Foreign banks and creditors should lose everything they gambled on the likes of Anglo, but instead, they have been saved by the taxpayer
Make no mistake about it, this ‘bailout’ will sink Ireland. We are witnessing a monumental struggle between the innocent average Irish person and the guilty creditors of the bust Irish banks.
Interestingly, the financial markets have seen through what the Government and the elite are trying to do and have reacted with ferocious negativity to the Irish deal.
The markets realise that the Irish State is not bust; rather the Irish banking system is bust. Therefore, rational people can see that any deal which is framed to give Ireland a chance has to sever the link between the bust banks and the solvent State.
However, far from severing the link, the deal solders the link between State and banks, making the Irish Republic itself little more than a bust bank. The rest of the world has twigged that what the elites are trying to do is preserve their system by giving the bill to the people, and this will not work. This is why, far from calming the financial markets, the IMF deal with Ireland has enraged them.
Extraordinarily, the people who were supposed to negotiate for the Irish people not only negotiated against us, but couldn’t see the backlash coming. Perhaps this is because few of them have any real financial market qualifications.
So, rather than force the ECB to account for its own monumental culpability in allowing out-of-control German and French banks to lend recklessly to Irish banks, the Irish negotiators turned sides and acted as debt collecting agents of foreign banks.
Think about what is happening in our country. Foreign banks and creditors should lose everything they gambled on the likes of Anglo, but instead, they have been saved by the Irish taxpayer, who had nothing to do with executive decisions at Anglo and the other banks. These same major international banks will now lend money to the EU who will lend it to us and the same banks will make more money on interest from us.
So the very banks that should be punished for their failures are being bailed out by the Irish citizens and, worse still, they will get paid more interest from us in the loans they are now extending to us, to save themselves!
Let that sink in for a minute. This is not capitalism, it is not European diplomacy; it is a stitch-up.
This is only the first part of the terrible fantasyland we have been led into.
In order to get to the bottom of what is happening, we have to clear up a few things. First, we have to stop calling it a bailout. This isn’t anything like a bailout. Rather it is the EU giving us enough rope to hang ourselves in the hope that we don’t hang all of them.
Of course, as soon as they gave us the rope, they started discussions on a mechanism that would ensure no other country would have to be beggared by a profligate out-of-control administration again.
Amazingly, our so-called negotiators signed a deal that will be the last of its kind ever signed by a European government and, in so doing, they have condemned their own people.
The EU leaders realised last weekend that the problem was bigger than Ireland, so they have committed to come up with a construction in the weeks ahead which will mean that in the future when banks get into trouble for lending too much, they and their creditors will pay. They will share the burden.
But Ireland will not be allowed to avail of such a deal because that would be retrospective. So rather than dig their heels in, our negotiation team signed and allowed the EU to treat Ireland differently to any other country. We can go hang.
So not only have they given us a rope, but the interest rate on the rope is nearly a death sentence in itself. It is reported that the “blended rate at current market prices will be 5.82pc”. As opaque phraseology goes, that one is pretty meaningless.
But let’s accept that at face value, and look to the costs of the financial noose our ‘friends’ in Europe have given us.
There are two sides to the story.
First, there is the cost side. If we borrow the entire €67.5bn and scrape the bottom of our own barrel to come up with €17.5bn, we can add €85bn to the current outstanding €90bn of debt. That will leave us with a national debt of €175bn by the end of 2014. The interest on this will come to about €8.5bn per annum. This, of course, is the optimistic scenario.
Anyone who has watched in horror as the cost of Anglo has risen from zero to €4bn to €12bn to €18bn to €24bn to €35bn over the past 26 months will know exactly what stock to put in government forecasts.
But the other side of the story is growth.
If this debt is not to drown us, we need the economy to grow at a pace that is greater than the interest we are paying on our debt.
With a debt/GNP ratio far above 100pc our growth will have to be in the order of 8-10pc by 2014 for the economy just to stand still. Anything less than that and the interest payments head off on an unsustainable tangent.
Without growth at these levels, the interest payments leaving the economy (a major problem when a country has all its debt owned offshore) will prove such a drain on the State that we will end in a debt-deflationary spiral. This is where our growth fails to meet the interest payments, making the following year’s growth lower as there is less investment, making that year’s interest payment more burdensome, leading to less growth etc, until a huge default becomes inevitable.
So where will this growth come from? Where can it come from?
