Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
You are not helpful. The Irish central bank and Ireland in general did not really regulate its own banks. Your theory that that was somehow the responsibility of other regulators to regulate Irish banks let's your neoliberal irish friends of thew hook. Instead it is evil foreigners.

There is no exposure of german banks to genuine irish banks. What happened is that Ireland was because of its no regulation and ultra low corporate taxes a welcome tax and regulatory haven for daughters of foreign banks. One was depfa, others were big SIVs of WEtsLB for example. The cost for these daughters is already borne by Germany. The exposure to genuine Irish banks, who ruined themselves in real estate, was always low and is after two years almost nonexistent.

This whole foreign banks would lose is just a xenophobic talking point to distract the Irish from the responsibility of their own banks and government.  

by IM on Fri Feb 4th, 2011 at 02:22:03 PM EST
[ Parent ]
Perhaps you are missing the realpolitik aspect of this. Organizing a political movement involves narratives with moral judgments. Your morality may be a bit different from mine in that I oppose the neoliberal scheme in the broadest sense, and my morality does view the enemy as evil. Others may view them as ill-informed; I do not.

Point being that it takes campaigns to make a movement - much as the current Middle-Eastern situation may evolve. I want for our side to build a recruitment system, which includes propaganda, of course.

We can discuss the philosophical points 'til the cows come home, but at some point we stick our analysis out there - which I do often enough here at home - and try to build a base.

As far as the haircut aspect, you are certainly correct in that the natives will be shaved, too. As Migeru implies, they can suffer either now with the punishments that will accrue to those who fight back; or they can suffer more over the long term as this bailout debacle robs them in smaller amounts, but constantly.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Fri Feb 4th, 2011 at 02:44:48 PM EST
[ Parent ]
The Irish central bank and Ireland in general did not really regulate its own banks. Your theory that that was somehow the responsibility of other regulators to regulate Irish banks let's your neoliberal irish friends of thew hook.

I grant you that the Irish Central Bank failed to regulate its banks. Most likely regulatory capture. But there are two sides to every loan. When the Irish real estate bubble popped there were lots of foreign banks that were owed money. These banks also had an obligation to perform due diligence when making the loan. That they did is laughable. So they and their regulators also bear responsibility. But, especially in Germany, the attitude is that this is all the fault of a bunch of irresponsible banks in peripheral countries - the German version of evil foreigners.

I advocate a fair sharing of responsibility where each party takes a haircut. You advocate having only the evil foreigners take the haircut. Granted my position is unhelpful to German, British and other creditors and their agents in the guise of the ECB and BOE. Were all oxen to be gored perhaps there would be an incentive to construct a fairer and more balanced system that serves the purposes of more than just the elites in Germany.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Feb 4th, 2011 at 05:29:44 PM EST
[ Parent ]
As I said, two years or so to late. All foreign banks have as far as possible left town, leaving the Irish government - NAMA and so on and the ECB holding the bag. But of course most Irish private capital has fled these banks too.

And now you have this cunning plan that foreign holders of Irish government bonds are unworthy and  domestic holders are worthy. That is fine as as far defending the interest of the Irish elite goes, but why is that now suddenly a pan-european progressive project?  

by IM on Fri Feb 4th, 2011 at 05:39:32 PM EST
[ Parent ]
How about all depositors, whatever their nationality, get saved up to a certain amount (say 100k to be ridiculously generous). Then you save as many of the rest as you can in some order that derives from whatever your strategic bargaining plan is as Jake outlined.

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Fri Feb 4th, 2011 at 06:02:45 PM EST
[ Parent ]
There have been suggestions that Ireland doesn't even have enough money to guarantee all deposits up to 100k. I find that hard to believe, but it's within the realm of possibility, given what we've seen worldwide in the last 3 1/2 years.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Feb 4th, 2011 at 06:10:55 PM EST
[ Parent ]
And now you have this cunning plan that foreign holders of Irish government bonds are unworthy and  domestic holders are worthy.

Far from it! I advocate and support claw-backs from all involved in this debacle. Every cent obtained by executives and board members and all income received by politicians and regulators regardless of how it has been sequestered in property, trusts, etc. This should apply to all profiting from these banks, Irish, British, German, etc.

We need to return private banking to the days of unlimited personal responsibility of the bankers for the solvency of their institutions. The state can clean up damage to others, but should see that the full burden of fiascoes fall on the bankers themselves. Current policy is the exact opposite. That is the core problem.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 5th, 2011 at 04:43:34 PM EST
[ Parent ]
The Irish central bank and Ireland in general did not really regulate its own banks.

