Rehn: Bailout terms should be extended to seven years

Scofflaw

European Monetary Affairs Commissioner Olli Rehn has said the terms of Ireland's bailout loan from the ECB should be extended from three years to seven.

In a German newspaper article, Mr Rehn urged other Eurozone nations to grant Ireland - and Greece - easier terms.

He also issued a specific appeal to Germany's lower house of parliament, to soften its opposition to expanding the fund's powers to combat Europe's debt crisis.

Read more: http://breakingnews.ie/ireland/rehn-bailout-terms-should-be-extended-to-seven-years-496297.html#ixzz1FwECqiIY

Everybody still working on softening the Germans up, it seems.

cordially,
Scofflaw

Chucky the tree

I think it will take at least a year. If I was the IMF/EU I wouldn't renegiate the terms until we can show we can sort our own house out. We've a €17bn deficit and we're doing the bare minimum in terms of social welfare cuts and Public sector reform to fix this problem so I can understand why they are taking the hard line of no negiatation.

Sand

I dont think the Germans are going to be softened up.

Their unemployment benefit is barely half of the Irish payment - how are we going to play the poor mouths? The Germans have their own "most vulnerable" to take care of, and their own public sector wages to pay. It will never, ever play well to German voters that they have to pay higher taxes, cut spending and accept higher interest rates on sovereign borrowing to pay Irish public sector workers and social welfare recepients more than the German rate. All it will take is a few timely tabloid articles with headlines screaming about Irish rates of pay and social welfare payouts to alienate German taxpayers. I dont see many German politicians, engaged in a tough domestic political fight ready to lose votes by fighting for the Irish perspective with German voters.

Even if they were softened up - theyre still attempting to solve the wrong problem. We do not have a liquidity problem. We are insolvent - our debts, contingent and otherwise, far exceed our ability to meet them.



Colm McCarthy has summed up the prevailing EU mood:

It would have been far more honest for Barroso and Van Rompuy to have issued an even briefer statement clarifying their position. Had my services been sought, I would have offered a draft along the following lines:

* The Presidents of the Commission and Council of the European Union are aware that several member states face high risks of sovereign default, including disorderly default, and have bust banking systems which are unable to fund themselves. We do not care about this, and have no proposals to address the matter. We know that the European Central Bank has no proposals either.
* We hold simultaneously the view that the European banking system is just fine, there is no need for stress tests, but we will do them again to reassure the markets (again). And again, if needed. Any views held in markets which conflict with ours are mistaken.
* We will monitor, co-ordinate and review anything else we can think of, except sovereign debt or banking crises or any measures designed to address them.

ei.sdraob

Careful now @Sand with the "we are all doomed" meme here on Boards
its much easier to bury your head in sand (ha!)


sure look at the (another great) article from Colm you linked to

Colm McCarthy wrote:

In sum, the European political leadership has decided that there is no banking crisis, or alternatively that whatever bitty little crisis remains in the periphery can be dealt with by the European Central Bank, which everyone knows lacks the instruments, and perhaps the will, to act. Anyway, these countries face only a fiscal adjustment and should get on with it.

There seems to be some sort of collective amnesia and denial over in the EU, sure it will all be fine and dandy in the long term, nothing to see here move along

Scofflaw

So there won't be a series of summit meetings that are dominated by the issue, then, I'm sure.

amused,
Scofflaw

RichardAnd

Just because Mr Rhen has suggested it doesn't mean it will happen. What might happen though is that an extention or lowering of interest could be used as a carrot, who knows.

To be honest though, extenting the peroid of the loan would just mean less cuts over a longer peroid of time. Thus, it could easily be 10 years before Ireland breaks even on budget day

Welease

Scofflaw wrote: »

Everybody still working on softening the Germans up, it seems.

cordially,
Scofflaw

I wonder if it's the Irish populace thats being "softened up"?

Lots of anger and talk about burning bondholders here... drop the interest rate a little, and suddenly everyone in Ireland will be patting themselves on the back for renegotiating a better deal...

And we still get to bailout the excesses of a failed European banking system alone..

dan_d

I would imagine that over a period of time (a year or more), something will be agreed.

However, the idea that FG were peddling of instantly being able to change everything and negotiate lower interest rates (or whatever their fairy stories were) is laughable.

How do German politics work?? How much longer is Angela Merkel likely to be around? Having said that, I'd imagine that the next person the Germans would go for would probably take a fairly hard line on any sort of debt forgiveness - they're not likely to vote for anyone who'll be a bit softer!

I agree with Chucky...We're doing the bare minimum to fix the problem right now.It's going to take a good bit more before we're in a negotiating position.

fred252

i think the germans have an election in about 2 and a 1/2 years from now. i reckon they'd like to let us struggle along until then - labouring under the misconception that we can pay the banking debts. i guess we'll default before then and they'll have to make a decision one way or another. either the ECB can stuff our crap into a SPV and forget about it for a long time (probably altogether) or we default.

fred252

of course this should happen sooner rather than later but they seem to want to put it off as long as possible.

Cannibal Ox

I'd love to know what exactly is going on. I kind of expect them to go a little easier on us as time passes, but I also think they want to make an example out of us for future reference.

Sand wrote: »

I dont think the Germans are going to be softened up.

German banks have pretty high exposure to Ireland. A quick google search is giving me anything between 25€ billion direct exposure to Irish banks in the Irish Times in November, a nice graph from Reuters with data from September telling me it is 154.1€ billion altogether and a few articles from November saying nobody is quite sure of the exact number, but it is pretty big. It'd be safe to say that if German banks have an interest in that money, Angela Merkel will have an interest in keeping that money, and the German people will be made to soften up.

dan_d wrote:

How do German politics work?? How much longer is Angela Merkel likely to be around? Having said that, I'd imagine that the next person the Germans would go for would probably take a fairly hard line on any sort of debt forgiveness - they're not likely to vote for anyone who'll be a bit softer!

Late 2013 is the next election I think. I'd imagine the opposition will campaign for a stricter approach but maybe they'll change their minds when they're in power.

I think in general it's pretty safe to assume that people and opposition parties (to a greater and lesser extent) in Europe aren't privy to exactly what is happening at the moment. So unless we see a really radical, hardline right or left party coming to power I can't see good, responsible liberal democrats veering to far from the current line. Unless something major happens. Which it might.

Scofflaw

fred252 wrote: »

i think the germans have an election in about 2 and a 1/2 years from now. i reckon they'd like to let us struggle along until then - labouring under the misconception that we can pay the banking debts. i guess we'll default before then and they'll have to make a decision one way or another. either the ECB can stuff our crap into a SPV and forget about it for a long time (probably altogether) or we default.

Germany has 7 state elections this year. The first one - Hamburg - took place at the end of February, and Merkel's party took a beating, with half their previous vote (21.9% from 42.1% in 2008). So I'm afraid pretty much anything the Germans are being asked to pay for is hostage to German electoral politics all year.

Cannibal Ox wrote:

German banks have pretty high exposure to Ireland. A quick google search is giving me anything between 25€ billion direct exposure to Irish banks in the Irish Times in November, a nice graph from Reuters with data from September telling me it is 154.1€ billion altogether and a few articles from November saying nobody is quite sure of the exact number, but it is pretty big. It'd be safe to say that if German banks have an interest in that money, Angela Merkel will have an interest in keeping that money, and the German people will be made to soften up.

