Ireland Goes Bust

[David Guyatt]

The paper tabled yesterday, to be discussed at an EU summit next month, rowed back from a blanket insistence on creditor haircuts, instead saying the investor losses should be treated on a "case-by-case" basis.

Yeah, right. All "cases" being approved.

I know what's happening:

[Jan Klimkowski]

Ah, unlimited free heroin for the junkie bankers.

And the destruction of jobs, pensions and homes for ordinary working people.

There's no longer any pretence about the Shock Therapy. :bike:

ECB tries to calm markets by promising unlimited liquidity

• Bond markets backed by behind-the-scenes support
• Banks will get unlimited liquidity into next year
• Stock markets welcome Jean-Claude Trichet's announcement

Europe's central bankertoday appeared to calm jittery markets despite refusing to accelerate measures to support ailing eurozone economies in the aftermath of the Irish bailout.

The European Central Bank president, Jean-Claude Trichet, said he would keep giving banks unlimited liquidity well into next year but made no guarantee to step up the bond-buying to combat investor panic surrounding Portugal and Spain.

Investors initially sold the euro and increased the cost of insuring eurozone debts after Trichet's comments, but a closer reading of his remarks and analysis of market activity later showed that the ECB was involved in large-scale behind-the-scenes support to bond markets.

Tonight the euro settled higher and yields on Irish and Portuguese bonds fell, signalling that the markets would be more willing to lend to the embattled countries. Credit default swap spreads, which measure the cost of insuring government debt, also narrowed.

Stock markets also approved the comments, with the FTSE 100 index in London up 2.22% at 5767, Germany's Dax index up 1.32% and the Dow Jones industrial average in New York up 0.76% at lunchtime.

Speaking at a press conference in Frankfurt, Trichet addressed concerns that he was preparing to phase out unlimited liquidity measures for eurozone banks – as had been expected until recently – saying it would send the wrong signal to the markets. The bank had decided to conduct three-month liquidity operations in January, February and March "with full allotment", he said, which was welcomed by the markets.

Investors had also called for the ECB to support the wider economy in a similar manner to the US Federal Reserve. The Fed agreed last month to pump in $600bn to the US economy to ease concerns that a massive deleveraging by US banks would stall the economy.

However, Trichet said he would not support a similar quantitative easing plan to support countries such as Portugal and Spain, stressing that the ECB was actively involved in market support operations.

"The securities market programme (SMP) is ongoing, I repeat ... ongoing," he said after the ECB's monthly policy meeting left interest rates at 1%. "I won't comment on the observations of market participants."

The ECB started buying bonds through the SMP in May and has so far spent €67bn (£57bn), most of it during the first three weeks of the programme.

Analysts say that the ECB may well have to do so again soon if the eurozone debt crisis threatens to push Portugal and Spain to seek bailouts, as Ireland and Greece already have. "We continue to look for €100bn of purchases by the beginning of next year including Spanish securities," RBS economist Jacques Cailloux said in a note to investors.

Others see much larger intervention with Evolution Securities fixed income strategist Elisabeth Afseth saying there could be a €1 to €2 trillion bond-buying programme.

Yet the most powerful members of the ECB have turned their face against further bond purchases. Axel Weber, head of the German central bank, has made his distaste for the programme clear and called for it to be scrapped in October, saying it had failed to calm bond markets. Trichet said there had been a consensus within the ECB to keep liquidity flowing and that an "overwhelming majority" were in favour of the bond-buying programme.

Phil Shaw, chief economist at fund manager Investec, said he expected the coming months would see the ECB struggle to cope with competing demands as Weber and other hawks were confronted by members who argued deleveraging by banks and households would stifle growth without extra quantitative easing.

"Overall the ECB's decision on liquidity was a relief but not a surprise, while markets have questioned its resolution not to announce anything further to bolster confidence," he said. "Trichet remarked that the decision to continue with the SMP was by 'overwhelming majority'. Indeed it would not take a further revelation by WikiLeaks to prove that the German contingent on the governing council – certainly Axel Weber and possibly Jürgen Stark – would prefer to see it wound up, let alone extended."

Spain and Portugal have succeeded in recent days in selling tranches of bonds on the international markets, but only by paying much higher rates of interest.

