PDA

View Full Version : Ireland



Kaa
11-11-2010, 04:24 PM
Looks pretty bad, e.g. http://www.irishtimes.com/newspaper/opinion/2010/1108/1224282865400.html

Might even implode faster than Greece. Eurozone is not a happy place to be nowadays.

Kaa

L.W. Baxter
11-11-2010, 05:54 PM
A fascinating read by a good writer, thanks. It sounds like bankers are bankers, the world over.

Andrew Craig-Bennett
11-11-2010, 05:59 PM
Now that is an exceptionally good article. Dr Kelly is to be congratulated on conveying the economic facts of life to his readers in the manner of Dean Swift.

The action of the Irish government in unilaterally guaranteeing its three big banks at the height of the crisis was universally denounced by all other Europeans as not merely insane, but viciously self interested; Ireland can expect no sympathy, as the article makes clear.

Good place to buy a cheap house, for years to come.

Seriously, this sums it up:

"As ordinary people start to realise that this thing is not only happening, it is happening to them, we can see anxiety giving way to the first upwellings of an inchoate rage and despair that will transform Irish politics along the lines of the Tea Party in America. Within five years, both Civil War parties are likely to have been brushed aside by a hard right, anti-Europe, anti-Traveller party that, inconceivable as it now seems, will leave us nostalgic for the, usually, harmless buffoonery of Biffo, Inda, and their chums.

"You have read enough articles by economists by now to know that it is customary at this stage for me to propose, in 30 words or fewer, a simple policy that will solve all our problems. Unfortunately, this is where I have to hold up my hands and confess that I have no solutions, simple or otherwise.

"Ireland faced a painful choice between imposing a resolution on banks that were too big to save or becoming insolvent, and, for whatever reason, chose the latter. Sovereign nations get to make policy choices, and we are no longer a sovereign nation in any meaningful sense of that term.

"From here on, for better or worse, we can only rely on the kindness of strangers."

There's no difficulty in naming a hard right (indeed, quasi-Fascist) anti-Europe, populist party in Ireland : Sinn Fein.

SMARTINSEN
11-11-2010, 06:16 PM
Geeze, Kaa, this is depressing, I thought that you were going to show us some photos.

Kaa
11-11-2010, 09:10 PM
Geeze, Kaa, this is depressing, I thought that you were going to show us some photos.

:-)

http://i296.photobucket.com/albums/mm161/kaa_photobucket/20080517_0082_S1.jpg


Kaa

I, Rowboat
11-11-2010, 09:28 PM
Dammit, Kaa. That glass is wayyy more than half empty! Have you been surfing at ZeroHedge or the Automatic Earth or sumthin'?

Kaa
11-11-2010, 09:30 PM
I poke my nose into ZeroHedge once in a while, but it's very repetitive...

The glass comes from here, by the way:

http://i296.photobucket.com/albums/mm161/kaa_photobucket/20080517_0055_S1.jpg


Kaa

SMARTINSEN
11-11-2010, 09:41 PM
Drown your sorrows. That is more like it.

Andrew Craig-Bennett
11-12-2010, 08:14 AM
Unlike Greece, Ireland's fiscal system does work quite well.

Which was not an excuse for destroying the entire economy with the ill judged (to put it very kindly) bank bail out.

Ireland has gone from "plucky little Ireland taking all those budget cuts - they must be serious people" to "the black hole in the finances of the Irish government is much too big to be closed by further budget cuts, even at a level that would wreck the state, and the real problem is that there is no point in the European Bank lending to Ireland to help the Irish out, because the state could not pay interest on the debt" in one week.

Portugal next.

All the little countries that thought that, by joining the Euro they were getting a free ride on the German economy, being able to borrow at German rates, are finding that there is a bill to pay, and Chancellor Merkel won't hesitate to send in the bailiffs.

Kaa
11-12-2010, 11:20 AM
Unlike Greece, Ireland's fiscal system does work quite well.

Well, in the sense that the Irish usually do pay their taxes, that's true. On the other hand one of the reasons for the current problems is that Ireland structured its revenues in such a way as to derive a lot of them from real estate taxes. Guess what happens to such revenues when the real estate bubble pops...

