Merkel "There will not be any back-dated direct recapitalisation" of eurozone banks.

Scofflaw

Good loser wrote: »

Excellent posts Scoffs if I may say so.

Am I correct in understanding that the bolded paras. are your points of divergence with Peter Matthews, Stephen Donnelly, Shane Ross, Sinn Fein (insofar as they're coherent) etc.?

Probably, and my point of agreement with the IMF, I suppose. I know people like Eddie Hobbs, and those you mention, like to repeat that our debt is unsustainable, but they're careful either not to define it, or to use figures that no official source would accept. And if we defaulted on the basis of, say, Hobbs' WSJ claim our debt is 524% of GDP, it would be pretty transparent as a convenient fiction.

The nice thing about being in opposition, or a commentator, is that you can use these spurious figures to say the government is doing it wrong - but the government can't make policy off the back of such figures, because nobody who matters would accept them.

Good loser wrote: »

They claim the ECB forced us to force the banks to pay up on the bonds.
Do you disagree - and how?

No, I don't disagree - the ECB insisted on us repaying senior bonds. But - and this is one big 'but' - people transpose that insistence, which happened in late 2010, back to late 2008, without the slightest shred of evidence. In late 2010, what remained of unsecured unguaranteed senior debt might have saved us about €6bn, if we'd applied big haircuts to it all. The market ripples would, on the other hand, have been enormous, totaling multiples of that figure, and almost certainly coming back to bite us as well.

The second big 'but' is that the Irish government agreed with them, much to the disgust of the IMF - which is unsurprising, because it was in line with Irish government policy up to that point. One of big sales pitches for the last 20 years has been that we're finance-friendly, and there's no likelihood the government was ever going to want to queer that pitch - witness their current stand on recouping some of the costs of bank bailouts through the financial transactions tax. Oh, sure, if the ECB had been OK with it, we'd have done it and blamed them, but they weren't, so we didn't...and blamed them.

Junior debt we burned, shareholders we wiped out, senior debt we honoured, depositors didn't even make it onto the radar, even though the main reason for the bank recaps was the loss of deposits, and a major reason for the guarantee was potential loss of deposits. It doesn't feature in the political rhetoric because most people are bank depositors - but the bondholders are, to some extent, just convenient proxies for the depositors as the real movement in the banks both inward during the bubble and outward during the bust. They featured as villains not because they were taking a bigger risk than depositors (technically, they were taking a similar or lower one), but because the nature of bonds made them sitting ducks for having money taken off them - they'd loaned on fixed-term contracts, and could only pull their money back out by selling their bonds to someone else.

The ECB has now come out and said that it has changed its mind about senior debt, which is probably both a point in our favour as well as long overdue - but they're bankers of the cautious kind we've nearly forgotten about. At the time, the state of hysteria about bank fragility was very great, and I don't have much difficulty accepting the contagion argument as a realistic one.

I suppose my really big point of departure from everyone else is acknowledging that the Irish government took on the task of supporting the Irish banks, and all that that entailed, of their own volition - the result of which is that everyone else acts like "our" bank debt is our bank debt because it is our bank debt, acquired fair and square by the legal government of Ireland. Our hopes of getting a deal do not involve ranting and raving about other shadowy parties forcing odious debt on us, because the only thing that claim is good for is selling in bags to gardeners.

cordially,
Scofflaw

lmimmfn

Apparently( according to todayfm news - havnt had a chance to see/listen to any other news today ) Merkel and Enda Kenny agreed this evening that ireland is a special case, whatever that means.

I do think that Ireland will be a thorn in the side of the current Euro crisis if something isint done to resolve our issue with the banking debt being lumped in with the soverign. Mainly because we'll be drawing from the ESF( abnd IMF ) longer than expected rather than returning to the bond markets next year. I think it will be in their interest to get us off the books asap so they can deal with Spain. Of course i could be very very wrong

Scofflaw

thebman wrote: »

Except that much of Europe and the US is in almost exactly the same boat as us especially in relation to de-regulating markets on and off again.

True enough. That's what happens when you leave the big lever marked "deregulate banks" in the hands of the politicians. Eventually, they're just drawn into pulling it by the shiny stuff that initially flows out of it, forgetting the very much larger flow of brown stuff that inevitably follows.

cordially,
Scofflaw

Scofflaw

Idbatterim wrote: »

what i fail to understand is, say for example Deutsche bank lent AIb, BoI, Anglo etc money and this hasnt been repaid yet, they could easily take a one off "exceptional" hit, they wouldnt have to go to the german taxpayer, they could easily take it, yeah it would hit their share price, but so what, the share price of AIB, BOI etc have been totally decimated and it was deemed as acceptable...

It would save us sod-all, though, because the sums involved are small, which is why they could take the hit. I think Deutsche estimated their exposure to our covered banks as about €400m, and that was a couple of years ago.

cordially,
Scofflaw

Good loser

Scofflaw wrote: »

Probably, and my point of agreement with the IMF, I suppose. I know people like Eddie Hobbs, and those you mention, like to repeat that our debt is unsustainable, but they're careful either not to define it, or to use figures that no official source would accept. And if we defaulted on the basis of, say, Hobbs' WSJ claim our debt is 524% of GDP, it would be pretty transparent as a convenient fiction.

The nice thing about being in opposition, or a commentator, is that you can use these spurious figures to say the government is doing it wrong - but the government can't make policy off the back of such figures, because nobody who matters would accept them.



No, I don't disagree - the ECB insisted on us repaying senior bonds. But - and this is one big 'but' - people transpose that insistence, which happened in late 2010, back to late 2008, without the slightest shred of evidence. In late 2010, what remained of unsecured unguaranteed senior debt might have saved us about €6bn, if we'd applied big haircuts to it all. The market ripples would, on the other hand, have been enormous, totaling multiples of that figure, and almost certainly coming back to bite us as well.

The second big 'but' is that the Irish government agreed with them, much to the disgust of the IMF - which is unsurprising, because it was in line with Irish government policy up to that point. One of big sales pitches for the last 20 years has been that we're finance-friendly, and there's no likelihood the government was ever going to want to queer that pitch - witness their current stand on recouping some of the costs of bank bailouts through the financial transactions tax. Oh, sure, if the ECB had been OK with it, we'd have done it and blamed them, but they weren't, so we didn't...and blamed them.

Junior debt we burned, shareholders we wiped out, senior debt we honoured, depositors didn't even make it onto the radar, even though the main reason for the bank recaps was the loss of deposits, and a major reason for the guarantee was potential loss of deposits. It doesn't feature in the political rhetoric because most people are bank depositors - but the bondholders are, to some extent, just convenient proxies for the depositors as the real movement in the banks both inward during the bubble and outward during the bust. They featured as villains not because they were taking a bigger risk than depositors (technically, they were taking a similar or lower one), but because the nature of bonds made them sitting ducks for having money taken off them - they'd loaned on fixed-term contracts, and could only pull their money back out by selling their bonds to someone else.

