17/10/2013: To Deal or Not To Deal? ESM and Irish Banks

Few interesting signals coming out of Europe in recent days. All relate to the fallout from the German elections.

I suggested that the outcome of the German elections will result in coalition talks in which Ireland's bailout (or rather the feasibility of our ex post bailout unloading of banks legacy debts onto the ESM or some other European fund) will be demoted (link here: http://www.fergco.co/2013/10/8102013-german-voters-go-for-status-quo.html). Further more, I recently wrote about the pressures building up in Germany and the ECB on this issue as well (link here: http://www.fergco.co/2013/10/11102013-whats-new-in-german-coalition.html )

Now, another set of pronouncements on the same topic.
1) German finance minister Wolfgang Schäuble restated German opposition within the Euro finance ministers meeting to using the ESM fund to directly recapitalise Irish banks. link: www.irishtimes.com/business/sectors/financial-services/schäuble-pours-cold-water-over-idea-of-esm-relief-for-ireland-1.1561748

2) In a separate report, the Irish Independent reported that SPD - Germany's second largest party and one currently acting as a king-maker in coalition talks with Angela Merkel - staunchly opposes banks recapitalisation roll over from Ireland to ESM and continues to insist that Ireland must raise corporate tax rate. Link here: www.independent.ie/business/irish/germanys-coalition-talks-snagged-on-irish-issues-29658771.html. Do note, the statement is about raising the actual rate, not closing off the loopholes.

Not exactly encouraging, eh?..

But never mind, Minister Noonan thinks none of the above counts for much: http://www.irishtimes.com/news/politics/noonan-insists-esm-money-for-banks-still-possible-1.1562772 I mean, why on earth would anyone listen to anything that Schäuble or Draghi or Merkel or SPD or leaders of CDU/CSU or Asmussen or the Dutch, Austrian, Finnish governments or anyone else for that matter has to say on the topic?

Run by me this: if Minister Noonan is so certain he can get the ESM to pay us cash for banks equity we hold, then:

• Why do we still talk about 'regaining our independence'? Seems like Minister Noonan already has loads of it - enough to tell Schäuble to pack it; and
• Why don't we have the ESM 'deal' yet? Who's holding it up? Surely not Mr Schäuble who's opinion doesn't quite matter...

Of course, there is a major problem in Minister Noonan's selective referencing of memory. As I recall, the reductions in our interest rates or the extensions to maturity of our debt were granted to us because Portugal demanded them on foot of Greece receiving its own bailouts. As per Minister Noonan's claim on the Promo Notes debt swap 'deal', may be it was made possible by the fact that it wasn't much of a 'deal' in the end? We gave up quasi-sovereign debt for full-blown sovereign debt and got few shillings up front in cash flow relief... The equivalent of such a 'deal' for banks would be what? Allowing to repo our banks equity at the ECB for more loans?..

I am uncertain as to whether any ESM deal on retrospective recapitalisation of Irish banks via European funds is possible or not. It might be or it might be not. I am uncertain as to whether such a deal is even desirable, since we do not know the feasible terms and conditions of the deal. All I know is that over two years of negotiations and seismic announcements behind us, Minister Noonan so far:

• Has not a single open supporter of the idea of Ireland getting such a deal anywhere in the EU's upper echelons of power; 
• Has secured not a single open supporter for such a deal in the EU Parliament or the Commission (it seems that folks from Ballyhea-Charleville SaysNo campaign got more mileage on this); and
• Has plenty o very weighty opponents to such a deal all on public record.

I am sure Minister Noonan is working very hard attempting to secure a good deal for us with ESM. I hope he succeeds.


Updated: A related set of news out of Germany: http://www.spiegel.de/politik/deutschland/macht-der-eu-kommission-widerstand-gegen-merkels-europa-plaene-a-928918.html
In basic terms, Merkel is pushing for more oversight over national budgets for Europe... which, of course, means it is a good thing that Angela is such a close friend for Minister Noonan, right?

Any source

11/10/2013: What's 'new' in German Coalition talks... what's Ireland...

So today's report in the Irish Times on German Government coalition talks and demands by the Social Democrats (SPD) on Germany blocking use of ESM to cover Irish Exchequer debt exposures arising from the banking crisis and for Germany to adopt a tougher stance on irish corporate tax regime are news... Read them here: http://www.irishtimes.com/business/economy/irish-debt-linked-to-angela-merkel-talks-on-coalition-1.1556845

Now, recall this: http://www.fergco.co/2013/10/8102013-german-voters-go-for-status-quo.html where all of this fall-out from the German elections was foretold...

Any source

15/4/2013: About that orchestra on Titanic's deck...

In a telling sign of total disconnect with reality, last week we heard two bizarre comments from the European 'leaders' all made in the context of Dublin Ministerial dealing with Cyprus.

First, "Klaus Regling, managing director of the ESM, told reporters that the fund had had its "most successful week". The statement can on foot of ESM selling EUR10bn worth of new debt in heavily oversubscribed markets. Alas, the said claim was made in the week when ESM became the sole vehicle for handling EU side of the Cyprus 'bailout'. In other words, Regling, like rest of EU 'leaders' measures success by how high he can pile on debt (EUR8bn worth of bonds here, EUR2bn worth of notes there), not by real economic outcomes (which can see Cypriot economy shrinking 15% in one year - some 'success').

However, the weekly prize for detachement from reality goes, as it often does, to Olli 'The Delusional' Rehn - the EU Commissioner for Something-to-do with Economy - who was forced to concede that Cypriot bailout can lead to the island economy shrinking up to 15% in 2013. Never, mind, says Rehn, as "I don't deny that there is uncertainty about the precise figure whether it will 10 percent, 12.5 percent or 15 percent."

Indeed, 'never mind'. You'd think he would make it his job knowing. But, of course, why bother, since 10-12.5-15 percent range clearly might reach into 20-22.5-25 percent range as easily and Mr Rehn wouldn't bat an eyelid. Especially since the host nation's Government - aka Ireland's 'best pupils in the EUssroom' - were there to cheer Mr Rehn in exchange for getting a handful of platitudes from important foreigners. Behold Jeroen Dijsselbloem's claim that Ireland is "a living example that adjustment programmes do work". Cyprus, presumably, will be the EU's roadkill of history... joining Greece and Spain, with Italy and Portugal in the waiting wings.

In short, we are now going verifiably gaga this side of the Atlantic, begging for a comparison with the orchestra that played through Titanic's sinking. Alas, the orchestra, as historian tell, was rather competent one - unlike Messrs Rehn, Regling, et al.

Any source