EU offer lower debt interest rates

recedite

EU offering lower interest rates if we change the Constitution. Sounds like a good deal to me. Referendum, anyone?
If only we had a functioning government, we could respond to the offer.

http://www.irishtimes.com/newspaper/frontpage/2011/0126/1224288327446.html

GERMANY IS prepared to back lower-interest loans to Ireland and other peripheral euro zone countries if they agree to anchor a new “fiscal framework” in their constitutions.... declined to specify what “framework” he had in mind, but officials pointed to Berlin’s 2009 “debt brake” as a guideline. This constitutional provision limits new federal borrowing to 0.35 per cent of gross domestic product from 2016. Berlin officials say they are open to how Ireland and others go about their task, once they achieve the end goal of long-term fiscal responsibility.

Dannyboy83

On newstalk today, they were inferring that this framework involves tax harmonisation

i.e.

We'll give you lower interest rates if you give up your CTR advantage

oppenheimer1

They cannot buy our laws. Its incomprehensible that a friendly nation would seek to amend the constitution - a document that defines Ireland and protects its people.

Atlantic Dawn

Signing up to any of these preconditions would be economic suicide for this country in a worse way to the original interest terms that Lenihan signed the country over for.

ardmacha

This kind of thing is largely nonsense. Ireland wasn't borrowing excessively pre 2008 and even ran the odd surplus. This was based on a false understanding of the actual state of the country, so that we should have had a substantial surplus then. The reason we are now borrowing so much is partly because of excessive expenditure and low taxes built up at the time, but also because the economy tanked when the banks failed owing to lack of monetary regulation.

We need proper monetary policy and regulation, otherwise you cannot tell if your borrowing is appropriate or not.

Scofflaw

oppenheimer1 wrote: »

They cannot buy our laws. Its incomprehensible that a friendly nation would seek to amend the constitution - a document that defines Ireland and protects its people.

It's not at all incomprehensible. We're in a currency union with Germany, which means that Ireland's fiscal policy has an effect on Germany - and, more importantly, that the fiscal policies of the other eurozone countries likewise have a bearing on Germany.

Since Germany is the economy asked to bear the load when the others run into trouble, they'd like us to agree to limit the amount of trouble our governments can get into. We don't have to do it, but then Germany will not agree to easier terms for countries that do get into trouble, and who then stand in need of the EFSF or its successor - or those, like us, who are already reliant on it.

Surely the only question is whether an agreed limit on government debt is worth inserting into the Constitution - not who proposed it. I accept our government wouldn't propose it off its own bat in a million years, but I don't see how that makes it automatically a bad thing.

An Irish government will only put this to referendum if it accepts that it's something that should be put before the people. The people, in turn, only accept it if it seems like a good thing (unlikely to bring in abortion, for example).

On newstalk today, they were inferring that this framework involves tax harmonisation

i.e.

We'll give you lower interest rates if you give up your CTR advantage

I suspect that may say more about our national obsession with CTR than anything anyone else has actually suggested.

cordially,
Scofflaw

Scofflaw

Atlantic Dawn wrote: »

Signing up to any of these preconditions would be economic suicide for this country in a worse way to the original interest terms that Lenihan signed the country over for.

How exactly would an agreed limit to deficit spending be 'economic suicide'?

This kind of thing is largely nonsense. Ireland wasn't borrowing excessively pre 2008 and even ran the odd surplus. This was based on a false understanding of the actual state of the country, so that we should have had a substantial surplus then. The reason we are now borrowing so much is partly because of excessive expenditure and low taxes built up at the time, but also because the economy tanked when the banks failed owing to lack of monetary regulation.

We need proper monetary policy and regulation, otherwise you cannot tell if your borrowing is appropriate or not.

True. It's worth pointing out, though, that this isn't largely about us - it's about us from our point of view, certainly, but not really from Germany's point of view. The EFSF and its proposed/planned successor isn't a specific bailout vehicle for Ireland, but a eurozone bailout fund. The Germans are unwilling to get involved in paying for everybody else's deficits unless those deficits are within prescribed bounds.

cordially,
Scofflaw

oppenheimer1

Scofflaw wrote: »

It's not at all incomprehensible. We're in a currency union with Germany, which means that Ireland's fiscal policy has an effect on Germany - and, more importantly, that the fiscal policies of the other eurozone countries likewise have a bearing on Germany.

