This is going to be an interesting week.
The Irish are now openly saying they want to make the Senior bond holders take some of the bank losses. That is most definitely not in the European Financial Class’s game plan. Neither France nor Germany nor the UK will like the sound of it. Because for senior bond holders read their banks, big funds and insurance companies.
This was always about bailing out other nations’ banks and any restructuring of who takes what losses will simply make that clear. We will simply get to see which banks in which countries suddenly have to raise cash or get another bail out. Not only would it be a very public humiliation but it would also tell the world which banks were weakest. Given that banking is almost entirely based upon lies this would not be a good outcome for them.
Of course the obvious answer is for the big European players to use the ECB to quietly and confidentially buy up those bonds and make all Europe’s tax payers pay by a more indirect and less democratic route. The problem is, while it prevents a convulsion and a nasty leak of raw truth in the short term, it doesn’t undo the real damage.
The real damage is that IF Ireland sticks to their threat nearly all possible outcomes for the Big Banks become very bad. Which, providing they have the balls, puts Ireland in a very strong position.
If Ireland goes through with forcing Senior Bond holders to take their share of the losses, then it will be revealed that it was the big banks who were being protected at the expense of ordinary people all along. A whole new season of banker bashing would open.
It would also mean people in other countries who are being told day after day that they ‘have no choice’ but to impose even greater ‘austerity’ measures or that they ‘must’ have an IMF/EU ‘rescue’ package imposed upon them and accept whatever punitive terms the IMF/EU see fit, might decide they too are going to simply call everyone’s bluff and say ‘no’.
Even the possibility of such a contagion of rebellion would be quite sufficient to induce another credit crunch of banks refusing to lend to each other. Because who would know which banks would be affected next if Portugal or Hungary or even Spain or Italy were to start talking about their senior bond holders? That kind of uncertainty is what stopped banks lending to each other the first time.
So Ireland doesn’t even have to go through with it. They need only engender a worry that they might.
Equally bad for the Big Banks and the financial class/senior bond holders, is if he ECB bails them out and buys the bonds. Because once that happens for Ireland, after all the adamant proclamations that it would never happen, then who is going to believe that Portugal or even Greece, couldn’t force the same concession? Or Spain?
Then it becomes a political nightmare. Merkel is already wounded. If it looks to her domestic enemies that she is further losing control then the fragile Franco/German unity, such as it is, will collapse. The UK will not hold it together.
brilliant!! it looks like the election of so many radical lefty's rattled the establishment in Ireland
When you say "the Irish" in the opening paragraph who do you mean, specifically?
Golem, I have every faith in my fellow Mayoman Enda Kenny that he will tell the European banksters to sort it out between themselves and with their ECB.
The result of the so-called bank stress test about to be announced is merely the political battle over what false value to put on the Irish banks' toxic loan portfolios. The European "testers" will mark up the value of the Irish portfolios to hide the problem. They will carry inflated asset values on Irish banks' balance sheets until they can figure out their next trick.
But the crunch will come if the European leaders try to INCREASE the burden on the Irish taxpayers.
The Europeans bought the Irish Lisbon Treaty vote by locking in the 12.5% corporate tax rate. Now they want to go back on that deal. The Irish have not forgotten.
Enda will tell the Europeans that he will have to go to the Irish people in a referendum unless "somebody" shares the burden. He will tell the Europeans that the Irish would take the opportunity of a referendum to revote the Lisbon Treaty. It would be a rout for Europe.
So while the European humanitarian leaders are bombing Libya on behalf of democracy it is staring them straight in the face from Ireland.
So, Europe, welcome to democracy, Irish style, Mayo style. The Irish don't like being dictated to. Never have.
Simon Weller,
Yes, sorry about the sloppy short hand. I was referencing this Reuter's article. It quotes Simon Coveney, Minsiter for agriculture.
http://uk.reuters.com/article/2011/03/27/uk-ireland-bonds-idUKTRE72Q1CF20110327
Pat,
I think your comment is spot on. The intimate connection between the 12.5% tax rate and ratifying the Lisbon Treaty is what always gets over-looked. The Germans in particular constabntly refer to teh Irish wanting to re-negotiate whereas, as you point out, it is the EU which is trying to re-negotiate. And the clincher is, as you put it, that if the European do try to insist on stripping Ireland of its 12.5% tax rate, then Mr Kenny would have a perfect opening to,
"… tell the Europeans that the Irish would take the opportunity of a referendum to revote the Lisbon Treaty. It would be a rout for Europe."
As you say a rout indeed. They cannot allow the Lisbon Treaty to start to unravel, especially not now.
If they believe he won't blink then he has them.
Best of luck to them, looks like the dutch have had enough too http://www.guardian.co.uk/business/2011/mar/27/dutch-bankers-bonuses-axed-by-people-power
It sounds to me that they have the EU/IMF Banking bullies by the balls, here's hoping that they squeeze & twist, for my Grandchildrens sake & for everyone elses.
