26/7/2014: Of Germans Bearing the Ugly Truth?..

German experts and analysts have an un-Irish capability of speaking their own mind... and when they do (and they do it anywhere, including when visiting this country of ours), they don't mince words. Behold the latest 'visitor' from the land of 'Nein!': Dr. Joachim Pfeiffer, the economic policy spokesman for the parliamentary group of the ruling Christian Democrats. Dr. Pfeiffer was in Dublin this week. Somewhere between a nice dinners and customary ritual of witnessing the Irish 'craic' in a pub, the learned Doktor sneaked a few minutes to tell us that "Ireland has “no chance” of securing a deal on its legacy bank debt" and that "the euro zone’s new bailout fund had not been established for nor would be it used for retroactive bank recapitalisation."

Quoted in the Irish Times: “There is no chance Ireland’s legacy assets will be paid by the European Stability Mechanism (ESM). This instrument is only an instrument for emergency.”

R. Pfeiffer was in Dublin to speak at the German-Irish Chamber of Industry and Commerce, the same Chamber that recently sponsored a cheerful book on Ireland & Germany being the best pals in economic and policy terms. The best pals, alas, do not help each other all too much, and one of them has no problem telling the other that 'your mess is your mess': "Dr Pfeiffer said the financial meltdown in Ireland “did not fall from heaven . . . there were bubbles in the real estate sector, there were bubbles in the banking sector and all of this was home-made”."

As to the reasons why ESM cannot be used for retroactive assistance to the Irish state, Dr Pfeiffer evoked the same logic that I advanced for some years now: "If the ESM was to be used retroactively to compensate Ireland, he said other countries such as Greece, Spain, Portugal and potentially Italy would want similar compensation."

Needless to say, Department of Finance immediately chipped in with a denial of denial that denial is possible as a denial. I am certain Dr. Merkel in Berlin was all ears...

13/1/2014: Seeking MEPs support for legacy debt resolution?

Today, Irish Times is covering the intention of the Minister Noonan to seek support for a retrospective debt deal for Ireland from the EU MEPs. Here's the full article: http://www.irishtimes.com/news/politics/noonan-to-seek-meps-support-for-debt-relief-over-banks-1.1652911

Couple of thoughts in relation to this intention:

1. This is the 7th year since the ill-fated banks guarantee that started the process of transfer of banking sector losses away from (some) investors in the banks (majority of unsecured and all secured and senior bondholders)  to the taxpayers. This, it appears, is the first instance in which the Irish Government is officially attempting to enlist support for the retroactive resolution of these transfers from the EU MEPs. Why? The Ireland Says No campaign of ordinary citizens and residents of the state have requested such assistance in a number of meetings with the MEPs. People like myself, whenever asked to brief the MEPs on the issues relating to the banking crisis have done so on a number of occasions. Irish Government, it seems, is only now coming around to a realisation that having MEPs support can be of value in addressing the problem? Why? I spoke to the ECON committee members some 6-8 months ago and asked them to support Ireland's efforts. Why is the Irish Government only now officially attempting to do the same?
2. Per article: "The argument that Ireland’s significantly high debt to GDP ratio of almost 120 per cent means that it needs further debt relief has emerged in recent months as a key strand of the Government’s campaign to secure support on legacy bank debt." Why? Sustainability of our debt has been , allegedly, tested by the Department of Finance, by the Central Bank, the Troika etc, and yet none of these entities and organisations ever once voiced any serious concern with sustainability of debt. How can the same Government that continues to claim that everything is sustainable, that Ireland is in a recovery, that we will repay every red cent of our debts etc etc etc now turn around and credibly claim that "it needs further debt relief"? What has changed "in recent months" to alter Government position? Did Government alter its position?
3. In June 2012, Irish Government announced that it has reached - claiming its own effort to credit - a 'seismic deal'. There were no qualifiers used, no caution given, no room for 'may be it won't happen' doubts allowed. The deal was the deal and that was it: Ireland was to get retroactive debt relief. Since June 2012, this 'seismic' deal was thrown like a proverbial banana peel into every gathering of voices doubting the Government achievement or debt sustainability dogma. And now, is Minister Noonan finally admitting there is no deal? Because if the deal is just a matter of time - an 'when' not an 'if' - and has only to wait until the SSM comes into force, then why does Minister Noonan need the MEPs support?

Lastly, as the readers know, this blog position has been that Ireland's total economic debt levels (household, Government and non-financial corporate, combined) are not sustainable. Non-sustainability  of debt in the context of my arguments always involved the view that Ireland is facing a choice: either fund current levels of debt and face long term structural collapse of growth in this economy, or we will need to restructure our debts. In terms of restructuring our debts, I have consistently suggested that the best target would be banks liabilities. The opposing side in the argument always put forward the planned/projected declines in debt/GDP ratio starting with 2014 as a sign of debt sustainability. the cost of such 'reductions' in debt liabilities on the economy (growth and investment effects) and society (health, psychological costs, social costs etc) never phased those who argued that the debt is sustainable. The Government has expended significant effort attempting to argue against the view that our debt is not sustainable. Is the same Government now directly agreeing with the positions they disputed? Are they really saying that we are facing a risk to our debt sustainability?

Setting aside the above issues, if Minister Noonan is indeed committed to seeking MEPs support for a retroactive debt relief for Ireland in relation to the debts related to our banking crisis, I am happy to help in any way I can. it's been long (too long) overdue.