Update 12/10/2010: €40m in Bonuses for Greedy Irish
In the Old Country: Ireland is massively in debt to the IMF/EU because it (stupidly) bailed out its banks. Now AIB, one of the bailed out banks, is paying the people who ruined both the bank and the country €40 M in bonuses because – you’ve heard this before – if they don’t the clever boys and girls who sank an entire country will go to work elsewhere. Where? (Source)
The cost of the €40 M in bonuses will be paid for via cuts in everything for everybody else, in other words by harsh austerity measures, BUT:
Austerity Measures Will Fail: “The more that countries reduce wages and costs, the heavier their inherited debt loads become. And, as debt burdens become heavier, public spending must be cut further and taxes increased to service the government’s debt and that of its wards, like the banks. This, in turn, creates the need for more internal devaluation, further heightening the debt burden, and so on, in a vicious spiral downward into depression.” (Source)
Update 1/4/2011: Irish Leaders Castigated As Greatest Traitors Of All Time: Brian Cowen and Brian Lenihan are now being reviled as the villains who inflicted horrendous financial disaster upon the Irish people and forced the enslavement of future generations to a criminal cadre of International Banksters. (Source)
Jean-Claude Trichet, head of the European Central Bank, “has made very clear his opposition to “haircuts” (losses) for secured and unsecured bank creditors. In response to Fine Gael’s plan to unilaterally restructure Ireland’s debt, Trichet insisted that the bailout plans for Ireland’s banks have already been decided and that “the plans have to be executed. . . We have a programme, approved by the international community, approved by the IMF board, the entire world, approved by the European [Union], approved and financed by the IMF and the European [Union]” (Source)
Shouldn’t bankers like Trichet ask the people of Ireland if they want to assume the defaulted obligations of international bond holders, to become the designated debt slaves paying off defaulted obligations through higher taxes, just so that international bond holders don’t have to “take a haircut” (take a loss on their bonds).
Hmmmmm, anyone wonder how that would play out?
What happened in Ireland?
“commercial-property bust has knocked the country’s banks to their knees. Those ill-fated property loans have saddled the banks with tens of billions of euros in losses . . . bonds continued to weaken as investors worry that the country is moving toward a sovereign default due to the ever-rising costs of the banking bailout.” (Source)‘s
According to data compiled by the Bank of International Settlements, the three largest creditors to the Irish economy at the end of June, 2010, were:
- Germany to the tune of €109bn–or about 4.5 per cent of Germany’s GDP,
- UK at €100bn–or about 7 per cent of British GDP, and
- France at €40bn–or about 2 per cent of France’s GDP. (Source)
Financial Times describes “Europe’s dirty secret” in Ireland
The European Central Bank (ECB) and the International Monetary Fund [plan] to loan Ireland tens of billions of euros in order to guarantee in full the investments of international bankers and bondholders in the country’s failing banking system.
Under the plan, Ireland will effectively surrender sovereignty over its economic policy to the EU and the IMF and agree to claw back the latest bailout of the global financial elite by imposing a new and even more savage round of attacks on the wages and living standards of the working class. (Source)
Here’s the deal with Ireland’s debt crisis:
- Large banks in Ireland are facing a commercial-property bust which could result in huge bond losses.
- A large fraction of those bonds are held by institutions in other EU countries.
- If the Irish bonds are allowed to fail then bond holders will have to take a loss–which the bond holders desperately want to avoid.
The EU holders of the Irish bond have decided that the solution is for the Irish government to borrow billions from the EU and IMF and use that money to bail out the banks and bond holders–allowing bond holders to get their money back.
- The Irish government will then pass the cost of the bailout on to its citizens in the form of higher taxes and deep austerity measures (cuts to social services such as schools, roads, pensions, and health care)–effectively making citizens pay off the bond holders.
- The Irish government is hesitating to accept the deal.
