Bailout Referendum, what way would you vote?

Jackovarian

http://seekingalpha.com/article/256055-a-crash-in-saudi-arabia-arrogant-eurocrats-and-a-look-at-the-markets-part-1

Interesting article on the Bailout

Ireland and the Arrogant Eurocracy
Via Dr. Jim Walker of the excellent research firm Asianomics, we have been made aware of some of the things various eurocrats have had to say about the Irish election. Some of these quotes are remarkable for their unbridled and quite unwarranted arrogance.

"As Irish voters headed for the polling booths on Friday, the European Commission bluntly declared that the terms of the EU-IMF bailout "must be applied" whatever the will of Ireland's people or regardless of any change of government.
"It's an agreement between the EU and the Republic of Ireland, it's not an agreement between an institution and a particular government," said a Brussels spokesman.
A European diplomat, from a large eurozone country, told The Sunday Telegraph that "the more the Irish make a big deal about renegotiation in public, the more attitudes will harden."
"It is not even take it or leave it. It's done. Ireland's only role in this now is to implement the programme agreed with the EU, IMF and European Central Bank. Irish voters are not a party in this process, whatever they have been told," said the diplomat.”

(Our emphasis)
Hello? Irish voters are "not a party in this process"? Irish voters – i.e. the tax cows that have been condemned to bail out their failed banks so that the highly leveraged German banking system can avoid a debt restructuring broadside – may well go from "revolution lite" as the WSJ calls the election outcome (since essentially, one conservative party was exchanged for another), to a "real revolution." As an aside, while the WSJ asserts that 'Ireland needs Merkel," we believe it is exactly the other way around (see further below as to why). Our understanding of 'democracy' is that voters are the ultimate arbiters of such things. There is no agreement that can not be amended or broken if voters feel they have been sold out by the government that signed it. As the Telegraph notes further:

"Dessie Shiels, an independent candidate in Donegal, said: "People have not been given the basic right of deciding whether or not they should have their taxes increased in order to repay bondholders who have lent to the banks."
David McWilliams, an economist and former official at the Ireland's Central Bank, has led calls for a popular vote under Article 27 of the Irish constitution, which requires on a matter of "such national importance that the will of the people ought to be ascertained."
"We have to re-negotiate everything," he said. "Obviously, the first way to do this is to make them aware that if they force us to pay everything, we will default and they will get nothing. So they had better get a little bit of something, than all of nothing. To make this financial pill easier to swallow, we must take the initiative politically. We can do this via a referendum.
"If the Irish people hold a referendum on the bank debts now, we can go to the EU with a mandate from the people which says No. This will allow our politicians to play hard-ball, because to do otherwise would be an anti-democratic endgame."
Declan Ganley, the Irish businessman who led the 2008 No vote to the Lisbon Treaty, said Ireland must "have the balls" to threaten debt default and withdrawal from the single currency.
"We have a hostage, it is called the euro," he said. "The euro is insolvent. The only question is whether Ireland should be sacrificed to keep the Ponzi scheme going. We have to have a Plan B to the misnamed bailout, which is to go back to the Irish Punt."

