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22 thoughts on “Succinct

  1. Dave

    It’s not succinct at all. You’d have to make a tonne of cuts to balance the books when you’re cut off from borrowing overnight as a result.

    1. The End

      The debt of banks should never have been taken on by the Govt. There would be no problem if that ‘socialisation of the losses’ hadn’t taken place.

    1. Dave

      That’s what happens when you default. You get cut off from the markets. Don’t get me wrong here, I’m all in favour of default but people need their heads checked if they think you can default without consequences.

        1. Paulie Doohan

          renouncing the promissory note and its coupon would be a selective state default, actionable by anglo’s creditors under international law and punishable by removal of credit and trade.

          We could selectively default in Narnia without consequence which is presumably Mark Malone’s homeland.

        2. I should be working

          Failing to pay debts when they are due is default. Secured means there is an asset with a lien on it in the case of default. Unsecured means that there is no asset backing the loan.

          Think Mortgage v credit card.

      1. IrelandGuy

        Money lender has two choices:
        1) Lend money to a country with a heavy burden (like interest payments,unemployment)

        2)Lend money to economy debt “free” and producing goods.

        Which makes more sense

        1. Dave

          Correct, in the long term. But in our case we wouldn’t be debt free even if we got rid of the bank debt, we’d still have tonnes of adjustments to make to get the budget into the shape it would need to be to borrow as a sovereign who recently defaulted.

  2. Derek Bonsai

    We should invoke the notion of odious debt: “In international law, odious debt is a legal theory that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.”

    http://en.wikipedia.org/wiki/Odious_debt

    It can be argued, quiet strongly, that this concept applies in this case. We did not have a referendum on this, it is not our debt, it was incurred by others and we should not pay.

    1. Steve

      Agree – our bank debt smells pretty nasty alright. Wrong decision was made to guarantee Anglo and INBS and the best way to get rid of/farily share the pain of this €35 billion debt is diplomacy in Brussels. Dan O’Brien had a great piece on it in the IT this week.

      However invoking international law doesnt really stack up. The UN spent the ’70’s debating what was known as the New International Economic Order, which included the proposal to eradicate the pre-existing debt of third world countries who had recently gone through decolonisation. Noble cause, should have been adopted but it got nowehere largely because a few wealthy countries would have lost out. And our debt woes couldn’t be put in the same league as those of Sub-Sahara Africa/Asia etc. So considering Ireland is still one of richest countries in terms of GDP (according to the OECD), invoking international law might be a little ropey. Especially when looked at in the context of 3rd world debt. But I suppose all sane people, including yourself, are behind 3rd world debt eradication.

  3. Cian

    Ireland’s problem is that it is a beggar. It needs to borrow money because taxes are too low for the amount of money being spent. As the government has effectively stopped all spending on infrastructure – this means money spent on the public sector and social welfare. If or when the government gets the same money in as it sends out (either by raising taxes or income or cutting public sector – through numbers or wages or cutting social welfare) – it will then not have to borrow. At that point it will be in a position to go “ha ha ha, you shouldn’t have lent us any money – we’re not going to pay it back”. Markets will be mad at Ireland for a while (a couple of years) then they’ll calm down.
    The question is – when do you want that to happen? Tomorrow? – Then please find €15Billion in cuts or tax increases (that would be slightly €7500 extra tax per worker per year – if done as tax only).
    Three years time? That’s cuts of €5Billion over the next three years.
    Until Ireland does not need to borrow money day to day, it is not in a position to tell the markets to f*ck off – because it needs to come crawling back to them the following day.

      1. Steve

        Not really. And your analysis is incorrect. The “markets” have been lending to sovereigns with relatviely high Debt/GDP ratios since the days of Nat Rothshild. And they still do – look at Japan.The reason why the markets wont lend to Ireland currently is because they believe our ability to pay back our debt is severly compromised by the level of it, which is largely due to the significant amount of bank debt being peddled on to it and the fact that our economy is flatlining/contracting with ballooning sovereign debt interest payments due. Lending to sovereigns has everything to do with its credibility and a credible/realistic (i.e. payable) level of debt. The US has a huge amount of federal debt, but its treasury bond yields are still very low, even after their downgrade. Why? Because of credibility. The markets anticipate that the American sovereign, even with political wrangling, will pay back its debt. If we managed to reduce of debt/GDP ratio to a sustainable/credible level, which removing the 35 billion of Anglo INBS debt would help with, through negotiation with Brussels then Ireland could return to the bond markets while running a budget deficit.

        I agree, balancing books is all well and good and running large budget deficits long-term is not smart. But its a question of timing and now is not the right time for austerity. Ireland should attempt to balance its books….when its start returning to healthy growth. But the fiscal austerity meaures being taken by us are inhibiting that.

        1. Dave

          I don’t think you’re actually disagreeing that much. The only thing I’d say is that the market doesn’t lend to small sovereigns with huge Debt/GDP ratios. In the case of the US/Japan the fact they are both printing money is supportive of their bond prices too.

          1. Steve

            Yeah we are probably on the same track, Im all about timing :) and now is not the right time for austerity. Keynes would be turning in his grave….

            So our little predicament – the ECB won’t socialize the Anglo INBS bank debt to make our sovereign debt level credible to the markets. And the markets won’t lend because we haven’t a credible level and won’t unless ECB action is taken. Bit of a Catch 22 alright. As I think I said above or earlier on BS I think this will (hopefully) all come to a head in a couple of months and our European colleagues will see it in their interest to do so. Dan sums it up here nicely:

            http://www.irishtimes.com/newspaper/opinion/2012/0116/1224310308440.html

            Just a point though, yeah I agree the Fed can print the a@&e out of the dollar but its stopped the auld quantitative easing last June and US bonds are still trading below a 2% yield 6 months on, which would support the whole credibility of the sovereign argument.

  4. tellmemore

    pity the comments stopped i was learning a lot here and no real conclusion was reached – anyone else?

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