How far we done fell

It’s 2am. I just checked the news for the first time in 24 hours. Forgive the following poorly-written mind-dump. Comments and abuse though are of course still most welcome.

The figure won’t be 6.7%, but it will be too much.

6.7% is a senseless and idiotic figure. You’ve got to think the announced rate will be lower, perhaps so it can be claimed that the negotiations were ‘successful’.

If the figure does turn out to be 6%+ it will have been designed to scare other teetering PIIGS into line in the short term.

Clearly, Ireland cannot afford anything close to such a rate. If the rate turns out anything above about 4.5% it’ll be to make an example of Ireland to ensure Portugal, Spain, Belguim and others stay the course. It’ll be the ECB and Irish government kicking our default date two or three years down the line, while heaping an extra €xbn (who cares what X is anymore? Any number is too big) onto the bill, in a desperate and transparent attempt to stop further defaults in the eurozone. We’re the gangrenous arm and the high rate will be a tourniquet.

Our default is coming, the question is when it’ll arrive. Right now, the answer to that question lies in Irish hands. The question for them is what they’re more concerned about protecting; the Irish taxpayer or Ireland’s relationships with other Eurozone members. The Germans have big exposure to our debt… jus’ sayin’.

Admittedly these are not mutually exclusive options but with the euro looking decidedly shaky, well, it can’t be all fun-and-games in Brussels forever… big-decision time looms.

Slight aside; Read Paul Krugman today

Before the bank bust, Ireland had little public debt. But with taxpayers suddenly on the hook for gigantic bank losses, even as revenues plunged, the nation’s creditworthiness was put in doubt. So Ireland tried to reassure the markets with a harsh program of spending cuts.

Step back for a minute and think about that. These debts were incurred, not to pay for public programs, but by private wheeler-dealers seeking nothing but their own profit. Yet ordinary Irish citizens are now bearing the burden of those debts.

Or to be more accurate, they’re bearing a burden much larger than the debt — because those spending cuts have caused a severe recession so that in addition to taking on the banks’ debts, the Irish are suffering from plunging incomes and high unemployment.

But there is no alternative, say the serious people: all of this is necessary to restore confidence.

And Simon Johnson

So why not restructure some of this debt, particularly as much of what the government will owe is actually debt taken on by overgrown and careless Irish banks?

The government has indicated that it will force a restructuring of some subordinated, relatively junior debt. For at least for one prominent bank, Anglo Irish, this may amount to paying 20 cents in the euro. This debt by itself is too small to make a difference, but why not apply the same principle to other categories of borrowings?

The most obvious answer is: Ireland’s European partners do not want this to happen, because it would expose the really bad decisions made by pan-European banks and their regulators over the last decade and create potential fiscal risks in other euro-zone countries.

FOOTNOTE: Blogging about default being the best option; as Bunk said to Omar, “it makes me sick, motherfucker, how far we done fell.”

2 thoughts on “How far we done fell”

  1. I must say that I rather agree with defaulting. Regarding the euphemistically titled ‘bailout’, frankly I wouldn’t send Fianna Fail in to bat against the pickled skeleton of WG Grace. They’d come away 0 runs, fuck all wickets and charge us a fortune for the privilege.

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