EU Commission again calls for Irish debt deal

Scofflaw

The European Commission has warned that Ireland’s “hard-earned” reform progress to regain financial market trust will be “destroyed” unless EU leaders act quickly on debt promises made last year.

In a draft report the commission said the need for further bank recapitalisations cannot be ruled out, warned that the personal insolvency Bill was “at risk” and flagged health spending as a continued cause of concern.

The delegation criticised the Croke Park’s voluntary redundancy programme as “expensive” and noted Government plans to tackle unemployment by contracting private job agencies on a “payment-by-results” system. With tender proceedings likely in the spring, operations are unlikely to be signed before October. After positive comments this week from senior Brussels officials in Dublin the draft Commission report, circulated to German MPs yesterday and the German language version seen by The Irish Times, underlines the need for leaders to agree additional debt measures for Ireland.

http://www.irishtimes.com/newspaper/finance/2013/0112/1224328742783.html

Hopefully, that will help somewhat with attempts to secure a debt deal, but the institutional EU remains largely sidelined in attempts to reach a deal on the debt, since they're not in charge of the required money taps.

cordially,
Scofflaw

jased10s

By the time they get a so called deal it will be payed back.

They are string us along. Time for hard-ball. But alas you cant play if you have no balls.

woodoo

The IMF were calling for something similar too last year. Who suffers the hit if Ireland get a debt deal.

Sand

Yeah, everyone is calling for an Irish debt deal. I'm in favour of an Irish debt deal too for what its worth. Unfortunately, its the ECB who are the taskmasters here and they are not in favor of any meaningful Irish debt deal or any deal that looks anything like monetary financing. Nobody of importance to the issue is in favour of reducing the burden on the Irish taxpayer because that will mean they will have to take on that burden. I will give this government some credit - they are at least *asking* for a debt deal which is major, major, major progress for Green Jersey thinking. Unfortunately they only started asking for a deal after having played away all their negotiating cards. Oh well.

I am confident that a deal on the promissory notes will be announced by the government before March, a lot like the "deal on the promissory notes" secured back in March 2012. There will be some financial chicanery in how the promissory note is funded for the sake of appearance but the promissory note gets paid, on time and for the amount expected.

I would be interested in what others might think would constitute a meaningful "deal on the promissory notes"? Whats the measure of success? Any deal at all? Must the deal measurably reduce the fiscal burden of the promissory notes now and into the future, or is it enough to simply push the financial burden into the future when some other government will have to worry about it?

NIMAN

woodoo wrote: »

The IMF were calling for something similar too last year. Who suffers the hit if Ireland get a debt deal.

afaik, all the other members of the EU, although someone else may correct me.

Good loser

I would put it 'ourselves paying for ourselves'. Nothing could be fairer than that.

Scofflaw

Updates - Olli Rehn speaking at ECOFIN:

Good afternoon. I'm very happy to be here with Michael Noonan following the first ECOFIN meeting of the Irish Presidency.

We have begun this year significantly more advanced in our efforts to tackle both the symptoms and causes of the crisis than we were one year ago. The bold decisions taken at both the national and European levels have meant that tail risks related to the integrity of the euro have all but disappeared. Market tensions have eased and confidence has begun to return.

But with more than 26 million Europeans unemployed and businesses still struggling to obtain the credit they need to invest and grow, it is clear that we still have a great deal of work to do to ensure that Europe can move from stabilisation to sustained recovery. Against this background, I will highlight three key priorities that were discussed today, and that will be predominant during the Irish Presidency.

First, we need to reinforce the competitiveness of European industry. Several of our Member States have seen their export shares for goods and services in the global market decline over a number of years – a trend that poses a grave threat to Europe's future prosperity. We must reverse this trend by tackling the bottlenecks for growth. That's why we need more competitive labour markets and product and services markets.

That's why we need to restore the flow of credit to households and businesses. And that's why we need to enhance public and private investment. These will be key themes of this year's Country-Specific Recommendations, which the Commission will prepare in the coming months during the Irish Presidency in the context of the European Semester.

Second, we need to support Ireland and Portugal as they move into the concluding phase of their respective programmes and prepare to return to full market financing. Today's ECOFIN reaffirmed the growing confidence in both countries' prospects for a successful return to market financing. This confidence stems from the determined implementation of the economic reform programmes that we have seen in both Ireland and Portugal.

I want to underline that a successful return to the markets for these two countries is both in the interests of themselves and, indeed, certainly in the interests of the entire European Union. In the coming months, the ECOFIN and Eurogroup will explore, together with the European Commission, how to further facilitate this successful return to market financing.

Third, we need to take forward the rebuilding of Economic and Monetary Union with urgency and determination. This means that, in the coming weeks, we should see the conclusion of negotiations on the Single Supervisory Mechanism and new capital requirements rules (CRD IV). And before the summer, as my colleague Michel Barnier confirmed this morning, the Commission intends to come forward with our proposal for a single resolution authority.

In parallel, following yesterday evening's discussion in the Eurogroup, work will continue at technical level on the modalities for direct bank recapitalisation by the European Stability Mechanism, with a view to reaching agreement as soon as possible in the first half of the year.

Hopeful bits highlighted.

And from today's Irish Times:

European Union Economic and Monetary Commissioner Olli Rehn said today Ireland and Portugal could draw on a European Central Bank bond-buying programme to help them become the first bailout countries to be weaned off official aid and move back to market financing.

"The option of combining a precautionary program with the ECB's outright monetary transactions is something that should not be ruled out, and is one option that should be considered as a way of smoothing the way for a successful return to market financing," Mr Rehn told reporters after a meeting of EU finance ministers in Brussels today.

In a further concession, Mr Rehn said he favours giving Ireland and Portugal more time to pay back bailout loans, extending to them the same treatment granted to Greece last year. Any decision by the ECB to deploy its as-yet unused unlimited bond-purchase facility would rest with the independent central bank, he added.

Last night, euro zone finance ministers agreed in principle to extend the maturity of Ireland’s rescue loans, a move with potential to cut the cost of the bailout by billions of euro.The ministers called late last night for an examination of the maturity of Ireland’s loans from the EFSF, the fund controlled by euro zone countries.

http://www.irishtimes.com/newspaper/breaking/2013/0122/breaking10.html

cordially,
Scofflaw

Icepick

Everybody seriously suggesting that the debt is sustainable and will be repaid is either clueless or insane.
This country still has a huge deficit, rapidly ageing population and currently no energy sources to satisfy future needs.

Public pensions are going to bankrupt the government even without this enormous debt anyway.

Our recovery is based on economic predictions that are unrealistic. Japan has stagnated for 20 years and we want to pretend we can outgrow the above-mentioned burdens with half the adult population unemployed or outside the workforce.

Scofflaw

Icepick wrote: »

Everybody seriously suggesting that the debt is sustainable and will be repaid is either clueless or insane.
This country still has a huge deficit, rapidly ageing population and currently no energy sources to satisfy future needs.

Public pensions are going to bankrupt the government even without this enormous debt anyway.

Our recovery is based on economic predictions that are unrealistic. Japan has stagnated for 20 years and we want to pretend we can outgrow the above-mentioned burdens with half the adult population unemployed or outside the workforce.

Unfortunately, as far as I can see, it has worked out pretty much as I suggested a couple of years ago - our debt is just at the limits of sustainability. Maybe a little over, maybe a little under, depending on whether we have much growth or not, but not clearly in either definitely sustainable nor definitely unsustainable territory.

Part of that is the promissory notes, because while they've been added to our official public debt total, the whole point of them is that we didn't pay them at the time, so our debt in terms of what we've actually had to borrow, and what we're actually paying interest on, is still about €28bn less than the official figure.

So while this year's debt is projected to be €203.6bn and 121.4% of GDP (NTMA figures), the debt we'll actually be paying interest on is €178.6bn and 106% of GDP. That's a level that makes it rather harder to argue for a deal.

cordially,
Scofflaw

Cavehill Red

Anybody who would struggle to make the case that 5 million people on a small contracting island economy, many of whom are kids, or unemployed or otherwise not working, cannot be expected to repay €178.6bn is the wrong person to send in to the negotiations.
A monkey with a stick could point out how this debt is utterly unsustainable. Eurostat had a nice chart the other day, showing the cost of Europe's bank bailouts per capita as nearly €9,000 per head in Ireland (I make it more, myself, but whatever) compared to €491 in Germany (who were in second place.) Greece were bottom of the list having benefited per capita from the bail out.
Yeah, we're all in it together, aren't we?

