Discuss (Budget + Germany)

screamer

The country had it's say last April, and TBH, as I said then to my co-workers, they'll lie through their teeth to get elected, power at any price, the same circus, with different clowns. I give them 12 months now to survive in government.
Now, to the EU
"He who pays the piper, calls the tune", and the puppets here dance. What does annoy me though, is that France and Germany must realise, if you create something, and it succeeds, then you take the credit and the spoils, if it fails, you take the responsibility and the debt...... they can run all they like, but the can't hide from that fact. The EU overstepped it's mandate from
being the organisation for the export of coal and steel to being the singing, dancing variety show we have today, where the puppet masters call the tune. Time to go back to the drawing board, and take all the "frills" of the EU with it.

Scofflaw

KINGVictor wrote: »

Sorry Scoff, I disagree with you. I concur in a sense that Ireland been recipients of German funds are expected to show steps been taken to meet her debt obligations and how they intend to meet the set criteria for further payments. However, showing the actual details of budget proposals/intentions to the German parliament before the Dail is a bit too far.

It's impossible to avoid, though, as a result of the logic already outlined. The details have to be shown to the EFSF governments in advance, just as we see the details of the Greek budget in advance - in the case of Germany, their internal constitutional arrangements mean it's seen by a parliamentary committee.

The Germans are not the only government seeing the details of the Irish budget in advance - every EFSF government is doing so, because we are in receipt of funding from them all. I don't know whether it also applies to the UK and the other bilaterals, but I suspect it does.

KINGVictor wrote: »

If I am going to be honest, the way the EU (which is led by the Franco-Geramn axis) is dealing with crises is just basically a time bomb waiting to explode. That aside, the EU commission has come out today to acknowledege that the German authorities were at fault in leaking this documents to the press and as far as I know I have not heard any response from Germany, it seems very contrived.

I agree entirely that the handling of the crisis has been frankly appalling, but I think your statement confuses the two common senses of "EU". A large part of the problem - and of the optics of the problem, too - is that it is being handled intergovernmentally rather than cooperatively.

KINGVictor wrote: »

Even if we go by your position that Ireland as the debtor reporting to her creditor,still, I feel it is a total of breach of trust and confidentiality by the Germans.

Sure - whatever the logic of being able to see Irish budget plans before signing off on bailout money, the duty of care they have towards such information is obviously huge.

cordially,
Scofflaw

WalterMitty

The thing is , now that german politicians are looking through our budgets and finances in detail they will see that Public sector average pay in Ireland is a lot higher than in Germany (36kgermany, 48k ireland) and so much more than private sector in ireland( 35k versus 48k) that they will be reluctant to give us any debt write offs or other concessions. When we fail to reach our deficit targets and if we need a default they will urge cuts in that area. I outlined on other threads why i think we will not meet targets and will need a default ultimately.

irishh_bob

WalterMitty wrote: »

The thing is , now that german politicians are looking through our budgets and finances in detail they will see that Public sector average pay in Ireland is a lot higher than in Germany (36kgermany, 48k ireland) and so much more than private sector in ireland( 35k versus 48k) that they will be reluctant to give us any debt write offs or other concessions. When we fail to reach our deficit targets and if we need a default they will urge cuts in that area. I outlined on other threads why i think we will not meet targets and will need a default ultimately.

the average private sector wage isnt 48 k in ireland

nesf

irishh_bob wrote: »

the average private sector wage isnt 48 k in ireland

Or anything close. http://www.ronanlyons.com/2009/07/13/public-sector-versus-private-sector-pay-update/

WalterMitty

irishh_bob wrote: »

the average private sector wage isnt 48 k in ireland

I know its around 36k , its the public sector average wage that is 48k whereas its mid 30s in Germany and mid twenties in UK!
Look at how angry the British get when their public servants are slighly better paid than the private sector whereas here they are much better paid .
http://www.telegraph.co.uk/finance/economics/7036131/Record-gap-between-public-and-private-sector-pay.html

ardmacha

Sorry Scoff, I disagree with you. I concur in a sense that Ireland been recipients of German funds are expected to show steps been taken to meet her debt obligations and how they intend to meet the set criteria for further payments. However, showing the actual details of budget proposals/intentions to the German parliament before the Dail is a bit too far.

Absolutely. This leak is indicative of the mess created in the present situation and indirectly of how German arrogance is undermining the EU. The general thrust of Irish economic policy is of interest to other member states, the detail of VAT rates is not. This document was distributed to large number of politicians, who are not economists and who are probably not well informed on the structure of the Irish economy. They are no position to assess whether a VAT rate is appropriate or not. Poorly informed politicians contribute little to anything.

There are real dangers in providing this detail. What if the proposed motoring taxation rebalancing was seen to tax big German cars more heavily than smaller French or Italian ones, will we have the French supporting this and the Germans opposing it?

The IMF or the EU are the technocrats in this regard. They should be able to assess whether the Irish proposals are likely to provide the tax yield proposed and report on that to the German government. Anything beyond that is inappropriate.

Maura74

sceptic100 wrote: »

When everyone blames fianna fáil for the mess we're in, what were all the other main parties doing at the time , I didn't see them protesting too much , but probably reaping the rewards like the rest.
I'd say they would've done the same and i'm fed up with them reminding us how bad the last government did everytime they are asked a question.

If the other parties seen how wreckless Fianna fáil and the banks were , WHY did the not put a stop to it and tell the people of the nation??

I agree, that is all the Lib/Cons are doing in UK it was the last government fault for the mess, Cameron is very grateful for EU at present as it has taken the empharisis of what is happening in UK, one million young people unemployed also the UK owes billions and Mervyn is printing money like it is going our of fashion.

Scofflaw

ardmacha wrote: »

Absolutely. This leak is indicative of the mess created in the present situation and indirectly of how German arrogance is undermining the EU. The general thrust of Irish economic policy is of interest to other member states, the detail of VAT rates is not. This document was distributed to large number of politicians, who are not economists and who are probably not well informed on the structure of the Irish economy. They are no position to assess whether a VAT rate is appropriate or not. Poorly informed politicians contribute little to anything.

There are real dangers in providing this detail. What if the proposed motoring taxation rebalancing was seen to tax big German cars more heavily than smaller French or Italian ones, will we have the French supporting this and the Germans opposing it?

