Questions for Donnelly, Ross, Gurdgiev on Fiscal Treaty here please!

DeVore

Tonight (Friday 20th, 7.30pm) there will be a web-cast panel consisting of Stephen Donnelly, Constantine Gurdgiev and Shane Ross. (details on: http://www.stephendonnelly.ie/)

They have agreed to choose some questions from this thread to answer. Here's how it works:

1. Read the thread and see if your question has already been asked. If so Thank it.

2. If your question hasnt been asked. Post it.


Short and to the point questions wil be more likely to be picked as will questions with a lot of "thanks" so if you want your question to be chosen, then asking it a second time will only split its "thanks" and reduce its chance of being asked.


The webcast will start at 7.30pm and will be available here: http://www.stephendonnelly.ie/live/


Enjoy!

Sponge Bob

Does the new financial treaty negate the old financial 'bailout' treaty whereby the 'Troika' came into our lives in late 2010. That 'Troika' arrangement is a treaty is it not?

Will the next treaty override this one?

My name is URL

If, in the event that this treaty is not ratified, and Ireland needs a further bailout down the line, are we really likely to be left out in the cold because we voted against this? Are there still avenues which we could go down in order to secure financial assistance if needed?

dvpower

What would be the likely effect on our bond prices of accepting / rejecting the treaty?

tbh

Why are the government asking us to support this treaty, and why are they wrong (or right)?

Dirk Gently

is the treaty purely about state spending in isolation or will it address in any way private banking and financial institutions, or any private sectors at all (ratios to overall size of economy / sustainability / breaking up too big to fail entities).

Given that the state gets it's money from private taxes what's to stop relative massive spending in a bubble followed by a massive shortfall when the private economy collapses again. i.e what's to stop the very same thing happening again as regards to the budget deficit.

Big AK1

Just how much "immunity" from judicial processes, etc; will be afforded to the staff, MD, and Board of Governors of the ESM once the treaty is ratified... and why?

AboutTwoFiddy

"Contagion" is one of the biggest threats to the euro and European Economy at the moment. Should we not sign this Treaty, and we are not given funding in the future, what does the EU plan to do to counteract any possible "contagion" from an Irish default? Or is it a case that regardless of whether we ratify this Treaty or not; we will still get funding from the EU should we need it?

Casillas

What is the likelihood of this treaty being expanded beyond its current form?

If so will we need to vote again in the mid-term?

EyeBlinks

What are the negatives regarding future growth.

Possible scenario: We find substantial oil off the coast next year and clearly don't have the money to develop it. This find would help clear a large portion of our debts, but we would need to borrow to fund it and thereby exceed the 3% level?

Not by any means the only thing that would create this possible growth restriction either.

Any thoughts?

Micky Dolenz

Which way will each of the panel vote and why?

ressem

What will be the methods used to bring private debt in Ireland from 402% to the approved "macroeconomic imbalances scorecard" value of 160%?
Is even the current miserable rate of new business and consumer credit exceeding what we will end up with for the medium term?

(going by the Oirachtas Library & Research Service briefing on the Treaty linked on Stephen's site. http://www.stephendonnelly.ie/featured/briefings-the-fiscal-compact-treaty/ page 10)

femur61

Banking debt aside we still have to borrow money isnn't that correct so will we still be able to borrow money for SW and the PS since we borrowing 20bn a year to sustain them?

ressem

Is it likely that everyone will end up in breach of the "macroeconomic imbalances scorecard".
(seeing as all countries are already in breach on 3 or more points). Then every country will end up being dragged into the european court and being fined the 0.1% of GDP to be placed in the stability fund?

galwaytt

Given that under previous EU policy, where for example Ireland adhered to policy (e.g. inflation), but the likes of France and Germany did not. And despite the fact that no sanction was brought to bear against those countries that did not perform - despite it being in Treaty to do so - why should Ireland, this time, try to do anything to appease the EU if it conflicts with that which is in our own national interest ?

