Friday, 31 December 2010

Momentous Year From Bad To Worse...

A momentous year which went from bad to worse...

Siobhan Creaton uses the alphabet to summarise the main events of what proved to be a tumultuous year for Ireland

A The nightmare that is Anglo Irish Bank continued in 2010 when its staggering €35bn of bad loans finally bankrupted the country. Some of the bank's top brass were arrested and questioned by gardai, and the Director for Public Prosecutions will decide next year whether they will face charges for their recklessness.

Sean FitzPatrick did suffer the humiliation of being made bankrupt while his protege David Drumm filed for bankruptcy in the US where he may fare better in the long run.

For many months politicians dithered and differed over how to solve the Anglo problem before finally agreeing to wind it down. So in 2011 Anglo Irish Bank will disappear forever but Irish taxpayers will be paying for its failure for many years to come.

B 2010 will go down in history as the year when Ireland agreed to take an €85bn bailout from the International Monetary Fund, the European Union and the British and Swedish governments.

Due to the scale of Ireland's crippling bank debts, the Government's finances will be closely monitored by the IMF/EU. Every week it will be expected to tell Ireland's lenders how much cash there is in the kitty followed by detailed monthly and quarterly reports.

The years ahead will be lean and we can only hope our new masters' recovery plan will restore us to financial health.

C Contagion was the big fear across Europe as Ireland's debt problems threatened to topple the euro. By virtue of our toxic banks Ireland is now part of the PIGS of Europe -- a motley crew of the regions' sickest economies that also includes Portugal, Greece and Spain.

For months bond holders targeted the euro's weak links, first attacking Greece and forcing it to be bailed out before turning their sights to Ireland. The attention next year will focus on how Portugal and Spain.

D Billions of bank deposits were pulled out of Irish banks as international investors took their money to safer havens. AIB, Anglo Irish Bank and Bank of Ireland saw more than €36bn being withdrawn as corporate deposits were shifted to AAA-rated institutions.

This left a massive hole in their balance sheets and left the Irish banks reliant on the ECB to provide them with cheap money.

Many nervous Irish bank customers also switched their money into foreign-owned institutions despite the Government guaranteeing up to €100,000 at any bank, building society or credit union regulated by the Financial Regulator.

E Ireland has remained a leading exporter of manufacturing goods and services and the sector continues to attract high levels of inward foreign direct investment.

Lower costs and the availability of a large pool of skilled workers are amongst the upsides of the economic gloom for exporters. The retention of our 12.5pc rate of corporation tax is also welcome as the bulk of Ireland exports come from the multinationals.

But the only way to ensure an export-led recovery that will create jobs is for Irish-owned small and medium sized businesses to seize international opportunities.

F Kerry-based financial services group FEXCO moved into the major league by purchasing Goodbody Stockbrokers from a distressed AIB for €24m in cash.

It's a bold move that will put the firm in direct competition with the likes of Davy and NCB for the first time in its history.

Brian McCarthy's business was in the envious position of having a €123m cash pile at a time when AIB desperately needed the money and walked away with what looks like a bargain.

Goodbody's senior management are staying on board, taking a stake in the business but there will be redundancies as the two businesses are merged. This transformational deal for FEXCO will be approved by regulators early in 2011.

G There was good news in Co Monaghan where the exploration company Conroy struck gold. The firm, headed by Richard Conroy, is set to develop a gold mine at Clontibret after "excellent" results confirmed the find.

And the company has hopes of an even bigger discovery at Clay Lake, Co Armagh. It has raised enough money to fund the work it needs to complete feasibility studies at the one million-ounce prospect at Clontibret and is excited about the company's prospects.

H It was left to Central Bank Governor, Patrick Honohan, to confirm that Ireland was definitely taking a bailout after days of denial from Taoiseach Brian Cowen and senior ministers.

"We're talking about a very substantial loan for sure -- tens of billions, yes," he told RTE's 'Morning Ireland' as the IMF team arrived.

