So, Is The ESM A Fund To Bailout The Banks?

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Justice Kevin Feeney (above) of the Referendum Commission was on RTE R1′s Morning ireland earlier with Cathal Mac Coille conducting the second part of a pre-recorded Q&A about the fiscal treaty.

It offered this intriguing exchange.

Cathal Mac Coille: “Just before we move on from the ESM. Philip McCardle asks ‘The funds from the ESM. Will they be used to bailout European banks?”

Kevin Feeney: “The purpose of the ESM fund is, the aim of the ESM is to try and ensure the financial stability of the Euro area so it is the governors of the ESM, or the ministers of finance of the countries that ratify it, that they will decide how the funds are used. It is inevitable, or all but inevitable, that part of the stability of the Euro area is interlinked with the stability of the banks within the Euro.”

Hmm.

Listen here

(Sam Boal/Photocall Ireland)

 

7 thoughts on “So, Is The ESM A Fund To Bailout The Banks?

  1. ProvingGround

    Of course it is – there are no national governments any more – just civil servants working with or gun-to-the-head for various banks / global funds!

    The ESM is just another version of loan shark, but this time fully formed, funded and run by German interests.

    Wake up people.

  2. PaddyJoe

    As of now the ESM cannot recapitalise the banks directly. However, the money it loans to government and be directed to the banks.
    The ESM would require a banking license to funds banks directly
    Countries like Ireland and Spain would prefer to see their banks funded directly in this way but Germany is opposing it.
    Enda on Wednesday:
    “BRUSSELS (Dow Jones)–The Irish government is interested in the idea of using the region’s permanent bailout fund to lend directly to banks, Irish Prime Minister Enda Kenny said Wednesday”
    http://online.wsj.com/article/BT-CO-20120523-711052.html

  3. PaddyJoe

    Typo above. Should have read “However, the money it loans to government can be directed to the banks.

  4. ThatsMeTrying

    I hope it is used to bail out the banks. Much better idea than loading bailout costs on to national debt, like we did. The benefits of saving banks accrue to all of Europe, so all of Europe should share the cost.

  5. collynomial

    I think Patrick Honohan has made it pretty clear that he would like to see the ESM being used to directly finance banks.

    I don’t see that has being a bad thing either, at the moment, if Ireland were to have access to the ESM, Ireland would borrow from it and pass the money on to banks. The Irish government would then have on their balance sheet, one loan from the ESM and one deposit at the Irish banks.

    The Irish government has to pay the ESM back, and the banks have to pay the Irish Government back. For all intents and purposes the Irish government becomes a middleman with a massive liability to the banks.

    If the ESM lends directly to banks (read bailout if you wish) then the middle man is cut out, and risk is on the balance sheet of the ESM not the Irish government.

    Moreover, since there is not a cosy relationship between the ESM and the banks, it is more likely that the ESM will be able to turn the screw in a way the Irish government would not.

    Finally, in the same way that the IMF can remove sovereignty by forcing governments to implement changes in return for cash, the ESM lending to the Irish government would have the same leverage. If the ESM does not directly lend to the Irish government then there is more freedom for the Irish government to implement its own reforms and to protect its sacred cows.

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