Ireland Goes Bust

[Jan Klimkowski]

Have the Irish forgotten how to have a revolution?

Allied Irish Banks to pay €40m bonuses despite bailout

Stricken Allied Irish Banks says court case forces it to give out bonuses while Ireland's taxpayers suffer

Jill Treanor guardian.co.uk, Wednesday 8 December 2010 19.15 GMT

Stricken Allied Irish Banks is preparing to hand out €40m (£34m) of bonuses next week – despite being on the brink of receiving another emergency bailout from the Irish government.

As many as 2,400 bankers in its Dublin capital markets division are to receive the payments on 17 December under agreements struck with the bank in 2008.

The bank, 19% owned by Ireland's taxpayers but expected to reach 95% state-ownership, had originally been blocked from making the payments under one of the government's bailout programmes.

But legal action by a trader, John Foy, over a deferred €161,000 bonus awarded in 2008 has led the bank to conclude it will need to pay bonuses to many of the staff to whom they were awarded for that year. The bonuses are being handed out at a time when the government is instigating four years of tax rises and brutal cuts to benefits. The most austere budget in the country's history was passed this week.

European banking regulators are also meeting in London tomorrow to try to agree a new set of European-wide rules on how bonuses should be structured to avoid paying them when they suffer losses after taking on too much risk. The rules will require bonuses to be deferred over three years and clawed back if losses are made

Once the Committee of European Banking Supervisors makes its announcement, domestic regulators across Europe will have to race to implement the rules if they are to meet the January 1 deadline that Europe has demanded.

Given the Foy judgment last month, AIB says it has little option but to honour the 2008 bonus awards to staff "as per the contractual entitlements arising from the business's performance in 2008".

Ireland's central bank has told AIB it needs to raise a further €5.2bn by the end of February though this is likely to come from the €85bn International Monetary Fund-European Union rescue package rather than the private sector. This will take the bank almost entirely into state ownership.

Bank of Ireland is also racing to raise €2.1bn of fresh cash to avoid falling into majority state control. The government owns a 38% stake and the bank today tried to start generating better quality capital by offering to exchange its existing low quality securities for securities guaranteed by the government.

BoI will be hoping for takers of its so-called liability management exercise as the more money it can raise from private investors the lower the level of bailout funds it will need from the government.

Bankers are receiving much of the blame for forcing Ireland to take international assistance and implement the austerity budgetary measures. But while the public is expected to endure years of pain, the package of measures to save €6bn in the coming year were welcomed by the European commission. An EC spokesman described the budget as "tough and ambitious". and part of the programme needed to allow Ireland to be granted €85bn of rescue funds.

"It is an ambitious and indispensable tool for the redressment of the situation. There is the right balance between revenue and expenditure measures," the spokesman added.

http://www.guardian.co.uk/business/2010/...te-bailout

[Magda Hassan]

http://www.youtube.com/watch?v=Pu3IT1kGa..._embedded#!

[Magda Hassan]

http://www.youtube.com/watch?v=n5N6i0DuYpc
Bob and Mary explain what happened in Ireland.

[Magda Hassan]

http://whistleblowerirl.blogspot.com/

[Jan Klimkowski]

The rating scumbags downgrade Ireland close to Junk:

Fitch Downgrades Ireland to 'BBB+; Outlook Stable
09 Dec 2010 6:11 AM (EST)

--------------------------------------------------------------------------------
Fitch Ratings-London-09 December 2010: Fitch Ratings has downgraded the Republic of Ireland's (Ireland) Long-term foreign and local currency Issuer Default Ratings (IDRs) to 'BBB+' from 'A+', respectively.

And what's this is Der Spiegel?

The EU has failed to make the foreign bondholders take a hit on the losses from toxic real estate loans. In particular, the ECB insisted that the interests of the German, British and French banks would continue to be protected. Instead, Irish taxpayers are being asked to pay the bill: at a hefty interest rate of 5.8 percent, to ensure the foreign creditors will get their money back rather than face any losses.

That may be something German banks welcome, but it is a disaster for Ireland. And many economists now predicts that it is just a question of time before the country defaults. "This 'bailout' will sink the Republic," warns economist David McWilliams in the Belfast Telegraph. "It is the EU giving us enough rope to hang ourselves in the hope that we don't hang all of them."

If Ireland fully exhausts the EU bailout then it will double the national debt to €175 billion by 2014, he calculates, and the interest on that would come to €8.5 billion a year -- more than even the thriftiest of governments could afford.