Which, by the way, brings us to the next point


All the little countries that thought that, by joining the Euro they were getting a free ride on the German economy, being able to borrow at German rates, are finding that there is a bill to pay, and Chancellor Merkel won't hesitate to send in the bailiffs.

An interesting thing -- there's nothing intrinsically bad in being able to borrow at low interest rates or have a revenue windfall from a real estate bubble. It can be argued that a prudent entity would have used this to pay off its debts and accumulate a reserve for hard times. Unfortunately, governments' attitude to revenue resembles a drunken sailor's attitude to money -- regardless of the amounts they find it impossible to resist spending everything and then borrow as much as they can, too. It doesn't always happen this way -- helped by petrodollars Canada managed to get its deficit under control and get the fiscal ship back on the more or less even keel -- but I think that's the default mode of operation.

By the way, the looming massive mortgage default that the article talks about doesn't have much to do with the decision to bail out banks. It's just the inevitable consequence of a bubble that was inflated by borrowing -- and then popped. Even if the Irish government let its banks collapse, the plight of your middle-class Irishman with his mortgage under water wouldn't have improved much.

Kaa

Bruce Taylor
11-12-2010, 12:17 PM
helped by petrodollars Canada managed to get its deficit under control and get the fiscal ship back on the more or less even keel

I wouldn't give "petrodollars" too much of the credit. When Chretien & Paul Martin balanced the budget in 1997-8, and began paying off debt, oil production had not yet climbed back to where it had been in 1973 and prices were still comparatively low. Overall, the economy was pretty strong (as yours was, at the time), which helped bring in revenue. But Martin also brought in very deep program cuts (arguably, the military & healthcare have yet to recover from them).

Incidentally, the Chretien government also maintained strict banking regulations, while other countries were going all loosey-goosey. ;) In particular, when four of our banks asked for permission to make themselves "too big to fail" by merging (Royal Bank to join B of M, TD to mate with CIBC), they said "Nuh uh." The argument the banks made, at the time, was that they simply could not remain profitable unless they bulked up enough to swim with the big fish. In the end, regulatory constraints did not make the banks unprofitable at all, and almost certainly spared them the indignity of having to take public money during the recent financial crisis.

B_B
11-12-2010, 02:00 PM
Originally Posted by Kaa
helped by petrodollars Canada managed to get its deficit under control and get the fiscal ship back on the more or less even keel
I wouldn't give "petrodollars" too much of the credit.
FWIW revenue derived directly from resources (royalties, exploration auctions, timber licenses etc) go to the provinces, not the feds. Feds only benefit indirectly from resources through corporate and personal income taxes (including payroll taxes) and consumption (GST) taxes.

TomF has pointed out that the Feds balanced their budget on the backs of the Provinces - i.e. they did it by cutting transfers to provinces. Any increase in resource revenue received by the provinces fell far short of these reductions in transfer payments.

As Bruce said - oil was trading at $20 barrel for much of the 1990's and early 2000's when the Liberals had more than a decade of budgetary surpluses. Additionally the tar sands, which may hold larger reserves than Saudi Arabia at it's peak, are unprofitable at bbl prices below $25-30, some co's declare they need $50 or so to remain profitable - i.e. not much royalty income, nor tax income, at $25 bbl.

Andrew Craig-Bennett
11-12-2010, 02:34 PM
Kaa, as I'm sure I don't need to tell you, the connection between the bank bailout and reposessions is not property prices as such but the level of employment. A lender does not repossess a property because it is worth less than the loan secured on it but because the borrower is not making payments.

The effect of the Irish goverment's guarantee of the Irish banks on employment has not been positive.

Kaa
11-12-2010, 03:38 PM
Kaa, as I'm sure I don't need to tell you, the connection between the bank bailout and reposessions is not property prices as such but the level of employment. A lender does not repossess a property because it is worth less than the loan secured on it but because the borrower is not making payments.

The effect of the Irish goverment's guarantee of the Irish banks on employment has not been positive.

