"Dicing with Debt" - Documentary

http://www.abc.net.au/4corners/stories/2012/03/08/3448633.htm

Worth a watch for an outside view

If your stuck for time skip halfway as the first half simply builds the picture for the Australian audience.

Many interesting comments about the bondholder burning negotiations & apparently we are locked in paying 3 billion a year for 17 years to bondholders!

Scofflaw

Deleted User wrote: »

If your stuck for time skip halfway as the first half simply builds the picture for the Australian audience.

Many interesting comments about the bondholder burning negotiations & apparently we are locked in paying 3 billion a year for 17 years to bondholders!

Not quite exactly. Locked in to destroying the money the last government created in order to pay off the bondholders is slightly more accurate - but see the possibility of an EU-brokered tracker mortgage - promissory notes deal that would change things a fair bit.

cordially,
Scofflaw

Just a quick pseudo synopsis:


comment in the documentary is that we are locked in paying 3 billion a year for 17 years to bond holders- Joan Burton says this at 38mins 35secs approx.

FF wouldnt burn bondholders without Europes permission. IMF said burn them.
FG got in saying they would renegotiate with Europe and was told no. FG had no guts to force the issue.
ECB bank guy says Ireland can pay back the debts without a writedown like Greece. Says Greece
is a unique case and will not be repeated.

36 mins 15secs in Colm McCarthy says we will have "great difficulty" paying this all back and alludes to a default. That Irish govt will have trouble making the sums add up - ECB guys says we will be able to pay it off.

later12

As Blindjustice says, there is much in that documentary which is probably well known to must people with an interest in the Irish economic and financial crisis.

However there was, to my mind, two crucial aspects of the dialogue. The first, and most important, is new information on me. And that is the IMF's and Alan Ahearne's version of events in relation to senior unguaranteed burdensharing at Anglo and that of the ECB. This claim that he fought for restructuring, and met ECB resistance, was previously suggested by Brian Lenihan, but came in for some skepticism at the time.

Jurgen Stark
Former Executive Board Member of the ECB
28:00

- (On burdensharing at Anglo) ...One has to consider the spillover effect to other market segments and to other countries, to other economies, and for this reason the Irish Government was advised not to follow the path, and it was not...

- Who advised them?

-...It was not only the ECB. It was the troika; so the senior management of the IMF, the EU Commission and the ECB, so there was a unanimous view at the top management level of the three institutions.

- Not to burn the private bondholders?

- Not to burn the private bondholders.

Jorg Amussen
Executive Board
ECB
29:00

- ...But the view of the troika... and they were united on this... was not to burn senior bank bondholders because the fear was that it would lead to more contagion.

- How strong was the fear of contagion at that time?

- It was there. You could see that the very large banking sector has linkages all over Europe... in the Euro zone... non-Euro zone...non-Euro zone countries obviously the U.K; but there's also a strong link across the Atlantic.

-- vs --

Alan Aherne
Economist
Adviser to Brian Lenihan
27:00

- The big issue was this issue over discounting bonds... the senior unguaranteed bonds in Anglo. And that was met right through that week, and in fact, even on the Saturday, the day before the Irish Government formally applied.
Brian Lenihan was still fighting, he brought all the senior people in from the troika for one last go at trying to put some losses onto senior bank bonds, but the ECB were absolutely against it.

Ajay Chopra
Head of the I.M.F. Mission to Ireland

We saw a very strong case that for the failed banks, there should be such sharing of the burdens with the unguaranteed creditors of the failed banks. That was our view. The Government made it very clear that they would act on this only with the consent of the European partners. The European partners were much more hesitant. They were very concerned about the knock-on effect.

And hence the Government had to decide not to proceed because it did not have the support of the European partners.

While it is recognized that the IMF have recently supported burden sharing in Anglo, I think it is important to clarify the input of both Alan Ahearne and the head of the IMF mission which are in conflict with the ECB's suggestion that there was unanimous opposition for restructuring senior unguaranteed debt at Anglo Irish Bank, now IBRC, at that crucial period back in 2010. These claims add further weight to similar claims made by Brian Lenihan in early 2011.

The second important point pertains to the issue surrounding contagion. I think the emphasis placed on contagion of an international nature by the ECB is also a particularly important contribution.

It's not exactly clear what role exactly the Commission played in all of this, but since their role is purely advisory anyway, and their recommendations must be accepted or rejected by the EU heads of state, I assume we can quite cheerfully ignore the Commission.

Scofflaw

later12 wrote:

However there was, to my mind, two crucial aspects of the dialogue. The first, and most important, is new information on me. And that is the IMF's and Alan Ahearne's version of events in relation to senior unguaranteed burdensharing at Anglo and that of the ECB. This claim that he fought for restructuring, and met ECB resistance, was previously suggested by Brian Lenihan, but came in for some skepticism at the time.

I'm not sure what scepticism it came in for, though. As far as I can see, people not only believe that the ECB were the main stumbling block to burning senior bondholders at the time of the bailout - something for which there's solid evidence - but apply that retrospectively to make the ECB responsible for the government's protection of senior bondholders from the very beginning, something for which the evidence is absent.

While it is recognized that the IMF have recently supported burden sharing in Anglo, I think it is important to clarify the input of both Alan Ahearne and the head of the IMF mission which are in conflict with the ECB's suggestion that there was unanimous opposition for restructuring senior unguaranteed debt at Anglo Irish Bank, now IBRC, at that crucial period back in 2010. These claims add further weight to similar claims made by Brian Lenihan in early 2011.