The ECB has now come out and said that it has changed its mind about senior debt, which is probably both a point in our favour as well as long overdue - but they're bankers of the cautious kind we've nearly forgotten about. At the time, the state of hysteria about bank fragility was very great, and I don't have much difficulty accepting the contagion argument as a realistic one.

I suppose my really big point of departure from everyone else is acknowledging that the Irish government took on the task of supporting the Irish banks, and all that that entailed, of their own volition - the result of which is that everyone else acts like "our" bank debt is our bank debt because it is our bank debt, acquired fair and square by the legal government of Ireland. Our hopes of getting a deal do not involve ranting and raving about other shadowy parties forcing odious debt on us, because the only thing that claim is good for is selling in bags to gardeners.

cordially,
Scofflaw

Thanks for the time, trouble and light.

Afraid I can't handle the three 'ours' highlighted. In your own time.

Is it true that the ECB is currently giving our Central Bank up to €100 bn liquidity funding at around 1% rates? And is there a subsidy there over market rates?

Scofflaw

Good loser wrote: »

Thanks for the time, trouble and light.

Afraid I can't handle the three 'ours' highlighted. In your own time.

Is that "it reads like nonsense because it's poorly phrased" or "it reads like nonsense because there's no way it's our debt"?

If the former, the point is that the debt on our books is our debt. Our government acquired it in just as legal a way as if they had spent it on foreign aid or PS salaries. With the exception of a small amount of money we might otherwise have saved in 2010, no outside force is responsible - and even there, I don't think we were forced into it so much as not allowed to use someone else to take responsibility for it.

That's why all these outside forces act as if it's our debt - because it is. The widespread belief in Ireland that it's somehow not our debt, and more properly belongs on someone else's tab is false. It was our government that ran up that bill.

Good loser wrote: »

Is it true that the ECB is currently giving our Central Bank up to €100 bn liquidity funding at around 1% rates? And is there a subsidy there over market rates?

Yes, they are, and no, there's no premium. In effect, it's actually the ECB who are rolling over our bank debts as they fall due. That's why Noonan et all bang on about it so much, because for the size of the country, that's an enormous call on ECB resources.

cordially,
Scofflaw

Good loser

Scofflaw wrote: »

Is that "it reads like nonsense because it's poorly phrased" or "it reads like nonsense because there's no way it's our debt"?

If the former, the point is that the debt on our books is our debt. Our government acquired it in just as legal a way as if they had spent it on foreign aid or PS salaries. With the exception of a small amount of money we might otherwise have saved in 2010, no outside force is responsible - and even there, I don't think we were forced into it so much as not allowed to use someone else to take responsibility for it.

That's why all these outside forces act as if it's our debt - because it is. The widespread belief in Ireland that it's somehow not our debt, and more properly belongs on someone else's tab is false. It was our government that ran up that bill.



Yes, they are, and no, there's no premium. In effect, it's actually the ECB who are rolling over our bank debts as they fall due. That's why Noonan et all bang on about it so much, because for the size of the country, that's an enormous call on ECB resources.

cordially,
Scofflaw

Thanks Scofflaw. My trouble was the (for you) inelegant phrasing. I wish Pat Kenny, M Finucane and Fintan O Tool would read your posts!

Still a question. If the banks had to go to the markets for the €100 bn would it not be at a lot higher interest rate than 1% - say 4%; how then is that not an effective €3bn per annum subsidy?

noodler

So, still no sign of this statement being published anywhere?

NIMAN

I heard on the radio this morning that the gap between what we earn and what we spend annually is now €7billion (down from €20bill?).

If this is true then its slightly encouraging, isn't it? A couple of more harsh Budgets should be enough to balance the books, as long as they don't kill the economy completely!

Or maybe if we could do 1 more harsh Budget and say the rest by looking at the CPA again or stop silly spending in the Gov?

If we were to balance the books over the next couple of years, plus get a deal on our bank debt, does anyone see light at the end of the tunnel?

bbam

I'm presuming this is a game of political strategy on Merkels behalf...
Her statement was very clear on no retrospective funding, it would seem from her more recent joint statement that we are "special", I note there was no mention that retrospective funding was made..

Surely this is a case of Kenny ringing up and saying "your killing us here, throw me something to keep the people off the streets for another while"
It suits Merkel and co to string us along as we keep making bondholder repayments...then at the end, no retrospective funding, as was clearly stated. Is it possible Kenny is being made a complete fool out of..

noodler

NIMAN wrote: »

I heard on the radio this morning that the gap between what we earn and what we spend annually is now €7billion (down from €20bill?).

If this is true then its slightly encouraging, isn't it? A couple of more harsh Budgets should be enough to balance the books, as long as they don't kill the economy completely!

Or maybe if we could do 1 more harsh Budget and say the rest by looking at the CPA again or stop silly spending in the Gov?

If we were to balance the books over the next couple of years, plus get a deal on our bank debt, does anyone see light at the end of the tunnel?

To the best of my knowledge (and this will be updated in the coming weeks with the pre-budget documents).

The Exchequer balance in 2012 was forecast at 18bn.

We then didn't pay the promissory note (bond instead) - so you can say we don't need to raise that 3bn this year (although we do next so bit of a misnomer but whatever).

So thats less than 15bn.

Our interest bill is around 7bn this year and we can't really do anything about that in the budget so that leaves us with a primary deficit (balance) of nearly 8bn.

Black Smoke

noodler wrote: »

So, still no sign of this statement being published anywhere?

Don't worry. Enda, has ways to make her talk:cool:

NIMAN

Noodler,

It was Ruairi Quinn on Morning Ireland, he said our deficit was now €7billion.

Is this nonsense?

noodler

NIMAN wrote: »

Noodler,

It was Ruairi Quinn on Morning Ireland, he said our deficit was now €7billion.

Is this nonsense?

See above.

Our deficit is the total difference between EXP and REV.

However, usually some part of this is beyond the Government's control (interest of over 7bn this year) so there exists a term called primary deficit (excluding interest repayments) which would bring us to 11bn.

Then the fact we didn't pay the promissory note payment this year so brings us down to 7/8bn.

Problem is we currently have to pay next year's promissory note payment in March AND the one we didn't pay this year (via repaying BoI) so if we could potentially be adding 6bn to the deficit next year.



In so far as the part of the deficit Ireland can actually affect in the budget, then 7bn would be generally correct.

gerryo777

NIMAN wrote: »

I heard on the radio this morning that the gap between what we earn and what we spend annually is now €7billion (down from €20bill?).

If this is true then its slightly encouraging, isn't it? A couple of more harsh Budgets should be enough to balance the books, as long as they don't kill the economy completely!

Or maybe if we could do 1 more harsh Budget and say the rest by looking at the CPA again or stop silly spending in the Gov?

If we were to balance the books over the next couple of years, plus get a deal on our bank debt, does anyone see light at the end of the tunnel?

