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Thread: This is how the Debt deal will be done (roughly)

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    Politics.ie Member riker1969's Avatar
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    Default This is how the Debt deal will be done (roughly)

    I think this guy talks the most sense. He certainly talks more sense than the spin put out by the Government and its lackeys here on this site. I still think FG/LAb doing the right thing on deficit but I don't believe the June or Oct hype on a bank deal. Only a fool would.

    Let's not get our hopes up for pot of gold at end of debt saga - The Irish Times - Tue, Oct 30, 2012

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    Politics.ie Member Shpake's Avatar
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    Quote Originally Posted by riker1969 View Post
    I think this guy talks the most sense. He certainly talks more sense than the spin put out by the Government and its lackeys here on this site. I still think FG/LAb doing the right thing on deficit but I don't believe the June or Oct hype on a bank deal. Only a fool would.

    Let's not get our hopes up for pot of gold at end of debt saga - The Irish Times - Tue, Oct 30, 2012
    The article is well written and Donal Donovan seems to have a very experienced seevee what with him being on the world bank and being a professor in Limerick and that.
    Some miscellaneous points cut and pasted from the article:
    "There remains considerable opposition to using ESM funds (that come mainly from German taxpayers) for this purpose. It is feared that with the debtor government “off the hook”, the banks in question will have less of an incentive to achieve profitability, including by means of aggressive loan recovery."

    Scary bit there. And coming from a man who has international experience in the IMF and who I think, is independent of the big parties. Course it doesn't necessarily mean throwing people out of their houses... they could negotiate to stay on as renters too.
    The Irish and German arguments show how far apart the two sides are:
    Ireland's main argument or what seems to strike most resonance with those I've spoken with in Ireland:

    "First, since much of the credit extended by the banks to finance the property bubble came from European lenders, Europe should share some of the cost of the banking collapse."

    And the German/Creditor response... and, unfortunately these are the lads who write the checks, the ones in power:
    "In any negotiation, it is wise to first understand, if not necessarily appreciate, where the other side is coming from. German thinking (and that of other like-minded creditor countries) tends to be somewhat sceptical of the first of these arguments.
    It is pointed out that while all euro area countries had access to unlimited cheap credit, Ireland was the most extreme in generating a massive property bubble, that Irish taxpayers enthusiastically voted for governments that did not stop the “benign neglect” by the Irish Financial Regulator that permitted this bubble, and that the September 2008 guarantee was aimed first and foremost at preventing a run on Irish banks.
    Neither is it forgotten that Depfa, the German-owned bank that availed of the “light regulation” regime of the Irish Financial Services Centre, ended up costing the German taxpayer dearly."

    I have to say I don't see a lot of relevance or logic in the German point of view... I concede that under the usual bankruptcy procedures they should be the proud owners of our under water houses and our bankrupt banks....
    There are two other arguments but there is enough discussion material in this one alone of the german point of view for Pie readers to chew on.
    Well let me mention the third Irish argument because if it is the one that cuts most weight with our negotiating partners then it shows that are goose has really been plucked:

    "Third, it is in Europe’s interest that a country such as Ireland that has adhered faithfully to the terms of the current bailout programme succeed in regaining market creditworthiness. This in turn requires some alleviation of the potentially unsustainable debt burden."

    Donavan's opinion is that this pragmatic reason is what the Germans find the most creditable:

    "As with most debt controversies, the moral debate about who should end up owing what to whom is likely to remain unresolved. Thus, the third, pragmatic argument, namely, that a second bailout must be avoided, is likely to be the most powerful.
    Although some precautionary back-up financial arrangements may still prove necessary, a failure to exit the current programme successfully and regain market access would be seen as a telling indictment of current euro area strategy."

    It is a good article and it makes sense to see the arguments of both sides.
    As Ireland is one of many countries seeking debt alleviation it would seem understandable that the Germans are interested in the pragmatic side of how to get out of the fix... The solution then, or the debt alleviation will be taken in the context of all the other countries in distress.

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    Time for some realpolitic, when the streets are filled with smoke and rubble, our europeanmasters may decide that the orange has been squeezed enough.

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