivating most immigrants) rather than the contribution that immigrants are making to the growth in the UK economy. Had Germany been equally liberal, perhaps growth in the German economy would have been less anaemic? We place a heavy burden that is undeserved on the media. The newspapers have been in decline for well over a decade. Newspapers are heavily dependent on advertising with property making up a substantial portion of their advertising income. The old adage, do not bite the hand that feeds you applies. Television has always been eye candy and cannot be taken seriously. Increasingly people are being entertained on the internet and broadcast TV is becoming irrelevant. Give me YouTube and Netflix but do not condemn me to RTE is the mantra of the under 30s’. Now that the world is our Newstand we can find information on Ireland that has not been subjected to censorship voluntary or involuntary. We are world masters of keeping up appearances so voluntary censorship is the norm. We wash our dirty linen in the back porch under dim lighting. To the world we want to be the shining light. The film Philomena which is distributed internationally brings to light an aura of official maliciousness that should have and would have died in the back porch if the Brit had not been involved. All went on during the heyday of newspapers and RTE who behaved like a paid for claque at La Scala in Milan. Forget about the Irish media, get involved in local politics where you can have a say in who runs for election. For Chrissake do not weigh having your Passport renewed and delivered to you by your TD in 5 days as an important factor. Take out the cheque book and put the money where it will do some political good. Scrub the incumbents and previous incumbents off your list. School Teachers, Solicitors. Football players and relatives of previous TDs need not apply. A couple of executives out of Kerry Group could do more for Irish progress than all the usual suspects combined. Successful people who are competing in the real world is what is needed in Irish governments. Break the cycle of nepotism, cronyism, favouritism and corruption once and for all. Sure our TD’s are lovely peeple Mikel doeshn’t dey take good care of us and even better care of demselves. That is it in a nutshell a culture complete with perverse rewards. God forbid that we will ever see the day when our TD’s and Taoiseach are not seen as our Head Waiter and Waiters is the prevailing attitude. To succeed all the government has to do is convince us that they are all that stands between us and the evil empire that is the rest of the EU and EZ. As my mother used to say, holy sufferin Jaysus, the BVM and glorious St Paul the holiest one of dem all, save us, is this what it has come to now. We are not helpless babies we can do what we have done abroad and not wallow helplessly up to our chins in bog water. We can drain the bog or leave the bog, we have clearly opted for the latter. @BWS I have noticed that in countries that are world class those words are rarely used. If there is discussion on the issue in a country/city then the countrycity is not world class. A lot of stars have to align to achieve world class and when it is achieved there is very little doubt, hence little discussion. @ All Another link of possible interest against the background of the speech by Weidmann to the BIS. http://ftalphaville.ft.com/2014/01/23/1749972/attack-of-the-killer-rentiers/ @ francis China v Europe. That’s a truly vast topic, which goes way beyond the sphere of economic history. Ideas matter, because there is also a market in intellectual capital. Bourdieu had a handle on it all. ‘As early as the middle of the 12th century, the German historian Otto of Freising recognised that a new and remarkable form of social and political organisation had arisen in northern Italy’ http://www.amazon.com/Foundations-Modern-Political-Thought-Vol/dp/0521293375 There is also Braudel’s massive investigations such as ‘The Mediterranean in the age of Philip 11, and Arrighi’s Long Twentieth Century, as well as Bobbit on the centrality of power and weapons…… Ars longa vita brevis. Off topic. From Colm Keena piece in the Irish times “While the shifting of debt from the Government to the State-owned utility is “an accountancy trick” on one level, it has important implications for “how the outside world sees us”. Write-down While the details have yet to be worked out, Prof FitzGerald believes that the net effect of the transfer of water assets to the new utility company will be a write-down in the national debt of approximately €3 billion. ” I had questioned how in the hell Ireland’s debt was going to hit its peak last year as predicted in government estimates when we made interest payments of 6 billion and were still spending billions more than we were taking in. My fears were clearly misplaced. I didnt realise that it was through Enronesque accounting tricks like this that our national debt would be reduced. How silly of me. I also see that the Irish government is to handover the assets to Irish Water at way below market value so that this new Irish Vampire Squid can make a paper profit and hand out generous bonuses. Question: Are the OECD really as lax as Professor Fitzgerald seems to suggest? @kfitz Says: I thought Enda Kenny was from mayo!!! You have me bang to rights guvnor. In my defence Kerry had been mentioned no less than six times in previous postings in the thread so I had it on the brain. @ eamonn moran Dodgy accounting didn’t disappear with Enron and in Ireland we do in effect