Unfortunately, most of those can be dismissed outright. As far as direct eurozone bank holdings of debt in the Irish covered banks goes, the numbers have to fit within the known eurozone holdings of securities from the covered banks - a figure which is available from the Central Bank, and which was, at the end of January, only €9.9bn.

Most of the figures that have been used by journalists and politicians are from the Basel Bank of International Settlements, and those figures cover all banks based in Ireland, including all the subsidiaries of eurozone banks in the IFSC, whose money is recorded in those figures as "owed" to their parents in the eurozone. As a result, those figures are entirely inappropriate as a measure of the money owed by the Irish domestic banks, or by the Irish covered institutions (the ones the last government made us responsible for).

cordially,
Scofflaw

fred252

Scofflaw wrote: »

Germany has 7 state elections this year. The first one - Hamburg - took place at the end of February, and Merkel's party took a beating, with half their previous vote (21.9% from 42.1% in 2008). So I'm afraid pretty much anything the Germans are being asked to pay for is hostage to German electoral politics all year.



Unfortunately, most of those can be dismissed outright. As far as direct eurozone bank holdings of debt in the Irish covered banks goes, the numbers have to fit within the known eurozone holdings of securities from the covered banks - a figure which is available from the Central Bank, and which was, at the end of January, only €9.9bn.

Most of the figures that have been used by journalists and politicians are from the Basel Bank of International Settlements, and those figures cover all banks based in Ireland, including all the subsidiaries of eurozone banks in the IFSC, whose money is recorded in those figures as "owed" to their parents in the eurozone. As a result, those figures are entirely inappropriate as a measure of the money owed by the Irish domestic banks, or by the Irish covered institutions (the ones the last government made us responsible for).

cordially,
Scofflaw

i was referring to the federal election.

surely german politicians should be discussing the consequences of germany not paying. if they were to leave the euro the new DM would rise in value hurting their exports leaving many unemployed.

Scofflaw

fred252 wrote: »

i was referring to the federal election.

I wasn't correcting you - just pointing out that there are state elections all year. The states are represented in the German upper chamber, so these are meaningful elections from the point of view of the actions of the German Chancellor.

fred252 wrote: »

surely german politicians should be discussing the consequences of germany not paying. if they were to leave the euro the new DM would rise in value hurting their exports leaving many unemployed.

First - Germany not paying what? Second, what is best for Germany as a country may not be popular with the German on the street, any more than what's good for Ireland is therefore popular in Ireland.

cordially,
Scofflaw

jester77

Scofflaw wrote: »

Germany has 7 state elections this year. The first one - Hamburg - took place at the end of February, and Merkel's party took a beating, with half their previous vote (21.9% from 42.1% in 2008). So I'm afraid pretty much anything the Germans are being asked to pay for is hostage to German electoral politics all year.

The result of the Hamburg elections were because of local issues (mainly because of that muppet Ahlhaus) and are not a true reflection of the support for Merkels party or her EU policies.

The Baden Württemberg elections later this month will give a truer political picture of where her party and policies stand.

fred252

Scofflaw wrote: »

First - Germany not paying what? Second, what is best for Germany as a country may not be popular with the German on the street, any more than what's good for Ireland is therefore popular in Ireland.

cordially,
Scofflaw

i didn't specify what they are being asked to pay for as you said whatever "the Germans are being asked to pay for". to be specific i suppose we'd be asking them to allow the ECB to roll our banking debts into a SPV and forget about them for the next few years.

i didn't suggest it would be popular with the german on the street. i was just wondering if german economists are painting the full picture over there. all i hear is "its our way or the high way" from the german economist media and the consequences of the "highway" should be spelt out fully.

Scofflaw

fred252 wrote: »

i didn't specify what they are being asked to pay for as you said whatever "the Germans are being asked to pay for". to be specific i suppose we'd be asking them to allow the ECB to roll our banking debts into a SPV and forget about them for the next few years.

Ah - I know I said it originally, I was only wondering if you had something specific in mind.

fred252 wrote: »

i didn't suggest it would be popular with the german on the street. i was just wondering if german economists are painting the full picture over there. all i hear is "its our way or the high way" from the german economist media and the consequences of the "highway" should be spelt out fully.

And presumably all they hear from ours is "default, default". As here, there's probably more willingness at the political level to do something cooperative than there is in media circles.

cordially,
Scofflaw

fred252

Scofflaw wrote: »

And presumably all they hear from ours is "default, default". As here, there's probably more willingness at the political level to do something cooperative than there is in media circles.

cordially,
Scofflaw

the difference being that impartial economists outside the EU, like krugman, are also saying "default, default" - maybe not in those words but debt relief anyway. doesn't the impartial view have more credibility?

Scofflaw

fred252 wrote: »

the difference being that impartial economists outside the EU, like krugman, are also saying "default, default" - maybe not in those words but debt relief anyway. doesn't the impartial view have more credibility?

Is it an impartial view, and what are external economists saying about Germany allowing a transfer union (at their expense)?

cordially,
Scofflaw

fred252

i had assumed there was such a thing as an impartial view in economics. do you honestly believe this isn't the case? or are you simply implying that any of the non-eu economists that are suggesting default are biased in some way? i agree its a profession riddled with conflicts of interest but at least some of the commentary on this must be impartial.

i haven't read much on the potential transfer union. any links? thanks

later12

fred252 wrote: »

i had assumed there was such a thing as an impartial view in economics. do you honestly believe this isn't the case?

There are only impartial facts from which opinions may be drawn; Krugman's view is not fact; he writes a pretty non technical piece scant on detail about a country where the ramifications of following his advice, be it right or wrong, has zero impact on him. It would realistically have zero impact on his professional career too.

I really worry some times that people expect that economists have gone through some detailed academic training on the macroeconomic dynamics of major developed economies defaulting amid a global equities and investment crisis and a collapse in capital markets simultaneously. Hardly. This territory, particularly in European terms, is all pretty new to economists too.

The same people typically, when attempting to back up their opinions, only go so far as to demonstrate that well known economists also share (or rather, inspired) their opinions as opposed to referring to any primary technical data in itself. Why are you so convinced that Paul Krugmann knows better than what you might yourself deduce?

fred252

later10 wrote: »

There are only impartial facts from which opinions may be drawn; Krugman's view is not fact; he writes a pretty non technical piece scant on detail about a country where the ramifications of following his advice, be it right or wrong, has zero impact on him. It would realistically have zero impact on his professional career too.

I really worry some times that people expect that economists have gone through some detailed academic training on the macroeconomic dynamics of major developed economies defaulting amid a global equities and investment crisis and a collapse in capital markets simultaneously. Hardly. This territory, particularly in European terms, is all pretty new to economists too.

The same people typically, when attempting to back up their opinions, only go so far as to demonstrate that well known economists also share (or rather, inspired) their opinions as opposed to referring to any primary technical data in itself. Why are you so convinced that Paul Krugmann knows better than what you might yourself deduce?

there is such a thing as an impartial view. should i call it an unbiased view instead? you're saying his view has zero impact on him ramification and career wise. that's an impartial view in my impartial view. only kidding, my view is partial.

later12

fred252 wrote: »

you're saying his view has zero impact on him ramification and career wise.

