December 22, 2013

Countries using the Euro de jure Countries and...

Countries using the Euro de jure Countries and territories using the Euro de facto Countries in the EU not using the Euro (Photo credit: Wikipedia)

Its untrue what Manuel Barroso of the European Commission states, that it was the Irish who created a problem for the euro; not the other way round.

Barroso, as President of the European Commission, is unaware of the responsibilities of his own job and that of his predecessor.

Both he and his predecessors are bound by articles 121 and 140 Treaty on the functioning of the European Union.

They must have fallen asleep at the wheel when it came to managing Ireland’s Celtic Tiger years:

1. Member States shall regard their economic policies as a matter of common concern and shall coordinate them within the Council, in accordance with the provisions of Article 120.

2. The Council shall, on a recommendation from the Commission, formulate a draft for the broad guidelines of the economic policies of the Member States and of the Union, and shall report its findings to the European Council. The European Council shall, acting on the basis of the report from the Council, discuss a conclusion on the broad guidelines of the economic policies of the Member States and of the Union. On the basis of this conclusion, the Council shall adopt a recommendation setting out these broad guidelines. The Council shall inform the European Parliament of its recommendation.

3. In order to ensure closer coordination of economic policies and sustained convergence of the economic performances of the Member States, the Council shall, on the basis of reports submitted by the Commission, monitor economic developments in each of the Member States and in the Union as well as the consistency of economic policies with the broad guidelines referred to in paragraph 2, and regularly carry out an overall assessment. For the purpose of this multilateral surveillance, Member States shall forward information to the Commission about important measures taken by them in the field of their economic policy and such other information as they deem necessary.

4. Where it is established, under the procedure referred to in paragraph 3, that the economic policies of a Member State are not consistent with the broad guidelines referred to in paragraph 2 or that they risk jeopardising the proper functioning of economic and monetary union, the Commission may address a warning to the Member State concerned. The Council, on a recommendation from the Commission, may address the necessary recommendations to the Member State concerned. The Council may, on a proposal from the Commission, decide to make its recommendations public. Within the scope of this paragraph, the Council shall act without taking into account the vote of the member of the Council representing the Member State concerned. A qualified majority of the other members of the Council shall be defined in accordance with Article 238(3)(a).

5. The President of the Council and the Commission shall report to the European Parliament on the results of multilateral surveillance. The President of the Council may be invited to appear before the competent committee of the European Parliament if the Council has made its recommendations public.

6. The European Parliament and the Council, acting by means of regulations in accordance with the ordinary legislative procedure, may adopt detailed rules for the multilateral surveillance procedure referred to in paragraphs 3 and 4.

Barroso’ comments that the euro was a victim of Ireland is ludicrous. Ireland fell victim to cheap euro credit that was unregulated from the top down.

But some of what he says is true:

The euro flooded the periphery with cheap credit. The ECB was not a FED that could regulate the monetary policy of participating national central banks and their regulators. Unlike the FED the euro is not a true monetary union. It acts more like a credit union pooling the funds of participating member states.

Like a vast Newbridge Credit Union it allowed its members to indulge in profligate lending practices and left its supervisory role a hands-off affair that saw vast quantities of its euros pile into ghost estates and uneconomic commercial property lending in Ireland and Spain and Portugal.

In Greece unproductive wealth was poured into military spending and an unregulated civil service. The periphery bought the exports of  inner core EMU countries such as Germany, Finland and France.

Everyone was happy until the unsustainable ponzi scheme fell apart with the Wall St crash of 2008.

In the wake of its economic disasters ECB is frantically trying to hammer out and agree upon a Banking Union that will regulate its banking system.It faces large political obstacles in achieving its goals.

In future, banks that fail will be the subject of bail in by both depositors and bondholders. Many argue persuading the Bundestag to allow its banks to be regulated by a body set up under the proposed banking union will be impossible to achieve.

Chaos exiting the bailout

Ireland did not invite Ollie Rehn or Manuel Barrosa to celebrations marking our exit from bailout. They were told to stay away. Enda Kenny and FG wanted all the political glory they could muster from such an event for themselves.

Rehn and Barrosa must have been very upset. In their minds their bailout of €67 bn and their renegotiation of these loans had been an unmitigated success. These loans advanced to Ireland were performing well and Ireland through a more than appreciative and compliant  Enda Kenny was signalling growth heralding future success on foot of improving employment and growth figures.