The assumption underlying the four-year plan is that things will not get any worse. That is some assumption. But let’s allow it for a moment. Has there been any government policy recently that is aimed at improving opportunity for the future? Or have they all been about preserving the past, and the “insider” power nexus that got us here in the first place?
The bailout hits the sweet spot where the interests of our insiders and the European insiders meet. Luckily for us, the financial markets do not have the same interests. The markets want growth, not punishment, which is why they are sceptical.
Without a radical change in the way this country is governed, there is no hope of growth returning. Our only hope is that maybe there is a tide coming that will wash away the ‘insiders’ and take their policy decisions that will bankrupt the country with them.
David McWilliams performs ‘Outsiders’ tonight at the Glor, Ennis; tomorrow at the Backstage Theatre, Longford; Friday at the Dunamaise Arts Centre, Portlaoise; and Saturday at Siamsa Tire, Tralee
Bullseye dude.
Insider Spoofaramaâ„¢ sliced and diced.
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How they turned private business debts into sovereign debt and made the citizenry liable for them leads one to believe that some of their cute hoor friends/ sponsors/ owners own some of those crappy bonds. Thank you for contunually providing this bullshit filter.
How they turned private business debts into sovereign debt and made the citizenry liable for them leads one to believe that some of their cute hoor friends/ sponsors/ owners own some of those crappy bonds. Thank you for continually providing this bullshit filter.
I want to know can a new government renege on this appalling deal? How might that be done? Or indeed will they? Are we bound by this arrangement or can we simply say Sorry we’ve decided not to and it’s just tough if you don’t like it and here’s what we are willing to do?
David’s sentence: ‘Our only hope is that maybe there is a tide coming that will wash away the ‘insiders’ and take their policy decisions that will bankrupt the country with them’.
Is this the fallout from the inevitable ‘contagion’, the nuclear option? Something on the horizon which the international financial media are beginning to describe?
Thank you David for always providing the BS filter. I second that comment from @ElQuebin above.
Well done. U Nailed it!
Until we have a radical change in our political landscape and the way in which we govern this country, we will be in real trouble. We are thundering down a black hole and the markets know it, we know it, Europe knows it. We are the scapegoats of Europe. Everyone knows it and our so called leaders still shape up and dance with the bust banks. Who are the idiots here? I was of the opinion it was the crony politics practices that were at fault, but now I realize it’s us, the very people who tolerate these leeches and… Read more »
Sink or swim. Deckchairs on the Titanic. Submerged in a wave of debt.
As usual, William Shakespeare said it all 400 years ago.
Full fathom five thy Fatherland lies,
Of its bones Joe Corrall made:
Worthless bonds that were its prize,
Nothing of it that doth fade,
But doth suffer a Sea-change
Into something poor & strange
ECB & IMF weekly ring its knell.
Harke now I heare them, ding-dong, bell.
[…] You may view the full article and add your own comments at http://www.davidmcwilliams.ie/2010/12/01/bailout-will-sink-ireland-before-we-can-even-swim […]
I thought things were bad a few weeks ago, but things seem to have got progressively worse and worse. The Vincent Brown shows last week I think have been a turning point for me.
Basically, this place seems to be completely banjaxed, honestly is there any hope at all? I’m single with some a lot of savings in the bank (no mortgage) and to be honest I think I’m well off out of here. But where to go and what to do?
any suggestions please…
David – as always, I appreciate the frankness and directness of your posts.
We know the situation we are in. We know this EU *bailout* is not in the our best interest. I think anybody with a pocket calculator can see that the numbers don’t really add up.
The question is, what is the SOLUTION?
David, you are spot on with this post. It adds insult to injury, the interest rate we are being charged for assuming the banks debts in order to make whole the bondholders who I believe to be mainly German, French and UK banks. This is basic Economics 101, capital markets have risks & rewards. The higher the risk, the larger the risk premium and potential reward. If it was implied that sovereign governments were the guarantors of all bondholders then the interest rate bondholders were paid would be much lower, equal to the sovereign lending rate, but they were not.… Read more »
Down here at sarkozy’s office in Cannes the attitude is that the Irish are ‘ egoiste’ and just tough luck.
My thoughts on reading this article is that were we a Protestant State this financial genocide would not have happened from our elected politicians.
And Dorothy when are you down this way ?