No, that the ramifications of going along with Krugmann's advice has no ramification for him.

Do you think journalists are paid for concensus heralding boring opinions? It is very much in the media's interest to exaggerate and to stoke populist rhetoric. It's seperating that sort of cheap commentary from sound, considered commentary that people have to try and do successfully.

Perhaps Krugmann is correct, I am just saying that the policy he supports should be seen in light of his own potential motives. Same goes for someone writing for a banking magazine, an investments magazine, or a socialists' monthly. Krugmann's audience in the NYT is, largely, Joe Public and if joe Public doesn't like what he reads in the NYT he's not going to read it.

Scofflaw

fred252 wrote: »

i had assumed there was such a thing as an impartial view in economics. do you honestly believe this isn't the case? or are you simply implying that any of the non-eu economists that are suggesting default are biased in some way? i agree its a profession riddled with conflicts of interest but at least some of the commentary on this must be impartial.

As later10 says, there isn't such a thing as an impartial opinion as such in economics. Economics, like any other field of social science, is prey to ideologies, and the ideological stance of an economist is extremely influential in determining their interpretation of events.

I have a feeling that people feel economics is like engineering - or at least ought to be - so that we would know that the application of such and such an amount of economic stress x produces effect y. Unfortunately we don't know, although many economists would regard their particular answer to the question as true, or at least the closest approximation to truth available.

fred252 wrote: »

i haven't read much on the potential transfer union. any links? thanks

http://www.economist.com/node/17632957
http://online.wsj.com/article/SB10001424052748704657704576150371429717018.html

cordially,
Scofflaw

Sand

Scofflaw wrote: »

So there won't be a series of summit meetings that are dominated by the issue, then, I'm sure.

amused,
Scofflaw

No, there isnt. There are summit meetings dominated by competiveness pact proposals.

The top item on the agenda for the 17 heads of state and government is to agree a "competitiveness pact", a deal Germany and France are pushing the rest of the euro zone to adopt to show their commitment to overhauling their economies....

..."The competitiveness pact as it stands is largely meaningless, it's beside the point right now," said Simon Tilford, chief economist of the Centre for European Reform, a London-based think tank.

"The immediate issue is debt restructuring and bank recapitalisation and they're not dealing with that."

Friday's summit is only likely to lay the ground for a meeting of all 27 EU leaders in Brussels on March 24-25, when they hope to agree on a "comprehensive package" of measures they hope will draw a line under the crisis....

...But Merkel's political allies at home are adamantly opposed to bolstering the EFSF, which would require more taxpayer-backed guarantees, and neither do they want the fund to be used to buy distressed euro zone debt, as many other countries favour.

Merkel's coalition lost an important regional election in Hamburg last week and is expected to lose another in Baden-Wuerttemberg on March 27, piling pressure on the chancellor to stick closely to what voters want, which is no more German taxpayer funds being used for EU bailouts....

...."The wiggle room, the political room for manoeuvre on the part of the Germans, is worryingly limited," said Tilford.

"They are going to have to deliver something (on March 24-25) because the market reaction otherwise could be pretty adverse, but I fear that very little is going to be delivered."

We might get some sort of sort of concession (I am reminded by the joy that greeted news of the birth of the EFSF, how it was going to rout the markets and the evil speculators and save the world) that will look good on paper, but the basic political reality remains the same - German voters do not want to pay to bail out Ireland when Irish public sector wages and social welfare payments are so far in excess of what they themselves earn. And German politicians get their votes from appeasing the German electorate, not the Irish one. Dont expect the German political analysis of the issue to be any more mature or advanced than the Irish fixiation with getting a meaningless interest rate adjustment on the ECB/IMF bailout.

Scofflaw

Sand wrote: »

No, there isnt. There are summit meetings dominated by competiveness pact proposals.



We might get some sort of sort of concession (I am reminded by the joy that greeted news of the birth of the EFSF, how it was going to rout the markets and the evil speculators and save the world) that will look good on paper, but the basic political reality remains the same - German voters do not want to pay to bail out Ireland when Irish public sector wages and social welfare payments are so far in excess of what they themselves earn.

As far as I recall, the competitiveness pact is the German quid pro quo for movement on debt restructuring and bank recapitalisation - a binding promise that we won't do it again.

cordially,
Scofflaw

Sand

Scofflaw wrote: »

As far as I recall, the competitiveness pact is the German quid pro quo for movement on debt restructuring and bank recapitalisation - a binding promise that we won't do it again.

cordially,
Scofflaw

Wont do what again? The competitiveness pact text revolves almost entirely around competitiveness, employment and public debt sustainability. Ireland didnt get into a fiscal crisis through running up public debt - if anything, Irelands fiscal position and public debt position was being held up as a role model as late as 2007.

Our crisis is a banking crisis, and the proposal mentions "bank" zero times, and "banking" zero times.

People might *hope* for some mercy if we do everything we're told without question, but theres not commitment or link between the competiveness pact and a German undertaking to realistically address the EU banking crisis.

Scofflaw

Sand wrote: »

Wont do what again? The competitiveness pact text revolves almost entirely around competitiveness, employment and public debt sustainability. Ireland didnt get into a fiscal crisis through running up public debt - if anything, Irelands fiscal position and public debt position was being held up as a role model as late as 2007.

Our crisis is a banking crisis, and the proposal mentions "bank" zero times, and "banking" zero times.

People might *hope* for some mercy if we do everything we're told without question, but theres not commitment or link between the competiveness pact and a German undertaking to realistically address the EU banking crisis.

The quid isn't usually the same as the quo - that's why there's a lot in the document about indebtedness, which is the quid, but nothing about the quo, which is bailout fund changes. That draft was definitely put out as the French and German price for EFSF changes:

A DRAFT document by the EU, unveiled in Brussels on March 1, continues to demand legally binding commitments to a “competitiveness pact” but allows eurozone members some leeway on the legal framework in which the new rules would be enshrined.

Billed as a compromise, the draft was drawn up under instructions from European Commission President Jose Manuel Barroso and European Council President Herman van Rompuy in the hopes of quelling opposition to permanent measures of fiscal discipline as proposed by Berlin and Paris.
In return for signing the competitiveness pact, the Franco-German deal has offered to boost the lending capacity of a rescue fund for over-indebted eurozone countries.

The draft will be discussed at a special EU summit on March 11, with the aim of finalising a formal agreement at the EU’s official summit on March 25.

Still, I guess we'll see soon enough.

cordially,
Scofflaw

fred252

later10 wrote: »

No, that the ramifications of going along with Krugmann's advice has no ramification for him.

Do you think journalists are paid for concensus heralding boring opinions? It is very much in the media's interest to exaggerate and to stoke populist rhetoric. It's seperating that sort of cheap commentary from sound, considered commentary that people have to try and do successfully.