The IMF or the EU are the technocrats in this regard. They should be able to assess whether the Irish proposals are likely to provide the tax yield proposed and report on that to the German government. Anything beyond that is inappropriate.

Unfortunately, the EU is not responsible for decisions on the EFSF, which is a multilateral and intergovernmental fund. The German budgetary committee is, under German law, entitled to see documents passed to the Commission because the Commission is only acting as an agent for the EFSF governments:

The Commission passed the document to Germany, which in turn gave the document to its budget committee, which is entitled to a quarterly update on the progress of countries bailed out by the European Financial Stability Facility bailout fund.

Leaking it is extremely negligent, but having it in the first place is simply a corollary of the EFSF's intergovernmental nature.

cordially,
Scofflaw

ART6

If you run a commercial company, where your liabilities exceed your assets, you become insolvent. Now, someone comes along (a bank or an investor) who offers to loan you funds to get out of the mess you are in. That provider of the loan, however, dictates terms under which he will provide the funds. Those will always include regular updates of what you are doing to ensure his funds are repaid. He will reserve the right to approve or otherwise the budget you have presented.

If he doesn't like it he can call his loan, in which case you may be placed into administration, and the appointed administrator then takes charge of your company. The directors no longer have any authority, and the only interests the Administrator considers are those of the secured creditor (he who provided the loan).

Let us suppose that the lender doesn't immediately elect to appoint an administrator. He thinks you are being prudent. He wants to know how you are planning your future budgets. You tell him that you are reducing your administration staff, cutting salaries, cutting expenditure ruthlessly. You are determined to prune the rose.

The lender approves in principle, but he doubts that under your employment contracts with you staff you can actually cut salaries etc. He is concerned that if you put that to your staff they would revolt. You resist doing so in the knowledge that if you did that it is exactly what would happen and the business would go fast down the pan.

The Board or directors meets to consider the situation and how the company got into this situation. It came about because there were a number of supplier companies that were considered to be essential to the business. They had over-reached themselves and had got into trouble. At the time it had been decided that they were so essential to the business that they couldn't be allowed to fail, so funds were made available to them by buying shares to the extent that the principal company effectively owned them. These funds were provided by the lenders on top of their original loans.

Now the lender says "Now there are a number of other sub-debtors in this, unsecured, contingent, or otherwise. Who is actually going to pay back our money? You have sent us directors who have made resounding speeches and who have virtually guaranteed our money, but where is it coming from?"

DO YOU HAVE THE MEANS TO PAY?

ardmacha

Leaking it is extremely negligent, but having it in the first place is simply a corollary of the EFSF's intergovernmental nature.

That's the problem. This has been set up by politicians who are playing to their own audience. These people are perfectly aware of how a leak such as this would play, but by rubbing the Irish people's noses in it they can get short term advantage in their own politics. The collective institutions of the EU have to get their role back or the whole project is banjaxed. There isn't much left of the vision of Schuman and Monnet and I question if Adenauer would be proud of the German parliamentarians this week.

Scofflaw

ardmacha wrote: »

That's the problem. This has been set up by politicians who are playing to their own audience. These people are perfectly aware of how a leak such as this would play, but by rubbing the Irish people's noses in it they can get short term advantage in their own politics. The collective institutions of the EU have to get their role back or the whole project is banjaxed. There isn't much left of the vision of Schuman and Monnet and I question if Adenauer would be proud of the German parliamentarians this week.

There I suspect you might well be right, but I admit I can't see how on earth any German parliamentarian could benefit politically from the leak.

cordially,
Scofflaw

Going Forward

nesf wrote: »

Got **** all to do with Treaties and everything to do with us being bailed out and those bailing us out having a say in our Budgets during the time we're borrowing money from them. Comes with the territory unfortunately, like it or lump it.

Thats all well and good, but 2 days ago Merkel said she wanted a new Treaty so that she could step in and interfere with other country's budget decisions.

It has to be acknowledged that it appears from the "leak" that she already has that facility if her parliament is currently scrutinising the Irish budgetary proposals.

Whilst accepting her interest in Irish affairs, neither she nor her fatherland is expressly mentioned in Ireland's memorandum of understanding.

Its been suggested that she's grandstanding for political reasons, and that appears to be the case, as she, nor any other EU leader has come up with any solid viable economic proposals to tackle the Eurozone crisis, and by tackling it I mean tackling the root causes.

Notice how quiet little Nick is at the moment? Something must be going to give in France soon.

Fundamental changes will have to be made to how markets work.

Much has been smugly made here about electorates reaping what the have sown.

If that is now to be a new accepted norm, then the time will also have to come for ignorant and ill advised bank share holders and investors to accept the same thinking and suffer their losses, as the electorates are now being forced to do.

But the banks, any bank even the non-systemic ones, cannot be allowed to fail for reasons as yet unexplained. (The line about having to have credit available doesnt even wash now.)

Do I want to bail out my neighbour who bought their apartment in Bulgaria? Certainly not, nor do I want to bail out the sub prime mortgage lenders (and other so called repectable institutions) who went against all normal accepted lending criteria and slipped the money into the purchaser's pocket to simply turn another little profit.

With 10% of mortgage holders officially experiencing some degree of repayment problems, and an unknown figure barely keeping to their agreements, a new leaf will have to be turned in relation to debt nationally and internationally.

Going Forward

ART6 wrote: »

If you run a commercial company, where your liabilities exceed your assets, you become insolvent. Now, someone comes along (a bank or an investor) who offers to loan you funds to get out of the mess you are in. That provider of the loan, however, dictates terms under which he will provide the funds. Those will always include regular updates of what you are doing to ensure his funds are repaid. He will reserve the right to approve or otherwise the budget you have presented.

If he doesn't like it he can call his loan, in which case you may be placed into administration, and the appointed administrator then takes charge of your company. The directors no longer have any authority, and the only interests the Administrator considers are those of the secured creditor (he who provided the loan).

Let us suppose that the lender doesn't immediately elect to appoint an administrator. He thinks you are being prudent. He wants to know how you are planning your future budgets. You tell him that you are reducing your administration staff, cutting salaries, cutting expenditure ruthlessly. You are determined to prune the rose.