- The EU leaders are making incendiary speeches about the dire consequences to Ireland if the Irish government does not bail out the at risk bond holders (i.e., do what they are told to do by EU leaders)–effectively threatening Ireland.
- EU leaders deeper fear is that if Irish banks and/or bonds are allowed to default, then the same thing could easily spread to Portugal, Greece, Spain, and Italy.
Here’s a few examples of the incendiary speeches being made by EU leaders:
- Fench Finance Minister, Christine Legare, said:
“The real issue is: Will the euro stand under the current circumstances in Ireland? That’s what the Irish government really has to focus attention on.”
“to bankrupt countries and turn them into satellites by foreclosing on the bankrupt countries.” (Source)
For example, the head of the International Monetary Fund, Mr Strauss-Kahn, says,
“European nations need to cede more of their sovereignty and hand greater powers to the centre to avoid future crises.” (Source)
Using the Crisis and Pushing Ireland to Cede More
It is worth remembering that Ireland’s government was a model of fiscal probity prior to the economic meltdown. It had run large budget surpluses for the 5 years prior to the onset of the crisis. Ireland’s problem was certainly not out of control government spending; it was a reckless banking system that fueled an enormous housing bubble. The economic wizards at the ECB and the IMF either couldn’t see the bubble or didn’t think it was worth mentioning.
The decision to make Ireland’s workers, along with workers in Spain, Portugal, Latvia and elsewhere, pay for the recklessness of their country’s bankers is entirely a political one. There is no economic imperative that says that workers must pay; this is a political decision being imposed by the ECB and IMF.
This should be a huge warning flag for progressives and, in fact, anyone who believes in democracy. If the ECB puts conditions on a rescue package, it will be very difficult for an elected government in Ireland to reverse these conditions. In other words, the issues that Ireland’s voters will be able to decide are likely to be trivial in importance relative to the conditions that will be imposed by the ECB. (Source)
The economic crack down on Ireland as explained by Jim Corr:
- Ireland’s Bailout Is Finalized, The Indebted Gets More Debt As A Solution But The Fine Print Is Glossed Over – Caveat Emptor! Monday, November 29th, 2010
- The BoomBustBlog Contagion Model: How We Predicted 9 Months Ago That The UK and Sweden Would Rush To Bail Out Ireland, and Why Friday, November 26th, 2010
Extend and Pretend
Problem Solving 101: The European intent, identical to the US program, is not to solve the problems of the European banks but to find ways of papering the problems over through bailouts – Greece, Ireland, the rest of the batting order to come. The bailouts are loans that will eventually have to be ‘rescheduled’. But eventually is another day, and that’s the object of the exercise. (Source)
Here is a short video from the Wall Street Journal Dow Jones Newswire that explains why the bailout will not work for Ireland.
The most astounding part of this long, slow charade is that the rescues of the banks and bond holders keep being described as sovereign bailouts. Nonsense. No one cares if Ireland or Greece or Portugal fail as countries and their people suffer grinding poverty for decades. The object of the exercise is to keep the European financial system going, just a little bit longer. . . . It’s just another set of bank bailouts on the sly. (Source)
Jim Rogers argues that Ireland going bankrupt would result in a stronger euro and European Union in the end. He believes that the massive borrowing will cripple the Irish economy for years to come.
“There is no reason that taxpayers around the world or around Europe or in Ireland should pay for other peoples’ mistakes. The banks who lent the money and made the mistakes should lose money. The bondholders and the stockholders of those banks should lose money. It’s that simple.” (Source)
Ireland insists it does not want a bailout because it has enough money through the middle of next year and is wary of the strings attached to a rescue by the International Monetary Fund. (Source)
- Can the Irish peasantry support both the government (with a deficit equal to 32% of GDP) and the banks and the euro? No.
- Should citizens of Ireland be required to become debt slaves to pay off the banks and bond holders? No.
- What should Ireland do? Stand up to the banksters, reject debt slavery.
- How? Just like Iceland (see below).