Never a truer word could have been spoken, David. My wife and I are going to follow the advice you gave us last Sunday night at your show in Cork about asking the politicians when they start coming around whether they’re going to meekly follow what those idiots in government did or whether they’re going to tear up the agreement and leave the banks and bankers ‘swinging in the wind’. David has been absolutely right in everything he’s said in regard to what’s happened over the past 2 years. All this FF led government have done is pander to their… Read more »
Its a lovely night out there. Am I really supposed to think that they are all eejits in the government and civil service. Mabey it is best to believe that the negotaiotors did their best. David is very interesting reading but he is making his living out of challenging every decision made.
Another view on the ECB Mess:
http://globaleconomicanalysis.blogspot.com/2010/12/barbershops-open-in-2013-market-screams.html
It looks as, just like the US and the UK, the ECB are hoping that if they can kick the can about three years down the road, the problems will all have gone away.
No one has given a single useful idea as to what, sustainable, employment sector will grow, over the coming three years.
Hi, I have read your article David and as usual you state what is obvious and you are consistently very accurate. But what concerns me is what you don’t say. If we blow this deal out of the water where will the money come from to keep liquidity in the Irish economy and keep the ATM machines etc working? I am asking a very serious question not one that panders to one faction or another. If the ATM machines stop dispensing currency and stop they will if the ECB pulls the package what then? Everyone here points to the Iceland… Read more »
Who needs enemies when we got friends like our European partners!!!
http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/11/what_the_uk_is_contributing_to.html
Do you love the Germans?
http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/11/germany_wants_punitive_interes.html
not after reading that article
Default. Leave the Euro and Leave the EU
MEMO FROM EUROPE NOISE NOISE NOISE all you are doing is causing further depletion of deposits from our safe Irish banks. All this domestic analysis is not contributing to our prospects in Federal Europe Lisbon Part 3 (allowed one attempt this time or we will rewrite your constitution). Dont believe economists Mc Williams Gurdgiev Lucey Kinsella they will shortly be going on holidays. Your recovery is well underway thanks to our multinational exports we reserve right to move them if we decide. Your GNP will grow in 2014 for those of you still left with a roof over your heads… Read more »
NICE ONE DAVID
THIS IS GRAND LARCENY!
TREASONOUS RATS
EU BANK RUNS MUST BE COVERED BY ECB.
WE NEED A CHANT GOING……
ECB IS LENDER OF LAST RESORT!
TRICHET! BAIL OUT YOUR OWN MESS!
ECB IS LENDER OF LAST RESORT!
TRICHET! BAIL OUT YOUR OWN MESS!
ECB IS LENDER OF LAST RESORT!
TRICHET! BAIL OUT YOUR OWN MESS!
SOMEONE TRANSLATE “LENDER OF LAST RESORT” INTO FRENCH PLEASE!
QUICK LESSON FOR ANY SITTING TD STEP 1 – GIVE PEOPLE PRO’S AND CONS OF DEFAULT – HAVE A REFERENDUM AND GO WITH THE RESULT! STEP 2 – THERE IS NO STEP 2! IT’S CALLED DEMOCRACY STUPID AND WE GET TO DECIDE AND SHARE IN SOLIDARITY THE RESULTING CONSEQUENCES. P.S. I BET INVESTORS WOULD HAVE MORE RESPECT AND FAITH IN US IF WE DEFAULTED! OH AND YOU DON’T HAVE TO SUPPORT YOUR PARTY – TRY SUPPORTING THE PEOPLE FOR A CHANGE – YOU MIGHT EVEN LIKE IT! IF YOU THINK THAT THIS IS AN OVER SIMPLIFICATION….WELL THAT’S JUST YOUR SELF… Read more »
@Bella,cbweb above
In relation to the binding or non-binding element, there is an article from 22 Nov, updated 25 if you google: ‘darren o donovan imf conditionality’
Apparently the memoranda are not legally binding under international law and two cases, thai and irish, are included in the update. So there may possibly be a window of opportunity.
David, Paul, Brian, Karl, et al: A united front for a challenge and change? We [irish] are in a strange position today where some american and english commentators are sympathising with us! Todays FT and v early morning Newstalk…
Just read in the Washington post that the American people will be paying $1,700 extra in tax next year. Each. In Ireland we will be paying E1,850 extra to begin with. Thats’ what we know about before the budget!
