Ireland's debt deal: What will the Left do now?

Zonda999

I didn't hear the Gerry Adams or Mary Lou interviews that were mentioned here earlier but I did hear Matt Coopers interview with Pierce Doherty. I wouldn't say he sounded bitter about it but he certainly wasn't as aggressive on his stance against government policy as usual. When asked about the link between the ESM in this deal, and SF's stability treaty referendum stance, he sort of avoided the question and claimed there was no link but there's a pretty inextricable link in this posters eyes.

As for the people who say that we are merely living off scraps here, not only in respect of this latest deal but also the reduction from 5.8 to ~3% in the bailout interest rate about 12 months ago, I think those people are being a bit naive in respect of our position in Europe..

My view is this: Pretty obviously the core countries do not want to be picking up the tab for us. They will naturally try to resist picking up the tab where possible, except where it effects their own economy/currency. When we got the interest rate reduction 12 months ago, the unsustainablity of the Greece situation was undermining confidence in the Eurozone, and endangering the euro. The core decided here the best course of action was to reduce the burden on Greece by lowering the interest rate, fair enough. We benefited from this. The point is though, at the time, we were never going to get that interest rate drop if it were not for the Greek situation. Our plight as regards the interest rate was not endangering the EZ at that time, therefore the core did not really care.

Again this time, our bank debt was a contentious issue since we got the bailout. However, it alone was not an issue for the wider EZ. However, when major EZ economies like Spain and Italy have issues raising funds, it would have had severe repercussions on the core. Therefore the issue was dealt with then. It was not due in any major way to our particular situation. Then again, I read in the Irish Times that the Irish Government insisted on our banking debt situation being explicitly stated in this deal. The fact that this occurred at all cannot be looked past. Of course plenty will say our implementation of the bailout programme thus far and our yes vote in May had nothing to do with us getting this compromise, but I think otherwise here.

As for the deal itself, I am one to agree the devil is indeed in the detail but the policy shift is very important. There can be little doubt though, this deal has more positive implications for us than any other EZ member. Remember here, Spains banks supposedly only need ~€62 billion (Now obviously that'll rise). Our banks required to date €64 billion. You cannot possibly compare the two figures in comparison the size of the respective economies. Its not hard to see here why the separation of bank debt from sovereign debt is so important for us.

In any case, I honestly can see us getting through this now(As in not defaulting down the line), as long as this deal is implemented properly and our bank debt is truly taken off our books.I read yesterday on Bloomberg that our current cost of borrowing in plied about a 40% chance of default within 5 years, not great could has been far worse before. In the meantime there is nothing more we can do other than implement reforms and reduce our budget deficit at the agreed rate. We can continue to draw down the 3% bailout cash until mid to late 2013. I think we may be able to re enter the markets at that point at a rate somewhere about 5%

Noreen1

The devil remains in the detail, and some of the detail appears to be this:

http://in.reuters.com/article/2012/06/29/eurozone-idINDEE85P06O20120629

The ESM's ability to inject capital directly into banks will come too late to help Spain recapitalise its debt-laden lenders immediately this year, but it should allow Madrid to remove the cleanup from state books next year, euro zone officials said.
Merkel said finance ministers would have to work out whether the state or the banks would be legally responsible for repayment of the loans thereafter.
Some analysts were more sceptical about the benefits of the deal, given the level of detail left open.

I remain sceptical about this deal - though this is one occasion when I sincerely hope I'm wrong.
Until the decision is taken as to whether the sovereign, or the banks are legally responsible for the repayment of the loans, this remains just one more exercise in moving figures around on the balance sheet. It does nothing to resolve the financial crisis, it's merely one more attempt to appease the markets - unfortunately.

MrReynholm

Noreen1 wrote: »

I remain sceptical about this deal - though this is one occasion when I sincerely hope I'm wrong.
Until the decision is taken as to whether the sovereign, or the banks are legally responsible for the repayment of the loans, this remains just one more exercise in moving figures around on the balance sheet. It does nothing to resolve the financial crisis, it's merely one more attempt to appease the markets - unfortunately.

While yes, it has the potential to keep the debt sovereign, it also spreads that debt out throughout the participating members of the pact in a size weighted way. It would essentially take the €67bn bank debt burden from the tax payer here, put it into a weighted pool and a pool that our maximum possible exposure to is €11bn.

I think it's fantastic news myself.

I can't imagine this move will be very popular with the far left parties as it strips them of the drum they've beaten the hardest. Although, they're deluded enough that they'll continue to make grand claims about our debt repayment, even though the debt after this move will be completely as a result of our public expenditure on wages and social welfare.

