The Default 111: The Final Phase

February 20, 2011

As we approach the day of the election of February 25, it’s hard not to to have the feeling of a build-up of irrelevance as regards our debt crisis.

This is sad and it also an inditement of our political leadership.

One would have hoped that the failure successive attempts to solve our banking and sovereign debt crisis would have led to a sharpening of the outlook on our way forward and the possibility of restart from a clean slate.

At first, there was the bank guarantee, this failed to reassure market fear of default for Ireland’s banks and a subsequent fear of sovereign default. Then we had the failure of NAMA. It was supposed to provide liquidity for the banks and restore trust in us from the markets, but it did not.

So then we had the EU/IMF/EFSF  bailout for Ireland. Again, we were led to believe this would do it, financial stability, with  austerity thrown in, would restore market place trust in us and get our economy going again. No, that didn’t work either. Instead, ballooning emigration, a declining tax base, increasing job losses, the threat of a growing personal debt crisis, rising local and european interest rates, further downgrade of Ireland by rating agencies, growing negative equity, and further doubts regarding the loan books of the banks, all conspire to give a gloomy outlook for Ireland. In 2011 many holding onto their businesses with their fingers, will be forced to let go.

Not to be outdone by this, politicians have managed in this election to put the question of Ireland’s default out of sight, out of the electorate’s mind. Instead we have illusory growth rate forecasting by the ESRI and Department of Finance built into the economic projections of our leading political parties, 3% annually between now and 2014.

Not only that but the public service is to be slashed by up to 30,000 jobs over the next three years!  This will have an enormous deflationary effect on our economy. There is no limit to the optimism preached that sees the public service being slashed, taxes increased, cut backs to services introduced everywhere, and all this while achieving growth rates of 3% of GPD . Exports from the multinational sector and agri food related exports are doing very well, but both have spare capacity to grow exports with only a marginal increase in jobs to be hoped from those sectors.

The fact is, we are quickly running out of options. Default looms closer. The next government will have to cope with its inevitability.

We should have a strategy devised and ready to use to leave the EuroZone, if we are left to suffer as a vassal state with injurious and penal 5.8% interest debt bailout.  The word bailout here as used is a misnomer. It is a ligature around the neck of the Irish economy that will see our economy destroyed in the coming years. This destruction comes at the expense of giving up our economic sovereignty  witnessed by our so-called allies and friends in Europe. Meanwhile banks are rewarded for their contribution to the Irish economy with massive transfers of money from taxpayers to them in the guise of recapitalisation or pure funding through taxes securing repayments to bondholders who lent in an unregulated and toxic manner to our banks chief of whom was cuckoo Anglo.

If the coming European summit in March, does not address our imminent default and provide us with a viable way out to save us from default, its time for us to leave the EZ.

Let us look to another strategy to save our economy.

A report in the Sunday Independent by Ronan Quinlan, p8, ‘Bring back sterling if EU treats us badly – McEvaddy’ ascribes to businessman, Ulick McEvaddy, this view to leave the euro and for us to link to sterling. Such a strategy should be explored along with the return to a PuntNua,  the sterling option would have some serious advantages for us compared to the PuntNUA option.

The QUESTION is becoming whether we wish to STAY in the EZ on life support in a form of quasi vassal state as a debt collection agency collecting debt reparations imposed on us to pay for senior bondholders of euro banks who’ve led us into the mess through poor regulation, just as much as local mismanagement on a political and banking level did the same; or whether we wish to LEAVE the  EZ , which has become no longer viable as an economic entity for us.

Perhaps Republicans have to consider deeply the option of Sterling vs Puntnua as well leaving nationalist political considerations aside for the sake of a better future for Irish citizens. This question of leaving the EZ should have as much broad discussion as its corollary, whether we burn senior bondholders of Irish banks along similar lines as Amagerbanken bank, Denmark, has done in the past 2 weeks.

Next government will have to deal with default and there is no preparation evident for this eventuality other than a vague, we will negotiate!

Having just come from a viewing of the excellent ‘ Insider Job ‘
I would like to ask the question whether political parties and individuals including their supporters by way of consultancy fees or any form of subvention eg corporate donations to his university, or personal investments, or other paid posts, if there are any possible conflicts of interest in regard to their views on senior bondholder debt?

In the USA postings to both Harvard and Columbia and corporate donations to both were seen as conflicts of interest in certain instances. In Ireland, names such as Sutherland, John Bruton, Dukes and an array of economists and personalities including up to a third of senior management and directors of Ireland’s toxic banks as well as members of the previous government, could be said to be leading an active campaign to keep the previous status quo who led our banks into pear shaped demise, are intent on keeping the previous show on the road.

Our coming default though much regreted will soon hopefully put an end to that. The serious question meanwhile is, are our figures being doctored? The banks have lied to us before. is now up and running and content will accrue and be of increasing value over time. Accompanying the site is its companion forum to which everyone is invited to contribute. The purpose of both sites is to gather a body of information and resources showing how our financial crisis in Ireland is being seen from abroad.



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