Monday, November 29, 2010

If Ireland Doesn’t Take The Bailout . . .

Update I, below. Update II, below.

So a week ago as I write this, the Irish formally asked for a bailout from the European Union, acting in concert with the International Monetary Fund and the British government.

And now, a week after that request, the EU finance ministers just approved the bailout of the Republic of Ireland—

however . . . However, in those seven days in between, a serious shitstorm broke out in Ireland—it has been one hell of a week, over there in the Emerald Isle.

And though the bailout has been approved by the EU finance drones, we still do not have an approval from the most important player of them all:

The Irish people.

Let’s recap:

On Monday, immediately after the announcement that the Irish government had formally asked for the bailout, the Greens—partners of Prime Minister Brian Cowen’s Fiana Fáil party—left the governing coalition, forcing Cowen to call for an election in January.

The Green’s leader, John Gormley, isn’t stupid: He knows that, in politics, association is the very definition of guilt—and the Greens are guilty of having been in bed with Cowen. So Gormley and the Greens want to put as much daylight between themselves and Fiana Fáil before the election.

Even members of Cowen’s own party are trying to put distance between him and them—they’re openly calling for his resignation. That’s gotta hurt.

But Cowen’s holding on like Nixon—barely, but tenaciously. And even though they’ve left the governing coalition, the Greens are saying that they’ll support Brian Cowen’s budget—including the austerity measures being imposed as part of the EU/IMF bailout.

They say that—now. But what about later? ‘Cause later’s gonna be bad for everyone associated with the Cowen government. The Donegal by-election on Thursday proved that.

Donegal—traditionally a safe seat for Fiana Fáil—saw them lose in humiliating fashion to Sinn Féin. How humiliatingly? By a margin of more than two-to-one. Irony of ironies, the seat became vacant when the Fiana Fáil MP for Donegal, Pat Gallagher, left to become a European Parliament minister. Now Gallagher is stranded in Brussels, and Sinn Féin has his old seat locked tight. 

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.” 

Ominous words, those. 

Finally, on Saturday, somewhere between 50,000 and 100,000 Irishmen and women protested, marching on Dublin’s streets against the bailout. Even if it was only 50,000 people, that’s still about 1% of the population—imagine if 3 million people marched on the U.S. Capitol, protesting an upcoming budget deal: Get the picture? Big.

There wasn’t any violence in the protest—but there was anger, especially over the interest rate that the bailout is going to cost.

During the week, reports were that the bailout would come to around €90 billion, but with an interest rate of possibly 6.7%. You know that a country’s financial situation is dire when the tabloids start quoting bond market interest rates on the front page: The whole of Ireland was having a cow over that possible 6.7%. To top it off, the EU and the IMF negotiating position was that the Irish had to cut their fiscal budget deficit to no more than 3% of GDP by 2013—

—the Irish were pissed. No wonder they all marched on Dublin’s streets on Saturday afternoon in the freezing cold.

Tonight, Sunday night, the negotiations were supposed to be concluded and the bailout approved before Asian markets opened—and the Euro-drones did not disappoint: Brian Cowen went on TV and gave the hard-sell on the bailout package less than an hour before Asia opened.

The key details were: €85 billion total package (for comparison, Ireland’s 2009 GDP was €167 billion), with €10 billion available immediately to shore up the tottering Irish banks—which were the cause of this entire mess. Additional funds to prop up those banks would be made available on an as-needed basis, to a ceiling of €25 billion—that ought to prevent any near-term run on those banks. However, Irish pension funds would have to be raided to the tune of €17 billion. The Irish would have until 2015 to reduce their fiscal deficit to less than 3% of GDP, as per EU rules. And finally, the interest rate would be 5.8%.

This is what was negotiated. This is what the EU finance ministers approved. This is what’s on deck now

However, we have a long week ahead of us—a very lo-o-o-o-ong week, to be sure. Because although this is the deal that’s been approved by the EU finance ministers, the deal negotiated by the Cowen government, there is one final hurdle to this bailout:

The Irish. Specifically, the Irish parliament.

The key date that’s coming up insofar as Ireland is concerned is December 7: “A date which will live in infamy!” really is living up to its moniker, because that’s the day the Irish are supposed to pass their budget—their budget with the EU/IMF bailout conditions: The Austerity Budget. 