Again, not sure what the doubt was - the IMF made supportive noises about burning the senior unguaranteed debt quite early.

The second important point pertains to the issue surrounding contagion. I think the emphasis placed on contagion of an international nature by the ECB is also a particularly important contribution.

Particularly the "obviously the U.K; but there's also a strong link across the Atlantic", which bears out the view that a lot of the money in the Irish banks was UK/US (mind you, I'm not sure why people ever have a hard time with that idea, since those are the traditional money markets for Irish banks) , as well as the Karl Whelan claim that Geithner intervened in favour of protecting senior debt.

It's not exactly clear what role exactly the Commission played in all of this, but since their role is purely advisory anyway, and their recommendations must be accepted or rejected by the EU heads of state, I assume we can quite cheerfully ignore the Commission.

That's been something of a feature of the crisis.

cordially,
Scofflaw

later12

Yes the role of the ECB in protecting senior bondholders was challenged previously in this forum (including by myself at first, when media reports were unconfirmed).

I seem to remember having a debate with you on this very subject at the time of the 5th review and the Klaus Masuch episode. I don't want to misquote you but I believed you were in some doubt as to both the state's position on senior anglo debt and the foreign contagion argument which you didn't seem to agree concerned the ECB?

Not only do I think think that the IMF and Alan Ahearne version of events are difficult to challenge, but moving away from that, I think it would be necessary for economic historians to revisit similar suggestions made by Brian Lenihan and Michael Noonan in relation to Ireland having been 'bounced' into a bailout by the ECB.

Jurgen Stark, who I would suggest is not being completely honest in his portrayal of "unanimity" in the documentary also came out against the idea of Ireland being 'bounced' into a bailout two years ago.

Given the fact that Stark's and Jorg Amussen's version of events so blatantly clashes with the claims of the IMF, Ahearne, and Lenihan on senior debt, I wonder if the former and current ECB executive board members (if not the ECB itself) are not suffering from a slight credibility issue in relation to Ireland?

In that sense, I think historians, and those interested in or concerned with the roles played by the European institutions, might want to re-address other claims made by Lenihan with respect to the sovereign bailout and the ECB in light of this documentary.

Readyhed

Deleted User wrote: »

Worth a watch for an outside view

Excellent Synopsis of the last 5 - 6 years in a way that only a foreign channel could do. FYI It caches as an mp4 so you can save it in in case it is
time limited.

thanks blindjustice

Scofflaw

later12 wrote: »

Yes the role of the ECB in protecting senior bondholders was challenged previously in this forum (including by myself at first, when media reports were unconfirmed).

I seem to remember having a debate with you on this very subject at the time of the 5th review and the Klaus Masuch episode. I don't want to misquote you but I believed you were in some doubt as to both the state's position on senior anglo debt and the foreign contagion argument which you didn't seem to agree concerned the ECB?

I'm still not convinced the government has had to be coerced into adopting the ECB's point of view, if that's what you're thinking of?

later12 wrote: »

Not only do I think think that the IMF and Alan Ahearne version of events are difficult to challenge, but moving away from that, I think it would be necessary for economic historians to revisit similar suggestions made by Brian Lenihan and Michael Noonan in relation to Ireland having been 'bounced' into a bailout by the ECB.

Jurgen Stark, who I would suggest is not being completely honest in his portrayal of "unanimity" in the documentary also came out against the idea of Ireland being 'bounced' into a bailout two years ago.

Given the fact that Stark's and Jorg Amussen's version of events so blatantly clashes with the claims of the IMF, Ahearne, and Lenihan on senior debt, I wonder if the former and current ECB executive board members (if not the ECB itself) are not suffering from a slight credibility issue in relation to Ireland?

In that sense, I think historians, and those interested in or concerned with the roles played by the European institutions, might want to re-address other claims made by Lenihan with respect to the sovereign bailout and the ECB in light of this documentary.

I'm not sure what makes the statements involved more immediately credible than anyone else's account. Alan Ahearne was Lenihan's special advisor, which means that statements he makes may or may not be entirely neutral. And the same goes for the IMF, really - while people seem to have adopted the position that the IMF are somehow our friends, while the ECB are our enemies, they have, of course, a particular interest here - as well as no reputation for being anybody's friends. They do crisis management, and "success" to them is the country exiting their plan within the plan parameters. Whether that fast exit stores up difficulties down the line for the country in question is of no particular relevance to the IMF's "business model" - but perhaps, for some reason, they have a soft spot for Ireland that means they are looking out for our long-term best interests regardless.

sceptically,
Scofflaw

later12

Scofflaw wrote: »

I'm still not convinced the government has had to be coerced into adopting the ECB's point of view, if that's what you're thinking of?

No. I'm thinking specifically of doubts you expressed that foreign contagion was a concern of the ECB. As well as a belief that the state was in some way hesitant to impose losses on senior bondholders at Anglo from its own point if view. Neither of which are borne out in the documentary. In fact the former is most decidedly demolished..

I'm not sure what makes the statements involved more immediately credible than anyone else's account.

It's just that it is difficult to understand why Ajay Chopra would lie about the IMF's position, especially so when one considers that his organization has subsequently been rather public in its discourse surrounding the imposition of losses on this Anglo debt.

What's even more perplexing is the idea that the IMF would try to cover up Irish inherent hesitancy on imposing losses, if it existed, and blame the unwillingness on the Europeans. I can't quite see any credible reason as to why Ajay Chopra or IMF representatives would do such a thing.