Iceland rejected EU debt slavery–and survived just fine
In Iceland a similar debt crisis occurred a few months ago. EU institutions faced losses on bonds issued by banks located in Iceland. EU leaders demanded that the people of Iceland should bail out the bond holders and pay for it with higher taxes and austerity measures. The people of Iceland rejected these demands by EU leaders–and threw out the politicians who sided with the bond holders. The bonds defaulted. The Iceland economy did not crash and life there goes on.
Inquiring Irish minds just might be interested to see how Iceland fared after they told EU bankers to go to hell. For the answer, please consider:
- Iceland Is No Ireland as State Kept Free of Bank Debt
- Iceland exits recession–Decision to force bondholders to pay for banking system’s collapse appears to pay off as economy grows 1.2% in third quarter
Vote the Bums Out and Tell the EU and IMF to Go to Hell
Unfortunately, the idiots running Ireland’s government, especially Minister Brian Cowen, don’t see it the way Iceland’s president does.
However, Iceland’s government did not see it that way either, but the citizens of Iceland took matters into their own hands and voted the bums out, rejecting “Icesave”.
Regardless of what deal Cowen signs, I see no reason it need be binding on the next Irish Parliament. Indeed, I recommend to to citizens of Ireland that they firmly tell their representatives that if they vote for Cowen’s proposed budget, they will be voted out of office.
That may be all it will take to stop this nonsense right here right now. Should I be wrong, the remedy is simple: Vote the bums out and vote in a Prime Minister and Parliament who will tell the IMF and EU to go to hell. (Source)
Bankers jailed, sued as Iceland seeks culprits for crisis: May 12, 2010, REYKJAVIK — More than a year and a half after Iceland’s major banks failed, all but sinking the country’s economy, police have begun rounding up a number of top bankers while other former executives and owners face a two-billion-dollar lawsuit. (Source)
Curious about how Iceland’s rejection of EU demands? See also:
- Iceland Stands Up to the Banksters, Rejects Their Fraudulent “Austerity” Programs–and survives just fine
- The Meaning of “Austerity” — and its antidote in Iceland
- Iceland Does What the US Should Have Done — stands up to bankster terrorists
Meanwhile in Portugal
Portuguese finance Minister, Teixeira dos Santos said that fiscal consolidation will be “harsh and demanding” with wage cuts of 10%, but it must be done or “the nation’s situation will be much worse than people imagine”.
- US firms pressure Ireland to tax the people, not corporations
- William K. Black: The Celtic Chimera (huffingtonpost.com)
- As Ireland Flounders, the E.U. Moves Toward a Bailout (time.com)
- Ireland in Crisis Talks With EU Over Bailout (dailyfinance.com)
- EU working to contain Irish banking crisis (usatoday.com)
- Ireland Bows To Pressure, Formally Seeks Aid From EU, IMF (forexlive.com)
- Ireland forced to take EU and IMF bailout package (telegraph.co.uk)
- Ireland Agrees To IMF, EU, U.S. Taxpayer Bailout – Bank Bondholders Don’t Lose A Dime
- Guess what, Ireland. Brian Lenihan and Brian Cowen just sold you down the IMF river. Why? To bail out bank bondholders and giant European banks. (Source)
Today the Irish Government agreed to guarantee loans made by German, British, and US banks. Irish Prime Minister Brian Cowen said he expects talks on the package to be completed in the “next few weeks.” Finance Minister Brian Lenihan said the loan will be less than 100 billion euros ($137 billion). Irish taxpayers will now bail out the Irish banks (which is in reality a bailout of German, and UK banks that made piss poor loans to Ireland).
The population of Ireland is approximately 4.35 million. Going into debt to the tune of $137 billion saddles the average Irish citizen with $31,494. By agreeing to take on that debt, and sticking it to the Irish taxpayers who will be forced to accept various austerity measures to pay back that debt, Irish Prime Minister Brian Cowen and Finance Minister Brian Lenihan just sold Ireland down the river. (Source)