Now, here’s a question—the obvious question: 

What if the Irish can’t—or won’t—pass the austerity budget?

What if the Irish don’t take the bailout?

Cowen’s government is teetering—the Greens could just as easily go back on their word and reject the austerity budget—or any of the other coalition parties could walk out—Sinn Féin wants no part of any IMF austerity deal—hell, just a couple of Fiana Fáil’s own MP’s could bolt and wreck Cowen’s parliamentary majority—

—and Fine Gael? Well, there’s the rub: Fine Gael, the center-left party which has traditionally been pro-European, stands to win huge in January. They currently have 51 seat in the Irish parliament, to Fiana Fáil’s 70; considering the Donegal results, it is not unreasonable to think that Fine Gael might win an outright majority in the 166-seat Dáil Éireann (lower house)—if they play their cards right. 

Now, over the weekend, the Fine Gael finance spokesman, Michael Noonan, limited himself to urging Cowen’s governmet to take a “hard line” in negotiations with the EU and the IMF. 

Clearly, Fine Gael realizes the mine field they’re traversing. They are pro-Europe, but they are Irish politicans too—with seats they have to win, and constituents they have to appease.

If push comes to shove, will they jump to the Irish side, or jump to the European side? 

The question is no question at all—it’s obvious: They’ll jump to the Irish side. Fiana Fáil took the beating it did in Donegal because of the widespread perception that they’re the IMF’s lackeys—Fine Gael isn’t going to make that same mistake. Not with the noises Noonan is making on their behalf.

Therefore, the next week will be crucial, in Ireland. The next week could likely decide the fate of the Eurozone.

If the popular perception grows over the coming week that the Cowen government sold out the country to the IMF and the EU, then it is possible—very possible—that the austerity budget will not pass on December 7.

This would be a disaster to the European Union.

Is such an outcome likely? Will the Irish reject the austerity budget on December 7? Will they instead force the Irish banks to default on their debt?

There are already such calls. The Sunday Independent, the largest Sunday broadsheet in Ireland by a comfortable margin, has an editorial calling for an outright default. This call isn’t a lonely voice: The 50,000 march on Saturday proves that.

See, the problem in Ireland really isn’t so much the state’s deficits—rather, it’s the state’s guarantees of the Irish banks. That is what led to this mess. Yes, the Irish public sector is bloated, but it’s the banks that are busting the fiscal budget.

The Irish government allowed the banks to grow too big for too long, and to get mixed up in too many dicey deals—and so when the crisis hit in 2008, instead of letting them fail, Brian Cowen and his Fiana Fáil government backstopped those banks.

Much like in the United States in 2008, the Irish confused an insolvency issue with a liquidity issue. They thought their banks were having a cash crunch, when really, they were broke.

Cowen is reaping what he sowed: Even if the 2008 crisis had been a cash crunch and not an insolvency issue, Cowen never should have backstopped those banks—not when their combined liabilities were twice the GDP of Ireland. But that’s for another conversation.

Right now, the Irish people know that they are footing the bill so that British, German and American banks don’t suffer for having been foolish enough to be caught with Irish bank bonds. Here is a terrific breakdown of what the Irish owe, and to whom.

Rightfully, the Irish people are pissed. Now the question is, Will the various political factions in Ireland manage to maneuver Irish public opinion, and get them to accept the austerity budget?

This is what we spectators have to be looking at: Whether Irish public sentiment will go along with the deal—or turn against it.

This is very, very possible—after all, the Irish have already flipped off the EU once before, on a very big-ticket item: They gave The Big Middle Finger to the EU Constitution back in 2008, by a margin of 53% to 47%—and that’s when times were good and everybody wanted to be European. Now? Not so much.

What happens in the streets of Ireland will likely not be the deciding factor in the continuation of the EU and the Eurozone; not in my estimation. I still think, as I have argued, that Spain is the key to the Eurozone’s survival.

But if the Irish reject the austerity budget on December 7, it is obvious that the Spanish problems will come to a head a lot faster.

An Irish rejection of the bailout would send the bond markets into a frenzy—Spanish debt would immediately come under pressure, likely crashing before Christmas. Italy would come immediately next. The whole Eurozone could be ablaze by the New Year’s.