Furthermore, Ireland was on tap for its annual 20% levy to pay off its loans to European banks. No civil unrest, the troika happy enough with their returns on their investment, that had also avoided a compromising situation for the EMU testing its viability future.

However, Enda Kenny wanted all  glory for both himself and Fine Gael. It would be unseemly to dramatically highlight the growing control of the Irish economy coming from Europe with too many foreigners looking to claim center stage, puppet masters showing off their glove puppet status.

Perhaps it was this confidence in the success of bailout along with Kenny’s trumpeting of our emergence from bailout and positive growth prospects, that led  Manuel Barrosa to state categorically there would not be any retrospective bailout for Irish banks.

This was a slap down of Kenny and Noonan who argue otherwise and a reminder as to who pulls the strings in Ireland’s puppet cabinet: the troika and Ireland’s creditors in the eurozone.

Put another way there is simply  not enough money in the ESM to pay for the retrospective bailout of Irish banks or other banks across the EMU. At most, the ESM will set up a contributory fund contingent on stringent conditions under an emergent banking union that has yet to be agreed, conditionality may include bail-in by depositors and bond holders.

ITs simply ludicrous to think Irish banks given the long quEUe for bailout in other PIIGS countries that include inner core countries in France and Germany, should be given retrospective bailout. We had our chance and we blew it.

Within 24 hours there was clarification from Barrosa, that his comments did not apply to any requests made under the ESM re the retrospective bailout of Irish banks.

At this point we enter the murky world of double speak propaganda from Enda Kenny and FG and also the European Commission.

Nod, nod, wink wink…. It does not matter that there will not be bailout of Irish banks, all that matters is that the Irish and investors in Ireland, think and believe there will be bailout….Suddenly Barroso was not playing the game and letting the mask slip.

It turns out that Barroso is the rabbit Cowslip of  Richard Adams, Watership Down , who invites the rabbits to join his warren. Unwittingly Barrosso has let news about the deadly trip wire that lurks in the eurozone for Ireland, that it must pay back all that eg €32bn it ploughed into Anglo. Enda Kenny is no Hazel; Noonan no Fiver.

Its only when  rabbits realize the residents of the new warren are simply using them to increase their own odds of survival, that Ireland will consider leaving the euro warren and step out alone to join EFTA or the British Commonwealth or variant.

FG/LB with a disastrous failure to negotiate burden sharing for Ireland, are left with the task of turning disaster into success through doublespeak that black is white. Subservience and compliance to their political masters in Europe has by propaganda been turned into a virtuous circle for them. 

They pretend what has been set out for them by Europe is a glorification of their own negotiating powers, rather than lack of same.The order of propaganda must be restored at EU level and locally for FG/LB.  

The irony is the more austerity Ireland endures to pay back its debts and its success at punishing its citizens, the less likely Ireland will gain relief from its odious debt obligations with its ill-omened rescue of European senior bondholders. Eurozone banks now fill up at the Irish petrol pump of interest yielding bailout of circa €67bn repayable all the way to 2042.

But this is par for the course in the Eurozone with bailouts from Greece to Ireland bailing out the banking sector and bondholders at the expense of taxpayers.

German elections have shown the Bundestag has made the decision that German taxpayers will not pay one euro more to bail out Irish banks.

Making a banking union operate independently where many see Brussels has already abdicated most of its power to Berlin, is another target the eurozone has failed to deliver. Clearly Angela Merkel calls the shots in post meltdown Europe awaiting its next meltdown.

Angela has not backed a backstop provision for Ireland as it exits bailout. Barroso’s comments on Ireland show he is the mouthpiece of both Merkel and Schauble. The eurozone should be renamed Germania. Clearly Germany is intent on not paying one more euro for what it sees as the self-inflicted wounds of peripheral countries such as Ireland.

Its true what Craig Beaumont of the IMF states that Ireland could have saved itself billions by burning senior bondholders at failed banks such as Anglo or Irish Nationwide. Ireland could also have applied such a policy in banks such as Allied Irish or BOI.