Some economists reckon we will be back in the black at the end of 2013 if we see some growth.

goodie2shoes

gerryo777 wrote: »

Some economists reckon we will be back in the black at the end of 2013 if we see some growth.

not so sure about 2013, but i do believe once things start to turn they'll improve rather quickly.

the fact that we are being squeezed might not be all that negative, as it's forcing us to reform our economy, get wages down, retrain, address public sector pay excesses, Governmental reform, HSE reform, Welfare reform etc.
these things would never be touched if we didn't have to.

a bit like a 50 year old guy being told he's overweight and he should join a gym, cut down on the pints, the pizzas etc. most likely he'll laugh at you and quip "Ah" sure it's all me own!" or "This beer gut cost me a small mortgage" Ha! Ha!
However if one Monday morning he wakes up with a pain in his chest, and ends up needing a triple by-pass, you bet your bottom dollar he'll reform.

to this end the squeeze is a good thing. nobody likes taking medicine, but sometimes it's necessary.

my wildest guess is we'll be sowing the seeds for the next bubble/crash sometime in 2016.:D

Scofflaw

Good loser wrote: »

Thanks Scofflaw. My trouble was the (for you) inelegant phrasing. I wish Pat Kenny, M Finucane and Fintan O Tool would read your posts!

Still a question. If the banks had to go to the markets for the €100 bn would it not be at a lot higher interest rate than 1% - say 4%; how then is that not an effective €3bn per annum subsidy?

Well, yes, it is, and without it the bank situation would be completely unsustainable. As far as I can see, it's OK because it's available not to sovereigns but to banks, and it's available to everyone even if Ireland is a particularly heavy user of it.

In fact, it works out as so much of a subsidy, and is so important to the bank support, and in turn to government finances, that what the DoF was really concerned the ECB might do if we didn't take the bailout back in 2010 was raise the rate for this support.

cordially,
Scofflaw

Scofflaw

noodler wrote: »

To the best of my knowledge (and this will be updated in the coming weeks with the pre-budget documents).

The Exchequer balance in 2012 was forecast at 18bn.

We then didn't pay the promissory note (bond instead) - so you can say we don't need to raise that 3bn this year (although we do next so bit of a misnomer but whatever).

So thats less than 15bn.

Our interest bill is around 7bn this year and we can't really do anything about that in the budget so that leaves us with a primary deficit (balance) of nearly 8bn.

Are you sure that figure is correct? As far as I know, interest to date this year is €4bn or so, and looking at the debt projections and interest costs from the NTMA, I would have said interest payments this year are due to be somewhere around €5bn.

cordially,
Scofflaw

noodler

Scofflaw wrote: »

Are you sure that figure is correct? As far as I know, interest to date this year is €4bn or so, and looking at the debt projections and interest costs from the NTMA, I would have said interest payments this year are due to be somewhere around €5bn.

cordially,
Scofflaw

The DoF said in this document in February that it would be 7.4bn in 2012
http://www.finance.gov.ie/documents/publications/profiles%202012/revdebtprof.pdf


At the end of September it was already at 4.9bn
http://www.finance.gov.ie/viewdoc.asp?DocID=7385&CatID=5&StartDate=1+January+2012


Now, I'll wait for the revised documents and all. It is possible that 2012's interest could be a little lower than 7.4bn as maybe the interest component of the prom note (which we didn't actually have to pay this year) was included in the February calculations.

Regardless, I am 100% certain it is going to be alot closer to 7bn than 5bn this year.
EDIT: The NTMA figures you linked too don't have an interest projection for 2012.

Scofflaw

noodler wrote: »

The DoF said in this document in February that it would be 7.4bn in 2012
http://www.finance.gov.ie/documents/publications/profiles%202012/revdebtprof.pdf


At the end of September it was already at 4.9bn
http://www.finance.gov.ie/viewdoc.asp?DocID=7385&CatID=5&StartDate=1+January+2012


Now, I'll wait for the revised documents and all. It is possible that 2012's interest could be a little lower than 7.4bn as maybe the interest component of the prom note (which we didn't actually have to pay this year) was included in the February calculations.

Regardless, I am 100% certain it is going to be alot closer to 7bn than 5bn this year.
EDIT: The NTMA figures you linked too don't have an interest projection for 2012.

No, they didn't - I was back-calculating it by combining debt projection with current interest payments, but you've provided the necessary figures! End-September looks like it will all turn out as expected, and as you said.

cordially,
Scofflaw

noodler

Scofflaw wrote: »

No, they didn't - I was back-calculating it by combining debt projection with current interest payments, but you've provided the necessary figures! End-September looks like it will all turn out as expected, and as you said.

cordially,
Scofflaw

According to the Indo today, the DoF us updating their pre-budget macro forecasts on Thursday so might shed some more definitive light on the issue.

noodler

Actually, the annual Budgetary and Economic Statistics was only published last week (Oct 10th actually) and that has a debt interest forecast of just 6.1bn for 2012.

http://www.finance.gov.ie/viewdoc.asp?DocID=7397&CatID=14&StartDate=1+January+2012

P9.


6.1bn is quite a reduction from a start of the year estimate of 7.4bn. Could be prom note related - hopefully all revealed on Thurs.


EDIT:

Actually , scratch that. It says 7bn - didn't read the total properly.

goodie2shoes

apparently French PM has now said we are UNIQUE.

bloody heck 2 uniques in 2 days.
this is great news surely?

frankosw

Japer wrote: »

Its time the german public servants told the Irish public servants sitting across the table that they bare not putting up with the situation where they are paying us so much more than they pay themselves any longer.

Maybe the german publicans sittinng across the table from the irish publicans will ask them why they charge nearly twice as much for a pint of beer thats made in ireland as the germans do?

Perhaps the respective german and irish highstreet shops can sit down and compare notes on who charges more for the same product too.

goodie2shoes

frankosw wrote: »

Maybe the german publicans sittinng across the table from the irish publicans will ask them why they charge nearly twice as much for a pint of beer thats made in ireland as the germans do?

Perhaps the respective german and irish highstreet shops can sit down and compare notes on who charges more for the same product too.

maybe they could compare numbers of public servants per head of pop. in both countries also?

desaparecidos

They said that it was our choice to bail out the banks, our decision to do it so we had to face the consequences of that choice.

Well, as confirmed by the Brian Lenihan near his deathbed, our current Taoiseach and Mr Hollande today, it was imposed on us. We had no choice, we had no say.

I should quote in this post all the posts by the arrogant pro EU **** who shouted down anyone who suggested we were forced into it.

Scofflaw

desaparecidos wrote: »

They said that it was our choice to bail out the banks, our decision to do it so we had to face the consequences of that choice.

Well, as confirmed by the Brian Lenihan near his deathbed, our current Taoiseach and Mr Hollande today, it was imposed on us. We had no choice, we had no say.

I should quote in this post all the posts by the arrogant pro EU **** who shouted down anyone who suggested we were forced into it.

But first, of course, you'd need to find someone who claimed that the ECB didn't make us pay the remaining senior bondholders in 2010, which is what Hollande's remarks apply to. The decision to support the Irish banking sector remains where it was, in 2008, and what it was, which was an Irish decision.

