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.

Scofflaw

SkepticOne wrote: »

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.

It really isn't a stick, because what we want - a negotiated default - is worse from a contagion point of view than a unilateral default.

Scenario 1: Ireland unilaterally defaults on bank debt. Other European countries make clear their disapproval, refuse to follow suit, possibly make punitive moves. Result: markets are disturbed - degree of withdrawal from European bank debt depends on the extent to which they believe the other European countries won't follow suit.

Scenario 2: Ireland defaults on bank debt with European agreement. Result: markets assume other European countries will follow suit, mass withdrawal from bank debt across Europe.

You want to argue for scenario 2 by threatening scenario 1. It's not credible.

cordially,
Scofflaw

later12

Contrary to the apparently conventional economic wisdom on the bailout, I'd vote No, actually.

People on both sides seem to misunderstand the entire situation; on the one hand you have those supporting deference to Europe and amicably resolving the issues in some sort of negotiations with our perceived buddies, the other side put forward an equally stupid argument of showing the world our balls.

In actual fact, the Europeans need to understand, in terms that are both forceful, unilateral and quite clear, that Ireland will not accept the current debt situation. Banking debt must be transferred to a central European vehicle, a precursor to Eurobonds must be devloped via a European Treasury and Debt Agency and in returj Ireland must necessarily respond quid pro quo in terms of fiscal stability and harmonised taxation and by signing up to a new European treaty to those effects.

As Wolfgang Muchau wrote the other day in the FT, this needs to be cleared up for once and for all, there will be no going back to the Bundestag, cap in hand, next May.
Like the Israeli conflict, the European debt crisis, it is one where everybody knows what the end result must be, the problem is in negotiating effectively to reach that end as quickly and as peacefully as possible.

SkepticOne

later10 wrote: »

In actual fact, the Europeans need to understand, in terms that are both forceful, unilateral and quite clear, that Ireland will not accept the current debt situation.

Thought you were against "showing our balls"?

Anyway I would agree with your proposals and would also vote No for similar reasons.

Scofflaw

later10 wrote: »

Contrary to the apparently conventional economic wisdom on the bailout, I'd vote No, actually.

People on both sides seem to misunderstand the entire situation; on the one hand you have those supporting deference to Europe and amicably resolving the issues in some sort of negotiations with our perceived buddies, the other side put forward an equally stupid argument of showing the world our balls.

In actual fact, the Europeans need to understand, in terms that are both forceful, unilateral and quite clear, that Ireland will not accept the current debt situation. Banking debt must be transferred to a central European vehicle, a precursor to Eurobonds must be devloped via a European Treasury and Debt Agency and in returj Ireland must necessarily respond quid pro quo in terms of fiscal stability and harmonised taxation and by signing up to a new European treaty to those effects.

As Wolfgang Muchau wrote the other day in the FT, this needs to be cleared up for once and for all, there will be no going back to the Bundestag, cap in hand, next May.
Like the Israeli conflict, the European debt crisis, it is one where everybody knows what the end result must be, the problem is in negotiating effectively to reach that end as quickly and as peacefully as possible.

I agree with that, and regard it as the practical course - although I don't know at this stage what value a referendum No would have - but, out of interest, morally where do we get off demanding that Irish banking debt be socialised onto the taxpayers of all of Europe?

cordially,
Scofflaw

Permabear

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hatrickpatrick

View wrote: »

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.

In other words, politicians know best and they should be allowed to do whatever they want, regardless of what the people want.

Now THAT worked out extremely well for us over the last decade, didn't it?

SkepticOne

View wrote: »

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.

In any form of negotiations you need to make assumptions. I don't think it is possible without such assumptions.

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.

No, the best way of preventing other countries from resorting to the same tactics is by giving them a deal where they don't have to resort to such 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.

And indeed the outcome of a referendum is by no means certain. This is why a referendum may be necessary if the government is to pursue an robust stance.

later12

SkepticOne wrote: »

Thought you were against "showing our balls"?

I'm not especially convinced that Ireland's balls have descended yet actually. However luckily for us, the issue is not one of testosterone. The Europeans and financial houses are about as impressed by bravado rhetoric as they are by Enda Kenny hopping around in a wrestling suit. Not very.

But they need to understand the consequences of the current crisis mechanism for the European project as a whole. It isn't abotu bravado, it's about being realistic with our colleagues and expecting a reasonable response, which we are perfectly entitled to expect.

Scofflaw wrote:

morally where do we get off demanding that Irish banking debt be socialised onto the taxpayers of all of Europe?

