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

[Amsterdam_Neil_D]

^^ AWol, you talk a lot of sense to be fair mate.

[villa89]

If they go for a new treaty among the 17 instead then they will still have to get that past - at the minimum - an Irish referendum. I'd be surprised if our neighbours are too keen on the idea of fiscal union, having already seen their eurozone future when the President caught the German Parliament studying the 'secret' Irish budget before his own Parliament had done so!

One thing to note is that our EU overlords don't give two shits about what us poor Irish have to say. We might get to vote on in referendum and if we say No, then we'll get to keep voting again & again until we give them the answer they want. Its democracy at its best.

As for the Euro currency failing. That's not going to happen anytime soon, the time frame to get 17 countries back to using their own currency would be years not months. The scaremongering in some sections seems to be try to hurry up the germans to accept that they are going to have to pay for fiscal irresponsiblity of the other nations.

[Amsterdam_Neil_D]

I was here for the switch from Guilders to Euro.

Unbelievable to have actually lived through something like that but the bit that everyone seems to forget is that at the time nobody wanted to go to it, especially in Holland. What we thought would happen did and confidence in it has never been there.

The day after the change I went from having too much money each month, I could not spend it all to having absolutely nothing. It seems the shops worked out that by just changing the symbol and leaving the price the same was a gamble worth doing if they all did it.

Evil idea created by evil rich people for no real gain, only pain.

[peterms]

This may shed some light on why Ireland decided to bung billions to the bondholders and banks. They were simply following advice! What could be wrong with that?

Parliamentary Question reveals Minster for Finance paid 6.2 million to bond traders Rothschild for advice on banking crisis

In a statement today Richard Boyd Barrett TD has expressed disbelief and outrage on receipt of an answer to a parliamentary question relating to outsourcing in government departments and the public sector generally.

An answer to a parliamentary questions revealed that in 2010 the NTMA paid put €6.2 million to bond traders and wealth managers Rothschild for advice to the Minister for Finance on how to deal with the banking crisis.

Deputy Boyd Barrett pointed out that this means that on the absolutely most important issue facing Ireland in terms of an unprecedented economic crisis and whether or not to pay off senior bondholders, the Irish government actually paid bondholders to advise them on what to do.

It is hardly surprising the representatives of bondholders advised the government to prioritise bondholders with devastating consequences for the country and for Ireland’s economic future.

This raises the question of how long have we been taking advice from these private corporate interests and are we still.

It also raises questions about conflicts of interest when the state is taking advice from private interests with a stake in government decisions.

Were we, for example, taking advice from the Rothschild Group or other similar companies at the beginning of the crisis in 2008 and at the time the blanket bank guarantee was established?

It opens the door to corruption in public decision making when senior public officials are taking decisions that affect the public interest on advice from private sector golden circles. These senior public officials often end up working for these same private interests when they leave office.

Bertie Ahern was Taoiseach, making vital decisions on matters affecting the public interest and is now in the employ of a subsidiary of Helvetica Wealth, an asset management agency based in Switzerland.

Golden circles don’t just operate at a national level but are tied to an international circle of bond traders and wealth asset managers who represent the interests of multi-billionaires. In this context is it any wonder then that the state has made the decision to ransom the country for bondholders.

In a statement today Richard Boyd Barrett TD said, “it is just outrageous that we have been taking financial advice from bondholders when we know the vicious austerity being inflicted on ordinary people is because of a decision to pay the bondholders. The bondholders are hardly likely to tell the government to burn the bondholders”.

“It beggars belief that a government could be handing out 6.2million to an obscenely wealthy asset management group while at the same time planning to impose a charge of 100 on pensioners, the disabled and low income families in the form of the household charge and cutting the income of lone parents”

[Awol]

S & P have downgraded the credit rating of France, Austria, Malta, Slovakia, and Slovenia by one notch, Italy Spain, Portugal and Cyprus by two.

Reaction of French and German politicians? Complain that the UK hasn't been downgraded, based purely on spite, envy and knee-jerk hatred.

They still don't understand that we're not being downgraded because we have a sovereign currency, control of our montentary policy and a central bank/lender of last resort. Therefore we will only default on our debts if we choose to. It's true our overall debt is higher than that of France, but we don't have the Euro Albatross around our necks, have an austerity plan in place and have already bailed our our banking sector.

The Merkozy's hate the fact that we (UK) are being proved correct in our argument that the Euro was structurally destined to fail, instead whining about ratings agencies playing politics and anglo-saxon conspiracies. Anything to avoid facing the fact that they've screwed up with the Euro and have still not articulated a credible strategy to save it.

On top of that talks between Greece and her creditors broke down yesterday making a disorderly default and euro exit even more likely. Italy and Spain have to refinance 200 billion euros of debt by March. Things could get quite interesting..

