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Noonan comments criticised - The Irish Times - Tue, May 01, 2012
Minister for Finance Michael Noonan has today warned he will have to introduce a tougher budget that will include tax increases if the public rejects the Fiscal Treaty Referendum.

Speaking on his way into a Cabinet meeting this morning, Mr Noonan rejected suggestions that the country would still be able to access funding if a No vote is returned by the electorate.

"It's very clear on this treaty that only those countries that ratify it will have access to European Stability Mechanism (ESM) funding and there are no other funds," he said.

"If there's a No vote the Budget I'll be planning for later in the year will be dramatically more difficult than if there's a Yes vote.

"If people think that by voting No they'll avoid further tax cuts and increases, actually a No vote will do the opposite," he added.

Fianna Fáil described Mr Noonan's comments as "unhelpful" and said they would only serve to alienate potential Yes voters.

The problem is not that there is no mechanism for stimulating the Irish economy in the event of a no vote and a default (or similar) on Anglo Irish promissory notes etc. -  the problem is that the national elite have absolutely no idea how this might be done.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 1st, 2012 at 04:48:30 PM EST
See Steve Keen on Tonight with Vincent Brown. He discusses, (about six or seven minutes in), an e-mailed suggestion for Ireland to issue New Punts pegged to the Euro for domestic use only. They would trade Euros for New Punts with Irish citizens and use the Euros so acquired to pay off their Euro denominated debts to 'The Troika', telling them: "Here is your damaged currency back!" With the value of these Euros still circulating domestically as New Punts, the domestic economy would not crash. See also this thread.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu May 3rd, 2012 at 07:28:17 PM EST
[ Parent ]
Thereby circumvent the ECB's near monopoly on the creation of money?  I can't see our overlords in the CB liking that!

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu May 3rd, 2012 at 08:14:40 PM EST
[ Parent ]
Fuck 'em. If you have a plan implement the plan and listen to them scream. And just to make the point, some respectable people, such as yourself, need to start pointing out in print that, by refusing to consider negotiating with the Troika and by refusing to consider possible alternatives, such as the one discussed by Steve Keen, the Fiana Gael government becomes the collection agent for foreign powers that are collecting what, by any reasonable interpretation, should be considered odious debt. No matter how many times the debt has been through the laundry, it remains odious. By making Fiana Gael the face for the tax collector of funds to repay odious debt it is likely that Fiana Gael will follow the illustrious path of Fiana Fail. Come the day.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu May 3rd, 2012 at 09:16:41 PM EST
[ Parent ]
Me respectable? LOL
Serious people won't consider funny money.
There is no concept of odious debt in popular debate. We're screwing the little people in negative equity for their debts even after their houses have been foreclosed. That "system" doesn't work if the State suddenly defaults...

At the moment the Irish economy is bouncing along the bottom with c. 0.7% growth, stable unemployment, significant emigration and some good news job announcements. Most small mall businesses and consumers are just about hanging in there. If there is a significant further downturn then all bets are off. Just now people are still clinging to the life rafts and a belief that we may still get out of this alive.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri May 4th, 2012 at 06:12:59 AM EST
[ Parent ]
Well, it is probably not too long before govt. policies at the behest of the Troika come to be seen as the smasher of life rafts.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 4th, 2012 at 09:33:13 AM EST
[ Parent ]
The deal with the Troika requires that a further incremental €3 Billion be taken out of the economy each year for the next few years. That will more than kill off any green shoots that might be trying to peep through...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri May 4th, 2012 at 09:51:09 AM EST
[ Parent ]
The Wörgl solution, in short.

Of course, that is a violation of the EU treaties since they give the ECB the monopoly of legal tender. More imaginative ways around it must be sought.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper

by Carrie (migeru at eurotrib dot com) on Fri May 4th, 2012 at 01:55:25 AM EST
[ Parent ]
  1. Replace the central banker.

  2. Create a government charter bank.

  3. Intervene to defend the yield curve per Article 123 b) of the Consolidated Treaties.

- Jake

Friends come and go. Enemies accumulate.
by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 03:45:38 AM EST
[ Parent ]
More imaginative ways around it must be sought.

Adding the three points from Jake's list and just doing it would be pretty creative. As a sweetener they could preface the actions with a statement that they are fully pledged to maintaining the value of the Euro and the Punt to which it is pledged and would consider exiting the plan if the EU and the ECB began to show signs of sanity.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 4th, 2012 at 09:40:55 AM EST
[ Parent ]
Such a pledge would be prima facie incredible, for the simple reason that if upholding it were possible, they would not need to issue New Punts.

