Bollitics - Ireland, the Euro and the future of the EU

[peterms]

Thank god for our civilising influence.

Not all good, not all bad. At least we got them to stop eating each other.

I didn't know about the USA's support in extending the commonwealth, but here's an interesting letter in the LRB:

Rwanda in Six Scenes

It is a pity that Stephen Smith, in his excellent article on Rwanda, does not include a few words about Paul Kagame’s background, which explains a great deal about the roots of the past massacres and the present position (LRB, 17 March). Kagame, after fighting for Museveni’s National Resistance Movement to oust Milton Obote from Uganda, became head of military intelligence for the NRA in 1986. In 1990, he went to Fort Leavenworth, Kansas for military training. Well before the massacre of the Tutsis in 1994, the US and UK gave active military support to the Tutsi Rwanda Patriotic Front, which Kagame had created and which took power soon afterwards. The US was looking to create a dependable base in Central Africa from which to influence developments in an important area that included the Democratic Republic of the Congo; later US Special Forces assisted in the overthrow of the Mobutu government. Part of the plan was the transformation of Rwanda from a French-speaking country into an English-speaking one, which culminated, as Smith says, in 2009 when it was admitted to the Commonwealth, leaving the Francophone Hutus stranded and powerless.

George Roussopoulos

Hindhead, Surrey

On the beneficial effects of colonialisation stopping people from eating each other, I'm not sure we can call it a total success.

[peterms]

They are getting bailed out because they couldn't get their latest austerity measures through Parliament, so how are they going to comply with the terms of a bailout they can't afford and how will they get domestic agreement for them?

Default is the logical option but doing so would bring down the whole rotten european banking system.

Whether they or whatever new government they elect can get austerity measures through parliament may be academic. The point is that the measures will be unacceptable, partly because the cost is too great, and partly because people will gradually come to realise that these are not bills they have racked up, but casino debts run up by professional speculators and spivs, mostly from countries other than Portugal. There is no earthly reason why they should pay them, and they won't.

It's a testing process, like a negotiation. How much pain can we dump on these people before they kick back? How far can we protect out own banks before they take a hit?

A key part of the strategy is to blind people to how the global financial system actually works, because if they realised how utterly corrupt and rotten it is, they wouldn't even contemplate bailing out any of these thieving fuckwits in banks and hedge funds, the parasites who seek to bet against currencies and commodities at whatever cost to others so they can make a million without doing anything that resembles productive work, or giving the world anything that adds to the sum of human happiness.

Reading the popular press, it seems that lots of people don't in fact see how they are being screwed over by these scumbags, and a lot more information needs to be made available.

[Awol]

You're preaching to the choir here Peter. FWIW I think Ireland or Greece will default anyway and it will only take one to start the dominos falling - and the sooner the better imo. Dismantling social assets and infrastructure that have taken decades to build in order to concentrate even more wealth on a small number of robbing bastards, well, it's a crime. Time to invest in gallows and piano wire.

[peterms]

You're preaching to the choir here Peter. FWIW I think Ireland or Greece will default anyway and it will only take one to start the dominos falling - and the sooner the better imo. Dismantling social assets and infrastructure that have taken decades to build in order to concentrate even more wealth on a small number of robbing bastards, well, it's a crime. Time to invest in gallows and piano wire.

I know I quoted your post, but I was trying to address a wider audience - I know you fully understand the dishonesty and immorality of it all.

I like your central phrase - it's as good a summation of current economic policy as I've seen, in two lines. "Dismantling social assets and infrastructure that have taken decades to build in order to concentrate even more wealth on a small number of robbing bastards, well, it's a crime." That's really rather good. I wish I'd thought of something as short and pithy.

I'm a bit taken aback by your comment on gallows and piano wire. I completely concur with the sentiment, but i somehow thought you'd be a little more high-tech than that.

[LondonLax]

I think you are looking at it with a much too black and white "us vs them" attitude.

A lot of these hedge funds and investments represent our money collectively. They are our own pension funds, our local council authorities budgets etc. The banks get paid to try and make the most of the money they are given and skim some off the top when they invest it.

You are acting like it's just a group of rich individuals whose bank accounts are now affected because they bought risky bonds. If these countries default on the debts they owe we will all be screwed because we are all tied up with the bond holders accounts who these countries now owe money to.

[peterms]

I think you are looking at it with a much too black and white "us vs them" attitude.

A lot of these hedge funds and investments represent our money collectively. They are our own pension funds, our local council authorities budgets etc. The banks get paid to try and make the most of the money they are given and skim some off the top when they invest it.

