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

[dbsboots]

Ironic that Robinson said that considering he had strong ties with the UDA and UFV leadership. He also invaded the south and was prosecuted for it by an Irish court, who in my opinion gave him a slap on the wrist.

[HolteExile]

Indeed.

Just illustrates the peculiarities and nature of politics in Ireland, particularly in the North.

People in glass houses and all that.

80 years in the grand scheme of things isn't huge in the history timeline either, with descendants of figureheads from the War of Independence and Civil War era still active in politics south of the border. Indeed, that's probably just about the only thing some have going for them, trading on their name or the deeds of their Grandparents.

[CVByrne]

People forget that the majority in the republic don't care about the north and its politics. We also have no interest in having sinn fein form part of any government and won't for the foreseeable future. The political backlash any party who goes into power with them would be huge.

[Lombardo]

The only worry is that Sinn Fein are getting a sizeable proportion of the young vote. This is concerning to me as when these people are growing up, their kids will vote for the Sinners and it will carry on like that. In a way, Ireland needs a new Fianna Fail to come up and stop these criminals from getting into government and to capture any of that republican vote that remains. I am in no way a Fianna Fail supporter, but I do think they have a large role to play in stopping the Shinners from capturing more of that young vote. They have gotten rid of a lot of the older TD’s and they need these now to be replaced by younger more enthusiastic deputies.

[BOF]

Sinn Féin are being very clever. They were the only party in this election who said they would give Europe 2 fingers and tell the IMF they weren't getting a cent. This is what a lot of people wanted to hear from more of the parties. It is also why the youth liked what they were hearing, because they know it's their money that will be helping ze Germans for a generation. While we are technically able to default, it would have ramifications. Even though it is corporate debt, not sovereign debt (thanks again Fianna Fáil). But Sinn Féin identified that this would be a vote winner and it was. But the lads above are right, as little as we care about the politics of the North, there is still a huge stigma attached to 'being a Sinn Féin voter' in this country. And that isn't about to change to any significant degree in the near future.

[peterms]

Sinn Féin are being very clever. They were the only party in this election who said they would give Europe 2 fingers and tell the IMF they weren't getting a cent. This is what a lot of people wanted to hear from more of the parties.

And of course it's the only sensible and coherent policy, unless you're related to the owner of a bank.

But then, not many of us are.

[BOF]

Newly elected woman driver leaves Ireland's government buildings by driving down the steps

[Awol]

"Please Sir, can I have some more?"

Irish banks to raise further €24bn, but investors remain sceptical

Ireland's four main banks will have to raise €24bn (£21bn) after the country's central bank announced the results of tests designed to repair market confidence in the country's shattered financial system.

The new capital raisings are expected to lead to the effective nationalisation of the Irish banking system as Dublin draws down on a multi-billion euro bail-out package to prop up its troubled lenders.

Allied Irish Bank, which is already 49.9pc owned by the state, will need to raise the most of any of the banks and is required to increase its capital by €13.3bn to hit a new core Tier 1 target of 10.3pc.

The next largest increase will be undertaken by Bank of Ireland, which is 36pc owned by the Irish taxpayer and will have to raise an additional €5.2bn to meet the central bank's new target capital ratio.

Irish Life & Permanent, which has so far avoided taking government money, is being asked to raise €4bn, while the fully-nationalised EBS Building Society will raise an extra €1.5bn of capital.

Patrick Honohan, governor of the Central Bank of Ireland, said the measures being taken were "exceptional", but were essential to restore market confidence in the banks.

"The Financial Measures Programme aims to create a sustainable Irish banking system through a process of recapitalisation, deleveraging and reorganisation," said Mr Honohan.

"Smaller, but more soundly constituted, Irish banks should be in a better position to provide loan and other financial services to households and businesses to support the economic recovery," he added.

As part of the reorganisation, the Irish government wants to merge the four banks. Allied Irish and EBS are expected to join to create a new bank, with the eventual aim of selling the business.