Perhaps Krugmann is correct, I am just saying that the policy he supports should be seen in light of his own potential motives. Same goes for someone writing for a banking magazine, an investments magazine, or a socialists' monthly. Krugmann's audience in the NYT is, largely, Joe Public and if joe Public doesn't like what he reads in the NYT he's not going to read it.

above you said his view "would realistically have zero impact on his professional career". at the same time you're saying it should be seen "in light of his own potential motives". are you suggesting his motives are to "exaggerate and stoke populist rhetoric" to keep his employers at the NYT happy?

i understand economics is not a science but i find it hard to believe there's no such thing as an unbiased view. of course your views are influenced by those you've been around, your work experience and education but that doesn't mean every view from every economist is biased. maybe its the definition of bias or impartiality that's causing a misunderstanding here.

although i do take the point that impartiality and economists rarely mix

Boskowski

jester77 wrote: »

The result of the Hamburg elections were because of local issues (mainly because of that muppet Ahlhaus) and are not a true reflection of the support for Merkels party or her EU policies.

The Baden Württemberg elections later this month will give a truer political picture of where her party and policies stand.

Of all things THAT I do not believe.

Baden-Württemberg like all states below the Weisswurstgrenze (read: predominantly catholic) are traditionally dominated by the Union (CDU/CSU).

However, the elections will be hugely influenced by the political desaster around the new railway station in Stuttgart.
You may not be familiar with this issue but it's basically what one may call 'the usual stuff': Ridiculous decision making in order to back corporate profit-making against common sense, actual requirements and the will of the ordinary people combined with brown envelopes left, right an center.
Which lead to widespread protests across the local population and not just across the 'usual suspects' (read: social democrats, lefties and greens). Which culminated in a scandalous police operation justified on technicalities against a demonstration in which secondary school students and elderly people (amongst others) were battered down by a mislead and overly violent police force. This had caused massive uproar and an unusually wide consensus in the populace and I cant actually believe how Mr. Mappus is still in office. He will be presented with the bill in the next election however.

Look up 'Stuttgart 21' for more information.

Not sure how that's relevant to the Irish problem, just trying to correct the notion this election will be anything like 'run of the mill'.

Sand

@Scofflaw

The quid isn't usually the same as the quo - that's why there's a lot in the document about indebtedness, which is the quid, but nothing about the quo, which is bailout fund changes. That draft was definitely put out as the French and German price for EFSF changes:

Eaten bread is soon forgotten Scofflaw. Nobody today seems to recall the sterling service of the Irish in saving our banks at any cost, and thus the Euro - apparently there was an implicit understanding there too. Nor is there any recognition that the Irish have sacrificed our sovereign credit rating to act as a go-between to help the ECB in bailing out EU banks by the backdoor. I doubt the Germans memory will improve should we sign up to their competiveness proposals in nothing more than hope that having gotten everything they wanted they might adopt us as some sort of pet.

Phillip Lane on irisheconomy.ie has highlighted this piece over on the FT on the mood in the countries we are expecting will take one for the team. Generally, much as there is popular anger against bailing out the banks in Ireland, theres a similar or even greater level of anger amongst core EU countries that they are being asked to pay and pay and pay for feckless and reckless behavior.

Much has been made about growing public anger in Europe’s periphery over Brussels-imposed austerity measures, from rioting in the streets of Athens to the overthrow of the long-ruling Fianna Fáil party two weeks ago in Dublin. But less well documented has been the seething bitterness in the eurozone’s fiscally prudent north that Mr Soini represents.

That public resentment is threatening to destabilise governments in Germany, Finland and the Netherlands just as the EU enters the final stretch of negotiations over a much-touted “comprehensive package” of reforms aimed at, once and for all, putting an end to the eurozone’s debt crisis.

According to officials involved in the talks, leaders from those three eurozone countries – all triple-A rated, all with strong balance sheets and all obliged to sign up for further financial guarantees if the EU were to enlarge its rescue system – have become the most significant roadblock to giving the Union new fiscal tools that many believe are essential to shoring up the continent’s debt-ridden economies.

But Berlin’s recent reluctance to support the array of proposals to help countries cope with unsustainable borrowing costs has engendered hand-wringing within the European Commission, the EU’s executive branch, and at the European Central Bank. The fear is that Ms Merkel has lost the initiative at home.

Over the past month she has suffered a series of setbacks, from defeat in elections in Hamburg – the first of seven states to vote this year – to the embarrassing resignation of her popular defence minister. Backbenchers in her coalition parties insist that no further concessions be made in Brussels. The chancellor’s carefully plotted strategy to keep her options open seems to be unravelling.

. . .

Ms Merkel’s dilemma is acute. Failure to agree on a new package of rescue measures in Brussels could add to the impression that her centre-right coalition in Berlin is confused and directionless. But if she agrees to put significantly more German taxpayers’ money on the line to guarantee the debts of “budgetary sinners”, she could alienate supporters.

The three state elections are all likely to provide a severe test of the popularity of her Christian Democratic Union. If they go badly, her own leadership will be called into question – although there is no other alternative leader in sight.

An Allensbach poll in January showed 68 per cent of Germans lacked trust in the euro. Public opinion is still essentially pro-European, but confidence has slipped. In May 2005, 62 per cent of Germans questioned agreed that “Europe is our future”; this January, only 41 per cent agreed, while 34 per cent disagreed.

But events have conspired to derail the plan. Her Free Democrat coalition partners, desperate to revive their own popularity, have been taking an ever-tougher line against German concessions in Brussels. In alliance with CDU backbenchers, they drafted a parliamentary resolution to limit her room for manoeuvre in Brussels. “She hated that,” says one adviser.

As nervous as Ms Merkel may be, her standing is relatively safe compared with that of her Dutch and Finnish counterparts, whom officials say have occasionally become even more strident than Germany in closed-door negotiations as their political fortunes have waned.

“The Finns and the Dutch have become terrible bedfellows,” says one person involved in the negotiations.

Mr Rutte struggled in December, for example, to win parliamentary support for Dutch participation in the Irish bail-out. Last month he faced a united front of anti-EU anger when a group of parties from across the political spectrum – from Mr Wilders on the far right to the Socialist party on the far left – passed a motion condemning any new controls by Brussels over national economic policy.

Essentially, the political imperative remains that Ireland ought to be punished, scolded and left to learn from pain. Its actually a remarkably similar mindset to the one that prevailed during Irelands last truly serious national crisis in the 1840s.

‘The judgement of God sent the calamity to teach the Irish a lesson, that calamity must not be too much mitigated. …The real evil with which we have to contend is not the physical evil of the Famine, but the moral evil of the selfish, perverse and turbulent character of the people’.

Like Trevalyn the view is that the problem ought to be managed, but not solved for fear that people wont have learned their lesson.

Grovelling as a negotiating tactic isnt going to make much headway with the popular anger (an anger I quite understand) that will incentivise our EU partners to drive a hard line so as to prevent themselves being outflanked by political rivals tapping into that anger at home. Given the Germans seem to be fixiated on these competiveness proposals which are utterly irrelevant to Irelands true problem (theyre nice and I dont have a problem with them - theyre just irrelevant), I wouldnt hold out much hope of anything other than a few baubles in concessions.

View

Sand wrote: »

Ireland didnt get into a fiscal crisis through running up public debt - if anything, Irelands fiscal position and public debt position was being held up as a role model as late as 2007.

