OPINION: If Ireland did what Morgan Kelly advocates, the European Central Bank itself might go bust and the euro could collapse
MORGAN KELLY has sparked a lively debate about Irish economic policy with his Irish Times article of last Saturday – much like his previous interventions. He has a lot of credibility because he foresaw the bursting of the Irish housing bubble. To his credit, he does not confine himself to a critique with his latest contribution, but offers his own suggestions.
He is advocating a two-pronged strategy:
(1)That Ireland walk away from the EU-IMF deal (a notion that is, of course, attracting a lot of favourable media comment) and;
(2)that, in order to be able to pay its way in the absence of funds from the EU-IMF, Ireland should immediately eliminate its budget deficit (a drastic notion that, equally predictably, is being ignored in the same media comment).
While I favour speeding up the adjustment, doing it all in one year would be impossibly disruptive.
He claims that a strategy along these lines is needed because otherwise, he thinks, our debts are unsustainable. He bases this on pessimistic growth assumptions, which may or may not transpire. And he argues that a slow, messy bankruptcy would destroy an Irish economy that depends so much on international trust. Better, he argues, to do the whole job immediately.
There are a number of elements missing in Professor Kelly’s analysis.
First, he does not consider the impact of what he is suggesting on other countries, and how they might react.
The effect of a comparatively well-off country like Ireland (a founder member of the euro which had benefited more than most from EU agricultural, regional and cohesion funds) failing to pay money it owed to an EU institution would undermine the mutual confidence on which the EU is based.
If Ireland were to walk away from the EU-IMF deal, that would leave the European Central Bank itself with a huge shortfall. In fact the ECB might be insolvent. It might have to go to the member states to look for more capital. Emulating Ireland’s example, they might refuse, and then the euro would collapse. If they even hesitated about recapitalising the ECB, the resultant uncertainty could have a devastating effect on the world economy; an economy on which Ireland is more dependent for sales than most.
If the euro collapsed because of a failure of other EU states to recapitalise the ECB, or because of a breakdown in trust between its members, Ireland would have to launch a currency of its own in the same year that it would also have to cut wages by perhaps 40 per cent and increase tax revenues to meet Prof Kelly’s other requirement of balancing its budget in one year.
In walking away from the EU-IMF deal, Ireland would be reneging on freely contracted debts to an EU institution and to other EU members, so we would also presumably be excluded from the benefits of EU membership. For Ireland, the Common Agricultural Policy would disappear overnight, as might its access to EU markets for other products, at least until the debts it owed had been collected by other means.
Prof Kelly, who is an economic historian, should look up what happened when we last walked away from international financial obligations. We refused to pay land annuities to the UK in the 1930s, and found some of our critical exports excluded from the UK market, with devastating effects in what came to be remembered as the Economic War.
That is not to say that the EU should not be challenged. The EU-IMF programme may indeed be too optimistic. There is a lack of joined-up thinking on economic policy in the EU. The EU institutions may be too nervous about burden-sharing by private bondholders. There is a selfish nationalism in some of the stands being taken by our EU partners. But then there is a selfish nationalism in some of our own attitudes too. We all have domestic political constituencies and media to appease.
Ireland may not be as influential as it would like to be in the EU. But at least we are still in the EU, and we have some influence there still. We can use that influence to move the EU towards a more credible long-term strategy, one that allows countries such as Ireland time to restore their finances, and allows surplus countries such as Germany time to rebalance their economies towards consumption.
The coming into effect of the European Stability Mechanism in 2013 offers the prospect of all countries still in difficulty having more time and space to resolve their problems in a way that balances public and private interests better than was possible in the emergency conditions of 2008.
In calmer economic times, things are possible that are impossible in the midst of crisis and potential panic.
But trying to achieve all that overnight, by holding a gun to everyone else’s head as well as to our own, as the professor urges, seems to me to be needlessly reckless. Prof Kelly argues that we need to do something like this to keep our international credibility. But, like the advocates of default, I am afraid that the course he favours would destroy our international credibility instantly. It would involve immediate shock therapy for our economy, which could do much more harm than good. It would undermine trust.
All banking, all money, is based on mutual trust and confidence. Why else do we accept a scrap of paper, with no inherent value itself, as worth €100 or €500 or whatever other number is written on it?
Why else do we hand over our saving to banks on the promise that the money will be there when we need it?
It is all about trust. Without trust, the entire modern economy, built up over three centuries, would disappear overnight.
Breaking trust with our European and international neighbours would undermine the future of our own economy, and the economies of those to whom we sell. That is why I do not think Prof Kelly’s article, for all its erudition, offers good advice at all.
John Bruton is a former taoiseach and former EU ambassador to Washington. He is chairman of IFSC Ireland, a private sector body that seeks to promote Ireland’s international financial services sector
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[This user is an administrator] Oireachtas Retort
He is chairman of IFSC Ireland, a private sector body that seeks to promote Ireland’s international financial services sector.
Indeed
Today, 01:57:04
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[This user is an administrator] Bryan O'Donoghue
" If Ireland did what Morgan Kelly advocates, the European Central Bank itself might go bust"
Who cares ? Ireland has been doing exactly as required by the ECB - specifically ensuring no eurozone bank goes bust and in doing so is rated as 42% likely to default on "government" debt inside of five years according to S&P rating agency.