Thanks for that, it is gratifying to hear that someone is making a stand, maybe the worms are finally turning.
@ john
Excellent link! Inspiring example of bank customers threatening the banks with withdrawal of their custom, exactly how an organised boycott is supposed to work.
@ Golem – Along the lines of your depositors union, no?
Have been wondering, partly inspired by a quote from the Vanity Fair article, “When Irish Eyes are Crying”
“Senior people have forgotten that the government has certain powers,” as Morgan Kelly puts it. “You can conscript people. You can send them off to certain death. You can change the law.”
Why is it that so often we are led to believe that once a government makes a decision there is no going back on it – even if new evidence comes to light that clearly demonstrates the original decisions to be ill conceived? Is legislation just a one way street, onwards and upwards only?
John’s link to the guardian article on dutch banks describes the dutch government imposing retrospective taxes on bank bonuses!
In another guardian article today Europe Needs Debt Relief – Not Decades of Austerity hopefully this receives more publicity – independent audits to separate public from private debt
The backlash is already under way: in Ireland and Greece there are increasingly noisy public campaigns demanding an independent audit of these countries' debts, so that voters can see exactly who owes what to whom – and by implication, who precisely is being "bailed out".
Although, is it really such a secret? Doesn’t Bank of International Settlements already have that infor?
Nice chart at Bloomberg from last month.
An audit of the debt is a brilliant thing to push for. It cuts to the bone aginst bank confidentiality and will thus be resisted to the last in those countries like Ireland and the UK whose banks have the most to hide.
All the mosre reason to push for it. And if the major paritres and their leadership will not back it then we simply need a new party and a new leadership.
I don't want the big society. I want the honest society.
Simon Coveney, the new Irish Minister of Agriculture who made the most recent "burn the bondholders" remark, is a co-constituent of Michael Martin the leader of what is left of the ousted Fianna Fail governing party. I have no doubt that Coveney's remarks to the media on the weekend were fully approved in advance by Kenny's Cabinet.
It was good politics to have Coveney become the Fine Gael spokesperson on this because his Cork constitency is ground zero for the old kiss-ass Euro-compliance of Michael Martins Fianna Fail versus the new self assertiveness of Fine Gael.
The simple reality is that if the Europeans do not burn the bondholders the Irish will burn the Europeans. Cork is known as the "Rebel County". It took the lead in the War of Independence against the British in 1921 and will take the lead against the banksters and their corrupt politicans.
@Pat Flannery
I wish I could share your enthusiasm for Fine Gael's alleged appetite to go after the "banksters" as you call them, but I'm afraid my experience thus far prevents me from doing so. The reason is simple, here is a quote from an email I received from the office of one of Fine Gael most senior deputies:
"Deputy X has been in touch with the Financial Regulator, and set out the concerns raised at the meeting [a meeting between the Deputy and myself, WbIRL] on the matters which do not appear to have been addressed. I understand that these concerns are being followed up by the Regulator who has promised Deputy X a reply in due course."
I received this e-mail in JUNE 2010. I'm sorry to report that NOTHING was received from the distinguished deputy since then. It took until November last year before the issue was raised in the Dail (Irish parliament) by Joan Burton of the Labour party. UniCredit is still laughing loudly at the charade that is Irish banking. I know, the IFSC is a small place.
Here is another interesting point in question: why can we not get the truth about the hasty sale of Anglo's Austrian operation shortly before the parent bank in Dublin was nationalised? Kathleen Barrington of the Sunday Business Post has repeatedly raised the issue; as recently as last February she approached Anglo-Irish, now headed by Alan Dukes – a dedicated Fine Gael man, for replies. Alas, silence prevails.
Here is Barrington's most recent article about Anglo Vienna:
"How FitzPatrick sent a €600m deposit book waltzing to Vienna" –
http://kathleenbarrington.blogspot.com/2011/02/how-fitzpatrick-sent-600m-deposit-book.html
@Golem
Re your comment of "I want the honest society." – my impression is that the 'burn the bonholders' game is simply a poker game in which political leaders are trying to see who can hold out the longest in not having to tell their electorate the truth. Frau Merkel certainly does not want to have to explain to every German taxpayer why they will have to continue cough up money for the bail-out of HRE/Depfa. Enda Kenny would much rather have us, the Irish public, believe that the source of all evil are those nasty continental Europeans, rather than have to instigate proceedings against Irish politicians and senior civil servants who have let criminal 'banksters' get away with it. The liquidity regulations over which I resigned in 2007 clearly state a possible penalty of FIVE years in prison for failing to adhere to liquidity requirements. The entire Irish banking system almost collapsed in Sept 2008 as it had run completely dry of liquidity. Who is to blame? No one. Who is paying for it? Everyone.
