The lunatics are really coming out of the woodwork now, aren’t they? A band of assorted Lefty maniacs, including the Financial Times and the billionaire investor George Soros, are saying that the Irish taxpayer should not be paying for the private debts of badly-managed banks.
According to Soros, the markets have already assumed Ireland will default, and have priced that into their calculations, which is why the “bailout” made no difference to interest rates.
The authorities are making at least two mistakes. One is that they are determined to avoid defaults or haircuts on currently outstanding sovereign debt for fear of provoking a banking crisis. The bondholders of insolvent banks are being protected at the expense of taxpayers. This is politically unacceptable. A new Irish government to be elected next spring is bound to repudiate the current arrangements. Markets recognise this and that is why the Irish rescue brought no relief. Second, high interest rates charged on rescue packages make it impossible for the weaker countries to improve their competitiveness vis-à-vis the stronger ones. Divergences will continue to widen and weaker countries will continue to weaken. Mutual resentment between creditors and debtors is liable to grow and there is a real danger that the euro may destroy the political and social cohesion of the EU.
Both mistakes can be corrected. With regard to the first, emergency funds ought to be used to recapitalise banking systems as well as to provide loans to sovereign states. The former would be a more efficient use of funds than the latter. It would leave countries with smaller deficits, and they could regain access to the market sooner if the banking system were properly capitalised. It is better to inject equity now rather than later and it is better to do it on a Europe-wide basis than each country acting on its own. That would create a European regulatory regime. Europe-wide regulation of banks interferes with national sovereignty less than European control over fiscal policy. And European control over banks is less amenable to political abuse than national control.
When the investors themselves are saying they should have to carry their own losses, where does that leave Lenihan, the patriot?
Of course, it doesn’t take Einstein to figure out that the whole thing is a crock of shit. Typical Lenihan waffle. Nama can’t and won’t work. The bank recapitalisation shouldn’t happen. Why? Because we didn’t run up the fucking debts. Private companies did. And every time Nama administers a haircut to the value of banks’ loans, what happens? Lenihan shoves in another ten or twenty billion of public money to make up the difference.
It’s insanity, but it isn’t the only thing in that category.
What else is insanity?
How about the idea that the ECB, which had originally lent the money to the delinquent banks, somehow bullied our government into taking over this liability? Even though, I repeat, we did not incur the fucking debt. To put it another way, the Irish taxpayer is now doing the job of the ECB, and paying nearly 6% interest for the privilege, to the same ECB.
It won’t work. It can’t work. We will not be able to repay this money, which we should not have borrowed in the first place.
There might be a case for borrowing money to run the country for the next three of four years, but there is no case whatever for borrowing money to prop up failed, and possibly criminal, enterprises.
The Financial Times knows it. George Soros knows it. The markets know it.
You know it. I know it.
Guess who doesn’t.
Not to worry. I have the answer. All we need to do is take the €80 billion and give it to Bertie Ahern to put on a horse.