Scofflaw

Cavehill Red wrote: »

Anybody who would struggle to make the case that 5 million people on a small contracting island economy, many of whom are kids, or unemployed or otherwise not working, cannot be expected to repay €178.6bn is the wrong person to send in to the negotiations.
A monkey with a stick could point out how this debt is utterly unsustainable. Eurostat had a nice chart the other day, showing the cost of Europe's bank bailouts per capita as nearly €9,000 per head in Ireland (I make it more, myself, but whatever) compared to €491 in Germany (who were in second place.) Greece were bottom of the list having benefited per capita from the bail out.
Yeah, we're all in it together, aren't we?

Eurostat, though, shows only the impact of the bailouts on General Government Debt, which is why you make it more - it doesn't count the cash contributions from the NPRF, although it does count the promissory notes we haven't actually paid as yet. As such, it's a pretty meaningless basis for "comparison" of the size of bailouts - it's like saying that someone who paid €300k for their house and borrowed €260k of it "paid more for their house" than someone who put down €400k of their cash on a €600k house.

cordially,
Scofflaw

Cavehill Red

I think we all know Eurostat like to juggle figures on almost any issue in order to make the EU seem as egalitarian as possible.
The fact that the best they could do with this measure is still an off-the-chart debt levied solely on Ireland indicates that we got royally screwed.

Scofflaw

Cavehill Red wrote: »

I think we all know Eurostat like to juggle figures on almost any issue in order to make the EU seem as egalitarian as possible.
The fact that the best they could do with this measure is still an off-the-chart debt levied solely on Ireland indicates that we got royally screwed.

I think that's a frankly ridiculous analysis, to be honest. Those figures are what they are - I have no idea why anybody thinks they can be used for comparison across Europe, and even less idea how someone could come to such a daft conclusion about their use, given that the real size of the Irish bailout is a matter of public record.

cordially,
Scofflaw

Cavehill Red

I'm not sure what you're trying to query here.
It's a per capita analysis of relative cost across the EU nations.
It demonstrates a stratospheric disparity between the per capita cost in Ireland and everywhere else.
I appreciate depicting this information in such stark visual form somewhat undermines your ongoing thesis that we should just shut up and pay, because it's fair that we do. Nevertheless, as a comparative, it is a legitimate one, and it visually reveals the enormous unfairness of the burden of the bailout upon the people of this nation.

Scofflaw

Cavehill Red wrote: »

I'm not sure what you're trying to query here.
It's a per capita analysis of relative cost across the EU nations.
It demonstrates a stratospheric disparity between the per capita cost in Ireland and everywhere else.
I appreciate depicting this information in such stark visual form somewhat undermines your ongoing thesis that we should just shut up and pay, because it's fair that we do. Nevertheless, as a comparative, it is a legitimate one, and it visually reveals the enormous unfairness of the burden of the bailout upon the people of this nation.

Er, no. The point is that it's not a good basis for comparison at all - it's an apples and oranges comparison which depends entirely on what bits of the bailout costs were booked as general government debt. We know it doesn't show the actual cost of the Irish bailout, which is €62.5bn, or its actual cost to date, which is €28bn less than that (PNs not yet paid), and we know it can't possibly be showing the true cost of the German bailout, because the Germans put €100bn into Hypo alone. So it's rather obviously not a good comparison, and I suspect that the creator of the graph has engaged in some massage of the figures according to some agenda or other.

Nor do I advocate that we should "shut up and pay". On the contrary, I, like every other taxpayer and user of government services, would be very happy to see our bailout debt reduced (or any debt, come to that), because paying for it comes out of my taxes and services. However, I don't think kidding ourselves with made-up figures is of any value, because kidding ourselves doesn't have any impact on the people we need to persuade - well, except perhaps to persuade them we're not very good with figures, which is an impression rather contrary to what we want to create. If Germany has a figure for its bailout spending which is not this figure - which they do - waving this figure in their faces will achieve nothing. As such, figures like this tend to reflect domestic agendas rather than anything else.

Is the graph from Eurostat? Or is it from an Irish source with a vested interest in hyping the bank debt over the deficit?

cordially,
Scofflaw

AlmightyCushion

Scofflaw wrote: »

Er, no. The point is that it's not a good basis for comparison at all - it's an apples and oranges comparison which depends entirely on what bits of the bailout costs were booked as general government debt. We know it doesn't show the actual cost of the Irish bailout, which is €62.5bn, or its actual cost to date, which is €28bn less than that (PNs not yet paid), and we know it can't possibly be showing the true cost of the German bailout, because the Germans put €100bn into Hypo alone. So it's rather obviously not a good comparison, and I suspect that the creator of the graph has engaged in some massage of the figures.

Is the graph from Eurostat?

cordially,
Scofflaw

The graph is taken from this article. The Eurostat figures are here.

Also, apart from the €100bn Germany put into Hypo, didn't Germany give BayernLB €30bn. The UK gave Llyods and RBS about £70bn and threw a few billion at Northern Rock. The Spanish have to put €100bn into their banks and Greece is putting aside another €50bn for their banks (apparently, they only need about €28bn). Obviously, what Greece and Spain are going to put into their banks won't be counted by Eurostat because it hasn't been paid yet. However, it does show that they haven't escaped massive bailout costs like the graphs suggest.

Scofflaw

AlmightyCushion wrote: »

The graph is taken from this article. The Eurostat figures are here.

Also, apart from the €100bn Germany put into Hypo, didn't Germany give BayernLB €30bn. The UK gave Llyods and RBS about £70bn and threw a few billion at Northern Rock. The Spanish have to put €100bn into their banks and Greece is putting aside another €50bn for their banks (apparently, they only need about €28bn). Obviously, what Greece and Spain are going to put into their banks won't be counted by Eurostat because it hasn't been paid yet. However, it does show that they haven't escaped massive bailout costs like the graphs suggest.

Ah...Michael Taft. The unions' 'economic commentator'. I cannot for the life of me see why a union expert might possibly be interested in producing figures that hype the cost of the bank bailout - as opposed to, say, the government deficit partly resulting from agreements such as Croke Park...

...oh, wait, I just thought of a reason. I'll have a look at the Eurostat figures tomorrow, thanks for the link.

cordially,
Scofflaw

Cavehill Red

The figures are from Eurostat, not Michael Taft.

Scofflaw

Cavehill Red wrote: »

The figures are from Eurostat, not Michael Taft.

Actually, it turns out the original figures are from Eurostat, but you won't find the figures in Taft's article there, which means the figures you're using are indeed Taft's, not Eurostat's.

The Eurostat figures give the costs of bailouts around the EU as very - very - much higher than Taft's graph. There's a summary spreadsheet which allows for easy comparison, and that has the following costs for outlay:

Country|Bailout Costs (€m) 2011
BE|€24,500.23
DK|€8,230.75
DE|€294,735.36
IE|€45,567.76
EL|€5,094.00
ES|€24,405.00
IT|€2,600.00
LV|€1,341.69
LT|€867.88
LU|€2,500.00
HU|€498.94
NL|€44,512.00
AT|€7,545.35
PT|€7,294.13
SI|€1,312.00
SE|€629.63
UK|€122,264.29

This can be cross-confirmed by, for example, statements issued by the UK government:

Our most recent estimate of the outstanding support is set out in the C&AG’s Report on HM Treasury’s 2011-12 Resource Accounts.

Total outstanding support as at 31 March 2012 (£bn)
Guarantee commitments 109.17
Cash outlay 118.86
Total support 228.03

That's in sterling, of course, which means that the UK figure in Eurostat ought to be €141.5bn rather than €122bn. Right ballpark, but not the same figure - and the figures are provided by the governments to Eurostat, so they should be.