gordongekko

Considering we constantly are unable to manage our own finances (the imf were nearly called in back in the 80s) and we clearly dont learn from the past and politicians only look to the next election then surely its time to abide by these rules to insure we are never allowed follow these boom and bust policies that got us here in the first place.

creedp

Will the Fiscal Treaty kick in by a certain date or only when member states currently in difficulties manage to get their deficits within the approved parameters? In other words will it apply to current deficits after a defined or future deficits?

clint_silver

In article 5 of the the Fiscal compact of the treaty

http://www.stabilitytreaty.ie/index.php/en/about_the_treaty/title_3_fiscal_compact/

It specifies the content and the the format of any programs brought in place will be defined in EU law... and later states that any programs will be monitored by the EU

A Contracting Party that is subject to an excessive deficit procedure under the Treaties on which the European Union is founded shall put in place a budgetary and economic partnership programme including a detailed description of the structural reforms which must be put in place and implemented to ensure an effective and durable correction of its excessive deficit. The content and format of such programmes shall be defined in European Union law. Their submission to the Council of the European Union and to the European Commission for endorsement and their monitoring will take place within the context of the existing surveillance procedures under the Stability and Growth Pact.
The implementation of the budgetary and economic partnership programme, and the yearly budgetary plans consistent with it, will be monitored by the Council of the European Union and by the European Commission .

Yet in the FAQ, the question is asked if Irelands role in setting its own taxes will be preserved, and the answer seems to contradict the fiscal compact entry above.

http://www.stabilitytreaty.ie/index.php/en/faq/

Will Ireland’s role in setting its own taxes be preserved under the agreement?

Yes. Our government and Oireachtas will continue to have the same role in setting taxes. The Stability Treaty does not bring any change to how countries make decisions on what exactly is taxed and spent.

Can this apparent contradiction be explained or rather, will we definitively still be able to set our own tax programs and if so, why are the EU monitoring any programs that are implemented if they have no say in what we tax anyway?

Ghandee

Please sum it up in lay mans terms to myself and the hundreds of other people reading this, the pros (if ther are any) and cons (if there are any) on the very likely, in fact some would say the inevitable event of Ireland defaulting?

Can we just start again as per Iceland?

DeVore

This is just about to start now (*bump*!)

Zynks

Is the video down for everyone or just me?

Bubblefett

Zynks wrote: »

Is the video down for everyone or just me?

working for me here anyway

Dirk Gently

Zynks wrote: »

Is the video down for everyone or just me?

reload the page a couple of times if it times out.

sheesh

If we vote for the fiscal Compact

can we leave it afterwards.

Tigger

I want to leave the euro I think it would help us.
a "an punt nua" devaluation would solve many issues such as public sector pay personal debt and attractiveness to forgien (US & China) investment.

Will voting no help this to happen.

kincsem

Are there any plans to harmonise the secretariats, staffing, procedures, audit control of the states?

KINGVictor

Giving the fact that the EU is advocating austerity measures to address the debt problem in Europe; how can the EU commision possibly explain why they are seeking an increase in their budget by €8 billion for the next financial year? Surely that will be giving a medicine they themselves cannot swallow.

darkman2

I wanted to ask Gurdgiev about special relativity and space-time as it relates to the three spatial and one temporal time dimensions in the Universe and what this means for the future of our galaxy. Oh well.

Anyone got a link to the video?

bleg

Link worked for 5 minutes then failed.

Anybody have a summary?

DeVore

I watched most of it... Had to go out for a bit. Will post the link when I hear.

clint_silver

DeVore wrote: »

I watched most of it... Had to go out for a bit. Will post the link when I hear.

as its over now I guess we're at discussion time.

I watched all of it. apart from the locals trying to make themselves heard it wasn't bad.

donnelly came across well, constantine was great, star of the show really.

what did we learn? well, you either pick the lesser of 2 evils and say yes or stand up to bot evils and say no. make of that what you will. Im still undecided but the discussion was good and I learned 1000% more then what I knew before.

Scofflaw

clint_silver wrote:

as its over now I guess we're at discussion time.