Irish Life & Permanent will sell off its life assurance and investment management businesses to help it raise the required capital and could look to float them.

The stress tests were the second set faced by Ireland's banks in less than a year. In July the banks passed European Union tests that determined they were adequately capitalised even under stressed conditions.

However, just months later Ireland was forced to accept a joint EU/IMF bail-out of €85bn as the problems in the banks worsened.

Mr Honohan said the latest tests were designed to draw a line under the banks' problems and help them return to normality.

However, investors remain sceptical that even these harsher tests and new capital raisings will bring an end to Ireland's problems.

"Nothing changes – same debts, same credit backstop – the Irish state," said Gary McCarthy, head of Collins Stewart Quest. "It's amazing that the state, which has tax income of just €30bn, is now being asked to shoulder liabilities well over 10 times that amount."

In particular, the market remains concerned that Ireland has not yet agreed a new funding deal with the ECB to provide more secure financing to its banks on a longer-term basis. Asked about the deal, Mr Honohan said the talks were continuing.

Short back and sides for senior bondholders? No? What a surprise. The capacity of the Irish economy/taxpayer to service these increasing debts doesn't exist. Eventually default and debt restructuring seems inevitable, but once one country succumbs, how long before bigger economies follow and the system as it stands simply collapses under the weight of its own deceit? Sooner or later reality has to be confronted and then we're going to change on a dramatic scale.

[mjmooney]

People forget that the majority in the republic don't care about the north and its politics. We also have no interest in having sinn fein form part of any government and won't for the foreseeable future. The political backlash any party who goes into power with them would be huge.

The only worry is that Sinn Fein are getting a sizeable proportion of the young vote. This is concerning to me as when these people are growing up, their kids will vote for the Sinners and it will carry on like that. In a way, Ireland needs a new Fianna Fail to come up and stop these criminals from getting into government and to capture any of that republican vote that remains. I am in no way a Fianna Fail supporter, but I do think they have a large role to play in stopping the Shinners from capturing more of that young vote. They have gotten rid of a lot of the older TD’s and they need these now to be replaced by younger more enthusiastic deputies.

Sinn Féin are being very clever. They were the only party in this election who said they would give Europe 2 fingers and tell the IMF they weren't getting a cent. This is what a lot of people wanted to hear from more of the parties. It is also why the youth liked what they were hearing, because they know it's their money that will be helping ze Germans for a generation. While we are technically able to default, it would have ramifications. Even though it is corporate debt, not sovereign debt (thanks again Fianna Fáil). But Sinn Féin identified that this would be a vote winner and it was. But the lads above are right, as little as we care about the politics of the North, there is still a huge stigma attached to 'being a Sinn Féin voter' in this country. And that isn't about to change to any significant degree in the near future.

The above comments are very interesting. I know enough about Irish politics not to be surprised, but I wouldn't mind betting that a majority of English people would be.

I think there is a default assumption over here that the vast majority of people in the Republic are - if not active Sinn Féin supporters - at least very sympathetic to them.

[peterms]

Short back and sides for senior bondholders? No? What a surprise. The capacity of the Irish economy/taxpayer to service these increasing debts doesn't exist. Eventually default and debt restructuring seems inevitable, but once one country succumbs, how long before bigger economies follow and the system as it stands simply collapses under the weight of its own deceit? Sooner or later reality has to be confronted and then we're going to change on a dramatic scale.

As Michael Hudson has pointed out, a debt that can't be honoured, won't be; the question is how it won't be.

A good starting point in confronting reality would be a more open and honest public discussion about what these debts are and where they came from. The idea that institutions made loans with money they didn't have against assets that didn't exist at the value claimed, and now wish people to be thrown out of work and services cut in order to prevent bondholders from writing down their paper "worth" is utterly insane. No-one, at least no-one not in urgent need of psychiatric help, could say it's either fair or reasonable. But it's seldom discussed in that way, so we hear nonsense about "Ireland's debt" and similar ignorant bollocks.

