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The Immorality of Ireland

by Frank Schnittger Fri Sep 24th, 2010 at 07:41:31 AM EST

Bailing out Anglo-Irish Bank is not only economically stupid and politically terminal; it is immoral. My title encapsulates two notions that are extremely unpopular in contemporary thought: The notion that a nation can be said to have distinctive traits, and the notion of immorality itself.  Of course all the usual caveats apply: to speak of Ireland as being immoral is not to generalise about all Irish people, and to speak of immorality begs the question of whose and what moral rules you are applying.

However I wish to start form this perhaps slightly absurd starting point to illustrate the absurdity of the situation Ireland now finds itself in:  Three years ago Ireland had one of the most "modern" economies in the world, with a high standard of living, low national debt and a relatively advanced industrial, social and political infrastructure. Now all of this has been put at risk by the debts of the banking sector, and, in particular, by the debts of the Anglo-Irish Bank - a business bank with a narrow client base amongst the "developer" community many Irish people had never even heard of before the crisis struck.

My point simply is this: whatever the economic arguments for and against bailing our this relatively obscure bank - all of which seem to revolve around the impact of a bank failure on the international "investment community" which Ireland now relies on to fund its hugely inflated national debt - what is the moral impact of making ordinary taxpayers liable for the debts of a failed private bank?

Irish GNP has declined by 17%, the Debt/GDP ratio is likely to rise from 25% to 136%, an extra 10% of the Irish workforce have already been unemployed, many small businesses have failed because of a withdrawal of working capital by cash starved banks, many home-owners are in mortgage arrears or in negative equity, many of our most vulnerable citizens have had their social and medical services cut - and for all of these there will be no bail-out.  Only the anonymous and mostly foreign banking entities who where bond-holders (risk investors, not depositors!) in Anglo-Irish Bank will be bailed out - to the tune of c. €30 Billion or almost 20% of Irish GNP.


And despite the bail-out, and the supposed credibility this is claimed to impart to the Irish state in the eyes of international investors; interest rates on Irish debt are now exceeding 6% imposing an increasingly unsustainable burden on the Irish economy and tax base. This is almost 4% above German Sovereign Debt rates - the very country who's banks are said to be the major holders of Anglo-Irish bonds.

Indeed, it can be argued that international investors are punishing Ireland for being so stupid as to nationalise and bail-out the bank in the first place.  It is as if they are saying "We're immoral when it comes to money, so what the hell do you think you're doing by paying us back?"  This isn't playing by the rules. The concept of "Moral Hazard", that investors should reap both the rewards and losses of their investment decisions is central to the ideology of Capitalism itself. 

Making taxpayers who had no hand, act or part in the success or failure of a bank liable for its failures isn't just economically stupid, it is immoral, even by the "rules" of capitalism itself.  Ireland is effectively allowing itself to be extorted for fear of other consequences, and in so doing it is undermining not only its own relatively advanced economic infrastructure, but the moral and social order of Irish society itself.

Even the Financial Times has called on the Irish Government to change this "perverse policy":
FT.com / Comment / Editorial - Ireland's dilemma

The Irish public has already taken plenty of pain in the form of spending and wage cuts. Before asking for more, Mr Cowen should change a perverse policy that pushes up interest rates and crimps growth. Ireland was not highly indebted before the crisis, with sovereign borrowings of just 25 per cent of GDP. Private sector analysts now fear that gross public debt may reach up to 136 per cent in 2014, once Dublin's guarantees and estimated losses are added to its sovereign borrowings. Much of this reflects the state's acceptance of open-ended exposure to private liabilities across the banking sector - a policy that unnerves markets and jacks up sovereign rates.

Ultimately, given the government's determination to shrink the primary deficit, the main determinant of debt sustainability will be the interest rate. Getting market rates down will therefore be more important to control the deficit than cutting a couple more percentage points of GDP from public spending (a course that anyway might further harm a growth path that looks set to lag the government's own projections).

Mr Cowen should cut the umbilical chord to the banking system by making it credible that bondholders will no longer be protected against all losses. This could only be done after enacting a special resolution regime such as the one the UK has adopted. It might mean an Irish banking system with fewer liabilities and more foreign ownership. But it would cut sovereign yields and set the deficit on a sustainable path.

The Irish public has been stoical about austerity but anger is now crystallising around the banks. Mr Cowen has a sobering choice: to allow a wipeout of creditors or face wipeout at the next election.

In fact as an opinion poll for TV3 today makes clear, Cowen faces an electoral wipe-out in any case:

RTÉ News: Curran responds to poor FF poll results

The poll for TV3 was the first since the controversy over Taoiseach Brian Cowen's controversial radio interview and showed that support for him was at 11% and at 22% for Fianna Fáil.

------

The Millward Brown Lansdowne poll for TV3 also shows a big rise in support for Labour, with Eamon Gilmore as the most popular choice for Taoiseach after the next election.

Labour is the most popular party with 35% support, while Mr Gilmore is the choice of 36% of voters as the next Taoiseach.

Fine Gael is in second place, with 30% support, while just 19% opted for Mr Kenny as Taoiseach.

To put this into perspective: Fianna Fail has led 20 of the past 25 Irish Governments since its foundation in 1932 and has generally achieved well over 40% of the vote. Few have any confidence that an alternative Government led by Fine Gael or Labour would pursue a radically different course because many see the situation now as irrevocable: mistakes have been made which would be extremely difficult to undo.  

Meanwhile, the ECB and European Commission continue to press Ireland for further cuts it public expenditure, as if it had been expenditure on the poor, ill and aged which had been the cause of our financial difficulties, and Germany displays increasing indifference to the well-being of the EU as a whole - as if it wasn't German banks which are large beneficiaries of the bail-out.