Our governmental finances went off a cliff in Q2 2007. It continued getting worse as we opted for a policy of borrowing to fund the gap between revenues and expenditure, rather than face the consequences. Even if the banks were in fairly good shape, we'd still be having a fiscal crisis as we are spending 5 Euro for every 3 we take in in revenue. As it is, the banks are not remotely in good shape...

The figures from the IMF/EU "bailout" loans speak for themselves - 50 billion out of the total package of 85 billion goes to cover our day-to-day spending problem.

Politically speaking, unless we seriously tackle that, there is almost no chance that a solution to the banking issues could be put in place at EU level as it would be virtually impossible for other EU leaders to sell any possible solution to their parliaments - their opponents would claim that the only reason we need assistance with the banking problems is because we refuse to face our fiscal ones.

Scofflaw

Eaten bread is soon forgotten Scofflaw. Nobody today seems to recall the sterling service of the Irish in saving our banks at any cost, and thus the Euro - apparently there was an implicit understanding there too. Nor is there any recognition that the Irish have sacrificed our sovereign credit rating to act as a go-between to help the ECB in bailing out EU banks by the backdoor. I doubt the Germans memory will improve should we sign up to their competiveness proposals in nothing more than hope that having gotten everything they wanted they might adopt us as some sort of pet.

The narrative you have there requires certain things to be the case - that the Irish banks were full of EU money needing to be repaid, that the guarantee and the protection of the bondholders was required by Europe in order to allow the repayment, that the majority of the money in the bailout was destined for the banks. But none of those things are actually true.

Saving our banks at any cost was neither done on behalf of the rest of Europe, nor even in consultation with the rest of Europe - that's a matter of record. Our guarantee was a piece of precipitate and unilateral action which pretty much dragged everybody else in Europe into having to match our stance, and was highly unpopular.

Nobody asked Fianna Fáil to protect bondholders through the guarantee. The ECB now isn't happy about burning bondholders, and now has the leverage to make such a request - at the time, it didn't, and didn't. Back-casting the ECB as an explanation is anachronistic. Same goes for the EU and the IMF - it's silly to claim they compelled something that they weren't even consulted on.

The Irish banks borrowed very little money from eurozone banks. Again, that's a matter of record. There was very little in the way of covered Irish bank securities held in the eurozone - €14.3bn at the time of the guarantee, and only €3.9bn of that has been paid back. The rest of the world, by contrast, held €67.8bn in securities issued by the guaranteed banks, and €45.1bn of that has been paid back.

And the majority of the money in the bailout facility isn't for the banks either, unless you're one of these people who is willing to compare apples and oranges to make it look like that.

Fianna Fáil really weren't playing hero, I'm afraid, no matter what they claimed. They didn't institute the guarantee to save Europe, and nobody even asked them to do it. Our problems are primarily deficit problems, not banks problems - most of our debt is deficit debt, not bank debt, and it's 100% certain we will never recover any of our deficit debt. I'm not sure why you believe a narrative so entirely unsupported by facts, although I respect your right to do so if you prefer to.

cordially,
Scofflaw

fred252

Scofflaw wrote: »

The Irish banks borrowed very little money from eurozone banks. Again, that's a matter of record. There was very little in the way of covered Irish bank securities held in the eurozone - €14.3bn at the time of the guarantee, and only €3.9bn of that has been paid back. The rest of the world, by contrast, held €67.8bn in securities issued by the guaranteed banks, and €45.1bn of that has been paid back.

Where can these figures be found?

Scofflaw

fred252 wrote: »

Where can these figures be found?

Here: http://www.centralbank.ie/data/site/cmbs/ie_table_a.4.2_covered_institutions_-_aggregate_balance_sheet.xls

That's the aggregate balance sheet of the "covered institutions" - ie, the bailed out banks. Month-end figures for 2003-current.

cordially,
Scofflaw

fred252

Scofflaw wrote: »

Here: http://www.centralbank.ie/data/site/cmbs/ie_table_a.4.2_covered_institutions_-_aggregate_balance_sheet.xls

That's the aggregate balance sheet of the "covered institutions" - ie, the bailed out banks. Month-end figures for 2003-current.

cordially,
Scofflaw

when people talk about foreign banks lending irresponsibly to irish banks (who inturn lent irresponsibly to developers and joe public) are they referring to these "holdings of securities"?


if so that shows it at about 50 - 50, EU to Rest of World, upto Oct 2007. why did the balance change from then?

also how come loans to non-residents are so huge? are most of the developers non-residents?

Thanks

View

fred252 wrote: »

when people talk about foreign banks lending irresponsibly to irish banks (who inturn lent irresponsibly to developers and joe public) are they referring to these "holdings of securities"?

It's all soundbite - the reality is Anglo Irish had an A credit rate when they were being loaned money. It's a bit like a (random) bank loans Joe money to buy a house when he is on 100K a year - Joe subsequently fell on hard times and now earns 50K a year. He spends his time complaining that his bank were irresponsible in their lending to him at the time as he doesn't like paying back the money on a smaller salary.

later12

View wrote: »

It's all soundbite - the reality is Anglo Irish had an A credit rate when they were being loaned money. It's a bit like a (random) bank loans Joe money to buy a house when he is on 100K a year - Joe subsequently fell on hard times and now earns 50K a year. He spends his time complaining that his bank were irresponsible in their lending to him at the time as he doesn't like paying back the money on a smaller salary.

The thing is that loan application should have gone to a guy in credit assessment or risk analysis (as all loans do) who perhaps should have replied that Joe's job shifting gravels down the quarry was unstable due to greater market forces, or that Joe's own professional conduct was likely to land him in financial hot water in the medium term.

I'm not condoning anybody being put off the hook - but that applies to international wholesale lenders as much as to domestic managers and credit committees - both of whom have great recourse to their own pools of well educated and experienced risk analysis and control staff who ought to have been the kink in the chain both domestically and abroad. For some reason (yet to be broadly ascertained in my view, perhaps pending the Nyberg report) that did not happen.

Scofflaw

fred252 wrote: »

when people talk about foreign banks lending irresponsibly to irish banks (who inturn lent irresponsibly to developers and joe public) are they referring to these "holdings of securities"?

Yes - those debt issues are the borrowings of the Irish banks.

fred252 wrote:

if so that shows it at about 50 - 50, EU to Rest of World, upto Oct 2007. why did the balance change from then?