Therefore, the EU needs to make the December 7 budget vote go smooth—they need to pull out all the stops and make the Irish understand the situation. They need to make them see the wisdom of making sacrifices for the well being of British and German banks.

After all, as everyone knows, the Irish have always loved the British. And the Germans.

• For other pieces I’ve posted regarding the Eurozone crisis, see the “Europe Zoorope” section in my Directory of Posts

Update I: Monday, 7:00am EST:

So the point of contention turned out to be the raid on the pension funds: The opposition parties have all severely criticized the Fiana Fáil negotiations, focussing on the pension fund raid, but also hitting them on lack of haircuts for foreign bondholders, the high interest rate of the package, and the color of the ties the Fiana Fáil people wore to the negotiations. According to the Irish Times, which gives a nice recap of overnight political reaction in Ireland, Fine Gael, Labour and Sinn Féin are all likely at this point to vote against the budget on December 7.

Update II: Monday, 9:15am EST:

Reader Shay sent a link to a series of amazing photographs of the Saturday protest in Dublin, which I highly recommend. This is the slideshow of those photographs on flickr.

59 comments:

  1. Accepting the EU/IMF bail out is selling their souls to Goldman Sachs.

    Say No Ireland, better yet say HELL NO Don't sell your freedom or the worlds freedom to the banksters.

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  2. In 2008, I wrote the following article titled, "Irish to Save the World Again?" and it looks like they may have a second chance again through self-sacrifice and by doing the noble deed of defaulting, just as the Argentineans did in 2001 by telling the IMF and World Bank "to f*ck themselves" (the economic and financial costs were horrendous on the middle and poor classes but look where they are now):

    http://www.fourwinds10.com/siterun_data/government/new_world_order/news.php?q=1213065478

    The luck of the Irish!

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  3. My gut tells me the Irish are spoilers in this game. They will default, and let the chips fall. Good for them, let the speculative bankers eat their own dog food. I wonder how long it will take for the contagion to make its way across the Atlantic? Everyone seems to forget that we in the U.S. have our own part to play in this exciting drama. I feel fortunate to live in such interesting times. Who needs Jersey Shore when you get front seat tickets to the big show.

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  4. The battle of the Alamo...redux!

    Poor Ireland is surrounded by the European Army of Bureaucrats, helped by the American Weasel, Tim "bailout" Geithner.

    If the Irish people agree to surrender without firing a shot, their lives will be spared. They will be free to go work for their new masters, but will have to leave behind them all their possessions.

    Children will also have to stay in the country, as a guarantee against a debt repayment default.

    If, on the other hand, the Irish people want to put up a fight, there will be hell to pay. Access to financial markets will be cut!

    After a few month of harsh winter, famished and frozen rebels will probably give up and gladly accept the money kindly offered by the Bureaucrats, at the preferential rate of 5.8%.

    What this stubborn Irish people don't seem to understand is that bankers have rights! They have a right to eternal life and unlimited wealth! This right has been guaranteed by the Irish government, in the name of Irish people! And it extends not only to Irish banks, but to any bank in business with them!

    Therefore, Irish people should better get their act together, go to work, look for a second job and forget about week-ends and holidays.

    They should realize that there are bankers, everywhere in the world, who don't know how big their bonus will be this year, because of them!

    And it is the end of November. And there are almost no villas and yachts left for rent, in the Carribeans, for the coming holiday season!

    Click on my name to visit my blog.

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  5. A brilliant analysis, as usual, but friends, the bottom line is that the world's economic system has a rip down the side from stem to stern. It might be a week, a month, a year, or even a few years, but at some point this ship is going to the bottom.
    Standing on the aft deck speculating on the exact moment the water is going to come over the stern is very entertaining, but it won't save any of us.
    And there are no frigging life boats on this ship.
    Time to forget about when the water is going to come over the stern and grab a few deck chairs and start weaving them together into a raft big enough to float all of those you love.

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  6. Ironic that so many countries that sought independance from England are fiscally fucked.

    Is this what the men of Ireland imagined would have happened back in 1916. I doubt it.

    Below is a quick A-Z list of countries that fought so hard for independance from England, one has to wonder if the fight was worth it??