Since Germany is the economy asked to bear the load when the others run into trouble, they'd like us to agree to limit the amount of trouble our governments can get into. We don't have to do it, but then Germany will not agree to easier terms for countries that do get into trouble, and who then stand in need of the EFSF or its successor - or those, like us, who are already reliant on it.

Surely the only question is whether an agreed limit on government debt is worth inserting into the Constitution - not who proposed it. I accept our government wouldn't propose it off its own bat in a million years, but I don't see how that makes it automatically a bad thing.

An Irish government will only put this to referendum if it accepts that it's something that should be put before the people. The people, in turn, only accept it if it seems like a good thing (unlikely to bring in abortion, for example).



I suspect that may say more about our national obsession with CTR than anything anyone else has actually suggested.

cordially,
Scofflaw

Incomprehensible perhaps was a bad word. This is however our constitution we are talking about here. The Irish constitution is for the Irish people not for the Germans or any other external organisation to be meddling in. The idea of another nation limiting the borrowing of another strikes at the heart of fiscal sovereignty, the idea of a group of common independent countries under the euro umbrella. Germany cannot have it both ways, on the one hand it cannot expect low interest rates to boost its economy and then not expect credit bubbles to form. There policy of the ECB was very lobsided in the mid naughties and it has come home to roost for them.

Personally I'm against these hard rules being inserted into the constitution, thats not what the document is for. In times of emergency there wouldn't be time to hold a referendum if the limits needed to be changed.

Ultimately this is about some sort of unified tax system with some form of federal taxation to give more substance to the euro project. Up until the last 6 months I would have considered myself to be pro european, now I'm certainly questioning my views. I'd find it very difficult to vote for further european integration considering the views espoused by our German, French and Austrian "friends" over the past few months.

I wouldn't suggest we leave the euro or the union though to rid ourselves of this interference as it has been written into the bilateral loan agreements that leaving the union would constitute a default.

zig

genuine question because im a bit lost, what has this to do with our CT rate? In that article there is no mention of CT rate, only talk of stopping countries from running up large debt? Am I reading that right?

As scofflaw said, if newstalk were talking about CT rate maybe it says alot about how we have been obsessing over it?

Having read the article, this whole thing looks more like the result of local bickering politics in Germany, and the heart of it seems to come from FDP not wanting to increase the capacity of the EFSF.

Also Id be interested to know what Rehn is referring to here...

Acknowledging Berlin’s call for a new “fiscal framework”, Mr Rehn told the FDP he favoured an “effective sanctions regime to make sure economic governance is reinforced”.

I am glad that there must be a referendum if our constitution is to be changed, because i dont think its healthy having something like this put in black and white, and I really believe talk like this is doing more damage than good to the EU overall as people grow more and more sceptical, and more concerned about sovereignty.

Like oppenheimer1, I have always been pro EU, especially the Lisbon treaty, mainly because the EU has done a great job at addressing ethical issues and implementing liberal views, but as every month passes on, Im also questioning my views. We may be all in the Eurozone, and a result are very tightly stuck together but I would be disappointed to see us begin to genuinely lose our financial sovereignty.

Scofflaw

zig wrote: »

genuine question because im a bit lost, what has this to do with our CT rate? In that article there is no mention of CT rate, only talk of stopping countries from running up large debt? Am I reading that right?

As scofflaw said, if newstalk were talking about CT rate maybe it says alot about how we have been obsessing over it?

It has no connection at all, as far as I can see.

zig wrote: »

Having read the article, this whole thing looks more like the result of local bickering politics in Germany, and the heart of it seems to come from FDP not wanting to increase the capacity of the EFSF.

Also Id be interested to know what Rehn is referring to here...


I am glad that there must be a referendum if our constitution is to be changed, because i dont think its healthy having something like this put in black and white, and I really believe talk like this is doing more damage than good to the EU overall as people grow more and more sceptical, and more concerned about sovereignty.