Nobody here is disputing that. Ireland was a massive case of control fraud. People should be going to prison for that. But the fact that several highly placed property developers, bankers and Fianna Fail machine politicians should be dining on prison fare for a few years does not mean that the general public has to be flagellated in order to honour obviously bogus debts.

You could make the argument that those who voted for Fianna Fail bear some measure of responsibility, since Ireland is, after all, a democracy. While I agree that on some moral level they do, as a practical matter the buck has to stop somewhere. You cannot flagellate the entire Irish economy in penance over their corrupt politicians, for the same reason that you couldn't hang every German who voted for the Nazi party, or worked in the German armaments industry during the war.

Personal responsibility is all well and good, but you have to draw a line somewhere, or your quest for personal responsibility will turn into collective punishment.

The exposure to genuine Irish banks, who ruined themselves in real estate, was always low and is after two years almost nonexistent.

Well, that would simplify matters greatly. Then the Irish government just needs to shaft some domestic Irish bondholders. Which is always less complicated than shafting foreign bondholders.

There's just the teensy-tiny problem that it isn't true.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 5th, 2011 at 01:09:55 AM EST
[ Parent ]
I call Godwin!

Is is all the fault of Fianna fail now, what?

Yes, Fine Gael and Labour and the greens and the Progressive Democrats were all a bunch of communists.

by IM on Sat Feb 5th, 2011 at 06:47:04 AM EST
[ Parent ]
Tell me, do you believe that all Americans should be held responsible for the war crimes in Iraq, just because they are supported by both their major parties?

The buck has to stop somewhere. Killing the Irish economy to punish the Irish for electing crooked politicians is both overkill and collective punishment.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 5th, 2011 at 07:10:50 AM EST
[ Parent ]
The Fine Gael Labour Government left office in 1997 - long before any property bubble or unsustainable fiscal expansion.  I really don' understand why you appear to be trying to spread blame equally all round.  While there may be few in positions of power who are entirely blameless, the primary responsibility in Ireland has to lie with the FF led Governments since 1997, their developer/banker friends, the Central bank and the financial regulator.

In any case the primary losers now are the poor, old, sick and unemployed, few, if any of whom bear any responsibility for the crisis.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Feb 6th, 2011 at 09:08:24 AM EST
[ Parent ]
Do you really want claim the neoliberal policies of Ireland were all fine until the property bubble? And did either Fine Gael or even Labour offer any alternatives at the last election?
Six and half a dozen.
by IM on Sun Feb 6th, 2011 at 12:00:44 PM EST
[ Parent ]
Neo Liberal policies as such weren't introduced until Charlie McCreevy and PDs decided they preferred Boston to Berlin and introduced pro-cyclical tax reductions at a time of booming development and construction.  You may not be happy with economic policies prior to 1997 but to describe them as neo-liberal would be inaccurate.  There was huge state intervention in economic activity, the trade unions were officially recognised as "social partners" in national economic planning, and social welfare and minimum wages were increased (to what is now regarded as an unsustainable degree).  Throwing the neo-liberal label around too liberally is no more helpful that making nationalistic or Godwinian allegations.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Feb 6th, 2011 at 01:18:50 PM EST
[ Parent ]
I am using it as shorthand, yes, But how would you dewcribe Fine Gael? Social democrats? And hasn't Labour been very third-wayish now for years?
by IM on Sun Feb 6th, 2011 at 02:39:28 PM EST
[ Parent ]
You have also claimed the German policy is not neoliberal. How would you describe it Fine Gael's EPP partners, the CDU? And hasn't the SPD been a model for European third-wayers since Schroeder?

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Feb 6th, 2011 at 02:49:24 PM EST
[ Parent ]
I did say german policy tin this crisi was not neoliberal. And that is true. Prior to that both CDU and SPD have been drifting to the right. That said, the CDU is still to left of say the Tories, or the PP or both FF and FG. And I think, especially in the last years the SPD is going back to the left. And even in worst years we were still tame compared to New Labour.  
by IM on Sun Feb 6th, 2011 at 03:19:10 PM EST
[ Parent ]
Two words: Hartz IV.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Feb 6th, 2011 at 03:33:16 PM EST
[ Parent ]
That was pre-crisis. If we agree we are talking about a economic crisis starting in 2008 or late 2007. One word:
Kurzarbeit.
by IM on Sun Feb 6th, 2011 at 03:49:52 PM EST
[ Parent ]
The German response to this crisis has been a single-minded focus on balanced budgets and wage suppression. How isn't that neoliberal policy? Except, of course, insofar as it might be Austrianism...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Feb 6th, 2011 at 06:40:28 PM EST
[ Parent ]
The real german response has been automatic stabilisers and stimulus. The rest was rhetoric.
by IM on Mon Feb 7th, 2011 at 09:39:42 AM EST
[ Parent ]
Rhetoric. Right. We all know that constitutional amendments are expressions of rhetoric, not policy.