I'm delighted with what has happened this week myself and am just thankful that we elected a government that is more mature and calculated than to just get into office and give the finger to everyone outside the country while demanding we retain access to the free common market and currency.

stackerman

Icepick wrote: »

And what is this inevitable thing?
BTW, if you know more than "the markets", you can easily become a millionaire in 2/3 weeks.

No need to be a smart a**, I'm entitled to my opinion as much as the other guy.

"I believe" that mass default throughout the western world is inevitable.
"I believe" that we would all be better off, in a quicker time frame, if they did that sooner then later. Note that I am not saying this for one second, would be easy.
"I believe" that this will not happen by choice, as politicians in general don't have the bottle to do the right thing. That is why we see the famous can constantly moving down the same road, and money printing (under various names).
"I believe" that after a deflationary pocket, we will see further inflation.
And please don't quote me the published inflation figures (because I don't believe them).

I doubt that I will be "a millionaire" any time soon, however I'm more than happy with my choices along the way. My instinct, gut feeling, and being open to hearing all opinions has stood me well so far

Monty Burnz

stackerman wrote: »

"I believe" that mass default throughout the western world is inevitable.
"I believe" that we would all be better off, in a quicker time frame, if they did that sooner then later.

What about pensioners and savers? Would they be better off seeing their pensions and money go up in smoke?

Noreen1

MrReynholm wrote: »

While yes, it has the potential to keep the debt sovereign, it also spreads that debt out throughout the participating members of the pact in a size weighted way. It would essentially take the €67bn bank debt burden from the tax payer here, put it into a weighted pool and a pool that our maximum possible exposure to is €11bn.

I think it's fantastic news myself.

I can't imagine this move will be very popular with the far left parties as it strips them of the drum they've beaten the hardest. Although, they're deluded enough that they'll continue to make grand claims about our debt repayment, even though the debt after this move will be completely as a result of our public expenditure on wages and social welfare.

I'm delighted with what has happened this week myself and am just thankful that we elected a government that is more mature and calculated than to just get into office and give the finger to everyone outside the country while demanding we retain access to the free common market and currency.

Link?

stackerman

Monty Burnz wrote: »

What about pensioners and savers? Would they be better off seeing their pensions and money go up in smoke?

Of coarse not :rolleyes:

I never said that.
It is very unfortunate, but I believe that that will be the outcome whichever way things go. I have family, just like the rest of you, and they will be devastated too. I am NOT saying I like, what is happening, I abhor it. In fact I think is a bloody disgrace !
But looking at the figures . . .
I can't see any other way out.

I'd LOVE to hear one if you have it.

Monty Burnz

stackerman wrote: »

I'd LOVE to hear one if you have it.

How about people paying back their debts if they can, and if they can't, then paying back what they are able to?

That's how it has been done for a long time.

dsmythy

Heads the ball wrote: »

You didnt answer the question. You pointed out ways where it has not disimproved but remained flat.

I was calling out someone to show how it has RECOVERED (not just stayed flat)

You expect the unemployment rate to go from rising to falling in a flash or what? First you stop the rise. It's at a stable rate. Then it starts to fall. IF the economy is trying to get started again then by this time next year I would hope for a slow reduction in the unemployment rate.

dsmythy

The Sinn Féins of the world will still bang the same drum knowing their voters will lap it up while not watching their TD's get destroyed debate after debate.

Heads the ball

dsmythy wrote: »

Heads the ball wrote: »

You didnt answer the question. You pointed out ways where it has not disimproved but remained flat.

I was calling out someone to show how it has RECOVERED (not just stayed flat)

You expect the unemployment rate to go from rising to falling in a flash or what? First you stop the rise. It's at a stable rate. Then it starts to fall. IF the economy is trying to get started again then by this time next year I would hope for a slow reduction in the unemployment rate.

You also have fallen into the wont/cant answer the question. A slow down in the rate of disimprovement is not an improvement.

Godge

stackerman wrote: »

No need to be a smart a**, I'm entitled to my opinion as much as the other guy.

"I believe" that mass default throughout the western world is inevitable.
"I believe" that we would all be better off, in a quicker time frame, if they did that sooner then later. Note that I am not saying this for one second, would be easy.
"I believe" that this will not happen by choice, as politicians in general don't have the bottle to do the right thing. That is why we see the famous can constantly moving down the same road, and money printing (under various names).
"I believe" that after a deflationary pocket, we will see further inflation.
And please don't quote me the published inflation figures (because I don't believe them).