Ulster Bank employees are running around Ireland (North and Republic) telling all about their fantastic year-end results for 2010; they all seem to happily ignore the fact that had it not been for the UK tax-payer bailing them out, none of them would have jobs. RBS is Ulster Banks' parent bank…
Merkel and Kenny and their respective domestic banks are just an example for what has happened all over Europe. There are some clues to solving the mystery – notice how the the bailout of HRE/Depfa makes perfect sense through the eyes of Deutsche Bank shareholders, or have a look at the mock arrest of Anglo-Irish bank's ex CEO and the subsequent tapes that appeared in the public domain not too long after.
Regards,
WhistleblowerIRL
UniCredit Ireland's EX Risk-Manager
PS
Links to all relevant official debates and regulation documents can be found on my blog.
Hello WhistleblowerIRL,
Good to hear from you. I agree that leaders are seeing if who amongst them can manage not to tell their citizens anything by forcing other countries to be their fall guy. Perhaps I am too naive to hope that some country can start a rebellion that brings the entire game down.
And yes the HRE/Depfa nightmare does make more sense when seen from Deutsche's position. Germany was and is protecting its own TBTF banks and then trying to blame Ireland to cover the truth.
In the Guardian today
Irish banks heading for new bailout • Stress tests expected to show black hole of up to €23bn
And that's before they request renegotiation. This will add even more to the pressure building in Ireland. I don't think the Irish people can or will accept any more condition and cuts for an extra £23bn. As your Heading say's this is going to be a interesting week. Particularly for Ireland
I'm with WhisterblowerIRL. Cat and mouse potlitics is all it is.
Interesting they know roughly how much assistance they need before they have done the stress tests.
Ever get the feeling you've been lied to all along? She describes it as 'another black hole'. Feels it’s the same black hole to me, it just wasn't adequately assessed in the first place.
Hi Golem,
I have taken the liberty of sharing your posting and some of the comments here on PoliticalWorld.org – an Irish political forum.
Here are some responses:
C. Flower – Founding Member
Thanks for posting this, Whistleblower. I think this is really getting to the heart of it although my view is that the entire global financial system is in crisis by its very nature, and it is not really a question of Ireland vs Germany, apart from in the way that the politicians parse it.
Captain Con O'Sullivan – Senior Member
Oh boy oh boy … I love hearing from WhistleblowerIRL and Golem and I think I see something any Irishman or Irishwoman simply cannot resist from reading my history and my sense of the Irish character.
The above exchange lifts my heart in a way because when you are deep in the brown stuff and surrounded by 'enemies' sometimes the most glorious thing to do is charge.
We've been humiliated as a sovereign nation in recent years through the acts of corrupt Irish people and foreign chancers and brought a bit low and everybody is wondering now about the Irish and horrible words like 'supine' and 'docile' have been used against us in some quarters.
I agree that [Enda] Kenny and co have so far managed to make Brussels and various boardrooms quite nervous with talk of burning debtholders and thats a good way to go as a negotiating stance to give as strong a hand as possible at the table for Irish interests in this fight.
The way it looks to me right now is that we have very little left to lose and I don't know about anyone else but I'd rather go down as a madbastard than a coward.
If Kenny and co can stick to the line and even ramp it up I'd happily go like the clappers in support of the kamikaze run.
Bollocks to it. And bollocks to being cowed as well. I'll find a way to bite an arse or two in support if the rest of us are up for taking on another Empire. And laugh my head off as we go.
I'm tired of worrying. Have we horses outside?
C. Flower – Founding Member
Now that Fine Gael are in Government – mainly as a result of the Bank Guarantee carte blanche to bankers – is there anything to stop them carrying out a proper investigation into liquidity breaches and acting on it?
At this stage I'm very confused about the full extent of what is and is not being investigated, but surely Fine Gael should be reinforcing the feeble gestures so far with a belt and braces approach ?
Here is the link to the thread:
PoliticalWorld.org
Regards,
WhistleblowerIRL
UniCredit Ireland's EX Risk-Manager
Thank you WhistleblowerIRL!
Continuation to the above:
Captain Con O'Sullivan – Senior Member
Its an open goal on FF [Fianna Fail] and their entire crew of backers as well as far as I can see. I suppose now we'll find out what the style of cooperation is between the political class party hacks.
I'd be very suspicious if there isn't a meltdown for FF out of current investigations and it'll help me make up my mind about politics in Ireland and how far the connections go across parties.
Its beat them or join them time for FG [Fine Gael, Prime Minister Kenny's ruling party, WbIRL] and Labour and if they don't do it to the full extent the rest of the country wants to see then they'll very quickly solidify who exactly the internal enemies are for most Irish people.
Is anyone forgetting the golden rule? S/he who has the geld makes the rules!
The EU is well aware that politics in Ireland requires the appearance of a spine now. The deal has already been done, low CT rate and good record as a debtor and the EU will shovel over more Euro to ease the pain. For a few more years!
The Depression tends to last decades….. I can't wait to see the first non-deficit budget! Maybe in 2016?
Looks like they cleaned house at Irisheconomy.ie. None of my posts survived!
WAS IT SOMETHING I SAID?!