[peterms]

S & P have downgraded the credit rating of France, Austria, Malta, Slovakia, and Slovenia by one notch, Italy Spain, Portugal and Cyprus by two.

Reaction of French and German politicians? Complain that the UK hasn't been downgraded, based purely on spite, envy and knee-jerk hatred.

They still don't understand that we're not being downgraded because we have a sovereign currency, control of our montentary policy and a central bank/lender of last resort. Therefore we will only default on our debts if we choose to. It's true our overall debt is higher than that of France, but we don't have the Euro Albatross around our necks, have an austerity plan in place and have already bailed our our banking sector.

The Merkozy's hate the fact that we (UK) are being proved correct in our argument that the Euro was structurally destined to fail, instead whining about ratings agencies playing politics and anglo-saxon conspiracies. Anything to avoid facing the fact that they've screwed up with the Euro and have still not articulated a credible strategy to save it.

On top of that talks between Greece and her creditors broke down yesterday making a disorderly default and euro exit even more likely. Italy and Spain have to refinance 200 billion euros of debt by March. Things could get quite interesting..

It really doesn't matter if we're downgraded or not. It doesn't affect anything. It's just a lazy story for the meeja. The real problems are far larger.

Though on the euro, doesn't the Costa Concordia seem a fitting metaphor? Taxi for the captain! Who's in charge? How did we get here? What's the plan now?

[LondonLax]

The ECB is lending vast amounts to Euro banks at low interest. Those banks are then parking that money back with the ECB. I'd say they are all waiting for the Greek default which will trigger their CDS payouts to bond holders.

There is little chance that Greek bond holders will take a 'voluntary haircut' of the size being talked about now when they have insurance that will pay out the full amount if they hold out and refuse to take the cut.

[Awol]

Thought it might be worth dragging this thread back up and taking stock of the situation as the time bought by the bail outs of Greece runs out.

There is still no government in Greece and they are now having another go at national elections next month with the far left riding high in the polls and a well supported fascist group patrolling the streets in some areas. Anyone who can is getting their money out of the country and messy default followed by exit from the Euro looks almost inevitable before the summer is out. One out going Greek Minister even spoke publicly about the danger of a 'coming civil war' in his country - a situation predicted by Nigel Farage nearly 2 years ago.

Elsewhere there have been mass downgrades on Spanish banks, bond yields for government borrowing are above 6%, unemployment is over 25% (youth unemployment over 50%) and the fear of default + euro exit spreading beyond Greece is hitting Spain very hard. It is broadly accepted that Spain is too big to save should things go wrong so that effectively puts them one bank run away from total economic collapse.

One of the biggest buyers of European debt (other than their own central banks) has been Chinese who have now suspended those purchases, which is further increasing bond yields and indicates how a country known for its shrewd decisions thinks this crisis will play out.

Once Greece goes it will be joined by the other Med countries in the euro departure lounge unless Germany agrees to unleash the ECB as the unrestricted lender of last resort for the entire euro zone. Merkel shows no sign of doing this and global stock markets are falling accordingly.

Whitehall also seems to have belatedly woken up to the warnings of so many since 2008 that the eurozone could collapse and trigger a global depression - even Mervyn King has now admitted that European banks are basically insolvent.

All in all it seems like a good time to ask the poll question again: Will the euro survive, die or continue in a different form?

[tonyh29]

The most recent polls suggest that if the Greek vote were to be held tomorrow, the pro-bailout New Democracy party would win – news which could quell euro exit talk.

There was a good article yesterday that i read , it said that to some extent Cameron has been talking sense to the other Euro leaders , but not acting on his own words when it comes down to it ... as if he is scarred of his own party and wont break away from Browns economic strategy ... I'll see if I can locate it ....

[tonyh29]

Here it is

No one dispenses advice to the eurozone better than David Cameron. His speech yesterday was a fountain of good sense and hard truth. Quite rightly, he said there’s no point in any uncompetitive, debt-addicted country thinking it can just muddle along. Radical, structural reform is needed. He didn’t say which of the many basket-case European economies he had in mind, but one sticks out. It is increasing its debt faster than anywhere else in Europe. It languishes behind even Pakistan and Nicaragua on the global regulation league tables. Its growth prospects have almost evaporated.

How do you solve a problem like the United Kingdom? Two years in, and Mr Cameron seems no nearer to a solution. He is ambitious over welfare and schools, but on the economy he seems trapped inside a failed Brownite consensus. The Prime Minister does know what should be done, as we heard yesterday: radical reform, and accepting that you can’t (as he puts it) “borrow your way out of a debt crisis”. But his government is attempting to do precisely that, borrowing more over five years than Labour did over 13.