(our emphasis)
Got it in one, Mr, Ganley. Ireland is the party that has the leverage in this situation, not the EU. The decisive point is this: The euro is a kind of roach motel – it's easy (too easy) to get in, but it is very hard to get out.
Why is it so hard to get out? It isn't, as the outgoing Irish government asserted, the fact that government would find it hard to borrow money in the markets after a bank debt restructuring, or even after a restructuring of the government's own debt. Greece, which has been bankrupt for half of the past 180 years, is proof positive that it is fairly easy to find new suckers for government debt after a while.
No, at the root of the roach motel problem are the banks themselves. If the population suspects that an abandonment of the euro is imminent, worries that the national currency likely to succeed the euro will be devalued would provoke a flight from the banks – depositors would shift their deposits to other banks somewhere else in the euro area. Both Greece and Ireland have in fact been plagued by such a flight of depositors already, to varying extent. In fact, the biggest and quite obviously bankrupt Irish banks have bled deposits at an enormous rate lately. With the banks completely zombified, worries about a flight of depositors should be much reduced – since they have already largely fled.
The banking system is however also a big worry for the rest of the EU. Why was the Irish government forced to accept a bailout? What was so urgent? Why was it so important to especially avoid a restructuring of the senior debt of Ireland's banks? The answer is that an Irish debt restructuring imposing a big haircut on bondholders would hit banks elsewhere in the euro area (including the ECB, as it were). The way we see this, Irish voters will eventually prove the arrogant unnamed European diplomat from a big country wrong. They will eventually be a party to the proceedings. Negotiating a lower interest rate on borrowings from the EFSF, the currently enunciated goal of the new Irish government won't be enough. It won't do the trick because the burden will still be too large.
We would note here, as we have repeatedly done before, that it does no-one any good to pretend that losses don't exist or that the giant fiat money Ponzi scheme made up of unpayable government debt and de facto insolvent fractionally reserved banks can be forever kept going by heaping new debts atop the old ones. If we want genuine, sustainable economic growth to resume, the only way to achieve that is to bite the bullet. Acknowledge the losses and let them fall upon those who have invested unwisely. This is not merely a question of morality, as prominent Keynesians like Paul Krugman keep saying. It is a question that concerns the system of free market capitalism itself. Capitalism is not supposed to privatize profits and socialize losses. This is a perversion of the free market system that will ultimately serve to destroy it.
In addition, as the EU lurches toward the 'big accord' planned for late March – a.k.a. the Grand Bargain (Portugal may well fall into crisis before that date, as its bond yields remain stuck above the crucial 7% level and large debt rollovers are awaiting it in March) , there are evidently plans afoot to make other European nations more like Germany. Unfortunately this is not merely about fiscal rectitude as such. It is also about the desire of the German political class to impose Germany's high taxes on everyone. Ireland would do well to think twice about agreeing to such stipulations.

I'd like to put a poll on this to see how people would vote if we actually had a choice on the bailout. But I dont know how to create a poll, so...

How would you vote?

Scofflaw

Er, we need the money, so voting No to the money is pretty stupid. And however "arrogant" those quotes can be made to sound, they're factually correct - the deal is negotiable only within the limits agreed. What part of "IMF programme" do people not understand?

cordially,
Scofflaw

niallers1

I would vote No..Whether a no vote would change anything is anybody's guess..


On another note, I was always pro Europe and voted yes in every referendum. I think I will be voting no as a protest to the next European referendum.. Whether right or wrong...or stupid..

professore

Scofflaw wrote: »

Er, we need the money, so voting No to the money is pretty stupid. And however "arrogant" those quotes can be made to sound, they're factually correct - the deal is negotiable only within the limits agreed. What part of "IMF programme" do people not understand?

cordially,
Scofflaw

I actually didn't think they are arrogant - from their viewpoint they are lending us money at high risk.

Did our government invite the IMF here ? I don't know about you but I think the answer is no. I think it was shameful how they handled it.

Have we lost the right to make decisions (stupid or otherwise) for ourselves ? I really think this is about democracy now. If we did have a referendum and people voted no to it then we would have to take the consequences - which would be bad in the short term but in the medium to long term would be much better than the bailout. I personally would vote No.

20Cent

I would vote no on a matter of principle.

Permabear

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seamus

Jackovarian wrote: »

How would you vote?

What's the question?

Seriously though, I don't have any specific problem with the bailout except that we need it.

If I had an opportunity to vote against all the nonsense that caused it - such as bailing out and nationalising Anglo, I have voted No then. But put to the people as to whether to take an IMF bailout, I would have voted Yes, because there are no other alternatives. It would be either relatively minor increases in taxation in order to service this debt. Or if we chose to reject it, then massive hikes in taxation and a collapse in public services in order to pay for the state when no-one will give us any credit.

Such an issue is too important to put to referendum, where it can be hijacked by the likes of Sinn Féin to encourage people to use a "protest vote".
Seriously, it would be like voting against paycuts and in favour of being fired from your employment because you disagree with past decisions of the board.

