Joined up thinking for the Irish Left
Progressive Film Club: Palfest & ?5 Broken Cameras? Thu Jul 02, 2015 15:59 | Irish Left Review
Greece; Deathplace of Democracy Wed Jul 01, 2015 17:51 | Tony Phillips
Irish Living Standards Fall Further Behind Europe Wed Jul 01, 2015 15:52 | Michael Taft
Free Education: A Really Modest Proposal Fri Jun 26, 2015 13:04 | Michael Taft
The June Issue of Socialist Voice is Out Now! Thu Jun 25, 2015 14:01 | Communist Party of Ireland
Irish Left Review >>
Trotsky and TTIP: how secret diplomacy serves elite interests Tue Jun 09, 2015 16:02 | yeksmesh
Some Various Tidbits on #GE2015 Fri May 08, 2015 01:49 | Jerome Nikolai Warren
Americaâ€™s Palestinians: Lessons from The American Indian Experience for Israel... Sun Mar 29, 2015 20:00 | Jerome Nikolai Warren
Spain is not Greece, or is it? Electoral prospects for the left in 2015. Thu Feb 05, 2015 19:00 | modulus
SYRIZA and Memnosyne Sat Jan 24, 2015 09:09 | CornetJoyce
Spirit of Contradiction >>
Just another WordPress site
Sean O’Rourke’s continuing support for the Government
Sean O’Rourke: No bias allowed – except RTEs Anthony
Journalist Sinead Ryan: Not an informed journalist Anthony
Brian Lenihan documentary: A ruling elite propaganda exercise Anthony
Journalist Gavin Sheridan wins major case against NAMA Anthony
Public Inquiry >>
Farewell from NWL Sun May 19, 2013 14:00 | namawinelake
Happy 70th Birthday, Michael Sun May 19, 2013 14:00 | namawinelake
Of the Week? Sat May 18, 2013 00:02 | namawinelake
Noonan denies IBRC legal fees loan approval to Paddy McKillen was in breach of E... Fri May 17, 2013 14:23 | namawinelake
Gayle Killilea Dunne asks to be added as notice party in Sean Dunne?s bankruptcy Fri May 17, 2013 12:30 | namawinelake
NAMA Wine Lake >>
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