    Afghanistan
    Belize
    Botswana
    Brunei
    Burma
    Cyprus
    Dominica
    Egypt
    Fiji
    Gambia
    Grenada
    Guyana
    India
    Iraq
    Jamaica
    Kenya
    Kiribati
    Kuwait
    Lesotho
    Malawi
    Malta
    Pakistan
    South Africa
    Sri Lanka
    Swaziland
    Tuvalu
    Uganda
    USA
    Vanuatu
    Zambia
    Zimbabwe

    I note the USA are so close to Zimbabwe, and not just on this list.

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  7. I doubt the budget will fail to pass. The stakes are usually too high to let the common folk's disagreement on political matters lead to anything.

    Even your example of the Irish middle finger to the EU is misleading. The Irish rejected the EU constitution only to vote on it again until it passed. This suggests that popular opinion doesn't matter.

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  8. This is just the beginning of something. I just don't know what.

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  9. In terms of personal freedom, the Irish must make a stand. The foolishness of the rulers and their supporters must be for their own cost. You can't keep a people in bondage to pay the elite. Say no, well, say the hell NO!
    As for British protectorates falling, what about Britain itself. We used to have a British Empire, now we have the English. The core is rotten.

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  10. No one should underestimate Sinn Fein or Gerry Adams. The British made that mistake for a long time. Yes they have but a few MP's, but that could change fast.

    Ireland may or may not have bloated public sector, but it balanced its books every year up until the banking sector crashed.

    It's also the most educated country in Europe.

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  11. December 7th is also bank run day in Europe.
    One more way for the people to withdraw support.

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  12. But everybody is broke Gonzalo!

    It is one thing to say; "fuck the bondholders, IMF etc" but the problem with this is it will only further expose the insolvency of the Irish, British, German, US banks & on & on.

    Governments cannot just sit back & say "fuck the bondholders" without risking the deposits (& life savings) of millions of people.

    No, the only possible route is bailouts to kick the can down the road. Until it can no longer be kicked of course but that could be years away yet. Rational people might have said that "there's no way the US can keep kicking the can down the road" when the US government defaulted in 1971, yet here we are.

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  13. Every time I read one of the stories in the MSM about the Irish crisis, the Headline reads “Irish Accept $150B Bailout or something similar, except ALSO when I read down to the 3rd or 4th paragraph, I find out that they aren’t going to vote on their Budget until at earliest Dec 7th.

    The folks supposedly “accepting” these Bailouts in the name of the Irish Taxpayer are folks who are shortly to be voted out of office, so HTF is this supposed to calm the markets or the Bond Vigilantes? I mean really, at this point Brian Lenihan might agree to blow JC Trashit, but unless the Irish Parliament as a whole signs off on the Budget its just an abstraction.

    I see no way in HELL the Irish Parliament will sign off on a budget which puts no pain on the foreign bondholders but all the pain on the Irish pensioners. At the very least, the Irish will Go Galt and stop paying taxes. The economy will tank, and there will be no money to pay the bondholders regardless.

    Take this to its logical conclusion. Say the Irish Goobermint laid off every single Goobermint Worker to save pence to send to the Bondholders. Who is left paying any taxes at all?

    Even if the current Irish Goobermint signs off on the debt, they simply are not going to have enough money to pay the bondholdes no matter what. Their tax receipts will keep dropping and they won’t be able to service the new debt or the old debt. The only thing that could keep them numerically solvent is if Helicopter Ben loans them an infinite amount more money here. I just do not see how that is possible in the current climate.

    Even back in the time of Robin Hood, it was impossible to tax a population on more than they produced. The people will start to steal back until some type of balance is achieved. For the Irish, and for ourselves as we work our way into the same boat, a Black Market economy will develop, in the case of the Irish many will emigrate just as was the case in the years of the Potato Famine. Although its kinda hard to figure where they will go that is all that much better. Canada is probably a bit better right now, but its just a matter of time before their social state economics go into the toilet.

    Anyhow, we apparently have to wait a while while the BK Parade marches its way around the Globe here, although this does look like its going to be a watershed week in the Bond Market. Ireland is still not out of the Newz, and I doubt it will be until they actually do vote on their budget. There will likely be a good deal more street action, and then Portugal should light up as well. Break out the Popcorn.

    RE

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  14. I have bought pop corn. This sure will be an interesting movie to watch this winter.

