Skip to main content

We Face Greek Style Crisis...

They're all away as we face Greek-style crisis

Immediate action needed on debt, but Dail won't cut short holidays...


THE Government is to leave the political apparatus of the State on holiday throughout September -- even though there is growing concern that the country could face a Greek-style crisis before the end of the year.

Widespread bewilderment was aroused in high finance circles last week by the publication of photographs of the Taoiseach, Brian Cowen, playing golf the day after Ireland's sovereign debt was downgraded again.

In what is seen as an example of ill-judged timing, Mr Cowen played golf in Connemara on Wednesday with other seemingly carefree TDs and senators, who still have four weeks of a two-month summer break to go.

But while the Oireachtas is in repose, enjoying a longer than usual break, the financial markets are in overdrive and are now evidently training their sights on Ireland with the apparent intention of again testing the resolve of the EU later this year.

There is growing consensus among economic commentators here that, to counteract the threat, Ireland desperately needs to address the concerns of the markets between now and the end of September.

The markets' concerns relate to the massive and seemingly open-ended debt burden being foisted on taxpayers by the Government in an attempt, effectively, to bail out the banks -- primarily Anglo Irish Bank.

There is agreement among commentators that Finance Minister Brian Lenihan urgently needs to draw a definitive line on the cost of the Anglo bailout.

The markets are also awaiting a decision by the Government on whether it intends to extend the bank guarantee scheme; and, if so, to what extent and for how long. An announcement will not be made, however, until the day the Oireachtas comes off holiday.

A Sunday Independent/ Quantum Research poll, conducted on Friday, asked whether the Government should extend the bank guarantee scheme: 58 per cent said no, while 42 per cent said yes.

"It gets more and more damning and more and more worrying," Brian Lucey, economics professor at Trinity College, Dublin, said on Friday. "Where is the Dail? On its bloody holidays? Where is the Government?" he asked.

Ciaran O'Hagan, an Irish economist who is head of rates research at Societe Generale in Paris, said measures to limit public debt and contingent liabilities were now needed.

On whether these urgent measures were required before the end of September, he said: "Bang on."

But the Oireachtas will not be back off of its holiday until the end of next month.

The significance of the downgrade by the rating agency Standard & Poor's is regarded as of minor importance, although it still has serious consequences.

An immediate consequence last week was that yields of Irish government debt rose sharply, at one point closing at its highest since the EU agreed a bail-out fund in early May when the entire euro project was under threat.

Last April, Standard & Poor's decreased the Greek debt rating to the first levels of 'junk' status amid fears of default by the government there. Following that downgrading, yields on Greek government two-year bonds rose to 15.3 per cent as analysts questioned Greece's ability to refinance its debt.

Last week, Standard & Poor's also assigned a negative outlook to Ireland, citing substantially higher costs to support its struggling financial institutions.

The influential Financial Times, in an editorial last week, said: "It is time to staunch the bleeding. As Irish state guarantees near their expiry date, some banks will not be able to refinance their balances.

"The government should prepare insolvent banks for forced debt-for-equity swaps, which would instantly recapitalise the banks in question and cap the government's exposure.

"This cannot be done frivolously; European institutions are exposed and EU partners must be consulted. But someone must put an end to the practice of handing banks blank cheques.

"Some Irish pluckiness would benefit us all."

In the absence of out-front political leadership, it has been left to the Governor of the Central Bank, Dr Patrick Honohan, and the National Treasury Manager Agency chief executive, Jim Corrigan, to effectively defend policy.

On Wednesday, Mr Corrigan said Standard & Poor's analysis was "flawed".

Among economic commentators, there is some sympathy for Mr Corrigan's argument; there is also widely held opinion that rating agencies should be held to greater scrutiny for their role in mis-rating many of the toxic assets at the centre of the international financial crisis.

Nevertheless, Ireland's rating at three notches below the top, triple-A ranking has caused a further problem for the Government at a time when it is making plans for what will be a politically sensitive Budget.



Report by JODY CORCORAN - Sunday Independent

Popular posts from this blog

The State is about to create another housing bubble...

The Irish economy is set to repeat its old mistake of excess mortgage-lending... The run-up to Christmas is always a good time for burying bad news and this year was no different. On the Friday before Christmas, Bank of Ireland announced it was going to have to put more money aside to absorb possible losses on Irish residential mortgages. Just how much more money was not very clear but it would appear to run into several hundred million euro. The statement was extremely technical and did not actually talk about losses or defaults. But the point is clear. The bank had already put aside some money to absorb losses that might occur as a result of people not being able to pay their mortgages. It now seems that more people than expected are going to default and the bank has had to put some extra money aside. It is as timely a reminder as you could hope for that the Irish banks are still broken and still fighting their way through a mountain of problem mortgages as a result of their rec

Ireland's Celtic Tiger Excesses...

'Bang twins' may never get to run a business again... POST-boom Ireland is awash with cautionary tales of Celtic Tiger excesses, as a rattle around the carcasses of fallen property developers and entrepreneurs will show. Few can compete with the so-called Bang twins for youth, glamour and tasteful extravagance. Simon and Christian Stokes, the 35-year-old identical twins behind Bang Cafe and exclusive private members club, Residence, saw their entire business go bust with debts of €9m, €3m of which is owed to the tax man. The debt may be in the ha'penny place compared with the eye-watering billions owed by some of their former customers. But their fall has been arguably steeper and more damning than some of the country's richest tycoons. Last week, further humiliation was heaped on them with revelations that even as their businesses were going under, the twins spent €146,000 of company money in 18 months on designer shopping sprees, five star holidays and sumptu

Top property sales 2016 – who bought and sold...

The year saw a shift from D4 to D6 while the country market slowed on the previous year... DUBLIN... Dublin 6 dominated top-end sales this year and, in particular, Dartry. Whereas in other years coastal south Co Dublin and Shrewsbury and Ailesbury Roads have dominated, Dublin 6 and the area around Temple Road have become hot property. Top of the list was the purchase in May of Alston at 19 Temple Road for a whopping €10.225 million when former Paddy Power boss Patrick Kennedy traded up from his home on nearby Palmerston Road. In a quiet off-market deal, the Victorian property, on one acre, was sold by barrister Vincent Foley and his wife, Helen, who have lived there since the late 1980s. Around the corner at 5 Temple Gardens, €6.5 million exchanged hands when the detached redbrick house on a third of an acre owned by the late barrister and former attorney general, Rory Brady, sold in another off-market deal. Not long after Subiaco at 1 Temple Gardens sold for €5.85 million shortly a