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Yeah, the permanent solution is for the new Dail to renege on the blanket guarantee of all bank liabilities adopted by the previous government in October 2008. This will burn some creditors of the Irish banks. It will be a sovereign default since presumably the guarantee by now has legal standing. Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
That would actually make sense.
But that is not the proposal of the post and not the proposal of most of the commentators here who want to default on all Irish government debt.
They guaranteed the entire balance sheet of the banks, from deposits to senior to junior debt to derivatives to whatever.
So bondholders had a government guarantee they didn't have before.
I'm not saying repeal the deposit guarantee. After all, depositors have always been and will always remain the most senior creditors of any regulated bank. No, I'm saying repeal the blanket guarantee of the entire unsecured debt of the Irish banks. Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
The plan outlined in the post above discriminates between foreign and domestic creditors. Do you support that?
However, as an initial threat in order to bargain down to a sensible position it might make sense. Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
If the powers that be do not want German taxpayers to bail out Greek sovereign bonds, then there is no reason for Irish taxpayers to bail out German pension funds.
- Jake Friends come and go. Enemies accumulate.
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