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Tuesday Newspaper Review - Irish Business News and International Stories - - June 25, 2013
By Finfacts Team
Jun 25, 2013 - 8:00 AM

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Irish Independent

ANGLO Irish Bank boss David Drumm laughed about "abusing" the bank guarantee and warned his executives not to be caught abusing it, the Anglo Tapes reveal.

Drumm is also heard giggling as one of his executives sings the German national anthem as deposits from Germany flow into Anglo as a result of the bank guarantee.

It's the first time the former Anglo chief executive is brought directly into the controversy.

His language and casual attitude to the crisis will be found extraordinary by readers.

The latest revelations from the Irish Independent's 'Inside Anglo' investigation display a casual, even reckless, attitude at the bank during the financial crash.

Mr Drumm can be heard laughing at the financial regulator's concerns about being seen internationally to be "abusing" the bank guarantee in late 2008.

"We won't do anything blatant, but . . . we have to get the money in . . . get the f***in' money in, get it in," he tells his senior manager, John Bowe."

Emigration is at famine levels because Anglo bankers lied. Workers are on the dole because Anglo bankers lied. Homeowners can't pay their mortgages because Anglo bankers lied. Public service cutbacks, especially in health and education, are causing suffering because Anglo bankers lied. And Ireland lost its economic sovereignty because Anglo bankers lied.

Not just recklessness, but deception on the part of bankers protecting their broken bank – and their own skins by extension – brought Ireland to the verge of ruin.

An independent republic was reduced to a satellite state by the world's worst bank – and citizens are still picking their way around the crater left behind after Anglo crashed and burned.

Recession was inevitable: job losses and shrunken services were on the way, even if Anglo bankers had been honest about their problems. But the truth would have prevented austerity on today's disaster scale.

ITALY is likely to need an EU rescue within six months as the country slides into deeper economic crisis and a credit crunch spreads to large companies, a top Italian bank has warned privately.

Mediobanca, Italy's second-biggest bank, said its "index of solvency risk" for Italy was already flashing warning signs as the worldwide bond rout continued into a second week, pushing up borrowing costs.

"Time is running out fast," said Mediobanca's top analyst, Antonio Guglielmi, in a confidential client note.

"The Italian macro situation has not improved over the last quarter, rather the contrary. Some 160 large corporates in Italy are now in special crisis administration."

GLOBAL equities, bond prices and commodities tumbled yesterday, entering another week of heavy selling as investors fled markets on worries about the US central bank's plans to scale back its bond buying, combined with tighter financial conditions in China.

Prices of US Treasuries resumed their slide, and benchmark yields climbed to a nearly two-year high. The S&P 500 fell more than 2pc, erasing all of its quarterly gains as Wall Street joined a global selloff after concerns about a liquidity crunch in China sent Shanghai stocks down more than 5pc.

The shift out of assets that have benefited most from cheap money has been sharpest in the US debt market, where yields on 10-year Treasury notes spiked to two-year highs of 2.6pc yesterday. The 10-year note yield has risen a full percentage point in a little more than a month.

Irish Times

A recorded conversation between senior officials at former Anglo Irish Bank appears to confirm what the public has long suspected: that the Central Bank and last government were bounced into bailing out the banking system and lacked detailed knowledge of the extent of the crisis.

The manner in which this exercise was conducted: through obfuscation, veiled financial threats and political pressure, exposes a clientelist system where power and contacts are paramount and nobody is held to account.

Taoiseach Enda Kenny says he understands the “rage and anger” of those citizens whose lives have been blighted by the banking collapse. But he is reluctant to say anything that might prejudice ongoing investigations. Legislation establishing a banking inquiry will be passed within months, he promises, and the Government will then decide how to proceed. So, an inquiry may get under way in the autumn. Or, perhaps not. Allowing time for public outrage to dissipate is one way of protecting established interests. And few interests are as well established or powerful as those within the financial sector.

Voluntary organisations that exist simply to perpetuate themselves are known within the public service as the “poverazzi industry”, according to a senior civil servant of at least 10 years’ standing.

The civil servant was one of several individuals interviewed in confidence to find out what they really thought of the voluntary sector.

A report titled In Other Words was commissioned by the Advocacy Initiative, which is funded by Atlantic Philanthropies. It was set up three years ago to help such organisations lobby the Government effectively for change.

The civil servant did not name the organisations about which he was talking but said there were some that had a vested interest in not solving the problems they were set up to resolve.

 Ireland’s low tax revenue compared to peer countries is accounted for by relatively low levels of tax paid by those at the lower end of the income spectrum, according to a study published today by the Economic and Social Research Institute.

Those on higher incomes in Ireland pay proportionately similar amounts of tax to their better-off counterparts in high-tax countries such as Germany and the Nordics. As such, the research finds that there is “rather limited scope for tax increases on incomes above €100,000 to contribute to a substantial upward shift in the tax ratio”.

More specifically, it notes that a new income tax band of 48 per cent for those earning more than €100,000 would raise just 0.3 per cent of gross national product.

Bundesbank president Jens Weidmann has said a European Central Bank (ECB) programme to stabilise the euro zone by buying sovereign bonds of crisis-hit countries is strictly limited in scope.

A year ago ECB president Mario Draghi insisted his bank would do “whatever it takes” to defend the euro and keep the currency bloc together. To back up his promise, he later presented a programme, dubbed Outright Monetary Transactions (OMT), to allow indirect ECB bond buy-ups to help lower borrowing costs.

Markets interpreted Mr Draghi’s remarks as a readiness to, if necessary, mobilise the ECB’s unlimited financial fire power to defend the single currency. The mere announcement of the OMT instrument, which has yet to be activated, calmed market speculation over a potential euro zone break-up.