operate with two sets of national accounts while public accounts of the government sector in accounting parlance are ‘incomplete records’ or shoe-box accounting. Enda Kenny on the mountains of Donegal read from a a paper in 2009 “why do we have a budgetary system in place that is unfit to run a corner-shop, let alone a nation of 4m people?” Last week, he was far from worrying about such mundane nitty-gritty on another mountain, with a freshly minted billionaire gushing that he was “brilliant leader.” Sheryl Sandberg, Facebook’s No. 2, has very good reasons to be liberal with the flattery. The narrative for international consumption is given more attention than dealing with reality at home and wonder why the public had to await for an oracle like John FitzGerald to do a few calculations to discover some home truths about water supply? Remember those dark days when other wise men said the Department of Finance should hire more economists? Was there a budget? I see that Pat Rabbitte is blaming the Troika for railroading policymakers whose default mode is glacial speed. Then again, how hard is it to ask for credible costings on such a project at a Cabinet meeting? 😳 Time flies and Enda Kenny will be soon preparing for the trip to the White House with his bowl of shamrock. Ten years ago, Bertie Ahern was being touted as a possible UN or European Commission head. Ireland then was also getting a lot of plaudits from people who knew little about economy. Absent any significant change, it’s easy to see how political leaders can believe their own distorted narratives of success. There are consequences. @Michael H Successive Irish governments have sucked the US teat dry. Even suckling piglets know when to change teats. Time to contemplate visiting Seoul, Shanghai, Taiwan, Sydney, Stuttgart. Leave the shamrock at home and tout our empty factories and available labour. We are in an open 400 million market, that is a highly desirable attribute for any country. Lenovo could put that to good use. In a previous post I mentioned that Germans (a subset) see us as great organisers I left out Ryanair which is often cited as an example of our present day organising abilities. @ Mickey Hickey Maybe it is time for some star gazing! http://www.thejournal.ie/astro-tourism-kerry-astronomy-dark-sky-reserve-1284627-Jan2014/ @ eamonn Shifting public liabilities off balance sheet is something extremely worrying, especially after the last 10 years. This should however not be part of the OECD agenda, these people are just bean counters, and do as told, and that will stay so, for good reasons, there are already too many “actors” in the field. This potential problem should and is part of Eurostat accounting rules, which Greece had to (http://uk.reuters.com/article/2013/02/08/uk-greece-statistics-idUKBRE9170SO20130208) and Spain did come clean on (End of 2012). So, I actually do have significant confidence, that Ireland will not start to stray apart on this. [ note to blog owner: if I would know how to do this here, I would have put the original “some” with a visible line through it ahead of the “significant” ] @ DOCM I was not aware that I was “making an argument”, I thought I am merely providing some information, but honest thanks for the reminder, that it did not come across that way, very likely not only to you. You are completely right, to point out, that the actual economic situation (especially real unemployment) has significant impact on the mood of people, the most politicians are catering to. After I bitched here recently about the Fed constantly fiddling with the numbers, even way back into the past, I have seen today similar remarks about German authorities too (http://www.spiegel.de/wirtschaft/henrik-mueller-ueber-zweifel-an-bip-statistik-und-einen-heimlichen-boom-a-945642.html) @ Paul Quigley The question “why technical revolution in Europe”, actually more like an 2% per year productivity evolution, will stay with us for years to come without any ultimate answer. E.g. Deidre McCloskey tables about a 2 dozen, and with a significant anglo bias: – ) The interesting part for me was, that this paper was actually the first clearly articulated “Chinese” go at it, for me. “audiatur et altera pars” That I cite references, does not necessarily mean that I agree with them, or even endorse them, but very often basically asking for the opinion of other intelligent folks, and I am trying to not bias the response. @ Michael Hennigan This leader in “de paper” illustrates very neatly the growing public awareness of the need for “accountability and control” by the people they have elected to represent them. http://www.irishexaminer.com/viewpoints/ourview/a-culture-exposed–committees-too-weak-to-force-any-real-change-256580.html In this conclusion, it also manages to monumentally miss the point. “In 2011 an amendment to the Constitution to strengthen Oireachtas powers of investigation was rejected by 53.3% to 46.7% of the electorate. That was a considerable setback for Mr Kenny’s Coalition and its promise of openness in public life. Every day that passes, and as the mind-set of so many of those entrusted with great public responsibility and funds is revealed, suggests that it was also a setback for the principles of accountability and control. The need to revisit that amendment and its game-changing ambitions becomes ever more pressing.” Investigating what happened when the horse has already bolted is not the main job of parliamentary committees in modern parliamentary systems. It is to participate in ensuring that there is