I am sure you realize it's a bit more complicated than that. There are incentives inherent in an underwater mortgage, there is the freezing of the real estate market because people tend to not sell at all rather than sell and take a loss, there's availability (or lack thereof) of new mortgages for the buyers, there's the need for austerity measures even without the bank bailout, etc. etc.

In any case, Ireland seems to be in the process of falling into a pit and it will be interesting to see how far down the bottom is and whether Ireland will be able to twist to avoid the sharpened stakes at that bottom. Post-WW2 no Western country economically imploded, I think. I am quite curious as to how the process will work out in our times.

Kaa

purri
11-12-2010, 05:06 PM
Plenty of cheap Irish real estate and boats for the Chermans, nein?

L.W. Baxter
11-12-2010, 08:40 PM
...In the end, regulatory constraints did not make the banks unprofitable at all, and almost certainly spared them the indignity of having to take public money during the recent financial crisis.

hahaha right. As we say at home: "Es que me da verguenza." "Ni la conoces."

Andrew Craig-Bennett
11-15-2010, 08:19 AM
Today's news is that the Irish Government have not asked for help from the ECB, but they are in talks with the ECB.

Decoded, this apparently means that Ireland has enough cash to see it well into next year, so they don't want help at the Government level, but they do want their banks to be helped (it was guaranteeing bank deposits, on 30th September 2008, that got the Irish Government into Queer Street in the first place, so if the ECB relieves the Irish Government of this incubus all will be well...)

paladin
11-15-2010, 08:56 AM
Prices of real estate don't seem to have dropped a single Euro...perhaps folks are still hoping it's all a dream.

Kaa
11-15-2010, 12:09 PM
...so they don't want help at the Government level, but they do want their banks to be helped...

Isn't that more or less the same thing at this point? :-)

Kaa

B_B
11-15-2010, 01:08 PM
Interesting graph:

http://beta.images.theglobeandmail.com/archive/01004/ireland_1004221a.jpg

Andrew Craig-Bennett
11-17-2010, 05:05 AM
Isn't that more or less the same thing at this point? :-)

Kaa

Zackly!

Andrew Craig-Bennett
11-17-2010, 05:26 AM
Ireland's problems have been made worse by an old habit of the Irish government as a whole and Fianna Fail in particular - a habit which was all very well in de Valera's time - namely the habit of thumbing your nose at Big Brother and doing whatever you feel is good for you at the time.

For eighty years Big Brother was Great Britain, who could be relied on to cause no trouble partly out of guilt over the Black and Tans, partly because Uncle Sam would see to it and partly because the two economies are intertwined, and the result was that Ireland got away with all sorts of things.

The unilateral declaration on the 30th September 2008 that the Government of Ireland would guarantee all bank deposits was a fine example of this principle at work. It irritated the hell out of every other European government, espescially places like Holland and Belgium, whose banks were in much better order but who were compelled to do the same.

The graph showing Irish government debt that Braam posted above shows the effects of this over time; the deterioration will continue, as noted in the article which Kaa posted at the head of this thread.

The elephant in the room is the close relationship between Fianna Fail and the property developers.

The same Government is now saying that "we don't need a bail out but our banks do" which as Kaa has noted is nonsense. A bail out is needed but one of its terms is likely to be, or at least ought to be, that Ireland brings its rate of Corporation Tax into line with that of its neighbours, which will put a spoke in the Celtic Tiger's wheel.

The problem is that Big Brother is no longer the UK, but the EU, because Ireland is in the Eurozone. I'm not sure the Irish Government have noticed.

Britain, not officially involved because not it the Eurozone, will apparently chip in seven billion pounds, officially as a loan, for reason no 3 above.

Stiletto
11-17-2010, 04:31 PM
It is interesting to look at Braam's chart of government debt across Europe and Scandinavia.

I wonder whether there is a common factor that Sweden and Finland share with the Czech Republic and Turkey, or not.

Kaa
11-17-2010, 04:41 PM
A fun quiz question -- no Google-peeking! -- which industrialized country has the highest debt-to-GDP ratio?