To make sure that the state does not drown in its debts, the annual rate of growth has to be significantly higher than the interest due on the national debt, McWilliams argues. If the Irish economy does not grow by 8-10 percent, then the country will end in a debt-deflationary spiral. And even the most optimistic government projections are just below 4 percent.

Barry Eichengreen, a professor of economics at the University of California, Berkeley, makes a similar argument. It would be neither politically nor economically sustainable to force Ireland to pay 10 percent of its national income as reparations to bondholders, he wrote recently in German business daily Handelsblatt, "as anyone who remembers Germany's own experience with World War I reparations should know." It would be more sensible to have a debt restructuring and offer the bondholders 20 cents on the euro, he argues.

Such a restructuring would with one fell swoop cut the Irish public debt from 130 percent to 100 percent of GDP, he says. And it would have shown the Irish that the European Union was on their side, writes Kevin O'Rourke, economics professor at Trinity College Dublin, for the Eurointelligence website. Instead the EU is forcing "pro-cyclical adjustment onto countries that are already sinking."

'We Face a Negative Spiral'

O'Rourke's prognosis is as foreboding as that of his colleagues. "We now face a negative spiral in which austerity causes emigration, which increases the burden of the debt, which ultimately leads to more austerity," he writes. He recommends as a way out the path pursued by Iceland. In a referendum, the voters rejected a proposal to pay back their banks' international creditors. Ireland, O'Rourke argues, needs a "radical change."

http://www.spiegel.de/international/euro...22,00.html

[David Guyatt]

This could result in a new "Great Famine" the necessary conditions of which are set out in the Wiki entry extract below. Today's "Landlords" are the EU:

Landlords and tenants

During the 18th century a new system for managing the landlord's property was introduced in the form of the "middleman system". Rent collection was left in the hands of the landlords' agents, or middlemen. This assured the (usually Protestant) landlord of a regular income, and relieved them of any responsibility; the tenants however were then subject to exploitation through these middlemen.

Catholics made up 80 percent of the population, the bulk of whom lived in conditions of poverty and insecurity despite Catholic emancipation in 1829. At the top of the "social pyramid" was the "ascendancy class", the English and Anglo-Irish families who owned most of the land, and who had more or less limitless power over their tenants. Some of their estates were vast: the Earl of Lucan owned over 60,000 acres (240 km2). Many of these landlords lived in England and were called "absentee landlords". The rent revenue was sent to England [14], collected from "impoverished tenants" paid minimal wages to raise crops and livestock for export.[15]

In 1843, the British Government considered that the land question in Ireland was the root cause of disaffection in the country. They set up a Royal Commission, chaired by the Earl of Devon, to inquire into the laws with regard to the occupation of land in Ireland. Daniel O'Connell described this commission as perfectly one-sided, being made up of landlords and no tenants.[16] Devon in February 1845 reported that "It would be impossible adequately to describe the privations which they [Irish labourer and his family] habitually and silently endure . . . in many districts their only food is the potato, their only beverage water . . . their cabins are seldom a protection against the weather... a bed or a blanket is a rare luxury . . . and nearly in all their pig and a manure heap constitute their only property." The Commissioners concluded that they could not "forbear expressing our strong sense of the patient endurance which the labouring classes have exhibited under sufferings greater, we believe, than the people of any other country in Europe have to sustain."[17]

The Commission stated that the principal cause was the bad relations between the landlord and tenant. There was no hereditary loyalty, feudal tie or paternalism as existed in England. Ireland was a conquered country, with the Earl of Clare speaking of the landlords saying "confiscation is their common title." According to Woodham-Smith, the landlords regarded the land as a source of income from which to extract as much money as possible. With the Irish "brooding over their discontent in sullen indignation" according to the Earl of Clare, Ireland was seen as a hostile place in which to live, and as a consequence absentee landlords were common, with some visiting their property once or twice in a lifetime, or never. The Rents from Ireland were then spent in England, it being estimated that in 1842 £6,000,000 was remitted out of Ireland.

According to Woodham-Smith, the ability of the middlemen was measured by the amount of money they could contrive to extract.[18] . Described by the Commission as "the most oppressive species of tyrant that ever lent assistance to the destruction of a country," they were invariably described as "land sharks" and "bloodsuckers."[19]

[Peter Presland]

This could result in a new "Great Famine" the necessary conditions of which are set out in the Wiki entry extract below. Today's "Landlords" are the EU:

It's a powerful analogy David; and one which will resonate deeply in Ireland.

