The Big Bailout of the Eurozone (Another crisis coming? - Seriously)

[Declan]

In today's Irish Times William Buiter, chief economist of Citigroup, says Ireland should restructure its bank and perhaps its sovereign debt as 'quickly as possible'.
"He said that he expected that, if Fine Gael and Labour were to form the next government, they would introduce an element of burden-sharing for senior unsecured creditors "quite soon after they come into office", unless persuaded otherwise by the European Central Bank (ECB), the European Commission and the International Monetary Fund (IMF)."-
http://www.irishtimes.com/newspaper/finance/2011/0111/1224287235799.html

how many times must we hear this message?

[Zapatista]

Anyone know why we are drawing this money now? I thought we had enough to do up to March in reserve and that revenue was performing better than predicted. Will there be a massive spend before the election?: 

http://www.rte.ie/news/2011/0112/euro-business.html

[Declan]

Anyone know why we are drawing this money now?

Yep it's Clowens' round next

[Bogball XV]

Yep it's Clowens' round next

Hold the f**k on here!! Is this St Patricks day? Was he not on official business that day with the elite of Vietnam? Unless all the Vietmanese elite were in bed at 9 O'Clock and Cowen headed off to another party?

many asians lack the enzyme which breaks down alcohol thus they get drunk quicker and have a much lower capacity for alcohol consumption.
This enzyme is particularly plentiful in beasts of the bovine family, of which the Buffalo and presumably its near neighbour the biffo are members.

[muppet]

http://www.irishtimes.com/newspaper/opinion/2011/0114/1224287488231.html?via=mr

Cowen fiddled in summer Ireland burned

OPINION: The Taoiseach played Nero during the incredible weeks from July to September 2008, writes ELAINE BYRNE

NERO FIDDLED while Rome burned. The infamous inaction of the Roman emporer finds an echo in Brian Cowen's time as Taoiseach.

Nero occupied himself with unimportant matters and neglected priorities during a crisis – that has been the distinguishing feature of Cowen's tenure.

A timeline of events from the July golf outing to the September bank guarantee paints a picture of incompetence and a deep failure to realise the severity of Ireland's economic crisis.

It began with the Taoiseach "just shooting the breeze" and playing golf with Seán FitzPatrick, chairman of Anglo Irish Bank, on July 28th, 2008. Anglo was then on the verge of collapse with shares at €5.30 on that fateful day in July, compared to a €14.40 high the previous October. The bank was putting together a list of names, the infamous Maple 10, to buy a stake and boost the share price.

Yet Cowen apparently never discussed any of these matters while dining with two directors of Anglo, a recently resigned director and a director of the Central Bank that night. Alan Gray, appointed in 2007 by Cowen as a director of the Central Bank, said the purpose of the informal dinner "was to provide independent ideas to stimulate economic growth and to reduce unemployment in Ireland".

What a disaster that advice, if given and accepted, proved to be.

That was the summer Cowen decided not to introduce a mini-budget in fear of "talking down the economy".

A year later the Murphy report would introduce Irish public life to the language of "mental reservation": the creative concept which allowed those in authority to justify saying one thing and meaning another, without consequences, in order to protect the reputation of powerful individuals.

The timing of events that summer was as incredible as the events themselves. The Standards in Public Office Commission issued its annual report a day after the Taoiseach's golf game with FitzPatrick. The commission said it "regrets" Cowen's refusal to heed its recommendations to make it easier to investigate politicians. "It is not known," the commission said, "how the parties financed their election campaigns in 2007."

Political parties spent over €11 million on that election, yet disclosed just €1.12 million in donations.

The next day, Cowen was enjoying the Galway races. He told Frank McNally of this newspaper there was a "media fixation" with the Fianna Fáil tent.

