Weidmann, Munchau and Target2

Here are some comments on the reported letter of the Bundesbank president to Mario Draghi.  The blog software is objecting to posts longer than a couple of paragraphs, so for now I’ll just post links to files hosted on my own website.

Update: Here is a short piece on Target2 balances written by two Bundesbank staff that I’m guessing are not too thrilled with Mr. Weidmann’s intervention.

RTE: Nation to Be Spared From Promissory Note Deal

RTE’s Nine O’Clock news are reporting Enda Kenny as explaining that promissory note negotiations are totally separate from the question of will the Irish people vote for the Fiscal Compact Treaty and that the Irish people will not bribed to vote for the Treaty.

RTE also noted that the latest Council meeting was “dominated by jobs and growth” which sounds like great news. And, best of all, reporter Tony Connelly helpfully explained that it was now felt that asking for a better deal on promissory notes was actually a bad idea because it would send a bad signal to financial markets that we were not able to cope with our debt burden and that there was no way this issue would be dealt with any time before the summer.

Ok, so be it. But I suspect that “the Irish people won’t be bribed” may prove to be the worst referendum slogan in history.

2012 TINA Award Winner: Laura Noonan

One of the most depressing aspects of the Irish banking crisis has been the consistent insistence of most of our financial journalists that any action that ran counter to government policy would result in disaster. There was simply no alternative.

I remember countless reports that nationalising any more banks after Anglo would result in torrents of frogs and locusts in the streets of Ireland. Today we have many economic problems but I doubt if the nationalised status of AIB and ILP would make the top ten.

I remember, time and again, journalistic reports that you couldn’t nationalise a bank because the ECB couldn’t lend to such a bank because of the monetary financing clause. Only this was blatantly false.

Even more common was the insistence that if any senior bank bond was defaulted on, the Irish people would be reduced begging in streets for scraps for a millennium. Of course, Brian Lenihan ended his period as Minister for Finance looking to get haircuts applied to senior bank bonds and Michael Noonan spent most of 2011 arguing that this was the right thing to do.

It’s early days yet, but the status of runaway favourite for the 2012 “TINA Award” must go to the Irish Independent’s Laura Noonan for her appearance on last night’s Vincent Browne show. Despite Michael Noonan’s consistent statement of his hope that the promissory note could be renegotiated, Laura insisted that There Simply Was No Alternative to making the €3.1 billion on March 31.

Among the reasons why we “Had to Make this Payment” were:

  • Eurostat have insisted on it (yes, Eurostat, who knew they were the real powers behind the throne, huh?)
  • Failing to make the €3.1 billion payment would, via some mysterious process, trigger the need to pay the full €28 billion that was outstanding on the notes.
  • Failing to make the €3.1 billion payment would also trigger the need to pay all of Anglo’s outstanding bonds.
  • And all of AIB’s guaranteed bonds.
  • And all of Bank of Ireland’s guaranteed bonds.
  • I think the frogs and locusts appeared again at some point.

Anyway, exciting stuff. All complete nonsense of course. There is nothing preventing the note being restructured in any number of ways, provided the ECB Governing Council are willing to go along with it. And none of Laura’s appalling vistas are remotely relevant.

I guess the more interesting question is whether Laura is passing along what she’s been told by DoF spinners or whether she came up with this exciting stuff all on her own.

Those interested in checking out this Olympic-level TINA performance can check it out here (in particular, after 26 minutes in.)

Update: Laura has written to me to say the following: “A few points of fact: I never said that the Government could not restructure the pro note, in fact I said repeatedly that efforts were under way to restructure the pro note, and that they were progressing well. I said that the pro note repayment for this March would have to be made, with the benefit of more airtime I’d have qualified that it will have to be made unless the pro note is restructured before then. I did not say that there was no alternative to make the pro note payment every year to maturity – the whole point of the restructuring is that the pro note payment schedule would be changed.”

So I’m happy to say that Laura was only saying that the March 31 payment had to be made and that failure to do so would trigger these consequences. I have edited the post to remove any implication that Laura said  the note couldn’t be renegotiated at some point in the future.

Department of Finance Presentations: January 2012

Following on from the NTMA’s slidefest from a few days ago, here’s an interesting set of presentations that have just been released (apparently without a press release explaining who they were originally presented to but I think you can guess). There are presentations on Mortgage Arrears, SME Lending, Deleveraging, Funding, and a Banking Report Card. Enjoy.

Briefing Paper for Oireachtas Finance Committee

I’m appearing at the Oireachtas Finance Committee this afternoon, along with Brian Lucey and Stephen Kinsella, to discuss ELA and promissory notes. Here‘s a copy of a briefing paper I have provided to the committee and here are my opening remarks.

I’m told that the meeting can be watched live online at this link by choosing Committee 4 and also on UPC channel 801.