Incidentally, why shouldn't Ireland pursue countercyclical fiscal policy? Because the current German line is that they shouldn't.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Feb 7th, 2011 at 09:42:42 AM EST
[ Parent ]
In Irish terms, FG were mildly social democrat under Garrett Fitzgerald, more centrist under Bruton and are now becoming more old style conservative now under Kenny.

Labour wouldn't quite know how to find one way, never mind three...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Feb 6th, 2011 at 02:55:54 PM EST
[ Parent ]
<sigh>

Here's my simplified story about the Irish economy:

  • During the late 80's and early 90's there were a sequence of changes - tax cuts from very high rates (marginal of 90% at one stage!), the maturation of Irish infrastructure with the help of EU transfer payments, that sort of thing - that freed up the market economy to be reasonably efficient.

  • We started playing some catch-up on the rest of Europe - the whole EU solidarity thing worked, leading to pretty fast growth from a very low base. Not a bad thing.

  • The next ten years of FF-led government was an unholy mix of neo-liberals and populists who wanted to buy power by any means. What followed was a festival of tax cuts and selling the family silver - privatising assets - in order to fund tax cuts. The property boom was encouraged and fanned when it looked like flagging so that further giveaways could take place.

  • Meanwhile, the neo-liberals almost entirely captured the media. Ireland is best viewed as a regional UK media market, with three Irish TV stations and tens of UK or US ones, with UK newspapers and tabloids selling well. Labour ended up believing they couldn't be too lefty if they wanted to get votes because the conventional wisdom, locally and internationally, was entirely against them. Every other day there were reports of how wonderful the rest of the world thought the Irish model was. Ireland was the shining poster child, the richest country in Europe (note that income!=wealth).

  • Complaints (mentioned by Labour) about inequality, about the fragility of the tax system, about the dangers of pro-cyclical policies were all poo-pooed, with the Taoiseach of the time saying that the unbelievers should go kill themselves.

  • Then the economy started to slow and the financial meltdown happened and the government and the financial regulators couldn't bring themselves to understand exactly how badly they screwed up. They went from being the smartest guys in the room to being a crowd of feckless paddies again and they have no idea how to deal with that except more of the same: cut, cut, cut and be good little boys and girls and don't let any banks die or the serious people will be upset at them.

  • Bank guarantee, etc.
by Colman (colman at eurotrib.com) on Mon Feb 7th, 2011 at 10:07:54 AM EST
[ Parent ]
I call Godwin!

I would be very careful with that call. Were one to ignore the rampant short-sighted, self-serving stupidity employed by so many in their response to the Irish debt crisis, one could construct a narrative composed of the long litany of macro-economic policies and ECB decisions that have consistently been favorable to Germany and unfavorable to the periphery that Germany is attempting to achieve by economics what they could not achieve by military force 70 years ago. That would be worthy of a Godwin call. (I in fact believe that it is a group of wealthy individuals and those who serve them in several countries that, not entirely coherently, is advancing such a goal in their somewhat collective self interest.)

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Feb 6th, 2011 at 11:30:59 PM EST
[ Parent ]
This whole foreign banks would lose is just a xenophobic talking point to distract the Irish from the responsibility of their own banks and government.

Merkel, already the largest contributor to the EU's rescue fund, must walk "a very thin line" as she tries to balance her pledge to do whatever is needed to save the euro with voter hostility to the bailouts, said Carsten Brzeski, an economist at ING Groep NV in Brussels. She also risks harming her country's banks by her insistence that bondholders take losses on future bailouts. German lenders hold more than 112 billion euros of debt issued by the governments of Greece, Ireland, Portugal, Spain and Italy, according to data compiled by Bloomberg.


Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Feb 6th, 2011 at 04:50:57 AM EST
[ Parent ]
God, how sloppy, if not more. Let me take a hand:

German lenders hold more than 600 billion euros of debt issued by the governments of Greece, Ireland, Portugal and the United States.