In July the Government tax intake was €776 million below its expectations for that month. However, sources within Government said that no decisions on revising projections or otherwise would be taken until September. By September, tax revenues were an extraordinary €2.8 billion below target, raising fears that borrowing would breach EU guidelines of 3 per cent of GDP. Unemployment rose by 73,800 or 42 per cent in the 12 months to August – the highest annual increase then on record. High-profile multinationals Pfizer and Boston Scientific shed 180 and 240 jobs that summer. Calls for a state-of-the-nation address by the Taoiseach grew louder.

In the last week of August, Cowen sang the emigration song Paddy's Green Shamrock Shore on the Fleadh Cheoil main stage in Tullamore.

At the end of that same week, Ibec – deeply frustrated at the non-response to rapidly rising unemployment, a deterioration in tax revenues, a worsening economic situation and with social partnership pay talks stalled for August – issued a press release. The employers' federation called on the Government "to show leadership and to cut their own cloth to fit".

On that same day, Cowen officially opened the Connemara Golf Club in Ballyconneely, Co Galway, where he had holidayed in his caravan that summer.

The response to the Lehman Brothers collapse of September 15th by Anglo Irish Bank was the attempt, four days later, to acquire Irish Nationwide Building Society – a bank in a worse state than Anglo, with an 80 per cent loan book exposed to commercial property and development.

Anglo told The Irish Times that it believed it had the blessing of the Government if it wished to proceed with the transaction. On that very same day, Cowen told those assembled for the launch of the Irish operations of Australian bank Macquarie, that the Irish financial services sector had "weathered developments well to date" and that the Financial Regulator was "liaising closely with the industry".

And all was well in Nero's land.

The Dáil convened after its 11-week summer recess on September 24th. Cowen was at the National Ploughing Championships the next day. The CSO released data the following day that showed the Irish economy had "technically" entered a recession.

Four days later, the Government offered a blanket bank guarantee over all €440 billion of Irish bank liabilities. This decision not only damaged the Government's credit rating but led ultimately to the €85 billion bailout by the International Monetary Fund and the European Union.

This was Brian Cowen's first 150 days as Taoiseach.

Like Nero, he will be remembered as an ineffectual and neglectful leader. Anglo has ruined a country, so why not the career of a Taoiseach that presided over it?

Elaine Byrne is an adjunct lecturer in politics in Trinity College Dublin

[Declan]

Food for thought
http://jackhbarnes.com/2011/01/17/fianna-failed-ireland-prints-25-of-its-gdp-in-german-euros/

[seafoid]

This came out in November but is a scary taster of what may be ahead thanks to Fianna Freakonomics

http://mpettis.com/2010/11/chinese-inflation-and-european-defaults/

"The truth is we didn't need the denials to know what was going to happen. Everything we are seeing in Europe has a great deal of historical precedence and events are unfolding very much according to the standard script. I think it is pretty safe to make the following predictions:

1. Greece will be forced to default and restructure its debt, and the restructuring will come with a significant amount of debt forgiveness. The idea that it can grow its way out of the current debt burden is a fantasy. Remember that when countries are in conditions of financial distress, they face systematic disinvestment and capital flight, and as a consequence are never able to grow at anywhere close to the necessary rates – especially since any growth they do manage to achieve generally comes from additional fiscal spending, which simply runs up debt further.

2. Greece will not be the only defaulter. Spain, Portugal, Ireland, Italy, Belgium and much of Eastern Europe will also face severe financial distress and possible default. History suggests that when a country is experiencing a solvency crisis, growth comes only after debt forgiveness, and many or most of those countries will also be forced into debt forgiveness.

3. Political radicalism in these countries will rise inexorably as a consequence of rising class conflict. As Keynes pointed out as far back as 1922, the process of adjusting the currency and debt will primarily be one of assigning the costs to different economic groups, and this is never an easy or conflict-free exercise. Of course the less stable a government becomes as a consequence of this adjustment, the more likely it is to prefer very short-term solutions.* This Sunday, by the way, Catalans are likely to vote in an election in which the "current Socialist-led coalition government in Spain's northeastern region will fall, a slap in the face for Spain's prime minister, José Luis Rodríguez Zapatero,", according to an article in Wednesday's New York Times. There will be a lot more of this sort of thing in the next few years.