The government is already stonewalling on CCCTB. What does 'constructive engagement' mean ? How out of touch with the REQUIREMENTS of Irish citizens in this regard are you people ?
Who cares about the ECB. It's not acting in the interests of the citizens of this state, appears to be acting against those interests are regular intervals and there's a word for that - enemy.
The ECB is Ireland's enemy. Lets not mince words.
How much worse will it actually get for this country irredeemably wedded to the Euro and the diktats of the technocrats in the ECB ? Ireland is right behind Greece in the ratings agencies estimation of default. Read the FT and WSJ for the last three years. Nobody is fooled. The public perhaps under-informed but, the people who's job it is to lend money to sovereign states clearly AREN'T fooled.
After three years of hapless dithering - Greece in on the cusp, the ostensibly useless political class is in denial. Morgan Kelly has mapped out a path - that avoids a sovereign default in this country.
Instead of sticking to the obviously flawed 'plan' of the ECB/Berlin - we as a sovereign nation should act now and impose a settlement rather than the do-nothing approach which has in effect led this country as lambs to the slaughter.
The 'great project' of European federalism is clearly well helped along hobbling sodenkinder like Ireland. Silence our dissent, bring the country to economic ruin, mandate the fiscal/political union by fait.
By the time Paddy realises what's happened it'll be way too late.
With the way the EU is going it won't take long for radical nationalist movements to start a 'campaign' in Brussels, Berlin and Frankfurt.
We can dress oppression from the EU up as 'help' but - hospital beds closing so that European bondholders can be paid off is oppression and eventually the inaction of the political class will unleash all sorts of non-political unpleasantness.
Today, 01:58:58
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[This user is an administrator] David O'Donnell
'The coming into effect of the European Stability Mechanism in 2013 offers the prospect of all countries still in difficulty having more time and space to resolve their problems in a way that balances public and private interests better than was possible in the emergency conditions of 2008.'
Why not now John? Now that we have 'saved the Euro', you want the Irish citizen-serfs to 'save the world'!
It is time to save ourselves - the banks' detritus is too heavy for the state, and its citizenry.
Today, 02:15:27
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[This user is an administrator] Manofiona
In daring to challenge Prof Kelly's views, Mr Bruton will no doubt be widely criticised in the media. Of the 170 comments on Prof Kelly's article, I counted only 3, including my own, which disagreed with his proposals. The Irish people are being incited into believing that it is possible, and indeed desirable, to take unilateral steps whose only sure result would be to destabilise the Euro and therefore the whole process of European integration. Such consequences would be disastrous for Ireland and for every person in Ireland.
The terms of the so-called bail-out are tough: they had to be in order to be credible. If Ireland cannot meet them (and the evidence is by no means conclusive on this point), those terms will in all probability be changed. No one in the Eurozone wants a member state to fail. However, as is the case with all agreements, any change must meet the reasonable interests of all parties to it.
It is in the interest of all member states of the Eurozone for there to be an alignment over time of the economies of all the member states with the prevailing model in the zone, one which is very different from the model promoted by politicians who claimed that Ireland was closer to Boston than to Berlin. Any Irish government which wishes to establish credibility with its Eurozone partners must show that it is actively working to promote such alignment.
Instead of bamboozling the Irish people with prospects of unilateral actions which no sane Irish government could contemplate taking, those economists and commentators with pretentions to public influence would do well to look at the real challenges facing Ireland over the coming years as a member of a Eurozone which, as Martin Wolf noted in the Financial Times last week, will have to press on with ever closer economic and political integration in order for the Euro to be assured of a long-term future.
Today, 02:34:57
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[This user is an administrator] Robert Browne
How about this for a way out. Reduce interest rates which were increased for Germany and France immediately and which our governor of the ICB Mr. Honohan voted for, telling us by so doing, that he was "playing for Ireland". Then the ECB can be mandated and empowered to proceed with the issuance of a common European sovereign bonds.
If our colleagues proceed with the slaughter of Piigs the foul stench will soon corrupt the entire body politic and destroy the entire European project. Ireland has become a venially corrupt country. We have been on a journey without maps and have not had a vision of where we wanted to go as a people for over 40 years now and that includes your time in office. The dystopia Ahern created was special. I am talking about people not GDP, GNP or some other esoteric ESRI statistical porn. Not one single coherent comprehensive plan has been put forward regarding where Irish society wants to be in 2020 or 2030. I am talking about philosophers, historians, artists, economists, politicians etc sitting down to come up with the road map we were never given. All the journeymen, politicians have done is piled up a mountain of debt as they cede more and more power to foreigners every single week. Meanwhile, all they can do is fill in the blank spots, left for them by the EU/IMF in the MOU (memorandum of understanding) Which one of our best journalists, Damien Kiberd accurately described as a surrender document. My one caveat about my "solution" is that I first want to see an end to the myriad Ponzi schemes, quango's, double pensions and political cronyism. I find it hard to be lectured by someone who preferring to leave office on the principle of putting VAT on children's shoes.
