Cowen on Ireland Defaulting

An Taoiseach has said the following in relation to Morgan Kelly’s article:

“Really implicit in some of the argumentation is the idea that it would be better for Ireland to default. But we simply don’t accept that at all and I think all of the implications from other countries where that happens greatly undermines, not just in terms of financial credibility but also the ability to retain confidence at home,” he added.

Let’s compare this with the following passage from Morgan’s article:

We need to explain that the Irish State has always honoured its debts in the past, and will continue to do so. However, the State is a distinct entity from its banks and, having learned the extent of the banks’ recklessness, we now have no choice but to allow the bank guarantee to lapse and to share the banks’ losses with their bondholders. It must be remembered that when these bonds were issued they had no government guarantee, and the institutions that bought them did so in full knowledge that they could default, and charged an appropriate rate of interest to compensate themselves for this risk.

So here’s a question. When Mr. Cowen says “Ireland”, does he mean “Irish banks”? If so, it would be nice if he was clearer about this matter in the future.

Bank Debt Versus Sovereign Debt

Last night’s The Week in Politics on RTE featured an important discussion between the Minister for Finance, Brian Lenihan, and Fine Gael finance spokesman, Richard Bruton (The discussion is in the first clip on the webpage after Brian Dowling’s report).  They discussed a number of issues such as NAMA and Anglo Irish Bank.  However, to my mind, the most important discussion related to bank bond holders.