[peterms]

I think there is a default assumption over here that the vast majority of people in the Republic are - if not active Sinn Féin supporters - at least very sympathetic to them.

I should think their support will grow, as they seem to be the only party with anything sensible to say about the debt issue which is bringing the country to its knees. Those younger people who are left after the next wave of emigration are likely to see this as a more relevant issue in their lives than the politics of the north. And I suppose for younger people, there's not the same perception of historical baggage around Sinn Fein as for many older people.

[BOF]

I think there is a default assumption over here that the vast majority of people in the Republic are - if not active Sinn Féin supporters - at least very sympathetic to them.

That's an unfortunate and very wrong default assumption. I'd say the majority of people in the Republic are as afraid of the Shinners as you are.

[Awol]

But it's seldom discussed in that way, so we hear nonsense about "Ireland's debt" and similar ignorant bollocks.

Thing is once governments decide to nationalise private debt then it does become Ireland's/UK's/whoever's debt in a national sense. We might not agree with that course of action, but my question is once it's been done can it actually be undone?

[peterms]

But it's seldom discussed in that way, so we hear nonsense about "Ireland's debt" and similar ignorant bollocks.

Thing is once governments decide to nationalise private debt then it does become Ireland's/UK's/whoever's debt in a national sense. We might not agree with that course of action, but my question is once it's been done can it actually be undone?

I'm unclear about the mechanism by which money was put into the banks and how it can be taken back out. The cleanest thing would be to take back all the public funding, let the banks collapse, safeguard individual investors up to some maximum figure, and reconstitute some banks based on proper regulation and sound practices.

However, if we assume that this isn't possible and the banks debts have now become the nation's debts in a way which can't be unravelled, then it's a case of arranging a default on the sovereign debt.

There's an interesting piece here on how to manage that process. I especially like the idea of a debt commission to lift the lid on exactly what these debts are, and which of them are unenforceable anyway. That process could set the scene for a great many criminal actions against a lot of people. So we can expect a lot of powerful people using all their power to kill the idea before it takes root.

Ireland, Greece and Portugal should all default on their debt.

The problem with saying that is that as soon as you do, a great clucking flock of Chicken Littles come speeding out of their corners, kicking up dust and confusion and drowning out any attempt to discuss the issue beneath a frenzy of shrill cries of "Don't listen to the madman. If you do the sky will fall on our heads. All the banks will burn down, the ATM's will all stop working, our houses will be re-possessed, all our pensions - OH WOE! - all our pensions will be seized and eaten by a rampaging army of angry vengeful Bond Holders and we will never, ever in the whole future of the universe be allowed to borrow money from the bond market ever again, till the end of time."

So before they get here I want to say the sky would not fall in. There is, in fact, a history of sovereign default and restructuring of debt and there are recognized and tried methods for doing it. Those countries that have, Mexico, India, Russia, Argentina, Ecuador to name only a few, are still with us, are able to borrow on the bond markets and generally the sky did not fall on their heads nor on ours.

Somehow the word default has come to be for nations a bit like suicide is for people: terminal and immoral because of the misery it causes to those left behind. We must stop listening and believing those who take this view. They do so because it profits them for us to be afraid of default.

Greece can and, I argue, should default and sooner rather than later, for the reason that it is going to anyway. The bond market knows this. It has been made almost explicit in the newly agreed European Stabilization Mechanism (ESM). The ESM was the product of German and French negotiations for how to augment the EFSF (European Financial Stability Fund) with something more believable and long term. But in the ESM there is the explicit agreement, which Germany insisted upon, that for bonds after 2013, some bond holders would be expected to share in any future losses on these bonds. Which has led to an expectation that 2013 marks the moment at which it will become accepted that Bond Holders in general should take losses and that this might well become retroactively applied. None of this is in the ESM but it is widely expected. And if these expected things came to pass, then Greece would be 'free', perhaps even encouraged, to restructure its debts by making bond holders take their share of the losses.