I want to see an end to the enormous moral and egregious abuses of power by unions and others that are continuing on a daily basis then I will move on. We always have the choice of making the hard decisions that Kelly prescribes and of bailing ourselves out by paying ourselves pro rata to what we take in, in taxes. We can take back control of our semi-states, adjust public sector pay and pensions, dole to the same levels as they are in the UK. After all, is it not us that is supposed to be insolvent? However, the likely hood of Irish people taking courageous decisions regarding their collective fate is slim to nil as long as the above mentioned continue with the balm of high public sector salaries and dole all paid for by endless borrowing from the ECB until the collapse comes.
Today, 02:42:07
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[This user is an administrator] conor77
No John, it's about a lot more than that, it's about what is right and what is wrong. It's about standing up for ourselves. That is how people will respect us, not on our knees begging for "trust" as you suggest...
Today, 02:45:55
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[This user is an administrator] Roger Rafferty
If Ireland could have collapsed the Euro, as Mr Bruton says earlier on, what a glorious bargaining chip we had during the bail-out negotiations. Why then wasn't it played? A drastic measure indeed - but drastic measures were needed when the nation's sovereignty – now gone - was at stake. But I have absolutely no doubt that those batting for Ireland batted for the ECB as Morgan Kelly says, so the only drastic measures in play were those the ECB wanted. It’s treacherous stuff, but no surprise when you really see the allegiances of Ireland’s political elite, and top civil servants. The relationships between them and Europe are to the detriment of the ordinary Irish people. The allegiance or rather subservience of Irish politicians and critically their civil service advisers is to the EU project – a feature in part of years of gravy-training too. There needs to be serious decisions taken soon about Ireland's future relationship with the EU - and alternatives explored too. None of the political establishment in Ireland has any vision on this - Enda Kenny's speech yesterday, incredibly despite the kicking we've received from Europe, was to bemoan the fact that Ireland is no longer viewed by all as good European partners. This is shocking – as is the absence of comment about it in the papers. This kind of politics is finished, as it’s outdated guff, and doesn’t reflect our new – subservient – relationship with Europe (aided by our approval of the Lisbon Treaty, with a huge campaign effort helped by big business, bogus promises and an anti-democratic media consensus.) Mr Bruton and other EU insiders can bleat all they want about how it’s in Ireland’s interests to be closer to Europe – but the facts now tells ordinary people otherwise. Those days are over. A failure by those elected by the Irish people to grasp these new realities spells doom for them too like Fianna Fail. My money’s on the doom – and on Morgan Kelly’s analysis any day. We won’t have to wait long to see who’s right.
Today, 02:51:20
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[This user is an administrator] Chris
To dispute everything said in this article we need one word, Iceland
Today, 04:26:08
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[This user is an administrator] CELTIC MELTDOWN
.
I find something very distasteful in lectures like this from a man who when he was Irish finance minister proposed the introduction of VAT on children's shoes.
He seems to be much more concerned with the welfare of EU bankers than with the welfare of the Irish people.
But then again, I suppose what else would one expect from the chairman of the Irish Financial Services Center, the location of all the chicanery which has brought Ireland's economy to it's knees.
.
Today, 04:27:54
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[This user is an administrator] Chris
'The ECB might be insolvent' Really I am very disapionted in Mr. Bruton. He is scaremongering. Do we ever hear anyone talking about the US Federal Reserve being insolvent? What about quantitiative easing? Does the ECB not have access to printing presses to print new Euros to cover their losses? Please Mr. Bruton do not patronise the Irish people. They have had enough of that.
If we were to walk away from the EU-IMF deal we would be out of the Common Agricultural Policy. Again scarmongering. First of all Ireland now contibutes more to the EU than it receives. Secondly, there is no treaty or policy etc that says that not paying back debt of a bank based in your country would lead to being cut off from the CAP. Come in Mr. Bruton you can do better than this.
Mr. Bruton if you are reading this I believe that a student with a masters degree in International Economics and a good knowledge of EU integration could easily defeat you in a debate on this topic. Which is probably why you will never engage in one.
OPINION: If Ireland did what Morgan Kelly advocates, the European Central Bank itself might go bust and the euro could collapse
MORGAN KELLY has sparked a lively debate about Irish economic policy with his Irish Times article of last Saturday – much like his previous interventions. He has a lot of credibility because he foresaw the bursting of the Irish housing bubble. To his credit, he does not confine himself to a critique with his latest contribution, but offers his own suggestions.
He is advocating a two-pronged strategy:
(1)That Ireland walk away from the EU-IMF deal (a notion that is, of course, attracting a lot of favourable media comment) and;
(2)that, in order to be able to pay its way in the absence of funds from the EU-IMF, Ireland should immediately eliminate its budget deficit (a drastic notion that, equally predictably, is being ignored in the same media comment).
While I favour speeding up the adjustment, doing it all in one year would be impossibly disruptive.
He claims that a strategy along these lines is needed because otherwise, he thinks, our debts are unsustainable. He bases this on pessimistic growth assumptions, which may or may not transpire. And he argues that a slow, messy bankruptcy would destroy an Irish economy that depends so much on international trust. Better, he argues, to do the whole job immediately.
