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August 1st 2011
BREAD N’ WATER 7-DAY FAST – the reason why
The following are extracts taken from an article by Colm McCarthy in the Sunday Independent, July 31st 2011 – the italics to highlight specific quotes are mine:
“As ministers head for the beaches after the close of the new Government's first parliamentary session, there should be no self-congratulation or talk of corners being turned.
The principal beneficiaries of European policy towards Ireland are those who bought bonds from insolvent Irish banks. Meanwhile, those who bought bonds from an insolvent Greek government are expected to bear at least some of the burden. Whatever relief the package contains for Ireland was grudging, inadequate and arose coincidentally from a belated attempt to solve problems elsewhere in Europe.
One of the reasons why Ireland has been shut out of the sovereign credit markets is the perception that, in addition to the known accumulation of sovereign debt, there may be further exposures for the Exchequer lurking beneath the waves in the murky wreckage of the banking system.
It is entirely fair for our European partners to observe that we have brought this on ourselves but it is equally fair to note that in picking up the tab, the Irish are 'taking one for the team', in the phrase of Sharon Bowles, the British MEP who chairs the Economic and Monetary Affairs Committee. The team, in the form of the EU Commission, the European Central Bank and the Franco-German political leadership, persist in the pretence that the protection of creditors of the bust Irish banks, at the expense of the Irish Exchequer, represents some form of generosity to Irish citizens and taxpayers.
Fortunately, the existing deal with our European partners is impractical as well as unfair. It has not worked, it will not work and there will be further rounds of modifications as Europe gropes towards a resolution of the banking and sovereign debt crises. It will not be enough, in regaining solvency, for the Irish Government to avoid further pay-offs to bondholders in Anglo and Irish Nationwide. The Irish Exchequer's contributions to bank rescue have already destroyed the sovereign's capacity to borrow. There is still an opportunity to avoid default on the sovereign debt of the state, but the ability to avoid this outcome is being undermined by the obligations undertaken to investors in bonds issued by insolvent banks.
The restoration of that ability requires, in addition to vigorous reductions in the budget deficit, that the remaining costs of rescuing the Irish banks be shared with their creditors and with the European institutions whose defence of bank bondholders has helped to create the current untenable situation.
It would be nice if both sovereign and bank bondholder obligation could realistically be met. If they cannot, the choices need to be understood both here and in Europe.”
Colm McCarthy lectures in economics at UCD. He headed an expert group examining State assets and chaired the Special Group on Public Service Numbers and Expenditure Progra-mmes, An Bord Snip Nua. He also authored the report into the semi-state sector from the Review Group on State Assets and Liabilities.