I watched all of it. apart from the locals trying to make themselves heard it wasn't bad.

donnelly came across well, constantine was great, star of the show really.

what did we learn? well, you either pick the lesser of 2 evils and say yes or stand up to bot evils and say no. make of that what you will. Im still undecided but the discussion was good and I learned 1000% more then what I knew before.

I'd be interested to hear whether (a) people felt their questions were answered, and (b) what the answer was.

Thread open for general discussion, although more complex questions might need to be broken out into their own threads.

moderately,
Scofflaw

Ghandee

clint_silver wrote: »

as its over now I guess we're at discussion time.

I watched all of it. apart from the locals trying to make themselves heard it wasn't bad.

donnelly came across well, constantine was great, star of the show really.

what did we learn? well, you either pick the lesser of 2 evils and say yes or stand up to bot evils and say no. make of that what you will. Im still undecided but the discussion was good and I learned 1000% more then what I knew before.

So, stand up to them, say no?

Then hope they come back with an alternative for us, with some of our overall, unsustainable debt wiped off?

I think our government should be telling the EU to write off the private debt that was turned into sovereign debt before they even think of sitting down to deal with them

As it looks like its this deal or no deal, I fear the people will get a yes vote, by the skin of their teeth, with decades of harsh austerity measures to follow.


I hope I'm wrong though.

DeVore

One thing I think people are unclear about is that this isn't like Lisbon or Nice. In those cases a No vote stopped the whole train. In this case it merely disconnects the Irish carriage and the rest of the train continues on with out us. That might be a good thing, that's for everyone of us to decide for ourselves but don't be mistaken and think that our No vote forces any sort of halt to this treaty.

edanto

Today, thinking about the debate last night, what is really sticking in my mind is what Constantin said about debt that goes into the ESM. He said that debt is concreted, because a default on that debt would be an unthinkable euro zone default.

So, for us to have any hope of debt resolution (banking/sovereign) that has to happen before our debt goes into ESM. Saying Yes to the treaty doesn't guarantee us funding from ESM, but saying No the treaty will probably exclude us - at least I think that's what Constantin was saying. So, if we had a government that had any courage at all and was prepared to fight for debt resolution then I think it should be a No to the treaty. Because hopefully after the next election, we will have a Government that is less of a pushover than this one. (saying that, I'm still conflicted about the treaty and could be swayed by more debate).

Great debate, I learned a lot about the treaty and the implications of it.

It was frankly, awesome, to see a room full of about 300 people talking politics on a Friday night in Bray, with another 1100 people at home watching the live stream. Very encouraging, I hope this gets to happen again.

recedite

Beforehand I thought the treaty was a debt brake.
But Constantin maintains that if the treaty had been in place ten years ago, it wouldn't have protected us. I assume this is because the govt. managed to run a surplus by taxing money that was loaned into the country from abroad.
On the other hand, a "No" vote prevents a second bailout from happening.
Therefore it now seems that a No vote is required to put the brakes on the govt taking on more debt.
Respect to Donnelly for saying he wasn't sure about it yet. Too many politicians campaign vociferously for a Yes vote without having a clue why. I attended it BTW, very interesting speakers.

donegal_road

very interesting indeed, and I only discovered it was on after checking boards.ie
The three speakers spoke very well, and Stephen Donnelly articluated his reason for voting yes very well. I was leaning towards 'yes' myself but after hearing constantin gurdgiev's analysis, particularly his claim that you would need a phd in 'Brussels ecconomics' to understand the 11 page fiscal treaty document, has made my mind up. This is Lisbon all over again, a resounding 'no' from me.