The lender approves in principle, but he doubts that under your employment contracts with you staff you can actually cut salaries etc. He is concerned that if you put that to your staff they would revolt. You resist doing so in the knowledge that if you did that it is exactly what would happen and the business would go fast down the pan.

The Board or directors meets to consider the situation and how the company got into this situation. It came about because there were a number of supplier companies that were considered to be essential to the business. They had over-reached themselves and had got into trouble. At the time it had been decided that they were so essential to the business that they couldn't be allowed to fail, so funds were made available to them by buying shares to the extent that the principal company effectively owned them. These funds were provided by the lenders on top of their original loans.

Now the lender says "Now there are a number of other sub-debtors in this, unsecured, contingent, or otherwise. Who is actually going to pay back our money? You have sent us directors who have made resounding speeches and who have virtually guaranteed our money, but where is it coming from?"

DO YOU HAVE THE MEANS TO PAY?

Thanks for explaining what the "old" lending principles were that banks used to adhere to before they got risky and dished money in the form of loans out to all and sundry.

Scofflaw

Going Forward wrote: »

Thats all well and good, but 2 days ago Merkel said she wanted a new Treaty so that she could step in and interfere with other country's budget decisions.

It has to be acknowledged that it appears from the "leak" that she already has that facility if her parliament is currently scrutinising the Irish budgetary proposals.

Whilst accepting her interest in Irish affairs, neither she nor her fatherland is expressly mentioned in Ireland's memorandum of understanding.

No countries are expressly mentioned in that sense, but Germany is part of the EFSF multilateral fund. Those who are bailing us out expect to see the books.

A minor point is that it's interesting that an Irish poster would interpret the German parliament's ability to scrutinise such things as part of Merkel's ability to "interfere" - it is, if anything, the opposite.

cordially,
Scofflaw

rumour

Scofflaw wrote: »

Also not really anything to do with Germany having any kind of 'special' position...

cordially,
Scofflaw

Absolute nonsense.....do we get to see Germany's budget proposals???

beeftotheheels

I have to say I'm amused by the misplaced irritation on this thread yet the failure to actually mention the point that is particularly irksome.

The budget details are not actually being shared under the EFSF rules, because that would not require us to share them with the commission.

They are being shared under a new interpretation of Art 121

Article 121
(ex Article 99 TEC)
1. Member States shall regard their economic policies as a matter of common concern and shall coordinate them within the Council, in accordance with the provisions of Article 120.

2. The Council shall, on a recommendation from the Commission, formulate a draft for the broad guidelines of the economic policies of the Member States and of the Union, and shall report its findings to the European Council. The European Council shall, acting on the basis of the report from the Council, discuss a conclusion on the broad guidelines of the economic policies of the Member States and of the Union. On the basis of this conclusion, the Council shall adopt a recommendation setting out these broad guidelines. The Council shall inform the European Parliament of its recommendation.

3. In order to ensure closer coordination of economic policies and sustained convergence of the economic performances of the Member States, the Council shall, on the basis of reports submitted by the Commission, monitor economic developments in each of the Member States and in the Union as well as the consistency of economic policies with the broad guidelines referred to in paragraph 2, and regularly carry out an overall assessment. For the purpose of this multilateral surveillance, Member States shall forward information to the Commission about important measures taken by them in the field of their economic policy and such other information as they deem necessary.

4. Where it is established, under the procedure referred to in paragraph 3, that the economic policies of a Member State are not consistent with the broad guidelines referred to in paragraph 2 or that they risk jeopardising the proper functioning of economic and monetary union, the Commission may address a warning to the Member State concerned. The Council, on a recommendation from the Commission, may address the necessary recommendations to the Member State concerned. The Council may, on a proposal from the Commission, decide to make its recommendations public. Within the scope of this paragraph, the Council shall act without taking into account the vote of the member of the Council representing the Member State concerned. A qualified majority of the other members of the Council shall be defined in accordance with Article 238(3)(a).

5. The President of the Council and the Commission shall report to the European Parliament on the results of multilateral surveillance. The President of the Council may be invited to appear before the competent committee of the European Parliament if the Council has made its recommendations
public.

6. The European Parliament and the Council, acting by means of regulations in accordance with the ordinary legislative procedure, may adopt detailed rules for the multilateral surveillance procedure referred to in paragraphs 3 and 4.

And Art 126

Article 126
(ex Article 104 TEC)
1. Member States shall avoid excessive government deficits.

2. The Commission shall monitor the development of the budgetary situation and of the stock of government debt in the Member States with a view to identifying gross errors. In particular it shall examine compliance with budgetary discipline on the basis of the following two criteria:
(a) whether the ratio of the planned or actual government deficit to gross domestic product exceeds a reference value, unless:
— either the ratio has declined substantially and continuously and reached a level that comes close to the reference value,
— or, alternatively, the excess over the reference value is only exceptional and temporary and the ratio remains close to the reference value;
(b) whether the ratio of government debt to gross domestic product exceeds a reference value, unless the ratio is sufficiently diminishing and approaching the reference value at a satisfactory pace. The reference values are specified in the Protocol on the excessive deficit procedure annexed to the Treaties.

3. If a Member State does not fulfil the requirements under one or both of these criteria, the Commission shall prepare a report. The report of the Commission shall also take into account whether the government deficit exceeds government investment expenditure and take into account all other relevant factors, including the medium-term economic and budgetary position of the Member State. The Commission may also prepare a report if, notwithstanding the fulfilment of the requirements under the criteria, it is of the opinion that there is a risk of an excessive deficit in a Member State.

4. The Economic and Financial Committee shall formulate an opinion on the report of the Commission.

5. If the Commission considers that an excessive deficit in a Member State exists or may occur, it shall address an opinion to the Member State concerned and shall inform the Council accordingly.

6. The Council shall, on a proposal from the Commission, and having considered any observations which the Member State concerned may wish to make, decide after an overall assessment whether an excessive deficit exists.

7. Where the Council decides, in accordance with paragraph 6, that an excessive deficit exists, it shall adopt, without undue delay, on a recommendation from the Commission, recommendations addressed to the Member State concerned with a view to bringing that situation to an end within a given period. Subject to the provisions of paragraph 8, these recommendations shall not be made public.