So is it Ireland's immorality here which is ultimately at fault, or is it the craven stupidity of an Irish Government which seems to think it has to do the bidding of it's masters in global debt markets and German dominance within the EU?  The Irish electorate are clearly assigning blame to the Irish Government, even when the opposition parties are not articulating a clearly different policy.  It seems that the Irish political and business leadership class in general see Ireland as having no option but to do the bidding of our global financial and European political masters.

But herein lies the fundamental immorality in my view:  No one is arguing that Irish taxpayers are legally or morally liable for the private debts of international banks and investors who foolishly invested in Irish banks.  The argument is simply that "There Is No Alternative" (TINA).  In accepting that logic the Irish leadership class is doing the global financial and European Political community no favours:  Moral hazard is an unavoidable part of the capitalist system.  By caving in to the extortionate demands of larger players, Ireland is undermining the international system as a whole - never mind the damage done to the Irish citizens who can afford it least - and who had the very least responsibility for the crisis in the first place.

Our political mistake is to see the international investment community as one coherent corporate body which will punish us for any default - when in fact investors are individual actors who have little sympathy for competing investors who make bad decisions. Our immorality lies in accepting that the poor should suffer for the sins of the rich.  That is something that is not even congruent with capitalism red in tooth and claw.  It is back to the robber barons of disaster capitalism; of government by conquest rather than consent.

At least we haven't entirely lost our sense of humour, however. Writing in today's Irish Times, FRANK MCNALLY argues that Ireland should be split into two independent entities: Good and Bad Ireland...
Time for Good Ireland to tell Bad Ireland to split - The Irish Times - Fri, Sep 24, 2010

"Good" Ireland would retain most of the national territory, including islands and seas; all working parts of the economy; success in the arts and sport; a reputation for friendliness; any remaining tours of Riverdance , etc. "Bad" Ireland (BI) would take over the mess left by the construction bubble. In this respect, BI wouldn't be so much a country - at least initially - as an asset company with impaired loans.

Its vast debts thus moved "off-balance-sheet", Good Ireland would (one hopes) soon recover a triple-A credit rating and be borrowing money again at under 3 per cent, like the Germans. Bad Ireland, meanwhile, could test the thesis - popular among some economists - that markets have short memories, and that having failed to reward us for being virtuous, they might equally fail to punish us for defaulting.

This is a radical proposal: untried at national level anywhere. So in breaking new ground, there would be many big questions to answer.

Speaking of ground, for example, would Bad Ireland need a territory? Arguably not. It could be just an accounting exercise, run from a back-office in Dublin, like those tax-avoiding multinational subsidiaries that have no employees but control billions of their mother company's profits. In this sense, bad Ireland could be a logical progression of an idea beloved of business leaders: "Ireland Inc".

But maybe some geographical identity would be advisable, if only to distinguish it from Good Ireland. There are several possibilities. One is that, while moving debts off-balance-sheet, we could also move them off-shore: to one of our abandoned islands, which - in a swift referendum on Article 2 - would be declared independent for the purpose. If the mainland was deemed preferable, however, a greenfield site near Malin Head might suit. Not only would it be safely distant from good Ireland's HQ, benefits might also accrue from that part of Donegal's mythical location. As Ireland's most northerly point, while also being firmly in the "South", it could encourage the creative ambiguity that my two-state solution requires.

Speaking of two-state solutions, another possible model would be along the lines of the Palestinian territories. The borders of Bad Ireland need not be contiguous. On the contrary, there's an argument that, as well as nominally owning all the country's ghost estates, abandoned building sites and empty office blocks, the administration of Bad Ireland should be physically based there too.

Hence there might be a "Gaza strip" in every Irish town, self-governing and connected to each other by "corridors" through Good Ireland. Yes, it would be a nightmare to run such a state. But in my ideal scenario, the territory would be administered by those people who love saying - vis-a-vis the causes of our economic disaster - that "we are where we are". Maybe after a year or two of getting lost on backroads, they might finally drop that phrase.

On the other hand, the Palestinian model could make Bad Ireland bigger than Andorra, San Marino, and several other European states that have their own football team. I'm not sure we want that. So getting back to more concentrated territories, my last suggested location is the site earmarked for Thornton Hall prison. This would be apt for many reasons: including the possibility that, eventually, certain people would be deported there to help run the new country, as part of their community-service sentences.

Bad Ireland would need an official name: perhaps "Namaland" or the "Anglo-Irish Republic". It would also need a flag. I suggest the existing Tricolour with skull-and-crossbones, or a harp with all the strings broken. Ideally, the statelet should not be too political. It would, after all, be a business arrangement. So whatever its name (this is important), it should have the letters "PLC" after it. And rather than a president, it would have a chief executive.

Perhaps the serious point here is that countries are not corporations; citizens are not shareholders. The financial engineering and "creative" accounting solutions currently possible for private corporations are not appropriate for sovereign states. Different rules do and should apply. To make a Sovereign State liable for the failings of its banking sector is not just economically nonsensical; it is politically suicidal and morally wrong. Otherwise, what is the point of having private enterprise and a mixed economy in the first place: to enable the rich to get richer and the poor to bear the loses when things go wrong?

This isn't just a time when a part of Ireland's soul dies, but when the European dream also becomes besmirched. The "European Community" used to mean that greater common interests and human rights should triumph over the economic and political interests of national elites. The only institution that should be "too big to fail" in this instance should be the state and the EU itself.

Ireland's failure here also betrays a moral vacuum at the heart of Europe. We have betrayed the Ireland and the EU bequeathed to us by the post war generations.

Poll
Should Ireland be split into "Good" and "Bad" Ireland?
. Yes 50%
. No 0%
. Yes and No 0%
. We are wehere we are 0%
. Where are we? 0%
. No, Ireland is split already 0%
. We would only have to re-split in a few years time 0%
. The Financial services centre has been the capital of bad Ireland all along 50%

Votes: 6
Results | Other Polls
Display:
Perhaps the serious point here is that countries are not corporations; citizens are not shareholders.