Amtmann

So, you're voting no because it's complicated?

later12

A PhD in Brussels Economics doesn't necessarily mean something is complicated, but it might well mean it is laboriously nonsensical. That's the interpretation I would take from Gurdgiev's contribution

I don't think there are many economists rushing to the defence of the economic content of the Fiscal Treaty, even if they agree with its ratification. That might be because it's unfashionable to do so, but it might also mean that the Treaty's provisions are, well, nonsense.

donegal_road

later12 wrote: »

A PhD in Brussels Economics doesn't necessarily mean something is complicated, but it might well mean it is laboriously nonsensical. That's the interpretation I would take from Gurdgiev's contribution

I don't think there are many economists rushing to the defence of the economic content of the Fiscal Treaty, even if they agree with its ratification. That might be because it's unfashionable to do so, but it might also mean that the Treaty's provisions are, well, nonsense.

Is the reason that I will probably vote no... I will not blindly endorse something that I don't understand. I heard a poll result this morning on Newstalk reporting that only 6% claim to fully understand the treaty.

Scofflaw

recedite wrote: »

Beforehand I thought the treaty was a debt brake.
But Constantin maintains that if the treaty had been in place ten years ago, it wouldn't have protected us. I assume this is because the govt. managed to run a surplus by taxing money that was loaned into the country from abroad.
On the other hand, a "No" vote prevents a second bailout from happening.
Therefore it now seems that a No vote is required to put the brakes on the govt taking on more debt.
Respect to Donnelly for saying he wasn't sure about it yet. Too many politicians campaign vociferously for a Yes vote without having a clue why. I attended it BTW, very interesting speakers.

Unfortunately, just as the Treaty wouldn't necessarily have prevented the specific way Ireland threw itself off a cliff (it's not aimed at us, after all), voting No will not prevent the government from taking on more debt - all that it will do is make the conditions Ireland must endure for the debt rather more stringent.

Ireland got to where it is while running a government surplus by producing that surplus out of taxation on an unsustainable bubble, which meant that as soon as the property bubble collapsed, tax receipts collapsed, just as the collapse of the bloated construction sector threw a huge chunk of the workforce onto the dole, and put a huge number of construction-related companies (and their service companies etc) out of business.

The existing Stability & Growth Pact, which contains the same straight budget limits as the new Treaty, did not prevent that from happening. The "structural surplus" requirements of the new Treaty might, but it's almost impossible to determine "structural" as opposed to "cyclical" surpluses or deficits except in hindsight, so it probably won't.

However, not signing up the FST doesn't in any way prevent the government from actually running a deficit - it just means there are penalties for doing so.

Nor does not having access to the ESM mean that the State won't be bailed out if we can't return to the markets over the next couple of years (still an open possibility) - it just means the terms will be worse, because a bailout package will have to be negotiated separately with countries that are already paying for ESM, and who obviously can't give a non-ESM country a better deal than ESM. And the alternative to such a bailout will still be default, and that's still an alternative that no Irish government will take.

On top of that, not having access to ESM means we're not formally and automatically backed by the eurozone, which means our debt is more risky, which means our bonds rates will be higher, which in turn makes it more likely that we'll need a bailout if we don't have access to the ESM bailout fund, because we still have a lot of debt to be rolled over over the next few years even if we magically disposed of the bank debt. Having the ESM makes it less likely we'll need the ESM, not more.

That's why economists aren't rushing to defend the contents, but are recommending a Yes - because silly as the exercise is, it's not any more onerous than what we're already signed up to, so even though it doesn't really change much for us rejecting it still carries potentially large downside penalties.

cordially,
Scofflaw

recedite

Scofflaw you are still looking at this from the point of view that anything which makes it easier and cheaper for Ireland to borrow money is a good thing.
IMO the whole euro crisis is a result of excessive lending, not excessive borrowing. Lending becomes "excessive" when the lender does not actually have the money or assets to cover a default by the borrower. The reason the ECB will not allow defaults is because they would trigger a general euro collapse which would be really due to excessive lending.
In our case, the bubble was inflated by cheap eurozone credit, but when that bubble burst, the ECB and the eurozone banks still expected to get all their money back; by transferring the debt onto present and future generations of the Irish taxpayer.
Austerity for the purposes of paying off interest and debt leads to a slow strangulation.
Instead we need a fair debt restructuring, followed by a radical reduction in pay and pensions of politicians and public servants. €60k or €70k max is plenty. And if this is to be done, "then tis better twere done quickly".