So default is already on the table it just has a thin cloth politely draped over it for now. Because it is on the table the bond market is, in a way, already pricing it in and that is helping to push up the costs of borrowing NOW for Greece, Ireland and Portugal. Thus it would simply be better for both the Greek and Irish people and perhaps also for the Portuguese, and for the broader Bond market if they all got on with it . Of course it would not be better for Germany nor France and that is the hold up.

Germany and France are trying to put off the moment when their banks will have to deal with more losses. They would rather have a few more years when their banks might raise more capital or make more money or, or...something. And of course it is fine for them to put it off. In the interim it's not their people who are suffering. It's the Irish, the Greeks and the Portuguese.

It would be far, far better for the Irish and Greek people to default because they have already entered a terminal downward spiral last travelled by Zambia. Zambia, was forced principally by the IMF, at the point of a financial bayonet, down the road of crippling austerity cuts and trying to service a debt that grew faster than they could pay it off, forcing the country ever deeper into debt, not getting it out of it at all. The IMF did not care and did not allow any deviation. In the end the IMF's diktats caused Zambia's economic output to collapse by 30% and instead of this solving its debts it caused their debt to GDP burden to double to 150%.

The IMF has learned nothing since then. It is ideologically and intellectually moribund but sadly still very powerful.

SO... Ireland, Greece and perhaps Portugal should default. The questions then are: How, who decides how much, and what happens then?

Recently a campaign has been started in Greece and now in Ireland as well for what is called a Debt Commission and Audit. The idea is simple and has legal precedent. The nation which decides to restructure its debt forms a Debt Commission. Such a Commission is generally made up of experts in debt, bond and Swaps contracts, forensic accountants, prominent civil servants, members of various civil society groups (Charities etc), interested NGOs and representatives of Labour Unions as well as employers organizations. Such Commissions have to be nationally based with wide and varied roots in the broader civil society. A wide representation is essential to prevent it becoming the tool of any one group.

The purpose of the Commission is first to simply find out who is owed and by whom. What debt was private, what public and in each instance what was the debt for? Would you like to know what debt has been bought by the Bank of England, or the Fed or the central Bank of Ireland? I would. Or what debts we are insuring? I would, considering I am personally expected to pay for it out of my taxes.

The Commission's next job is to establish if any of that debt was Odious, Illegitimate, Illegal or Unsustainable. Each of these has legal standing and precedent and each is enough to send a cold shudder through board rooms of banks and their lawyers. For we already know, from a small tidal wave of cases pending in the US alone, that fraud there was. Lots of it. Many cases have already been 'settled' out of court. Time to close the option of settling on the court house steps and haul the malfactors into the public dock. Banker bashing? Those involved in fraud are criminals. Criminal bashing - You bet!

Odious debt is debt that was taken on by a former government that was in no way in the interests of the people or nation and which the people under a new government should not be asked to pay. The USA was considering using the idea of Odious Debt to clear Iraq of Saddam's debts. In the end, when they realized this could open a can of worms for 'people' who were still their friends, they reconsidered.

Illegitimate debts are when debts were taken on that are palpably contrary to the well being and interest of the people. For instance, bailing out Anglo Irish Bank, in which the Irish people had no deposits nor interest, would likely be found to be Illegitimate.

Illegal debts are those where fraud was involved in the selling and buying of the debt. This could be fraudulent mis-selling, by not making clear the risks or liabilities etc. Many such cases are pending against the big banks right now in both Europe and the US.

And the most contentious, Unsustainable debt, is when debt was legally taken on, by a legitimate government but where repaying the debt would cause great harm to the lives of people in the nation who were never involved in the taking on of the debt. An example would be bailing out banks with public money who had made bad loans to some of the people but not all. Such debts cripple the lives of people who were never part of the debt and property bubble but whose taxes and savings are being plundered to bail out those who were, and the banks who encouraged them.