His intervention sparked rumours of a deep rift between the Government and the central banker with the Taoiseach saying sniffily that Mr Honohan was entitled to his opinion.

The controversial Central Bank Governor also declared that the Irish banks were "up for sale" and that he was "relaxed" about who owned them.

I The Republic of Ireland was put up for sale on for €900bn or nearest offer. The 74,000sqkm island at the edge of western Europe was advertised with full planning permission for 300,000 homes, eight prisons, five public hospitals, one city metro system, 10,000 schools with extensions as well as hundreds of unfinished road developments ranging in size from national primary roads to larger motorway systems.

"In need of some refurbishing," it said. "Also comes with a variety of weather, nationalities and political opinions." Offers to Taoiseach Brian Cowen. (No time wasters please)

J News on the jobs front was mostly bad with the Department of Finance expecting the rate of unemployment by the end of 2010 to be around 13.5pc as thousands of people continued to lose their jobs.

There was some relief with companies such as Citi group, outsourcing company OSG, HP and Facebook all seeking to recruit new staff. The Government announced an ambitious plan to create 300,000 jobs over the next five years in the business and tourism sectors, with 30,000 to be created in 2011.

K UCD academic Morgan Kelly, who forecast Ireland's spectacular property crash, emerged once again with more grim predictions.

If you thought the bank bailout was bad, he warned, wait until mortgage defaults hit home. Dr Doom says that, while the first round of the banking crisis centred on a few dozen large property developers, the next will involve hundreds of thousands of families with mortgages.

At least 100,000 or one-in-eight mortgages are already underwater and struggling to make repayments.

L New legislation will give the Finance Minister powers over banks guaranteed by the Government that would be the envy of North Korea's masters.

The opposition claimed the Credit Institutions (Stabilisation) Bill would give Brian Lenihan the most powerful position ever given to any minister in any government in the history of the State.

But the Finance Minister insisted these sweeping powers were necessary to intensify the Government's efforts to resolve the banking crisis and the financial stability of the nation. Independent TD Finian McGrath was reminded of Cuba when debating the Bill.

"One big difference, however, is that the Cubans nationalised the banks when there was money in them, but we take major shareholdings when the banks are broke," he said.

M One of Ireland's biggest and best-known property developers Bernard McNamara's empire came tumbling when the National Asset Management Agency moved to shut it down. McNamara, who owes about €1.5bn to Irish banks, had been working with Ireland's bad bank to agree a business plan for his company but his debts were too big.

NAMA went to court to have his building firm, Michael McNamara, liquidated and soon its assets were put up for sale.

The company was owed millions by other companies he controlled and with no prospect of repaying them. NAMA believed his building group could not survive.

N Ireland's bad bank was forced to defend itself in a court action taken by property developer Paddy McKillen.

The publicity-shy tycoon, who stayed away from the High Court during the hearing, took the first serious challenge against NAMA.

He believed that the transfer of €2.1bn of his loans to the agency -- which is also his tenant at the Treasury Building in Dublin -- would irreparably damage his vast property empire.

NAMA emerged unscathed but Mr McKillen, who claims to be facing commercial disaster as a result of the transfer of his loans to the agency, has appealed the verdict.

O The south Dublin suburb of Dalkey may become the centre of Ireland's oil industry if Providence Resources strikes oil off its coast. The company is set to begin drilling just off Dalkey Island to assess how much oil and even gas might be there.

The exploration will be offshore and shouldn't upset residents like U2's Bono although there are concerns about the potential impact on the exclusive neighbourhood.

P One of Ireland's biggest building contractors Pierse collapsed under the weight of some €200m in debts.

The firm founded by Ged Pierse in 1987 had undertaken many major construction projects in Ireland for the last three decades.

But the collapse of the property market dealt a fatal blow to the contractor which was forced to ask the High Court for protection against its creditors.

It was owed €16m by Gannon Homes, a company controlled by developer Gerry Gannon, while Pierse owed subcontractors and suppliers more than €50m.

An intricate 'spider's web' of enormous intra-company loans was exposed as being at the heart of the group's problems.