It didn't - these are the figures:

Year|Month|Irish Held|%|Eurozone Held|%|Rest of World|%|Total
2003|Jan|1,510 |9.85|490 |3.2|13,325 |86.95|15325.64
2003|Feb|1,698 |10.78|676 |4.29|13,380 |84.93|15753.86
2003|Mar|1,601 |10.16|665 |4.22|13,492 |85.62|15757.81
2003|Apr|1,554 |9.11|554 |3.25|14,955 |87.65|17063.38
2003|May|2,233 |12.43|712 |3.97|15,020 |83.6|17965.98
2003|Jun|2,330 |12.29|844 |4.45|15,775 |83.25|18948.68
2003|Jul|2,335 |11.99|744 |3.82|16,403 |84.2|19482.25
2003|Aug|2,356 |11.87|724 |3.65|16,767 |84.48|19847.35
2003|Sep|3,681 |16.42|743 |3.31|17,999 |80.27|22423.15
2003|Oct|3,817 |17.05|840 |3.75|17,729 |79.2|22385.81
2003|Nov|3,498 |15.65|795 |3.56|18,057 |80.79|22349.85
2003|Dec|3,486 |15.57|976 |4.36|17,928 |80.07|22390.1
2004|Jan|4,155 |16.36|1,113 |4.38|20,131 |79.26|25398.85
2004|Feb|4,925 |18.06|1,119 |4.1|21,232 |77.84|27276.88
2004|Mar|4,715 |16.72|1,447 |5.13|22,036 |78.15|28198.33
2004|Apr|4,934 |15.81|1,283 |4.11|24,994 |80.08|31211.38
2004|May|4,466 |14.59|1,258 |4.11|24,875 |81.29|30598.69
2004|Jun|4,008 |12.37|1,522 |4.7|26,865 |82.93|32395.13
2004|Jul|4,369 |13.3|1,496 |4.56|26,972 |82.14|32836.48
2004|Aug|6,002 |16.5|2,078 |5.71|28,293 |77.79|36373.39
2004|Sep|7,884 |20.05|1,684 |4.28|29,755 |75.67|39322.32
2004|Oct|8,655 |21.48|1,973 |4.9|29,665 |73.62|40293.55
2004|Nov|8,475 |20.31|1,834 |4.4|31,417 |75.29|41726.51
2004|Dec|6,641 |15.83|3,320 |7.91|31,985 |76.25|41945.44
2005|Jan|7,521 |16.28|3,471 |7.51|35,208 |76.21|46200.59
2005|Feb|7,963 |17.17|3,791 |8.17|34,623 |74.65|46377.09
2005|Mar|8,106 |16.66|4,550 |9.35|35,993 |73.99|48648.82
2005|Apr|8,241 |16.25|4,521 |8.92|37,943 |74.83|50704.92
2005|May|9,563 |17.71|5,190 |9.61|39,236 |72.67|53989.27
2005|Jun|10,293 |18.45|5,791 |10.38|39,719 |71.18|55803.74
2005|Jul|10,407 |18.38|6,237 |11.02|39,973 |70.6|56617.19
2005|Aug|10,752 |18.85|6,056 |10.62|40,226 |70.53|57034.1
2005|Sep|10,835 |17.4|6,059 |9.73|45,383 |72.87|62276.67
2005|Oct|9,467 |14.79|7,661 |11.97|46,887 |73.24|64014.92
2005|Nov|11,370 |16.11|8,026 |11.37|51,202 |72.53|70599.01
2005|Dec|11,602 |15.77|9,293 |12.63|52,681 |71.6|73576.49
2006|Jan|11,726 |15.84|9,564 |12.92|52,751 |71.25|74041.44
2006|Feb|12,892 |16.71|9,469 |12.27|54,807 |71.02|77167.81
2006|Mar|13,919 |17.51|10,659 |13.41|54,894 |69.07|79471.78
2006|Apr|17,406 |20.79|12,040 |14.38|54,291 |64.84|83736.91
2006|May|17,144 |20.58|12,459 |14.96|53,695 |64.46|83298.06
2006|Jun|15,860 |19.46|11,633 |14.27|54,026 |66.27|81518.54
2006|Jul|15,989 |18.38|12,212 |14.04|58,775 |67.58|86976.52
2006|Aug|16,366 |18.03|12,334 |13.59|62,060 |68.38|90759.82
2006|Sep|17,368 |17.78|12,728 |13.03|67,561 |69.18|97657.24
2006|Oct|17,765 |17.82|12,281 |12.32|69,658 |69.87|99703.39
2006|Nov|18,351 |17.88|13,110 |12.77|71,183 |69.35|102644.45
2006|Dec|20,988 |19.64|11,555 |10.81|74,299 |69.54|106841.92
2007|Jan|22,820 |20.06|13,181 |11.59|77,754 |68.35|113754.76
2007|Feb|23,614 |19.75|16,575 |13.86|79,388 |66.39|119575.89
2007|Mar|25,171 |21.28|15,824 |13.38|77,308 |65.35|118302.56
2007|Apr|28,467 |23.63|16,167 |13.42|75,826 |62.95|120459.88
2007|May|29,009 |24.05|15,249 |12.64|76,372 |63.31|120629.93
2007|Jun|31,364 |25.61|15,477 |12.64|75,626 |61.75|122467.88
2007|Jul|31,276 |24.81|15,556 |12.34|79,215 |62.85|126047.5
2007|Aug|29,658 |24.01|15,102 |12.23|78,772 |63.77|123532.42
2007|Sep|28,819 |23.6|14,090 |11.54|79,185 |64.86|122093.4
2007|Oct|28,578 |22.67|14,213 |11.28|83,256 |66.05|126048.05
2007|Nov|28,009 |22.84|13,786 |11.24|80,821 |65.91|122616.14
2007|Dec|28,068 |24.19|13,123 |11.31|74,826 |64.5|116016.89
2008|Jan|27,636 |23.01|13,357 |11.12|79,086 |65.86|120078.22
2008|Feb|27,272 |23.14|13,499 |11.45|77,091 |65.41|117862.35
2008|Mar|27,040 |23.29|14,065 |12.11|75,012 |64.6|116117.21
2008|Apr|26,954 |23.57|13,916 |12.17|73,477 |64.26|114347.14
2008|May|26,846 |23.01|15,274 |13.09|74,572 |63.9|116691.44
2008|Jun|26,719 |23.48|14,303 |12.57|72,766 |63.95|113786.82
2008|Jul|26,501 |24.04|14,005 |12.7|69,743 |63.26|110248.35
2008|Aug|25,877 |24.01|14,145 |13.12|67,775 |62.87|107796.6

No 50:50 there - not at any point.

fred252 wrote: »

also how come loans to non-residents are so huge? are most of the developers non-residents?

The covered banks virtually all have UK and US outlets, and loan heavily into those markets. They're not loans to Irish developers based abroad, but to foreign banks, governments, private sector etc.

Again, the pattern there is similar to in liabilities - most of the business engaged in by our banks outside Ireland is just not eurozone business. That's hardly surprising - the subsidiaries of banks like Anglo, AIB, BOI etc are based in the UK, US, places like the Channel Islands, Bermuda. There was a Polish subsidiary (now sold), but that's pretty much it for mainland Europe.

cordially,
Scofflaw

fred252

i was looking at "holdings of securities" on the assets tab. ooops :rolleyes:

as a matter of interest why were the rest of the world "holdings of securities" increasing and the EU "holdings of securities" decreasing for the year from Oct 2007 when they had been neck and neck to that point?

Scofflaw

fred252 wrote: »

i was looking at "holdings of securities" on the assets tab. ooops :rolleyes:

as a matter of interest why were the rest of the world "holdings of securities" increasing and the EU "holdings of securities" decreasing for the year from Oct 2007 when they had been neck and neck to that point?

Good question - I presume that ROW securities either offered a better deal or were more secure. No idea, really, though.

cordially,
Scofflaw

Sand

Scofflaw wrote: »

The narrative you have there requires certain things to be the case - that the Irish banks were full of EU money needing to be repaid, that the guarantee and the protection of the bondholders was required by Europe in order to allow the repayment, that the majority of the money in the bailout was destined for the banks. But none of those things are actually true.