Can such a Commission actually work? One already did in Ecuador. The Ecuadorians had a free and fair election. The winner won on a platform of debt restructuring. He formed the Commission. The Commission found a lot of the debt was Illegal and Immoral and the Ecuadorian government therefore said flatly it would NOT be paying. The price of its bonds collapsed. Once its debt was trading for a few cents on the dollar the government then bought it all back. Meaning it paid those who were holding its debt only a few cents on the dollar.

What happend then? Surely the sky fell in, and Ecuador was never allowed to borrow ever again? Well actually nothing of the sort. You see the there isn't any evidence that nations get locked or priced out of the bond market after default. There is a short term spike and then a fairly rapid return to a rate that is in line with the FUTURE prospects of the country. Sure, the country defaulted and some of the bond market players lost money. but not all. And those who didn't lose are likely to simply say, 'glad it was them and not me, but now let's talk business, shall we?'. The fact is, once a country has got rid of its debt overhang and, as a consequence, is much better placed to do well in the future, it becomes a much better prospect for lending to. The market isn't monolithic and has no loyalty to its own. Think of the Bond Market as a tank of exceptionally greedy gold fish. They are 'short' memory and 'long' greed. They swim up and down looking only forward and forget what happened five minutes ago. Goldfish Sachs.

Ecuador defaulted and within just a few years was back in the market selling debt. The rate wasn't punitive but in line with its actual economic prospects which were improved by having rid itself of much of its old debt. Greece and Ireland would do well to take note.

Of course there would be massive opposition from the IMF, the EU, ECB, Germany on behalf of its banks and France on behaf of its banks. But you know what? A government is supposed to put the interests of its people ABOVE the interests of banks, bankers and Bond holders.

What about Pensions? Pensions will do worse if our economies stagnate for a decade trying to pay off debts they cannot afford to pay, than if they take a huge loss now, AND THEN find they are in better, sounder financial shape going forward. This is what the bond market will think too. As noted above, the bond market players themselves will look forward not back and simply see that going forward the nation that has defaulted is now in better shape to make everyone a profit than it was before. Growth is what sustains pensions NOT paying off old debts. You can't and won't grow if your economy is weighed down paying debts. That is the position we are in now and look at how every nation is reducing its estimates of growth. Portugal just revised their negative growth to be even more negative. There is a hint in there somewhere.

And lastly, the contentious notion of declaring perfectly legally agreed upon debts to be 'Unsustainable'. Surely this is just some woolly, do-gooder, semi socialist notion dreamt up by financial fat heads? Actually it is just saying that just as there are laws against usury for people so there should be for nations. A nation can, because of greed, stupidity or getting advice from bankers about how prices will 'never go down' and 'it's different this time' get in to debt that cannot be paid off. Companies that do it declare bankruptcy all the time. No one bats an eye.

Nation's don't get in to unsupportable debt on their own. Banks and bond holders have to help them. In the standard theory and legal practice of lending it is the duty of the lender to monitor the borrower to make sure too much debt is not being taken on. Lenders to Europe never bothered. Caveat emptor. Don't think you can lend and lend and then tell the debtor it was their fault for taking on too much debt. True they did. But it's also true the lender helped them. Both are at fault, both take the consequences.

You can find out more about this subject and make contact with those running the Debt Commission campaigns in Greece and Ireland here

[Corcaigh]

I think there is a default assumption over here that the vast majority of people in the Republic are - if not active Sinn Féin supporters - at least very sympathetic to them.

That's an unfortunate and very wrong default assumption. I'd say the majority of people in the Republic are as afraid of the Shinners as you are.

Perhap's of a certain generation BOF, but as the troubles recede into history people are more willing to forgive and forget, and younger people don't particularly care about what happened a generation ago.