Q Sean Quinn and his family ended the year owing Anglo Irish Bank a whopping €2.8bn as efforts continued to restructure and sell his Co Fermanagh-based empire.

Once Ireland's richest man, Mr Quinn has given a "firm commitment" to repay this debt but his prospects are bleak.

He has lost control of the business he built over three decades while the circumstances surrounding the purchase of his family's stake in Anglo Irish Bank are still being probed.

R Europe's Commissioner for Economic and Monetary Affairs Olli Rehn became a household name.

The Finnish politician is Ireland's new economic overlord as the man who oversaw our austerity plan and who knocked politicians' heads together to engineer the bailout.

"The Irish are smart, resilient and stubborn people: they will get over this challenge and the EU is supporting them in that," he has soothed.

S The Government is getting ready to sell off the family silver to pay for the bailout. In the months and years ahead companies like the ESB, Bord Gais, Coillte, Dublin Port and even the National Lottery licence will all be sold as part of the biggest ever shake-up of the semi-state sector, which is worth about €10bn.

The Government's stake in Aer Lingus could also be put on the market and spark another battle with Ryanair for control of the air routes in and out of our tiny island.

T Dublin Airport finally opened its second terminal. At a cost of €600m it is an impressive building that has so far seen very little activity.

Etihad is the only airline that is fully operational there with Aer Lingus operating a few flights -- leaving the 40 shops empty.

With passenger numbers declining rapidly it will be a challenge for the Dublin Airport Authority to make it pay.

Michael O'Leary, who has pledged that Ryanair will never use T2, described it as a statement of modern Ireland: "A big bankrupt property development."

U As the Government gets ready to sell the banks it now controls, other financial institutions will also go under the hammer.

Royal Bank of Scotland, which owns Ulster Bank, is keen to offload this bank and get out of Ireland to concentrate on more vibrant markets.

Ulster has racked up enormous bad loans and has transferred more than €29bn into RBS's own toxic skip.

The RBS boss, Stephen Hester has promised a wave of asset sales and job cuts in 2011 that could see another familiar bank exit Ireland's high streets.

V Vodafone Ireland chairman Brian Patterson attacked the media for its overly gloomy reporting of Ireland's bankruptcy while wagging his finger to say that everybody was to blame for the country's economic woes.

His remarks are of significance only because Patterson is a former chairman of the Financial Regulator at the height of the boom when Anglo and AIB were lending recklessly.

"We were all responsible," he said several times in a speech to Kilkenny Chamber of Commerce. We are certainly all responsible for picking up the tab anyway.

W Wikileaks brought us the news that there are two sites in Ireland of vital importance to US national security.

The 12,200km Hibernia Atlantic transatlantic communications cable that links North America with Ireland, the UK and Europe is a key piece of infrastructure.

While the bio-tech Genzyme plant in Co Waterford was also a vital enterprise as far as the Americans are concerned.

Genzyme's 37-acre biotechnology site is a subsidiary of a Massachusetts-based multinational that produces Thymoglobulin, a kidney transplant rejection treatment product, as well as other products. It employs 460 people outside Waterford.

X Supermarket chain Tesco enjoyed lots of good publicity as the public followed the success of check-out operator Mary Byrne on the 'X Factor'.

Byrne moved to London once she made it through to the live shows but customers were treated to cardboard cut-outs of the singer for weeks and asked to vote for her.

The Dubliner, from Ballyfermot, didn't make the final but has secured a record deal and is hoping not to return to working on the tills in the near future but won't rule it out.

"I'm still an employee of Tesco and if things don't work out, I wouldn't have any qualms about coming back here,' she said.

Y Poet Theo Dorgan offered some solace to University College Cork's young graduates who like so many in Ireland now are facing an uncertain future.

Those who must emigrate, he said should go with a full heart and high expectations of the world. "Do not go in defeat, with regret, in loneliness."

And those who stay have the same opportunities to learn and explore, to discover and innovate, to be surprised and joyful, to learn and to help teach us all what it is to be fully human.