I suggest a pragmatic approach. Take the bailout money. Agree to the conditions. Fix the Irish banks. Get our costs down. Get the private sector labour market hiring again. And eventually we will have the banks solvent again – though much reduced from present. Here is the memorandum of undestanding. There is not requirement concerning Spain is going to go to the wall within 12 months. Belgium holds the EU Presidency, but it has not selected a government in 7 months. Unlike the Czechs and the Slovaks, the Walloons and the Flemings don’t know how to divorce a state. In… Read more »
@joxer Article by David is available in the archives on this site from Dec 24 2008. [Response to your post above of 7:32pm today]. You might be kind enough to read this in light of the comments contained within your post. The night porter in the Lisbon hotel then let me read it at the reception desk at around midnight. Very Christmassy it was. I hope it is not taking a liberty to include the final piece below: He has just done a deal with the management of the Irish banks which even the bewigged last queen of France (bred… Read more »
++1 David…. hey…. did they not tell us they will rebrand Anglo Irish Bank?
Here is a suggestion: Republic of Ireland
We wouldn’t want to be like Iceland with its now massive unemployment of 7.5%. When they defaulted on their debt, their unemployment rose from 13% to 7.5%. Now we wouldn’t want to do something crazy like that (sarcasm). No our Brian said we have matured as a nation and we are good Europeans, and we should all be calm, as our friends in Europe and the IMF are going to help us. You know these people in Fianna Fail are either idiots or traitors. They are more interested in saving the Euro than saving Ireland. This is like Michael Collins… Read more »
The bailout hits the sweet spot where the interests of our insiders and the European insiders meet. THIS is precisely the case! Europe is infested by Lobbies, and guess what the banksters lobbies did in the past two years? Working around the clock. If you think Ireland has a corruption and cronyism problem, look at Brussels. 1. Government out! 2. EU/IMF read my lips…. Deal is off! 3. No politician who agrees to the insane 3% framework will get a vote Since the Maastricht treaties were established, the contract was broken 75 times by EU member states. No one was… Read more »
One point to remember . If what David says is right and also from from his last article that Ireland will not be able to afford the repayments and as well the interest, could this bailout ” stich up” effectively have (as in Terminator 3) postponed not stopped ” Judgement Day” and that whether you like it or not that Ireland will default ? Is it also possible that by Ireland defaulting that that will be the catylst for Portugal , Spain , and whatever else to come crashing down ? The Mighty Euro Itself ? Is it just a… Read more »
Does anybody know what qualifications Ollie Rehn has
or any of the EU team ? DO they rely on their equivalent ” Civil Servants” to advise them or do them come from buisness and financial backrounds ?
Anybody know ?
Great article David.
I get the feeling though that its too late, the damage has been done by Cowen and Lenihan, and the many gobshites out there who still support them. Greens are no better. So much for “the worst day in government is still better than the best day in opposition”, ah poor auld Gormless is feeling sick to the pit of his stomach, ah poor auld Gormless, God love him.
Here’s my one cent worth. Hi Mr Rehn and Mr Chopra. I hope you liked your visit to Ireland. It is interesting that you want to offer Ireland a loan. The terms of the loan are even more interesting. We are not sure about the interest rate. We will get back to you in a few months and let you know if we need it. And by the way it will be necessary for you to instruct the ECB that they will need to keep the banks in Ireland liquid until we make a final decision about the loan you… Read more »
THIS IS TRICHETS MESS.
MAINTAINING LIQUIDITY IS THE ECBS TASK.
THE ECB WANTS TO ALLOW A DEFAULT ON AN EU BANK…..?
THEN SO BE IT.
BUT IT WONT DEFAULT!
BECAUSE THAT IS ITS JOB!
AND EURO CREDIBILITY DEPENDS ON IT.
LET THAT SINK IN….
IRELAND WAS NEVER “THE LENDER OF LAST RESORT”
THE ECB IS.
THIS DEAL IS EQUIVIALENT TO NY STATE BAILING OUT LEHMANS.
LET THAT SINK IN….
YOU ARE BEING ROBBED BY THE BANKING SYSTEM.
MAKE NO MISTAKE.
7,000 FIRST PREFERENCE VOTES FOR FF IN DONEGAL SW LAST WEEK, SAYS IT ALL.
I recommend Damon Vrabel’s series of videos “Debunking Money”
http://csper.wordpress.com/
Also his series “Rennaisance 2.0″ is an eye-opener about the ‘bond holders’ and the real nexus of power in our world.
http://www.csper.org/
My hope is that there will be a cascade collapse in Europe which will effectively cancel the sell-out deal.
I dont think its worth paper it was written on.
FF have shown their real colors but still many will not be able to see that and will vote for them.
I hope the Greens are wiped out…their betrayal of the Irish people is unforgivable.
FG are just as bad. If they get power they will accellerate the dismantling and privitisation of the Irish state. They will sell us out too. Guaranteed.