There are a number of elements missing in Professor Kelly’s analysis.
First, he does not consider the impact of what he is suggesting on other countries, and how they might react.
The effect of a comparatively well-off country like Ireland (a founder member of the euro which had benefited more than most from EU agricultural, regional and cohesion funds) failing to pay money it owed to an EU institution would undermine the mutual confidence on which the EU is based.
If Ireland were to walk away from the EU-IMF deal, that would leave the European Central Bank itself with a huge shortfall. In fact the ECB might be insolvent. It might have to go to the member states to look for more capital. Emulating Ireland’s example, they might refuse, and then the euro would collapse. If they even hesitated about recapitalising the ECB, the resultant uncertainty could have a devastating effect on the world economy; an economy on which Ireland is more dependent for sales than most.
If the euro collapsed because of a failure of other EU states to recapitalise the ECB, or because of a breakdown in trust between its members, Ireland would have to launch a currency of its own in the same year that it would also have to cut wages by perhaps 40 per cent and increase tax revenues to meet Prof Kelly’s other requirement of balancing its budget in one year.
In walking away from the EU-IMF deal, Ireland would be reneging on freely contracted debts to an EU institution and to other EU members, so we would also presumably be excluded from the benefits of EU membership. For Ireland, the Common Agricultural Policy would disappear overnight, as might its access to EU markets for other products, at least until the debts it owed had been collected by other means.
Prof Kelly, who is an economic historian, should look up what happened when we last walked away from international financial obligations. We refused to pay land annuities to the UK in the 1930s, and found some of our critical exports excluded from the UK market, with devastating effects in what came to be remembered as the Economic War.
That is not to say that the EU should not be challenged. The EU-IMF programme may indeed be too optimistic. There is a lack of joined-up thinking on economic policy in the EU. The EU institutions may be too nervous about burden-sharing by private bondholders. There is a selfish nationalism in some of the stands being taken by our EU partners. But then there is a selfish nationalism in some of our own attitudes too. We all have domestic political constituencies and media to appease.
Ireland may not be as influential as it would like to be in the EU. But at least we are still in the EU, and we have some influence there still. We can use that influence to move the EU towards a more credible long-term strategy, one that allows countries such as Ireland time to restore their finances, and allows surplus countries such as Germany time to rebalance their economies towards consumption.
The coming into effect of the European Stability Mechanism in 2013 offers the prospect of all countries still in difficulty having more time and space to resolve their problems in a way that balances public and private interests better than was possible in the emergency conditions of 2008.
In calmer economic times, things are possible that are impossible in the midst of crisis and potential panic.
But trying to achieve all that overnight, by holding a gun to everyone else’s head as well as to our own, as the professor urges, seems to me to be needlessly reckless. Prof Kelly argues that we need to do something like this to keep our international credibility. But, like the advocates of default, I am afraid that the course he favours would destroy our international credibility instantly. It would involve immediate shock therapy for our economy, which could do much more harm than good. It would undermine trust.
All banking, all money, is based on mutual trust and confidence. Why else do we accept a scrap of paper, with no inherent value itself, as worth €100 or €500 or whatever other number is written on it?
Why else do we hand over our saving to banks on the promise that the money will be there when we need it?
It is all about trust. Without trust, the entire modern economy, built up over three centuries, would disappear overnight.
Breaking trust with our European and international neighbours would undermine the future of our own economy, and the economies of those to whom we sell. That is why I do not think Prof Kelly’s article, for all its erudition, offers good advice at all.
John Bruton is a former taoiseach and former EU ambassador to Washington. He is chairman of IFSC Ireland, a private sector body that seeks to promote Ireland’s international financial services sector
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[This user is an administrator] Oireachtas Retort
He is chairman of IFSC Ireland, a private sector body that seeks to promote Ireland’s international financial services sector.
Indeed
Today, 01:57:04
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[This user is an administrator] Bryan O'Donoghue
" If Ireland did what Morgan Kelly advocates, the European Central Bank itself might go bust"
Who cares ? Ireland has been doing exactly as required by the ECB - specifically ensuring no eurozone bank goes bust and in doing so is rated as 42% likely to default on "government" debt inside of five years according to S&P rating agency.
The government is already stonewalling on CCCTB. What does 'constructive engagement' mean ? How out of touch with the REQUIREMENTS of Irish citizens in this regard are you people ?
Who cares about the ECB. It's not acting in the interests of the citizens of this state, appears to be acting against those interests are regular intervals and there's a word for that - enemy.
The ECB is Ireland's enemy. Lets not mince words.
How much worse will it actually get for this country irredeemably wedded to the Euro and the diktats of the technocrats in the ECB ? Ireland is right behind Greece in the ratings agencies estimation of default. Read the FT and WSJ for the last three years. Nobody is fooled. The public perhaps under-informed but, the people who's job it is to lend money to sovereign states clearly AREN'T fooled.
After three years of hapless dithering - Greece in on the cusp, the ostensibly useless political class is in denial. Morgan Kelly has mapped out a path - that avoids a sovereign default in this country.
Instead of sticking to the obviously flawed 'plan' of the ECB/Berlin - we as a sovereign nation should act now and impose a settlement rather than the do-nothing approach which has in effect led this country as lambs to the slaughter.