"The nation is beaten down, but not defeated. A certain kind of Ireland is over, and we are well rid of it; there is a new Ireland to be imagined and worked for, a new kind of Ireland to build, and it is you who must build it."

Z Farewell to Bank Zachodni WBK. The Polish bank that was the "jewel" in AIB's crown was put up for sale by the beleaguered Irish bank.

Spanish bank Santander snapped it up in a €3.1bn deal and also bought AIB's 22pc stake in the US bank M&T for another €1.5bn, as it struggled to raise cash.

Bank Zachodni WBK was Poland's third biggest bank and its prospects were bright. It was a dire outcome for AIB. Years of reckless lending have left it an insolvent wreck that will be sliced, diced and sold to whoever will take it.

Irish Independent

Monday, 27 December 2010

Surge In Emigration...

Surge in emigration as economic downturn takes toll...

THE NUMBER of people moving to live in Australia, Canada, the US, New Zealand and Britain over the past year has increased sharply, reflecting a major surge in emigration due to the recession.

New figures show Irish citizens have received 21 per cent more long-term resident visas for Australia, 49 per cent more New Zealand resident visas and 33 per cent more US immigrant visas.

There has also been a 100 per cent increase in the number of Canadian work permits issued to Irish people and a significant increase in the number of similar visas issued for Australia. The number of people moving to Britain has risen by 2 per cent in 2010, which amounts to just under 1,000 Irish people moving to Britain every month to live.

The figures from five of the most popular destinations for Irish emigrants are in line with recent data from Central Statistics Office, showing 65,300 people emigrated in the year to April 2010, the highest number leaving the country since 1989.

Britain and Australia are the most popular destinations for Irish emigrants but there is also a major increase in the number of people moving to work in Canada.

In the first six months of 2010, Canada issued 3,077 work permits to Irish citizens, which is more than the 3,047 it issued during the whole of 2009. This corresponds with a steady rise in Irish workers in Canada recently: 2,959 in 2009; 2,617 in 2008; and 2,392 in 2007.

Australia has seen a similar increase in the issuing of permanent residence visas. In the year to the end of June 2010, 3,041 Irish people got migration programme visas (for highly skilled workers), up from 2,501 a year earlier. A separate visa programme, which enables Australian firms to sponsor workers on a temporary basis, is also experiencing a big increase in Irish applicants. In the five months to November 30th, some 2,290 people received these visas, compared to 3,370 for the whole of the previous 12-month period.

However, the number of holiday working visas issued to Irish citizens under 31 years for Australia fell to 14,833 in the year to June 30th, 2010, down significantly from a record high of 22,786 in the previous 12 months.

Liz O’Hagan, founder of the firm Australian Visa Specialists, said this probably reflected the fact that many young people had already been on the programme and were now looking for ways to get long-term Australian visas.

Britain has not experienced a dramatic upturn in immigration. Some 5,630 national insurance numbers were issued in the first six months of 2010, suggesting full-year figures will surpass the 11,050 people in 2009 and the 10,550 people in 2008.

The US issued 287 immigrant visas to Irish people in the year to end September 2010. This represents a 33 per cent increase on the figure in 2009, although it is so small a number it is almost irrelevant to the figures.

Some 1,637 people gained legal permanent resident status in the US in the year to end September 2009 but no figures are available yet for 2010. Some 14,444 non-immigrant visas, covering students work programmes, intra-company transfers and other temporary workers, were also issued in the year to end September 2010.

Irish immigrant groups also suggest there has been an increase in illegal emigration to the US.

The number of permanent resident visas issued by New Zealand to Irish people is up 49 per cent at 434 in the year to end June 2010. It has also issued 4,010 work visas to Irish people, up from 3,936 in the previous 12-month period.

Dr Alan Barrett, who co-ordinates the migration programme at the Economic and Social Research Institute, said the emigration figures reflected one of the most depressing aspects of the economic downturn. He said, given there are few job opportunities in Ireland, it was probably preferable that people went away to work elsewhere to maintain their skills.