Our bailout figure there of €45.6bn also looks a little odd, given we know that our bailout figure is actually €62.5bn - as I suggested earlier, this is because Eurostat only records the amount that makes it onto General Government Debt. So, straight off, we know we're not dealing with figures that actually represent what has been spent - instead, this is an accountancy statistic.

Second, those obviously aren't the figures in Taft's graph. The only way I could come close to those is by subtracting from the cost of the bailouts the figure also provided for "general government assets", which seems to be the value of the assets acquired in the bailed out banks. Such valuations will depend very heavily on share prices in all cases (bar Anglo/IBRC in our case), which means that the figures in question are a snapshot of the valuation of the bailed out banks' assets in 2011.

Taft's figures, then, depend sensitively on the balance between the "booked to GGD" value of the bailouts on the one hand and the "market valuation" of the value of the banks on the other. Is there anything special about the Irish case? Yes, it turns out there is:

The only case where government liabilities increased much more than government assets is Ireland. This can be explained by the fact that most interventions have been immediately recorded as deficit-increasing government expenditure and not as financial transactions.

That is, the way in which we bailed the banks out is important - our direct capitalisations, and our promissory notes, both had to be booked directly to GGD as "deficit-increasing government expenditure", whereas other bailouts took the form of "financial transactions" where assets were bought for government cash. Thus, presumably, the missing part of our bailout figure is the share purchases as opposed to capital injections and promissory notes - whether the NPRF contribution is recorded I don't see that the NPRF contribution would be counted either, but since in large measure the share purchases were funded from the NPRF anyway, the question is a little redundant.

We can also see that IBRC's assets are not included in our assets total, because IBRC doesn't apparently qualify to be classified under general government debt, although all spending on Anglo is booked.

So our bailout cost according to Taft turns out to depend very heavily on the wayin which we chose to bail the banks out, as opposed to how much we spent, and on the market value of the acquired bank assets in 2011. The German bailout is made to look smaller than ours by subtracting the very much larger perceived value of the German banks' assets of €250bn, whereas our bank assets apparently manage to be negative. France has managed to avoid retaining any of its bailout costs on GGD by 2011, although it's clear it was spending money earlier - we know it was involved in the Dexia and Fortis bailouts, which seem to be shown in the figures from 2008-2010. So in France's case, the bailouts show up as making a profit, because the French government appears to have wound down its bailout positions.

These figures, then, paint an extremely false picture of actual bailout costs. They represent only a snapshot of a part of the costs and assets, and they depend heavily on four variables:

1. the exact nature of the transactions used to bail out the banks - the more direct recapitalisations were used, the "larger" the bailout. Our bailout consisted of 70%+ direct recapitalisations, so more of our bailout registers.

2. the government deficit position at the time of bailout, because Eurostat is only concerned with deficit-increasing expenditure. Our bailouts came 100% on top of an existing deficit.

3. the valuation of the banks' assets at the time of record. The dependence here is very large - a 10% drop in the value of German bank shares would balloon Taft's version of their bailout to €68bn.

4. the stage of the process the country is at. France's bailouts have basically been completed, and show a small net profit. Most countries' bailouts are somewhere in the middle, and any return they might show lies in the future. We are mid-bailout, having not returned the banks to normal functioning or market funding.

It's hard to see what Taft has done as anything other than an extremely contrived exercise in comparing apples and oranges in support of a domestic agenda that seeks to focus on the bank bailouts as against the ongoing government deficit.

cordially,
Scofflaw

Bits_n_Bobs

Scofflaw wrote: »

It's hard to see what Taft has done as anything other than an extremely contrived exercise in comparing apples and oranges

Taft sounds like a pretty good economist on that basis. He should go work for one of the banks...

passive

Scofflaw wrote: »

All the sensible words and analysis

Would it be possible, without massive amounts of effort, to make a graph showing the actual total cost per country/as a % of GDP or even per capita? i.e. a counter-graph that isn't totally made up? Or would that be nigh impossible as the figures are all slippery and fluctuating and yet-to-be-quantifiable?

I find it depressing that this graph will go viral and I will have extreme difficulty getting even two or three people to read your lengthy rebuttal (nevermind read it a couple of times to get some idea what it actually says about the graph and why, if those people are as economically illiterate as me.)

Icepick

Scofflaw wrote: »

Unfortunately, as far as I can see, it has worked out pretty much as I suggested a couple of years ago - our debt is just at the limits of sustainability. Maybe a little over, maybe a little under, depending on whether we have much growth or not, but not clearly in either definitely sustainable nor definitely unsustainable territory.

Part of that is the promissory notes, because while they've been added to our official public debt total, the whole point of them is that we didn't pay them at the time, so our debt in terms of what we've actually had to borrow, and what we're actually paying interest on, is still about €28bn less than the official figure.

So while this year's debt is projected to be €203.6bn and 121.4% of GDP (NTMA figures), the debt we'll actually be paying interest on is €178.6bn and 106% of GDP. That's a level that makes it rather harder to argue for a deal.

cordially,
Scofflaw

Tell me where the growth is going to come from.

Cavehill Red

I'm no especial fan of Taft or the unions, but I think I need to respond to the following:

Scofflaw wrote: »

1. the exact nature of the transactions used to bail out the banks - the more direct recapitalisations were used, the "larger" the bailout. Our bailout consisted of 70%+ direct recapitalisations, so more of our bailout registers.

Taft wasn't responsible for how Ireland (or anyone else) constructed their recapitalisations. How we (or to be precise Brian Lenihan) chose to construct those transactions may have an impact on the thing which he is attempting to measure, ie per capita bailout cost, but just because we chose a more expensive way of recapitalising doesn't undermine his figures.

Scofflaw wrote: »

2. the government deficit position at the time of bailout, because Eurostat is only concerned with deficit-increasing expenditure. Our bailouts came 100% on top of an existing deficit.

I think even you accept this is not Taft's fault and indeed it is a legitimate measurement that Eurostat are engaged in. It might change the optics slightly to depict the bailouts in isolation from deficits across Europe, but it doesn't change what Taft has presented, ie the cost of the Irish bailout per capita.

Scofflaw wrote: »

3. the valuation of the banks' assets at the time of record. The dependence here is very large - a 10% drop in the value of German bank shares would balloon Taft's version of their bailout to €68bn.

Again, this changes the optics of other bailouts, but not the Irish one. Of course, we're in a string length-measuring exercise attempting to guess the future book price of bank assets. Economic trajectory and fundamentals (mortgage defaults etc) indicates that the Irish bank assets are especially poor.

Scofflaw wrote: »

4. the stage of the process the country is at. France's bailouts have basically been completed, and show a small net profit. Most countries' bailouts are somewhere in the middle, and any return they might show lies in the future. We are mid-bailout, having not returned the banks to normal functioning or market funding.

Again, only slightly changes the optics of some of the figures. Also, again, it isn't Taft's or Eurostat's problem that Ireland is still attempting to resuscitate zombie banks while other economies have completed the bank restructuring process and moved ahead.

Scofflaw wrote: »

It's hard to see what Taft has done as anything other than an extremely contrived exercise in comparing apples and oranges in support of a domestic agenda that seeks to focus on the bank bailouts as against the ongoing government deficit.

cordially,
Scofflaw

You see, while I don't especially query your quibbles, I do have problems with your conclusion. Taking a snapshot is not a contrivance. If Taft had attempted to compare Ireland 2013 with France 2010 for example, you'd be complaining of contrivance too. The way you construct the discussion, there is no possibility of NOT contriving the figures.
Now, it may well be that you're entirely correct that it serves a domestic purpose for Taft to present these particular figures at this particular time. I don't dispute that, nor do I query the need to address the ongoing deficit whatsoever.
However, what I do dispute and query is your ongoing insistance that the Irish bailout is somehow reasonable, or fair, or normal. No matter how one attempts to parse the Eurostat figures, or contrive them, it is painfully evident that the burden on the Irish taxpayer greatly exceeds that experienced by any other European.

