I can’t really add much to Mr Kelly’s excellent analysis. What it says to me is that the next 12 to 18 months are going to be among the most difficult, if not the most difficult, time this country has faced. I encourage everyone to read the entire document.
I will emphasise his conclusion:
Despite having pushed the Irish state close to, and quite possibly beyond, the limits ofits fiscal capacity with the NAMA scheme, the Irish banks remain as zombies whose only priority is to reduce their debt, and who face complete destruction from mortgage losses. The issue therefore is not whether the Irish bank bailout will restore the Irish banks sothat they can function as independent commercial entities: it cannot. Rather it is whether the Irish government’s commitments to bank bond holders when added to its existing spend-ing commitments, will overwhelm the fiscal capacity of the Irish state, forcing outside entities such as the IMF and EU to intervene and impose a resolution on the Irish banking system.
Seems timely to re-read this paper from almost a year ago, in the light of what has happened since.
Kelly was spot-on. If only Lenihan had the courage to admit that the blanket guarantee was a mistake, or even to make it contingent on the banks numbers being accurate.
The fecker left us wide open on that one, I don’t think we can forgive FF for that incompetence.