Countries are corporations. And citizens are employees. Which means they can - and should - be downsized if the profits of the shareholders are threatened.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Sep 24th, 2010 at 09:46:07 AM EST
And who are the shareholders?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Sep 24th, 2010 at 10:33:17 AM EST
[ Parent ]
Bond holders and fund investors. Some of the banks have a say too.

It's an astonishing thing, but if you look at almost any large development or infrastructure management project in the UK, you'll find that it's co-owned by one of the big banks.

This may not be an especially democratic way to organise things.

Elsewhere in the EU there's strong union representation, which can at least put the bottom-up case.

In the UK and probably Ireland too, not so much.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Sep 24th, 2010 at 10:38:52 AM EST
[ Parent ]
Yea - the Government is still wedded to the idea of PPPs to leverage Government investment - despite a very patchy outcome from such projects to date. The problem is that capital is so scarce at the moment, that almost any investment from any source is welcomed, regardless of its long term costs or lack of tangible added value to the country as a whole.

As to your larger point - if bond holders and banks are indeed the key shareholders of Ireland Inc., they have a funny way of adding value to their corporation. -17% GNP growth?  That only reinforces my point that it is they who should take the hit for some pretty awful investment/corporate management decisions...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Sep 24th, 2010 at 10:52:19 AM EST
[ Parent ]
I suspect you may find something of a disconnection between Ireland's GNP and the personal net worth of the shareholders.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Sep 24th, 2010 at 12:13:15 PM EST
[ Parent ]
Perhaps I should have added that the quarterly returns out yesterday show that the risk of a double dip recession in Ireland is growing:
Goodbody Stockbrokers - News and Comment - Morning Meeting Wrap
While the economy "technically" came out of recession in Q1, when GDP rose by 2.2%, there was a renewed decline of 1.2% quarter on quarter, seasonally-adjusted, in the second quarter. Moreover, while we expected GNP to grow in Q2, a further 0.3% decline was the actual result, taking the decline in GNP from the peak to 17.3%; it's now back at levels last seen in the second half of 2003. On an annual basis, GDP fell by 1.8% in Q2, but GNP was down by 4.1%. As we noted yesterday, there is indeed a two-speed economy in process, whereby exports continue to perform well - they grew by 7.5% yoy in Q2 after 6.5% yoy growth in Q1 - but the profits from this activity mainly accrue to multi-national companies based in Ireland and therefore do not get included in the GNP figure. The contribution from net trade actually fell in Q2, due to a pick-up in imports. Downward revisions to forecasts for both GNP and GDP are now likely, but as we have noted before, our preferred gauge of activity on the ground in Ireland is neither of these two measures. We prefer the use of domestic demand, which is the sum of consumption, investment and government spending. All three components remained weak in the second three months of the year, with domestic demand falling at an annual pace of 5.7%. This was largely expected.

A key ingredient of the process to returning order to the public finances in Ireland is growth. The expectation of an export-led recovery is still a real one, and yesterday's numbers did little to change that view. However, the lower than expected data might push the government into a larger consolidation effort in the Budget in December than was previously outlined, as the denominator, and thus the deficit and debt numbers as a percentage of output, will now be higher. It must be said that the increase in bond yields yesterday was not triggered by the growth data, but was part of wider European sovereign concerns before its release. From that point of view, a European response also looks to be required, but Ireland must play its own part with further transparency on banking and fiscal issues.

There is still much that is healthy about the Irish economy, as the above figures show, and in this regard Ireland is different from Iceland and some other PIIGS countries.  However the fiscal drag of the banking bail-outs threatens to overwhelm the positives and result in a further possibly catastrophic and self-reinforcing cycle of decline.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Sep 24th, 2010 at 10:45:46 AM EST
I think you have too much faith in the rationality of the main actors, and which Ireland, exactly, do you think we've betrayed? The Ireland left to us by the post-war generations wasn't exactly utopia.

Three years ago Ireland had one of the most "modern" economies in the world, with a high standard of living, low national debt and a relatively advanced industrial, social and political infrastructure

No. Just no.

by Colman (colman at eurotrib.com) on Fri Sep 24th, 2010 at 10:46:54 AM EST
Colman:
Three years ago Ireland had one of the most "modern" economies in the world
That is rather the point, and the scare quotes around "modern" are entirely appropriate.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Fri Sep 24th, 2010 at 11:04:07 AM EST
[ Parent ]
The Ireland we have betrayed are the "main street" citizens who had no hand, act, or part in corporate decision making at major banks or within the Governmental/regulation system and who have yet been made liable for the losses/failures of those elites.

I agree post war Ireland wasn't exactly utopia but real progress was made, particularly following EU accession and in the 1990's.  The bubble economy didn't really emerge until the naughties and part of the whole point of the European Community and particularly it's social dimensions was to reign in the excesses of national political and financial elites in making wars and predatory unregulated capitalism.

The "Anglo disease" has infected the EU as much a Ireland and is in party responsible for the current Franco-German disinterest in looking for pan-European solutions to what are, in many ways, pan European problems.

As to rationality, it is clear a new rationality is required.  So far it is not clear even a change of Government after an election would provide one.  The problem, as I see it, is that there seems to be growing buy-in into the notion that the public sector is a large part of the problem, that social benefits are in any case unsustainable, and that our current banking models are the only ones possible.  Next we will be blaming the unemployed for being feckless.

Yet when people were given the chance with (relatively) good educational and employment opportunities, the vast majority took them with both hands.  How come the unemployed get to be responsible for a banking led crisis?  I make no assumptions as to rationality "of the main actors".  I is clear they are not even acting in their own best interests, never mind the interests of the country as a whole.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Sep 24th, 2010 at 11:11:25 AM EST
[ Parent ]
That would be the people of Ireland who voted for whoever promised them the lowest taxes and best public services?