I think that's a question for a philosopher; I don't personally know much about the morality of any of this. As one German commentator said last week, Angela Merkel doesn't do buddy politics. Similarly, we shouldn't expect friends in Europe, the end has come to the Eurozone as a political movement; it must now be one of sensible economics whereby we treat one another like grown up business partners.

In any case, to get back to your point, I don't think morality is a pressing issue because the long term loss on Irish debt need not be as significant as many of those advocating a total default would desire. Ireland, must, necessarily, repay its debts. It will be painful, it must be. But there are ways for our ability to repay to be ameliorated, such as a European Treasury, a precursor to Euro sovereigns, and a European vehicle for banking debt. Ideally, Ireland would still be responsible for discharging its own debts under the proposed model, it wouldn't be simply socialised proportionately across Europe. That would be grossly irresponsible.

Presently, the irish bailout has cost the Europeans precisely nothing in terms of extending credit to the state; it is simply unsustainable and unreasonable that they can impose serious restrictions on Ireland's economic future in such a situation as currently exists. This whole process must be - genuinely - quid pro quo. At present the core economies are coming up short in terms of what they are bringing to the table. It is in their own interest to offer more, but as we know, European governments have a habit of hiding behind the curve and often don't break a sweat until it is too late.

hatrickpatrick

Permabear wrote: »

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Except that in this case the sitting government had absolutely no mandate whatsoever left from the people.

There is really no question of "calling the bluff of Brussels" here. On what grounds can we possibly play hardball with Europe at the present time? Our negotiating position since the guarantee has been extremely weak. We have much more to lose than Europe does if we take the nuclear option.

If we do the right thing and allow failed businesses to go under (IE Anglo & co), investors across Europe who made crappy gambling decisions will lose their money. Isn't that what the whole "bailout" is about in the first place? Forcing ordinary people to pay for the mistakes of bondholders?

To give you an analogy, it's like asking a group of teetotalers to pay for an alcoholic's drinks because he has run out of money for them.

If Europe accedes to our demands for some kind of pain-free, low-interest bailout, won't that actually tempt other nations to say, "Hey! Look at what the Irish got away with. Let's do the same thing!"

Any other country which is being asked to bail out private speculators and investors at the expense of the ordinary citizen should rightly give Brussels the two fingers.

TBH I wouldn't have such strong views about this if the bailout was about Ireland's fiscal situation and if these harsh terms were being put on us to bail out our public finances. That would be somewhat more reasonable. But they aren't. This is a case, literally, of the taxpayer bailing out private corporations who ****ed up.

If a business fails, it fails. End of story. If we believe in a free market, a bank which ****s up loses its money and investors lose their investment. Just like if someone invests in a start up company and it doesn't work out. That's how investment works.

If we're going to bail out investors, how about we compensate everyone who bought a house during the boom as a financial asset and has now been utterly burned?

Either all investors are burned or none, IMO. Caving in to banking investors and giving them special status is utterly unjust to the entire rest of the population.

Scofflaw

later10 wrote: »

I'm not especially convinced that Ireland's balls have descended yet actually. However luckily for us, the issue is not one of testosterone. The Europeans and financial houses are about as impressed by bravado rhetoric as they are by Enda Kenny hopping around in a wrestling suit. Not very.

But they need to understand the consequences of the current crisis mechanism for the European project as a whole. It isn't abotu bravado, it's about being realistic with our colleagues and expecting a reasonable response, which we are perfectly entitled to expect.


I think that's a question for a philosopher; I don't personally know much about the morality of any of this. As one German commentator said last week, Angela Merkel doesn't do buddy politics. Similarly, we shouldn't expect friends in Europe, the end has come to the Eurozone as a political movement; it must now be one of sensible economics whereby we treat one another like grown up business partners.

In any case, to get back to your point, I don't think morality is a pressing issue because the long term loss on Irish debt need not be as significant as many of those advocating a total default would desire. Ireland, must, necessarily, repay its debts. It will be painful, it must be. But there are ways for our ability to repay to be ameliorated, such as a European Treasury, a precursor to Euro sovereigns, and a European vehicle for banking debt.

Presently, the irish bailout has cost the Europeans precisely nothing in terms of extending credit to the state; it is simply unsustainable and unreasonable that they can impose serious restrictions on Ireland's economic future in such a situation as currently exists. This whole process must be - genuinely - quid pro quo. At present the core economies are coming up short in terms of what they are bringing to the table. It is in their own interest to offer more, but as we know, European governments have a habit of hiding behind the curve and often don't break a sweat until it is too late.

