The End of the European Dream | 276 comments (274 topical, 2 editorial, 0 hidden)

Re: This sounds like bullshit (4.00 / 5)

Well, this is not coming from Yves Smith, but from Morgan Kelly in the Irish Times (right before the bit that Frank Schnittger quotes in the diary):

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....

It was a complete mystery why Ireland capitulated so quickly as it did, assuming the very public claim was true that the Irish government was funded on a cash basis until mid-2011. So far, the only explanation for the capitulation was that the ECB threatened to crash the Irish banks, to a great cost to the Irish taxpayer in any case as the government had to make good on the €100,000 deposit guarantee (one question that posed itself, then, was doesn't Ireland have enough cash in hand to make good on the deposit guarantee?).

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."

Economics is politics by other means

by Carrie (migeru at eurotrib dot com) on Mon May 9th, 2011 at 07:12:55 AM EST
[ Parent ]

Re: This sounds like bullshit (none / 1)

See also: Lenihan blamed ECB for forcing Ireland into bailout (Eurointelligence)

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.

(with links in the original)

Economics is politics by other means

by Carrie (migeru at eurotrib dot com) on Mon May 9th, 2011 at 07:31:18 AM EST
[ Parent ]

Re: This sounds like bullshit (none / 0)

So the argument made is that the Irish architect of the bailout and the German and UK governments that have been faithful servants of their own banks which are the ones most exposed to Irish debt were ready to reverse course and make the bondholders pay, as the IMF had recommended, but that the American Treasury whose only role is as a member of the IMF also reversed course and vetoed any haircut?

"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.

by rootless2 on Mon May 9th, 2011 at 07:37:26 AM EST
[ Parent ]

Re: This sounds like bullshit (4.00 / 2)

I'd very much like to see the expanded version. We have several claims here:

The IMF proposed a haircut plan

At a G7 finance minister meeting Geithner vetoed that plan

Osborne "spoke up" for the Irish. He was the only one to do so.

The ECB insisted on full repaiment.

The only positions we get are the US and UK. No one else had an opinion?

by generic on Mon May 9th, 2011 at 08:27:52 AM EST
[ Parent ]

Re: This sounds like bullshit (none / 1)

I can think of one explanation: No single European country can veto an IMF decision. The US can. Geithner could just have been the one who formally killed the plan. Not necessarily on his own initiative, but on behalf of the creditor nations.

by generic on Mon May 9th, 2011 at 09:12:23 AM EST
[ Parent ]

Re: This sounds like bullshit (none / 0)

But of course the EU and UK are not constrained to follow IMF recommendations either.

by rootless2 on Mon May 9th, 2011 at 09:51:45 AM EST
[ Parent ]

Re: This sounds like bullshit (none / 0)

Of course. But It would have been supremely embarrassing for everyone involved were the IMF to sing from a completely different hymn sheet.

by generic on Mon May 9th, 2011 at 11:07:29 AM EST
[ Parent ]

Re: This sounds like bullshit (4.00 / 3)

The G7 consists of the US, Japan, Germany, France, UK, Italy and Canada.

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

by Carrie (migeru at eurotrib dot com) on Tue May 10th, 2011 at 02:05:40 PM EST
[ Parent ]

Re: This sounds like bullshit (none / 1)

At a G7 finance minister meeting Geithner vetoed that plan

The claim was that this occurred during a telephone conference of G7 financial authorities.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon May 9th, 2011 at 12:12:49 PM EST
[ Parent ]

Re: This sounds like bullshit (4.00 / 3)

Well, then the US government should have a tape that could clear things up for us...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 9th, 2011 at 02:06:32 PM EST
[ Parent ]

Re: This sounds like bullshit (4.00 / 2)

We may hear or see a transcript of that conference call yet, but not likely from the US government.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon May 9th, 2011 at 03:33:31 PM EST
[ Parent ]

Re: This sounds like bullshit (none / 1)

George Osborne has strong Irish roots and has been viewed as being consistently "helpful" to Ireland considering he is a British conservative. Don't forget Irish/UK trade is huge and it is not in the UK's interest for the Irish economy to crash. The peace process is ongoing - as symbolised by the queens visit in a week or too. Huge numbers of Irish people live and work and vote in the UK. George Osborne has been a lot less sympathetic to Portugal/Greece.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 9th, 2011 at 04:07:56 PM EST
[ Parent ]

The End of the European Dream | 276 comments (274 topical, 2 editorial, 0 hidden)

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