    By the way you(Gonzalo Lira) have very interesting writings. Thank you.

    From Sweden

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  15. Great piece. "Interesting" times here!
    Some pics from the protest http://www.flickr.com/photos/xshayx/sets/72157625353422577/

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  16. Clearly many of you expressing the view that the Irish will fight back, do not live here. Already, the establishment - politicians, the central bank governor, economists - is softening up everyone by appearing on the main state owned radio and television stations and insisting this was the best deal we could expect, 'given the circumstances'. According to them, this additional 85 billion 'credit line' may not have to be drawn down and that even if it is the 20% of GDP we'll be paying in interest payments on this debt will be 'manageable'. Over the past two years, the Irish people have shown themselves to be so determined to hold onto the myth of the Celtic Tiger and the absurd debt-driven lifestyle that it represented, that they still hope that they (well, those who still have a job, ideally in the protected, bloated public service) can keep their heads down and hope that they can survive the worst of the tax increases and service cutbacks. Whipped dogs? Not a bad metaphor for the vast majority of people.

    Vested interests and insiders continue to dominate Irish public life and society. It's all going to come to an end eventually - the level of personal and state debt is so enormous now it cannot be repaid so long as we remain in the eurozone and even if we do return to our own currency, the chances of our exporting our way out of the fiscal ruins are much poorer than they were in the late 1980s and early 90s when there was inward foreign investment, sharp cutbacks in public spending and personal tax rates and a booming world economy. The growth projections for Ireland which are necessary for both the success of the EU/IMF bailout and the now five year state austerity National Recovery Plan, at 2.75% per annum are a nonsense. If we show any growth (using credible and reliable stats - no one believes anything the Irish Department of Finance says anymore) at all in the next few years it will be a miracle.

    This has always been a debt crisis - of the Irish banks and the Irish state. Debt has to be paid off or written off. There is no debt forgiveness in this EU/IMF plan for Ireland.

    A structured, organised sovereign default, with all the horrors that involves regards future borrowing prospects, bond rates, inflation, is now just being 'kicked down the road', along with all the other empty cans. Since this is a euro-wide bank and sovereign debt problem little Ireland needs to be the first in the queue to get the best terms possible from the IMF and whoever else will be burned by our inability to pay our bills.

    Ireland has been like a teenager who was given a credit card by mum and dad that had neither a strict credit balance or realistically high interest rate. Mum and dad (ie the Germans) were rather remiss in waiting nearly a decade to check the bank statement and to finally cut up the card. But unlike a real parent who knows they will never get the bulk of their money back from their feckless children, Germany seems to think they can squeeze the Irish til their pips squeak - thus protecting their own irresponsible banks and those of the French and others who also were part of the great lending extravaganza that took place between the strong eurozone countries and the rest of us little PIIGS.

    I can't imagine that they don't see the Day of Reckoning is coming, sooner or later. Unfortunately, most Irish people either don't have a clue about any of this or if they do, they still think some kindly old soul - it is the season of cheer after all - will come along and save us from ourselves and all our nasty creditors.

    Sadly, the quality of political parties being what it is, this is what the opposition parties are probably counting on as well. Scared witless, they will vote through the Dec 7 Budget all the while insisting - weasel-like - that once they're in power, they'll revisit the National Recovery Plan and the EU/IMF deal, as if it will make an iota of difference.

    As we say here, you couldn't make it up..

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  17. The people in Ireland would be better off bartering for goods and services without using fiat currency, or to nationalize the banks, and drop-out of the EU altogether.
    Don't sell your souls, or the souls of your grandchildren, to the international banking cabal.

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  18. Finland went through a very rough period in the early 90s, not too dissimilar to what is happening now around Europe (our export sector, for example, contracted at the time by 30% in just a few weeks at its worst).

    The bankrupt banks in Finland were first effectively nationalized, then spun off without the toxic assets, and the economy was back on track, albeit from a lower level, within months.

    The key to Finland's recovery was letting the banks fail, and I've read similar accounts from the Asian crisis of the late 90s, on how those countries bounced back.

    The correct way forward, with Ireland, is to let the banks fail.

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  19. >You know that a country’s financial situation is dire when the tabloids start quoting bond market interest rates on the front page.

    Too funny.

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  20. His prophecy about to be fulfilled?