Still, if Hollande is willing to say we should get special treatment on the back of the ECB's intervention in 2010, that's works for me.

amused,
Scofflaw

Idbatterim

fingers crossed we get some deal! wonder will we be pleading the same ignorance and misfortune when its obvious the sovereign debt ( the non bank debt part) is too unsustainable after years of pussyfooting around!

poeticseraphim

goodie2shoes wrote: »

apparently French PM has now said we are UNIQUE.

bloody heck 2 uniques in 2 days.
this is great news surely?

Scofflaw
Quote:
Originally Posted by desaparecidos View Post
They said that it was our choice to bail out the banks, our decision to do it so we had to face the consequences of that choice.

Well, as confirmed by the Brian Lenihan near his deathbed, our current Taoiseach and Mr Hollande today, it was imposed on us. We had no choice, we had no say.

I should quote in this post all the posts by the arrogant pro EU **** who shouted down anyone who suggested we were forced into it.
But first, of course, you'd need to find someone who claimed that the ECB didn't make us pay the remaining senior bondholders in 2010, which is what Hollande's remarks apply to. The decision to support the Irish banking sector remains where it was, in 2008, and what it was, which was an Irish decision.

Still, if Hollande is willing to say we should get special treatment on the back of the ECB's intervention in 2010, that's works for me.

amused,
Scofflaw

This is getting ridiculous. It is clear Merkel is playing to a home crowd.

I just can't believe how messy it is politically.

It's a multi-way tug of war.

sock puppet

frankosw wrote: »

Perhaps the respective german and irish highstreet shops can sit down and compare notes on who charges more for the same product too.

The Germans do if Eurostat is anything to go by.

Scofflaw

poeticseraphim wrote: »

This is getting ridiculous. It is clear Merkel is playing to a home crowd.

I just can't believe how messy it is politically.

It's a multi-way tug of war.

Sure - what else would it be?

cordially,
Scofflaw

View

poeticseraphim wrote: »

This is getting ridiculous. It is clear Merkel is playing to a home crowd.

Merkel wasn't playing to a home crowd rather she was stating (part of) what had been agreed by the EU Council. It wasn't obviously everything they had agreed since that ran to several pages.

That though doesn't prevent the media "constructing" the news based on her not mentioning other parts of the agreement.

Scofflaw

I can't help but notice that the markets appear completely unfazed by all of this - Irish bond prices, of whatever duration, haven't so much as flickered during this whole episode.

Given the previous propensity for Irish bond prices to jump about like cats on a griddle, it suggests that the markets either thought the "no retrospective recapitalisation" statement didn't impact the chances of an Irish debt deal, or aren't basing our bond prices on a debt deal in the first place.

Either way, there seems to be a strong 'storm in a teacup' aspect to all this.

cordially,
Scofflaw

goodie2shoes

Scofflaw wrote: »

I can't help but notice that the markets appear completely unfazed by all of this - Irish bond prices, of whatever duration, haven't so much as flickered during this whole episode.

Given the previous propensity for Irish bond prices to jump about like cats on a griddle, it suggests that the markets either thought the "no retrospective recapitalisation" statement didn't impact the chances of an Irish debt deal, or aren't basing our bond prices on a debt deal in the first place.

Either way, there seems to be a strong 'storm in a teacup' aspect to all this.

cordially,
Scofflaw

i agree. it's just politics.
the markets have already factored this in, as they are (as usual) ahead of the curve and the politicians are playing catch-up.
a deal of some sort will be hatched, once Angela (and Enda) get the party politics out of the way.

the markets don't listen to Joe Duffy.

Scofflaw

goodie2shoes wrote: »

i agree. it's just politics.
the markets have already factored this in, as they are (as usual) ahead of the curve and the politicians are playing catch-up.
a deal of some sort will be hatched, once Angela (and Enda) get the party politics out of the way.

the markets don't listen to Joe Duffy.

Heh - no, I don't think the markets are "ahead of the curve" by any means. I think what's more important is that they don't listen to Joe Duffy or indeed Fianna Fáil.

This whole business is like the Lisbon 'guarantees' - the impression was created that the Stockholm statement changed the game, but it didn't, and we've wound up with a new bunch of statements that are aimed entirely at comforting the Irish electorate about a problem that never existed.

Market analysts, I would say, were factoring in the kind of deal we were on track to achieve after June - a combination of selling our stake in the banks to the ESM and (effectively) lengthening the period on the promissory notes - which the Stockholm statement had no bearing on in the first place.

Presumably, the markets never thought we were in line for a straight writeoff of bank debt, and still don't think we are. It's just the Irish public and media who thought that's what was being talked about, as far as I can see - I don't know whether the opposition genuinely thought so, or just grabbed the opportunity to make political capital.

cordially,
Scofflaw

AllGunsBlazing

Scofflaw wrote: »

I can't help but notice that the markets appear completely unfazed by all of this - Irish bond prices, of whatever duration, haven't so much as flickered during this whole episode.

Given the previous propensity for Irish bond prices to jump about like cats on a griddle, it suggests that the markets either thought the "no retrospective recapitalisation" statement didn't impact the chances of an Irish debt deal, or aren't basing our bond prices on a debt deal in the first place.

Either way, there seems to be a strong 'storm in a teacup' aspect to all this.

cordially,
Scofflaw

I dare say Spain wishes it could say the same. Their bonds yields have all risen sharply since the weekend after a protracted period of relative calm.

Whatever about Ireland, Merkel certainly kicked Spain square in the balls last Friday. That woman has no sense of diplomacy imo, she could have at least dodged the question a bit.

Sand

@Scofflaw

The bit where we "saved them money" came in 2010, when we were forced into honouring the bonds we had already agreed to honour and accepted a bailout to stop us, again, putting the entire system in jeopardy.

At best, that is an inaccuracy. In 2010 we were forced by the ECB into honoring bonds that we had never agreed to guarantee, and forced into honoring bonds after the ending of the 2008 guarantee, which expired in September 2010 and covered *certain* liabilities - not all liabilities as demanded by the ECB.

By the terms of the 2008 guarantee, no call could be made against the state after September 2010. The ECB did not simply ask us to honour commitments already made - those were due to end in September 2010. They forced to accept them as permament, and expanded them to cover all bank debts. This, as Colm McCarthy has pointed out, is not their decision to make (at our expense) and neither are they able to misuse their treaty granted powers to force us into it.



As for how the 2008 deal was greeted - its true, it was unpopular in certain circles, particularly with the British. But "Europe" is not just a particular institution or nation. Its a whole host of agencies and nations. The guarantee was approved by the EU commission in October 2008, and the ECB was happily issuing guidance on how states should issue bank guarantees in the same month.

The real criticism for the Irish (referenced in EU communications) was that they had not acted in a coordinated manner, that their actions threatened to cause market distortions - but didn't according to the EU commission. That leaves the question of what was the alternative in September 2008? Given the glacial speed at which the EU has confronted the current crisis (5-6 years in, contagion rampant and still "playing for time") does anyone seriously think Anglo or the rest of the Irish banks would have been able to limp on for 5 or 6 years without support or default waiting for the ECB and the EU to finish screaming and shouting?