I doubt that I will be "a millionaire" any time soon, however I'm more than happy with my choices along the way. My instinct, gut feeling, and being open to hearing all opinions has stood me well so far

Ah yes, the doomsday scenario, we are all going to default and the euro will collapse, didn't David Mcwilliams and Constatin say that this was all going to happen by the end of the week about two years ago?

The boy has been crying wolf for a long time and we are still here.

Scofflaw

Heads the ball wrote: »

You also have fallen into the wont/cant answer the question. A slow down in the rate of disimprovement is not an improvement.

No, but it can perfectly well be considered 'stabilisation'. I hope there's more to your argument than semantic straw men.

regards,
Scofflaw

djpbarry

Heads the ball wrote: »

Are you really disputing that there has been a massive social cost?

Yes. Yes I am. When I see that Jobseekers Benefit is still paying €188 per week (versus a maximum of £71 here in the UK), it's difficult to take claims of "massive social costs" at all seriously.

SupaNova

Yes that doomsday scenario, I think its worth thinking about what these guys are missing and why they are getting it wrong.

I have yet to see a single economist predicting an imminent break up of the euro account for its history. The occasional one glosses over how the European Union has brought peace, but not a single one seems aware of the history of the currency, of the drive for a monetary union, the motives behind it and the massive amount of planning it took.

The first proposal for an economic and monetary union was in 1962, the Marjolin Memorandum. Robert Marjolin was a french economist who was an advisor to Charles the Gaulle who was one of the most vocal critics of the US's unfair position as world reserve currency. And it was the French who were the most aggressive in demanding their dollars be converted to gold that drove the end of the gold standard and that Nixon Conference in 1971.

So the next leg of the Euro's history quickly began in 1971, where the Werner Report proposed to create a monetary union by 1980. Divergent policy and economic shocks put the plan on hold. In 1979 the EMS was created, along with the ECU(European Currency Unit) to facilitate exchange rates and settlement among central banks. This had limited success in its goal of economic convergence.

In 1988 the push for a monetary union continued with the Delors Report. It is this report that laid out the steps towards the Euro we have today.

Quite a history, and one I was unaware of until I decided to go and read about it. Decades of work and planning, both political and technical, and a real push for an alternative currency to the dollar, but some economists still predict its over night disappearance.

To read the ECB's history go here:
http://www.ecb.int/pub/pdf/other/ecbhistoryrolefunctions2004en.pdf

Here is an interesting find also:
http://www.ecb.int/pub/pdf/scpops/ecbocp77.pdf

Heads the ball

djpbarry wrote: »

Yes. Yes I am. When I see that Jobseekers Benefit is still paying €188 per week (versus a maximum of £71 here in the UK), it's difficult to take claims of "massive social costs" at all seriously.

Well I cant take you seriously so and I dont feel compelled to spell out for you the massive social costs which are patently obvious to anyone.

Perhaps you are just trying to wind me up.

Heads the ball

Scofflaw wrote: »

No, but it can perfectly well be considered 'stabilisation'. I hope there's more to your argument than semantic straw men.

regards,
Scofflaw

My point is the government has not done a remarkable job - or whatever an earlier poster claimed. Nobody claimed it explicitly but I got the impression people were saying we had improved.

My point may seem semantic - but yes, you are correct - it has stabilised but at an unacceptable level of 14/15%. And yes yes I know thats step 1 and step 2 is the actual recovery but my point is, lets hold our applause until the recovery begins.

Gurgle

Heads the ball wrote: »

it has stabilised but at an unacceptable level of 14/15%.

The Spanish would be only too happy to accept 14% at the moment, they're running at 24%. Greece at 22.6% would swap for our economy in a heartbeat.

Not saying 14% should be our long term target, but it could be a lot worse.

stackerman

Godge wrote: »

Ah yes, the doomsday scenario, we are all going to default and the euro will collapse, didn't David Mcwilliams and Constatin say that this was all going to happen by the end of the week about two years ago?

The boy has been crying wolf for a long time and we are still here.

Ok let's not go down the road of a whole debate on this, as you seem to have already blanked off the possibility that this whole thing has moved past the point of return.

Let's just keep it to one detail, if you like.

Where is the money coming from ?

For the record, I never have, nor would I, vote for SF.

antoobrien

Noreen1 wrote: »

Link?

That's the maximum amount we're due to pay into the ESM treaty

djpbarry

Heads the ball wrote: »

...I dont feel compelled to spell out for you the massive social costs which are patently obvious to anyone.

