After Merkel…Ireland’s unpalatable choices

So, it seems now that Dr Merkel backs the idea that no, there should be no retrospective debt deal. Where does that leave us?

We have invested 20+ billion into the pillar banks (or another word starting with P and ending in X as a noted economist of many years standing is wont to call them). This is valued at 8b in the NTMA, and consists of the ownership of AIB, ILP and a chunk of BOI.

The ESM it is now clear will only deal with new claims. Therefore we will not get this back. Even if we did, in the context of a gross government debt of  170b, its a drop in the ocean. Even the whole 20b would not be meaningful. We face debt/GDP levels of 120% in the near future and when we measure against the taxable GNP we are heading towards hellenic hellish numbers of 150% plus

We have 28b in the wretched promissory notes. These are as flammable as petrol soaked crepe paper but the government refuses to consider setting match to them. And so they advance into the budget with 3.1b (6w tax take) in the hole of nonvoted captial spending, aka money to Anglo to give to the Central Bank which will destroy it.

History tells us that countries with unrepayable debts restructure, default outright, fiscally repress or let inflation do the dirty work. Where we now stand the latter is not possible with the BundesHawks at the ECB vigilant against weimarian excesses; repression takes time; default is a last resort. So we need to restructure. The only choice is what and how. The only stuff we can  restructure is the ProNote. Id restructure it to zero. Talking to politicians they are obsessed with the 3.1b- this is a liquidity issue. Unless we get the entirety of the Pronotes removed we are in deadly danger. Even with them gone we still labour under a massive burden of debt.

Unpalatable choices abound.


7 thoughts on “After Merkel…Ireland’s unpalatable choices

  1. crunchy

    How much of an option is defaulting on all or part of the sovereign debt?(Obviously that’s requires a balanced budget but for the sake of argument, lets assume)

  2. Michael

    If we tear up the note, the Troika can stop the next tranche of the bailout money until the state keeps its promise to support IBRC. So surely this option isn’t viable until Ireland is free of the current programme?

  3. Michael

    I don’t see why not as long as they can contain it from spilling out into a more general panic. So the cost to the Troika of Ireland failing should be much less than the cost to Ireland, of Ireland failing 😉

    Of course it’s a completely different story when the state is not reliant on official funding to keep the lights turned on….

  4. Pingback: Reuters: Merkel says NO to back dated bank recapitalisation via ESM - Page 121

  5. Mike Hall

    In the light of Enda et al’s protests of the German, Dutch & Fin reneging on the June summit agreement, there is even more reason to simply tear up the Pro Notes.

    After all, there is no-one on the other end of them.

    The Troika will not dare for one moment to consider refusing any loan tranches. They know full well if they do, Ireland leaves the Euro & the EMU then implodes in a most disorderly fashion.

    Why on earth do people think Greece has been kept in the Euro? It is, & never has been, to ‘help’ Greece.

    Long past time Ireland’s political ‘leaders’ & economics advisers started representing the interests of citizens, not just their own & those at the core of a deeply flawed, by design, currency union.


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