Good loser

Cavehill Red wrote: »

You see, while I don't especially query your quibbles, I do have problems with your conclusion. Taking a snapshot is not a contrivance. If Taft had attempted to compare Ireland 2013 with France 2010 for example, you'd be complaining of contrivance too. The way you construct the discussion, there is no possibility of NOT contriving the figures.
Now, it may well be that you're entirely correct that it serves a domestic purpose for Taft to present these particular figures at this particular time. I don't dispute that, nor do I query the need to address the ongoing deficit whatsoever.
However, what I do dispute and query is your ongoing insistance that the Irish bailout is somehow reasonable, or fair, or normal. No matter how one attempts to parse the Eurostat figures, or contrive them, it is painfully evident that the burden on the Irish taxpayer greatly exceeds that experienced by any other European.

They're far more than quibbles. They comprehensively show up the tendentious 'fraud' of Taft's work.

A snapshot can readily be a contrivance. And is so here.

Scofflaw's work, here as always, is real scholarship. Argue with him at your peril!

As a taxpayer I would not mind getting a bailout from Europe, but I consider the arguments 'we' make morally and intellectually dubious.

I would love to have listened in to that discussion last year between the Irish (incl. Peter Matthews) and German parliamentarians - the Irish have been quiet as mice about it.

Cavehill Red

I don't mind arguing with Scofflaw. He/She is formidably informed, which is a breath of fresh air when discussing such matters. As I recall, we have had a number of tussles in which Scofflaw has lost the argument as often as won it. I am always interested in Scofflaw's analysis, though I don't often agree with his/her conclusions.
As a taxpayer, I'd adore a bailout from Europe. We never got one. I lament the ongoing media portrayal that the IMF/EU deal was a bailout of Ireland when in fact the bailout went in the opposite direction - the Irish taxpayer bailing out foreign banks.
I too would love to know what was said by the German parliamentarians, though somehow I feel it wouldn't surprise me. I know what I would say if I were a German parliamentarian, and I know what the Germans have consistently said in relation to Greece.
Nevertheless, and I am entirely aware of the divergence in circumstances (Euro membership being the primary one), I am constantly reminded of the reversal of perspective in relation to Iceland, about which at one time we joked. Now they are in significant recovery, with senior bankers facing imprisonment and can borrow on the bonds markets as they choose. We remain mired in debt, much of which was not contracted by the state, but underwritten without the express will of the Irish people by Brian Lenihan.
There is a school of thought, which I believe Scofflaw adheres to, which considers this a debt of honour, requiring repayment, the failure of which to do would incur all manner of wrathful vengeance from boogeymen such as the ECB, the German government and the international bonds markets. I am not of this school of thought.
Rather, I believe it is not a debt of the Irish people to repay speculative investments in private Irish banks, and I think that it is long past time that we looked long and hard at the impact of attempting to pay the impossible on the future of this nation, because it is not sustainable to continue exporting our brightest and best youth, slashing public services (and yes, maintaining jobs for life in the public sector too) and expect the growth levels necessary to repay even a fraction of the debt we are currently contracting to pay.

NAP123

Good loser wrote: »

They're far more than quibbles. They comprehensively show up the tendentious 'fraud' of Taft's work.

A snapshot can readily be a contrivance. And is so here.

Scofflaw's work, here as always, is real scholarship. Argue with him at your peril!

As a taxpayer I would not mind getting a bailout from Europe, but I consider the arguments 'we' make morally and intellectually dubious.

I would love to have listened in to that discussion last year between the Irish (incl. Peter Matthews) and German parliamentarians - the Irish have been quiet as mice about it.

Did you not notice the last bailout of Europe/ sorry, from Europe.

Hero worship is not a quality I am particularly fond of.

Scofflaw

Cavehill Red wrote:

However, what I do dispute and query is your ongoing insistance that the Irish bailout is somehow reasonable, or fair, or normal. No matter how one attempts to parse the Eurostat figures, or contrive them, it is painfully evident that the burden on the Irish taxpayer greatly exceeds that experienced by any other European.

I don't know whether that's really anything I've asserted - my main point has been that a lot of silly numbers are thrown around through support of various agendas, through journalistic sloppiness, or through just plain innumeracy. Still, let's take the idea that Ireland's bank bailout is "reasonable, fair and normal" - I guess the question there is "what's reasonable, fair, or normal" supposed to be in relation to?

I would have said, and this is also somewhat in response to passive's query, that the size of our bank bailout should really be judged in proportion to the size of our banks - that seems logical to me, since if Anglo had had a balance sheet of fifty quid, bailing it out would presumably have cost pocket money.

So:



The figures that's based on are the Eurostat figures - I don't like them as comparatives, for all the reasons I've given, but they're OK as indicators of general magnitude, which is what we're aiming for here:

Country|Bank Balance Sheets end-2007 (€bn)|Bailout Impact on GGD, gross (€m)|Bailout as % of Bank Balance Sheets
AT|785|7,545.4|0.96%
BE|1362|24,500.2|1.80%
DE|6625|294,735.4|4.45%
DK|745|8,230.8|1.10%
EL|312|5,094.0|1.63%
ES|3008|24,405.0|0.81%
HU|43|498.9|1.16%
IE|584|45,567.8|7.80%
IT|2422|2,600.0|0.11%
LT|5|867.9|17.36%
LU|88|2,500.0|2.84%
LV|12|1,341.7|11.18%
NL|1807|44,512.0|2.46%
PT|340|7,294.1|2.15%
SE|1100|629.6|0.06%
SI|35|1,312.0|3.75%
UK|7329|122,264.3|1.67%

The bank figures are from here (ECB consolidated national figures), are domestic banks only (no IFSC), and are end-2007, which I've picked as the last normal pre-crisis year.

As you can see, our GGD cost of bailout comes in as about 7.8% of the size of the banks' pre-crisis balance sheets. That's certainly not the least costly bailout, but it's not the most either. I guess I wouldn't necessarily call it "normal", but I'd certainly say "reasonable" in the sense that it's no outlier. "Fair" is a different question, really - the magnitude of a bailout clearly relates to the size of a country's banks, and it's quite possible that the differences thereafter relate in some degree to the quality of regulation, which is generally agreed as having been very poor in Ireland's case - the degree to which banks were 'irresponsible' relates primarily to their regulation. Since Germany also has a high bailout cost in relation to the size of its banks, those who claim German banks were also particularly 'irresponsible' seem prima facie to have a case - until one remembers that their most expensive bailout resulted from Depfa, which was based in the IFSC and regulated by the Irish regulator.

An exercise I'm only a very little surprised hasn't been done is to see what proportion of the bank bailouts round Europe involve IFSC subsidiaries - I can think of two straight off, Sachsen and Depfa. I suspect the result would be interesting, and highly unpopular here.

cordially,
Scofflaw

Scofflaw

Cavehill Red wrote: »

I don't mind arguing with Scofflaw. He/She is formidably informed, which is a breath of fresh air when discussing such matters. As I recall, we have had a number of tussles in which Scofflaw has lost the argument as often as won it. I am always interested in Scofflaw's analysis, though I don't often agree with his/her conclusions.

Thanks, although I should point out in respect of those kind words that I don't usually have any access to sources which are not public.

Cavehill Red wrote: »

As a taxpayer, I'd adore a bailout from Europe. We never got one. I lament the ongoing media portrayal that the IMF/EU deal was a bailout of Ireland when in fact the bailout went in the opposite direction - the Irish taxpayer bailing out foreign banks.
I too would love to know what was said by the German parliamentarians, though somehow I feel it wouldn't surprise me. I know what I would say if I were a German parliamentarian, and I know what the Germans have consistently said in relation to Greece.
Nevertheless, and I am entirely aware of the divergence in circumstances (Euro membership being the primary one), I am constantly reminded of the reversal of perspective in relation to Iceland, about which at one time we joked. Now they are in significant recovery, with senior bankers facing imprisonment and can borrow on the bonds markets as they choose.

It's worth reading what Icelanders say about Iceland rather than accepting at face value media judgements which we know to be largely valueless in our own case.

Cavehill Red wrote: »

We remain mired in debt, much of which was not contracted by the state, but underwritten without the express will of the Irish people by Brian Lenihan.

Unfortunately, that makes no constitutional sense at all. Brian Lenihan contracted the debt on behalf of the State, and thus the Irish people, and was entirely within his legal powers in doing so. One doesn't have to like the fact, but the suggestion that there's something illegal about what he did is entirely spurious.