“But regardless of these possible benefits, emigration that is involuntary is saddening and brings back sad memories for people of my generation who left college in the 1980s,” he said.

Report by JAMIE SMYTH - Irish Times

Useful links:

Guide to Moving to Canada

Guide to Moving to New Zealand

Guide to Moving to Spain

Nursing Jobs in Australia

Jobs in Dubai

Wednesday, 22 December 2010

Horses Abandonded As Financial Crisis Bites...

Thousands of horses and ponies abandoned in Irish countryside as financial crisis bites...

Tens of thousands of horses and ponies are believed to have been abandoned in the Irish countryside as families struggle to cope with the financial meltdown.

Animal welfare inspectors have had to shoot some of the worst affected animals left badly weakened by exposure, starvation, sickness and injury.

With costs of feeding or keeping the horses in stables running to £26 per day, generations who have kept horses as a passion have no longer been able to afford to keep them.

Irish Prime Minister Brian Cowen has pledged £12.8billion in spending cuts and tax increases over the next four years.

The austerity measures are expected to lead to a 10 per cent cut in the disposable income of Ireland's middle class, and worse for those on lower incomes, leaving them without the funds to care for domestic pets.

Irish law requires owners to have animals registered and microchipped, but it is not rigidly enforced.

Thousands of people are thought to have invested in horses or ponies during the boom years in Ireland, fuelled by a property bubble in the country.

Reckless breeding has also seen the horse population soar rapidly.

Many were kept in gardens, fenced-off building sites or on common land.

But the global financial meltdown has led to them being left to wander in the countryside as owners are unable to pay for their upkeep.

Joe Collins, president of the Veterinary Council of Ireland, estimates there are between 10,000 and 20,000 'surplus horses' across the country.

Ted Walsh, father of top steeplechase jockey Ruby Walsh, said that number could be as high as 100,000.

Thousands of the animals have been left to roam around the site of Dunsink tip, just miles from the centre of Dublin.

Many of them have been shot with a .32-calibre pistol by animal welfare inspectors as they were too weak to survive.

The Dublin Society for the Prevention of Cruelty to Animals has been forced to limit its stabling capacity in the hills around Dublin and slash its $500,000 budget for horses and ponies.

In 2008, it took in 26 sick or injured horses and ponies; last year that figure was 106, and so far it has cared for 115, according to the New York Times.

Some of the released animals are even recaptured and sold to unregulated horse markets for as little as £10 each.

Report - Daily Mail.

Friday, 10 December 2010

Corporate Welfare Will Sink Ireland...

FF's parting gift of corporate welfare will sink the country...

A farmer told me he had just taken €53,000 out of the local bank and put it under his bed

YESTERDAY was the feast of the Immaculate Conception. In many other Catholic countries, particularly in Belgium and southern Holland, this is also the week that Santa comes and leaves presents in children's shoes. For many, both the Immaculate Conception and Santa Claus are simply not believable. For me as a child, December 8 was a day off school and that's all that counted.

What would Christmas be without Santa, or Catholicism without the Immaculate Conception? You can't have one without the other. Even if you don't believe, sometimes it is easier to pretend.

The Budget was akin to the Government playing a big game of 'let's pretend'. Let's pretend that the banks are solvent. Let's pretend that the problem in Ireland is 'social' welfare rather than 'corporate' welfare (because this is what bailing out the banks amounts to) -- welfare fraud by corporations. Let's pretend that the Budget can make the economy grow. Let's pretend that some other country has tried austerity without mass debt restructuring and succeeded. None of the above are true.

The problem with 'let's pretend' games is that, when we are young, they allow a child's imagination to flourish, with reality and fantasy crossing over, but when we become adults, we know it's only a game. We also know, for example, that the reason no country has ever tried what we are doing -- austerity budgets without debt restructuring -- is that it doesn't work. So why go through the charade?