If the ECB and the EU had been consulted back in September 2008 - and we are presuming they were kept completely in the dark as to what the brain trust in the DoF were up to - what do you think they would have done? What treaty mechanism would they have triggered? What still non-existent cross border bank guarantee scheme would they have thrown together in 48 hours? The reality is they would have had to muddle through with some local, national solution ( like a state bank guarantee maybe) whilst waiting for the EU to develop institutions that could deal with a banking crisis in a peripheral state. The idea that there was some sort of co-ordinated solution there as an alternative is truly fantasy when you consider there is *still* no co-ordinated solution to a banking system failure in a peripheral EU state. EU banks based in Spain are still solely the problem of Spain itself.

Whatever about the ECBs initial involvement or reaction, its criticism of the 2008 bank guarantee in 2010 had matured to the point where it felt Ireland's main error in 2008 was that the Irish bank guarantee had a time limit and didn't cover all bank debts.

The ESM wasn't ever going to take the €60bn off our backs, and anyone who thinks that was ever on the cards is kidding themselves. The deals on the table, or at least at the table, are that the ESM might buy the State's share in our covered banks, and that we might get an extended arrangement for the promissory notes.

This I agree wholeheartedly with. This is why Ireland *should* front loaded the budget correction and should have been relentlessly representing its *own* interests over the past 4 years rather than betting the house on some dreamt of "grand bargain" which will never come.

@AllGunsBlazing

Whatever about Ireland, Merkel certainly kicked Spain square in the balls last Friday. That woman has no sense of diplomacy imo, she could have at least dodged the question a bit.

Why? Diplomacy isn't always telling people what they want to hear (Enda Kenny take note). Merkel has been extremely consistent - Germany will never accept burden sharing under terms that the rest of the EU would accept. That's never ever changed.

noodler

Sand wrote: »

@Scofflaw



At best, that is an inaccuracy. In 2010 we were forced by the ECB into honoring bonds that we had never agreed to guarantee, and forced into honoring bonds after the ending of the 2008 guarantee, which expired in September 2010 and covered *certain* liabilities - not all liabilities as demanded by the ECB.

Our revised ELG scheme in Sept 2010 only exclused some corporate deposits and subordinate debt. It had no material effect on senior bonds.


Worth noting as well we had committed 45bn to the banks by September 2010 as per the latest capital announcement.

Sand wrote: »

By the terms of the 2008 guarantee, no call could be made against the state after September 2010.

In fairness, the majority of the CIFs (old guarantee) stuff outstanding in 2010 just rolled over into the ELG scheme.




By the time FF became serious about burning senior bondholders, it seems that to a relatively large extent the Horse had bolted. Don't get me wrong, I don't mean to trivialise the amounts involved.

I am not sure if FF were specifiyng unguaranteed senior or just senior but by the time FG were advocating cuts in the unsecured, unguaranteed senior bonds remaining, the amounts involved were about 5/6bn with a likely haircut saving us 3bn. At this juncture I could understand the position of "well we've already paid the majority of the bank bill, why risk what we've been trying to avoid for the sake of 3bn".

If nobody is willing to play ball, then we should simply cease paying back our Central Bank i.e. no more promissory notes. I'd settle for that in a moral sense, I don't quite feel as bad about pumping money into banks that actually play a part in the economy.

Scofflaw

Sand wrote: »

@Scofflaw

At best, that is an inaccuracy. In 2010 we were forced by the ECB into honoring bonds that we had never agreed to guarantee, and forced into honoring bonds after the ending of the 2008 guarantee, which expired in September 2010 and covered *certain* liabilities - not all liabilities as demanded by the ECB.

By the terms of the 2008 guarantee, no call could be made against the state after September 2010. The ECB did not simply ask us to honour commitments already made - those were due to end in September 2010. They forced to accept them as permament, and expanded them to cover all bank debts. This, as Colm McCarthy has pointed out, is not their decision to make (at our expense) and neither are they able to misuse their treaty granted powers to force us into it.

That's highly inaccurate in itself, on matters of fairly straightforward fact. The ECB certainly did not require us to cover all liabilities. And it was the 2008 guarantee that covered all liabilities, while the subsequent ELG covered only agreed liabilities - it also, to put another point straight, started in 2009, in order to provide state guarantees past the September 2010 expiry of the CIFS.

All junior bondholder burning that has taken place happened after the end of the original guarantee, because up to then those debts too were guaranteed.

You pretty much have everything there arse about face.

Sand wrote: »

As for how the 2008 deal was greeted - its true, it was unpopular in certain circles, particularly with the British. But "Europe" is not just a particular institution or nation. Its a whole host of agencies and nations. The guarantee was approved by the EU commission in October 2008, and the ECB was happily issuing guidance on how states should issue bank guarantees in the same month.

Which is, again, a mixing up of different types of "guarantee", with an unsupported implication added. I'm not aware that the ECB at any point suggested that anyone issue a guarantee similar to the CIFS.

Sand wrote: »

The real criticism for the Irish (referenced in EU communications) was that they had not acted in a coordinated manner, that their actions threatened to cause market distortions - but didn't according to the EU commission. That leaves the question of what was the alternative in September 2008? Given the glacial speed at which the EU has confronted the current crisis (5-6 years in, contagion rampant and still "playing for time") does anyone seriously think Anglo or the rest of the Irish banks would have been able to limp on for 5 or 6 years without support or default waiting for the ECB and the EU to finish screaming and shouting?

If the ECB and the EU had been consulted back in September 2008 - and we are presuming they were kept completely in the dark as to what the brain trust in the DoF were up to - what do you think they would have done? What treaty mechanism would they have triggered? What still non-existent cross border bank guarantee scheme would they have thrown together in 48 hours? The reality is they would have had to muddle through with some local, national solution ( like a state bank guarantee maybe) whilst waiting for the EU to develop institutions that could deal with a banking crisis in a peripheral state. The idea that there was some sort of co-ordinated solution there as an alternative is truly fantasy when you consider there is *still* no co-ordinated solution to a banking system failure in a peripheral EU state. EU banks based in Spain are still solely the problem of Spain itself.

Those are fair points - it's difficult to see what else could have been done, although I admit to being surprised to see you on that side of the argument.

Sand wrote: »

Whatever about the ECBs initial involvement or reaction, its criticism of the 2008 bank guarantee in 2010 had matured to the point where it felt Ireland's main error in 2008 was that the Irish bank guarantee had a time limit and didn't cover all bank debts.

Eh, no, that's rubbish, based on your rather bizarre incorrect version of events as per the top.

Sand wrote: »

This I agree wholeheartedly with. This is why Ireland *should* front loaded the budget correction and should have been relentlessly representing its *own* interests over the past 4 years rather than betting the house on some dreamt of "grand bargain" which will never come.

