by Frank Schnittger
Wed Jun 15th, 2011 at 05:42:30 PM EST
|The ECB has set its face against any "credit event" being allowed to happen as part of the Greek or any other bail-out. Ireland has even been prevented from buying out its own debt at discounted rates on secondary markets.|
Ireland's EU partners have also been spectacularly unhelpful in insisting that Ireland pay a higher rate of interest on its loans than that payable by Portugal. Sarkozy persists in believing that Ireland can be bullied on the corporate tax issue despite France's effective rate of corporation tax being lower than Ireland's.
However today, Michael Noonan, Ireland's Finance Minister, has announced that Ireland will impose loses on unsecured senior bondholders in Anglo Irish Bank and Irish Nationwide despite such a move being explicitly ruled out by the ECB. Interestingly, Noonan went to the USA to clear the deal with the IMF and Timothy Geithner first - such has been the Irish Government's loss of faith in the ECB and its European "partners".
Senior Anglo and Nationwide bondholders could be burned
The Government plans to burn unsecured senior bondholders in Anglo Irish Bank and Irish Nationwide in a bid to cut taxpayers' debt exposure.
Finance Minister Michael Noonan made the announcement after a meeting with the International Monetary Fund and US Treasury Secretary Timothy Geithner in Washington.
It is understood that the Government will seek to impose losses of up to 3.5bn on some of the bondholders - although there is no guarantee that the bid will be successful.
Earlier moves have been challenged in the High Court.
And the Government has come under fire from the opposition for promising to tackle these bondholders before the election but failing to deliver since.
Mr Noonan said he had discussed the plan with the IMF, which supported the strategy.
He added these banks are no longer normal institutions.
Mr Noonan also said he would seek support from Europe to propose significant cuts in the money to be paid to these bondholders.
He added that Mr Geithner will support Ireland's efforts to maintain our low 12.5pc corporation tax while the treasury secretary has agreed to take the issue up with French authorities who have been lobbying strongly for a cut as part of our EU/IMF loan agreement.
It could, of course, all end up being just another abortive attempt by the Irish government to show some semblance of independent thinking. The equation of private banking debt with national sovereign debt should never have been allowed in the first place. Many will criticise the Minister for gambling all of Ireland's much diminished political capital for such a small sum. The 3.5 Billion of Senior debt at issue is a small fraction of the total private debt which has been socialised.
However Noonan is an experienced Minister and not given to blowing off steam on ill-considered proposals. Presumably he knows the ECB will go ballistic that another country is threatening its no "credit event" mantra just as the Greek crisis is coming to a head. It says much about the almost total breakdown of trust and goodwill between Ireland and the EU that Noonan would even consider such a step. Irish Taoiseach, Enda Kenny, has yet to meet with Sarkozy on a bilateral basis since he took office - such has been the breakdown of relations with France, in particular.
We are about to find out whether the new Irish Government has any balls - and how far the ECB is prepared to go to destroy the Euro.