Irish Examiner

Banking union will be thrown off-track, if EU countries cannot agree on bank resolution later this week, Finance Minister Michael Noonan has warned.

He intends to work through Wednesday night if necessary to get the agreement that eluded him and his fellow finance ministers earlier this week on this pivotal piece of legislation.

He and the Irish presidency received lots of praise from members of the European Parliament’s budget committee as they work through the final few days of the presidency.

Getting agreement on banking recovery and resolution is one of three major issues facing Irish negotiators, with serious problems to be overcome to get agreement on the EU seven-year €960bn budget and on reform of the Common Agriculture Policy.

Lithuania takes over the presidency from Ireland on Monday and Mr Noonan believes it would be November before they could return to the issue: “If we don’t get it done on Wednesday, then the time line for banking union goes out of kilter, so it is important for the bigger project that we get agreement.”

Development loans of €260m were advanced to a company on securities including a guarantee of one of its directors limited to €8m, the commercial court was told yesterday.

David Kennedy, with an address in Jersey, will argue he is not liable to repay any sum on grounds including that Bank of Scotland had a 20% shareholding in the borrowing company, Dublin-registered Clancy Quay Properties Ltd, counsel for Mr Kennedy, Edward Farrelly BL, indicated.

No substantial decisions on development could be taken without the bank and actions by it had caused losses, counsel said. The bank, for example, reneged on the building of a school and also refused to let the company proceed with €26m worth of closed contracts, he said.

Europe

Presseurop: The Dutch coalition government said in a memo published on June 21 that: "The Netherlands is convinced that the time of an “ever closer union” in every possible policy area is behind us", reports the EUobserver. According to the news website, the memo “said the Union's slogan should be "European where necessary, national where possible."

It also said there is a ‘strong need’ for joint EU action on big-ticket items, such as economic governance, migration and defence. But it noted that a review of EU powers by its foreign minister, Frans Timmermans, shows an equal need for ‘creating a European Union that is more modest, more sober.’

According to a study commissioned by the European Union “Italy is among the countries with the highest level of income inequality, second only to the UK in the EU, and well above the OECD average,” reports the Italian daily Il Sole 24 Ore.

The “Gini – Growing Inequalities’ Impacts” study, based on the Gini index and compiled by researchers at seven European universities, analysed the income dynamics of 30 European countries from the 1980s up to the present day, dividing them in regional catagories. The newspaper continues:

"Continental European countries (Germany, France and Benelux) have a low Gini index, between 0.26 and 0.30 and one which is almost stable; northern countries show a rising inequality trend led by Sweden and Finland but starting from very low levels; market economies like the UK have limited welfare and high inequality; [...] eastern countries, which before 1989 had levels close to Scandinavia, have now gone in a different direction."

Euro Topics: Edward Snowden, the whistleblower wanted by the US, has fled from Hong Kong to Moscow. From there he apparently plans to travel to Cuba and then on to Ecuador, where according to the authorities he has applied for asylum. Commentators say that by fleeing to countries with dubious democratic records Snowden is abusing international diplomacy and betraying the very ideals he is supposedly fighting for.

Former NSA employee Edward Snowden's plans to flee from Moscow to Cuba and from there to Ecuador is not viewed favourably by the liberal Slovenian daily Sme: "You can hardly blame Snowden for wanting to avoid a perhaps unfair trial before a US court. And it's clear that there are only a handful of countries that wouldn't hand him over to the US. But Snowdon justified his act by saying that all he is concerned about is democracy and freedom. If that is really the case, he should risk a trial before a US court instead of becoming a hypocrite now. By taking advantage of the offer of asylum in a Latin American dictatorship a person calls everything he has allegedly fought for into question. Wikileaks founder Julian Assange roused similar doubts. He too has a strange tendency to only see problems with democracy and freedom in the West."

The rules of the Internet need to be rewritten, but dubious people like Edward Snowden and his alleged legal consultant Baltasar Garzón have no place in this process, the conservative Spanish daily ABC warns: "CIA agent Edward Snowden's tour of half the world's airports in the company of ex-judge Garzón as his supposed legal advisor is a spectacle that can't appeal to anyone with any common sense. Because it represents an abuse of the legal and diplomatic services available to those who know how to use them - with good or bad intentions. ... The Internet has changed the relationship between citizens and authorities, and it certainly needs new rules. But we must not entrust people like Garzón or the Ecuadorian president with this task. It's extremely worrying that people like Snowden should be granted refuge by regimes like those in Cuba or Venezuela."

Europe should take the message of the Brazilian youths to heart, the left-liberal French daily Libération writes with an eye to their protests: "European democracies would be wrong to think that an ocean protects them from the movement of anger that is rocking Brazil. They would do well to pay close attention to the at times confused remarks of the demonstrators in Rio de Janeiro, Brasília and São Paulo. Because above all they express the anger of a disillusioned young generation that has been traumatised by the crisis, that is frightened by the future and that has lost its faith in politics. And despite the social and political realities that separate Brazil from France, Spain and Italy, it's this very sense of helplessness that weighs down upon youths in the large Western countries. Politicians must offer them cross-border prospects, jobs and a future."

The Belgian artist Delphine Boël is allegedly the illegitimate daughter of King Albert II and now plans to force him to recognise her through court proceedings. The Belgians don't understand the silence of the royal family, the left-liberal Belgian daily De Morgen warns: "The king seems to assume that this 'little problem' will just disappear if he keeps quiet. But with each day that passes the silence becomes more painful and his credibility is further eroded. What seemed a minor blemish is turning into a festering wound. ... When he makes his next Christmas speech half the country will shake with laughter if he tries to play the role of its moral conscience again. ... Everyone knows that Delphine exists, and no one is shocked about it. But for the sake of preserving appearances King Albert neither wants to nor can officially recognise and accept his daughter."

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