Author: Seamus Coffey

The short statement from from the European Council summit held last night/this morning can be read here.  Some of the points of note:

1. “When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly.”
2. “The Eurogroup will examine the situation of the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme.”
3. “We urge the rapid conclusion of the Memorandum of Understanding attached to the financial support to Spain for recapitalisation of its banking sector. We reaffirm that the financial assistance will be provided by the EFSF until the ESM becomes available, and that it will then be transferred to the ESM, without gaining seniority status.”

UPDATE: I have provided some initial reaction to the summit here.

A new IMF Working Paper by Luc Laeven and Fabián Valencia can be read here.  The authors look at the costliest banking crises in terms of fiscal costs, public debt and output losses.  The paragraph beginning on the bottom of page 19 is noteworthy.

Iceland and Ireland also feature among the ten costliest banking crises in terms of overall increase in public debt, with public debt in both cases increasing by more than 70 percent of GDP within four years. In terms of output losses, the ongoing crises in Ireland and Latvia are among the ten costliest banking crises since the 1970s, with output losses exceeding 100 percent in both cases. Ireland holds the undesirable position of being the only country currently undergoing a banking crisis that features among the top-ten of costliest banking crises along all three dimensions, making it the costliest banking crisis in advanced economies since at least the Great Depression. And the crisis in Ireland is still ongoing.

The report by the President of the European Council, Herman van Rompuy, can be read here.

The IMF’s Sixth Review of the Extended Arrangement with Ireland can be read here.

The official result of the referendum has now been announced.