The 'great project' of European federalism is clearly well helped along hobbling sodenkinder like Ireland. Silence our dissent, bring the country to economic ruin, mandate the fiscal/political union by fait.
By the time Paddy realises what's happened it'll be way too late.
With the way the EU is going it won't take long for radical nationalist movements to start a 'campaign' in Brussels, Berlin and Frankfurt.
We can dress oppression from the EU up as 'help' but - hospital beds closing so that European bondholders can be paid off is oppression and eventually the inaction of the political class will unleash all sorts of non-political unpleasantness.
Today, 01:58:58
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[This user is an administrator] David O'Donnell
'The coming into effect of the European Stability Mechanism in 2013 offers the prospect of all countries still in difficulty having more time and space to resolve their problems in a way that balances public and private interests better than was possible in the emergency conditions of 2008.'
Why not now John? Now that we have 'saved the Euro', you want the Irish citizen-serfs to 'save the world'!
It is time to save ourselves - the banks' detritus is too heavy for the state, and its citizenry.
Today, 02:15:27
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[This user is an administrator] Manofiona
In daring to challenge Prof Kelly's views, Mr Bruton will no doubt be widely criticised in the media. Of the 170 comments on Prof Kelly's article, I counted only 3, including my own, which disagreed with his proposals. The Irish people are being incited into believing that it is possible, and indeed desirable, to take unilateral steps whose only sure result would be to destabilise the Euro and therefore the whole process of European integration. Such consequences would be disastrous for Ireland and for every person in Ireland.
The terms of the so-called bail-out are tough: they had to be in order to be credible. If Ireland cannot meet them (and the evidence is by no means conclusive on this point), those terms will in all probability be changed. No one in the Eurozone wants a member state to fail. However, as is the case with all agreements, any change must meet the reasonable interests of all parties to it.
It is in the interest of all member states of the Eurozone for there to be an alignment over time of the economies of all the member states with the prevailing model in the zone, one which is very different from the model promoted by politicians who claimed that Ireland was closer to Boston than to Berlin. Any Irish government which wishes to establish credibility with its Eurozone partners must show that it is actively working to promote such alignment.
Instead of bamboozling the Irish people with prospects of unilateral actions which no sane Irish government could contemplate taking, those economists and commentators with pretentions to public influence would do well to look at the real challenges facing Ireland over the coming years as a member of a Eurozone which, as Martin Wolf noted in the Financial Times last week, will have to press on with ever closer economic and political integration in order for the Euro to be assured of a long-term future.
Today, 02:34:57
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[This user is an administrator] Robert Browne
How about this for a way out. Reduce interest rates which were increased for Germany and France immediately and which our governor of the ICB Mr. Honohan voted for, telling us by so doing, that he was "playing for Ireland". Then the ECB can be mandated and empowered to proceed with the issuance of a common European sovereign bonds.
If our colleagues proceed with the slaughter of Piigs the foul stench will soon corrupt the entire body politic and destroy the entire European project. Ireland has become a venially corrupt country. We have been on a journey without maps and have not had a vision of where we wanted to go as a people for over 40 years now and that includes your time in office. The dystopia Ahern created was special. I am talking about people not GDP, GNP or some other esoteric ESRI statistical porn. Not one single coherent comprehensive plan has been put forward regarding where Irish society wants to be in 2020 or 2030. I am talking about philosophers, historians, artists, economists, politicians etc sitting down to come up with the road map we were never given. All the journeymen, politicians have done is piled up a mountain of debt as they cede more and more power to foreigners every single week. Meanwhile, all they can do is fill in the blank spots, left for them by the EU/IMF in the MOU (memorandum of understanding) Which one of our best journalists, Damien Kiberd accurately described as a surrender document. My one caveat about my "solution" is that I first want to see an end to the myriad Ponzi schemes, quango's, double pensions and political cronyism. I find it hard to be lectured by someone who preferring to leave office on the principle of putting VAT on children's shoes.
I want to see an end to the enormous moral and egregious abuses of power by unions and others that are continuing on a daily basis then I will move on. We always have the choice of making the hard decisions that Kelly prescribes and of bailing ourselves out by paying ourselves pro rata to what we take in, in taxes. We can take back control of our semi-states, adjust public sector pay and pensions, dole to the same levels as they are in the UK. After all, is it not us that is supposed to be insolvent? However, the likely hood of Irish people taking courageous decisions regarding their collective fate is slim to nil as long as the above mentioned continue with the balm of high public sector salaries and dole all paid for by endless borrowing from the ECB until the collapse comes.
Today, 02:42:07
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[This user is an administrator] conor77
No John, it's about a lot more than that, it's about what is right and what is wrong. It's about standing up for ourselves. That is how people will respect us, not on our knees begging for "trust" as you suggest...