Kaa

B_B
11-17-2010, 04:57 PM
Japan?

stevebaby
11-17-2010, 05:02 PM
Arrest all the leprechauns and confiscate their pots of gold.
Sorted.

Kaa
11-17-2010, 09:23 PM
You people are no fun. A single answer and correct, too :-)

Japan indeed has the debt-to-GDP ratio way higher than anyone else.

Kaa

Andrew Craig-Bennett
11-18-2010, 08:18 AM
Yes, well, those of us who are interested in these things knew the answer and others are not interested enough. The other part of the answer is that Japan has an incredibly low default rate.

Anyway, the Irish bail out is now under way. Look out for German insistence that the Irish corporation tax rate (Google and friends, this means you!) should be raised from 12% to something nearer twenty. Britain will hold Germany's coat at this point, as we entirely agree but there are things that the evil Anglo-Saxons cannot be seen to impose on the hard done by Celts. Britain will however take part in the bail out as Ireland is vital to us.

purri
11-18-2010, 06:55 PM
You people are no fun. A single answer and correct, too :-)

Japan indeed has the debt-to-GDP ratio way higher than anyone else.

Kaa

Didn't answer as I think the debt/ GDP is internal not external (offshore) borrowings. A different result would ensue if defaults were on a large scale.

Kaa
11-18-2010, 08:33 PM
Didn't answer as I think the debt/ GDP is internal not external (offshore) borrowings. A different result would ensue if defaults were on a large scale.

Government debt is government debt. Japan, indeed, is different from many countries in that a lot of it's sovereign debt is placed domestically.

I don't see what defaults have to do with it. We're not talking mortgages -- we're talking sovereign debt by industrialized countries.

Kaa

purri
11-18-2010, 08:49 PM
I'm talking treasury and bank defaults on letters of credit, notes and other financial instruments.

Kaa
11-18-2010, 09:06 PM
I'm talking treasury and bank defaults on letters of credit, notes and other financial instruments.

Treasury -- that is, government -- debt is different from corporate (e.g. bank) debt.

Kaa

purri
11-18-2010, 09:14 PM
Truly?

Kaa
11-18-2010, 09:21 PM
Truly?

Yep, truly. For one thing, governments don't go bankrupt and you can't grab their assets in a banrkuptcy court. A government default is a fairly big deal, a corporate default -- no so much.

Kaa

purri
11-18-2010, 09:58 PM
So we both agree on the use of irony then?

Kaa
11-18-2010, 10:02 PM
So we both agree on the use of irony then?

Or something like that :-)

Kaa

Andrew Craig-Bennett
11-19-2010, 05:29 AM
Treasury -- that is, government -- debt is different from corporate (e.g. bank) debt.

Kaa

Er, not in Ireland as from the 30th September 2008.

Which is what the fuss is all about.

As of this morning, Lenihan, whose idea of a "cheapest ever bank bail out" this was, is still squawking that the 12.5% corporation tax rate is a non-negotiable "red line". France and Germany and the IMF will be telling him the facts of life over the weekend, which is when the bailout will be put in to avoid spooking the bond markets with the risk of a default by a West European nation.

The Irish political scene is about to change; the "political" issue will be that "Ireland has given away sovereignty" to the EU the ECB and the IMF, which of course it will have done.

The obvious consequence will be a resurgence of Poujadist nationalism from which Sinn Fein expects to benefit.

As noted earlier Britain will hold Germany's coat and France's coat because if there is even a glimmer of an opportunity to blame the evil Anglo-Saxons it will inflame the domestic situation.

Andrew Craig-Bennett
11-19-2010, 06:53 AM
A couple of snippets for the cognoscenti:

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/11/ireland_the_big_uncertainties.html

http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/2010/11/the_stages_of_irelands_grief.html

Presuming Ed
12-08-2010, 03:55 AM
Ireland vs Iceland

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8187476/Iceland-offers-risky-temptation-for-Ireland-as-recession-ends.html

Presuming Ed
02-02-2011, 01:32 PM
Michael Lewis on Ireland. Well worth a read.

http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103?currentPage=all