Fairly soon, Mr Cameron will be fully aware of these depressing metrics. He has ordered a special app on his iPad that will give him a “management dashboard”, with everything from dole figures to inflation. (One of his senior advisers says the PM spends “a crazy, scary amount of time playing Fruit Ninja on his iPad”, so the new software will offer some respite.) It will be a digital horror show. His government is “dealing with the debt” in the same way that George Best dealt with the drink: bingeing on it. Ours has increased more than any eurozone member’s. And still, as his iPad will soon tell him, the government envisages no economic improvement to speak of by 2015. Britain’s deficit won’t be abolished. It will still be there – indeed, it will be the largest in the Western world.

The Institute of Directors has done more than just provide a stage for the Prime Minister’s speech yesterday. Next week, with the Taxpayers’ Alliance, it will publish a compendium of radical solutions to get the economy moving, almost all of which he will likely consider beyond the pale. The report of its 2020 Tax Commission (of which I am a member) is intended to be the most comprehensive guide to supply-side economic reform published in Britain in a generation. It highlights the many options open to George Osborne to replace the losing formula of tax rises and slow-mo austerity.

Tinkering won’t be enough. It’s not much use trying to simplify taxes, for example, when the system itself is beyond redemption. Rules on inheritance tax alone would take the world’s fastest speaker 10 hours to read. The time has come to start abolishing taxes wholesale, as Nigel Lawson used to do with every Budget. The entire tax system needs to be replaced with something coherent. Trying to incubate “green technology” jobs may well keep ministers busy, but will make no noticeable difference to the economy. British government spending is about half of economic output. Study after study shows the optimal size of government is closer to a third. This should be the aim.

The Treasury is locked in the old way of thinking about growth: it assumes that everyone will just carry on as before, but pay more tax. Take the North Sea oil raid in last year’s Budget, which the Treasury claimed was cunning enough not to impact on any activity at all. Exploration projects collapsed by half last year, production by a fifth. Meanwhile, the Institute for Economic Affairs calculates that the VAT increase has cost about a quarter of a million jobs, and dealt such a hammer blow to growth that it ended up actually increasing the deficit – the opposite of the intended effect.

If Britain’s state spending were cut back to 2004 levels – hardly the Dark Ages – studies suggest our economy would be able to grow at twice today’s speed. William Hague recently suggested that the only growth strategy is for people to “work hard”. It’s not quite so simple. Ministers need to create a stronger incentive for people to work hard, cutting taxes and letting them keep more of the money they earn. None of this is hard to grasp, none of it is outlandish. The moral and economic case for limited government is firmly grasped in the roaring Asian economies. But none of this is obvious to HM Treasury: it is still risk-averse, still mistrustful, still hardwired with assumptions that Gordon Brown programmed in over 10 years.

For all the talk of cuts, state spending has come down just 0.9 per cent from Brown’s peak. The British strategy has been not so much sado-austerity as thesp-austerity: minimal cuts imposed with maximal dramatics. Mr Cameron is giving the best speeches on fiscal sanity on the world stage at the moment, while his ministers are borrowing like drunken Keynesians. The Prime Minister is not trying to “dupe the bond markets”, as one City firm suggested this week. The gap between what he’s saying and what he’s doing is better explained by the gap between what he knows he needs to do and what he feels able to enact.

For those around Mr Cameron, this gap is deeply frustrating – and illustrated by one dramatic incident a few weeks ago. As Benedict Brogan revealed yesterday, a small group inside No 10 had drawn up proposals for an immediate cut in corporation tax to 15 per cent. This would have been a game-changer – a clear signal that Britain was open for business with the one of the lowest corporation taxes on the planet. The idea was for companies to come flocking back from Ireland, itself sending a signal, and the cost of the tax rise would be funded by welfare cuts (which remain popular).

But the plan was rejected out of hand by the Treasury, and its advocates were given no help at all from Mr Cameron. To those who had believed they were working for a radical Prime Minister, it was a bitter blow. This sense of frustration is shared throughout the Conservative backbenches. Tory MPs fought an election saying that Britain was on the wrong path – yet some feel they’re still plodding along that path, whistling a different tune but with the cliff edge still in sight. The glummer Tories argue that a fresh eurozone blow-up would have its advantages for the Government, as there would be something to blame for the abject lack of economic progress.

Perhaps the most depressing theory circulating in Westminster at present is that “you have to go through Heath to get to Thatcher”. That is to say, tinkering has to be tried, and failed, before the Conservative Party reaches for radicalism. In 1970 Ted Heath spoke brilliantly about the changes needed to save Britain, but felt unable to implement them in office. Mr Cameron is familiar with the unflattering comparisons to Heath. He responds that Lady Thatcher was cautious at first, biding her time before waging war with the unions and saving Britain. If the Prime Minister does have such a card up his sleeve, now might be a good time to play it.