You are acting like it's just a group of rich individuals whose bank accounts are now affected because they bought risky bonds. If these countries default on the debts they owe we will all be screwed because we are all tied up with the bond holders accounts who these countries now owe money to.

Local authorities represent 0.2% of creditors, at Q3 2010, insurance companies and pension funds 28%. It's unclear which pension funds, and from which countries, and who are the beneficiaries, but I think we can all hazard a guess about who benefits most from pension funds.

But it's not the pension funds which lead the way in demanding that countries make massive cuts, or try to short currencies, or engage in speculation on food prices causing starvation to millions of people in the third world.

These dealers and speculators are entirely parasitic, they add nothing of value whatever to anything, they deliberately engineer misery and hardship for their own profit, and frankly they should be sidelined and marginalised by concerted government action, not placated and toadied to by Osborne and his fellow puppets. But of course Osborne, Cameron, Clegg et al are the very people from whom these speculators are drawn, and they personally have been made wealthy by their family connections with usurers. Of course they're not going to rein them in.

What is happening at the moment is a significant redistribution of wealth from poor to rich, and all the bollocks and lies about "no alternative" and "have to keep the markets happy" is just a mendacious and self-serving cover for what is basically theft.

It's very much us and them.

[Gringo]

[Gringo]

Buyer beware?

Iceland to vote on Icesave-Landsbanki debt repayment

Icelanders are set to vote in a referendum on the latest plan to repay the UK and Netherlands debts incurred when its banking system collapsed.

The country overwhelmingly rejected a previous repayment plan, which was put to a referendum last March.

The new deal offers less onerous repayment terms, but opinion polls suggest it will again be rejected.

Iceland's Landsbanki bank collapsed in 2008, and British and Dutch investors lost some 4bn euros (£3.5bn; $5.8bn).

The bank had offered savings accounts in the UK and Netherlands under the name Icesave.

The British and Dutch governments had to reimburse 400,000 citizens who lost savings - and Iceland must now decide how to repay that debt.

Under the terms of the latest deal, Iceland would pay the money back with 3.3% interest between 2016 and 2046.

Under the previous proposals, the money was to be paid back with 5.5% interest between 2016 and 2024.

[peterms]

Michael Hudson has written an excellent piece on the Iceland, Ireland, Portugal question.

[Gringo]

Michael Hudson has written an excellent piece on the Iceland, Ireland, Portugal question.

Will Iceland Vote “No” or commit financial suicide?

Well the people of Greece rioted instead of voting yes, the people of Ireland voted NO and the politicians of Portugal voted NO, but they're all still sold down the river.

Let's hope the icemen prevail.

[mockingbird_franklin]

Michael Hudson has written an excellent piece on the Iceland, Ireland, Portugal question.

from the above piece

"Iceland’s government seems to have become decoupled from what is good for voters and for the very survival of Iceland’s economy"

You can substitute any number of countries here for Iceland, and if you used Britain, you could say this would be true for a period of about 30 years.

The biggest problem in politics is that governments regularly follow policy that with a little smoke and mirrors appears great, appears to create wealth and improvements in lifestyle, to be for the greater good, but in reality has a real negative effect on the real standard of living and lifestyle for it's countries citizens, usually in the longer term, but them maybe that's part of the reason for this situation, Government, like so much 'management' nowadays seems about short term perceptions rather than the long term reality.

Things won't improve till Governments begin to remember who they work for and what there job description actually should be.

[Awol]

Michael Hudson has written an excellent piece on the Iceland, Ireland, Portugal question.

Had never heard of Hudson before but it's hard to disagree with a word of that.

[Awol]

EU tells Portugal 'no aid without harsher cuts'

"European Union finance ministers told Portugal it would have to implement tougher austerity measure than those proposed by its outgoing government if it hoped to secure a bailout."

So the usual EU suspects want to throw another society under the bus to delay the inevitable failure of their own compromised banks. They won't accept that the magic bullet of these countries taking on more and more debt they can't pay back isn't a solution.

Leave the Euro, default, devalue, recover. It's the only way Greece, Portugal and Ireland can avoid sinking poverty for the next 20 years.

[Gringo]

Oborne

Recently, I asked a well-placed minister what plans had been put in place in case the eurozone started to unravel. He just looked at me blankly: “That’s not going to happen. There is too much political will behind the euro for them to let it go.” In other words, the Cameron Government shares the same complacent analysis as the European political class: this is not a real problem, we’ll muddle through somehow, it’s all the fault of the speculators, etc etc.