It comes down to a case of being careful who we vote for, because we're handing them the power to do such things, and we have no legal recourse afterwards.

Cavehill Red wrote: »

There is a school of thought, which I believe Scofflaw adheres to, which considers this a debt of honour, requiring repayment, the failure of which to do would incur all manner of wrathful vengeance from boogeymen such as the ECB, the German government and the international bonds markets. I am not of this school of thought.

As you've described it, neither am I. I see it as an entirely legally contracted debt, and one which we should do our absolute best to get out of. I'm only of the view that our best should not consist of making up comforting stories about how we were hard done by, both because it's really quite unlikely they'll persuade anyone but ourselves, and because by believing them ourselves, we'll learn entirely the wrong lessons from the whole business. The "it was the German banks what done it" argument is the sort of comforting nonsense which is allowing people to drift back to Fianna Fáil, despite lacking a shred of evidence.

Cavehill Red wrote: »

Rather, I believe it is not a debt of the Irish people to repay speculative investments in private Irish banks

That depends on whether we wanted a functional banking system in Ireland - which was what the bailout was about. Again, the claim that Lenihan chose to bail out the Irish banks in order to satisfy foreigners is silly, and doesn't give the man what credit he does deserve - he did it to save the Irish banking system, and quite resolutely dodged any attempts by foreign banks based here to either come in under our guarantee or to partake of the bailout.

Cavehill Red wrote: »

and I think that it is long past time that we looked long and hard at the impact of attempting to pay the impossible on the future of this nation, because it is not sustainable to continue exporting our brightest and best youth, slashing public services (and yes, maintaining jobs for life in the public sector too) and expect the growth levels necessary to repay even a fraction of the debt we are currently contracting to pay.

Which is why we should get out of as much of it as we possibly can, but not by means that have equally bad or worse consequences.

cordially,
Scofflaw

Cavehill Red

It's late and I'll answer this more fully tomorrow, but I wanted to address two points:
Firstly, your choice of measuring bailout in terms of bank scale rather than the weight falling on the taxpayer is at the very least as spurious as anything Taft has done, and is no measurement of fairness or reasonability vis-a-vis the Irish taxpayer.
Secondly, I'm very much in touch with Icelanders and would be aware, among other things, that they did in fact partly bail out their banks, contrary to the British and Dutch media. I would direct you towards the writings of Sigrún Davíðsdóttir (uti.is) who has been at the forefront of reporting and analysing the Icelandic banking issue, and has written and broadcast repeatedly in relation to the comparison with Ireland.

noodler

Scofflaw wrote: »

Actually, it turns out the original figures are from Eurostat, but you won't find the figures in Taft's article there, which means the figures you're using are indeed Taft's, not Eurostat's.

The Eurostat figures give the costs of bailouts around the EU as very - very - much higher than Taft's graph. There's a summary spreadsheet which allows for easy comparison, and that has the following costs for outlay:

Country|Bailout Costs (€m) 2011
BE|€24,500.23
DK|€8,230.75
DE|€294,735.36
IE|€45,567.76
EL|€5,094.00
ES|€24,405.00
IT|€2,600.00
LV|€1,341.69
LT|€867.88
LU|€2,500.00
HU|€498.94
NL|€44,512.00
AT|€7,545.35
PT|€7,294.13
SI|€1,312.00
SE|€629.63
UK|€122,264.29
This can be cross-confirmed by, for example, statements issued by the UK government:



That's in sterling, of course, which means that the UK figure in Eurostat ought to be €141.5bn rather than €122bn. Right ballpark, but not the same figure - and the figures are provided by the governments to Eurostat, so they should be.

Our bailout figure there of €45.6bn also looks a little odd, given we know that our bailout figure is actually €62.5bn - as I suggested earlier, this is because Eurostat only records the amount that makes it onto General Government Debt. So, straight off, we know we're not dealing with figures that actually represent what has been spent - instead, this is an accountancy statistic.

Second, those obviously aren't the figures in Taft's graph. The only way I could come close to those is by subtracting from the cost of the bailouts the figure also provided for "general government assets", which seems to be the value of the assets acquired in the bailed out banks. Such valuations will depend very heavily on share prices in all cases (bar Anglo/IBRC in our case), which means that the figures in question are a snapshot of the valuation of the bailed out banks' assets in 2011.

Taft's figures, then, depend sensitively on the balance between the "booked to GGD" value of the bailouts on the one hand and the "market valuation" of the value of the banks on the other. Is there anything special about the Irish case? Yes, it turns out there is:



That is, the way in which we bailed the banks out is important - our direct capitalisations, and our promissory notes, both had to be booked directly to GGD as "deficit-increasing government expenditure", whereas other bailouts took the form of "financial transactions" where assets were bought for government cash. Thus, presumably, the missing part of our bailout figure is the share purchases as opposed to capital injections and promissory notes - whether the NPRF contribution is recorded I don't see that the NPRF contribution would be counted either, but since in large measure the share purchases were funded from the NPRF anyway, the question is a little redundant.

We can also see that IBRC's assets are not included in our assets total, because IBRC doesn't apparently qualify to be classified under general government debt, although all spending on Anglo is booked.

So our bailout cost according to Taft turns out to depend very heavily on the wayin which we chose to bail the banks out, as opposed to how much we spent, and on the market value of the acquired bank assets in 2011. The German bailout is made to look smaller than ours by subtracting the very much larger perceived value of the German banks' assets of €250bn, whereas our bank assets apparently manage to be negative. France has managed to avoid retaining any of its bailout costs on GGD by 2011, although it's clear it was spending money earlier - we know it was involved in the Dexia and Fortis bailouts, which seem to be shown in the figures from 2008-2010. So in France's case, the bailouts show up as making a profit, because the French government appears to have wound down its bailout positions.

These figures, then, paint an extremely false picture of actual bailout costs. They represent only a snapshot of a part of the costs and assets, and they depend heavily on four variables:

1. the exact nature of the transactions used to bail out the banks - the more direct recapitalisations were used, the "larger" the bailout. Our bailout consisted of 70%+ direct recapitalisations, so more of our bailout registers.

2. the government deficit position at the time of bailout, because Eurostat is only concerned with deficit-increasing expenditure. Our bailouts came 100% on top of an existing deficit.

3. the valuation of the banks' assets at the time of record. The dependence here is very large - a 10% drop in the value of German bank shares would balloon Taft's version of their bailout to €68bn.

4. the stage of the process the country is at. France's bailouts have basically been completed, and show a small net profit. Most countries' bailouts are somewhere in the middle, and any return they might show lies in the future. We are mid-bailout, having not returned the banks to normal functioning or market funding.

It's hard to see what Taft has done as anything other than an extremely contrived exercise in comparing apples and oranges in support of a domestic agenda that seeks to focus on the bank bailouts as against the ongoing government deficit.

cordially,
Scofflaw

Excellent, excellent analysis.

Scofflaw

Cavehill Red wrote: »

It's late and I'll answer this more fully tomorrow, but I wanted to address two points:
Firstly, your choice of measuring bailout in terms of bank scale rather than the weight falling on the taxpayer is at the very least as spurious as anything Taft has done, and is no measurement of fairness or reasonability vis-a-vis the Irish taxpayer.

I don't really see how it's possible to claim relating the size of bank bailouts to the size of the banks being bailed out is spurious - the two seem rather obviously linked - but the other two better measures would seem to me to be either a comparison of the benefits we derived from the banks with the bailout, or, somewhat more precisely, a comparison of the costs of alternative routes, such as the costs of allowing the banks to collapse. Unfortunately, these seem rather hard to do in any way that's not arguable even for orders of magnitude.

And, to be honest, while it's perhaps a little Vulcan of me, I don't really see the point of the desperate need for the bank bailout to be "unfair" - what difference does it make? I don't expect it to persuade anyone else to alleviate it, because no matter how aggrieved the Irish public may feel, the debt was acquired legally by the government they voted into power, in order to preserve the Irish banking system. One can argue until the cows come home that the size of the Irish bank bailout burden is particularly large and onerous, but it doesn't change the fact that our government legally took it on, and that therefore it's nobody else's fault but our own. Why should Germany, or Finland, or Holland, pay for what Brian Lenihan and Brian Cowen decided to do?