both “accountability and control” in respect of public expenditure as a matter of course. There is no need for a constitutional amendment as the constitution already makes clear that the government is responsible before the Dáil. What is lacking is the political will to organise and cede the necessary powers. It remains to be seen whether the increasing public awareness of the inadequacies of the current – distorted – practice that gives excessive executive power to members of the cabinet (and the public sector) – leaving the system wide open to manipulation for electoral advantage – will force a change. As I have already remarked, events are for once conspiring to push developments in the right direction and they may, for once, not be amenable to being treated as nine-day wonders as in the past. @ Michael glacial speed doesn’t mean what it used to. The Aletsch lost 20% of its volume over the last 100 years @DOCM “Investigating what happened when the horse has already bolted is not the main job of parliamentary committees in modern parliamentary systems. It is to participate in ensuring that there is both “accountability and control” in respect of public expenditure as a matter of course”. Surely it is important to know, who caused the horse to bolt, who benefitted from the horse bolting, and to shine a light on whether anybody in the stable yard could care less as to whether the horse has bolted or not, as long as their pensions are paid, or they get re-elected or both. Consider this excerpt from the Examiner: http://www.irishexaminer.com/ireland/aim-of-7m-office-to-persuade-authority-staff-to-switch-to-irish-water-256629.html “Over €7m has since been spent on the body, called the Water Services Transition Office, it was confirmed. But Mr Rabbitte defended his Cabinet colleague’s actions, telling RTÉ: “He sat down a committee from the local authorities, some of them managers and former managers, and said ‘how in the name of God are we going to persuade local authorities to hand over water to this organisation?’. ” Just for emphasis: “‘how in the name of God are we going to persuade local authorities to hand over water to this organisation” This is a government minister, ‘persuading’ organizations that are publicly funded, and that have committed to flexibility, more flexibility, and even more flexibility, consequent to Benchmarking 1, Benchmarking 2, Croke Park, Haddington Road etc etc etc, having to be bribed to cooperate with the State. Bribed beyond the very secure conditions and pensions that they already enjoy, particularly at the upper echelons. Thankfully John Fitzgerald has pointed to the lump on the Ogre’s nose, nose. Regrettably, he might as well be talking to himself. €2 billion is to be thrown away on a retirement home for Local Authority executives and staff, while public services are being destroyed. The Irish ‘Public Sector’ recommenced in 2012 exactly where they left off in 2007; fully recovered after a brief interval following their ordeal in bankrupting the country. They start again. My only hope is that, next time, the public purse collapses sufficiently, that these people will be routed out, without pensions. They deserve nothing less. @ Joseph Ryan I am not in any way questioning the need for committees of parliament to have an investigative role. What I was drawing attention to is the mistaken assumption in the Examiner editorial that we need a change to the Constitution to bring about a change in the overall situation of a blatant lack of control and accountability. We don’t! I am hopeful that this will come about not because politicians desire it but that they will see that the electorate is insisting that it happen.The public purse has collapsed. @DOCM There is a good business case for star gazing tourists. There is the problem of cloud cover in Ireland that would make it very difficult to justify a multi million dollar observatory. The giant expensive observatories are built on high mountains such as Northern Chile or in places far from towns where there are weeks of clear skies, snow covered ground and temperatures below -20C. We meet the low concentration of dust particles in the air but the clouds which bring the cleansing rain are a killer. There are usually 2 or 3 weeks of frosty clear skies in Kerry during Feb./Mar. that come close to being ideal. A few hundred thousand could be invested in Carrauntoohil or Cnoc Na Peiste to fill Killarney hotel rooms in the low season. Met Eireann could improve the reliability by providing custom star gazing forecasts for the MacGillicuddy’s reeks. A recent property transaction in Kerry gives some indication of our moribund property market. I am shocked I did not think things were this bad. 2007 sold to a property developer complete with planning permission within the town boundary sold at E162,000 an acre. 2014 bought back at auction for E14,300 an acre. A 1/4 of it was developed the unbuilt part was bought back. In a a related but independent transaction one vacant house was bought for the going 50% off peak price. Housing is down roughly 50% or as they say housing is half price now. Shops are boarded up and on top of that there is vacant new housing still overhanging the market so land has reverted to its agricultural value and even that has gone down. The developer was what is known in Kerry as a daycent man, the fourth generation in a family retail business. I do not know but would suspect that the bank roped in the established business as collateral. I hope he came out of it not too badly damaged. Comments are closed.