This is denial. The simple truth is that Greece, Ireland and Portugal are all bankrupt. Perhaps it is worth spelling out exactly what this means: however hard these countries try, and whatever austerities they impose, they will never, ever be able to pay off their debts.

In itself, this is not much of a problem – Greece and Portugal (though not Ireland) have gone bankrupt many times before, and always recovered. The tried and tested response is to default, then reschedule debts by reducing coupons (ie interest payments) and extending maturities, while allowing the national currency to depreciate so that the economy can once again become competitive.

Their membership of the eurozone, however, means that none of this can happen. There has, until recently, been an absolute determination in Frankfurt and Brussels that no European country should default. The reason for this is sobering: many leading European banks have massive exposure to the sovereign debt of these troubled countries.

The most troubling by far concerns the European Central Bank. Headquartered in Frankfurt, the German financial capital, the ECB was created by the Maastricht Treaty and is constitutionally obliged to be a sober financial institution that issues euros and banknotes, and regulates the monetary policy of the eurozone’s 17 member states.

The reality is different. The ECB conducts itself more recklessly than the most incontinent hedge fund. Its urgent task is the salvation of the eurozone, and it has chosen to do this by purchasing truly staggering amounts of government and bank debt, issued by the most endangered eurozone countries. Were it not for these so-called “market operations”, Greece, Portugal and Ireland would have defaulted months ago.

Yet the ECB has been paying what is effectively a false price, and, as a result, is daily taking unsustainable losses. Let’s look specifically at the case of Greece, as analysed last week in a devastating piece of research by the US investment bank JP Morgan. It suggested that the ECB may now be exposed, through various means, to approximately 200 billion euros (more than £150 billion) of Greek debt. Of course, this is not worth anything like what the ECB has paid for it. JP Morgan estimates that the ECB is facing losses of around 40 billion euros on its Greek investment, though my instinct is that the true figure is considerably higher.

[Awol]

Well the people of Iceland have told the banks to poke it and voted no to the repayment scheme - well done them.

I wonder what mechanisms will now be employed to subvert their decision?

[LondonLax]

The decision will cost the people of Iceland more than the 3 billion they owed but they have made a statement I suppose. A costly one for the future of their economy though.

[Gringo]

Indeed, we shouldn't let these terrorists get away with it.

[peterms]

Nothing to do with the Icelandic people, and they shouldn't pay for it. The ones who should are for example these guys and many more like them.

As well as criminal charges, retrospective unlimited personal liability would be a good place to start.

[Gringo]

TheEconomist"]The “no” camp argued that Iceland had no legal duty to stand behind €4 billion ($6 billion) of compensation to foreign depositors in Icesave, the online arm of a failed private bank, Landsbanki. The matter will now go to an international court, although Iceland says most or even all the money will be repaid from the disposal of Landsbanki’s assets. Beyond the legal arguments, the vote was an act of defiance. Icelanders were offended at their treatment by big countries, notably Britain, which had invoked anti-terrorist laws to seize Icelandic assets.

There is an epic quality about the way this remote island of glaciers and volcanoes has stood up to powerful states and economic orthodoxy. For its cheerleaders, such as Paul Krugman, an American Nobel laureate in economics, Iceland is a model for another north Atlantic island ruined by bad banks: Ireland.

Yet the Irish government has taken the opposite view. It guaranteed the obligations of Irish banks to a reckless degree, wrecking the country’s public finances. It then accepted a bail-out from the EU and IMF on the understanding that it would not try to burn the senior bondholders of Ireland’s bust banks. Why? Because many of them are other European banks, and imposing losses might spread financial infection. Enda Kenny, the new prime minister, has recoiled from acting on his election promise to make the bankers share the pain. Some left-wing parliamentarians have demanded an Iceland-style referendum on the conditions of Ireland’s bail-out. Look, they say, the sky has not fallen in on Iceland. (Portuguese activists are also calling for a referendum on any planned austerity measures.)

Yet Iceland made a virtue out of necessity. Irish banking assets were three times as big as national output; Iceland’s were ten times as large. Irish banks were too big to fail; Icelandic ones too big to save. Iceland salvaged only the domestic banks, letting foreign operations go to the wall. It imposed capital controls and suffered a sharp devaluation.

So which has done better? The two islands experienced similar losses of GDP. Unemployment has been higher in Ireland, but Iceland has endured a bigger drop in domestic demand, and saw inflation reach 18% (it is now back to normal levels). The IMF predicts that Iceland will grow faster than Ireland this year and next, with half Ireland’s jobless rate. Iceland’s deficit and debt levels, and its credit-default swap spreads (a sign of investor confidence), look healthier than Ireland’s. Steingrimur Sigfusson, Iceland’s finance minister, says his country could “amaze the world with a speedy and good recovery”.