4. So why not bite the bullet and just get it over with? Because the European banking system would not survive even the best-case restructuring scenario. As a consequence we are fated to witness several years of difficult economic adjustment while everyone pretends that these countries, under the right policies, can work their way through their debt burdens. What will really be happening is that European banks will aggressively rebuild their capital bases, with the unwilling help of the poor household sector, until they are sufficiently well capitalized to begin taking the write-offs. Only then will we recognize that some countries cannot repay their debts.

5. As an aside the European junk-bond market might take off. With banks crippled in their lending activities, Europe's financial markets will probably go through a process much like that which the US experienced in the 1980s. American banks at that time were unable to fulfill their traditional lending function as they struggled to clean up their LDC and energy loan portfolios, leaving the way open for the likes of Drexel Burnham to create a massive junk bond market. This process will be helped to the extent that European policymakers try to avoid paying for the adjustment by liberalizing bank-lending practices.

6. Several countries, most notably Spain, will be forced to choose between giving up sovereignty to Germany, suffering extremely high rates of unemployment for several years, or giving up the euro. They will almost certainly choose the third option. There are still a lot of people who say giving up the euro is "unimaginable", but that just shows a weak imagination. I especially remember in 2000 Domingo Cavallo dismissing the stupidity of foreign investors who imagined Argentina might be forced to suspend payments and devalue the peso – which it did in late 2001. More recently, on April 30, Cavallo warned Greece: "Don't even think of abandoning the euro, whether temporarily or definitively, because that will provoke a financial catastrophe in Greece and various other countries in Europe." Now there's some useful advice, especially when you consider the huge surge in growth and the fall in unemployment Argentina experienced after it devalued.

This has been said before, but in a way this crisis is the European equivalence of the American Civil War. Once the dust finally settles Europe will either be a unified country with fiscal sovereignty firmly established in Berlin or Brussels, or it will be fragmented with little chance of reunion."

[Declan]

http://www.tribune.ie/business/article/2011/jan/23/irish-corporation-tax-faces-ec-attack-just-days-af/

Remember all those Vote Yes for jobs posters!!

[Hardy]

Don't we have a veto on this? I remember being promised that we had when I was invited to approve the EU constitution dressed up as the Lisbon Treaty. Both times.

Surely the politicians didn't lie to me? That would be unthinkable.

[muppet]

Don't we have a veto on this? I remember being promised that we had when I was invited to approve the EU constitution dressed up as the Lisbon Treaty. Both times.

Surely the politicians didn't lie to me? That would be unthinkable.

We are paying an unsustainably high interest rate on our IMF/EU bailout because the EU wanted to punish us. Now they want to take away the only competitive advantage we have which would be our only hope of having an economy capable of paying back the debt. Anyone would think the EU seriously had it in for us.

Although considering we had Harney and McCreevy touring Europe not so long ago lecturing them on how to be a successful economy, I can see why they might have it in for us. Not to mention the type of Commissioner we have sent them. Flynn, Geoghegan-Quinn?

[Declan]

http://www.thersa.org/events/vision/animate/rsa-animate-crisis-of-capitalism

Some interesting discussion points here - Put aside your prejudices when you hear he's a Marxist- which I know is hard (well it was for me anyway) and it's certainly thought provoking. 

[seafoid]

That is a great video.
Only those who are not ideologues can call this crisis.

[Declan]

http://www.bbc.co.uk/news/business-12282405

Things are going to get very tough for everyone and yet we still have no real debate about it

[bailestil]

Seems Merv is happy to Inflate the UK's debt problems away.
So what people will lose in living standard they will gain from not having to deal with 5+% interest rate on their mortgage.

This is the UK's bailout for the Neg Equity general public.

[Ulick]

Seems Merv is happy to Inflate the UK's debt problems away.
So what people will lose in living standard they will gain from not having to deal with 5+% interest rate on their mortgage.

This is the UK's bailout for the Neg Equity general public.

Nice to have the option though.