I don't think that last is the case, though - I think we just ignore any impact bailing us out may have on them. It's certainly something they - and others - think about:

French public debt: the impact of Ireland

cordially,
Scofflaw

SkepticOne

Permabear wrote: »

This post had been deleted.

Well this is the big question. If a referendum were to be called I would vote No on this because I think ultimately it is cheaper to bail out Ireland properly and have the burden of the banks shared at the European level than have Ireland default and destabilise the Eurozone. This was the point made in an article I posted from the FT a few days ago and I agree with it. And remember our backs are to the wall anyway. It is the opinion of many economists that we're going to default at some stage under the current deal and I see no reason to disagree with them. On that basis I think the best thing is to stop putting off the crisis and deal with it once and for all now.

SkepticOne

later10 wrote: »

I'm not especially convinced that Ireland's balls have descended yet actually. However luckily for us, the issue is not one of testosterone. The Europeans and financial houses are about as impressed by bravado rhetoric as they are by Enda Kenny hopping around in a wrestling suit. Not very.

But they need to understand the consequences of the current crisis mechanism for the European project as a whole. It isn't abotu bravado, it's about being realistic with our colleagues and expecting a reasonable response, which we are perfectly entitled to expect.

I agree with the second part of this. It is not about bravado but about Ireland standing up for its own interests and using whatever it has at its disposal but I think you are being a bit hypocritical when you dismiss other arguments along the same line as "showing your balls".

Bullseye1

Scofflaw wrote: »

It really isn't a stick, because what we want - a negotiated default - is worse from a contagion point of view than a unilateral default.

Scenario 1: Ireland unilaterally defaults on bank debt. Other European countries make clear their disapproval, refuse to follow suit, possibly make punitive moves. Result: markets are disturbed - degree of withdrawal from European bank debt depends on the extent to which they believe the other European countries won't follow suit.

Scenario 2: Ireland defaults on bank debt with European agreement. Result: markets assume other European countries will follow suit, mass withdrawal from bank debt across Europe.

You want to argue for scenario 2 by threatening scenario 1. It's not credible.

cordially,
Scofflaw

Hasn't it been pointed out that we are going to default whether we want to or not as we simply do not have the money to pay this back.

tipptom

This a european problem as well and there are funds set aside for this eventuality,the least we can expect from those who are supposed to be our allies in this, is funds from this fund without punitive intrest rates and that they dont behave towards us as if we are some troublesome colony of germany and france.They have all agreed that these outcomes in the future will be done in a less punitive manner but when we have paid back nearly everything,then the rules change.Germany is going through a series of elections at the moment where our fate is being decided because the germans think the bail outs should be harsher despite the eu s shylock rates.

later12

SkepticOne wrote: »

I agree with the second part of this. It is not about bravado but about Ireland standing up for its own interests and using whatever it has at its disposal but I think you are being a bit hypocritical when you dismiss other arguments along the same line as "showing your balls".

Hypocritical, perhaps, I'm just removing myself from those who suggest that ireland impress the world by "burning" senior bondholders or by showing Germany the Queensbury Rules. Ireland does have a hand to play, contrary to what Europhiles might suggest and it must be forceful in its negotiation of the crisis mechanism. But just as Europhiles are generally wrong on the sovereign debt crisis, so too are most advocates of unilateral or large scale default.

Personally, I don't necessarily advocate any type of default on senior debt - not even senior banking debt. European aid is not a panacea, it will all be painful, but it must be operated intelligently. The current bailout scheme is like something that was written by the illiterate hand of a German yokel. It is doomed to never resolve or address anything, and may possibly be the European death warrant. The bailout mechanism needs to be changed dramatically and Ireland must insist on that. Germany too, if Germany sees a future for the Euro, must insist on that.

later12

Scofflaw wrote: »

I don't think that last is the case, though - I think we just ignore any impact bailing us out may have on them. It's certainly something they - and others - think about:

http://www.research.hsbc.com/midas/Res/RDV?p=pdf&$sessionid$=4OYhRerPvvAft_ZrBwNJ1aF&key=jmIwigaSbk&n=285720.PDF

Yes you're quite correct in one way but that report is really only talking about a real impact in an eventuality that many people hope will never arise, and indeed must never arise. At present, the Europeans have not themselves lent Ireland one red cent, that's all I meant.

We cannot trade economic recovery in IOU's. There needs to be real financial commitment to integration and a unified treasury if Ireland is to pull itself out if the hole that it has dug for itself. It may not be fair that that is necessary, it may not be right, but it is necessary.

