Here are some quotes and comments from March 28 2011 RTE Prime Time's discussion following the Central Bank stress tests on the Irish banks, which show that another €24bn will be pumped into the struggling Irish banking system.
...the “Break glass in case of emergency” money...
well, it's broken now,
says Richard Crowley, as he asks,
Who will be forced to pay for the sins of the past?
Having borrowed over a hundred billion Euro from Europe, Irish taxpayers are being asked to continue to cough up so much bank-recovery money that we could have instead bought 100 hospitals, 23,500 schools, or enough mosquito nets for every single person at risk of Malaria in Africa 14 times over...
It's hard to be reassured by announcements that we'll pump more money into the banks and then our woes will be over. Thankfully the most recent plan also outlines some specifics as to how banks are to sell off their "non-core" activities.
“We've moved the bank debt to the state again. We have a theory that we're going to create two good banks here going forward: that's not going to happen. The international market will not lend to these banks because they're domiciled within a state that is struggling, so if they won't lend to the state then they won't lend to the banks... so the whole policy in my view is flawed,” said Peter Brown, Irish Institute of Financial Trading. “I don't think these institutions can recover. I think it's years and years before they'll ever go back into the market to raise funds on their own. It's a bad day.”
Matthew Elderfield, Irish Financial Regulator, defended the plan, yet acknowledged the need for a modern-day 'secularisation'. “The banks' and the government's finances are joined at the hip and really need to separate to box off the cost of the banking crisis to convince... the financial markets... that you don't have to worry about leakage from the banks into the government's financial position.”
Karl Lannoo, (Chief Executive, Centre for European Policy Studies) slated Ireland's rash decision to unilaterally “and without consulting Europe” guarantee the banks the way we did in 2008.
The Irish banking crisis is going to set a record for one of the worst, if not the worst, in history.
Miriam O'Callaghan (as usual) framed it well:
“The European Central bank has lent our banks 117bn. Our own Central Bank has lent another 71bn.
Is it conceivable we can EVER pay that money back, ourselves?”
Matthew Elderfield struggled to reassure me.
Richard Curran (Sunday Business Post) gut-wrenchingly predicted we may get a measly 20bn of the 70bn back.
In the meantime, we'll continue to pay one of the highest interest rates in the world on that little sum.
So, this 16,000 Euro for every man woman and child in the country... who's paying?
Can we force some bondholders of the big banks to take a hit?
We're not even imposing “burden sharing” on the senior bond-holders in Anglo.
Pearse Doherty TD (Sinn Fein) is in favour: “Burning unguaranteed bonds will reduce your interest rates but more importantly reduce the capital required of tax payers to go into the bank. Today [March 28 2011] we put 2.5bn of taxpayer's money into Anglo Irish Bank. There's 3bn of unguaranteed bonds in that bank, that is senior bond-holders: we haven't even touched it. There's nothing to stop us legally from imposing burden-sharing on those bonds. That would mean that we wouldn't have to have borrowed from the markets at 5.8%.”
Donal Donovan countered, “For the few hundred million it would save, it is not worth deterring the world from investing in Irish banks.” He certainly has a point (that I've been hearing for 2 years now) that it's largely about building confidence in our banking system.
Pearse Doherty clarified, “it's not hundreds of millions, we're talking about billions of Euros.”
If what we're doing is not sustainable though, says Karl Lannoo, “we have to stop this 100% support of the banking system. At some stage we have to send a signal: private sector will contribute to saving a financial system.”
There's no easy answer and there's no clear answer as to how we can get ourselves out of this toxic situation. One thing's clear for the near future: it will continue to be the ordinary tax-payer who feels the pain of these past mistakes.
(These stress tests themselves cost tens of millions.)