Irish authorities were brought under pressure and weak political leadership capitulated to the pressure. Though ECB  policy now includes the future burning of senior bondholders, Ireland’s compliance to odious pressure from the ECB under Trichet will not yield any retrospective bailout of Irish banks, according to Manuel Barrosa.

Crisis in leadership covered in spin and propaganda

We have a crisis in political leadership at the highest levels in Ireland. For too long we’ve been fed myopia and blinkered propaganda typified in this example from Pascal Donohoe FG TD, who is currently Vice-Chair of the European Affairs Committee.

In 2008 he chaired this report:

Sub-Committee on Ireland’s Future in the European Union

“1. The starting point for the Sub-Committee was the Irish people’s democratic
decision on 12 June 2008 to reject a proposed constitutional amendment enabling
ratification of the Lisbon treaty by the Oireachtas.

18.      The Sub-Committee has strong concerns about any option that could potentially lead to Ireland finding itself on an outer or second tier of the EU. The option of Ireland leaving the EU is also unthinkable. These scenarios would be catastrophic for Ireland’s national interests, both economically and politically.”

You can visit Pascal’s website and see video of his Dail contributions attacking critics of bailout asking how they could come up with €15bn budget deficit shortage to pay salaries in the public service.

What Pascal means is, how will his inordinate and bloated salary by European/global standards be paid for along with the troupe of his advisors with their top ups; add in  bloated salaries of all  top echelons of the public service; throw in  expensive shambles of the health service with more  bloated salaries for both medical personnel and administrators; add in concerns by the troika re the bloated and expensive legal industry in Ireland.

Pascal from his lofty perch of comfort and political preferment has burst that reform balloon by vehemently attacking a wealth tax. His argument is a wealth tax would drive money out of our banks leaving (incredibly) the taxpayer to pick up the bill. In Pascal’s world the low lying fruit of taxpayer money should not come from the wealthy in society. Under the troika the gulf between the rich and poor in Irish society grows with the guillotine of debt burden extracted disproportionately from the poorer in society.

Expect ESRI nonsense propaganda refuting such claims with figures such as 17% clawed back from social welfare recipients compared to 18% for the rich. However 17% for a social welfare recipient may represent a day’s food for their children, whereas 18% for the rich may go unnoticed.

Let me try to answer Pascal’s €15bn question.

We need to leave the EU and default. No more trips to Brussels for Pascal. We can live on the food we produce at home. This will mean a severe correction to our economy for which we require support.

Bric countries, USA, Russia, China, Iceland, especially the UK should be lobbied to purchase our gevernment bonds to help us with this transition. Strong consideration should be given to closer ties between Ireland and the UK if necessary by Ireland joining the commonwealth.

We need to renegotiate our debt with our creditors based on our ability to repay and what we decide we will repay.

No more pliant and subservient propaganda from Pascal or EK.

No more the rubbish about the great achievement accomplished by tearing up the Promissory Notes. Pascal likes to talk about the tearing up of the €32bn promissory notes.

When you forensically examine Pascals’s deluded propaganda, what Pascal actually means is that the PN’s were laundered into long-term government bonds subject to international legally binding contract, that saved €1 bn against what would have been the cost of paying the PN’s in full.

However, we cannot now walk away from PN’s and simply say we’re not paying them. Pascal’s has sold us another pup. They are still celebrating this deal with Brussels champagne in Berlin.

Where will they find €15bn euro from?

Pascal should stay at home and help with reforms. Perhaps an update for 2014 of the above subcommittee to deal with: banks not lending; overpaid politicians and advisors their purses filled with top ups; HSE collapsing; legal industry overpaid; medical industry overpaid; top tier gravy train in the public sector, banks, charities; lack of investment in R&D and instead of investment in education, severe cutbacks that befit a zombie nation.

We should begin bilateral negotiations with the UK with the view to closer cooperation and political ties outside the EU but within a Swiss type membership of the European Free Trade Agreement.

We need to renegotiate with the troika and with the IMF on the basis of an exit from the EU.

Under present odious terms there is no future for this country within the EU. Crippled with a disastrous outcome for the PIIGS nations, with trip wire solutions ready to blow up at any moment, 2014 bank stress tests across Europe, the eurozone has not advanced any prospect of economic progress for peripheral members.

Its time to look for Plan B that involves a medium to long-term solution for Ireland’s debt outside the eurozone. It would make sense to join the sterling area.



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