Scofflaw, its my own fault. Theres no sarcasm tags.

Back in 2008, the banking guarantee was defended by its advocates as being the Irish, acting on a vague understanding ( the infamous, alleged "save your banks" call to Lenny from the ECB) stepping into the breach to buy time for the EU/ECB to come up with a policy in the face of total banking chaos. I remember, because Ive been pretty consistent in terms of leaving the banks to burn, and was told many, many, many times that this was a dangerous, crazy and derranged course of action. I also remember being told that if only we could hold out a bit longer, our good friends in the EU would be coming across the horizon, any day now, with the cavalry to save us. :rolleyes:

Now of course, the guarantee is presented as those reckless and feckless Irish engaging in their own, dangerous and unilateral action. Now the Irish are reaping the bitter fruit and they deserve it too. Apparently now, leaving the banks to burn was the EU/ECB policy all along. Apparently the memo just wasnt distributed.

What might have several EU banking failures done to the wider EU banking sector back in 2008? Who knows, and from a German perspective, who cares?

Now we come to 2011.

Again, Irish policy must be guided by some vague understanding that if they do X or Y, that they will get Z in return. Maybe. And we arent quite even sure what Z is. But if we do X or Y, we're pretty sure people will be grateful.

Unless of course, the narrative changes again.

Knowing what you know now - given how convinced you are now that the 2008 guarantee was reckless and feckless unilateral action...how sure are you that the narrative, based on only vague understandings of implied quid pro quos, wont change again? Maybe there was some poor guy in the DoF, who like you, honestly believed the EU/ECB would be grateful if the Irish threw themselves under a bus. Perhaps he too was reading between the lines to try and divine an implied quid pro quo.

This reminds me of the people who were trying to make friends with the market back in 2009, trying to wine and dine the bloody thing and invite it out to the pub for a chat, in the hope it wouldnt crush us.

Our problems are primarily deficit problems, not banks problems - most of our debt is deficit debt, not bank debt, and it's 100% certain we will never recover any of our deficit debt.

That is, quite simply...not true. We are not Greece. I am bemused by why you so readily surrender to the German fantasy that we are.

Irish debt was below 30% GDP as late as 2008. That is an excellent position to begin to tackle a deficit problem from. The Greeks by comparison had a debt well in excess of 100% GDP. They have a fiscal/deficit problem. We have been locked out of the markets because of the bottomless black holes that are our banks which have absorped up to 175 billion of debt which we are liable for - thanks to that stupid guarantee back in 2008. The markets might be willing to lend to an Irish state with a low debt profile and with a mind to address its deficits, but quite rightly, they will not lend to the Republic of Anglo-Irish.

To put the scale of the banking problem in its true context, the budget is planned to save a few billion this year.

In a single month, the Irish banks have increased the Irish taxpayers liability by almost 20 billion.

Oh yeah - Irelands problems are primarily a fiscal problem.

Scofflaw wrote: »

I'm not sure why you believe a narrative so entirely unsupported by facts, although I respect your right to do so if you prefer to.

What facts support your own narrative that if we sign up to these competiveness proposals and do everything the Germans ask of us, that like clockwork we will get a definite and decisive restructuring of Irish debt?

And yet, you believe it.

fred252

what sort of credit commitments are missing from the central bank's balance sheet?

this link seems to indicate that EU bank's exposure to Ireland is far greater than the 'rest of the world' banks;

http://www.ritholtz.com/blog/wp-content/uploads/2010/11/IRELAND_bail_out-002.jpg

where can we see what this "exposure" is comprised of?

Scofflaw

Sand wrote: »

Scofflaw, its my own fault. Theres no sarcasm tags.

Back in 2008, the banking guarantee was defended by its advocates as being the Irish, acting on a vague understanding ( the infamous, alleged "save your banks" call to Lenny from the ECB) stepping into the breach to buy time for the EU/ECB to come up with a policy in the face of total banking chaos. I remember, because Ive been pretty consistent in terms of leaving the banks to burn, and was told many, many, many times that this was a dangerous, crazy and derranged course of action. I also remember being told that if only we could hold out a bit longer, our good friends in the EU would be coming across the horizon, any day now, with the cavalry to save us. :rolleyes:

I should be interested to see the proof that that was the claim, because I was looking for evidence of it just yesterday, and, you know, I can't find it. On the contrary, Lenihan's statements at the time are all about reassuring the markets as to the solvency and stability of the Irish banking sector. Nothing about the ECB really appears in the justification narrative until mid-way through 2010.

Sand wrote: »

Now of course, the guarantee is presented as those reckless and feckless Irish engaging in their own, dangerous and unilateral action. Now the Irish are reaping the bitter fruit and they deserve it too. Apparently now, leaving the banks to burn was the EU/ECB policy all along. Apparently the memo just wasnt distributed.

No, that certainly wasn't the ECB's preference - but what relevance has that? It wasn't the Irish government's preference, and that's what counted. As to the unilateral nature of the Irish guarantee, the lack of consultation with any other parties, and the irritation of other European countries that resulted form it - all of that is a matter of record.

Sand wrote: »

What might have several EU banking failures done to the wider EU banking sector back in 2008? Who knows, and from a German perspective, who cares?

Now we come to 2011.

Again, Irish policy must be guided by some vague understanding that if they do X or Y, that they will get Z in return. Maybe. And we arent quite even sure what Z is. But if we do X or Y, we're pretty sure people will be grateful.

Unless of course, the narrative changes again.

No, I appreciate that's what has been spun about it here, but it seems to be purely for domestic consumption. I don't think anyone in Europe is particularly grateful for our actions, because I don't think any of our actions were particularly intended to benefit Europe, and they certainly haven't.

Sand wrote: »

Knowing what you know now - given how convinced you are now that the 2008 guarantee was reckless and feckless unilateral action...how sure are you that the narrative, based on only vague understandings of implied quid pro quos, wont change again? Maybe there was some poor guy in the DoF, who like you, honestly believed the EU/ECB would be grateful if the Irish threw themselves under a bus. Perhaps he too was reading between the lines to try and divine an implied quid pro quo.

Let's see - what has happened here is that the Irish government, in trying to save the entire Irish banking sector without upsetting anybody (including the banks), has gradually manoeuvered itself into a position where it can't afford the debts it has taken on by itself, has had to be bailed out by other people, can't really afford the debts it's taken on from them either, but has tied the issue of those debts so firmly to the confidence of the markets in eurozone bank and sovereign debt that it cannot be allowed to be seen to be allowed not to pay them. It has, in other words, manoeuvered itself and everyone else into a cleft stick. The problem is that, quite rightly, the Irish people feel they didn't ask for that to happen, and so they're making very loud noises about how it's an awful imposition on them. All true, but - and it's only fair for other countries to point this out - it was something imposed on them by their elected government. All that the outside lenders are requiring is that as part of the deal the Irish government now sticks to the commitments it has turned into a measure of everyone else's stability.

Sand wrote: »

This reminds me of the people who were trying to make friends with the market back in 2009, trying to wine and dine the bloody thing and invite it out to the pub for a chat, in the hope it wouldnt crush us.

That is, quite simply...not true. We are not Greece. I am bemused by why you so readily surrender to the German fantasy that we are.