Today, 02:45:55
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[This user is an administrator] Roger Rafferty
If Ireland could have collapsed the Euro, as Mr Bruton says earlier on, what a glorious bargaining chip we had during the bail-out negotiations. Why then wasn't it played? A drastic measure indeed - but drastic measures were needed when the nation's sovereignty – now gone - was at stake. But I have absolutely no doubt that those batting for Ireland batted for the ECB as Morgan Kelly says, so the only drastic measures in play were those the ECB wanted. It’s treacherous stuff, but no surprise when you really see the allegiances of Ireland’s political elite, and top civil servants. The relationships between them and Europe are to the detriment of the ordinary Irish people. The allegiance or rather subservience of Irish politicians and critically their civil service advisers is to the EU project – a feature in part of years of gravy-training too. There needs to be serious decisions taken soon about Ireland's future relationship with the EU - and alternatives explored too. None of the political establishment in Ireland has any vision on this - Enda Kenny's speech yesterday, incredibly despite the kicking we've received from Europe, was to bemoan the fact that Ireland is no longer viewed by all as good European partners. This is shocking – as is the absence of comment about it in the papers. This kind of politics is finished, as it’s outdated guff, and doesn’t reflect our new – subservient – relationship with Europe (aided by our approval of the Lisbon Treaty, with a huge campaign effort helped by big business, bogus promises and an anti-democratic media consensus.) Mr Bruton and other EU insiders can bleat all they want about how it’s in Ireland’s interests to be closer to Europe – but the facts now tells ordinary people otherwise. Those days are over. A failure by those elected by the Irish people to grasp these new realities spells doom for them too like Fianna Fail. My money’s on the doom – and on Morgan Kelly’s analysis any day. We won’t have to wait long to see who’s right.
Today, 02:51:20
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[This user is an administrator] Chris
To dispute everything said in this article we need one word, Iceland
Today, 04:26:08
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[This user is an administrator] CELTIC MELTDOWN
.
I find something very distasteful in lectures like this from a man who when he was Irish finance minister proposed the introduction of VAT on children's shoes.
He seems to be much more concerned with the welfare of EU bankers than with the welfare of the Irish people.
But then again, I suppose what else would one expect from the chairman of the Irish Financial Services Center, the location of all the chicanery which has brought Ireland's economy to it's knees.
.
Today, 04:27:54
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[This user is an administrator] Chris
'The ECB might be insolvent' Really I am very disapionted in Mr. Bruton. He is scaremongering. Do we ever hear anyone talking about the US Federal Reserve being insolvent? What about quantitiative easing? Does the ECB not have access to printing presses to print new Euros to cover their losses? Please Mr. Bruton do not patronise the Irish people. They have had enough of that.
If we were to walk away from the EU-IMF deal we would be out of the Common Agricultural Policy. Again scarmongering. First of all Ireland now contibutes more to the EU than it receives. Secondly, there is no treaty or policy etc that says that not paying back debt of a bank based in your country would lead to being cut off from the CAP. Come in Mr. Bruton you can do better than this.
Mr. Bruton if you are reading this I believe that a student with a masters degree in International Economics and a good knowledge of EU integration could easily defeat you in a debate on this topic. Which is probably why you will never engage in one.
Des Canine
The Europhile establishment is circling the wagons - Maire GQ and Kenny are talking similar nonsense!
So now all the assurances we were given at the various EU referendums are exposed, by Mr Bruton, to mean nothing. We could be kicked out of the EU for refusing to pay for private Franco-German gambling debts.
Rather more interesting and relevant stuff in the Wall Street Journal today by the leader of the True Finns.
I suggest you read that.
As Mr Burton says - pay attention to "how others might react" to this continued Euro-scam; organised and orchestrated by the same clique of failed politicians and bankers who got us into this mess despite the clear warnings of Morgan Kelly and many others.
Oh yes. And given the choice again I'd have no hesitation in refusing to pay war reparations to the former imperial power under the guise of "international obligations". There is actually a much greater similarity to the events of the 1930s and today then perhaps Mr Bruton intended to reveal.
Today, 09:04:28
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[This user is an administrator] Jim O'Sullivan
"We all have domestic political constituencies and media to appease"
Not to mention the vested interests of those with the money. Any chance that, as we face into our difficulties, we might try appeasing justice and fairness? Can Mr Bruton justify the pensions and other perks he receives from the Irish state given that the incomes of the most vulnerable are being cut for example? The whole taxation policy created by the outgoing govenrment, that sees wealth redistributed upwards, remains in situ and so long as we refuse to bite the bullet and decide to share what we have a bit more fairly, we continue to expose the country to the disastor of social breakdown, a point which the political establishment refuses to confront or even discuss.
Today, 09:08:12
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[This user is an administrator] Brian Flanagan
All very well for you to talk down to us as a paid lobbyist for the financial services industry with big EU and Dail pensions. Look at what you wrote:
"All banking, all money, is based on mutual trust and confidence. Why else do we accept a scrap of paper, with no inherent value itself, as worth €100 or €500 or whatever other number is written on it?"
Why do you think that huge amounts of cash have left the Irish banking system? Why are 10year bonds over 10%? Becauase of lack of trust and confidence.
"Why else do we hand over our saving to banks on the promise that the money will be there when we need it?"
Not exactly comparable but lots of people invested their savings in the Irish banks in the expectation that they would provide a modest, low risk flow of dividends. They need the cash now so where is it? Burnt by a crowd of greedy incompetent bankers. Their share certs are "scraps of paper, with no inherent value".