We have arguments in favour of better treatment, but they're not really connected to these somewhat sulky and aggrieved popular claims that it's all unfair.

Cavehill Red wrote: »

Secondly, I'm very much in touch with Icelanders and would be aware, among other things, that they did in fact partly bail out their banks, contrary to the British and Dutch media. I would direct you towards the writings of Sigrún Davíðsdóttir (uti.is) who has been at the forefront of reporting and analysing the Icelandic banking issue, and has written and broadcast repeatedly in relation to the comparison with Ireland.

Well, that one can run and run, because there are multiple sources in respect of Iceland, and they say different things. See, for example, Studio Tendra: http://studiotendra.com/2012/12/29/what-is-actually-going-on-in-iceland/

cordially,
Scofflaw

Bits_n_Bobs

Scofflaw wrote: »

One can argue until the cows come home that the size of the Irish bank bailout burden is particularly large and onerous, but it doesn't change the fact that our government legally took it on, and that therefore it's nobody else's fault but our own. Why should Germany, or Finland, or Holland, pay for what Brian Lenihan and Brian Cowen decided to do?

While Lenihan/Cowen legally took on the debt I do think there are real and valid questions as to what pressure the ECB exerted upon them vis-a-vis the bailout.

The extraordinary cover-up of the correspondence frankly stinks. Especially as the ECB legally cannot impose such pressure on a sovereign. So it is not entirely a black and white 'legal' argument that Ireland is liable for all the debt.

Scofflaw

Bits_n_Bobs wrote: »

While Lenihan/Cowen legally took on the debt I do think there are real and valid questions as to what pressure the ECB exerted upon them vis-a-vis the bailout.

The extraordinary cover-up of the correspondence frankly stinks. Especially as the ECB legally cannot impose such pressure on a sovereign. So it is not entirely a black and white 'legal' argument that Ireland is liable for all the debt.

This is one of those arguments which, while partly valid itself, tends to be conflated with other arguments and situations.

We know that the ECB, come the bailout in 2010, almost certainly exerted pressure on the the government to stick to its existing policy of honouring senior bank debt. To what extent the government was really forced into a policy it actually opposed is uncertain, given that up to that point they had honoured all senior debt as a matter of course, with Lenihan telling us all about pari passu and about poor widows with their savings in credit unions, and given that, according to both Karl Whelan and the IMF, the Irish negotiators sided with the ECB in the negotiations regarding that senior debt.

However, that applies only to a small amount of the senior debt that remained unpaid after the majority was paid off during the guarantee. Seamus Coffey worked through the numbers, and suggests that the amount of debt in question there is somewhere around €4-8bn, depending on whether we chose to include BOI in the deal, which we probably wouldn't.

So, sure, we could argue that that amount was debt taken on under duress from the ECB, although, again, the idea that there's something illegal about the ECB's actions there hasn't anything behind it but emotion - the ECB's actions may be repugnant, but given that they apparently consisted of putting a price on bank support that the ECB didn't have to provide, they're highly unlikely to be illegal.

And all that depends on what the Irish negotiators really did with respect to the IMF suggestions, and whether their attitude was dictated by ECB pressure or by the realisation that it would visibly be Ireland that had decided to burn the senior bond holders if the ECB wasn't prepared to publicly OK it.

Given the lengths to which our government had already gone to be seen to be a pro-banking regime, the likelihood that the then government weren't interested in spoiling the ship for a ha'porth of tar is fairly high.

cordially,
Scofflaw

Bits_n_Bobs

Fair enough, however there is a huge amount of conjecture within your answer, necessitated by the bizarre lack of transparency in almost every facet of the Irish states banking debt. No minutes of the original Cowen/Lenihan deicison, ECB letters not published, virtually no exposition on decision making within the banks in the lead up to the crash, no information on what the hell the regulator was up to in the lead up to the crash, no in depth report on what was going on in the Dept of Finance, what was going on with the Anglo 10 and Quinn....it goes on and on.

Given the lack of any reasonable level of transparency I do hope you will forgive me my small conspiracy that perhaps everything was not entirely "legal". Now 'scuse me while I fix me tin foil hat....

View

Bits_n_Bobs wrote: »

While Lenihan/Cowen legally took on the debt I do think there are real and valid questions as to what pressure the ECB exerted upon them vis-a-vis the bailout.

The extraordinary cover-up of the correspondence frankly stinks. Especially as the ECB legally cannot impose such pressure on a sovereign.

First, the "cover-up" of the correspondence was done at the request of our government not the ECB. If the correspondence was favorably to the government - "you're doing great, lads" - it would have been leaked to the Sunday papers within hours of arriving in Dublin.

Second, there is a narrative inconsistency in your story as either:
A) the ECB had the legal means to pressure the government, in which case the question is "were its legal actions in line with EU and Euro objectives that we approved in referenda?", or,
the ECB didn't have the legal means, in which case this is the equivalent of you or I threatening to get a court order to seize Enda Kenny's car when there is no legal agreement or other basis that would allow us to do so. In other words, no one is going to take such a threat seriously much less act on its basis.

Bits_n_Bobs wrote: »

So it is not entirely a black and white 'legal' argument that Ireland is liable for all the debt.

Unless you find a court that agrees with you, yes, it is.

Cavehill Red

Scofflaw wrote: »

Well, that one can run and run, because there are multiple sources in respect of Iceland, and they say different things. See, for example, Studio Tendra: http://studiotendra.com/2012/12/29/what-is-actually-going-on-in-iceland/

cordially,
Scofflaw

Hold on. I cited a senior economics journalist who broadcasts on Icelandic television every week, if not daily, and in response you offer me opinion gleaned from some graphic designer's blog? Really?

Good loser

Scofflaw wrote: »

I don't really see how it's possible to claim relating the size of bank bailouts to the size of the banks being bailed out is spurious - the two seem rather obviously linked - but the other two better measures would seem to me to be either a comparison of the benefits we derived from the banks with the bailout, or, somewhat more precisely, a comparison of the costs of alternative routes, such as the costs of allowing the banks to collapse. Unfortunately, these seem rather hard to do in any way that's not arguable even for orders of magnitude.

And, to be honest, while it's perhaps a little Vulcan of me, I don't really see the point of the desperate need for the bank bailout to be "unfair" - what difference does it make? I don't expect it to persuade anyone else to alleviate it, because no matter how aggrieved the Irish public may feel, the debt was acquired legally by the government they voted into power, in order to preserve the Irish banking system. One can argue until the cows come home that the size of the Irish bank bailout burden is particularly large and onerous, but it doesn't change the fact that our government legally took it on, and that therefore it's nobody else's fault but our own. Why should Germany, or Finland, or Holland, pay for what Brian Lenihan and Brian Cowen decided to do?

We have arguments in favour of better treatment, but they're not really connected to these somewhat sulky and aggrieved popular claims that it's all unfair.



Well, that one can run and run, because there are multiple sources in respect of Iceland, and they say different things. See, for example, Studio Tendra: http://studiotendra.com/2012/12/29/what-is-actually-going-on-in-iceland/

cordially,
Scofflaw

Thanks again Scofflaw. Particularly liked the Tendra blog - witty and convincing. Also the wikipedia piece on Icesave.

How about doing a column for the IT on Tuesdays or Wednesdays? It would save mankind a lot of drivel.

Scofflaw

Cavehill Red wrote: »

Hold on. I cited a senior economics journalist who broadcasts on Icelandic television every week, if not daily, and in response you offer me opinion gleaned from some graphic designer's blog? Really?

Sure - if I had to pick one of those as having an agenda, it would be the former rather than the latter. Are you really claiming that the output of Ireland's "senior economics journalists" is a fountain of truth? I doubt it (for example, you appear to believe that Eurostat figures are politically mainpulated) - and if you would apply that scepticism to Ireland, why drop it for Iceland?

cordially,
Scofflaw

Scofflaw

Good loser wrote: »

Thanks again Scofflaw. Particularly liked the Tendra blog - witty and convincing. Also the wikipedia piece on Icesave.