Irish debt was below 30% GDP as late as 2008. That is an excellent position to begin to tackle a deficit problem from. The Greeks by comparison had a debt well in excess of 100% GDP. They have a fiscal/deficit problem. We have been locked out of the markets because of the bottomless black holes that are our banks which have absorped up to 175 billion of debt which we are liable for - thanks to that stupid guarantee back in 2008. The markets might be willing to lend to an Irish state with a low debt profile and with a mind to address its deficits, but quite rightly, they will not lend to the Republic of Anglo-Irish.

To put the scale of the banking problem in its true context, the budget is planned to save a few billion this year.

In a single month, the Irish banks have increased the Irish taxpayers liability by almost 20 billion.

Oh yeah - Irelands problems are primarily a fiscal problem.

By the time the debt actually taken on is counted up, the arithmetic invariably shows that the majority of the debt the state has taken on in this crisis is deficit debt, not bank debt. Waving "liabilities" around doesn't change that - it's meaningless that we were liable for €400bn under the original guarantee, for example, and it's meaningless to wave the 'own bonds' issue in February around either. None of those liabilities mean anything except in the case of liquidation, whereas deficit money is always gone when it goes.

manoeuvered What facts support your own narrative that if we sign up to these competiveness proposals and do everything the Germans ask of us, that like clockwork we will get a definite and decisive restructuring of Irish debt?

And yet, you believe it.[/QUOTE]

I not only don't believe it, I've never suggested it. We might, if that's the quid pro quo - if not, not. There is no clockwork.

regards,
Scofflaw

Scofflaw

fred252 wrote: »

what sort of credit commitments are missing from the central bank's balance sheet?

this link seems to indicate that EU bank's exposure to Ireland is far greater than the 'rest of the world' banks;

http://www.ritholtz.com/blog/wp-content/uploads/2010/11/IRELAND_bail_out-002.jpg

where can we see what this "exposure" is comprised of?

You can't, because the Basel Bank of International Settlements - on whose figures that diagram is based - doesn't give a breakdown.

The diagram is entirely irrelevant to the Irish covered banks, though, because it includes every bank and bank subsidiary in Ireland, including all the ones in the IFSC. That means it includes any money in a IFSC-based foreign bank subsidiary, because that money is technically 'owed' to the foreign parent of the bank.

Since the IFSC is a large financial hub, with a large number of bank subsidiaries based here only to avail of our CT rate, but doing no business in Ireland at all, the picture provided by such statistics tells you virtually nothing about the state of the Irish covered banks - which are the only ones of relevance to the Irish taxpayer.

cordially,
Scofflaw

Sand

@Scofflaw

I not only don't believe it, I've never suggested it. We might, if that's the quid pro quo - if not, not. There is no clockwork.

So again there is no link between Germany's proposals for a competiveness pact and anything even mildly useful for Ireland, which is unsurprising - as I originally noted, the word "bank" and "banking" do not appear in the document at all. Why then should Ireland feed the fantastical German narrative by meekly submitting to this view that the solution to the problem is competiveness and fiscal discipline given there is no quid pro quo, other than guesswork?

Anytime the Germans, or anyone else, tries to pretend Ireland has a fiscal crisis they ought to be referred to this graph .

Ireland ran surpluses in 2003, 2004, 2005, 2006 and 2007. Germany on the other hand ran deficits in 2001, 2002, 2003, 2004, 2005 and 2006.

Greece has never run a surplus in 14 years. Thats why they have a fiscal crisis.

We ought to be reminding the Germans of that each time they try to portray the crisis as a fiscal one.

No, that [leaving the banks to burn] certainly wasn't the ECB's preference - but what relevance has that?

Would Anglo-Irish or any of the other Irish banks have lasted to the end of 2008 absent extraordinary support - either from the government or the EU/ECB? If the decision is not to leave the banks to burn, then given the glacial pace of developments in the EU/ECB could Anglo-Irish or any of the other Irish banks have survived until Merkel and Company finally figured out if they were willing to entertain a transfer union? As it stands, theres serious grounds for doubt that Ireland will be able to survive until Merkel and Company finally figure out what they want to do, if anything.

If the view was bank failures ought to be prevented for fear of contagion (which is still the reason advocated for preventing restructuring of debt today) then in the absence of any EU/ECB ability to come up with a decisive plan for what are relatively minor banking losses on the periphery even now - the only people who could act were the government of Ireland who were forced to come up with a plan, making it up as they went along. That they made a mess of it is indisputable, but that was always inevitable if leaving the banks to burn was ruled out.

Let's see - what has happened here is that the Irish government, in trying to save the entire Irish banking sector without upsetting anybody (including the banks), has gradually manoeuvered itself into a position where it can't afford the debts it has taken on by itself, has had to be bailed out by other people, can't really afford the debts it's taken on from them either, but has tied the issue of those debts so firmly to the confidence of the markets in eurozone bank and sovereign debt that it cannot be allowed to be seen to be allowed not to pay them. It has, in other words, manoeuvered itself and everyone else into a cleft stick.

I dont know why youre telling me this. Ive been pretty consistent that the banks ought to have been left to burn, that the government should only have intervened to pick up the pieces, that the guarantee ought to have been revoked before it strangled us, that NAMA should never have been embarked on and so on.

Irelands creditors dont really care who is seen to pay back their money. They have already registered their disbelief that Ireland will pay them back by locking Ireland out of the markets. The only question left is if the EU/ECB will pay them back or if the glorious joy ride begun with Lennihan is finally at an end. If the EU/ECB are willing to pay up to maintain financial stability, then fine. If theyre not - and so far it appears very clear they are not - then fine.

Either decision will make our course of action clear and neither will be painless.

By the time the debt actually taken on is counted up, the arithmetic invariably shows that the majority of the debt the state has taken on in this crisis is deficit debt, not bank debt. Waving "liabilities" around doesn't change that - it's meaningless that we were liable for €400bn under the original guarantee, for example, and it's meaningless to wave the 'own bonds' issue in February around either. None of those liabilities mean anything except in the case of liquidation, whereas deficit money is always gone when it goes.

When you talk about deficit debt, are you including the value of the promissory notes that Lenny wrote for a series of insolvent banks on our behalf? Or the interest payment on those promissory notes? Because the EU is counting them as part of the deficit debt which is why we have the most ridiculous budget deficit measured as percentage of GDP measured by a developed, peacetime economy.

When I look at the deficits registed for 2008 and 2009 I get a total of 36 billion. And a good 4 billion of that is down to bank debt - specifically the 4 billion injected into Anglo-Irish in 2009. The markets havent locked us out because of 36 billion, which is barely enough to fund a mini-NAMA. Theyve locked us out because of the huge contingent liabilities we have to the black holes that are our banks. Trying to pretend that the banking liabilities we have taken on dont "mean anything" is your own opinion - the markets have taken their own view.

Again, I am bemused by how you so easily surrender to the lazy German narrative of the fiscally inept periphery. Yes, we have a budget deficit. Yes, we have to deal with it. But lets establish clear blue sky between us and the likes of Greece. We do not need a solution designed for the Greeks. We need a solution designed for our problems. And the first step in getting there is making it very, very, very clear that we are not Greece.