Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
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
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