McCarthy: Time for a whole new strategy on negotiations

As chairman of the Limerick Branch of the McCarthy fan club, I hereby point you towards yesterday’s Sindo column where The Colm describes a new strategy for negotiating with our overlords cousins in the EU.

From the column:

The reported ECB attitude on Irish debt relief should come as no surprise to anyone. Taking one for the team will not go unpunished in the new European order.

Here’s an alternative negotiating strategy. The key premise is that debt relief cannot be confined to Greece, a centerpiece of the most recent deal in Brussels. This is, of course, a matter of judgement, but it is the judgement of the bond market, the one that matters in the end. The debt relief currently contemplated for Greece is inadequate, so there will be more. Debt relief will be required also for Portugal. If Ireland is to repay its core sovereign debt, there needs to be a deal on sharing the bank-rescue costs. Otherwise, Ireland will either join Greece and Portugal in sovereign default or will be reliant on official lenders indefinitely.

It follows that the number of European sovereign defaults can, with luck, be confined to two, but only with a deal on sharing some of the Irish bank-rescue costs with those who insisted that they be incurred.

Three questions immediately present themselves:

  1. Is this strategy realistic? Assuming it is, then:
  2. Assuming we adopt the strategy, how will our EU cousins react?
  3. Will the outcome in terms of debt sustainability be better or worse under the new strategy if it is successfully carried out?