No, they’re not. Because they don’t exist. Barely a dent has been made in Ireland’s colossal welfare budget.

Heads the ball wrote: »

My point may seem semantic - but yes, you are correct - it has stabilised but at an unacceptable level of 14/15%.

It’s difficult to envisage a situation where Ireland returns to the low levels of unemployment experienced over the last 5-10 years, given the very large numbers of unemployed construction workers present. Even if the economy begins to grow again, and assuming Ireland doesn’t experience another construction boom, unless the ex-construction workers re-train, they will be unemployable. Now, some will of course re-train and many will almost certainly emigrate to work on construction projects abroad, but I suspect many will remain on the dole. Dealing with this situation will be Ireland’s greatest social challenge over the coming years/decades.

Heads the ball

djpbarry wrote: »

No, they’re not. Because they don’t exist. Barely a dent has been made in Ireland’s colossal welfare budget.

I think you are confusing "social costs" with social welfare .

There have been many social costs, not just those which are related to welfare. Just read any of the last four budgets and you will see them.

Then there are the unwritten costs – ie those costs which arise as a result of policies – a very unsophisticated example would be decreased demand hurting small business owners.

I think youre point is they should have cut social welfare more. Is that right? Personally thats not a view I share but its a perfectly valid opinion to have.

Just for clarity, when I refer to social costs I am talking about more than just welfare.

Heads the ball

djpbarry wrote: »

It’s difficult to envisage a situation where Ireland returns to the low levels of unemployment experienced over the last 5-10 years, given the very large numbers of unemployed construction workers present. Even if the economy begins to grow again, and assuming Ireland doesn’t experience another construction boom, unless the ex-construction workers re-train, they will be unemployable. Now, some will of course re-train and many will almost certainly emigrate to work on construction projects abroad, but I suspect many will remain on the dole. Dealing with this situation will be Ireland’s greatest social challenge over the coming years/decades.

I dont disagree with that. In fact I think we are in a similar position now, I guess my point is (and I wont labour it any further) is just I am reserving my applause for FG until a material recovery begins (after all their election campaign was "lets get Ireland working" not just "lets stop the more people losing their jobs").

Some people here see the slowdown in unemployement as a substantive acheivement of government, whereas I see it as just inevitable that it would hit a floor (ie all the viable firms have cut back to the minimum staff levels by now and have no more to cut, all the non viable firms are probably gone).

Perhaps Im cynical, perhaps not.

Noreen1

http://www.irishtimes.com/newspaper/breaking/2012/0702/breaking4.html

The Government is working to a deadline of the end of October for reaching agreement with the European Union on substantial reductions in the State’s bank debts.
Minister for Finance Michael Noonan will table the Government’s first proposals for a revised banking debt arrangement for Ireland at a meeting of EU finance ministers in Brussels next Monday.
However, Mr Noonan, Taoiseach Enda Kenny and Tánaiste Eamon Gilmore have all refused to quantify the scale of bank debt reduction they will seek when negotiations begin in earnest next week, although it is understood officials are working on a possible cut of upwards of half of the total €63 billion spent to date on bailing out the banks.
Mr Noonan said over the weekend he wanted a successful outcome on the bank debt issue before the budget in December. Last night, senior sources familiar with the process said, in practical terms, that meant a resolution by the end of October.
The Government also needs to be in a position to have certainty by the end of October over the State’s ability to fund itself over the following 12 months: this one-year-rule is one of the preconditions laid down by the International Monetary Fund for programme countries.
At the meeting on Monday, Mr Noonan will outline for the first time the Government’s detailed interpretation of the outcome of last week’s summit in Brussels, which agreed that bank debt should be separated from sovereign debt. The conclusions specifically mentioned the sustainability of Irish debt and the principle of equivalence in the EU’s response to crises in different countries.
Mr Gilmore and other senior figures emphasised the complexity of the negotiations, particularly in applying new rules retrospectively to bank debt already borne by the Irish sovereign.
“You have to look at our record. All of the records we have conducted with the troika, the EU and other member states have been conducted in private. That’s the most productive way of getting an outcome,” he told The Irish Times.
It is understood the Government will be guided to a certain extent by the agreement that may be reached with Spain. But, expressing a note of caution, the Taoiseach’s spokesman last night said there was overlap but there were important differences, not least that Spain does not have the same retrospection issue as Ireland.
Following next week’s meeting of finance ministers, Mr Noonan will continue negotiations at a euro group meeting later this month, with a view to having political agreement on Ireland’s case before the next summit of EU leaders in late October.
There is an assumption, according to sources, that a successful resolution would allow Ireland’s overall debt fall from a peak of 117 per cent of gross domestic product to about 100 per cent. In monetary terms, that would amount to some €34 billion, or slightly over half of the overall bank rescue cost.
Fianna Fáil leader Micheál Martin said the outcome had helped save the euro but claimed Mr Gilmore was indulging in “retrospective spinning” and was playing up the Government’s part in achieving the deal in Brussels. Pearse Doherty of Sinn Féin expressed concerns that the Irish taxpayer might still be on the hook for the bulk of the bank debts.
Separately, Mr Gilmore defended comments by his Labour ministerial colleague that seemed directed at the budget later this year.
In a speech this weekend, Minister for Social Protection Joan Burton suggested increases in PRSI, saying the Irish rate was lower than other countries. Mr Gilmore defended Ms Burton yesterday, saying she was quite right drawing attention to shortfalls in the social insurance fund.