    The Vision & Beyond by David Wilkerson
    1973, written 36 years ago
    David Wilkerson’s statements are followed by media references (in italics).

    1. Economic Crash Coming
    “There is worldwide economic confusion just ahead. In my vision this is the clearest thing I have seen…Not only is the American Dollar headed for deep trouble, but so are all other world currencies. I see total economic confusion striking Europe first and then affecting Japan, the United States, Canada and all other nations shortly thereafter.” David Wilkerson, “The Vision & Beyond”

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  21. The IMF has been imposing austerity measures on many so-called third world countries while pillaging their natural resources in exchange. In most instances, these nations were deliberately driven into debt by economic hitmen for this express purpose. Now, the rape extends to the rest of the world, but again, this is nothing new. Of course, naturally the people of these nations had a problem and the solution of the hitmen was to install favorable governments and arm them to keep the populace in line. That too has now been extended worldwide.

    It's the silence of many while they knew full well this was occurring elsewhere that gave rise to the problems in Europe and soon to come to America. The oligarchs simply ran out of third world countries to exploit and need to create some more "third worlders"--this time in the European periphery, but certain not to end there.

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  22. "No, the only possible route is bailouts to kick the can down the road. Until it can no longer be kicked of course but that could be years away yet. Rational people might have said that "there's no way the US can keep kicking the can down the road" when the US government defaulted in 1971, yet here we are. "

    Why prolong the inevitable? Get it on now, suffer now, and work for the future. We ain't getting out of this one no matter how far you kick the can down the road.

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  23. If the budget is passed then I can't imagine that Sinn Fein will simply remain as a peaceful political party. Quite possibly we will see the birth of a new round of terrorism in Ireland - but this time it will be aimed at the banking system and the IMF.

    PeteCA

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  24. Who Stole The Peoples's Money? Was it the EU Central Bank?

    Irish Taxpayers Forced To Bail Out British & German Banks.

    The D-Mark was efficiently managed by the Bundesbank from Frankfurt. The successor paper-money, the Euro, was supposed to have been managed by the EU's Central Bank from its ivory tower in Frankfurt. The current EU Central bank's boss is a Frenchman named Trichet. His predecessor was Dutch. What exactly were they and the EU's Central Bank doing when British, German and other banks pumped about €400 Billion into Ireland in the property pyramid scheme of 1998 to 2010?

    Why did the EU Central Bank not manage the Euro currency?


    http://galwaytent.blogspot.com/2010/11/who-stole-peopless-money-do-tell.html

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  25. I M F'd

    Don't get IMF'd...
    tell IMF, "FU"

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  26. How about a readers' poll? I bet the budget will pass, in spite of all the public protest and outrage.

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  27. A coward dies a 1000 death but a brave man but one. Remember Bobby Sands!

    Irlanda should default and let the Brits and Germans and Goldman Sachs get screwed. Let's get this fight going. There are over one billion Catholics who are not going to let Irlanda starve or freeze this winter but they have to fight!

    El pueblo Espanol is going to bring down this house of cards in 2011. Fu!! the Spanish Oligarchy and its European and American Bankster brethren! Let's get this fight going.

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  28. The IRA needs to start blowing up bankers and politicians.

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  29. Brilliant analysis Gonzalo, again.

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  30. Nice analysis GL. You understand the pieces as if you were a "Mick".

    Could this fail? I guess so, but I doubt it. This will be just another step in a bad direction. The failure will happen because of something we don't see coming. That's what makes it interesting.

    Your estimates the other day on IMF/USA exposure to Spain were spot on. The Ireland deal is 1/3 IMF, the US is 20% of IMF advances. Spain starts at $500b. So ~$35b is US share of Spain.($6b for Ireland)

    Tough sale these days.
    bk

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  31. It was a mere %30 of colonists on this side of the pond that carried out the "american revolution" which means that %70 were content to lick their chains and British boots. The people (presumably only Dublin residents) that showed their ire (land) the other day just might represent a significantly larger number per capita, thus enough to carry this off. It is, in any case, my fond hope. How's yur armalite?

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  32. Get your facts right.
    Fine gael is not a centre left party, it is, and traditionally has been more to the right than Fianna Fail..
    I wish as an Irishman living in Australia, to see the Irish government who are supposed to represent the people of Ireland show some guts for once and default, but alas there is not much chance of that happening and the budget will pass because corruption within the Irish system is rife where politions and those in high places are one and the same...