How about doing a column for the IT on Tuesdays or Wednesdays? It would save mankind a lot of drivel.

At this stage, alas, it seems unlikely anything can save us from drivel. The Victorian scientists were right that by the 21st century we'd be 100 foot deep in horse cr@p, they only failed to envision the internet and thus realise it would be virtual horse cr@p.

cordially,
Scofflaw

tenton

Scofflaw wrote: »

Why should Germany, or Finland, or Holland, pay for what Brian Lenihan and Brian Cowen decided to do?

Excellent point. Why should the representatives of those countries - along with other countries such as UK, Denmark etc - continue to lend us money when

(a) we squandered the astronomical handouts we got from over 3 decades of EC / EEC membership - we were the beggars of Europe, and beneffitted far more from handouts than any other country

(b) we "steal" manufacturing jobs, investment + other jobs from those countries by undercutting them with corporation tax , and effectively being a tax haven for multinationals to launder their profits

(c) our representatives and public sector and welfare recipients are paid so much more than their own. On a personal level, the negiotators sitting across the table are paid + pensioned so much more than themselves , even though it is them lending / giving us the money.

The old adage "ah sure we're great lads and t'will be grand and we're worth it" does not really wash any more. Time they said " they're out".

Cavehill Red

Scofflaw wrote: »

Sure - if I had to pick one of those as having an agenda, it would be the former rather than the latter. Are you really claiming that the output of Ireland's "senior economics journalists" is a fountain of truth? I doubt it (for example, you appear to believe that Eurostat figures are politically mainpulated) - and if you would apply that scepticism to Ireland, why drop it for Iceland?

cordially,
Scofflaw

I don't drop it for Iceland. What I do is apply the same rigour I apply to any other subject matter. Random graphic designer who explicitly states they don't do economics is only worth looking at to guage a random person's non-expert understanding.
Iceland's leading economics journalist, on the other hand, is a professional who spends their life examining exactly this subject matter.
I'd ask you, what do you believe to be her 'agenda' that you're so quick to dismiss her significant writings on the subject?

Scofflaw

Cavehill Red wrote: »

I don't drop it for Iceland. What I do is apply the same rigour I apply to any other subject matter. Random graphic designer who explicitly states they don't do economics is only worth looking at to guage a random person's non-expert understanding.
Iceland's leading economics journalist, on the other hand, is a professional who spends their life examining exactly this subject matter.
I'd ask you, what do you believe to be her 'agenda' that you're so quick to dismiss her significant writings on the subject?

I don't dismiss them, I'm just taking them as one point of view, since that's what they are. I don't know what her agenda is, or the extent to which she has one, and I doubt you do either. Is it necessary for you to have everything be rosy in Iceland, and if so, why?

cordially,
Scofflaw

KyussBishop

tenton wrote: »

Scofflaw wrote:

Why should Germany, or Finland, or Holland, pay for what Brian Lenihan and Brian Cowen decided to do?

Excellent point. Why should the representatives of those countries - along with other countries such as UK, Denmark etc - continue to lend us money

This is one thing in this thread I disagree with strongly; the EU collectively shared responsibility for poor financial regulation, and the EU already is acting much like a federal entity in many ways, particularly where it comes to monetary and fiscal policy (as countries do not have real independent control over fiscal policy, since monetary policy directly affects that).

Just like it is wrong to ignore the failure of government and banks in sharing a significant responsibility for the debt burden of mortgages (thus it is wrong to put the whole burden on indebted homeowners), it is also wrong to put the entire burden of the debt and overall crisis on each individual country (and with punitively high interest rates, which the EU can alleviate), when responsibility both for the crisis happening, and for resolving the crisis, is shared by the EU as a whole.

It's far too easy to just blame individual people or countries, when it is not that simple, when the problem is more complicated and heavily entangled in EU politics. Banks/governments, and the EU as a whole, should not be allowed defer their responsibilities onto individual people, or onto individual states; the EU in particular, was responsible for ensuring adequate regulation, in addition to individual countries; their light-touch approach here directly helped perpetuate the crisis.

People are all too quick, to pretend the EU did not share collective responsibility in all of this (which is what you do, when you lump the entire responsibility onto individual states); that is totally wrong, both when looked at morally, and when looking at the past/current structure of the EU and its regulatory system, and its current implicit roles through controlling monetary (and thus fiscal) policy.

Kinski

Scofflaw wrote: »

[N]o matter how aggrieved the Irish public may feel, the debt was acquired legally by the government they voted into power, in order to preserve the Irish banking system. One can argue until the cows come home that the size of the Irish bank bailout burden is particularly large and onerous, but it doesn't change the fact that our government legally took it on, and that therefore it's nobody else's fault but our own. Why should Germany, or Finland, or Holland, pay for what Brian Lenihan and Brian Cowen decided to do?

Apologies if I'm mistaken, but haven't you previously argued that the bank guarantee made some sense at the time, that the failure to anticipate its eventual cost was down to lack of information and other systemic breakdowns - as opposed simply to incompetence - and that the vilification of Lenihan's actions stems from a misguided preference for a narrative with "strong actors" over one which can accommodate the full complexity of the situation it tries to account for?

Indeed, you seem to maintain that the alternatives (which, raking the coals, people still debate vociferously) could well have been more costly. How is it possible to hold that position and still shrug and say the electorate needs to be more careful whom they vote for?

ardmacha

tenton wrote:

(a) we squandered the astronomical handouts we got from over 3 decades of EC / EEC membership - we were the beggars of Europe, and beneffitted far more from handouts than any other country

Not true. Ireland moved from 60% of EU living standards to about 100% in that period and by and large auditors have had less concerns about Irish spending that in other parts of the EU. There are concrete outputs from such funding, be it in roads, universities, sewage plants etc.

tenton wrote:

(b) we "steal" manufacturing jobs, investment + other jobs from those countries by undercutting them with corporation tax , and effectively being a tax haven for multinationals to launder their profits

Also grossly exaggerated. If we "stole" a material number of jobs then we wouldn't have such a high unemployment rate. As for the tax haven it has been shown many times that the effective tax rates these companies pay is not high anywhere, and they avoid tax in Ireland by passing profits through places like the Netherlands.

NIMAN

Was going to start a new thread to ask a general question, but may as well do it here.

If we get the deal on bank debt thats in the media at present, how exactly will we as a nation notice in our day to day lives? Or over the short, medium and long term?

Will there be less tough budgets?

Will there be an end to cut-backs?

How much in total are we likely to get off our debt burden? Or does the amount stay the same and we just get longer to pay it off?

Scofflaw

Kinski wrote: »

Apologies if I'm mistaken, but haven't you previously argued that the bank guarantee made some sense at the time, that the failure to anticipate its eventual cost was down to lack of information and other systemic breakdowns - as opposed simply to incompetence - and that the vilification of Lenihan's actions stems from a misguided preference for a narrative with "strong actors" over one which can accommodate the full complexity of the situation it tries to account for?

Indeed, you seem to maintain that the alternatives (which, raking the coals, people still debate vociferously) could well have been more costly. How is it possible to hold that position and still shrug and say the electorate needs to be more careful whom they vote for?

You're not mistaken on my views on the guarantee, but I admit I don't see a contradiction here. The last government took on the burden of the bank bailout in a way which has landed us with a very onerous bank-related debt, primarily resulting from one bank - and while the deficit has indeed landed us with far more, the bank-related debt is not thereby smaller.

The size of that debt is, I would say, related both to the poor information available to the government at the time, and to the sheer size of the banks' balance sheets - but both of those, in turn, relate to the extent to which successive governments, particularly the FF-PD governments of the preceding decade, had bent over backwards to accommodate the banks, and the financial sector more generally. Nor is the bank bailout simply a corollary of that policy stance - aspects of it, such as the honouring of all debt, are very much a continuation of it.

So, in short, I come to the view that we should be careful who we vote for not as a result of the decisions taken in the heat of the crisis, which, while they aren't above criticism, seem to me mostly to have made sense at the time, but as a result of the previous decade, and in particular from 2002 on, when virtually every government decision seems to have added a further stick of dynamite to the powder-keg the Irish economy was sitting on.

cordially,
Scofflaw

Scofflaw

NIMAN wrote: »

Was going to start a new thread to ask a general question, but may as well do it here.