I don't think it should have done the former any more than it did, and I don't think it has necessarily done the latter.

cordially,
Scofflaw

Sand

Scofflaw wrote: »

That's highly inaccurate in itself, on matters of fairly straightforward fact. The ECB certainly did not require us to cover all liabilities. And it was the 2008 guarantee that covered all liabilities, while the subsequent ELG covered only agreed liabilities - it also, to put another point straight, started in 2009, in order to provide state guarantees past the September 2010 expiry of the CIFS.

All junior bondholder burning that has taken place happened after the end of the original guarantee, because up to then those debts too were guaranteed.

You pretty much have everything there arse about face.

So, when Seamus Coffey of UCC states:

"There is little dispute that the unguaranteed unsecured bank bondholders were repaid, in part, at the insistence of the ECB. One member of the ECB’s Governing Council has told us why the unsecured unguaranteed bonds in Anglo and Irish Nationwide were repaid."

"All told, it seems there was something close to €19 billion of unsecured bonds which became unguaranteed in September 2010. A recent parliamentary question to Michael Noonan tells us that there was just €5.2 billion of unsecured unguaranteed bonds left in the covered banks by the middle of July 2012."

what do you think hes talking about?

Those are fair points - it's difficult to see what else could have been done, although I admit to being surprised to see you on that side of the argument.

That's always been my side of the argument. Ireland should never have issued the guarantee and should have reversed it ASAP. I was honest enough to understand the implication of that was leaving the banks to burn and only stepping in to rescue the banking system - not the banks themselves. The people who simultaneously think leaving the banks to burn is just crazy talk whilst the 2008 bank guarantee was a bad idea will need to figure out the contradictions in that themselves to their own contentment.

Ireland doesn't have to apologise for coming up with a state centric solution - that's the only toolset that was available and 4 years in, there's no real change in that position. An ECB/EU guided solution provided within the timeframe faced by Ireland (and talks of the ECB/EU arriving in Ireland to have a conference to discuss a banking system rescue would have led to massive capital flight in hours...) would have looked pretty much exactly the same as the 2008 guarantee - it would have been the Irish taxpayer completely on the hook with no burden or risk sharing with the EU or the ECB possible.

I don't think it should have done the former any more than it did, and I don't think it has necessarily done the latter.

Uh huh. Would I be correct to say that you would have disagreed with leaving the banks to burn in 2008 as reckless and dangerous to Irish interests, recognize that an EU based alternative to a state guarantee was not on the table in 2008 (or even now), think the pace of budgetary adjustment has been as fast as is sensible and that Ireland has represented itself effectively in the EU.

If thats broadly correct, can you clarify what major aspect of Irish strategy and implementation you have disagreed with during a period of time when Ireland was driven out of the bondmarkets, isolated in Europe and surrendered to vested interests in the CPA?

noodler

I think you guys are getting semantical now.

1) The September 2008 guarantee (CIFs) guaranteed everything, past, present and future until Setpe 2010.

2) ELG introduced alongside it and could guarantee future debt (but not subordinated) for a period of 5 years into the future from date of debt issuance. Lots of stuff transferred from CIFs to ELG over the course of the year.

By 2010 - as far as we know - the ECB didn't want any senior bondholder left behind (although what made the issue more complciated was that Ireland already essentially owned AIB, EBS, Anglo and INBS at this stage so the waters had been muddied somewhat as to the difference between bank default and sovereign default).

You guys seem to be arguing over 1) and 2) when both are true.

antoobrien

Sand wrote: »

"All told, it seems there was something close to €19 billion of unsecured bonds which became unguaranteed in September 2010. A recent parliamentary question to Michael Noonan tells us that there was just €5.2 billion of unsecured unguaranteed bonds left in the covered banks by the middle of July 2012."

what do you think hes talking about?

Among others failing to pay the Wexford credit union on their full investment. They had an 80% write down

In 2004, the credit union invested €2.9 million in the 'floating rate note'. When the bank was nationalised in January 2009, the Government gave a guarantee on investments by all deposit and bond holders but that guarantee was removed in October of this year.(article dated 8/12/10)

The State-owned bank then offered the credit union only 20% of every Euro invested, resulting in a loss of over €2.3 million.

View

Perhaps the explanation is as follows, based on a reply from Mr Noonan?

In aggregate, the losses imposed to date on subordinated bondholders at the covered institutions since the introduction of the original bank guarantee in September 2008 is €13.9bn.

The €13.9 billion (unsecured) subordinated bond holders plus the €5.2 billion unsecured senior bond holders (I.e. €20.7 billion balance in the right column less the €15.5 billion of those mentioned as guaranteed) would appear to tally with the €19 billion "unsecured bonds" that Mr. Coffey mentions in his article.

View

Out of curiousity, can anyone point to the relevant legal powers that apparently the ECB used to "force" us into repaying those bond-holders?

Offhand, I don't know of any, so how exactly was the government "forced" to re-pay them?

noodler

http://www.google.ie/imgres?q=unguaranteed+unsecured+bonds&hl=en&sa=X&tbm=isch&prmd=imvns&tbnid=FN3Mk0N7zTFXBM:&imgrefurl=http://namawinelake.wordpress.com/2011/06/15/well-hallelujah-and-about-time-noonan-signals-burning-of-senior-bondholders-at-anglo-and-inbs/&docid=ZsTFc-sX5gmvqM&imgurl=http://namawinelake.files.wordpress.com/2011/06/cbibondholdingscorrected2.jpg&w=712&h=217&ei=DyeJUIGKKKGb0QXgzICYBg&zoom=1&iact=hc&vpx=576&vpy=62&dur=560&hovh=124&hovw=407&tx=272&ty=58&sig=114486416178202558834&page=1&tbnh=72&tbnw=236&start=0&ndsp=13&ved=1t:429,r:3,s:0,i:75&biw=1024&bih=605

Thats the table the CBI published once regarding a consolidated position on the bonds in the coveredbanks.

Obviously out of date now.

Scofflaw

Sand wrote: »

So, when Seamus Coffey of UCC states:

"There is little dispute that the unguaranteed unsecured bank bondholders were repaid, in part, at the insistence of the ECB. One member of the ECB’s Governing Council has told us why the unsecured unguaranteed bonds in Anglo and Irish Nationwide were repaid."

"All told, it seems there was something close to €19 billion of unsecured bonds which became unguaranteed in September 2010. A recent parliamentary question to Michael Noonan tells us that there was just €5.2 billion of unsecured unguaranteed bonds left in the covered banks by the middle of July 2012."

what do you think hes talking about?

He's talking about the unsecured senior bonds which became unguaranteed after the expiry of the 2008 guarantee, as he says he is - and nobody has disputed at any point (including me) that the ECB required us to honour those bonds.

Unfortunately, what you were claiming was that the ECB required us to "guarantee all debt", which is both different and incorrect. Those bonds were not guaranteed by the State, and the State did not honour all bank debt, but extensively burned the junior bondholders.

Under the 2008 guarantee, burning even the junior bondholders had been impossible, since that guarantee did indeed cover all bank liabilities.