Following these measures, and with the deficit gone, a period of austerity will still be needed for the purposes of capital investment in jobs and the economy. What we don't need is more debt.

As for this treaty; apart from not addressing the core problem, it may well be irrelevant by the time of the referendum if the French and the Dutch are no longer supporting it at that stage.

Scofflaw

recedite wrote: »

Scofflaw you are still looking at this from the point of view that anything which makes it easier and cheaper for Ireland to borrow money is a good thing.

IMO the whole euro crisis is a result of excessive lending, not excessive borrowing. Lending becomes "excessive" when the lender does not actually have the money or assets to cover a default by the borrower. The reason the ECB will not allow defaults is because they would trigger a general euro collapse which would be really due to excessive lending.
In our case, the bubble was inflated by cheap eurozone credit, but when that bubble burst, the ECB and the eurozone banks still expected to get all their money back; by transferring the debt onto present and future generations of the Irish taxpayer.
Austerity for the purposes of paying off interest and debt leads to a slow strangulation.
Instead we need a fair debt restructuring, followed by a radical reduction in pay and pensions of politicians and public servants. €60k or €70k max is plenty. And if this is to be done, "then tis better twere done quickly".

Following these measures, and with the deficit gone, a period of austerity will still be needed for the purposes of capital investment in jobs and the economy. What we don't need is more debt.

As for this treaty; apart from not addressing the core problem, it may well be irrelevant by the time of the referendum if the French and the Dutch are no longer supporting it at that stage.

Some of what you say I agree with, some I don't, and there's a variety of inaccuracies in that, and they're all mixed together.

First, yes, anything that makes it easier and cheaper for Ireland to borrow what it has to borrow is a good thing. Excessive or pointless borrowing is not. But the ESM is not a replacement for the markets in the ordinary run of things, so it only makes things easier for us in an emergency. I'd call that unequivocally a good thing, because no government will deliberately run themselves into an emergency programme. The ESM doesn't make it easier for Ireland to borrow unecessarily, but does make it easier and cheaper to borrow if it's needed.

Second, the idea that one can separate excessive lending from excessive borrowing, and ascribe the problems to one but not the other, doesn't work at all. If I lend to someone who borrows only what they are guaranteed to be able to pay back, I really need to make no provision whatsoever for a potential default. Only if I lend to someone who borrows more than they can pay back does lending become 'excessive' - and it's very clear there that the borrower's borrowing is also excessive, because it is in excess of what they can pay back. Similarly, if I never borrow more than I can guarantee to pay back, then clearly it's not possible for anyone to lend excessively to me. It makes no sense to claim you can have one without the other.

Third, the "eurozone money" argument - if you're going to make it, please back it up. You won't be able to, though, because nobody has produced evidence for it at any point. The Irish banks borrowed on the international money markets, and accepted Irish and international deposits, probably largely, and unsurprisingly, from the Anglosphere in which they primarily do business. The eurozone element of our banks' borrowing was minimal, rising to a maximum of only 17% of their funding. That's there in their balance sheets. There no evidence of any large exposure to Ireland's covered banks by eurozone banks - on the contrary, they are on record as stating that their exposure to the Irish banking sector was minimal.

Fourth, the ECB's concern is not to "ensure eurozone banks get paid back", but to prevent a collapse in confidence in senior bank debt generally as a safe haven. That's why the ECB's concern is called "contagion" - because its concern is that if one member state writes down senior bank debt - normally a gilt-edged investment - then the markets will panic in the belief that it presages a wave of such write-downs across Europe's troubled banks.

So, fifth, while I'd be perfectly happy to see all our debts written off tomorrow, it's utterly unrealistic to approach negotiations for such a write-off on the basis of a series of misconceptions and myths.

Sixth, removing government spending from the economy obviously leads to the opposite of a stimulus, whether for the purposes of paying off debt or not. But we can't actually afford anything else unless we borrow further - and you don't want to borrow further. Reducing the pay of senior grades in the civil service and political class, while emotionally satisfying, would barely begin to scratch the skin of the surface of our deficit. So there is no option but adjustment there.