<sigh> VOTES HAVE CONSEQUENCES. THE PEOPLE OF IRELAND REPEATEDLY VOTED FOR THESE SHITHEADS. YET THEY HAVE NO RESPONSIBILITY FOR THEIR DECISIONS?

<cue wittering about how the people were conned by the media and don't bear any blame for that, it's all the fault of our superhero elites>

Next we will be blaming the unemployed for being feckless.

"We" never stopped.

by Colman (colman at eurotrib.com) on Fri Sep 24th, 2010 at 11:23:32 AM EST
[ Parent ]
See why I normally avoid writing about Irish politics or the Irish economy?
by Colman (colman at eurotrib.com) on Fri Sep 24th, 2010 at 11:31:09 AM EST
[ Parent ]
And I always thought you were fairly equally cynical on all topics! :-)

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Sep 24th, 2010 at 11:43:01 AM EST
[ Parent ]
I froth less on other topics though.
by Colman (colman at eurotrib.com) on Fri Sep 24th, 2010 at 11:47:32 AM EST
[ Parent ]
No one ever voted for the bank managements or financial regulators and people are entitled to expect some level of competence and integrity from highly paid people in highly technical fields of expertise. Most people had little control over house prices or the asset bubble yet and were forced to get on board even when they knew, instinctively, that prices were going in an unsustainable direction.

However I don't entirely disagree, votes do have consequences and looking for "lowest taxes and best public services" wasn't necessarily sustainable either. I had some pretty hair raising encounters with senior civil servants and their flahulach attitudes to spending taxpayers money and disinterest in anything other than personal empire building at huge cost to productivity.

A labour/Fine Gael led Government would have been marginally better and might have managed the bubble down earlier.  However even now, they are hardly offering a radical alternative. The title of the "Immorality of Ireland" isn't entirely inappropriate.  We all do bear some measure of responsibility

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Sep 24th, 2010 at 11:38:18 AM EST
[ Parent ]
A Labour led government might be moderately interesting, you never know, but they're pretty centre left too - because they believe that a left-wing party wouldn't get elected even now.

A Fine Gael led government would only have the advantage of being able to throw.

by Colman (colman at eurotrib.com) on Fri Sep 24th, 2010 at 11:42:35 AM EST
[ Parent ]
throw?

Labour have arguably been to the right of Fianna Fail for at least a significant part of their history. It was Fianna Fail who set up most of the semi-state bodies which formed the bedrock of the Irish economy and infrastructure for much of the last century - contrary to the neo-lib mythical narrative for the Celtic tiger.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Sep 24th, 2010 at 11:52:26 AM EST
[ Parent ]
Whoops - passing two year old distracted me.

Throw out old policies that they're not personally attached to.

Fianna Fail were coming from a corporatist point of view rather than a left-wing point of view when they set those things up. I think.

And now I'm abandoning serious debate for the weekend to let the bruises from banging my head off the table subside.

by Colman (colman at eurotrib.com) on Fri Sep 24th, 2010 at 12:01:57 PM EST
[ Parent ]
You know what they say..."never give a cynic an evening break..."  :-)

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Sep 24th, 2010 at 12:14:09 PM EST
[ Parent ]
Who else were they going to vote for?

Was there anyone prominent on the ballot saying 'No, let's not do this, it's a really, really bad idea'?

You're blaming voters without choices for not making sensible choices.

This is, to put it mildly, rather bonkers.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Sep 24th, 2010 at 12:16:33 PM EST
[ Parent ]
Yes, yes, it was the superhero elites wot done it. The ordinary people are free of all blame.

The lizards! The lizards in the walls! Mind control!

TBG: the thinking woman's David Icke. And he calls me bonkers.

by Colman (colman at eurotrib.com) on Fri Sep 24th, 2010 at 12:31:48 PM EST
[ Parent ]
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Sep 24th, 2010 at 12:48:39 PM EST
[ Parent ]
Would you shush?  We've already gotten them to admit it was all Ireland's fault.  Cripes, fucking English.

;)

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Sep 24th, 2010 at 06:52:49 PM EST
[ Parent ]
the Anglo-English bank with treason, and put them on trial for their lives.  This would provide an opportunity to seize the bank's assets, and repudiate fraudulent loans.  

However, the treason charge would not be a mere strategem.  Based on the damage to the Irish state that you have cited alone, the charge is justified.  

The government could then sort through and arrange the discharging of legitimate obligations, using seized assets.  Obviously, some obligations, though legitimate, may not get paid in full--this happens in any bankruptcy.  

I assume to the contrary, though, that the Anglo-Irish Bank owns a controlling interest in Irish politicians and none of the above suggestions will ever happen.  

The Fates are kind.

by Gaianne on Fri Sep 24th, 2010 at 07:45:45 PM EST
The "expert" consensus appears to be that Criminal charges are unlikely, or at least a distant possibility.  Apparently it's not a crime to give wildly excessive loans backed by wildly over-inflated assets.  For such a small bank, Anglo Irish was spectacularly unsuccessful, with an estimated net deficit of debts overs assets of c. €30 Billion - and with almost no "good" or performing loans.

As is often the case in such cases, the CEO, Sean Fitzpatrick may be caught on a technicality.  Apparently the bank transferred some speculative Nigerian Oil assets which were supposed to back up his own considerable Loans from the bank - to back up some Personal/family debts instead - just as he was leaving the bank in disgrace.  He now claims to be living on €188 Euros a week in his €2 Million home and driving a Jag all in his wife's name - together with a further portfolio of investments estimated to be worth c. 30M which are insufficient to cover his debts of c. 100M.