If we get the deal on bank debt thats in the media at present, how exactly will we as a nation notice in our day to day lives? Or over the short, medium and long term?

Will there be less tough budgets?

Will there be an end to cut-backs?

How much in total are we likely to get off our debt burden? Or does the amount stay the same and we just get longer to pay it off?

Nearly all the proposals that seem likely to get traction are of the latter type - the amount stays the same, but we get longer to pay it off. That doesn't seem like that much of a deal until you consider two factors - first, that longer to pay off official loans means lower interest for longer, since our official bailout rates are below market rates, and second, that things work somewhat differently for countries than for people. Our earning potential tends to peak and then diminish, whereas the earning potential of a country tends to increase exponentially and indefinitely (barring a complete change in economics) - which means that pushing repayment further into the future is always a reasonable option for a country.

cordially,
Scofflaw

Scofflaw

KyussBishop wrote: »

This is one thing in this thread I disagree with strongly; the EU collectively shared responsibility for poor financial regulation, and the EU already is acting much like a federal entity in many ways, particularly where it comes to monetary and fiscal policy (as countries do not have real independent control over fiscal policy, since monetary policy directly affects that).

Just like it is wrong to ignore the failure of government and banks in sharing a significant responsibility for the debt burden of mortgages (thus it is wrong to put the whole burden on indebted homeowners), it is also wrong to put the entire burden of the debt and overall crisis on each individual country (and with punitively high interest rates, which the EU can alleviate), when responsibility both for the crisis happening, and for resolving the crisis, is shared by the EU as a whole.

It's far too easy to just blame individual people or countries, when it is not that simple, when the problem is more complicated and heavily entangled in EU politics. Banks/governments, and the EU as a whole, should not be allowed defer their responsibilities onto individual people, or onto individual states; the EU in particular, was responsible for ensuring adequate regulation, in addition to individual countries; their light-touch approach here directly helped perpetuate the crisis.

People are all too quick, to pretend the EU did not share collective responsibility in all of this (which is what you do, when you lump the entire responsibility onto individual states); that is totally wrong, both when looked at morally, and when looking at the past/current structure of the EU and its regulatory system, and its current implicit roles through controlling monetary (and thus fiscal) policy.

The problem with the collectivist argument is that one of the identified problems with the euro is that the ECB did not have the necessary tools to ensure adequate oversight of the banks, while the EU was in a similar position in respect of the economies more generally. The six-pack and two-pack proposals, as well as the new bank regulatory powers for the ECB, are attempts to address precisely those problems.

The absence of those powers, which weren't delegated to the European institutions when the euro was being created, puts the ball firmly back in the court of national regulatory regimes - in effect, it was their ball before the euro, and while it may have made sense to give it to the EU, they didn't do so. They kept it, they played it, and the broken window comes of of their pockets.

Again, referring to an exercise earlier, the very different sizes of bank bailout compared to the size of national bank balance sheets tends to support my view on the importance of national regimes.

cordially,
Scofflaw

KyussBishop

Scofflaw wrote: »

The problem with the collectivist argument is that one of the identified problems with the euro is that the ECB did not have the necessary tools to ensure adequate oversight of the banks, while the EU was in a similar position in respect of the economies more generally. The six-pack and two-pack proposals, as well as the new bank regulatory powers for the ECB, are attempts to address precisely those problems.

The absence of those powers, which weren't delegated to the European institutions when the euro was being created, puts the ball firmly back in the court of national regulatory regimes - in effect, it was their ball before the euro, and while it may have made sense to give it to the EU, they didn't do so. They kept it, they played it, and the broken window comes of of their pockets.

Again, referring to an exercise earlier, the very different sizes of bank bailout compared to the size of national bank balance sheets tends to support my view on the importance of national regimes.

cordially,
Scofflaw

The EU did have a regulatory framework though, which had oversight over member states economies; from reading up on it a little, this was formed as part of the 'Lamfalussy process', with these three institutions:
https://en.wikipedia.org/wiki/Committee_of_European_Banking_Supervisors
https://en.wikipedia.org/wiki/Committee_of_European_Securities_Regulators
https://en.wikipedia.org/wiki/Committee_of_European_Insurance_and_Occupational_Pensions_Supervisors

So there was a definite EU-wide responsibility for monitoring and providing robust regulation; this is also (separate from the above) a role that goes hand-in-hand with the centralization of monetary policy at the ECB, as a de-facto reality (much like how the ECB has de-facto control over fiscal policy, despite it not being setup that way).


There is a risk here, of trying to judge political/moral rights and wrongs, based solely on the letter of the law, and not on the real roles and responsibilities these monetary/political institutions hold; responsibility must also be collectively shared, for laws/policies themselves, which implemented such a dangerously inadequate system in the first place.

Even though I think the EU as a whole bears responsibility even within the letter of the law here (based on the responsibilities laid down in the links above), I really quite strongly disagree in general, with basing moral arguments (e.g. whether or not we should be granted debt forgiveness) solely based on responsibility as written in the letter of the law, rather than based in de-facto responsibilities that exist anyway in reality (regardless of what is written down), or rather than based in the spirit of the political-framework/law laid down (the ECB clearly was given a regulatory framework for supervising member states; their role and responsibilities in spirit there are clear, even if it was implemented in a lax manner).


I don't disagree that some member states share more responsibility than others, as the figures you provide do show, I just disagree on the deferral of responsibilities from the EU as a whole, to member states; it is very politically dangerous, in my view, to allow any entity at any level of governance, to defer responsibility (thus allowing a lack of accountability) like that.

Scofflaw

KyussBishop wrote: »

The EU did have a regulatory framework though, which had oversight over member states economies; from reading up on it a little, this was formed as part of the 'Lamfalussy process', with these three institutions:
https://en.wikipedia.org/wiki/Committee_of_European_Banking_Supervisors
https://en.wikipedia.org/wiki/Committee_of_European_Securities_Regulators
https://en.wikipedia.org/wiki/Committee_of_European_Insurance_and_Occupational_Pensions_Supervisors

So there was a definite EU-wide responsibility for monitoring and providing robust regulation; this is also (separate from the above) a role that goes hand-in-hand with the centralization of monetary policy at the ECB, as a de-facto reality (much like how the ECB has de-facto control over fiscal policy, despite it not being setup that way).


There is a risk here, of trying to judge political/moral rights and wrongs, based solely on the letter of the law, and not on the real roles and responsibilities these monetary/political institutions hold; responsibility must also be collectively shared, for laws/policies themselves, which implemented such a dangerously inadequate system in the first place.

Even though I think the EU as a whole bears responsibility even within the letter of the law here (based on the responsibilities laid down in the links above), I really quite strongly disagree in general, with basing moral arguments (e.g. whether or not we should be granted debt forgiveness) solely based on responsibility as written in the letter of the law, rather than based in de-facto responsibilities that exist anyway in reality (regardless of what is written down), or rather than based in the spirit of the political-framework/law laid down (the ECB clearly was given a regulatory framework for supervising member states; their role and responsibilities in spirit there are clear, even if it was implemented in a lax manner).


I don't disagree that some member states share more responsibility than others, as the figures you provide do show, I just disagree on the deferral of responsibilities from the EU as a whole, to member states; it is very politically dangerous, in my view, to allow any entity at any level of governance, to defer responsibility (thus allowing a lack of accountability) like that.

Which is fair enough, but the mere existence of a regulatory body is meaningless in itself, and responsibility is in direct proportion to the powers regulatory bodies have. The European regulatory bodies had no power to intervene in banks, nor to set the regulatory regimes they were subject to. If you look, the roles of those supervisory bodies is advisory with respect to the Commission, advisory in respect of implementation of Directives, and aspirationally informational amongst its members. Those members, in turn, are national supervisors, whic means that the information the supervisory bodies would have from any country would be only as good as the national regulator passed on.

Since our financial regulator has been found to have done an inadequate job in a variety of ways, from regulatory capture to groupthink to conflicting interests, what should a European supervisory body with no investigatory powers of its own have done?

cordially,
Scofflaw