But the less we pay for our current borrowings, the less of our adjustment has to come from reduced services or raised taxes - which brings me back to point 1 - we have borrowed, and we are paying. Paying less doesn't strike me as the evil you claim it to be - the current rates we're getting from the troika average out at 3.55% (EU 2.97%, EFSF 3.06%, bilaterals 4.83%, IMF 4.79%) are much lower than the market rates would be, but the facility is capped, meaning that borrowing from it costs us less, but we can't borrow from it willy-nilly.

And the last couple of points - no, the Treaty doesn't address our particular route to failure, because it's not really aimed at us. And the Dutch and French may seek renegotiation, but maybe no - I don't really see the relevance of their position to ours.

Again, the Treaty isn't intended to sort out Europe's problems. It's something intended to strengthen the stable door - which seems silly, but the point is that we're expecting to get the horse back in. From a specifically Irish perspective, the main reason for voting Yes is ESM access, which we are more likely to need than other signatories - and we will still need it, if we do need it, whether we have it or not. Better to have and not need than need and not have, in my book.

cordially,
Scofflaw

recedite

Scofflaw wrote: »

The ESM doesn't make it easier for Ireland to borrow unnecessarily, but does make it easier and cheaper to borrow if it's needed.

Fair point, perhaps the only reason to vote Yes to the treaty.

Only if I lend to someone who borrows more than they can pay back does lending become 'excessive' - and it's very clear there that the borrower's borrowing is also excessive

I disagree, because in this case the borrowing is excessive, but the lending is not excessive if the lender has put away sufficient reserves to cover the loss (by putting aside a portion of interest payments from some other loans, instead of handing out all those profits in the form of bankers bonuses and dividends) It all depends on what reserves the lender has in relation to the size of the loan.

Third, the "eurozone money" argument - if you're going to make it, please back it up. You won't be able to, though, because nobody has produced evidence for it at any point. The Irish banks borrowed on the international money markets, and accepted Irish and international deposits, probably largely, and unsurprisingly, from the Anglosphere in which they primarily do business.

I refer to such practices as the ECB buying up Irish govt. bonds over a long period of time, accepting dodgy mortgages as collateral for the issuance of Euro money by Irish institutions, and also the identity of the infamous Anglo bondholders turning out to be mainly European institutions and funds.
All these factors allowed an unreasonable amount of "money" or temporary credit to inflate our economy, but without any acceptance of the resultant consequences, ie a serious default risk.

Fourth, the ECB's concern is not to "ensure eurozone banks get paid back", but to prevent a collapse in confidence in senior bank debt generally as a safe haven.

"Getting paid back" and "being a safe haven" tend to amount to the same thing, as outlined in the points above.

Sixth, removing government spending from the economy obviously leads to the opposite of a stimulus, whether for the purposes of paying off debt or not.

Yes, but the term austerity means thrift, or the art of living day to day on less money. The money saved as a result of this austerity eliminating the structural deficit can be used either to pay off debt, or else to invest in jobs via spending on capital projects, new infastructure etc.
But not both. To do both requires more borrowing, and thence we are into an endless cycle of borrowing and more debt (which suits the private lenders just fine)

Stephen Donnelly TD

The 3 speeches are now on YouTube:

(~ posted by Peter, Stephen's online manager)

meglome

Stephen Donnelly TD wrote: »

(~ posted by Peter, Stephen's online manager)

And what was said? Discussion forum an' all that.

My name is URL

Is the debate in its entirety going to be put up?

Scofflaw

recedite wrote: »

Fair point, perhaps the only reason to vote Yes to the treaty.

It's pretty much the only one needed.

recedite wrote: »

I disagree, because in this case the borrowing is excessive, but the lending is not excessive if the lender has put away sufficient reserves to cover the loss (by putting aside a portion of interest payments from some other loans, instead of handing out all those profits in the form of bankers bonuses and dividends) It all depends on what reserves the lender has in relation to the size of the loan.