8. Where it establishes that there has been no effective action in response to its recommendations within the period laid down, the Council may make its recommendations public.

9. If a Member State persists in failing to put into practice the recommendations of the Council, the Council may decide to give notice to the Member State to take, within a specified time limit, measures for the deficit reduction which is judged necessary by the Council in order to remedy the situation. In such a case, the Council may request the Member State concerned to submit reports in accordance with a specific timetable in order to examine the adjustment efforts of that Member State.

10. The rights to bring actions provided for in Articles 258 and 259 may not be exercised within the framework of paragraphs 1 to 9 of this Article.

11. As long as a Member State fails to comply with a decision taken in accordance with paragraph 9, the Council may decide to apply or, as the case may be, intensify one or more of the following measures:
— to require the Member State concerned to publish additional information, to be specified by the Council, before issuing bonds and securities,
— to invite the European Investment Bank to reconsider its lending policy towards the Member State concerned,
— to require the Member State concerned to make a non-interest-bearing deposit of an appropriate size with the Union until the excessive deficit has, in the view of the Council, been corrected,
— to impose fines of an appropriate size.
The President of the Council shall inform the European Parliament of the decisions taken.

12. The Council shall abrogate some or all of its decisions or recommendations referred to in paragraphs 6 to 9 and 11 to the extent that the excessive deficit in the Member State concerned has, in the view of the Council, been corrected. If the Council has previously made public recommendations, it shall, as soon as the decision under paragraph 8 has been abrogated, make a public statement that an excessive deficit in the Member State concerned no longer exists.

13. When taking the decisions or recommendations referred to in paragraphs 8, 9, 11 and 12, the Council shall act on a recommendation from the Commission. When the Council adopts the measures referred to in paragraphs 6 to 9, 11 and 12, it shall act without taking into account the vote of the member of the Council representing the Member State concerned. A qualified majority of the other members of the Council shall be defined in accordance with Article 238(3)(a).

14. Further provisions relating to the implementation of the procedure described in this Article are set out in the Protocol on the excessive deficit procedure annexed to the Treaties. The Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the European Central Bank, adopt the appropriate provisions which shall then replace the said Protocol. Subject to the other provisions of this paragraph, the Council shall, on a proposal from the Commission and after consulting the European Parliament, lay down detailed rules and definitions for the application of the provisions of the said Protocol.

So it was already in the treaty that we shouldn't run excessive deficits, it was already in the treaty that our economic policy should pay heed to the Union as a whole, it was already in the treaty that our debt should remain below certain limits, and it was already in the treaty that if we breached these rules then the Council and Commission could start looking for data and plans off us.

Which is hugely irritating.

Because these rules were adhered to by Ireland and Spain throughout their euro membership until a global financial crisis started. And these rules were never applied, because as you will note it requires a qualified majority of the council to kick things off and Germany and France made clear they would not tolerate such a vote in relation to their consistent and ongoing breaches since the introduction of the euro. Breaches which have played some small part in the mess we are in today, Germany couldn't balance her books, Germany couldn't grow, Interest rates were kept low. Ireland and Spain should have countered their lack of control over interest rate policy with a better structured tax system but they didn't.

So what am I most indignant about in relation to this? Not that we're sharing the data, that makes sense. But that

a) The Germans leaked the data, and
b) That the data is being shared under rules rendered toothless by the Germans (for the most part) whilst the German's talk about treaty change rather than acknowledge that no treaty change is required if every Member State lived up to their obligations under Arts 121 or 126.

Or perhaps a change is required, perhaps those articles should leave the power with the Commission alone and not the Council. But if that is necessary then the Germans need to admit the change is required to prevent Germany and France (and Italy) frustrating the proper functioning of those articles, not Ireland and not Spain. We have been compliant in not running deficits and keeping debt down until a crisis, we have been compliant in terms of accepting a programme

nesf

rumour wrote: »

Absolute nonsense.....do we get to see Germany's budget proposals???

If we were bailing out Germany we'd be able to see them alright.

nesf

Going Forward wrote: »

Thats all well and good, but 2 days ago Merkel said she wanted a new Treaty so that she could step in and interfere with other country's budget decisions.

It has to be acknowledged that it appears from the "leak" that she already has that facility if her parliament is currently scrutinising the Irish budgetary proposals.

Whilst accepting her interest in Irish affairs, neither she nor her fatherland is expressly mentioned in Ireland's memorandum of understanding.

Its been suggested that she's grandstanding for political reasons, and that appears to be the case, as she, nor any other EU leader has come up with any solid viable economic proposals to tackle the Eurozone crisis, and by tackling it I mean tackling the root causes.

The Treaty change is (I think) about greater fiscal oversight by the EU as a whole over individual budgets of member states in the Eurozone. This is something economists having being pointing out as necessary for 20 years or so.

texidub

Scofflaw wrote: »

There I suspect you might well be right, but I admit I can't see how on earth any German parliamentarian could benefit politically from the leak.

This is how they will benefit: By being seen to be taking control of the 'weaker'/'periphery' nations, they will garner respect amongst some German voters.

Going Forward

Scofflaw wrote: »

A minor point is that it's interesting that an Irish poster would interpret the German parliament's ability to scrutinise such things as part of Merkel's ability to "interfere" - it is, if anything, the opposite.

cordially,
Scofflaw

Notwithstanding the role played by the profligacy of German banks in contributing to the state we now find ourselves in, are you implying that we should now be grateful for the austerity measures and impending experimental vat increase to 23%?

It is now as ever in Germany's interest that Ireland and other peripherals now stay just with their heads above the water, just as long as we meet our loan repayments.

Dont forget she not so long ago tried to interfere with our corporation tax arrangements.

It is a competitive economic area , and she is the ultimate bankers' politician.

Scofflaw

rumour wrote: »

Absolute nonsense.....do we get to see Germany's budget proposals???

As nesf says, if we were bailing them out, we would - we do get to see Greece's, because we are. Whether the Oireachtas does, as opposed to the government, I doubt, but that's a question of our internal arrangements.

Elements of the confidential draft programme documents for Ireland were reported in the press yesterday. These documents were not final and were not signed by the Irish government. Decisions on the budget have not been taken yet.

