Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
And that is why we're not talking about defaulting on bank debt anymore - we're talking about defaulting on sovereign debt.

That default should hit, in declining order of evilness:

  1. Irish oligarchs who profiteered from the bubble years.

  2. Major money market operators, who have been attacking €-zone countries for more or less valid reasons.

  3. The ESFS, for being a useless abortion that needs to blow up sooner rather than later.

  4. The ECB, for not doing its goddamn job and printing money on demand.

  5. German, French and Dutch private banks, to incentivise the ECB to start doing its goddamn job and printing money on demand.

  6. German, French and Dutch sovereigns and pension funds, for the same reason.

But you are in all probability through the odious part of the debt before you start hitting pension funds.

Yes, it won't hit all the people who stole the money in the first place, and yes it will hit some people who didn't steal any money in this particular bailout. But not hitting every crook is not an excuse for hitting no crook, and with the exception of the pension funds, the ones on this list who didn't steal any money in the bailout are still horse thieves who should lose their shirts on general principles.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Feb 7th, 2011 at 11:17:29 PM EST
[ Parent ]
How would a sovereign default hurt anyone but the ECB (and other holders of Irish sovereign debt)?

I'm all for hitting crooks, but it seems to me that because of the willfull insanity of the Irish governement, the ECB and the other euro governments, that window of opportunity is closed.

The best thing I can see is an Irish partial sovereign default, where they default on all debt except that held by other euro nations (i.e. the ECB).

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

by Starvid on Tue Feb 8th, 2011 at 09:02:04 AM EST
[ Parent ]
Hitting the ECB is good since it forces Germany to be part of a "transfer union" as the capital of the ECB is shared by all EU countries in proportion to their GDP.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Feb 8th, 2011 at 09:14:54 AM EST
[ Parent ]
And touch off Unternehmen Grün... :P

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Tue Feb 8th, 2011 at 10:07:17 AM EST
[ Parent ]
How would a sovereign default hurt anyone but the ECB (and other holders of Irish sovereign debt)?

It wouldn't.

But there are a lot of holders of Irish sovereign debt that we want to hit.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Feb 9th, 2011 at 01:15:20 AM EST
[ Parent ]
Like who? Who holds the outstanding Irsih debt, beside the ECB?

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Thu Feb 10th, 2011 at 10:36:16 AM EST
[ Parent ]
Private banks with exposure to Ireland - since there isn't any private Irish interbank debt left, per your top-level comment.

We are talking, if the BIS is to be believed, about a quit substantial sum there.

But of course, threatening to default on the ECB isn't a bad idea either. Might motivate them to stop behaving like a hedge fund and start behaving like a central bank. Or not. But then, that would solve the problem as well...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 11th, 2011 at 01:42:01 AM EST
[ Parent ]
I'm not sure what the figures for this are - I have heard various sums mentioned - and the data is probably all out of date since there are delays in reporting and the "bank run" of funds out of the Irish banking system is ongoing.  The way not to manage a default is to keep talking about it - it has become a major argument within the election campaign - and not actually do anything.  It just exacerbates the funds outflow and dependency on the ECB.

The ECB really need this issue to be settled by a democratic mandate from the people or it will fester on for years.  The opposition parties will have a mandate for some sort of renegotiation and if the ECB is obdurate and agrees nothing - then we may just have a Government collapse and another General election and another year of instability.

Do these guys ever learn?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Feb 11th, 2011 at 05:56:51 AM EST
[ Parent ]

Display:

Top Diaries

Occasional Series