A bird's eye view of the vineyard
THIS BLOG HAS MOVED TO A NEW LOCATION VINEYARDSAKER:
Good news out of Russia - even the "non-system" opposition refuses to blame the Kremlin VINEYARDSAKER:
Nemtsov murder: Putin warned about exactly this type of "false flag" two years ago VINEYARDSAKER:
DPR PM Zakharchenko presser 27/02/15 Economical and political future of DPR VINEYARDSAKER:
Breaking news: FALSE FLAG IN MOSCOW! VINEYARDSAKER:
The Saker >>
Is the Marriage Equality Referendum about Human Rights? Thu Apr 23, 2015 19:22 | Fiona de Londras
Childbirth, Choice and the Courts: The 8th Amendment and More. Tue Apr 21, 2015 18:11 | Máiréad Enright
School of Law, NUI Galway, Annual Distinguished Lecture 2015: Friday 24th April, 8pm, Aula Maxima, N... Mon Apr 20, 2015 10:29 | Charles O'Mahony
Just and unjust wars: the Holy See, #R2P and a concern about genocide in the Middle East Mon Apr 20, 2015 08:38 | Liam Thornton
DPP v JC: Initial Observations on the Exclusionary Rule case Fri Apr 17, 2015 22:37 | Yvonne Daly
Human Rights in Ireland >>
For lefties too stubborn to quit
The luxury of a granny? 15:53 Fri Apr 24, 2015 | WorldbyStorm
Childcare and class politics? 11:52 Fri Apr 24, 2015 | WorldbyStorm
Another problem for the government? but could it fall? 10:00 Fri Apr 24, 2015 | WorldbyStorm
This Week At Irish Election Literature 06:19 Fri Apr 24, 2015 | irishelectionliterature
Workers? Party Election Manifesto 15:30 Thu Apr 23, 2015 | Garibaldy
Cedar Lounge >>
Life should be full of strangeness, like a rich painting
THE WRATH OF KANE: BANKING CRISES AND POLITICAL POWER 09:32 Fri Jan 30, 2015
ALWAYS THE ARTISTS: WEEK THREE OF THE BANK INQUIRY 23:11 Thu Jan 22, 2015
FIANNA FÁIL AND THE BANK INQUIRY : SOME INITIAL OBSERVATIONS 21:04 Mon Jan 12, 2015
PETER NYBERG BANK INQUIRY EVIDENCE, 17 DECEMBER 2014 18:05 Sun Dec 28, 2014
For Some Vicious Mole of Nature: Making Sense of The Irish Bank Crisis 21:07 Fri Dec 26, 2014
Dublin Opinion >>
The Recession, Bank Bailout or our Deficit?
Tuesday May 01, 2012 09:27 by Sonya Oldham - The People's Association Watchdog irelandpaw at gmail dot com
Does the Fiscal Compact Treaty Deal with the Cause of the Crisis?
Does the Fiscal Compact Treaty Deal with the Cause of the Crisis?
What Caused the Crisis? The collapse of the Irish banking system was principally caused by a failure of regulation and the reckless lending practices of the Irish and European banking system.
According to the Banking Enquiry: Financial integration in the euro area allowed banks in Ireland unprecedented access to cross-border funding. As in many smaller EU economies the entry of foreign banks intensified competition in lending. The banks’ ability to borrow cheaply in international wholesale markets created a ‘capital flow bonanza’ which has been observed to markedly increase the likelihood of a banking crisis within the receiving country. This clearly happened in Ireland.
According to the Assistant Director General, Financial Institutions Supervision, Central Bank of Ireland:
In the 2000s, it is clear that the low ECB policy rate facilitated the growth of property prices in Ireland.
There was also no direct regulation of credit limits, for example through restrictions on LTV ratios. This meant that Irish households were able to accumulate liabilities more easily than consumers in countries where there was stricter regulation. A contributing cause of the crisis was that bank governance and risk management were weak – in some cases disastrously so.
It appears that internal procedures were overridden, sometimes systematically. There is a need to probe more widely the scope of governance failings in banks and whether auditors were sufficiently vigilant in some episodes.
According to the Banking Enquiry: These supervisory problems must be seen in conjunction with the absence of forceful warnings from the central bank. However, the IMF’s major Financial System Stability Assessment of 2006 also did not sound the alarm.
According to the Assistant Director General, Financial Institutions Supervision, Central Bank of Ireland: A striking lesson of the global banking crisis is the danger of allowing banks to operate to free market principles within free market economies.
Did Ireland overspend?
According to Paul Murphy MEP: This is simply not the case. In 2007, Ireland’s debt to GDP ratio was 24.8% (Eurostat) - far less than the 60% dictated in the Fiscal Treaty; our general budget was in surplus of 0.1% compared to a target of a deficit of 3%; and our structural balance was estimated by the EU Commission in spring 2008 to be in surplus of 0.2% compared to a target of a maximum deficit of 0.5%. Later on, the structural balance was revised downwards, with the Commission in 2011 saying that Ireland had a structural deficit of 1.4%. So having the strictures of the Fiscal Treaty in place would not have meant we avoided the economic crisis. In fact, the government would have been congratulated on having met the targets so effectively and with such high growth rates! The same is largely the case for Spain and Portugal, which had relatively low levels of public debt in advance of the economic crisis.
How Much is the Bailout Costing?
Bond payments September 2008 to April 2012 were €103.7bn
Bond payments from April 2012 onwards: €40.6bn
TOTAL BOND PAYMENTS (according to Michael Noonan): €144.3bn
THE COST: So far, according to Mr Noonan, the bank recapitalisation is €62.8bn (Anglo/INBS €34.7bn; AIB/EBS €20.7bn; BoI €4.7bn; IL&P €2.7bn). Given that according to Mr Noonan these banks still have over €40bn to pay, there is a good possibility we may have to recapitalise again. Also, this figure does NOT include interest lost on the money taken from the National Pension Reserve Fund, nor the interest we’ll have to pay on the borrowings needed to fund all that recapitalisation.
So we can see it was the bank and bondholder payouts that caused our deficit to take a downward spiral so will the Fiscal Compact Treaty be effective?
How can it when it does not deal with the cause of the collapse. The fiscal treaty, if it had been in place, would have been ineffective in preventing this recession as our country was within limits. This is not a crisis caused by government overspending, this is a crisis caused by the lack of financial regulation within Ireland and the EU. Todate we are still living with the moral hazard of the fiscal sector.
According to many leading economists this treaty will in fact make matters worse:
Roubini Global Economics: “In our view, the terms of the fiscal compact require a fiscal adjustment by most Eurozone countries that will significantly undermine their short-term growth prospects. If the treaty is not enforced, it will be positive for Eurozone growth prospects and therefore for fiscal sustainability.”
Vote No to the Fiscal Compact and Demand real solutions to this crisis!
The People's Association Watchdog; www.paw.ie; firstname.lastname@example.org