Well done David, writing with truth and vision as ever! I think people feel helpless that they can’t do anything about what is happening. They should know and be reminded that they can do something and that is to use their vote carefully and thoughtfully. People need to wake up and fight! This is an immoral theft – plain and simple. Nobody comes and bails me out everytime I lose money on the stock markets! People need to understand fractional reserve banking and fiat monetary systems. It should be taught in schools so everyone understands how the system is wide… Read more »
Debt Markets Don’t Believe Ireland’s Lucky Charms
http://hedgeanalyst.com/2010/12/debt-markets-doesnt-believe-irelands-lucky-charms/
ADDRESSING THE FINANCIAL CRISIS:
THE EU’S INCOMPLETE REGULATORY RESPONSE
http://www.egmontinstitute.be/paperegm/ep39.pdf
Responding to Martina Devlin’s latest article http://www.independent.ie/opinion/columnists/martina-devlin/martina-devlin-were-left-out-of-pocket-by-tds-moral-bankruptcy-2444700.html By any measure, it is an extravagant annuity: almost four times the average industrial wage. There is more to that picture: The GDP (Gross Domestic Product) of the 41 Heavily Indebted Poor Countries (567 million people) is less than the wealth of the world’s 7 richest people combined. -World Bank Key Development and Data Statistics – Nearly a billion people entered the 21st century unable to read a book or sign their names. Less than one per cent of what the world spent every year on weapons was needed to put every child… Read more »
Michaelcoughlan. Yes, we get out of the Euro now and print our own money now. The euro by my reckoning is a busted flush once the ECB / Bundesbank wheel out the printing presses and krank up the money printing engines. I reckon the euro had always been for Germany since the fall of the Berlin wall a bridging mechanism to see Germany into its own currency the Euro mark. Germany is the next super power and Germany will trash the euro for a new indigenous currency and launch the rise of the fourth Reich and go for broke on… Read more »
Germany basically used the PIIGS greed against them and used it to rebuild itself into a superpower for the coming century. Germany has pulled off as clever an economic coup de grace the world has ever witnessed, as far as I can make out, and they’ve carried it out on a bunch of laizy countries that laid itself open to it, the PIIGS. The PIIGs thought they were the wise guy and onto easy money and the PIIGS insiders destroyed their economies with property POnzi pyramid scams and Germany quietly in the background laid the industrial productive foundation for its… Read more »
In Roman times, a slave was placed on the chariot of the returning conquering General. As the General paraded through the eternal city and received the garlands and tributes from the populace and its elders, the slave would whisper gently in the General’s ear: “fame and fortune are fleeting”.
Someone would do well to repeat these words to senior FF ministers as well as the ruling EU class along with a certain Monsieur Trichet.
Found this podcast on the Guardian – a lot of mentions about Ireland – a bit downbeat though reason given that we have no money for stimulus
http://www.guardian.co.uk/business/audio/2010/nov/30/the-business-podcast-china-obr-ireland
Thinking about how best to use my vote in the upcoming election…. are any of the politcal parties willing to stand up for the irish people and refuse to take on debts of private banks? Even a child could understand that what is happening here is robbery , plain and simple. I want the people who make up the next government to feel the same anger and sense of injustice at what is happening as I and many others do,and be willing to act accordingly ie. be willing to tear up any deals, and cancel any guarantee’s made by the… Read more »
I want to REASSURE everybody that FIFA are definitely not corrupt in any way….FIFA are clean as John Delaney’s underwear during the Saipan incident…
http://www.rte.ie/sport/soccer/2010/1202/worldcup.html
Putin stayed away for the official announcement. It is a strange when a politician distances himself from this sort of “success”. It is like as if he knew that it was going to be a charade.
Coming to Anglo near you
http://www.youtube.com/watch?v=h0dJ0hjOwC4&feature=player_embedded#!
Michael Hudson re economic warfare.
http://www.counterpunch.org/hudson10112010.html
He is, like David, one of those very rare creatures…an economist who can see and think clearly.
For those who doubt the Machiavellian truth check out John Perkins on google or youtube…He wrote: “Confessions of an Economic Hitman”.
Perhaps the Debt Agency for Irish Lending could break tomorrow for a few minutes to watch the now gone viral:
http://bit.ly/e3kd0H
They could then reconvene to allow Lenny and Clown to do an address the nation type broadcast, a Hammer Production, something along the lines of:
http://bit.ly/e1S71K