I have deep family connection with Ireland. My wife's mother had some horrific tales of her childhood experiences of the Black and Tans (she was born in 1909) and I have personal experience of the visceral nature of Irish working class antipathy to the British State - an antipathy which I have no hesitation in endorsing and encouraging.

I have posted at least a dozen comments on various Irish blogs this past couple of weeks making EXACTLY that analogy.

The present Irish government incumbents and the bulk of their Civil Servants are latter-day enablers of Ireland's new absentee landlords. The Irish population are on the cusp of a new wave of emigration (which will place the already crippling burden of these so-called 'austerity measures' on a shrinking tax base and further impoverish the country in a vicious downward spiral.

If the Irish population fail to rise up and reject these measure out of hand then the country does not have a future as a Sovereign State. It's that simple.

[David Guyatt]

I agree Peter. I think the insight of economist, David McWiliams in the Der Spiegel article posted by Jan above, is chillingly accurate:

"This 'bailout' will sink the Republic," warns economist David McWilliams in the Belfast Telegraph. "It is the EU giving us enough rope to hang ourselves in the hope that we don't hang all of them."

But I think Europe will end up dangling from the gallows.

And "they" deserve it too.

But then, of course, "they" will actually be safe and comfortable spending their accrued dirty wealth in some distant gated community basking in a warm climate, while it will be the citizens of Europe who will have to pick up the yoke in their name.

[Jan Klimkowski]

The analogy with the Great Famine does indeed resonate.

I have drawn attention to the following before, and do so again, using wikipedia for its pithy summary:

George Gideon Oliver Osborne,[1] MP, PC (born 23 May 1971[2] in Paddington, London[3]) is a British Conservative politician. He is currently the Chancellor of the Exchequer of the United Kingdom, a role he was appointed to in May 2010, and has been the Member of Parliament for Tatton since 2001.

Osborne is part of the old Anglo-Irish aristocracy, known in Ireland as the Ascendancy. He is the heir to the Osborne baronetcy (of Ballentaylor, in County Tipperary, and Ballylemon, in County Waterford).[4][5]

http://en.wikipedia.org/wiki/George_Osborne

The Protestant Ascendancy (Irish: An Chinsealacht Phrotastúnach), usually known in Ireland simply as the Ascendancy, is a phrase used when referring to the political, economic, and social domination of Ireland by a minority of great landowners, Protestant clergy, and professionals, all members of the Established Church (the Church of Ireland and Church of England, both being the State Churches) during the 17th through 19th centuries and, in a portion of the island, into the 20th century). The sense of Ascendancy is seen as excluding primarily Roman Catholics, as they have comprised the majority of the Irish population island-wide, but this can be misleading, as members of the Presbyterians and other Protestant denominations, along with non-Christians, were also excluded politically and socially. Even the majority of Protestants were effectively excluded from the ascendancy, being too poor to vote. In general, the privileges of the Ascendancy were resented by Irish Catholics, who remained the majority of the population.

http://en.wikipedia.org/wiki/Protestant_Ascendancy

More at wiki and elsewhere.... :flute:

[Jan Klimkowski]

Ireland for sale:

Ireland could sell banks to Middle Eastern wealth funds

Middle Eastern wealth funds are being touted as potential buyers of Ireland's indebted banks as the Irish government looks for outside investors in the country's financial system.

Former Irish prime minister John Bruton has travelled to the Gulf states, including Saudi Arabia, Bahrain and Qatar, to sound out their interest in buying one of Ireland's troubled banks.

According to The National, an Abu Dhabi-based newspaper, Mr Bruton has met with sovereign wealth funds in the Gulf in an attempt to attract billions of pounds of badly-needed outside investment.

"The message was 'our banks are for sale to any investors, foreign or local'," said a Gulf-based executive quoted by The National.

Mr Bruton told the local press that he was not representing Ireland in an official capacity and was in the region to discuss general investment opportunities.

"We are not here to facilitate the sale of any assets or start any negotiations. That is the government's decision and role, but obviously discussions have taken place about the Irish economy generally. The central bank has clearly said asset sales are being studied," said Mr Bruton.

Irish officials are already understood to have made contact with several large financial institutions as they hunt for "strategic partners" for their banks.

The credit ratings of Ireland's main banks were on Friday downgraded by ratings agency Fitch following its three-notch downgrade of Irish government debt on Thursday.

Standard & Poor's and Moody's have also begun downgrading Irish bank debt as details become clearer of the restructuring of their balance sheets.

Moody's has Bank of Ireland on review for a possible downgrade, citing the terms of potential exchange offer for some of the lender's debt.

http://www.telegraph.co.uk/finance/finan...funds.html