"It is all about trust. Without trust, the entire modern economy, built up over three centuries, would disappear overnight."
You are right on that one. People don't trust bankers (Irish or EU), politicians and ex-politicians. That is why the economy is going down the plug hole. Ireland has no credibility thanks to these people. No amount of spinning will restore it. We should have these people in jail.
All your response to Kelly has done is to annoy people even more. Apologies for coming across as angry. While anger is not a policy (as Conor McCarthy said recently) it can be a very powerful motivator to pursue change.
Ireland needs real, real help or we default: http://www.planware.org/briansblog/2011/04/banking-crisis-help-us-or-we-default.html
Today, 09:09:55
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[This user is an administrator] Pope Epopt
So we have it on good authority that any form of default will cause the skies to be rent asunder, the earth with groan and all manner of plagues will be visited upon this land.
The problem is that we've stopped believing in this consensus.
Ireland is bankrupt. Let's get on with the default - the ECB, with it's constitutional mono-mania about price stability is an absurdity anyway. If we did bring about a crisis in that institution, possibly leading to it's replacement with something more functional, then we would be doing the rest of Europe a favour.
Today, 09:22:28
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[This user is an administrator] Gavin O'Neill
Mr Bruton has been an excellent servant for Ireland but today his argument is flawed. It implies that if Ireland refuses to pay back the debts of private banks that the ECB could become insolvent. It won't. It always has the option of increasing liquidity in a manner similiar to the way that the US and UK central banks have done. The ECB, and particularly the Germans, do not want to do this, but it is fast becoming the only option. Ireland can not afford to pay the bank debts back and the current policy of bowing down to the EU/ECB in the hope that they take pity on us, eventually, will do more damage in the long run than taking some dynamic or dramatic acion. It is in the power of the ECB/EU to sort out this mess, but they need to be forced to take action. We need to get on the front foot or the country will die................
Today, 09:24:29
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[This user is an administrator] Praetorian Guard
Ironic piece is it?
Today, 09:32:57
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[This user is an administrator] Mark Keenan
John Bruton admits "If Ireland were to walk away from the EU-IMF deal, that would leave the European Central Bank itself with a huge shortfall". The EU-IMF deal is therefore as much a bailout for europe. Therefore why should a country of only 4 million people be forced to pay the burden for shielding europe (600 million people) from collapse of the ECB??? In addition there is no moral reason for citizens to pay the gambling debts of private banks.
In addition, ECB is part of a flawed global banking system (fractional reserve banking) that is scrambling to save itself from collapse. Mr. Bruton doesnt seem to realise that bailing out a flawed system is not the answer. Two wrongs do not make a right.
David McWilliams stated on Pat Kenny yesterday, that Finland (a highly successful country) and Asian countries imposed 'haircuts' on internatonal bondholders during past crises. but the FF and FG/Lab govs have miserably failed to do this here.
John Bruton also conveniently forgets that Ireland gave away 95% of its fishing rights (worth an estimated €400 billion) so as to get grants for landowners, (all the money the landowners got from the EU wouldn't cover what we lost by or could have developed with one of the biggest fishing sea areas in the world - which should have been our main industry). EU hand outs to landowners also drove land prices through the roof - thus causing the cost of housing and land for roads, factories, hospitals, etc. to become the most expensive in Europe. This caused the vast majority of the Irish people to pay for the wealth of the landowners. And, today we have Nama because of it.
Establishment figures like Mr.Bruton dont seem to realise there is a bigger picture and a bigger storm on the way and redesign of the current outdated flawed neo-classical economic system is needed to avoid ecological and resource collpase. See article at http://www.thinkorswim.ie/?p=1324
Also why has the Irish Times stopped allowing comments on the runaway success of Morgan Kellys article ???
Today, 09:44:17
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[This user is an administrator] Mark Keenan
John Bruton shouts about what might happen in case of default but doesnt seem to realise some sort of default is inevitable anyway under the current unjust bailout/austerity package to pay for the gambling debts of privvate banks. I agree with Professor Morgan Kelly.
Today, 09:50:32
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[This user is an administrator] Jim
The choice is simple. We either allow ourselves to become the sacrificial lamb on the altar of EU financial stability, or we take our destiny into our own hands. Both options will be extremely painful but in the case of the second we would be acting solely in the interests of Ireland and its people. Who else out there cares as much about this country? The ECB? The IMF? The US Treasury?
What is stopping us from taking the right course of action is the kind of 'guilt-trip' regularly foisted on us in articles such as this, as in we 'benefited more than most from EU agricultural, regional and cohesion funds'. Even if we were net beneficiaries of EU largesse as Bruton suggests, it should still not prevent us taking action in our own national interest. However, like all Europhiles, Bruton never mentions the price we paid for those benefits. And I don't just mean the loss of national sovereignty, but also the giving away of our vast natural resources in the seas around this island. Properly exploited, this would have been worth a multiple of the billions we received from Europe.
Ireland has endured hardship in the past in the interests of restoring our freedom. However, nothing in Prof. Kelly's bleak prescription would come close to the impact of the Penal Laws or the Famine, for instance. Nevertheless, compared with our recent history, times would get very tough. But they will be even tougher after the inevitable bankruptcy.
