Has Honohan gone native?

hinault

I know the Dailytorygraph will always do it's best to take down Ireland but
Patrick Honohan's interview in the DT smacks of desperation.



Spreads on Irish 10-year bonds reached 297 basis points over German Bunds on Wednesday amid reports the European Central Bank (ECB) is intervening to shore up Irish debt, a reversal of the bank’s plans to withdraw emergency support.

Asked to comment on the fact that Irish bond spreads were 297 basis points above the German bund, Patrick Honohan Irish Central Bank Govenor said "
“The spreads are a setback for our hopes of a narrowing to reflect the fiscal credibility of the country. I don’t look at them every day but at this level they are ridiculous,” he told The Daily Telegraph, speaking at his office in the heart of Dublin.
He said critics are failing to recognise the dynamism of Irish exports as the country quickly returns to a current account surplus, or the revolution in public accounts as tax reform kicks in.


I would have thought that given the poor bank results this week (AIB, BOI and Anglo) that it makes perfect sense for the irish bond spreads to increase given the dire state of the results as being a reflection of a contracting economy and a growing unemployment problem (13.7%).
But Honohan claims the difference in the spreads is "ridiculous"

Given the worsening debt situation at Anglo, the failure to tackle rising unemployment, diminishing tax revenues, austerity budgets pending, and the real prospect of an international double dip recession, is Honohan's comments a signal that he's putting on the Irish jersey instead of being in rational about the situation?

Full interview is here

http://www.telegraph.co.uk/finance/economics/7940078/Irish-debt-under-fire-on-fresh-bank-jitters.html

Sergeant

The Telegraph are reporting the facts of the matter. We are becoming friendless in the bond market. It isn't a group of hacks with photos of Maggie T on their desks writing a story to bring Paddy to his knees.

We are close to a classic case of debt deflation, and the lack of noise on this matter from the media is outrageous. It was reported on CNBC yesterday afternoon that the ECB was buying 10 year Irish bonds. Not as much as a line on the RTE news.

Expect a government lackie to mumble some rubbish about Lehmans, global recession etc.

hinault

Sergeant wrote: »

The Telegraph are reporting the facts of the matter. We are becoming friendless in the bond market. It isn't a group of hacks with photos of Maggie T on their desks writing a story to bring Paddy to his knees.

We are close to a classic case of debt deflation, and the lack of noise on this matter from the media is outrageous. It was reported on CNBC yesterday afternoon that the ECB was buying 10 year Irish bonds. Not as much as a line on the RTE news.

Expect a government lackie to mumble some rubbish about Lehmans, global recession etc.

Agreed.
The facts are that the hard evidence shows that the bond markets are right to treat Ireland as they are doing.

So surely Honohan should be shouting from the roof tops that it is wrong to be transferring billions in to the bottomless pit called Anglo, for example?
he should be shouting at the govt to consider perhaps using those billions instead to regenerate this economy, instead of trying to resuscitate a dead bank?

Instead, he's bemoaning the fact that Irish bond spreads are much higher than German spreads.

oppenheimer1

Did you expect anything else from him. Even if privately he was expressing concern hes not going to tell that to the Telegraph. What would happen if Irelands chief banker said in fact he thought Irish bonds were underpriced? Its not going native, but in a position of responsibility he has the duty to not make a bad situation worse.

hinault

oppenheimer1 wrote: »

Did you expect anything else from him. Even if privately he was expressing concern hes not going to tell that to the Telegraph. What would happen if Irelands chief banker said in fact he thought Irish bonds were underpriced? Its not going native, but in a position of responsibility he has the duty to not make a bad situation worse.

Two issues.
Honohan is complaining that the interest/spread on the bond is too high.
Meaning that when Ireland have to repay those bonds, we will be paying higher rate of interest than Germany would have to repay on their bonds.

I would argue that instead of bemoaning the high rate of interest that we have to repay, Honohan should be instead bemoaning the situation that causes lenders to charge us a higher premium and he should be telling our govt not to be pouring billions in to Anglo, billions which will never be repaid to the State by Anglo I might add and which adds to the perception that this economy is a basketcase.

The responsible thing would be for an independent Central Bank govenor to stand up, preferably in public, and tell this goverment that they're wrong.
That's what a responsible CB govenor would do.

John Hurley and Pat Neary mouthed the govt line.
Honohan has to be forceful and tell it as it is, in my opinion.

Scarab80

Sergeant wrote: »

We are close to a classic case of debt deflation, and the lack of noise on this matter from the media is outrageous. It was reported on CNBC yesterday afternoon that the ECB was buying 10 year Irish bonds. Not as much as a line on the RTE news.

That would be because that is not news, remember the 750bn european rescue package announced back in May / June? It involves purchases of corporate and soverign bonds by the ECB on the secondary markets and has been ongoing since it's announcement at varying levels of activity.

oppenheimer1

hinault wrote: »

Two issues.
Honohan is complaining that the interest/spread on the bond is too high.
Meaning that when Ireland have to repay those bonds, we will be paying higher rate of interest than Germany would have to repay on their bonds.

I would argue that instead of bemoaning the high rate of interest that we have to repay, Honohan should be instead bemoaning the situation that causes lenders to charge us a higher premium and he should be telling our govt not to be pouring billions in to Anglo, billions which will never be repaid to the State by Anglo I might add and which adds to the perception that this economy is a basketcase.

The responsible thing would be for an independent Central Bank govenor to stand up, preferably in public, and tell this goverment that they're wrong.
That's what a responsible CB govenor would do.

John Hurley and Pat Neary mouthed the govt line.
Honohan has to be forceful and tell it as it is, in my opinion.

But doing that in public, and were the government to go against his advice would cause a crisis. The market knows that in an interview like this, this is mere optics.

hinault

oppenheimer1 wrote: »

But doing that in public, and were the government to go against his advice would cause a crisis. The market knows that in an interview like this, this is mere optics.

That's a fair point, Oppenheimer.