You should not make obviously incredible threats or promises. It gains you nothing and makes people more likely to call upon you to make good on future threats and promises, which is almost always expensive.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 09:44:33 AM EST
[ Parent ]
The USA certainly has been impressed with the effectiveness with which the Chinese have maintained the peg of the renmimbi to the dollar.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 4th, 2012 at 11:16:44 AM EST
[ Parent ]
Different situation. China is maintaining an undervalued peg. Ireland would be maintaining an overvalued peg.

The former is trivial, the latter is impossible.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 11:18:19 AM EST
[ Parent ]
In that case it might be necessary to devalue the Punt wrt the Euro so that the Punt is slightly undervalued. Even that would seem better than what is currently on offer from the Troika.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 4th, 2012 at 12:31:54 PM EST
[ Parent ]
Both printing Punts and firing the central banker can be struck down by the court. But in the meantime executive power rules, and if the time is used to establish that this is a functioning policy, then you use that either in a cat-and-mouse game (change the rules slightly and claim you have complied) or stand your ground against the dictates from Brussels.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Fri May 4th, 2012 at 10:26:02 AM EST
[ Parent ]
The Cypriot central banker reshuffle does not seem to have been challenged in the Court.

For that matter, I'm not totally convinced that the powers that be want the Court to be looking too closely at their - uh - creative interpretation of the treaties.

I guess in the final extremity, you could always get a few pictures of the outgoing central banker with his favourite hooker and resign him instead of firing him.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 10:40:42 AM EST
[ Parent ]
JakeS:
The Cypriot central banker reshuffle does not seem to have been challenged in the Court.

I thought - but have no other source then the wording - that the term was up. If I remember EMU rules correctly its a six year term and appointment is by the parliament-appointed CB board. Firing a CB board member during the term can be challenged in national court and firing the boss can be challenged in the Court. Can't find a source right now.

JakeS:

For that matter, I'm not totally convinced that the powers that be want the Court to be looking too closely at their - uh - creative interpretation of the treaties.

Yes, firing for subverting EMU treaties with respect to other goals then price stability and using ECB to subvert other EU-treaties, would make a court hearing an interesting spectacle.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sat May 5th, 2012 at 04:58:07 AM EST
[ Parent ]
The trick would be to hold implicit and explicit threats of default in reserve and then proceed to implement your plan and pay back the debt in Euros. The debt would get paid, but not be accompanied by the 'soaking' of the rest of the economy that is the point of the current scheme. It would seem that the further Ireland proceeded along this path the more secure she would be in continuing. By so doing she would be providing a light for the feet of others.

One possibility would be to carefully 'privatize' the process of the creation and administration of the Punt. Then they could plead respect for private property. :-)

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

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 4th, 2012 at 11:23:39 AM EST
[ Parent ]
The Euro is hard currency for Ireland. There is no guarantee that it can pay back these debts. In fact, if I were to bet, I would bet on "not."

And if not, then they need to hang on to their strategic hard currency reserve, not expend it on frivolous things like pleasing foreign creditors.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 11:39:20 AM EST
[ Parent ]
The proposal is really unvetted, but it was Steve Keen's surmise that, by exchanging a significant portion of domestically circulating Euros for Punts that this would enable foreign creditors to be paid without crippling the domestic money supply. And additional Euros would still be entering Ireland, as it has a trade surplus. How much of the available Euro reserve so obtained it would be wise to pay on debts to other countries or the ECB should be a tactical decision - designed to buy time for the domestic economy to recover.

While no details were spelled out, I expect that it would be necessary to require all cross border transactions to be conducted through the Irish CB. This is what worked in China, however the Argentine experience might suggest other options. I don't know.

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

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 4th, 2012 at 12:28:22 PM EST
[ Parent ]
But it will have a current account deficit, which means that there will not be a net inflow of hard currency, unless .

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 12:40:11 PM EST
[ Parent ]
... unless they default on external debts, or take steps to prevent expatriation of profits.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 12:41:15 PM EST
[ Parent ]
Are you saying that the present current account surplus will turn negative if they implemented the proposed New Punt plan or that they do not now have a surplus? Were such a New Punt to be implemented it would allow for more domestic economic activity. Were it to be devalued relative to the Euro that would reduce imports. The effects on Intel and other transnational corporations could be mitigated by allowing such corporations to continue to make purchases of raw materials in Euros, and, of course, to price and sell their products in Euros.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 5th, 2012 at 10:26:32 AM EST
[ Parent ]
Ireland has a current account deficit, but a trade surplus.

Now, for a normal country, that would mean that after repudiating sufficient amounts of foreign debt, it would have a current accounts surplus. But Ireland is not a normal country, because the difference between trade balance and current accounts balance is driven by expatriation of profits rather than expatriation of interest payments (as is usually the case).

That means they can't default and peg the New Punt to the €, because they can't defend that peg.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat May 5th, 2012 at 04:58:04 PM EST
[ Parent ]

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