Including Italy in the PIIGS is a invention of the neoliberal anglo business press anyway.

by IM on Sun Feb 6th, 2011 at 12:09:44 PM EST
[ Parent ]
Okay, let me try again.

Eurointelligence: Is Ireland Solvent (Wolfgang Münchau and Raphael Cottin, 24.11.2010)

In the long run Ireland is probably insolvent. Portugal is in a very similar position, perhaps even worse, because of structural problems that might hinder economic growth.

But in the short run, the show will go on. The readiness by the other Europeans to bail out Ireland is easily explained. The exposures by EU banks to Ireland, Greece and Portugal are massive. ...

Ireland is in a different league than the others. Unlike Portugal, Ireland could bring the house down, and that will still be the case, once Ireland's insolvency is fully realised and understood. A breakdown by countries shows that Germany and the UK are most exposed to Ireland, Spain to Portugal, and France to Greece. If the periphery goes, the European banking system will have its own subprime crisis - in addition to the actual subprime crisis.

Where are we headed now? There will be no immediate default. Ireland, and also Portugal, will come under the umbrella of the EFSF. Spain is more solid, but also highly vulnerable to a financial market squeeze. I would expect the EU to step in should Spain come under pressure. That could be through a series of bilateral programmes, or more likely an increase in the lending ceilings of the EFSF. The likelihood of such an event would be hard to predict. I would expect Spain to be ok, but Spain, too, needs to return to some solid growth.

The source of the data is the Bank for International Settlements.

There you go, as of the latest data available on November 24, the exposure of German banks to Ireland was of the order of €120bn.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sun Feb 6th, 2011 at 12:42:17 PM EST
[ Parent ]
120 bn total exposure is not the same as 120 bn exposure to government debt.

And if we follow the money, it seems to be british-german belgian conspiracy against Ireland.

by IM on Sun Feb 6th, 2011 at 02:34:12 PM EST
[ Parent ]
I can't see your goalposts any more, can you stop moving them?

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Feb 6th, 2011 at 03:05:35 PM EST
[ Parent ]
But you are moving the goalposts. You are taking total exposure as if it is exposure to government debt. It isn't. The second number is smaller, probably much smaller. I never claimed there is no exposure at all. I just deny that all irish debt is public debt - private debt is rather larger and that all Irish debt is to german banks; the exposure to british banks alone is larger.

Also, most of this is Depfa/HRE anyway and this bank is already nationalised.  

by IM on Sun Feb 6th, 2011 at 04:02:45 PM EST
[ Parent ]
Also, most of this is Depfa/HRE anyway and this bank is already nationalised.

The fact that the German government has taken leave of its senses and bailed out German banks does not mean that Ireland has to compound the mistake by bailing out the German government. If the German government wants a bailout, the proper place to argue that is at the ECB, which controls the printing presses. The printing press is where governments go to get bailouts in normally functioning fiat monetary systems.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Feb 6th, 2011 at 06:43:07 PM EST
[ Parent ]
120 bn total exposure is not the same as 120 bn exposure to government debt.

Why yes, yes it is, since Ireland took leave of its senses and bailed out their own banks, that's precisely what it is. Unless you are in the minority that believes that Ireland has a single solvent bank left with overseas liabilities. In which case I have a "competitiveness" reform to sell you.

It's this bailout that the "Irish rescue" - at usurious 5.7 % interest - is now trying to prevent from collapsing (as it should by any right).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Feb 6th, 2011 at 06:40:05 PM EST
[ Parent ]
Which is the best argument around that events are being driven by the very short-sighted German domestic political concerns of Angela Merkel and not by economic understanding or financial prudence of any sort. Given the situation and given the extraordinary willingness of the Irish government to attempt to swallow the whale of debt they have assumed, one would think that the governments whose banks are counter-parties to Irish debt would be more than happy to make loans available at zero percent and see how much of the whale Ireland could swallow. But no! They want to make 5.7% interest on the loan! They may as well drop a 20 megaton bomb on Dublin for all the good this will do in helping Ireland to attempt the impossible.  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Feb 6th, 2011 at 10:44:40 PM EST
[ Parent ]
I would suspect that most of the private debt owed to German banks is either owed by Irish banks or by  private individuals who are basically in slow-motion bankruptcy.

The IFSC complicates matters, in that some of the debt might be owed to branches of German banks there, for instance.

by Colman (colman at eurotrib.com) on Mon Feb 7th, 2011 at 10:18:01 AM EST
[ Parent ]

Display:

Top Diaries

Occasional Series