Like oppenheimer1, I have always been pro EU, especially the Lisbon treaty, mainly because the EU has done a great job at addressing ethical issues and implementing liberal views, but as every month passes on, Im also questioning my views. We may be all in the Eurozone, and a result are very tightly stuck together but I would be disappointed to see us begin to genuinely lose our financial sovereignty.

A constitutional limitation on something isn't a loss of sovereignty, though - it's a restriction placed on the government by the people, who are sovereign. The origin of the suggestion is immaterial.

Whether we choose to do it or not should depend only on whether we think such a limit on government debt acquisition is a good thing in itself. If it isn't, then it's obviously necessary to reject it. A lot, for me, would depend on the wording of the amendment - it would need properly thought out exemptions as well as a broad enough definition of public debt to prevent, for example, future blanket guarantees of the banks.

cordially,
Scofflaw

Nody

Scofflaw wrote: »

Whether we choose to do it or not should depend only on whether we think such a limit on government debt acquisition is a good thing in itself. If it isn't, then it's obviously necessary to reject it. A lot, for me, would depend on the wording of the amendment - it would need properly thought out exemptions as well as a broad enough definition of public debt to prevent, for example, future blanket guarantees of the banks.

cordially,
Scofflaw

Keep it simple, a 2/3 or 3/4 approval to exceed the limit by up to 5% units or similar should do it. The big problem is going to be in the definition though as seen in the creative accounting done in Greece to lower the book listed debt etc.

Whiskeyjack

Scofflaw wrote: »

A constitutional limitation on something isn't a loss of sovereignty, though - it's a restriction placed on the government by the people, who are sovereign. The origin of the suggestion is immaterial.

If this goes to a referendum I don't see it happening. Joe public will see it as Hanz telling us to change our constitution, and because we'd rather blame Europe than blame ourselves for the mess we're in we'll tell them where they can stick it.

Scofflaw

Whiskeyjack wrote: »

If this goes to a referendum I don't see it happening. Joe public will see it as Hanz telling us to change our constitution, and because we'd rather blame Europe than blame ourselves for the mess we're in we'll tell them where they can stick it.

I suspect so. Still, one can hope, although not very much.

cordially,
Scofflaw

ei.sdraob

I am sorry but if EU can offer lower rate then why the hell not just give us the loan at lower rate, all this does is confirm that we are being shafted by our so called "friends".
so much for ****ing solidarity :rolleyes:


as for restraining the government from overspending then that should be included in our constitution, we had a discussion on this before
but this has to be done without EU involvement on our own! by them approaching the manner in the way they did, will ensure such a referendum is dead in water before it starts.

having the EU push in the manner they are doing will only push people to vote against what otherwise is a good policy for a state to have, and how the hell does taxation and CCTB come into all of this??

grrr stupid politicians

zig

It probably would never be put to a referendum because it would mean politicians having to make harsher budgets, very quickly in a few years,so if anything goes wrong there is enormous pressure on them, and hence they lose votes.

That said in theory it is a good idea, it would keep good control on spending and the past few years will not have been in vain, i.e. experience gained for the future of the country and our children, but it needs to be done independent of the Germans trying to cut deals with us and decide any rate themselves. We really should be putting something like this in place for ourselves, completely on our terms, and for our own benefit,after all it is our constitution , not theirs to be playing with.

I can 100% see why the Germans would want to implement this, but every time we ammend our constitution for the benefit of the whole of the EU(including ourselves) we are losing touch with our own sovereignty. Its not this idea alone thats offputting, its the principle of it, when does it stop? In 5 more years will there be some other small change? And then 5 more years after that another change again? Will it just keep happening until our contsitition is rendered useless and we become simply a provence of Europe? Some might say that would actually be a good thing, maybe im old fashioned but I dont think it is.

ei.sdraob

zig wrote: »

I can 100% see why the Germans would want to implement this

Dont they already have a restraining clause in theirs already?