Sand wrote: »

That's always been my side of the argument. Ireland should never have issued the guarantee and should have reversed it ASAP. I was honest enough to understand the implication of that was leaving the banks to burn and only stepping in to rescue the banking system - not the banks themselves. The people who simultaneously think leaving the banks to burn is just crazy talk whilst the 2008 bank guarantee was a bad idea will need to figure out the contradictions in that themselves to their own contentment.

Ireland doesn't have to apologise for coming up with a state centric solution - that's the only toolset that was available and 4 years in, there's no real change in that position. An ECB/EU guided solution provided within the timeframe faced by Ireland (and talks of the ECB/EU arriving in Ireland to have a conference to discuss a banking system rescue would have led to massive capital flight in hours...) would have looked pretty much exactly the same as the 2008 guarantee - it would have been the Irish taxpayer completely on the hook with no burden or risk sharing with the EU or the ECB possible.


Uh huh. Would I be correct to say that you would have disagreed with leaving the banks to burn in 2008 as reckless and dangerous to Irish interests, recognize that an EU based alternative to a state guarantee was not on the table in 2008 (or even now), think the pace of budgetary adjustment has been as fast as is sensible and that Ireland has represented itself effectively in the EU.

If thats broadly correct, can you clarify what major aspect of Irish strategy and implementation you have disagreed with during a period of time when Ireland was driven out of the bondmarkets, isolated in Europe and surrendered to vested interests in the CPA?

Hmm. I think, as a general rule, you mistake "understanding how it happened and failing to disagree with utterly" with "agreeing with". On the original guarantee, I disagree with the government not having informed the rest of the eurozone in advance - the impression is often given that the decision was very sudden, but it's clear that planning had in fact been extensive, while the only input sought from outside the State were contingency opinions on the legality of various options under consideration. I accept your point that Europe usually moves very slowly, but the EU on that occasion came to a guarantee decision within 10 days of the Irish guarantee.

I disagree with the inclusion of Anglo, which wasn't systemic, but I can see the argument for its inclusion - potential knock-on effects in the rest of the Irish banking sector - and as far as I can see the government genuinely had no idea how deep the rabbit-hole was at that point (which to me is their primary failure).

I disagree with the lack of a bank resolution process and the failure to implement one in the run-up to the crisis in order to provide another option for dealing with failing banks.

I disagree with the inclusion of junior debt in the guarantee.

I disagree with the pretence that we weren't going to have a bailout, and the resistance to the bailout.

And I think that's sufficient to make it clear you have no real idea what I do or don't disagree with, and writing up the entire list seems redundant. The main differences between us seem to be that I agree in principle with the decision to support the banking sector, and regard almost everything that happened after that as taking place as happening in a straitjacket imposed by the original poor decision, and the original poor decision as being a nearly inevitable outcome of the appalling failures of regulation that characterised the 'Celtic Tiger' governments.

So, in a sense, yes, I don't see much point in complaining about every step of a path that was pretty much mapped out back in 2001-2007. The only major fork was when the government had to decide whether to support the banks or not - and no Irish government would ever have decided not to.

cordially,
Scofflaw

Sand

noodler wrote: »

I think you guys are getting semantical now.

.....

You guys seem to be arguing over 1) and 2) when both are true.

Agreed.

Scofflaw noted that in 2010 the ECB only forced us to honor the bonds we had already agreed to honor. I noted this was inaccurate. Scofflaw now accepts (and predictably claims he always accepted) that actually the ECB were forcing us to honor bonds on which the guarantee had expired in September 2010.

Now that Scofflaw acknowledges that the ECB forced the Irish taxpayer to take on additional and permanent liabilities (as he always has done apparently) then the rest is indeed semantics.

@View

Out of curiousity, can anyone point to the relevant legal powers that apparently the ECB used to "force" us into repaying those bond-holders?

Offhand, I don't know of any, so how exactly was the government "forced" to re-pay them?

The key phrase is "relevant legal powers". Noone can direct you to those legal powers because ECB doesn't have any "relevant legal powers" to force us into repaying those bondholders. They bullied the government by threatening to use their powers to pull the rug out from under the feet of the Irish banks.

Its precisely Colm McCarthy s point that the ECB are not empowered to use their powers to achieve this and that the government should bring the matter to the ECJ to ask them to rule on if the ECB abused its powers in forcing the Irish government to pay out bank bondholders at Irish taxpayer expense.

@Scofflaw

He's talking about the unsecured senior bonds which became unguaranteed after the expiry of the 2008 guarantee, as he says he is - and nobody has disputed at any point (including me) that the ECB required us to honour those bonds.

Well, I'm glad you're acknowledging that actually, the ECB did force us to honor bonds that we were no longer on the hook for - placing *additional* and * permanent* burdens on the shoulders of the Irish taxpayer. As you always have done of course.

Hmm. I think, as a general rule, you mistake "understanding how it happened and failing to disagree with utterly" with "agreeing with".

Where did I use the phrase "agreeing with" when describing your position on the four key points? I did allow for you believing that the policy was simply the least worst option.

The main differences between us seem to be that I agree in principle with the decision to support the banking sector, and regard almost everything that happened after that as taking place as happening in a straitjacket imposed by the original poor decision, and the original poor decision as being a nearly inevitable outcome of the appalling failures of regulation that characterised the 'Celtic Tiger' governments.

I'd agree with that to a certain extent. I am on the economic right, so I think bad banks and their investors should be default allowed to reap their own rewards - both success and failure. On the other hand I'm not a fanatic. Id believe the state should intervene with the objective of minimising wider economic disruption, whilst still sticking the bank management and investors with their losses. However, my main objection to the Irish bank guarantee of 2008 is one detail - Ireland guaranteed 450 billion euro of liabilities in 2008. Ireland did not have 450 billion euro.

My objection is not so much if we should, or how we should - its that it was beyond our practical ability to do so. As has been demonstrated.

Even limiting the nature of the guarantee would have been impossible. Sure, there could have been a smarter guarantee that excluded some assets, or existing debt. But in reality there's a huge political problem with that - the ECB has flatly ruled out funding bankrupt credit institutions. Even today, it refuses to do so. Were any of the banks to default on assets outside of a theoretically smarter guarantee on the principle of "cant pay" they would have been decimated by the ECB.

In reality, once you decide in principle that the state needs to step in to prevent a bank failure, then you've magically found a way to take the events of 2001-2007 and make them *worse*.

I think the difference between you and I is that I think no matter how bad things are (Ireland 2007) someone can always find a way to make them worse (Ireland 2008). You don't.

So, in a sense, yes, I don't see much point in complaining about every step of a path that was pretty much mapped out back in 2001-2007. The only major fork was when the government had to decide whether to support the banks or not - and no Irish government would ever have decided not to.

You're right - no Irish government would ever have decided not to. That's not praise of Irish governments by the way.

I do remember posting back in 2010 or so that when the results of the policies pursued from 2008 onwards were fully understood, that their utter failure would be excused by the claim - indeed belief - that failure was inevitable. Standards of success would be constantly revised down to ensure that the Green Jersey policy could never have said to have been a bad idea. TINA, right?