We have a real problem with letting go in this country. It's done. The morons who did it are gone. Now we have a big dungheap where our country used to be. It's time to stop standing around talking about who put it there, and instead get out the shovels to clear it.

Jackovarian

seamus wrote: »

Such an issue is too important to put to referendum, where it can be hijacked by the likes of Sinn Féin to encourage people to use a "protest vote".

I dont think Sinn fein would be the only ones hijacking the situation. I seem to remember all parties actively campaigning a Yes vote for Lisbon 2, promising jobs and the rest.

RTE and the other media outlets all pushed for a Yes vote.

So I dont think its the No hijackers we have to worry about.

SkepticOne

seamus wrote: »

What's the question?

Seriously though, I don't have any specific problem with the bailout except that we need it.

If I had an opportunity to vote against all the nonsense that caused it - such as bailing out and nationalising Anglo, I have voted No then. But put to the people as to whether to take an IMF bailout, I would have voted Yes, because there are no other alternatives. It would be either relatively minor increases in taxation in order to service this debt. Or if we chose to reject it, then massive hikes in taxation and a collapse in public services in order to pay for the state when no-one will give us any credit.

I think most people would agree that some sort of bailout is needed, but what if the current bailout was badly negotiated? What if we gave away too much for too little in return? You have to admit that that is a possibility.

The thing is that it is not an IMF bailout. The IMF never travel to a country and camp out pressurising the country to accept a deal. This is an EU deal with the IMF along for the ride. You say that you don't support bailing out banks yet as a condition of the EU/IMF bailout, 35 billion of further money will end up going into the banks. And it is only a 67.5 billion loan (not 85 billion as is often quoted). Anecdotally, the banking requirement comes from the EU side. These conditions, defenders of the deal tell us, are to prevent contagion in the region that would occur if we let the bans fail.

Had we negotiated directly with the IMF, this requirement may not have been stipulated. Moreover the consensus of opinion among economists is that the current deal doesn't really solve any problems it just pushes them further down the track.

RichardAnd

If any such referendum came to pass it would most likely be a NO vote. Regardless of the reason for that, the result would be another referendum a few months later that would be passed.

Regardless of what I personally believe, if a referendum ends in a NO vote well then it's hardly democratic to spurn a democratic result.

seamus

SkepticOne wrote: »

I think most people would agree that some sort of bailout is needed, but what if the current bailout was badly negotiated? What if we gave away too much for too little in return? You have to admit that that is a possibility.

Indeed, but then we fire the people who we appointed to negotiate on our behalf.

You say that you don't support bailing out banks yet as a condition of the EU/IMF bailout

I wouldn't have back when Anglo was about to go down, but now we don't have a choice. I still think they're being a little too precious about effectively trying to repay every debt rather than telling some debts to go jump and paying the important ones, but then no deal would ever be done if they had to take the separate opinions of 4 million people into account.

bladespin

Permabear wrote: »

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Default and another austerity budget should see us within shouting distance of breaking even, then again, if default was put on the table in the first place I'd imagine the terms of the deal would have been much more in our favor, Germany's particularly high horse would look quite shaky too.

SkepticOne

RichardAnd wrote: »

If any such referendum came to pass it would most likely be a NO vote. Regardless of the reason for that, the result would be another referendum a few months later that would be passed.

Regardless of what I personally believe, if a referendum ends in a NO vote well then it's hardly democratic to spurn a democratic result.

That doesn't make sense. Why would the government having got the result it wanted: a "no" vote, then call another referendum?

And if it wanted a "yes" result why call a referendum in the first place? There's not constitutional requirement for a referendum. The purpose here is to use one to bolster the negotiating position of a government that already wishes to renegotiate.

SkepticOne

seamus wrote: »

Indeed, but then we fire the people who we appointed to negotiate on our behalf.

And that's it? If an employee performs badly and puts your business in jeopardy you don't merely sack the employee; you seek to rectify the mistake. Leaving the deal as it stands only makes sense if you believe it was the best possible deal that could have been negotiated by any party let alone a tired, error prone government on the way out.

