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.

“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!”

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.

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.

@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).

@ 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?

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.

@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.

@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?).

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).

“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

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.

@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.

@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?

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.

errrm, I forgot:

http://www.spiegel.de/wirtschaft/merkel-und-steinbrueck-im-wortlaut-die-spareinlagen-sind-sicher-a-582305.html

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.

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.

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. “

@ 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.”

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
.

@Dorothy Jones

+1

It’s selbstverständlich.
“Speak Fahkin English” doesn’t work as well as it used to.
Ochón agus ochón ó.

“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.

@ 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.

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?

@ 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.

@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.

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.

@ 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.

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!!!

@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.

@ 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.

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

@ 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.

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

@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

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.

@ 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.

@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.

@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.

@ 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
glacial speed doesn’t mean what it used to.
The Aletsch lost 20% of its volume over the last 100 years

@ 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.

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.