However none of this detracts from my central point.  Businessmen make bad decisions and businesses go bust all the time.  The moral/political crime is to make ordinary citizens liable for those debts - when they would have had no claim on any of that wealth had the investments come good.  Privatising wealth and socialising losses is common enough in "Western" societies, but the scale of the scam here in comparison to the size of the total economy is just breath taking.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Sep 25th, 2010 at 05:50:44 AM EST
[ Parent ]
to keep the Jag in petrol.
It'll be a sad day when he runs out of tins in the pantry.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Mon Sep 27th, 2010 at 10:35:31 AM EST
[ Parent ]
What's the conventional wisdom argument in Ireland against the sane textbook solution to dealing with failing banks? I.e. wiping out the shareholders, letting the bondholders take what value remains (which is unlikely to be 100 cents on the dollar) and then recapitalizing the bank with a rights issue guaranteed by the state?

It's not rocket science.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sat Sep 25th, 2010 at 11:43:30 AM EST
The CW (as articulated yesterday by Peter Sutherland, ex Irish European Commissioner for Competition, and current International Chairman of Goldman Sachs) is that the interest rates on Ireland's foreign debt would go up so much following a default that we would end up paying more in extra interest than we would save in reduced national debt.

The flaws in this argument, in my view, are that it assumes that

  1. Sovereign Debt markets cannot distinguish between Sovereign and Private debt
  2. That the Sovereign debt market will collectively seek to punish Ireland rather than objectively assess risks going forward
  3. That interest rates will rise even further above todays 6% rates which are inflated precisely by the fear that Ireland is taking on unsustainable debt obligations.  It is conceivable, therefore, that interest rates would actually go down if Ireland did not take on all of Anglo's debts.

There is speculation in today's Sunday Times (behind paywall) that the Irish Government may seek to make Bondholders at least partially liable for Anglo losses through a debt equity swap because of the unsustainable level of debt taxpayers would otherwise have to take on.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Sep 26th, 2010 at 04:28:39 PM EST
[ Parent ]
That makes no sense, given that the textbook plan doesn't require the state to default.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sun Sep 26th, 2010 at 05:39:48 PM EST
[ Parent ]
What is muddying that water is the fact that the State nationalised (and guaranteed) Anglo's debts long before it knew of the extent of the losses.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Sep 26th, 2010 at 06:18:37 PM EST
[ Parent ]
That's... insane. It's utterly insane.

Still, just as easy as a state can guarantee a debt, it can also un-guarantee it. States are sovereign. Investors, banks and hedge funds are not.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun Sep 26th, 2010 at 06:56:34 PM EST
[ Parent ]
States are sovereign. Investors, banks and hedge funds are not.

An important part of the effort of the neo-Hooverians is to make the administrators of sovereign states believe that it is, in fact, the other way around.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Sep 26th, 2010 at 07:05:23 PM EST
[ Parent ]
See item 1: "Sovereign Debt markets cannot distinguish between Sovereign and Private debt."

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Sep 26th, 2010 at 06:53:32 PM EST
[ Parent ]
They can. They know sovereign debt has cooties whereas private debt is sanitary.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Sun Sep 26th, 2010 at 08:18:44 PM EST
[ Parent ]
Or rather, its easier to screw a small country like Ireland around, than mess with a large hedge fund...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Sep 27th, 2010 at 06:25:42 AM EST
[ Parent ]
by Jerome a Paris (etg@eurotrib.com) on Sun Sep 26th, 2010 at 08:13:20 AM EST
Sutherland attacks Irish wages and calls for tougher Budget cuts - Irish, Business - Independent.ie

Peter Sutherland, former EU commissioner and chairman of Goldman Sachs International, told the Institute of Directors (IOD) in Dublin yesterday that Irish wages are too high.

His speech was ostensibly aimed at countering what he called the "air of fatalism . . . nurtured by negativity" currently taking place in Ireland. But the speech itself made for gloomy listening.

Addressing international perceptions of Ireland, Mr Sutherland highlighted the positive reception abroad to Ireland's budgetary discipline of recent years. But only before calling for cuts in the upcoming Budget to go further. He said policymakers should look to cut beyond the target of €3bn.

"Ireland's principal fiscal problem is its large primary deficit (rather than a large outstanding debt level)."

Tackling the deficit was, therefore, the key to the current crisis. In addition to calling for further cuts in the upcoming budget, he launched an attack on salaries, saying that costs in the Irish economy remained far too high.

"We have really failed to benchmark our costs -- particularly, but by no means exclusively, wages and salaries -- to other European countries."

Mr Sutherland also took the opportunity of the speech, delivered ahead of the IOD's autumn lunch, to challenge calls by the 'Financial Times' to hand Anglo Irish Bank to its creditors.

He said he agreed in principle that bondholders should not be protected, but said the "collateral damage" of such a decision would be very serious.

He said that the maximum saving of €5.1bn did not justify the risk of embarking on a bank resolution process.



Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Sep 26th, 2010 at 04:30:06 PM EST
Mr Sutherland also took the opportunity of the speech, delivered ahead of the IOD's autumn lunch, to challenge calls by the 'Financial Times' to hand Anglo Irish Bank to its creditors.

He said he agreed in principle that bondholders should not be protected, but said the "collateral damage" of such a decision would be very serious.

I am reminded of the Yes, Prime Minister episode where the PM asks a senior civil servant whether another senior civil servant should be fired for cause. The answer is, of course, "not at all." Well, asks the minister, don't you believe that civil servants should ever be fired? "If they deserve it, of course they should. In principle. But not in practise."

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Sep 26th, 2010 at 06:53:05 PM EST
[ Parent ]

"To underscore the importance of wage cuts in Ireland, and to combat such negativity roiling the underclasses," Sutherland said to a rousing chorus of standing applause from the IOD, "we at Goldman henceforth announce a 30% cut in our wages, and a 90% cut in our bonuses."

"Further, we will benchmark our costs to two investment banks in Romania and Slovakia, in support of Europe-wide standards. And to benchmark our company to the general economic reality so biting in today's EU, we will draw lots to discover which 19% of our top staff will bicycle over the White Cliffs of Dover."