[LondonLax]

Are you thinking of changing your vote Awol? Were you the one who voted the Euro would be dead by christmas 2010?

All the Eurozone countries are still desperate to keep it, including almost 90% of the population of Greece. That to me tends to suggest that it is not going anywhere.

Whether Greece will have to be forced out of the Eurozone for a period of time to restructure is another question though!

[peterms]

The most recent polls suggest that if the Greek vote were to be held tomorrow, the pro-bailout New Democracy party would win – news which could quell euro exit talk.

There was a good article yesterday that i read , it said that to some extent Cameron has been talking sense to the other Euro leaders , but not acting on his own words when it comes down to it ... as if he is scarred of his own party and wont break away from Browns economic strategy ... I'll see if I can locate it ....

The article is very helpful in demonstrating Mr Cameron's grasp of the situation and what he needs to do in his role as PM to lead the country at this difficult time.

I have in mind especially the insight that

One of his senior advisers says the PM spends “a crazy, scary amount of time playing Fruit Ninja on his iPad”

The article is the usual Torygraph nonsense. It starts by buying in to Dave's grotesquely wrong understanding of the problem as " a (public) debt crisis". It is a demand crisis. Cutting demand makes it worse, not better. It's the private sector which has the debt crisis. That's why it is deleveraging. That causes government deficits to rise.

Businesses are sitting on mountains of cash, and not investing because of lack of demand. And the policy prescription put forward by the policy advisers to Cameron is to cut welfare spending in order to fund cuts to corporation tax, to, er, give businesses more money which they won't invest because demand has fallen further. What a bunch of fools.

[peterms]

Thought it might be worth dragging this thread back up and taking stock of the situation as the time bought by the bail outs of Greece runs out.

There is still no government in Greece and they are now having another go at national elections next month with the far left riding high in the polls and a well supported fascist group patrolling the streets in some areas. Anyone who can is getting their money out of the country and messy default followed by exit from the Euro looks almost inevitable before the summer is out. One out going Greek Minister even spoke publicly about the danger of a 'coming civil war' in his country - a situation predicted by Nigel Farage nearly 2 years ago.

Elsewhere there have been mass downgrades on Spanish banks, bond yields for government borrowing are above 6%, unemployment is over 25% (youth unemployment over 50%) and the fear of default + euro exit spreading beyond Greece is hitting Spain very hard. It is broadly accepted that Spain is too big to save should things go wrong so that effectively puts them one bank run away from total economic collapse.

One of the biggest buyers of European debt (other than their own central banks) has been Chinese who have now suspended those purchases, which is further increasing bond yields and indicates how a country known for its shrewd decisions thinks this crisis will play out.

Once Greece goes it will be joined by the other Med countries in the euro departure lounge unless Germany agrees to unleash the ECB as the unrestricted lender of last resort for the entire euro zone. Merkel shows no sign of doing this and global stock markets are falling accordingly.

Whitehall also seems to have belatedly woken up to the warnings of so many since 2008 that the eurozone could collapse and trigger a global depression - even Mervyn King has now admitted that European banks are basically insolvent.

All in all it seems like a good time to ask the poll question again: Will the euro survive, die or continue in a different form?

It seems the banks and others are desperately checking their systems can cope with switching to drachmas, that legal agreements for loans are properly worded to cope with the switch, and that there is some way of providing the physical currency that will be needed.

The Spanish banks are ****. This despite being given massive handouts by being given ECB money at 1% and buying Spanish debt at 6% - a nice little earner for doing precisely nothing. A way of routing public money to them for no public benefit. But the scale of it is far outstripped by their underlying insolvency.

And the other banks, of course. German, French, UK. So many of them are caught up in it all, and have real assets worth far less than they claim, but don't dare to admit it.

It's not Greece or Spain, or even the Euro, but the underlying financial system which is built on illusion.

Oh, and China's property market is in some difficulty. Sound familiar?

[Awol]

Are you thinking of changing your vote Awol? Were you the one who voted the Euro would be dead by christmas 2010?

All the Eurozone countries are still desperate to keep it, including almost 90% of the population of Greece. That to me tends to suggest that it is not going anywhere.

Whether Greece will have to be forced out of the Eurozone for a period of time to restructure is another question though!

I had easter or summer 2011, plainly underestimating the commiment of the euro politicos to keep on reinforcing failure.

There is no mechanism for Greece to leave the euro and "restructure", if it did two things would happen:

1) The devaluation required for the new Drachma would be so severe that it could never rejoin the euro currency. Even if it could/did that would not address the structural problems which were created by its original membership.

2) Once the taboo of exit is broken the markets will pile the pressure on exits for Spain, Italy, Portugal and possibly others.

In short I still think its screwed as a currency in its current form, but the timeline is clearly much longer I thought in 2010.