Noreen1

I'd vote "No".
Not because I think we don't need the Bailout - we very obviously do.

I'd vote "No" because of the terms of the Bailout. Europe has no business insisting that the Irish taxpayer should pay for the Bondholders investments.

We clearly cannot sustain this level of debt, whether certain European Countries want more time to get their own financial institutions in order, or not!

Strange how Iceland was offered a better deal, isn't it?:rolleyes:
Then again, they have a Government willing to represent the interests of its people.
Whether we have, or not, remains to be seen!

Pete_Cavan

In case you didnt notice, we had an election last week in which a number of parties were running on the basis that they would reject the bailout. People were given the option of voting for parties who will accept the bailout money or those who will not. 75% of first preference votes went to parties who will keep the bailout money. That is the answer right there.

The problem is those advocating rejecting the bailout have no idea how to fund the country without that money. The EU/IMF are giving us €50bn to fund the budget deficit until 2014, unless you find someone else willing to give us that amount of money at a lower interest rate* we have a take the bailout regardless of what result is from some pointless referendum.

*Bailout has interest rate of 5.8%, bond markets were charging us ~9% before got the bailout.

hatrickpatrick

What's the point of voting no?
Sure they'll just keep asking us again and again until we give them the right answer.
Democracy my arse.

[MOD]If you really can't contribute anything beyond these little snarky rants, please don't bother to post, because you're really not adding anything to the discussion.[/MOD]

tipptom

I would vote no,how about getting the money of just the imf and going back to the punt as they would insist on in their bailout terms and operating within europe like britain does and looking outside the eu for partners,im not anti eu but they would pretty quickly change their hardball position if this or some other credible alternative was put to the germans and french that we the irish people were willing to take.They would be scared ****l*ss not of our position but of the knock on effect and their potential dominance of europe coming to an end.I just think our politicians need to get some balls with the eu and think a bit outside the box and stop kowtowing to these guys,we actually have a good bargaining position if we face them down.Those that pay should have their say.

jimmycrackcorm

Permabear wrote: »

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Cut public spending and social welfare back to match the level of our income and we can then tell the EU/IMF to get lost.

Oh wait - you meant: how do the "No" voters who want to keep high spending propose to finance the state....

edwinkane

Scofflaw wrote: »

Er, we need the money, so voting No to the money is pretty stupid. And however "arrogant" those quotes can be made to sound, they're factually correct - the deal is negotiable only within the limits agreed. What part of "IMF programme" do people not understand?

cordially,
Scofflaw

The problem is Ireland can't afford to pay the interest on the money, or repay the money. So, while Ireland might need the money, the very fact of taking the money will probably lead Ireland to a default.

SkepticOne

hatrickpatrick wrote: »

What's the point of voting no?
Sure they'll just keep asking us again and again until we give them the right answer.
Democracy my arse.

What is being proposed is that the government seeking to renegotiate would actually want a no vote as it would help them renegotiate.

xavidub

Nothing damages democracy like referendums. The tool of the demagogue indeed.

zephyro

Permabear wrote: »

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Crazy suggestion but how about living within our means as a country like most citizens of the state do? Tax income will be around 34 billion this year, it's not that many years ago that government spending was below this and as far as I remember the state didn't collapse.

Pete_Cavan

SkepticOne wrote: »

What is being proposed is that the government seeking to renegotiate would actually want a no vote as it would help them renegotiate.

How would getting a no vote in this referendum give us a better renegotiating position? They are not going to change their minds just because Paddy and Mary dont like the deal. Any renegotiation would be based on forecasts of economic growth, level of tax returns, etc. things that have a direct bearing on our ability to repay, not what some auld fella on a high stool in your local thinks.

zephyro wrote: »

Crazy suggestion but how about living with
in our means as a country like most citizens of the state do? Tax income will be around 34 billion this year, it's not that many years ago that government spending was below this.