The Commission, as a member of the Troika, has a mandate from the Member States to report on the contents of the quarterly review and share all the relevant information with the Governments. Ireland sees the same information from the Troika about Greece, for example. With this information Member States are in a position to endorse the conclusions and decide to proceed with the disbursement of the next instalment of the financial assistance programme .

In the case of Germany, we understand there is a legal obligation to share this information with the Budget Committee of the Bundestag as it has a central role in deciding on these disbursements. What happened there is the sole responsibility of the German authorities.

http://ec.europa.eu/ireland/press_office/news_of_the_day/clarification-irish-budget-leak_en.htm

As I said, no special position for Germany is involved.

cordially,
Scofflaw

Scofflaw

Going Forward wrote: »

Notwithstanding the role played by the profligacy of German banks in contributing to the state we now find ourselves in,

I'm glad you added the "notwithstanding", since I strongly suspect that you can't offer any evidence for the claim!

Going Forward wrote: »

are you implying that we should now be grateful for the austerity measures and impending experimental vat increase to 23%?

It is now as ever in Germany's interest that Ireland and other peripherals now stay just with their heads above the water, just as long as we meet our loan repayments.

Dont forget she not so long ago tried to interfere with our corporation tax arrangements.

It is a competitive economy, and she is the ultimate bankers' politician.

You seem to be under the impression, or at least trying to create the impression, that were it not for Germany we wouldn't be having any austerity...in what world would that be the case? Presumably it's one in which the Irish budget deficit doesn't exist...which must be nice.

Perhaps this needs to be laid out one step at a time:

1. we have a budget deficit, which we either need to close, or else we need to borrow.

2. unfortunately, we cannot close the budget deficit fast enough to avoid borrowing.

3. whoever we borrow from will take into account their estimation of our capacity and willingness to repay.

4. the markets' view of our current capacity or willingness is such that the lending rates they are willing to offer are too high for borrowing from the markets to be practical.

5. we are therefore only able to borrow from lenders of last resort - various multinational bodies and funds funded by other countries.

6. those lenders are lending to us at a rate either lower, or far lower, than the markets.

7. in return, those lenders require that our spending be agreed with them in advance.

8. it is in their interests that Ireland return to solvency as soon as possible, because the risk they absorb in lending to us is a drag on their fiscal position, since ultimately any money they lend to us must be sourced either on the markets - who will factor in that they're lending to us - or directly from their taxpayers.

So as taxpayers in the broadest sense, our interests are currently in line with those of the international lenders - that our government stick to a process of getting Ireland's public finances back under control. Obviously we may well object either as individuals or as sectoral/local interests to particular aspects of the austerity that involves - which is precisely the advantage of the involvement of the international lenders, because it prevents the attempt to get public finances back on track being derailed by a thousand and one concessions to special interests.

We may dislike aspects of the arrangement such as the lenders seeing Irish budget plans before they're presented to us, but attempting to cast it as some kind of villainy on the part of the lenders requires one to completely ignore reality in favour of a fantasy in which the innocent and bewildered Kathleen Ni Houlihan is beset by evil foreign money-lenders. But Kathleen is actually in rehab, I'm afraid, and her dreams of bullying foreigners are paranoid fantasies caused by sudden withdrawal from her previous coke and debt-fuelled five-star lifestyle.

cordially,
Scofflaw

professore

Maura74 wrote: »

The way I see it is Ireland borrowed a lot of money to buy large houses, cars, holiday’s large salaries with the top echelon taking the biggest shares in salaries and pensions.
Therefore, when you borrow money from a bank and cannot pay it back then the bank will want to see how you are spending their money in order that you are able to pay them back.

In this case it is Germany that is owed the money so it follows that they want to see what Ireland is spending their money on and that it is well spent to avoid Ireland getting into problems again.

The ordinary Joe Soap has some blame in this - far less though than is commonly acknowledged - but the developers really went mad, building as many houses as the UK at one stage which has 15 times our population. The Government also went mad, giving large pay rises and hiring like lunatics in the Public Sector, spending like crazy, and at the same time cutting taxes every year. How could it last?

Where Joe Soap must take the biggest blame is re electing a government that had these policies year in year out.

Now people are blaming Germany for seeing our budget before we do. Well that's the fault of our current Government - they should have shown it to us first. It's clear from the loan terms that they must do this so I don't get the big hoo-ha about it.

WalterMitty

Is the really cheap money from EU/IMF/ECB not a disincentive to make the real hard decisions though. Why make the really hard decisions now and get crucified by electorate and then return to markets early paying much more than the troika charge and even more scrutiny on spending decisions by the markets. If there is slippage in closing deficit they know troika will provide more time and cheap money.
I think this government are only doing the bare minimum to satisfy the troika,who are going easy on us at present due to the bigger probs on mainland europe. They are hoping growth or some EU wide debt write off of bank related debt will save them from making really hard choices like really large cuts to welfare and public pay and not the relatively small cuts seen so far.
Even if they do get some debt write off for the bank debt we will still have very high debt to GNP and with exports starting to falter and their sustainability under threat according to Gurdiev in yesterdays sunday times I think they are playing a dangerous game.

Scofflaw

WalterMitty wrote: »

Is the really cheap money from EU/IMF/ECB not a disincentive to make the real hard decisions though. Why make the really hard decisions now and get crucified by electorate and then return to markets early paying much more than the troika charge and even more scrutiny on spending decisions by the markets. If there is slippage in closing deficit they know troika will provide more time and cheap money.
I think this government are only doing the bare minimum to satisfy the troika,who are going easy on us at present due to the bigger probs on mainland europe. They are hoping growth or some EU wide debt write off of bank related debt will save them from making really hard choices like really large cuts to welfare and public pay and not the relatively small cuts seen so far.
Even if they do get some debt write off for the bank debt we will still have very high debt to GNP and with exports starting to falter and their sustainability under threat according to Gurdiev in yesterdays sunday times I think they are playing a dangerous game.

There's certainly some moral hazard involved in the bailout as you say. On the other hand, the troika are a handy scapegoat for changes that really do need to be made.

cordially,
Scofflaw

Going Forward

Scofflaw wrote: »

I'm glad you added the "notwithstanding", since I strongly suspect that you can't offer any evidence for the claim!