I am just pissed of about the manner in which this manner is being approached

Scofflaw

ei.sdraob wrote: »

I am sorry but if EU can offer lower rate then why the hell not just give us the loan at lower rate, all this does is confirm that we are being shafted by our so called "friends".
so much for ****ing solidarity :rolleyes:

No, it illustrates that the Germans won't stand for recklessly lending to the feckless. Of course the EFSF and EFSM can charge a different rate, but they're only willing to do so on the basis of a different set of assurances from the borrowers.

ei.sdraob wrote: »

as for restraining the government from overspending then that should be included in our constitution, we had a discussion on this before
but this has to be done without EU involvement on our own! by them approaching the manner in the way they did, will ensure such a referendum is dead in water before it starts.

having the EU push in the manner they are doing will only push people to vote against what otherwise is a good policy for a state to have, and how the hell does taxation and CCTB come into all of this??

grrr stupid politicians

Stupid media, as far as the taxation and CCCTB elements are concerned.

It's true that just because this is suggested by the Germans, at a time when the Irish media is keen to blame the Germans for all our problems, means that it's probably dead before it starts - but the thing is that the Germans aren't the root of our problems.

Dont they already have a restraining clause in theirs already?

They do.

I am just pissed of about the manner in which this manner is being approached

By whom, exactly, and why are you pissed off about it? We're looking for a renegotiation of the interest rate, the Germans will only do it if there are additional assurances that the other eurozone countries won't spend money like drunken sailors, or get themselves into situations where massive debts are taken on board by the state. If the Germans hadn't suggested it, it would never ever come anywhere near being put to referendum by an Irish government. What's pissing you off about it?

cordially,
Scofflaw

conorhal

Scofflaw wrote: »

It's not at all incomprehensible. We're in a currency union with Germany, which means that Ireland's fiscal policy has an effect on Germany - and, more importantly, that the fiscal policies of the other eurozone countries likewise have a bearing on Germany.

Since Germany is the economy asked to bear the load when the others run into trouble, they'd like us to agree to limit the amount of trouble our governments can get into. We don't have to do it, but then Germany will not agree to easier terms for countries that do get into trouble, and who then stand in need of the EFSF or its successor - or those, like us, who are already reliant on it.

Surely the only question is whether an agreed limit on government debt is worth inserting into the Constitution - not who proposed it. I accept our government wouldn't propose it off its own bat in a million years, but I don't see how that makes it automatically a bad thing.

An Irish government will only put this to referendum if it accepts that it's something that should be put before the people. The people, in turn, only accept it if it seems like a good thing (unlikely to bring in abortion, for example).



I suspect that may say more about our national obsession with CTR than anything anyone else has actually suggested.

cordially,
Scofflaw

While it is true that Ireland's fiscal policy has an effect on Germany, Germany has a far greater fiscal effect on Ireland, and Spain and Portugal ect... yet that was not a consideration when Germany was managing the Euro as though it were the Dutchemark, mantaining an artifically low intrest rate in the intrests of German industry, thus overheating many European economies with a glut of cheap money that was lent as irresponsibly as it was borrowed from German banks.
This smacks of the Germans wanting the have their cake an eat it.

recedite

We all know that governments are tempted to spend the taxpayers money in order to maintain popularity, especially coming up to an election. When the policy leads to long-term disaster, they still do it. When the money runs out, they borrow more. In the last decade the problem became worse. Michail Martin has just said "sorry" during his inauguration speech(like he won't do it again if he gets the chance).

The Germans sought to protect themselves by inserting the debt brake into their own constitution in 2009. They copied the idea from the Swiss Cantons which had it earlier.
http://blog-pfm.imf.org/pfmblog/2009/02/debt-brake-for-germanytoo-strict.html

The Germans have dropped a few hints since then, that others countries could consider similar protection. From last May;
http://www.businessworld.ie/livenews.htm?a=2604089;s=rollingnews.htm

Here in Ireland we have three big problems with the Germans;

1. Any money they lent us which we have already spent was too cheap and easy to get.

2. Any money they are lending us which we haven't spent yet is too expensive and hard to get.

3. The smug b'stards keep getting things right while we f***k things up.
Then we can't even copy them, because that would give them an even bigger head, so we are trapped in a cycle of self destruction because of them. :mad:

zig

ei.sdraob wrote: »

Dont they already have a restraining clause in theirs already?

I am just pissed of about the manner in which this manner is being approached

agreed, in theory its ok, but I think its something that should be implemented by us and only us

Tipp Man

Maybe i don't know the full ins and outs of this but damn this seems like a good idea on it's own merit - even regardless of the loan interest etc. This is the kind of idea that the next government should have been advocating.