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  33. Rather cunning or Quisling like, take your pick, for the Irish public pension fund and the government's own fund to be used to capitalize the Irish banks. Now they'll take the first losses if the Irish start defaulting on their home loans.

    The default rate is pretty low given the number of homes that are underwater on the loans but that is, apparently, in part, because the Irish government has been subsidizing the homeowners.

    The subsidies will have to end now that the IMF/ECB/EU troika wants the deficit cut. Then what? Well Ireland's a small country. Defaulting
    on your loan means someone else's pension is going to have to be cut and its not someone in New York or London or Berlin.

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  34. Hi,

    I really enjoy you blog! Good article, however I would like to add a comment:

    - I think, you may be underpalying the negative role of the Irish public sector in all this. Irish civil service is one of the biggest employer in the country and pays some of the highest wages in Europe (in spite of an underdeveloped and largely unproductive economy) as well as providing lavish entitlements and benefits to themselves. It employs a huge number of people who produce nothing and cost a lot!

    The rest of the economy - agriculture, a small private sector and poorly paid service sector see their jobs rapidly disapearing. Private sector employees have to endure low wages, poor security, low benefits and pay high taxes to feed those parasites in the government sector.

    Government is clearly at fault but the fact is that most middle class unfortunately did support the delusion of wealth back during the Celtic Property years allowing the criminals in the government to run the show to their own benefit. It was a scam but it was a scam where the present day acclaimed "victims" were yesterday's eager participants and co-speculators - I am talking about the entire middle class Irish, not just their criminal civil servants and banking elite.

    I used to visit Ireland frequently on business throughout the last decade and I can count on my fingers (even if I hide 3 out of 5) the number of people I met who would share my skepticism and early warnings, for example ,this.

    Best regards,
    Stan (Heretic)

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  35. DEATH to the IMF!

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  36. December 7th should prove "interesting" to Europe on so many levels. If the Irish simply vote by joining in on the bank run plan going viral on the internet, along with all their fellow Europeans, it will show who ultimately has the power: the banks or the people.

    The vote in parliament may prove to be pointless as all the banks may technically be insolvent by that day. The world would be much better off it that came to be...

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  37. What's with all the "Anonymous" commenters?? Grow a couple..like I hope Ireland does. Where's the IRA when you need them? Here's something to justifiably stand up and raise hell and worse about and hardly a garbage can is kicked over...

    Either the Banks and their shareholders take a haircut or the Irish people do...Bad loans? Tough..that's what investing is all about. Will the Irish financial system collapse if a bailout isn't taken? It already has! It's just a matter now of who pays the piper..The best that can come of this would be if the Irish people and the German taxpayers shouted "Forget it.." at one another ....

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  38. You're a bunch of little antisemites!

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  39. I'm German and I say: Go default, folks! Look at Iceland: They did. Sure, the following couple years were not a piece of cake, but they are already coming out of the hole, and in a much better shape than the Greeks. Also, a fantastic way to tell the bastards in Brussels to get real.

    Werner

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  40. Wow, you EU guys are a mess. Why not come to Canada? Everything is great here, no problems.
    Sure, we're crypto-socialist, but our banks are in great shape, they don't monetize debt like the Yanks.

    Well, maybe a little, in credit card debt, car loans, student loans, but no big deal. And hey, if you need free health care, or free welfare, a get out of jail free card for any crime, no problem. It doesn't cost anything, and we have no debt or deficit.

    Well, maybe a little. But we have vast resource base and can sell stuff to the rest of the world forever. Heck, 80% of our exports goes to the US, and they're coming out of a recession, right?

    Well, maybe not, but at least the Americans don't run our banks. Mark Carney is a great guy.

    Oh yeah, he's ex Goldman Sax, but that's no prob..., um, ok, maybe we have a few problems, but surely we won't fail, and o and our resources won't dry up or get taken over by China, and our real estate will go up forever.

    And so what if our Government is the largest employer in the nation. Our problems are much smaller than yours. Right?

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  41. Ireland will be bailed out - one way or another.