You seem to be under the impression, or at least trying to create the impression, that were it not for Germany we wouldn't be having any austerity...in what world would that be the case? Presumably it's one in which the Irish budget deficit doesn't exist...which must be nice.

Estimates vary as to the amount of debt Ireland owed Germany even prior to the IMF loan agreement.

http://www.independent.ie/business/european/confusion-reigns-over-germanys-exposure-to-our-debt-2434734.html

and



"France and Britain together had over €300 billion of exposure to the Irish banks and property market. In proportion to population size this was nearly ten times their exposure to Spain."

Whatever the figure is, combining this with Germany's contribution to the IMF loan, the simple fact is that those who purchased properties at artificially high prices during the boom years are now repaying it twofold; firstly by servicing an over-inflated mortgage, but crucially they are now also yoked to an austerity program which conversely serves to ensure the survival of foreign banks which flooded the Irish market with almost unlimited access to loan facilities.

IMO There is a double whammy effect here which is not being dicussed.

Scofflaw

Going Forward wrote: »

Estimates vary as to the amount of debt Ireland owed Germany even prior to the IMF loan agreement.

http://www.independent.ie/business/european/confusion-reigns-over-germanys-exposure-to-our-debt-2434734.html

and



"France and Britain together had over €300 billion of exposure to the Irish banks and property market. In proportion to population size this was nearly ten times their exposure to Spain."

Whatever the figure is, combining this with Germany's contribution to the IMF loan, the simple fact is that those who purchased properties at artificially high prices during the boom years are now repaying it twofold; firstly by servicing an over-inflated mortgage, but crucially they are now also yoked to an austerity program which conversely serves to ensure the survival of foreign banks which flooded the Irish market with almost unlimited access to loan facilities.

IMO There is a double whammy effect here which is not being dicussed.

Unfortunately, virtually all the estimates proffered in the media are complete rubbish. The problem was that journalists wanted comparative figures that showed debts between countries. There are no such figures readily available. What is available are the BIS locational banking statistics, which show the debt obligations between banks, based on the location of the bank.

In a country with no offshore banking sector and a nationally-owned domestic banking sector, all debts shown in the BIS figures for that country are owed by domestic banks to foreign banks, which is nice and simple, and tells you exactly what's owed by the country's banks to foreign banks.

In our case, as in the case of any country with an offshore banking sector, or with foreign banks operating in it, it does nothing of the kind. The bank subsidiaries in the IFSC operate at a scale that equals the Irish domestic banking sector, while subsidiaries of foreign banks have an appreciable presence in the domestic market.

As a result, the BIS figures bear no particular relation to the money owed by Irish domestic banks - that is, those we've bailed out, and to which Irish people generally owe their mortgages - to foreign banks. Using them to claim that Irish people's mortgages are effectively being paid to German banks is the result of not understanding what the statistics show in the first place.

There really isn't any evidence that shows German involvement in the Irish domestic market. On the contrary, the available evidence (two or three sources at this stage) shows that the money came from outside the eurozone - most likely from the US and UK, that being where the Irish banks have traditionally done business (and hence Geithner's intervention). The best anyone has been able to offer for the "German banks" claim is that the money owed to them might perhaps be concealed in the non-eurozone figures - but no-one has shown it to be the case.

So, no, there's no "double whammy".

Nor is there really any truth in the narrative that Irish banks were somehow held down and forced to take money from the rest of the world, that they could only dispose of by in turn forcing it onto an equally unwilling Irish public. A moment's thought should be sufficient to dispose of such an obvious cock-and-bull story - its longevity is precisely due to people's unwillingness to apply that moment of thought, because it offers such an appealing jack-booted and moustachioed foreign villain, while simultaneously thrusting responsibility for our over-borrowed state neatly onto other's shoulders.

In the real world, though, it's not possible for anyone to have made Irish banks borrow money. On the contrary, Irish banks - led by Anglo, but with AIB and the rest trailing at its heels at greater or lesser distances - thought they'd cleverly invented a whole new business model, and were rewarded by the ratings agencies for doing so with gold-star credit ratings, making it even easier for them to borrow. But the important point is that they borrowed - nobody could have forced them to take the money.

cordially,
Scofflaw

Tora Bora

Scofflaw wrote: »

There's certainly some moral hazard involved in the bailout as you say. On the other hand, the troika are a handy scapegoat for changes that really do need to be made.

cordially,
Scofflaw

Heads of governments of PIIG countries, need to get together, and tell Angela and Sarkozy, very politely and calmly, that all of the little piglets, intend to default together and at the same time, by 31/12/11, UNLESS, debt forgiveness in put squarely on the table in one form or another.

Collective default of the piglets, will blow the economies of the euro right out of the water.
Continuation of austerity in the piglet economies will blow our own countries to bits.

It is on the collective interest of the piglets and the core countries, to meet somewhere in the middle.

After all in the boom madness there was a willing borrower in the piglets, but there was also a willing lender in the core. They both fcuked up:(

So they both have to pay a price!

Scofflaw

Tora Bora wrote: »

Heads of governments of PIIG countries, need to get together, and tell Angela and Sarkozy, very politely and calmly, that all of the little piglets, intend to default together and at the same time, by 31/12/11, UNLESS, debt forgiveness in put squarely on the table in one form or another.

Collective default of the piglets, will blow the economies of the euro right out of the water.
Continuation of austerity in the piglet economies will blow our own countries to bits.

It is on the collective interest of the piglets and the core countries, to meet somewhere in the middle.

After all in the boom madness there was a willing borrower in the piglets, but there was also a willing lender in the core. They both fcuked up:(

So they both have to pay a price!

Actually, that's probably even more wrong than the "German banks" story, given it implies that Germany - the country - lent to the PIIGS in some sovereign way, when the whole fear of the Germans in respect of the euro was that the weaker countries would borrow on the strength of the German economy and then not be able or willing to pay back what they borrowed.

To be fair, that's not something we did, but it's certainly something the Greeks did. We built our sandcastle on the continuance of the property boom, but they borrowed directly from the markets who gave them low rates on the implicit idea that Germany was acting as guarantor.