This is why it is essential for the present government to take action now, instead of waiting for some chimerical uplift in the world economy to rescue us. As Prof. Kelly stated, we really only have until the next election, when perhaps more extreme elements will be waiting to replace yet another failed administration.
Today, 09:53:15
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[This user is an administrator] daniel king
The only thing our government should be doing immediately, is informing the E.U that if we do not receive a 200 billion euro loan at a reasonable interest rate over 30 years, then it is a default scenario in the next few months for this poor sovereign state.
Ethicist
The folly of taking seriously the views of economists is well demonstrated with the latest ranting from Ireland’s own version of Dr. Kevorkian (aka Morgan Kelly) who seems intent on directing Ireland to commit national suicide.
As much as Ireland’s very own Dr. Kevorkian would have it commit mass kamikaze, common sense needs to prevail.
Much of Ireland’s present difficulties can be traced to the ranting of economists who backed the disastrous PD led policies of deregulation and freewheeling market capitalism that has brought Ireland to its present state.
That Ireland’s media continues to give credibility in the destructive ranting of economists given the damage that they have already wrought on the country is incredible.
Today, 10:07:54
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[This user is an administrator] Jim Walsh
Interesting that in all the criticism on John Bruton and his article he was right in pointing out that nobody here has even attempted to address the second point of Morgan Kelly's article - the fact that by walking away we would have to eliminate our fiscial deficit immedidately. Everybody is just too busy bashing Euope and Mr. Bruton without facing the reality of ALL of what Morgan Kelly has suggested.
So wise people, if we walk away from the ECB/IMF/EU deal, how would you implement the €18 billion adjustment that would be required immediately to stop the country from going bankrupt. How about €12 billion of cuts in public services and €6 billion of tax increases? Or the other way around? Anybody here interested in tax rates of 50%-60% or wage cuts of 30%-40%?
Also how would we expect our ecomony to grow in such circumstances, especially since our the financial crisis in Europe cause by such an Irish default would probably send most of our main export markets into recession. For all the Europe hatred being expressed here we should be aware that most of our exports go there.
And lets not mention the fact that the rest of the Irish banks would probably collapse as the ECB removes funding from them, taking with them billions in savings of ordinary Irish people. Where would the government get the money to guarantee those deposits? Shall we go back to a barter system when we don't have a functioning banking system.
Easy to support the part of Morgan Kelly's analysis you like, but if you're on the bandwagon at least have the honesty to address the impact of ALL of his suggestions.
Today, 10:09:32
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[This user is an administrator] Sjöhuvud
"If Ireland did what Morgan Kelly advocates, the European Central Bank itself might go bust and the euro could collapse."
So instead Ireland is doing what the European Central Bank is advocating, and Ireland is going bust.
Today, 10:14:27
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[This user is an administrator] mikeirl
It's crystal clear Bruton speaks here as a representative of the ruling elites of the banker & wealth classes.
ECB go bust? What complete & utter nonsense.
How rich of Bruton to talk about 'trust'. He is one of the elites whom ordinary people 'trusted' to set up a European common currency & banking system that was not designed from the outset to become a cesspit of corruption & gambling with profits for themselves & the losses for the rest of us.
Note Mr Bruton, along with all the rest of the present system's cheerleaders, isn't too vocal on delving into the mess itself to establish how it all went wrong & what needs changing to prevent it happening again. Sure, why would they? They aren't much affected & are very well placed to profit from recession fire sales.
Today, 10:17:52
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[This user is an administrator] chomp
Mr Bruton - what you describe is a European problem due to the breadth of its impact. Yet what you are asking for is for Ireland to deal with the majority of this problem alone.
A possibly simplistic solution would be for Ireland to deal with its (massive) budgetary issues while the ECB/EU take the legal obligation of the banks liabilities. It is simply unsustainable, and indeed immoral, to ask the population of this country to deal with the debts of international banks and not default. This was a situation forced on us with incorrect information and massive pressure from the global powers to be. Without the threat of a default, we simply cannot force this hand from the ECB. The rest of Eurrope has taken a schadenfreude stance, which may be somewhat justifiable in the short term, but places a noose around our necks in the medium to long term.
As a population many did gain massively from the boom and some have yet to re-adjust to the bust. We should be willing to accept that our current budget deficit is ridiculously unrealistic. This will be a painful short term adjustment, but the long term slow grinding pain is not the answer. We need to allow people to plan for the future. In the mean-time the Irish population needs to show to the TV cameras of Europe why this is unsustainable and our displeasure at the circumstances of being forced into guaranteeing bank liabilities due to the ECBs concern of contagion. If they are so worried about it, they need to help us to a greater extent than short term funding, or expensive bailout financing.
Today, 10:57:08
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[This user is an administrator] V
The entire modern economy is all about trust..?? Trust in mammon..?? One way or another this little EU member state will pay the price for losing the run of itself and throwing caution to the wind……….which is to say putting its “trust” in the philanthropy of the ECB loan sharks that instinctively prey on smaller fish splashing about in the unchartered waters of uncertainty that surround this whole project of the homogenisation of Europe based solely on currency.
Today, 10:57:49
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