It would go a long way towards removing populist spending by governments, they are less likely to buy elections and at the end of the day a government spends something close to what it can afford to spend

ei.sdraob

zig wrote: »

agreed, in theory its ok, but I think its something that should be implemented by us and only us

Yes

Scofflaw asked what pissed me of about it

1. the media spinning it
2. the EU using lower interest rate as a carrot (and of course the question of why it cant be lower in first place, we are saving their economies too), which is a very clumsy political move which will backfire

In any future referendum with regards to EU this whole affair would be brought up time and time again.

Scofflaw

ei.sdraob wrote: »

Yes

Scofflaw asked what pissed me of about it

1. the media spinning it
2. the EU using lower interest rate as a carrot (and of course the question of why it cant be lower in first place, we are saving their economies too), which is a very clumsy political move which will backfire

In any future referendum with regards to EU this whole affair would be brought up time and time again.

The interest rate isn't being used "as a carrot" - the Germans have outlined the price for their agreeing to lower rates, which is that the other eurozone countries agree to a meaningful (ie constitutional) barrier to high deficits.

And we're not "saving their economies" - on the contrary, we're putting them in jeopardy.

While it is true that Ireland's fiscal policy has an effect on Germany, Germany has a far greater fiscal effect on Ireland, and Spain and Portugal ect... yet that was not a consideration when Germany was managing the Euro as though it were the Dutchemark, mantaining an artifically low intrest rate in the intrests of German industry, thus overheating many European economies with a glut of cheap money that was lent as irresponsibly as it was borrowed from German banks.
This smacks of the Germans wanting the have their cake an eat it.

Not even slightly. They would like us (and the other countries that may avail of bailout funds) to agree a limit to our fiscal irresponsibility before they're prepared to shoulder any more of our debt. And this is the German government, not the German banks - who lent far less than is usually claimed (€30 bn, not €130bn), and lent it to banks the ratings agencies gave high credit ratings to.

There is no such thing as "an artificially low interest rate" - there is a rate that is too low for Ireland, because it is set according to the conditions in the largest eurozone economies. The job of the ECB is to maintain price stability in the eurozone, and Ireland's economy is far too small for it to be the rate-setter. The job of the Irish government is to compensate for any ill effects that might have in Ireland, rather than - as they actually did - exacerbating it through every policy instrument at their disposal in order to buy elections.

It smacks of the Germans being careful with their money. Which is why they still have cake.

regards,
Scofflaw

hmmm

I don't understand how there can be people on these forums saying that our crisis was all Europe's fault and they need to bail us out, and then those same people go on to object when Europe asks us to behave like economic adults and consider a debt limiting clause in our Constitution. Which is it lads, are we in control of our own destiny or is Europe?

As for the suggestion it is an excellent idea, and as Germany is bankrolling the bailout to ungrateful Ireland they have every right to ask for something in return. Asking Ireland to do something which is in our own economic interest is hardly unfair either.

zig

hmmm wrote: »

I don't understand how there can be people on these forums saying that our crisis was all Europe's fault and they need to bail us out,

I dont know what your talking about, the people advocating a bailout are the people that acknowledge that it is our fault. Its the people against it that are the people that dont believe its all our fault. Hence the desire for a default instead of a bailout.

So in this case, the people that were giving out about the bailout and its interest rate are the same people giving out the fact that Germany now want to use this interest rate as a bargaining point.

NSNO

On its own merits, a debt restriction clause is a brilliant idea. It limits the debt burden an incompetent government can place on an unwilling people. It protects the Irish people from their government.

The fact that Germany is willing to offer us better terms on the bailout in return for this only sweetens the deal.

later12

I have just two points to make on this issue.

First, I am somewhat astonished that people are more vocal about the fact that the Germans may be proposing this than by they are interested in actual recommendation in itself.
Has it not occured to anyone out there in the ether that this is exactly the sort of thing that we ourselves ought to be proposing for ourselves and for our own long term benefit and to save ourselves from grossly irresponsible governments in the future? Did we really need a German chancellor to fly this kite? If so, I am quite honestly dismayed.

