Yesterday the Minister for Finance published a statement and a set of documents which set out in some detail parts of the agreement reached over the past couple of weeks with the IMF and various parties from within the EU. I say “some parts” because it seems a secret side letter dealing with the banks is not being published at present. It seems bizarre that the documents were published only after statements on the agreement in the Oireachtas where Opposition parties were forced to comment on documents unseen. Why weren’t the documents published on Monday last before the matter was dealt with in the Oireachtas? For interest, the PDF consolidated document was created at 1.51pm yesterday. And I am still at a loss as to why the letters at the top of the consolidated document are dated “ December”.
It was of course predictable that Opposition parties might attack the bailout plan in the Oireachtas on Tuesday. And it must be said that the Taoiseach gave a robust defence in which he pointed out that 5.8% was less than the rates practically available to Ireland at the moment, that the State was a half year away from running out of the cash to fund day-to-day spending (including pensions, social welfare and public sector pay), that Greece was now seeking the same bailout terms as Ireland and that we need a functioning banking system. He even managed to get a few laughs when he responded to Sinn Fein’s speech and remarked at how ironic it was that just as Sinn Fein were coming round to the idea of the State that they still weren’t aware that the State needed to be funded (unfair yet funny nonetheless). But he deployed at least three tactics in dealing with the onslaught from the Opposition which are worth examining:
(a) He didn’t reveal all of the terms of the deal. In particular we don’t know what has been agreed with the ECB from whom Irish banks appear to have €90bn+ of emergency liquidity assistance. He didn’t reveal why the banks need further capitalisation at this stage. He deployed misdirection as far as I was concerned to try to focus the bailout on “Garda and nurses salaries” instead of what it is really about : the banks. The interest rates are just now becoming known though they are not included in the document set published yesterday.
(b) He challenged the Opposition to produce a better alternative to the unpublished agreement. In principle this was a fair tactic because it is very easy to knock a solution to a difficult crisis without proposing an alternative. It would have been fairer though if the Opposition knew what deal was being proposed.
(c) He specifically challenged the notion that has gained mainstream traction in the State supporting “burning bondholders” and default. The Taoiseach claimed that the Opposition regarded these options as “cost-free”. Again a fair challenge but it would have been fairer if he didn’t use the extreme of claiming that supporters of default say it is cost-free, a more accurate assessment is that they said it would cost less than the present course.
So having studied the consolidated document published yesterday, is there an alternative and would default cost less than the proposed agreement? Before starting it needs to be acknowledged that we do not have comprehensive facts on what has been agreed with the IMF/EU and in particular we do not know what is proposed in detail with the banks, including the European Central Bank.
Firstly I should say that I don’t see fiscal balancing, getting our revenues to equal our costs (excluding the cost of the bank bailout) to be an epic challenge. Nor do the politicians who believe we can achieve near equilibrium in 4-6 years. And frankly if those fuckers (that’s what our Taoiseach called them in the Oireachtas when he didn’t realise his microphone was on) in our competition quangos got their act together then we could see a re-basing of costs in the economy going forward (so if food, electricity, gas, broadband, phones, mobiles, education, medical and other professional services, clothing, consumer goods for examples) are all cut by 25-50% then frankly the fiscal adjustment would be a lot less challenging than many think – yes, there would be challenges in dealing with legacy debt, particularly mortgage debt, but that is a banking matter and will be dealt with below.
Despite the international perception that the Irish got drunk on a credit binge during the boom years, we did do some things right. We established a €25bn rainy day fund called the National Pension Reserve Fund – most countries fund pensions from current tax but we decided to set up a special pot which frankly can be used for any expenditure (and as we see in the current proposal, it is to be used to bail out the banks). We have also borrowed so that we have a €25bn cash balance on hand in addition to our pension reserve. These are our strategic cash assets and their use/loss should be very carefully considered because they provide us with freedom to manoeuvre today.
Ireland also has many State-owned companies and interests which would have been privatised decades ago in other countries. The State owns a major stake in Aer Lingus. The State owns the electricity and gas generation and most distribution companies. The State owns the public transport companies. These are likely to be disposed of under the current IMF/EU plan.
This is part of a much bigger article at source and is well worth a read http://namawinelake.wordpress.com/author/namawinelake/
Just one point, we are again experiencing a “spin” version of a very different reality that this plan/bailout entails. The real interest payment when you take into account the plunder of our nation pension fund is in fact 7.3% .Draconian is the word I would use here, Then by Cowen and lenihan’s own admittance, up to a few days ago we (Ireland) did not need this bailout, and then yesterday Lenihan tell the Dail members that failure to pass the budget will result in State issued cheques will bounce! So which is it are we broke or we just doing the EU a favour and if so why are we paying this disastrous interest payment.
Cowen and lenihan are again ignoring reality the market has priced in a default and we should hold on to our own funds while we still have them.
Trying to borrower yourself out of debts can only work for a short time but only if you have an hedge like the Americans have i.e. a reserve currency for example!
All this plan is going to do for us is to deplete all of our own funds first and then the loss of our assets and all for the private gambling debts of Cowens and lenihans pals.
This budget should not be passed we can get a much better deal if we have the right people at the table any idiot knows that !