So make an €18bn budget adjustment this year - last years budget adjustment was €6bn and look how hard it has hit people, imagine what three times that, on top of what has already been done, would do.

edwinkane

xavidub wrote: »

Nothing damages democracy like referendums. The tool of the demagogue indeed.

That is the Gadaffi & Mugabe position also. I believe in democracy and only those who distrust democracy don't want refenerda and want to refuse the people their democratic say.

Permabear

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SkepticOne

Pete_Cavan wrote: »

How would getting a no vote in this referendum give us a better renegotiating position? They are not going to change their minds just because Paddy and Mary dont like the deal. Any renegotiation would be based on forecasts of economic growth, level of tax returns, etc. things that have a direct bearing on our ability to repay, not what some auld fella on a high stool in your local thinks.

It won't come down to just those things. For example, on the issue of bondholder losses, what is the correct answer here? Obviously Ireland would be better off if tax payers did not have to shoulder the burden of all bondholders in Irish banks who made bad investment choices. But this doesn't suit the opposite side in Brussels who are scared about contagion. Where should the line be drawn? If the EU are scared about contagion then why aren't they taking more of the burden.

There are no objective answers to this. It comes down to politics and this is where a government with the backing of the people on a specific issue may get a boost.

The government goes to Europe and says "look we want to be good little Europeans but our electorate won't tolerate the current deal so we'll have to dump the bank's losses on bondholders".

Of course the EU are going to argue that this can't possibly work. What else would they say? We have to call their bluff and in order to do this the support of the people helps.

SkepticOne

Permabear wrote: »

This post had been deleted.

I think you need to deal with the specific arguments put forward on this thread. So what if there are some people who wrongly think that rejecting any form of bailout will alleviate the need for budget cuts? I don't believe anyone is making that point here.

SkepticOne

Permabear wrote: »

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Here's my answer to this. First of all it is not an 85 billion bailout as 17.5 billion of that is money Ireland already raised prior to the bailout.

The answer is that if you are going to call the bluff of Brussels you need to be prepared to take the consequences if it doesn't work. That will mean a very harsh adjustment to current taxation levels in Ireland. This for me would not be desirable but if the alternative is debt slavery with very little chance of escaping then I am prepared to take it.

However there is also the point that the EU doesn't want us to throw the problem of the banks at them knowing that other countries may be tempted to do the same. They (quite rightly from their point of view) fear contagion. Therefore we can use this as a stick in the negotiations.

The more they "rule it out" or declare it as non-negotiable the more we become aware of its use as a stick.

View

edwinkane wrote: »

That is the Gadaffi & Mugabe position also. I believe in democracy and only those who distrust democracy don't want refenerda and want to refuse the people their democratic say.

Nonsense - an advocate of representative democracy would argue that political decision should be made by a parliament of elected representatives. Since the ultimate role of a parliament is that of a legislature, it has an experience of dealing with legislation on a day-to-day basis that the vast majority of the general public can never match at the best of times, much less in the heat of a referendum campaign (and none of the campaigns here have exactly been models for the referenda process btw). Furthermore, the system is designed to damp down the more extreme "popular opinions" that can engulf a society in the short term.

Anyone believing that more popular involvement automatically means better government might want to consider Athenian democracy and the fate of Socrates - sentenced to death because he refused to go along with popular opinion in the Athens of his day.

View

SkepticOne wrote: »

But this doesn't suit the opposite side in Brussels who are scared about contagion. Where should the line be drawn? If the EU are scared about contagion

Those are very big assumptions - the other member states might not like the possibility of contagion but that doesn't mean they are scared of it.

At least for some of them, the cost of taking a hit from an actual Irish default would probably be cheaper than the cost of capitulating to an attempt - either actual or merely perceived - by Ireland to threaten our way to a better deal. Particularly, as it would open the door to others trying the same tactics.

That wouldn't be the case for all of them of course but as each member state makes their decision individually that is a bit beside the point.

On the other hand, there is very little evidence from out election campaign that people here would be willing to face the closure of entire government departments plus associated services in order to be "vindicated" in some sort of inter-governmental game of "chicken" with the other member states.