The second point is in relation to how exactly the proposal comes across in that article. I would love to know where the figure of 0.35 came from or how it was mathematically deduced. It doesn't take an MPhil to be aware that a truly limber and effective economic governance does not set out such rigid terms of borrowing ratios.
There simply must be some times where it makes sense to borrow more or less than a certain ratio of GDP depending on periods of fiscal health or infirmity.
On some occasions, for example in periods of sustainable growth a figure as rigid as that which has been mentioned may prove far too limited a sum compared to what a growing economy ought to be borrowing to support and to perpetuate its growth.

In summary, while I am 100% in agreement with the principle behind this framework, I would be very sceptical about establishing such a rigid figure as 0.35% of GDP. To me that smacks of all of the worst sort of impotence and rigidy that has come, quite unfortunately, to characterise the European union and the Eurozone itself over the past decade.

zig

later10 wrote: »

The second point is in relation to how exactly the proposal comes across in that article. I would love to know where the figure of 0.35 came from or how it was mathematically deduced. It doesn't take an MPhil to be aware that a truly limber and effective economic governance does not set out such rigid terms of borrowing ratios.
There simply must be some times where it makes sense to borrow more or less than a certain ratio of GDP depending on periods of fiscal health or infirmity.

That figure wasnt what they were suggesting, it was just using Berlins 'debt brake' as an example, he said there was no framework in mind, and even seem to be open to other suggestions...

Berlin officials say they are open to how Ireland and others go about their task, once they achieve the end goal of long-term fiscal responsibility.German officials say further assistance to euro zone partners from Berlin goes without question.

later12

Yes i know but i'm just saying that i'd love to know how that 0.35 figure was arrived at and that I don't think that any equivalent figure would be appropriate for an entire sovereign economy like Ireland's, whose proportional borrowing needs quite naturally ebb and flow.

Obviously there must be some limit, but I would favour something slightly more flexible and moveable than an equivalent of the German debt brake without, of course, defeating the purpose of the brake entirely. A balance could be drawn somewhere in between.

recedite

later10 wrote: »

I would love to know where the figure of 0.35 came from or how it was mathematically deduced......On some occasions, for example in periods of sustainable growth a figure as rigid as that which has been mentioned may prove far too limited a sum compared to what a growing economy ought to be borrowing to support and to perpetuate its growth.

Fair point, but there has to be a definite line in the sand, otherwise every successive govt would have some "unique set of circumstances" requiring it to borrow more than the guideline figure.
Also bear in mind that "sustainable growth" is very modest growth, and in such an economy there are plenty of individual savers as well as borrowers. External borrowing is not a big consideration. We may not have experience of such an economy here, but the Germans do.

later12

recedite wrote: »

Fair point, but there has to be a definite line in the sand, otherwise every successive govt would have some "unique set of circumstances" requiring it to borrow more than the guideline figure.

I agree entirely, I would just be in favour of a formula that accounts for future economic growth and inflation instead of some blanket figure. I am quite surprised that the Germans have such a figure but admittedly I'm not quite sure how theirs actually works. It would be quite a strange suggestion that a limit of x% of GDP is always appropriate regardless of inward capital flows or growth rates or indeed economic contractions.

Also bear in mind that "sustainable growth" is very modest growth, and in such an economy there are plenty of individual savers as well as borrowers.

The problem with unsustainable growth is not particularly a lack of savers in itself, nor is all growth larger than "very modest" unsustainable in itself either. We have to be practical here, and pragmatic about our prospects, and I personally would shy away from blanket figures.

ardmacha

The job of the Irish government is to compensate for any ill effects that might have in Ireland, rather than - as they actually did - exacerbating it through every policy instrument at their disposal in order to buy elections.

THis is exactly my point, prudence in this case might require a substantial surplus at times and running such a surplus in good times should allow some borrowing in bad times. So a simple figure in the constitution is naive.

Responsibility for preventing overheating and financial stability is also the business of the central bank of the the currency union, a duty where the ECB has failed dismally.