Plus it has to be expected that people are ''sympathetic'' to SF these days not because of their past mis-adventures in the north, or Gerry Adam's charisma , but because they have taken up a position on the centre-Left of Irish politics and have consistently argued against the bailout of the banks, the EU and the general inequalities brought about by the bubble.

Come the next general election, with the prospect of the Labour party being contaminated by being in government, i envisage SF overtaking them to become the either the 2nd or 3rd largest party on the south - the variable being whether FF will be able to recover some of their lost support. The supreme irony of course being that if/when they get into power they're not going to do anything as drastic as their rhetoric suggests, as ably demonstrated by the parties work in the NI Assembly.

Swinging back to the topic of the debt, this latest cash injection of 24Bn just the latest charade in attempting to bring the country back to normality. It's too late, the dye is cast and Ireland is sleepwalking into defaulting.

[Awol]

Peter,

Interesting article, we shouldn't be in a place where sovereign default is an issue anyway, but we are and we should.

Points to note:

The banks are in the brown stuff and as a result of bailouts sooner or later national default is inevitable.

Where one goes others will follow.

The EU/ECB are part of the problem not part of the solution and the stress tests they have been doing on banks are worthless.

UK guaranteeing Eurozone bailouts when it's not our currency was utter **** stupidty.

France and Germany will throw whatever countries they need to under the bus to protect their own interests.

Getting out of the EU ASAP should be a national priority if we have any intention of limiting the damage to come.

[mjmooney]

I think there is a default assumption over here that the vast majority of people in the Republic are - if not active Sinn Féin supporters - at least very sympathetic to them.

That's an unfortunate and very wrong default assumption. I'd say the majority of people in the Republic are as afraid of the Shinners as you are.

I don't think anybody over here is afraid of them anymore - they've been replaced as the terrorists du jour by fundie Islamists.

[drat01]

Getting out of the EU ASAP should be a national priority if we have any intention of limiting the damage to come.

Which is the real basis behind all of your arguments Jon.

Denying the major benefits that we receive as a country in terms of trade from being in the EU and at a time where our inward economy is going tits up because of the Gvmt policy the idea of getting out of the EU now is nothing but idiocy

[Awol]

Getting out of the EU ASAP should be a national priority if we have any intention of limiting the damage to come.

Which is the real basis behind all of your arguments Jon.

Total bollocks but nevermind.

Denying the major benefits that we receive as a country in terms of trade from being in the EU and at a time where our inward economy is going tits up because of the Gvmt policy the idea of getting out of the EU now is nothing but idiocy

Idiocy is pretending that we don't actually run a trade deficit with the EU. Idiocy is believing that 42 billion pounds per year for our membership in 2012/13 is good value for money. Idiocy is believing that a relationship based purely on trade with the EU as per the Norweigian and Swiss models is impossible for the UK, the EU needs the UK as a market just as much as we need them. Idiocy is pretending that the EU is not an authoritarian, corrupt, undemocratic and meddling superstate obsessed with increasing its own power at the expense of nation states - replacing democracy with eurocracy.

Interesting that you completely ignored the other points raised regarding banks, bailouts and the Franco-German stitch up of other member states. Presumably that's because you know that they are demonstrably correct.

What do you think about the further bailout for the Irish banks? What do you think about the coming sovereign defaults? How that will impact on the Euro the EU, the individual countries involved? Interested to know your views on the issues rather than your views on me.

[El Zen]

Idiocy is believing that a relationship based purely on trade with the EU as per the Norweigian (...) models is impossible for the UK.

Do you honestly think our (Norway's) associated membership in the EU is based purely on trade? If you are uncomfortable with the lack of democracy in the EU, try our model.

Do you really think the EU would have any interest in negotating a bilateral free-trade agreement if the UK decided to leave the Union? You would need reassurances of a free-trade agreement before you leave the Union, and France and Germany would never ever ever give you that. Not a chance. You tried before you joined the Union - it didn't work then, it won't work now.

For British eurosceptics, a EU á la carte is your best hope. Leaving the Union is not a realistic option.