It would appear that 11bn is a tad optimistic, unfortunately.

Monty Burnz

Noreen1 wrote: »

It would appear that 11bn is a tad optimistic, unfortunately.

For some reason, the Anglo promissory notes are not on the table at the moment.

Noreen1

It seems there are a lot of assumptions/expectations about this agreement.

Unless the Anglo promissory notes are included, then, if Ireland has to pay the maximum 11bn to the ESM, then this agreement is worth little or nothing to the Irish people.:mad:

I suggest we wait until we obtain a lot more detail before we either break out the champagne, or drown our miseries.

djpbarry

Heads the ball wrote: »

I think youre point is they should have cut social welfare more. Is that right?

Yes, but my general point is I’m seeing very little evidence of “massive” social costs.

Heads the ball wrote: »

Some people here see the slowdown in unemployement as a substantive acheivement of government, whereas I see it as just inevitable that it would hit a floor (ie all the viable firms have cut back to the minimum staff levels by now and have no more to cut, all the non viable firms are probably gone).

I think a more realistic interpretation is that job losses are being balanced by job creation and emigration. Also, bear in mind that there are a lot of employers in Ireland struggling to fill positions – there is a great big skills mismatch between jobs available and those who are unemployed. That is a big problem.

The only way a lot of those positions are going to be filled is with overseas applicants, so in my opinion, one massive barrier to growth that the government could remove is the absolutely ridiculous criteria that must be met in Ireland in order to obtain a work permit. But that will never happen as it would be political suicide - “der’s massive unemployment and der givin all de jobs t’de bleedin’ immigrants!!!”

Heads the ball

djpbarry wrote: »

Yes, but my general point is I’m seeing very little evidence of “massive” social costs.

Well I would pick up a copy of the last few budgets so

Permabear

This post has been deleted.

Scofflaw

SupaNova wrote: »

Yes that doomsday scenario, I think its worth thinking about what these guys are missing and why they are getting it wrong.

I have yet to see a single economist predicting an imminent break up of the euro account for its history. The occasional one glosses over how the European Union has brought peace, but not a single one seems aware of the history of the currency, of the drive for a monetary union, the motives behind it and the massive amount of planning it took.

The first proposal for an economic and monetary union was in 1962, the Marjolin Memorandum. Robert Marjolin was a french economist who was an advisor to Charles the Gaulle who was one of the most vocal critics of the US's unfair position as world reserve currency. And it was the French who were the most aggressive in demanding their dollars be converted to gold that drove the end of the gold standard and that Nixon Conference in 1971.

So the next leg of the Euro's history quickly began in 1971, where the Werner Report proposed to create a monetary union by 1980. Divergent policy and economic shocks put the plan on hold. In 1979 the EMS was created, along with the ECU(European Currency Unit) to facilitate exchange rates and settlement among central banks. This had limited success in its goal of economic convergence.

In 1988 the push for a monetary union continued with the Delors Report. It is this report that laid out the steps towards the Euro we have today.

Quite a history, and one I was unaware of until I decided to go and read about it. Decades of work and planning, both political and technical, and a real push for an alternative currency to the dollar, but some economists still predict its over night disappearance.

To read the ECB's history go here:
http://www.ecb.int/pub/pdf/other/ecbhistoryrolefunctions2004en.pdf

Here is an interesting find also:
http://www.ecb.int/pub/pdf/scpops/ecbocp77.pdf

Textbook example of people thinking life is like the textbooks...and economists treating economics as if it were mechanics or physics. That sort of belief that economics is a quantitative science, and that the markets are a force of nature, is something that helped get us where we are in the first place.

Economics is politics and psychology, not engineering.

cordially,
Scofflaw