The Spanish prime minister, José Luis Rodríguez Zapatero, said Madrid would not need to tap any European Union funds to help it through its debt problems, but called for a "much more integrated fiscal policy" for the eurozone.

"What Spain advocates is that if we have a single currency, it's not enough just to have a central bank, a single central bank. It's not enough to have a single monetary policy. We also need to have a common economic policy," he said.

The German government has followed the lead of its central bank and defied calls to turn the eurozone into a "fiscal union", a step that could help the bloc address its economic imbalances but require members to sacrifice sovereignty for the good of the group.

Greek students clashed with police today as they marched in Athens to protest about austerity measures. Greece avoided bankruptcy in May after it received a rescue loan package from EU partners and the IMF, set to reach €110bn over the next three years. In return, the socialist government imposed a strict austerity plan which faces renewed union opposition. Unions have called a general strike, the seventh this year, for 15 December, while student protest groups occupy university buildings around the country.

http://www.guardian.co.uk/business/2010/...de-trichet

[Jan Klimkowski]

I wonder if this is true:

Speaking of Sinn Féin: On Friday, their leadership sent a couple of MP’s to talk to IMF representatives. The Sinn Féin told the IMF—literally—that “they are neither wanted nor needed in Ireland.”

http://gonzalolira.blogspot.com/2010/11/....html#more

That's fighting talk from the political wing of the Provisional IRA. :vroam:

Meanwhile, according to the Irish Times:

The €85 billion EU-IMF bailout package for Ireland announced last night was roundly condemned by the Opposition parties who are now all likely to vote against the budget on December 7th.

Fine Gael, Labour and Sinn Féin attacked the intention to use the National Pension Reserve Fund to help provide a further €10 billion in further capital for the banks. In total, the banks could end up getting another €35 billion if their losses are bigger than expected.

The remaining €50 billion is to cover the State’s borrowing needs for the next three years. Opposition parties were highly critical of the 5.8 per cent average interest rate that will be charged by the EU and the International Monetary Fund.

http://www.irishtimes.com/newspaper/brea...ing11.html

[Magda Hassan]

Very interesting there Jan. A creative way of forming bank policy. The MPs speak the truth and I doubt there will be any tears if any bankers are lost in the line of duty from the Irish or any other people for that matter. The banks will just have to go with out. :damnmate:

[Jan Klimkowski]

Once Upon a Time in the West: "Frank sent us"

[Magda Hassan]

Once Upon a Time in the West: "Frank sent us"

It is a game that both sides have to play for keeps. The Irish people will be slaves if they lose. The bankers will have to go get a real job if they lose. :reddy:
Not that it will be easy for the Irish if they go it alone. It is still difficult for the Icelanders taking their independent road but they are far, far better off than if they had succumbed to the banks. On the other hand if the Irish reject slavery and refuse to bail out the banks and wealthy bond holders Europe will falter. The should have designed a better Europe though.

[Peter Presland]

The documents comprising the EU/IMF bankers/bondholders bailout are here

The Irish Unite Union's 'Peoples Budget' is here

I have only skimmed the documents but a couple of things leap off the page:

1. The subservient (forelock-tugging) tone of the the Irish in the 'letters of intent' to both the EU and IMF - they seem to be quickly learning their new status as serfs - I guess it's just a return to the status-quo-anti for them, as the new enablers of their new absentee landlords.
   
2. The Unite union's pathetic faith in Growth as our saviour - with absolutely zero questioning of the system that - by design - produced (and will always produce) the mess in the first place.
   

[Jan Klimkowski]

The documents comprising the EU/IMF bankers/bondholders bailout are here

The Irish Unite Union's 'Peoples Budget' is here

I have only skimmed the documents but a couple of things leap off the page:

1. The subservient (forelock-tugging) tone of the the Irish in the 'letters of intent' to both the EU and IMF - they seem to be quickly learning their new status as serfs - I guess it's just a return to the status-quo-anti for them, as the new enablers of their new absentee landlords.
   
2. The Unite union's pathetic faith in Growth as our saviour - with absolutely zero questioning of the system that - by design - produced (and will always produce) the mess in the first place.
   