Fine diary (and comments) Frank, even if i appear to be hallucinating.

"Life shrinks or expands in proportion to one's courage." - Anaďs Nin

by Crazy Horse on Mon Sep 27th, 2010 at 08:48:22 AM EST
[ Parent ]
You will be pleased to know, CH, that I have a nephew involved in financing wind-farms in Australia and a niece who did a Masters in "Carbon Capture" in Scotland who is now recanting her earlier views on the feasibility of the concept...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Sep 27th, 2010 at 09:05:01 AM EST
[ Parent ]
They could use Segways instead.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Mon Sep 27th, 2010 at 10:40:58 AM EST
[ Parent ]
Why Ireland is bailing out foreign banks | Analysis & Opinion |

Robert Peston has a theory for why Ireland can't bail in the sophisticated institutions which lent untold billions to the country's beleaguered banks:

Take a look at the latest figures from the central bankers' bank, the Bank for International Settlements, on just the exposure of overseas banks to Ireland (in other words, credit provided by pension funds, hedge funds and wealthy individuals would be on top of this).

Total foreign bank exposure to Ireland's economy is $844bn, or five times the value of Ireland's GDP or economic output. Of that, German and UK banks are Ireland's biggest creditors, with €206bn and €224bn of exposure respectively.

To put it another way, German and British banks on their own have each extended credit to Ireland greater than Irish GDP. Which doesn't sound altogether prudent, does it?

As for direct bank-to-bank lending, overseas banks have provided Ireland's banks with €169bn of loans, which is also greater than Irish GDP.

Here's the point: an economy as open and as dependent on foreign finance as Ireland's cannot afford to alienate its creditors. If those overseas lenders asked for their money back now, Ireland's recent fall back into a modest economic contraction could spiral into dark deep prolonged recession or even depression.

The implicit assumption here is that if the Irish government took away its backstop of Irish banks' debts, there would be a mad dash for the exits, all of the banks' creditors would refuse, overnight, to roll over any of their debts and the resultant liquidity crisis would make the Lehman collapse look positively modest.



Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Mon Sep 27th, 2010 at 11:59:47 AM EST
The numbers are staggering even assuming the vast bulk of the €844 is productively invested and generating a decent return.  The vast bulk of it is also private debt - as Ireland's National debt was down to less that €50 Billion in 2007.  The problem now is that much of this private debt is now being nationalised - just the "non-performing" stuff of course, not the good investments which are generating a return for their private owners over and above any interest due...

The meta problem is that Ireland just wasn't used to the low interest rates the Euro brought in - and went on a private debt binge - most of it in concrete assets like businesses, offices and private homes, but also, increasingly to fuel an unsustainable asset price bubble which was making Ireland's real economy increasingly uncompetitive - and thus creating a triple whammy when the international economy also started to fail - uncompetitive prices, inflated debts, and then recessionary pressures from abroad.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Sep 27th, 2010 at 04:27:52 PM EST
[ Parent ]
Bond yields hit record high - The Irish Times - Tue, Sep 28, 2010

Irish bond yields hit a new record high above 6.7 per cent this morning as speculation continued that European government finances are worsening.

By 10am, the yields on 10-year Irish Government bonds rose to 6.769 per cent, with the spread between the German bund and Irish bonds widening to 451.9 basis points.

The yields jumped 20 points this morning as a report from Standard & Poor's on the estimated total cost of bailing out Anglo Irish Bank said the finanl total could be more than €35 billion. 

Irish bonds have fallen and yields have risen in recent weeks amid concerns about the State's sovereign debt and uncertainty over the final cost of the bank bailout. The Financial Regulator is expected to release an estimate for recapitalising State-owned Anglo as it's split into two units - a deposit bank and an asset-recovery unit.

In a note this morning, Goodbody Stockbrokers said the Government appears to remain resolute that there will be no renegotiation with Anglo Irish Bank's senior bondholders, even those that are not state-guaranteed.

This was echoed by Davy, which said all the indications are that the government remains committed to meeting Anglo's "senior debt obligations.

About €2.4 billion of subordinated Anglo debt and €4.2 billion of its senior bonds will no longer be guaranteed from the end of this week.



Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Sep 28th, 2010 at 06:22:06 AM EST
and I've a real problem on my hands : what do I do with the money?

I tried keeping it under the mattress, but I didn't sleep well (because of the lumps). I thought of putting it in the bank, but the interest rate is only marginally better than the mattress, and the security likewise (my bank is powerfully exposed to peripheral sovereign debt).

Tried to find virtuous companies to invest in. Renewable energies and the like. Problem : these people are having great difficulty building their projects, because the bankers are sitting on the money.

I did a bit of research on high-performing funds for the retail investor. I was tempted by BRIC industrial stocks, follow the money, but the potential for exchange rate mayhem is limitless.

My conclusion : Funds specialising in "risky" sovereign bonds are making money hand over fist. Though we are told that the market is making the improvident piigies pay for their errors, and rewarding itself for the risk of default, we all know that the risk of default is nil. Our wise rulers will tax us as much as necessary, to ensure that the fiction of credibility of the laughable eurozone is preserved; and to reward bondholders for their ruthlessness.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Tue Sep 28th, 2010 at 11:27:36 AM EST
[ Parent ]
So here is the problem. A decent person has some form of financial windfall, would like to do good things with it and make a marginal profit, yet our society does not provide any means to do that, short of starting a coffeehouse in a proper location? The system doesn't work!

The good news ... it's only a life sentence. You eventually leave this planet of idiots.
by THE Twank (yatta blah blah @ blah.com) on Tue Sep 28th, 2010 at 11:40:48 AM EST
[ Parent ]
for the retail investor.