[snowychap]

France and Italy in call to close EU borders in wake of Arab protests

Sarkozy and Berlusconi want passport-free travel within the EU suspended as north African migrants flee north

France and Italy have thrown down the gauntlet over Europe's system of passport-free travel, saying a crisis of immigration sparked by the Arab spring was calling into question the borderless regime enjoyed by more than 400 million people in 25 countries.

Challenging one of the biggest achievements of European integration of recent decades, Nicolas Sarkozy and Silvio Berlusconi also launched a joint effort to stem immigration and demanded European deportation pacts with the countries of revolutionary north Africa to send new arrivals packing.

The French president and the Italian prime minister, at a summit in Rome, opted to pile the pressure on Brussels and the governments of the other 25 EU states, demanding an "in-depth revision" of European law regulating the passport-free travel that takes in almost all of the EU with the exception of Britain and Ireland.

Prompted by the influx to Italy of almost 30,000 immigrants, mainly from Tunisia, in recent months, the two leaders warned that the upheavals in north Africa "could swiftly become an out-and-out crisis capable of undermining the trust our fellow citizens place in the free circulation within the Schengen area".

The passport-free travel system known as the Schengen regime was agreed by a handful of countries in 1985 and put into practice in 1995. Since then it has been embraced by 22 EU countries as well as Norway, Switzerland and Iceland, but spurned by Britain and Ireland. It is widely seen, along with the euro single currency, as Europe's signature unification project of recent decades.

But like the euro, fighting its biggest crisis over the past year, the Schengen regime is being tested amid mounting populism and the renationalisation of politics across the EU.

In other setbacks to borderless Europe, Germany, France and other countries have been blocking the admission of Bulgaria and Romania to Schengen in recent months, while the arrival of thousands of Middle Eastern migrants in Greece has fed exasperation with Athens's inability to control the EU's southern border.

The Franco-Italian move, following weeks of bad-tempered exchanges between Paris and Rome over how to deal with the Tunisian influx, is the biggest threat yet to the Schengen regime.

"For the treaty to stay alive, it must be reformed," Sarkozy said. Berlusconi added: "We both believe that in exceptional circumstances there should be variations to the Schengen treaty."

They sent a joint letter to the European commission and European council chiefs, José Manuel Barroso and Herman Van Rompuy, urging proposals from Brussels and agreement on a new system at an EU summit of government heads in June.

The commission said it was drawing up new proposals, tinkering with the current system, to be unveiled next week. But it has resisted, with the support of most EU governments, intense Italian pressure to label the arrivals from north Africa an emergency.

Under European law the border-free regime can be suspended only for reasons of national security, routinely invoked in recent years by member states hosting major international sporting events such as the World Cup or the European football championships, where individual countries contend with a huge, one-off influx of foreigners.

Sarkozy and Berlusconi insisted the rules be changed to allow more restrictions on freedom of travel. A new deal was "indispensable", they said. The June summit should "examine the possibility of temporarily re-establishing internal frontier controls in case of exceptional difficulty in the management of the [EU's] common external frontiers".

This, however, would clearly not be in the interests of Italy, which fears an end to the hostilities in Libya could spark an even bigger exodus. In that event, the letter said, the EU should provide "mechanisms of specific solidarity" including the distribution of immigrants among member states.

This will prove extremely divisive and will be rejected by countries such as Germany and Sweden, which have much higher numbers of asylum seekers than Italy, less restrictive immigration policies, and little sympathy for Italy's plight.

The concerted Franco-Italian initiative also called for accords between the EU and north African countries on repatriating immigrants, a policy certain to spark outrage among human rights groups, the refugee lobby, and more liberal EU governments.

Promising strong support for the democratic revolutions sweeping the Maghreb and the Middle East, Sarkozy and Berlusconi added: "In exchange we have the right to expect from our partner countries a commitment to a rapid and efficacious co-operation with the European Union and its member states in fighting illegal immigration."

Tuesday's move followed weeks of feuding between Rome and Paris over the Tunisian exodus. Furious at the failure of other EU countries to "share the burden", the Italians granted visas to the immigrants enabling them to move elsewhere in the EU. The Germans and the Austrians complained. The Belgians accused Rome of "cheating" on the Schengen rulebook. The French government promptly closed a part of the border with Italy briefly, re-erecting passport controls to halt trains.

But Berlusconi and Sarkozy, seeking to curry favour with the strong far-right constituencies in both countries, sought to bury their differences by urging the rest of Europe to buy into their anti-immigration agenda.