Peter - thanks.

I entirely agree about the stupidity of Unite's pathetic faith in material salvation through (the fetishized notion of) Growth.

Instead of thinking outside the box, Unite is attempting to preserve its place inside an already doomed box.

[Jan Klimkowski]

The Usual Suspects are very happy.

The poor get stuffed.

Deja vu all over again.

Irish budget praised by EC as 'tough and ambitious'

European commission welcomes Ireland's drastic budget cuts but accountants warn that the poorest will pay the price

Graeme Wearden guardian.co.uk, Wednesday 8 December 2010 13.29 GMT

The European commission has hailed Ireland's austerity budget as "tough and ambitious" but accountants have warned that the Irish people face many years of painful tax rises and spending cuts.

Speaking in Brussels, EC spokesman Amadeu Altafaj welcomed the measures announced by Brian Lenihan yesterday, which were passed last night in the Dáil.

"It is a successful first step towards the implementation of the programme that was agreed with the EU and the IMF," said Altafaj. "It is an ambitious and indispensable tool for the redressment of the situation. There is the right balance between revenue and expenditure measures."

The measures contained in the budget will save around €6bn (£5bn). They include a 4% cut in social welfare, €10 a month reductions to child benefit, and rises in petrol and diesel duty. Income tax revenues will also increase sharply, with tax credits and income tax bands being cut by 10%. Public sector pensions have been frozen, and new government workers will have an immediate 10% pay cut.

The austerity measures will allow Ireland to tap into the €85bn fund agreed with the International Monetary Fund (IMF) and the European Union. This package was designed to prevent Ireland defaulting on its debts or quitting the euro.

Ireland remained under pressure in the bond markets today, even though the budget passed its first hurdle last night. The yield, or rate of interest, on Ireland's 10-year government debt had dropped to 7.83% this morning, from 8.19% yesterday, but then rose back to 7.99% by lunchtime today.

Ireland is committed to cutting €15bn over the next four years, bringing its deficit down to 3% of GDP by 2015. The deficit is due to hit 32% of GDP this year, partly as a result of the cost of the Irish banking rescue.

Some critics have claimed that Ireland would be better advised to default on its debts, rather than push through tough austerity measures. Finance minister Brian Lenihan attempted to crush such talk today. "A small country like Ireland cannot default without the support of a central bank because you have to have the bank loaded with cash while you're engaged in such a default and it's not feasible for us to do this," Lenihan told RTÉ radio.

"We really need to face up to this because we've allowed public discussion to become dominated by it and it has done huge damage to the country," he added.

Deloitte, the accountancy firm, believes that the Irish budget cutbacks are both unpleasant and unavoidable.

"As unpalatable as they are, it is an important step in addressing the imbalance in our public finances but more importantly a significant message to the international community that Ireland is prepared to take the hard decisions to put its house in order," said Deloitte.

"These changes must be seen as a first step on a long road – they only address 40% of the overall adjustment that is required to get us to the deficit being only 3% of GDP."

Shaun Murphy, partner at KPMG, agreed that the budget changes would have a major impact on all parts of Irish society – but particularly the less well-off.

He said: "For many earners on low and middle incomes, budget 2011 represents the start of a painful reversal of a policy which sought to minimise the number of earners within the tax net and to minimise the numbers taxed at the marginal rate."

"For many higher income earners, budget 2011 represents a continuation of what has been a very substantial increase in their individual effective income tax rates – with many higher earners set to pay tax at an effective rate in excess of 40% in 2011," he added.

Some economists fear that growth in the Irish economy will be stifled by the cutbacks and tax rises.

"The Irish situation is pretty drastic," said Charles Dumas, research director at London-based Lombard Street Research. "They won't get the deficit improvement they're hoping for because they are hammering the economy."

http://www.guardian.co.uk/business/2010/...ish-budget

[Magda Hassan]

I can't believe the bastards passed it. You'd think there would be some opposition to it. Talk about lambs to the slaughter.


http://www.youtube.com/watch?v=5Eph-xTTACQ

Joe Higgins MEP explains why he walked out on a discussion with EU Commissioner, Olli Rehn, after he insisted that the contents of the meeting be kept confidential from public.