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On November 16th, European finance ministers urged [finance minister Brian] Lenihan to accept a bailout to stop the panic spreading to Spain and Portugal, but he refused, arguing that the Irish government was funded until the following summer. Although attacked by the Irish media for this seemingly delusional behaviour, Lenihan, for once, was doing precisely the right thing. Behind Lenihan's refusal lay the thinly veiled threat that, unless given suitably generous terms, Ireland could hold happily its breath for long enough that Spain and Portugal, who needed to borrow every month, would drown....
Ireland's Last Stand began less shambolically than you might expect. The IMF, which believes that lenders should pay for their stupidity before it has to reach into its pocket, presented the Irish with a plan to haircut 30 billion of unguaranteed bonds by two-thirds on average. Lenihan was overjoyed, according to a source who was there, telling the IMF team: "You are Ireland's salvation."
Here is a story we have so far refrained from reporting, but since it continues to make headlines here is what happened: In an interview with BBC Radio 4 former finance minister Brian Lenihan had accused the ECB of bouncing Ireland into a bailout, some days before Easter. Lenihan accused members of the ECB executive of "betrayal" and also criticises some ECB governing board members for the "damaging" manner in which they briefed some media about Ireland, according to the Irish Examiner. In a comment for the Irish Independent Gary O'Callaghan now supports Lenihan in his claim, saying that the ECB board's public frustration triggered the bank run in Ireland. Perceived as electoral rhetoric, the ECB's reaction was calm, the Irish Times reports. Yesterday, Jean-Claude Trichets dismissed again these claims saying that the facts prove that the ECB is siding with Ireland in the difficult circumstances.
"The only one to speak up for the Irish was UK chancellor George Osborne, but Geithner, as always, got his way. "
Unlikely on both counts.
The only positions we get are the US and UK. No one else had an opinion?
Three of the 7 (Germany, UK, France) are home to major creditor banks of the Eurozone, Italy is the in the PIIGS but not in the PIGS, and Canada and Japan presumably wanted nothing to do with the Euro policy mess. The US happens to be the single country which can veto the IMF and has no skin in the Irish rescue game, so its position can be sold to the outside world as disinterested.
Germany, the UK and France politely ask Geithner during the G7 conference call to veto the IMF position on Ireland, and he obliges.
Is that an implausible scenario?
All the same, Frank is right that he chose not to excerpt this part of the story in his diary and Geithner has been brought in by an American quoting Yves Smith...
Economics is politics by other means
At a G7 finance minister meeting Geithner vetoed that plan
Friends come and go. Enemies accumulate.
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