    Spain will be bailed out too - unbelievable as it seems to you. The ECB will just print the money. They have already doubled the bailout fund to 1.4 trillion euro.

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  42. of course you let the banks fail - you don't re-stock the tuck shop, under the same rules of conduct, with the same chocolate smeared fat boys in charge.

    Generally, it is agreed that when an action always leads to a particular outcome, it's madness to repeat that action, expecting a different outcome.

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  43. I'm amazed there hasn't been a run on these banks yet? Or has there? My money would be out of Allied Irish et al for sure. Does anyone remember Northern Rock?

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  44. Tuesday ... Nov 30'th.

    WELL - it's just 2 days since GL wrote his article on Ireland, and not much more than a week (or so) since GL pointed out that tidal forces are pulling Europe apart.

    Now today we see interest rates on Spanish debt soaring, rising rates happening for Italian debt, and corporate bond prices starting to plunge. THIS is it. The Ponzi scheme of banking fraud and sovereign debt levels in Europe is starting to really cave in.

    At this stage - how can Angela Merkel and the German ministers still possibly believe that they can bail out a "unified Europe". It is just NOT possible. Get real, Germany!

    Get ready to see emergency meetings of the ECB, and pronouncements on the media that "top politicians are working to resolve the crisis". Ha! Ha!!

    How long before ordinary people storm the banks and demand to get their money back?????

    PeteCA

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  45. If the Irish take this budget, heads will roll, believe me, heads will roll. Literally.

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  46. Great post Gonzalo......! Keep up the good work....

    Ireland, then Portugal, then España and then Italia.... then.... then.... Greece all over again....... Not pretty, not pretty at all, and that's not to mention Belgium....

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  47. The plan to collapse the global economy is intentional. Please read http://www.green-agenda.com for details sourced back to the UN and it's counterparts.

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  48. Sinn Fein in IMF out.Simple as that.

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  49. Haircuts (scalpings) are needed. Politicians should be sent into the wilderness forever. Banks and bankers should be eliminated.

    But the Irish people have their share of the blame. They voted for the bubble policies. They gleefully gloated about their ebullient property markets. They quaffed Guiness and Champagne like their was no tomorrow.

    All the criticism of the bailout laments Irish growth and prosperity, woefully criticizing the policies which will lead to a contraction of the economy. Sure, this is unfortunate, but the basis of the argument is erroneous.

    The Irish Miracle is the Irish Mirage. They consumes thirty or forty years of wealth in a decade and now must pay for it. Talking about negative GDP growth as being unacceptable is wrong because the baseline is unrealistic. Ireland needs to return to 2000 and stay there a long while.

    Oh, and the same for Spain, Portugal, Greece, Italy, England, US, China, Singapore, Brazil...oh, screw it, everyone.

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  50. my friends,
    they will pass the budget.
    but as we in greece, you are alone against all the bunksters of the world.only the people can win
    this battle.your parlament memmbers are puppets like our traitors.i hope im wrong.sorry for bad english.
    Greetings from Greece!
    sakis

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  51. Holy sh*t! Mr. Lira was on the latest Keiser Report!

    http://www.youtube.com/watch?v=8Y-YmyTXdBs

    Congrads! Great interview (starts half way).

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  52. Well, I told you the budget will pass, no surprise there:

    http://www.bbc.co.uk/news/business-11941337

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  53. Sinn Fein in IMF out.Simple as thats good

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  54. Wouldn't it make more sense to approve the budget, put the first tranche in the bank - but which one? - and then default.

    The first outing for the EFSF mechanism - or whatever it is called today - could be the fastest derailment in EU history.

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  55. my friends,
    they will pass the budget.
    but as we in greece, you are alone against all the bunksters of the world.only the people can win
    this battle.your parlament memmbers are puppets like our traitors.i hope im wrong.sorry for bad english.
    Greetings from Greece!

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  56. If the Irish don't take the bailout, EU is screwed. That's how it is.

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  57. So a week ago as I write this, the Irish formally asked for a bailout from the European Union, acting in concert with the International Monetary Fund and the British government. And now, a week after that request, the EU finance ministers just approved the bailout of the Republic of Ireland.

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  58. I'm amazed there hasn't been a run on these banks yet? Or has there? My money would be out of Allied Irish et al for sure. Does anyone remember Northern Rock?

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