The people know the Budget will not get us out of the hole, and they are voting with their pockets by taking money out of the banking system. The official response to this was, first, to deny it is happening and then to say it is all right because as quickly as our deposits leave, the ECB injects new cash into the banks and the net position stays the same. But this is a recipe for a banking collapse, as it implies that a banking system without deposits is a banking system; it is not.

For example, the other night, following a performance of 'Outsiders' at the lovely Backstage Theatre in Longford, a local farmer approached me tentatively. He mumbled for a bit, complained about the weather and abruptly told me that he had just taken €53,000 out of the local bank and put it under his bed (and being a farmer he had a shotgun by the bed). He didn't solicit any advice as to whether this was a good or a bad thing to do; he just stated baldly his own personal conclusion about the banks, the economy and the financial affairs of the nation in general.

Either we fix the banks or this farmer's approach will become commonplace and the establishment's course of action that increasingly looks like national economic suicide or 'patricide' will continue.

The only part of the banking system that is currently working is clearing. Most deposits are still in the banks, cheques still clear, the ATMs still work. But that is it. The original guarantee prevented a run back then, but the problem has changed utterly since September 2008. It is now failing. The reason it is failing is that it was the right solution to the wrong problem.

The banks are insolvent. It is interesting that the conversation is now about comparing levels of insolvency. Bank of Ireland is quite insolvent, AIB is more insolvent and Anglo is completely bankrupt. The thing about solvency is that either you are or you are not. You can pay the bills or you can't. None of our banks can pay their bills.

So, what is the solution? Let's look at the numbers. In September 2010, when the guarantee expired, the banks had €55bn of bonds that they needed to roll over. The market, knowing that the banks were insolvent, said 'no thanks', so the ECB and Irish Central Bank stepped up to the plate and provided the liquidity the banks needed in order to open for business the following day.

To that €55bn we can add the €35bn the ECB had already provided in liquidity, giving us €90bn.

Then we can add the €34bn of special liquidity provided by the Irish Central Bank and we get €124bn. To resolve this mess, we have to look to the biggest holders of Irish bank debt: the ECB and the Irish Central Bank as well as the bondholders.

It should be very easy to convince Mr Trichet that allowing Ireland to go bust -- as we surely will with the albatross of bank debt hanging around our neck -- would be against the very raison d'etre of the ECB.

What is the biggest cause of runaway inflation in every country from Weimar Germany to Zimbabwe? A currency that people think is weak, and therefore don't trust. The one thing that will weaken the euro is a sovereign default within its borders. It would turn into an existential crisis for the currency. There is no one willing to trust a currency whose continued existence is in doubt. Result? The euro plunges on the international market.

To stop this happening, the ECB has to sort out the Irish banking system in a way that does not lead to the people of Ireland being saddled with debts we cannot afford.

It should be fairly easy if there is a will to do it.

All deposits in Irish banks are held electronically. Ring fence these and move them to another institution. (This is not as odd as it sounds, it is exactly the plan Patrick Honohan outlined for the depositors in Anglo when he said that institution would be wound up by the end of January.) If a suitable institution does not exist, then we should create one.

The debts of the banking system can also be moved to the new institution, but the ECB would have to allow the money it is providing as liquidity to become capital in the bank. It would own, along with the other bondholders, 100pc of the shares in the new bank. As the property market here finally starts to clear, the bank could be sold to the private sector, fully capitalised and in good health.

Ireland is a systemic risk to the euro. We can deal with our own sovereign debt. We cannot deal with the debts of private institutions that went on a lending splurge to the private Irish banks for quick profits, nor should we.

If the ECB does not allow us to forego the bank debt, then it will reap what it is sowing. We will cause a crisis for the eurozone, and the demise of the very institution that has the power to save both itself and us.

The austerity Budget, without a deal on the banks, will lead to patricide. Corporate welfare, not social welfare, will sink this country. Will that be Fianna Fail's legacy?

Article by David McWilliams - Irish Independent

Saturday, 4 December 2010

It's A Scandal, We're Being Screwed...