View

hatrickpatrick wrote: »

In other words, politicians know best and they should be allowed to do whatever they want, regardless of what the people want.

We are a democracy. Politicians are elected by the people in elections. We even had one a week ago in case you missed it.

The people are free to elect whoever they want and/or stand for election themselves in these elections. If we end up with idiots after an election, the old saying that "In a democracy, the people get the politicians they deserve" definitely applies.

hatrickpatrick wrote: »

Now THAT worked out extremely well for us over the last decade, didn't it?

Let me guess - the people were all opposed to our economic policies for the last decade but the evil politicians just forced us to go out and buy properties against our wills. :rolleyes:

View

SkepticOne wrote: »

In any form of negotiations you need to make assumptions.

And if your assumptions have no basis in reality, you just end up imposing additional pain on yourself for no benefit whatsoever.

Your entire strategy is based on the possibility that the other member states might be afraid of the consequences of a default by Ireland, whereas we can be absolutely certain that should they refuse to roll over pathetically straight away we will face immediate massive cuts and mandatory lay-offs in all our governmental services.

You can't bluff if everyone knows all the cards in your hand and know that, should they call your bluff, you'll have to: either immediately fold or suffer an unbelievable painful loss.

SkepticOne

later10 wrote: »

Hypocritical, perhaps, I'm just removing myself from those who suggest that ireland impress the world by "burning" senior bondholders or by showing Germany the Queensbury Rules. Ireland does have a hand to play, contrary to what Europhiles might suggest and it must be forceful in its negotiation of the crisis mechanism. But just as Europhiles are generally wrong on the sovereign debt crisis, so too are most advocates of unilateral or large scale default.

Personally, I don't necessarily advocate any type of default on senior debt - not even senior banking debt. European aid is not a panacea, it will all be painful, but it must be operated intelligently. The current bailout scheme is like something that was written by the illiterate hand of a German yokel. It is doomed to never resolve or address anything, and may possibly be the European death warrant. The bailout mechanism needs to be changed dramatically and Ireland must insist on that. Germany too, if Germany sees a future for the Euro, must insist on that.

You said earlier "In actual fact, the Europeans need to understand, in terms that are both forceful, unilateral and quite clear, that Ireland will not accept the current debt situation. Banking debt must be transferred to a central European vehicle [...]"

All very reasonable but what I want to know here is in what way do we make them understand in a "unilateral and forceful way that Ireland does not accept the debt situation". What action do you propose that would convince them of that?

Remember you are advocating a "no" vote in the referendum. This means that if our bluff is called then we will default as we will have no access to other funds. It seems to me that if you are going to advocate a "no" vote then logically you must be prepared to take the consequences if you fail to persuade the other party of the wisdom of your position.

This is not a case of the deal being simply stupid from the European point of view. Those that framed the deal and then put pressure on Ireland to accept it knew exactly what they were doing. They knew it was not going to resolve the problem once and for all; it is a mistake to assume that that was the goal. What it did achieve was that the banking debts have been contained for the next couple of years in Ireland rather than either have bondholders some European vehicle yet to be set up take the hit. Some other arrangement can be found in a few years to keep the thing going but the problem has been contained for the time being.

SkepticOne

View wrote: »

And if your assumptions have no basis in reality, you just end up imposing additional pain on yourself for no benefit whatsoever.

Yes, however it does seem as if one of the driving forces behind the EUs activities has been fear of contagion.

Your entire strategy is based on the possibility that the other member states might be afraid of the consequences of a default by Ireland, whereas we can be absolutely certain that should they refuse to roll over pathetically straight away we will face immediate massive cuts and mandatory lay-offs in all our governmental services.

Yes, although I am personally fairly sure that the EU is afraid of the consequences of default by Ireland (particularly the consequences if it spreads to other EU countries), I don't know that for sure. I'm willing to act on the basis that this is the case but I'm also willing to take the consequences should it be wrong.

You can't bluff if everyone knows all the cards in your hand and know that, should they call your bluff, you'll have to: either immediately fold or suffer an unbelievable painful loss.

If it was the case that the current bailout was ultimately in Ireland's interest then I would agree with you, but I don't. It is about containing a European problem within one of the countries unfairly at the expense of that country.

Personally I would vote "no" even if it meant that funding would be immediately cut off with no chance of another deal from Europe, even though I don't think this is the most likely outcome. I am nevertheless prepared to do it if that is what it takes.