As to the PIIGS getting together and threatening to default...well, you evidently believe, for I know not what reason, that the PIIGS would come out of a set of uncontrolled defaults and the ensuing global crisis better than Germany would. Personally, I can't see any real basis for that belief.

amused,
Scofflaw

Tora Bora

Scofflaw wrote: »

Actually, that's probably even more wrong than the "German banks" story, given it implies that Germany - the country - lent to the PIIGS in some sovereign way, when the whole fear of the Germans in respect of the euro was that the weaker countries would borrow on the strength of the German economy and then not be able or willing to pay back what they borrowed.

To be fair, that's not something we did, but it's certainly something the Greeks did. We built our sandcastle on the continuance of the property boom, but they borrowed directly from the markets who gave them low rates on the implicit idea that Germany was acting as guarantor.

As to the PIIGS getting together and threatening to default...well, you evidently believe, for I know not what reason, that the PIIGS would come out of a set of uncontrolled defaults and the ensuing global crisis better than Germany would. Personally, I can't see any real basis for that belief.

amused,
Scofflaw

Of course we would out in very bad shape. But the current method, will have almost the same effect on us whilst leaving the reckless lenders unscathed.
I believe, if the PIIGS, collectively put it up to Merkel, she simply could not afford to play poker!! She would have to make a substantial counter offer, or risk taking an exocet right below the belt.
If she did call our bluff, of course we would probably have to blink, but we have little to lose and everything to gain, in this game of poker.
She has little to gain, and everything to lose. Ja:eek:

In any case, we just cannot go on sacrificing our children to this madness

Scofflaw

Tora Bora wrote: »

Of course we would out in very bad shape. But the current method, will have almost the same effect on us whilst leaving the reckless lenders unscathed.
I believe, if the PIIGS, collectively put it up to Merkel, she simply could not afford to play poker!! She would have to make a substantial counter offer, or risk taking an exocet right below the belt.
If she did call our bluff, of course we would probably have to blink, but we have little to lose and everything to gain, in this game of poker.
She has little to gain, and everything to lose. Ja:eek:

The thing is, that if you know that, so does she. So we can move right on to the point where we've made this rather silly threat, and she's called our bluff, and we've blinked, except without actually making ourselves look like eejits by actually making the threat.

Tora Bora wrote: »

In any case, we just cannot go on sacrificing our children to this madness

Then it seems that we might want to get our government deficit under control, because that's already racked up a lot more debt than the banks, and is still doing so. Oh, no, hang on, that's why we have austerity - we're trying to balance the budget! So we shouldn't try to balance the budget - oh, no, hang on, that means acquiring more debt!

Oh noes...

cordially,
Scofflaw

Tora Bora

Scofflaw wrote: »

The thing is, that if you know that, so does she. So we can move right on to the point where we've made this rather silly threat, and she's called our bluff, and we've blinked, except without actually making ourselves look like eejits by actually making the threat.



The it seems that we might want to get our government deficit under control, because that's already racked up a lot more debt than the banks, and is still doing so. Oh, no, hang on, that's why we have austerity - we're trying to balance the budget! So we shouldn't try to balance the budget - oh, no, hang on, that means acquiring more debt!

Oh noes...

cordially,
Scofflaw

I really do agree with you in principle. We should honour all our debts and get primary deficite under control.
However, the only possible way we have of pulling it off, is through a storming year on year performance from our export sector plus ability to ship our unemployed abroad to work, so we can reduce the SW bill at home. Plus a lot more needs to go in our favour.

It aint going to happen though!!:( World economy is far too fragile, to take the exports we need to ship.

PLUS: Our critical Pharma sector is facing expiry of major drug patents in the near time frame. Big drag on exports and money for Enda, post 2015.

Scofflaw

Tora Bora wrote: »

I really do agree with you in principle. We should honour all our debts and get primary deficite under control.
However, the only possible way we have of pulling it off, is through a storming year on year performance from our export sector plus ability to ship our unemployed abroad to work, so we can reduce the SW bill at home. Plus a lot more needs to go in our favour.

It aint going to happen though!!:( World economy is far too fragile, to take the exports we need to ship.

Realistically, we're probably facing a decade of reduced economic performance.

Tora Bora wrote: »

PLUS: Our critical Pharma sector is facing expiry of major drug patents in the near time frame. Big drag on exports and money for Enda, post 2015.

Unless we've lost all the advantages that led to pharma companies producing those drugs here, I would think it likely that they'll be replaced by other drugs, no?

cordially,
Scofflaw

BeeDI

Scofflaw wrote: »

Tora Bora wrote: »

I really do agree with you in principle. We should honour all our debts and get primary deficite under control.
However, the only possible way we have of pulling it off, is through a storming year on year performance from our export sector plus ability to ship our unemployed abroad to work, so we can reduce the SW bill at home. Plus a lot more needs to go in our favour.

It aint going to happen though!!:( World economy is far too fragile, to take the exports we need to ship.

Realistically, we're probably facing a decade of reduced economic performance.

Tora Bora wrote: »

PLUS: Our critical Pharma sector is facing expiry of major drug patents in the near time frame. Big drag on exports and money for Enda, post 2015.

Unless we've lost all the advantages that led to pharma companies producing those drugs here, I would think it likely that they'll be replaced by other drugs, no?

cordially,
Scofflaw

http://mobile.bloomberg.com/news/2011-11-22/ireland-faces-26-billion-export-headache-as-drugs-stop-working?category=/news/exclusive/

Going Forward

Scofflaw wrote: »

Unfortunately, virtually all the estimates proffered in the media are complete rubbish. The problem was that journalists wanted comparative figures that showed debts between countries. There are no such figures readily available. What is available are the BIS locational banking statistics, which show the debt obligations between banks, based on the location of the bank.

In a country with no offshore banking sector and a nationally-owned domestic banking sector, all debts shown in the BIS figures for that country are owed by domestic banks to foreign banks, which is nice and simple, and tells you exactly what's owed by the country's banks to foreign banks.

In our case, as in the case of any country with an offshore banking sector, or with foreign banks operating in it, it does nothing of the kind. The bank subsidiaries in the IFSC operate at a scale that equals the Irish domestic banking sector, while subsidiaries of foreign banks have an appreciable presence in the domestic market.