It's a scandal, we're still being screwed to pay bankers their bonuses...

This must be the final insult. In three days' time, Brian Lenihan's Budget will take a big chunk of money from every taxpayer in the country to bail out our failed banks.

Now we discover that those same banks have already been using public cash to pay their staff handsome bonuses and salary increases that will ensure they escape the worst of the pain.

Needless to say, this information has not been exactly been freely volunteered by the banks themselves. In fact, it has only emerged because the backbench Fianna Fail TD Chris Andrews put down a written Dail question on the issue last Wednesday.

A new opinion poll suggests that as few as 16 FF TDs could be returned in the coming general election -- but Andrews' willingness to confront his own Government's policies suggests that if there's any justice, he will be one of them. The evidence is clear.

Over the last two years, most workers have been forced to take pay cuts but AIB and Anglo Irish actually bumped up some staff salaries by 3.2pc and 5pc respectively.

This might seem like a generous gesture, until you remember that the Government was simultaneously pouring money into the banks' coffers in order to pay for their leaders' mistakes.

In the real world, bonuses are something that you only get if you've done a good job. It comes as something of a surprise, them, to discover that a grand total of 15 Anglo Irish staff members received these awards in 2009 and 2010.

Since Anglo is now one of the most pathetic basket cases the banking world has ever seen, we can only imagine how much worse things could be if these people hadn't been doing such sterling work behind the scenes. It would be bad enough if the only people to benefit from these pay increases were frontline staff, who are at least innocent of the crimes and stupidity that have brought this country to its knees. Instead, it seems that banking executives are as keen as ever to stick their own snouts into the public trough.

Earlier this week a Central Bank report found that only one bank was making a real effort to reform its pay policies, while the others were still presiding over the Celtic Tiger culture of perks, bonuses and golden parachutes.

As the report points out, this greed mentality is also responsible for the toxic loans that eventually led to the national humiliation of last week's IMF/EU bailout.

To put it very politely, most of us would be quite keen to see that not a red cent of this goes towards lining the pockets of banking executives.

Of the €35bn that has been earmarked for the banks, almost half will come from the National Pensions Reserve Fund -- while the likes of Michael 'Fingers' Fingleton can retire on a gold-plated €27m pension that the law is apparently unable to touch.


Since these people clearly don't do shame, it is up to the Central Bank to put manners on them. While Patrick Honohan's new regime seems to be a vast improvement on his predecessor's, however, it is still far from clear that the straight-talking governor has the powers he needs to clean up this mess.

This week's report even begs whistleblowers within the banks to expose any executives who may be overpaid, a shocking admission that the regulators are apparently unable to get this basic information for themselves.

Tuesday's Budget will be yet another grim reminder of how the banking system has bled this country dry. It seems that no amount of taxpayers' money, however, will make these financial institutions anything other than morally bankrupt.

Report - Evening Herald.

Wednesday, 1 December 2010

Bailout Will Sink Ireland...

Bailout will sink Ireland before we can even swim...

Foreign banks and creditors should lose everything they gambled on the likes of Anglo, but instead, they have been saved by the taxpayer

Make no mistake about it, this 'bailout' will sink Ireland. We are witnessing a monumental struggle between the innocent average Irish person and the guilty creditors of the bust Irish banks.

Interestingly, the financial markets have seen through what the Government and the elite are trying to do and have reacted with ferocious negativity to the Irish deal.

The markets realise that the Irish State is not bust; rather the Irish banking system is bust. Therefore, rational people can see that any deal which is framed to give Ireland a chance has to sever the link between the bust banks and the solvent State.

However, far from severing the link, the deal solders the link between State and banks, making the Irish Republic itself little more than a bust bank. The rest of the world has twigged that what the elites are trying to do is preserve their system by giving the bill to the people, and this will not work. This is why, far from calming the financial markets, the IMF deal with Ireland has enraged them.

Extraordinarily, the people who were supposed to negotiate for the Irish people not only negotiated against us, but couldn't see the backlash coming. Perhaps this is because few of them have any real financial market qualifications.

