What to make of the whole Ireland debâcle? Malcolm reckons that Jason Walsh’s review for newswhip.ie is as good an overview as one might expect. The headline is also the conclusion:
Bailout reactions: consensus that bust is better
He starts with:
Famously, Nobel Prize-winning economist Paul Krugman wrote in the New York Times that Ireland needed a new Jonathan Swift, saying only a satirist could communicate the true nature of what the bailout does: “punishing the populace for the bankers’ sins”.
“It’s like the Total Perspective Vortex from the Hitch-Hiker’s Guide to the Galaxy: Ireland has been forced to recognise how unimportant it is in the scheme of things,” says Fealty, noting the bailout was designed to protect the EU, not Ireland.
Fealty is also interested in how the question of sovereignty has cropped-up: “It’s not like virginity – it’s not something you lose once and then it’s gone. However, when the Germans come offering free money they may want to think very carefully.”
Dearie me! says shocked, naïf Malcolm.
Today’s main front-page piece is by Steve Dinneen:
Dinneen won’t add greatly to the sum of knowledge, especially after Walsh’s efficient précis. However, the same writer has another take under his by-line as “The Capitalist”:
IRELAND may have accepted an €85bn handout to keep it afloat, but why stop there? The ever-popular Powers That Be in Ireland seem to have come up with a novel solution to the country’s solvency issues.
An advert has appeared on Ireland’s biggest property website, the appropriately named daft.ie, offering the Republic of Ireland for a cut-price €900bn (o.n.o.).
The classified ad, posted by one Brian Cowen, says the property is available to move into immediately, with “full planning permission for 300,000 homes, eight prisons, five public hospitals, 10,000 schools… as well as hundreds of unfinished road developments”.
It warns the property is in need of some refurbishment but comes with stunning scenery.
There is at least one other gem in this edition of City A.M. It is a “Guest Comment” under the by-line of Mark Field.
“Who he?” you ask. Well, for the last decade, Tory MP for the Cities of London and Westminster, so with an ear to the ground at one end of town, and a voice at the other.
Field’s provocative piece seems not to be available on-line. At least for the natural audience of this free-sheet, it may be scandalously headlined:
Bondholders must take a haircut
After the throat-clearing, Field comes to his valid point:
The present panic in Ireland, so we are told, has been inflamed by the German chancellor Angela Merkel’s unilateral announcement that bond-holders should take a share of the responsibility for the costs of restructuring sovereign debt, not just European taxpayers. Yet to place blame on German shoulders is to shoot the messenger. Without a mechanism for sovereign-debt default, investors enjoy a perverse incentive to pump even more money into the riskiest economies. This will only be prevented if bondholders take an enforced haircut.
He goes on to argue that the September 2008 bank bailouts was essentially a political gambit to forestall further contagion. However, it has led bondholders to expect continuing and unbridled support from taxpayers:
This cannot go on. Further sovereign default in the Eurozone risks leaving European governments without either the financial capacity or political stock to let investors off the hook next time.
Field breaks ranks with the golf-club Tories who may have been chortling that the € is doomed:
It is hard to see how Greece or Ireland might ever be able to finance their debt in the global capital markets if expelled from the Eurozone. But it is not hard to envisage a fresh banking crisis.
While interest rates hover just above zero, banks have little incentive for banks to do their housekeeping and purge the huge unquantifiable toxic “assets” on their balance sheets. [That, at least, should no longer be true of Ireland].
Therein, then, lies the latent virus of the next calamity. If … when … that inflicts itself upon us, it would most likely precipitate a renewed credit crunch. “Most likely”? — oh, Mr Field, such sweet innocence!
With that further squeeze there evaporates any hope of the export-led, private-sector recovery on which all our hopes for economic growth are pinned. Those, like Malcolm, who wonder how every country can simultaneously manipulate its export-led recovery are less sanguine.
That apart, Field’s punchline is pertinent and chilling:
Conservative backbench critics of the Irish bailout are consoled by their clear understanding that British assistance would not have been offered to Portugal, Belgium of Spain.
Perhaps this faith will soon be put to the test.