It works fine for the market makers...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Sep 28th, 2010 at 11:45:27 AM EST
[ Parent ]
Driving off a cliff works ... for the car repair shop, for the hospital receiving the battered bodies, etc.

Cancer works ... for a while.

The good news ... it's only a life sentence. You eventually leave this planet of idiots.

by THE Twank (yatta blah blah @ blah.com) on Tue Sep 28th, 2010 at 11:50:46 AM EST
[ Parent ]
I like to loan money to friends for business ventures, when the opportunity arises.

But I am a frustrated capitalist. Capitalism is broken.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Tue Sep 28th, 2010 at 12:27:14 PM EST
[ Parent ]
You've got me thinking ( a rarity, i know.)

"Life shrinks or expands in proportion to one's courage." - Anaďs Nin
by Crazy Horse on Tue Sep 28th, 2010 at 02:05:43 PM EST
[ Parent ]
About what you could/would do with a loan from Eurogreen?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Sep 28th, 2010 at 04:00:04 PM EST
[ Parent ]
Loans are so last century, Frank.

Eurogreen could be a prototype 'capital partner' on a revenue or production sharing basis.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Sep 28th, 2010 at 08:21:53 PM EST
[ Parent ]
How true.  But your comment got me thinking.  If I give someone a loan for a set interest rate I have a known return without having to have much knowledge or involvement in his business. I just have to trust him to pay me back soemtime.  If I become a capital partner I not only have to trust him as a reliable honest sort, I also have to be ab;le and want to work with him in a line of business I may have little understanding or experience of.  They are two completely different kinds of relationship and I'm not sure the internet can facilitate or "disintermediate" the latter.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Sep 29th, 2010 at 04:36:28 AM EST
[ Parent ]
and we will continually re-invent these relationships from first principles. Before loaning money to / investing in someone's project, one needs to do the due diligence thing. Liking the person and believing in their project is perfectly possible, both in real life and over the internet, but not enough. Unless one is a genuine business angel -- i.e. with enough experience and wisdom to judge the viability of the project, one needs external validation. Such as : can he get a bank loan? if not, why not? ... etc.

Or on the other hand, if one doesn't really need the money, one can take a gamble.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Wed Sep 29th, 2010 at 10:54:45 AM EST
[ Parent ]
I think you are under a misapprehension as to what I mean by a 'Capital Partnership'. See this presentation for a refresher.

A capital provider/investor of money or 'money's worth' (eg land) need have no involvement in the running of the business whatever, but if he wishes to be a member of the 'Capital User' management group as well, that's possible.

Such detachment of investors has been normal in 'Limited Partnerships' - where there is a 'General Partner' with unlimited liability (and managerial control), and Limited Partners (pure investors) with limited liability - for over 100 years.  

In fact Master Limited Partnerships are quite the thing at the moment, but they are not what I advocate.

In a 'Capital Partnership' the agreement between capital user and capital provider is whatever the members agree, and in the template I use, investors - in their capacity of investor - have only a restricted amount of control (typically a veto power) over what the managing partner is doing.

One of the key risks is that the manager siphons off some of the gross revenues or production, and that risk may be minimised by the use of a 'custodian' account through which funds flow, and a transaction/title registry (aka accounts) which is totally transparent to members.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Sep 29th, 2010 at 12:02:52 PM EST
[ Parent ]
La Nef .: Qui sommes-nous :. La Nef
La Société financière de la Nef est une coopérative de finances solidaires. Depuis sa création en 1988, elle exerce une double activité de collecte d'épargne et d'octroi de crédit dans le cadre d'un agrément de la Banque de France.

L'épargne collectée sur des comptes de dépôts à terme ou sur des comptes courants est déposée par des particuliers, des associations et des entreprises. Toute personne physique ou morale désireuse de donner un sens à son argent peut ouvrir un compte à la Nef.

Les financements accordés par la Société financière de la Nef permettent de soutenir la création et le développement d'activités professionnelles et associatives à des fins d'utilité sociale et environnementale.


"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char
by Melanchthon on Tue Sep 28th, 2010 at 05:51:25 PM EST
[ Parent ]
I realise this was not your point but, if you are just looking to park your money while waiting for an investment opportunity, might I suggest putting some a non-interest bank like JAK (or actually JAK if you find none closer to home, the SEK tracks the euro fairly well at 10:1).

JAK Medlemsbank

JAK has been operating an interest-free savings and loan system since 1970. A bank license was obtained in 1997. Formally JAK is a co-operative bank. We have 35,000 members and our growth is 5 percent per year.

In essence a movement with a bank, JAK works towards a society without interest by granting interest free loans. If you put 1000 in your account for 10 years you get no interest but you get points, enough to borrow 10 000 for one year, 1000 for 10 years or 100 for 100 years without interest. Or maybe there is an upper limit to the time, but you get my point. Naturally you keep the points you have earned even if you withdraw all deposits.

There are fees mind you, a yearly membership fee in the organisation, and also loan fees. The fees cover the cost of running the bank. Still I think it is by far the cheapest loans you can get, so if you somewhere down the line see yourself getting a loan, getting some points can be a wise investment.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Tue Sep 28th, 2010 at 05:38:17 PM EST
[ Parent ]
Corporate bonds are your friend. Find a really cheap corporate bond fund which only invests in solid reliable companies that you understand. I know a great one which would work well for you, if it weren't for the fact that Sweden isn't using the euro, so you get the nasty currency risk.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Wed Sep 29th, 2010 at 11:03:49 AM EST
[ Parent ]

Dublin to put fresh €5bn into Anglo Irish

Ireland will unveil on Thursday a fresh taxpayer-funded recapitalisation of Anglo Irish Bank, the institution at the centre of the country's property meltdown, amid rising alarm over the country's financial health.

Ireland's cost of borrowing on Tuesday hit record levels with yields on 10-year government bonds jumping 25 basis points to 6.72 per cent.