So, rather than force the ECB to account for its own monumental culpability in allowing out-of-control German and French banks to lend recklessly to Irish banks, the Irish negotiators turned sides and acted as debt collecting agents of foreign banks.

Think about what is happening in our country. Foreign banks and creditors should lose everything they gambled on the likes of Anglo, but instead, they have been saved by the Irish taxpayer, who had nothing to do with executive decisions at Anglo and the other banks. These same major international banks will now lend money to the EU who will lend it to us and the same banks will make more money on interest from us.

So the very banks that should be punished for their failures are being bailed out by the Irish citizens and, worse still, they will get paid more interest from us in the loans they are now extending to us, to save themselves!

Let that sink in for a minute. This is not capitalism, it is not European diplomacy; it is a stitch-up.

This is only the first part of the terrible fantasyland we have been led into.

In order to get to the bottom of what is happening, we have to clear up a few things. First, we have to stop calling it a bailout. This isn't anything like a bailout. Rather it is the EU giving us enough rope to hang ourselves in the hope that we don't hang all of them.

Of course, as soon as they gave us the rope, they started discussions on a mechanism that would ensure no other country would have to be beggared by a profligate out-of-control administration again.

Amazingly, our so-called negotiators signed a deal that will be the last of its kind ever signed by a European government and, in so doing, they have condemned their own people.

The EU leaders realised last weekend that the problem was bigger than Ireland, so they have committed to come up with a construction in the weeks ahead which will mean that in the future when banks get into trouble for lending too much, they and their creditors will pay. They will share the burden.

But Ireland will not be allowed to avail of such a deal because that would be retrospective. So rather than dig their heels in, our negotiation team signed and allowed the EU to treat Ireland differently to any other country. We can go hang.

So not only have they given us a rope, but the interest rate on the rope is nearly a death sentence in itself. It is reported that the "blended rate at current market prices will be 5.82pc". As opaque phraseology goes, that one is pretty meaningless.

But let's accept that at face value, and look to the costs of the financial noose our 'friends' in Europe have given us.

There are two sides to the story.

First, there is the cost side. If we borrow the entire €67.5bn and scrape the bottom of our own barrel to come up with €17.5bn, we can add €85bn to the current outstanding €90bn of debt. That will leave us with a national debt of €175bn by the end of 2014. The interest on this will come to about €8.5bn per annum. This, of course, is the optimistic scenario.

Anyone who has watched in horror as the cost of Anglo has risen from zero to €4bn to €12bn to €18bn to €24bn to €35bn over the past 26 months will know exactly what stock to put in government forecasts.

But the other side of the story is growth.

If this debt is not to drown us, we need the economy to grow at a pace that is greater than the interest we are paying on our debt.

With a debt/GNP ratio far above 100pc our growth will have to be in the order of 8-10pc by 2014 for the economy just to stand still. Anything less than that and the interest payments head off on an unsustainable tangent.

Without growth at these levels, the interest payments leaving the economy (a major problem when a country has all its debt owned offshore) will prove such a drain on the State that we will end in a debt-deflationary spiral. This is where our growth fails to meet the interest payments, making the following year's growth lower as there is less investment, making that year's interest payment more burdensome, leading to less growth etc, until a huge default becomes inevitable.

So where will this growth come from? Where can it come from?

The assumption underlying the four-year plan is that things will not get any worse. That is some assumption. But let's allow it for a moment. Has there been any government policy recently that is aimed at improving opportunity for the future? Or have they all been about preserving the past, and the "insider" power nexus that got us here in the first place?

The bailout hits the sweet spot where the interests of our insiders and the European insiders meet. Luckily for us, the financial markets do not have the same interests. The markets want growth, not punishment, which is why they are sceptical.

Without a radical change in the way this country is governed, there is no hope of growth returning. Our only hope is that maybe there is a tide coming that will wash away the 'insiders' and take their policy decisions that will bankrupt the country with them.

Article by David McWilliams - Irish Independent