As a result, the BIS figures bear no particular relation to the money owed by Irish domestic banks - that is, those we've bailed out, and to which Irish people generally owe their mortgages - to foreign banks. Using them to claim that Irish people's mortgages are effectively being paid to German banks is the result of not understanding what the statistics show in the first place.

There really isn't any evidence that shows German involvement in the Irish domestic market. On the contrary, the available evidence (two or three sources at this stage) shows that the money came from outside the eurozone - most likely from the US and UK, that being where the Irish banks have traditionally done business (and hence Geithner's intervention). The best anyone has been able to offer for the "German banks" claim is that the money owed to them might perhaps be concealed in the non-eurozone figures - but no-one has shown it to be the case.

So, no, there's no "double whammy".

Nor is there really any truth in the narrative that Irish banks were somehow held down and forced to take money from the rest of the world, that they could only dispose of by in turn forcing it onto an equally unwilling Irish public. A moment's thought should be sufficient to dispose of such an obvious cock-and-bull story - its longevity is precisely due to people's unwillingness to apply that moment of thought, because it offers such an appealing jack-booted and moustachioed foreign villain, while simultaneously thrusting responsibility for our over-borrowed state neatly onto other's shoulders.

In the real world, though, it's not possible for anyone to have made Irish banks borrow money. On the contrary, Irish banks - led by Anglo, but with AIB and the rest trailing at its heels at greater or lesser distances - thought they'd cleverly invented a whole new business model, and were rewarded by the ratings agencies for doing so with gold-star credit ratings, making it even easier for them to borrow. But the important point is that they borrowed - nobody could have forced them to take the money.

cordially,
Scofflaw

You certainly have a different take on it than I do!

"First, in the frenzied party years before 2008, the banks borrowed too much from other institutions - especially from German banks - and lent far too much to housebuyers and property speculators." - BBC

"German banks are owed twice as much by banks in the three bailed-out countries as they are by governments. Once corporate loans and other exposures are included, Germany’s vulnerability is clear: its banks are owed some €230 billion. These numbers would ratchet up further were Spain to default." The Economist

"Top of the list are German banks, to whom we owe €92bn with a further €38bn of other exposures. Does the fact that Irish banks potentially owe their counterparts up to €146bn explain the German government's implacable opposition to any write-down of the Irish banks' debts?

What is clear from the BIS figures is that a complete collapse of the Irish banking system would have had very serious consequences not just for British banks but also for banks elsewhere in the eurozone.
.............This almost certainly explains the ECB's phobia of any "contagion" caused by imposing a haircut on holders of senior bonds in the Irish bank bonds.
" Independent.ie

"My measurement of my success in Anglo is not the statistics for this year, it’s what happens in seven years time." Seanie in 2005.

Scofflaw

Going Forward wrote: »

You certainly have a different take on it than I do!

"First, in the frenzied party years before 2008, the banks borrowed too much from other institutions - especially from German banks - and lent far too much to housebuyers and property speculators." - BBC

"German banks are owed twice as much by banks in the three bailed-out countries as they are by governments. Once corporate loans and other exposures are included, Germany’s vulnerability is clear: its banks are owed some €230 billion. These numbers would ratchet up further were Spain to default." The Economist

"Top of the list are German banks, to whom we owe €92bn with a further €38bn of other exposures. Does the fact that Irish banks potentially owe their counterparts up to €146bn explain the German government's implacable opposition to any write-down of the Irish banks' debts?

What is clear from the BIS figures is that a complete collapse of the Irish banking system would have had very serious consequences not just for British banks but also for banks elsewhere in the eurozone.
.............This almost certainly explains the ECB's phobia of any "contagion" caused by imposing a haircut on holders of senior bonds in the Irish bank bonds.
" Independent.ie

"My measurement of my success in Anglo is not the statistics for this year, it’s what happens in seven years time." Seanie in 2005.

I do have a different take, because I've done the research myself, rather than assuming that journalists have been accurate. As it turns out, journalists have not been at all accurate - unsurprisingly, they've simply used the first set of publicly available statistics that seemed to tell them what they wanted to know, which are the BIS locational banking statistics. Everything you've cited there is based on the use of those statistics - as are all the pretty "web of debt" pictures - and, as a result, they're all meaningless.

I can understand people taking what's in the papers if they have no other sources, but when other sources are available, I wouldn't dream of trusting journalists!

cordially,
Scofflaw

jjll

why dont people tell the TDs to vote no when the budgets votes come up in the dail after all they say they are there for the people who voted them in just an idea

Going Forward

Scofflaw wrote: »

Going Forward wrote: »

You certainly have a different take on it than I do!

"First, in the frenzied party years before 2008, the banks borrowed too much from other institutions - especially from German banks - and lent far too much to housebuyers and property speculators." - BBC

"German banks are owed twice as much by banks in the three bailed-out countries as they are by governments. Once corporate loans and other exposures are included, Germany’s vulnerability is clear: its banks are owed some €230 billion. These numbers would ratchet up further were Spain to default." The Economist

"Top of the list are German banks, to whom we owe €92bn with a further €38bn of other exposures. Does the fact that Irish banks potentially owe their counterparts up to €146bn explain the German government's implacable opposition to any write-down of the Irish banks' debts?

What is clear from the BIS figures is that a complete collapse of the Irish banking system would have had very serious consequences not just for British banks but also for banks elsewhere in the eurozone.
.............This almost certainly explains the ECB's phobia of any "contagion" caused by imposing a haircut on holders of senior bonds in the Irish bank bonds.
" Independent.ie

"My measurement of my success in Anglo is not the statistics for this year, it’s what happens in seven years time." Seanie in 2005.

I do have a different take, because I've done the research myself, rather than assuming that journalists have been accurate. As it turns out, journalists have not been at all accurate - unsurprisingly, they've simply used the first set of publicly available statistics that seemed to tell them what they wanted to know, which are the BIS locational banking statistics. Everything you've cited there is based on the use of those statistics - as are all the pretty "web of debt" pictures - and, as a result, they're all meaningless.

I can understand people taking what's in the papers if they have no other sources, but when other sources are available, I wouldn't dream of trusting journalists!

cordially,
Scofflaw

Sorry to ressurect this thread, but this is bugging me!

How much debt does Ireland actually owe to the German and French?


If the hacks are all wrong on this where's the trustworthy information to be gotten from?
Thanks