|EU Economic and Monetary Affairs commissioner, Olli Rehn, speaking to reporters before the Eurogroup meeting, Brussels, Feb 14, 2011.|
Irish debt haircuts would be welcome but it would
be stupid to start an immediate war now with Europe.
It has been striking since the slow-motion
response to the banking crisis in the aftermath of the issue of the State
guarantee in Sept 2008, that there has been much more enthusiasm for 'burning'
foreigners of various types than addressing the issues of reforming the failed
systems at home which turned what would have been a recession into a
It's as if, there is a hope that the status quo can be maintained as long as
foreigners solve our problems.
So, the traditional trade unions make common
cause with their wealthy counterparts in the protected private sector, in
wrote recently that multimillionaire tribunal lawyers are continuing to make
hay as public contractors; medical consultants can charge over €200 for a 15-20
minute consultation; an insolvency firm quoted the State's toxic property
loans agency, NAMA, €800 per hour for an assignment and was allowed hide behind
a Victorian veil of secrecy; GPs in Ireland get paid €38.95 to administer the
seasonal flu vaccine to patients. In the UK GPs get paid £7.51 (€8.30) for doing
the same job and the State health insurer VHI has to hike premiums by as much as
45% to pay for featherbedding.
The National Competitiveness Council says that
Irish medical consultants are the highest paid in the OECD area (comprising all
the world's developed countries), earning almost double the salaries in
countries such as Finland and Norway.
As to debt restructuring, it's also striking how little reliable data is available on European bank
exposures to Ireland.
So while the focus is on German and French banks, the greatest exposure is by
UK banks [mainly, the parents of Ulster Bank and Bank of Scotland (Ireland)
- - over £120bn].
Bank for International Settlements (BIS) data is often cited but the Irish figures
are confusing because they include data in respect of foreign banks at Dublin's
offshore centre, the IFSC.
The German Bundesbank said last November that German bank direct exposure to
Ireland was about €25bn not $139bn as stated in BIS data.
In The Irish Times today, Brian Lucey, a Trinity
says we could unilaterally impose losses on senior
bondholders, but they may well be in London or operate at Dublin's IFSC rather
than in the 17 Eurozone member countries.
The European Central Bank (ECB) and the Irish
Central Bank currently provide funding of €170bn to the domestic Irish banks and
a unilateral burning of senior bondholders would put pressure on the central
banks to open the liquidity taps further.
Just months into the EU-IMF bailout program, taking unilateral action now and
expecting the ECB to then endorse it, appears to be naive.
It simply would not happen as the central bank
would destroy its credibility at a stroke.
We should certainly open discussions while reforming a vested-interest
controlled system at home.
Ratings agency Standard & Poor's said last month that the 6 domestic banks
have debt of €275bn - - more than 170% of Ireland's GDP.
A European Commission report last week showed that Ireland needs to raise
fresh funds (allowing for maturities) of €48.9bn by the end of 2013, in addition
to the EU-IMF bailout funds.
So, before discussing our problems with Angela Merkel post
the appointment of the new government on March 9th, or even
with David Cameron, we should surely start with the facts.
Finfacts has advocated that rather than expending
all ammunition and goodwill now, we should have some patience as the EU-IMF
program is implemented and on Monday, EU Economic and Monetary Affairs
commissioner, Olli Rehn, said that while the EU-IMF bailout deal that was
approved last November, will not be opened for renegotiation by the new Irish
government, he signalled that patience could pay off.
“It is essential to respect the plan, respect
the memorandum and especially for 2011 the decisions are very much framed by the
memorandum but concerning the outer years there is more room of manoeuvre,”
he told reporters in Brussels.
He also signalled that the interest rate that was
agreed last November, could be cut.