View

Sand wrote: »

The key phrase is "relevant legal powers". Noone can direct you to those legal powers because ECB doesn't have any "relevant legal powers" to force us into repaying those bondholders.

Or to phrase that another way, since the ECB had no "relevant legal powers" to force us into repaying those bond holders, we chose to repay them.

And, obviously, if we chose to do so, we could have chosen not to do so.

Sand wrote: »

They bullied the government by threatening to use their powers to pull the rug out from under the feet of the Irish banks.

So the ECB wasn't prepared to back the strategy the government came up with, I don't believe they are actually obliged legally or otherwise to agree to whatever the government proposes, are they?

Sand wrote: »

Its precisely Colm McCarthy s point that the ECB are not empowered to use their powers to achieve this and that the government should bring the matter to the ECJ to ask them to rule on if the ECB abused its powers in forcing the Irish government to pay out bank bondholders at Irish taxpayer expense.

Well, that case would appear to rest on the assumption that there is some sort of legal obligation on the ECB to back our government's proposed course of action.

If the ECB forms the opinion the government's proposed strategy is wrong - rightly or wrongly - it would appear unwise to suggest they must back it, so I suspect the ECJ would be disinclined to back Mr McCarthy's arguments.

After all, popular opinion online is our government(s) makes Balderick look intellectual, so requiring the ECJ to always back our "cunning plans" would be a dangerous idea.

Scofflaw

Sand wrote: »

Agreed.

Scofflaw noted that in 2010 the ECB only forced us to honor the bonds we had already agreed to honor. I noted this was inaccurate. Scofflaw now accepts (and predictably claims he always accepted) that actually the ECB were forcing us to honor bonds on which the guarantee had expired in September 2010.

Now that Scofflaw acknowledges that the ECB forced the Irish taxpayer to take on additional and permanent liabilities (as he always has done apparently) then the rest is indeed semantics.

Heh. Well, not quite. The ECB did insist, but (a) our government agreed, and (b) there were solid legal and contagion arguments against it. I don't think I ever claimed that the debt the ECB insisted on us honouring was guaranteed. You're welcome to correct me.

Sand wrote: »

@View
The key phrase is "relevant legal powers". Noone can direct you to those legal powers because ECB doesn't have any "relevant legal powers" to force us into repaying those bondholders. They bullied the government by threatening to use their powers to pull the rug out from under the feet of the Irish banks.

Its precisely Colm McCarthy s point that the ECB are not empowered to use their powers to achieve this and that the government should bring the matter to the ECJ to ask them to rule on if the ECB abused its powers in forcing the Irish government to pay out bank bondholders at Irish taxpayer expense.

The claim that the ECB would have pulled the rug out from under the Irish banks still seems silly to me - they may have made it, but it's unlikely to have been taken seriously. The result of the Irish banks imploding would have been very large in stability terms.

I've definitely said that before, too.

Sand wrote: »

@Scofflaw

Well, I'm glad you're acknowledging that actually, the ECB did force us to honor bonds that we were no longer on the hook for - placing *additional* and * permanent* burdens on the shoulders of the Irish taxpayer.

Again, as per the above, I don't really agree. I think the government might have liked to get away with burning senior bonds if they could be seen to be doing it as part of their bailout terms, and the ECB didn't allow that, for reasons which have been stated several times since. I'd agree that that's the "European position" that was imposed as part of our bailout, but I'd reiterate the point that the Irish government wouldn't ever have chosen to burn senior bondholders either had it had complete freedom of action. I'd also reiterate the point that the government is recorded as having agreed with the ECB in those negotiations, much to the disgust of the IMF.

Sand wrote: »

As you always have done of course.

I'm definitely not the ECB. I'm pretty sure I'd feel larger and, well, bankier if I were.

Sand wrote: »

Where did I use the phrase "agreeing with" when describing your position on the four key points? I did allow for you believing that the policy was simply the least worst option.

Fair enough. It's not quite just "least worst option", though, I think one ought to add "least worst option resulting from a series of previous poor decisions", which I think gives a better flavour of it - "least worst option" on its own could make it sound as though the cleft stick they were in wasn't of their own making.

Sand wrote: »

I'd agree with that to a certain extent. I am on the economic right, so I think bad banks and their investors should be default allowed to reap their own rewards - both success and failure. On the other hand I'm not a fanatic. Id believe the state should intervene with the objective of minimising wider economic disruption, whilst still sticking the bank management and investors with their losses. However, my main objection to the Irish bank guarantee of 2008 is one detail - Ireland guaranteed 450 billion euro of liabilities in 2008. Ireland did not have 450 billion euro.

My objection is not so much if we should, or how we should - its that it was beyond our practical ability to do so. As has been demonstrated.

Even limiting the nature of the guarantee would have been impossible. Sure, there could have been a smarter guarantee that excluded some assets, or existing debt. But in reality there's a huge political problem with that - the ECB has flatly ruled out funding bankrupt credit institutions. Even today, it refuses to do so. Were any of the banks to default on assets outside of a theoretically smarter guarantee on the principle of "cant pay" they would have been decimated by the ECB.

In reality, once you decide in principle that the state needs to step in to prevent a bank failure, then you've magically found a way to take the events of 2001-2007 and make them *worse*.

I think the difference between you and I is that I think no matter how bad things are (Ireland 2007) someone can always find a way to make them worse (Ireland 2008). You don't.

Optimism is my particular cross, I guess. However, I have to point out that I was right in my rather dismal prediction that our debt would prove to be almost exactly at the borders of sustainability, rather than being either big enough to make default useful or small enough to render it clearly unnecessary.

Sand wrote: »

You're right - no Irish government would ever have decided not to. That's not praise of Irish governments by the way.

It wasn't intended to be!

Sand wrote: »

I do remember posting back in 2010 or so that when the results of the policies pursued from 2008 onwards were fully understood, that their utter failure would be excused by the claim - indeed belief - that failure was inevitable. Standards of success would be constantly revised down to ensure that the Green Jersey policy could never have said to have been a bad idea. TINA, right?

Sometimes there isn't really a better alternative, even if there's always an alternative. And sometimes - and yes, I'd argue that this is the case here - the alternatives were ruled out quite a while before.

I don't see the idea that "failure was inevitable" as any kind of cop-out, which I think you do (and therefore think I'm writing apologetics). On the contrary, the point that failure was virtually inevitable (nothing in politics or economics is totally inevitable) is the most damning aspect of the whole business - that the conditions for failure had been set by a policy of relentlessly encouraging a boom without any preparation for, or even admission of the possibility of, a bust, over a period of a decade before the bust. More broadly, we can say the same thing for the euro as a currency - the eurozone countries as a group encouraged the enjoyment of the nice things the euro was intended to provide (and did) without making any provision for crises.

And no, I don't see that the other routes would have not also led to large costs and also been perceived as failures. None of the proposed alternatives are cost-free, which means that failure itself was virtually inevitable and the only question was the extent and total cost of the failure. I don't see that we took the least costly route there, but I can see why it came about that way, although in this case to understand is not actually to forgive.

cordially,
Scofflaw