Borrowing is only "excessive", though, if it means the borrower can't pay it back - in which case any lender is simply throwing their money away. It's the lender who is covering the lender's loss there.

recedite wrote: »

I refer to such practices as the ECB buying up Irish govt. bonds over a long period of time, accepting dodgy mortgages as collateral for the issuance of Euro money by Irish institutions, and also the identity of the infamous Anglo bondholders turning out to be mainly European institutions and funds.
All these factors allowed an unreasonable amount of "money" or temporary credit to inflate our economy, but without any acceptance of the resultant consequences, ie a serious default risk.

You appear to be confusing two entirely different periods here - either that, or you're blaming the ECB for providing the government with the money to stand over the banks' debts as the government had decided to do.

The so-called Anglo list is utter rubbish, and has been debunked repeatedly. I can do it again for you personally if you need it.

recedite wrote: »

"Getting paid back" and "being a safe haven" tend to amount to the same thing, as outlined in the points above.

If they're outlined, I don't see where.

recedite wrote: »

Yes, but the term austerity means thrift, or the art of living day to day on less money. The money saved as a result of this austerity eliminating the structural deficit can be used either to pay off debt, or else to invest in jobs via spending on capital projects, new infastructure etc.

But not both. To do both requires more borrowing, and thence we are into an endless cycle of borrowing and more debt (which suits the private lenders just fine)

So the government should massively de-stimulate the economy in order to use the money to stimulate the economy? Um.

We don't need to pay down the debt to meet Fiscal Treaty targets. A combination of inflation and the kind of growth levels we had in the early 80s will do the job well within the required timeframe.

Worked demonstration of this available on request.

cordially,
Scofflaw

recedite

Scofflaw wrote: »

Borrowing is only "excessive", though, if it means the borrower can't pay it back - in which case any lender is simply throwing their money away. It's the lender who is covering the lender's loss there.

No, it was the taxpayer who had to cover the lender's losses, as it turned out.

Scofflaw wrote: »

The so-called Anglo list is utter rubbish, and has been debunked repeatedly. I can do it again for you personally if you need it.

A link would suffice.

Scofflaw wrote: »

So the government should massively de-stimulate the economy in order to use the money to stimulate the economy? Um.

Nien. The govt. needs to divert the limited resources from current account spending to capital spending. Axel Weber of der Bundesbank says it best, and I think der Bundesbank speaks for all of us in the EU whether we like it or not;

The large current account imbalances in EMU are mainly due to structural domestic imbalances in deficit countries. Given spillover effects in integrated euro-area financial markets, the imbalances are a serious strain on the monetary union as a whole. They must therefore be corrected.

Slightly ominous that. Its from a speech 18 months ago. He also explains the problem caused by eurozone money moving too freely into certain countries (which you seem to deny ever happening);

capital flows from countries with relatively large savings to countries with relatively high investment. In EMU this flow of capital was increased by the introduction of the euro...........In Spain and Ireland it went into booming real estate markets, in Greece it funded high government deficits and in Portugal it supported private consumption.

Finally the solutions, which are being implemented now. It's notable that the "surplus" countries who exported their capital are not accepting responsibility; its the deficit countries that must be changed.

In the long run, procedures to ensure fiscal policy commitment will have to be strengthened, for example by enhancing the Stability and Growth Pact. More effective macroeconomic surveillance and the development of a crisis resolution mechanism would, at least in the medium term, also be helpful. Thank you for your attention.

Unfortunately these measures can't prevent one country creating an asset bubble in another, so we will just have to hope that they'll be more careful in future what they invest in. No more shopping centres in Leitrim for a while anyway.

Full text.

Scofflaw

recedite wrote: »

No, it was the taxpayer who had to cover the lender's losses, as it turned out.

Because the taxpayer's government had not ensured that the borrower had the assets to repay, which in turn is largely because the taxpayer had borrowed from those borrowers without having the necessary assets either.

recedite wrote: »

A link would suffice.