Greece was the only country that cheated outright on borrowing The other peripherals had tax inflows from unsustainable booms, a problem that is not addressed by this type of simplistic proposal.

recedite

You need to move away from this boom/bust thinking. The job of the ECB is to keep average eurozone inflation at or below 2%. It has done that. What FF did to this country is not the fault of ECB.

ardmacha

The job of the ECB is to keep average eurozone inflation at or below 2%.

Doing so while being indifferent to banks busting themselves is irresponsible.

Scofflaw

ardmacha wrote: »

Doing so while being indifferent to banks busting themselves is irresponsible.

Not indifferent - it's the national regulator's job is to oversee the national banks. The ECB feed that information into their macro scale forecasts for the eurozone, but they don't have the power to interfere with national regulation. If the Irish regulator says "everything's fine with the Irish banks, despite the property boom - they're adequately capitalised, and have passed our stress tests", that's what gets fed into the ECB's outlook. You should also bear in mind that the ratings agencies were giving good ratings to banks like Anglo:

Anglo Irish Bank has today (1st September 2006) announced that Fitch Ratings has upgraded the Bank’s long term rating to ‘A+’ from ‘A’. The other ratings are affirmed at Short-term ‘F1’, Individual ‘B’ and Support ‘3’. The Outlook remains Stable.

Announcing the upgrade, the rating agency commented:

“The upgrade reflects consistent growth in the bank’s operating profit and prospects for continued growth for at least the next two to three years, a larger capital base and greater diversification of assets and funding. The Individual rating also reflects very good asset quality, an extremely low cost/income ratio and above-average margins. The bank continues to benefit from the buoyant Irish and stable UK economies, while diversifying into the US through offices in Boston and New York and into Europe. Profitability should continue to improve in 2006 and beyond as the bank expands its core lending business across all its markets. Strong profitability growth should put the bank in a better position to manage successfully any credit-related shocks, although Fitch is not expecting any significant asset quality deterioration in the medium term”

Our banks were undeniably successful at concealing their potential difficulties.

cordially,
Scofflaw

ardmacha

Our banks were undeniably successful at concealing their potential difficulties.

Doubtless. In the context of this thread the high interest rates are partly inspired by a desire to punish Ireland for profligacy and make sure that it wants to return to the markets. However, Ireland did not borrow excessively in the good times and if the Irish authorities did not respond appropriately to the boom this was in part because of ignorance of true conditions, an ignorance which the "experts" at the ECB did little to alleviate at the time, although they preach about it now.

High "punitive" interest rates on a bailout in Irelands case makes no sense, as in a currency union what we need is deflation (or at least lower inflation than other Euro nations) and that combined with the highest interest rate is not a great combination for getting out of a hole.

Scofflaw

ardmacha wrote: »

Doubtless. In the context of this thread the high interest rates are partly inspired by a desire to punish Ireland for profligacy and make sure that it wants to return to the markets. However, Ireland did not borrow excessively in the good times and if the Irish authorities did not respond appropriately to the boom this was in part because of ignorance of true conditions, an ignorance which the "experts" at the ECB did little to alleviate at the time, although they preach about it now.

They didn't alleviate it because they didn't know about it, because it's not their job to do so, and they don't have any power to regulate national banks. They're not bank regulators - not our bank regulators, not any Member State's bank regulators. We have a regulator, and had a regulator, and he was the person responsible for telling the ECB how things were with the banks in Ireland. It's not the ECB's job to 'alleviate' bad regulation in Ireland, either - that's the Irish government's job.

There is no point blaming people for things that they had no powers to control, when the blame lies with the person whose job it actually was. If you aren't aware of the failures in Irish bank regulation, read the Honohan or Regling reports.

ardmacha wrote: »

High "punitive" interest rates on a bailout in Irelands case makes no sense, as in a currency union what we need is deflation (or at least lower inflation than other Euro nations) and that combined with the highest interest rate is not a great combination for getting out of a hole.

The idea is to make the bailout facility an unattractive option, for much the same reason social welfare is supposed to be an unattractive option - countries should do what they can to calm the markets, rather than relying on the rest of the EU to bail them out. The margins were all determined in advance, and signed up to by Ireland.

That's kind of the problem - you can't rejig the bailout fund specifically for Ireland, because it's not specifically for Ireland.

cordially,
Scofflaw