Irish bond yields for 10-year debt are at similar levels to Greece at the start of April - only a month before Athens was forced to turn to the international community for loans.

The rise in yields came in spite of buying from the European Central Bank to help stabilise the markets, according to traders, as investors worried that the cost of bailing out Anglo Irish and other financial institutions would be higher than first thought.

The central bank's additional capital injection is expected to be about €5bn (£4.3bn). That would bring the bail-out costs for Anglo Irish to €30bn, shy of the €35bn forecast by credit rating agency Standard & Poor's.



Wind power
by Jerome a Paris (etg@eurotrib.com) on Wed Sep 29th, 2010 at 10:00:54 AM EST
Anglo Irish, Allied Irish May Need As Much as $19.6 Billion - Bloomberg
Ireland's government is preparing to take majority control of Allied Irish Banks Plc and pump extra cash into Anglo Irish Bank Corp. to draw a line under its financial crisis.

The total cost of bailing out the country's banks may ultimately rise to about 50 billion euros ($68 billion), under a "stress case" scenario for Anglo Irish, according to figures published by the country's finance ministry and the central bank in Dublin today. The base case estimate is 45 billion euros, the figures show. Allied Irish may need as much as 3 billion euros.

Ireland has pumped 22.9 billion euros to date into Anglo Irish since it seized the lender in January 2009 as its bad loans soared following the collapse of a decade-long real-estate bubble. The rising cost of the bank bailouts prompted Standard & Poor's to downgrade Ireland's credit rating last month and has pushed up the country's borrowing costs.

The government has injected a total of about 33 billion euros into banks and building societies. Anglo Irish may need up to an additional 6.4 billion euros of capital, rising by another 5 billion euros in the event of unexpected losses, the government said today. Irish Nationwide Building Society may need a further 2.7 billion euros.



"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char
by Melanchthon on Thu Sep 30th, 2010 at 03:04:56 AM EST
FT.com / World - Anglo failure would `bring down' Ireland
The failure of Anglo Irish bank, the lender at the centre of the country's financial crisis, would "bring down" Ireland, the country's finance minister said, as he vowed the government would stand behind the institution as it winds down.

Dublin will on Thursday unveil a fresh recapitalisation of Anglo Irish and seek to draw a line under its banking crisis. But doing so will raise the cost of its taxpayer-funded bail-out of the banks to up to €35bn ($48bn) and lift the country's fiscal deficit to a record expected to be as much as 30 per cent of gross domestic product.

In an interview with the Financial Times, Brian Lenihan, finance minister, said Ireland had no choice but to act.

"Any Anglo failure would bring down the sovereign. It is systemically important not because of any intrinsic merit in the bank. But because of its size relative to the national balance sheet. No country could contemplate the failure of such an institution," he said. As part of the new bail-out the finance minister will authorise the immediate transfer of Anglo Irish's remaining €25.9bn in non-performing property loans to the National Asset Management Agency, the government body set up to house troubled assets from the banking crisis.



"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char
by Melanchthon on Thu Sep 30th, 2010 at 04:45:35 AM EST
FT.com / Europe - Ireland unveils bank rescue package
Ireland will take a majority stake in its second-largest bank as part of a fresh multibillion euro bail-out for the country's lenders, prompting the government to redraft its budget plans.

The cost of bailing-out Anglo Irish Bank is set to reach €34bn as the central bank on Thursday announced additional capital injections the bank at the centre of Ireland's disastrous property crash.

The regulator said the final bill for Anglo, would be €29.3bn. A further capital injection under what it called "severe hypothetical stress scenario" would lift the total to €34bn if commercial property prices, having fallen 65 per cent from peak values, stayed at those levels for 10 years.

Allied Irish Bank, the country's second largest bank, will need €3bn in addition to the conversion of the government's existing €3.5bn preference share investment, lifting the state's stake in the lender to over 90 per cent. The government also announced that the current chairman Dan O'Connor and acting managing director Colm Doherty are to step down.

In addition, Irish Nationwide Building Society will need €2.7bn, bringing its total bail out to €5.4bn.

The bail out costs will lift the fiscal deficit from the planned 11.75 per cent of gross domestic product in 2010 to 32 per cent. This compares with the Maastricht treaty guidelines of 3 per cent.



"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char
by Melanchthon on Thu Sep 30th, 2010 at 04:58:50 AM EST
[ Parent ]
This is such utter BS. They are throwing good money after bad.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Thu Sep 30th, 2010 at 12:16:06 PM EST
[ Parent ]
But at least they don't have to admit they made any mistakes, which is what's really important.
by Colman (colman at eurotrib.com) on Thu Sep 30th, 2010 at 12:17:47 PM EST
[ Parent ]
Whist the Irish Govt. is still saying that it is unthinkable that Ireland would not fully bail-out Anglo Bondholders, the Commission seems to trying to talk some sense into them...

Commission favours deal with bondholders - The Irish Times - Fri, Oct 01, 2010

The European Commission is in favour of Ireland asking subordinated bondholders in Anglo Irish Bank to share some of the cost of winding down the nationalised lender, competition commissioner Joaquin Almunia said today.

"This is in line with the Commission's principles on burden sharing since it both addresses moral hazard and limits the amount of aid, with benefits to the taxpayers," Mr Almunia said in a statement.

The commissioner said the restructuring of Anglo Irish into an asset recovery bank and a funding bank, which will not lend, addressed competition concerns.

"Once the commission receives the details of the (Anglo) plan, it will proceed rapidly towards taking a final decision," he said.

Maybe the plan is that the Irish Government will appear to want to bail out all bondholders, but will be told by the bad boys in the Commission that they can't.  The Irish Government will be saved from its own stupidity, will look in to the markets, won't have to admit its mistakes, and the Commission will take the blame.

This is what's known in Ireland as cute hoor politics...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Oct 1st, 2010 at 10:18:03 AM EST


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