I'd have to track that down, and it's pretty much second nature at this stage. The essential problems with the so-called "Anglo list" is that it's supposed to show the senior bondholders in Anglo. It doesn't, though - there's a conversation in the comments on Guido's blog between a guy from one of the bondholding institutions (Deka GmBh, afair) and Guido, where the Deka guy challenges Guido to name the bonds Deka is supposed to hold, and Guido does so.

The problem is that the bond in question is (a) small - €25m or so, and (b) a junior bond.

That it's a junior bond means straight away that the list is not a list of Anglo senior bondholders - the people who are supposed to have been "bailed out". Junior bondholders got burned. In fact, the bond in question got written down to something like 25c in the euro, or a 75% haircut.

And that brings us to another funny point, which is that Wexford Credit Union had to inform its customers of a reduced dividend as a result of losses on Anglo bonds...on the same bond issue.

So Wexford Credit Union held the same junior bond as Deka, but Deka went on the list, Wexford Credit Union didn't.

Those who appear on that list are, as far as I can see, all Anglo bondholders. But they're not all senior bondholders. And they're not all the senior bondholders either, because the sum of bonds on the list is the same as the sum of senior bondholdings in Anglo.

So Guido's list is heavily redacted, and tells a particular story. Some people are certainly being protected, and no Irish bondholder was included.

recedite wrote: »

Nien. The govt. needs to divert the limited resources from current account spending to capital spending. Axel Weber of der Bundesbank says it best, and I think der Bundesbank speaks for all of us in the EU whether we like it or not;

If you mean that you'd rather some of the savings were being made in the current spending rather than capital, I agree with you. We're not, as yet, 'saving money' in the sense of having money after cuts. What we have after cuts is slightly lower borrowings.

recedite wrote: »

Slightly ominous that. Its from a speech 18 months ago. He also explains the problem caused by eurozone money moving too freely into certain countries (which you seem to deny ever happening);

I don;t see it as having been a major factor in Ireland. In other countries, yes, but there's just a total lack of evidence for it here. And, personally, when there's no evidence for a narrative in the places the evidence ought to be, I regard the narrative as unlikely to be correct.

Some eurozone countries - Greece is a good example - are traditional targets for investment by banks in places like Germany. Others, like Ireland, are not. We are, instead, traditionally part of the Anglosphere investment world, and that does fit with the available evidence.

recedite wrote: »

Finally the solutions, which are being implemented now. It's notable that the "surplus" countries who exported their capital are not accepting responsibility; its the deficit countries that must be changed.

Unfortunately these measures can't prevent one country creating an asset bubble in another, so we will just have to hope that they'll be more careful in future what they invest in. No more shopping centres in Leitrim for a while anyway.

Full text.

On the other hand, there's quite a bit a country can do to prevent an asset bubble being created in it. Interest rates are neither the only tool nor the best tool:

http://www.centralbank.ie/press-area/speeches/Pages/SpeechbyDeputyGovernorStefanGerlachonHousingMarketsandFinancialStability.aspx

Our problem with the euro was essentially one of poor Irish policy responses. We can avoid that happening again, but not if we spend our efforts trying to pin the blame on anyone else but ourselves.

cordially,
Scofflaw

recedite

ECB chief Mario Draghi has called on EU leaders to place economic growth at the centre of the battle against the financial crisis and described the stability treaty as the “starting point” on the path to a fiscal union in the euro zone.
Mr Draghi insisted, however, that there was no conflict between the emphasis on growth and the need for governments to rein in their budget deficits and debt.

Suggesting a fiscal union could come about within 10 years, Mr Draghi said this would involve the transfer of sovereignty from member states to a central authority.

source

I think this is a good reason to vote "yes" to the treaty. Not as a cure-all, but as a means to an end. The exact kind of fiscal union envisaged is not determined yet, but if we were in a fiscal union now, presumably the burden of the bank bailouts would be shared throughout the eurozone, and possibly there would be social welfare transfers or payments from a central fund to help stimulate the local (Irish) economy.