The FT has a very forthright editorial here.
Category: Banking Crisis
I understand the (party) political reasons which are prompting the government to seek a bailout that will be labelled a bailout for our banks, rather than for the State.
But I have a question. Which do people think the man on the Irish equivalent of the Clapham omnibus (the 46A?) is more likely to accept: An IMF-approved austerity programme whose stated aim is to help the State pay back the largely foreign creditors of Irish banks? Or an IMF-approved austerity programme whose stated aim is to make sure that the State is in a position to keep our schools, health care system and social welfare programmes running?
The government has pushed the line in recent days that the flair up in the crisis is all about the banks. There is little doubt that the trigger was ECB concern about their large and rising exposure to the Irish banking system. But the idea that the banks are the problem and the state is fine – happily pre-funded as it is through the middle of next year – is nonsense. As it stands, the Irish state is not creditworthy. All else equal, it will become even less creditworthy as it burns through its valuable cash buffer. The vanishing credibility of the ELG guarantee along with the creditworthiness of the state is the major cause of the banks’ increasing reliance on the ECB. The intensified banking crisis is a (very significant) symptom of a deeper problem.
Of course, hopes are pinned that we can demonstrate political capacity to stabilise the debt to GDP ratio through a credible four-year plan and budget. This will be a massive challenge. Funding support on good terms – part of which could be used to “overcapitalise” the two main banks – would be a significant advantage in regaining market access; indeed, probably indispensible. The last thing we need is another incorrect diagnosis of the problem.
Trevor Butterworth at Forbes has the solution
The Guardian has various live blogs: Twitter-like updates of the news as it develops. It has devoted one to Ireland’s debt crisis. It has all the latest about who is talking to our dear leaders and about what.
The Guardian also started a new blog on Ireland. Brian Lucey and Stephen Kinsella will contribute regularly. Here’s Lucey’s first.