Why I am Voting Yes – For Stability

A number of people have asked me why I am voting yes in the upcoming referendum on the Stability Treaty (Fiscal Compact, whatever you want to call it!), so I have decided to do a series of posts on why I am voting Yes. Here is the first part of the series.

One of the main reasons I am voting yes to the 30th Amendment to the Constitution on May 31st is to ensure Ireland has stability in the future. If we do not have access to the European Stability Mechanism (ESM) we put this at risk, in my view.

We are going through a tough time as a country at the moment, with the Troika (IMF, ECB and the EC) here telling us we have to cut spending and raising taxes to meet certain targets. We need to hit these to enable us to return to the markets.

If we do not accept this treaty we will not have access to the ESM, which will have more money available to us then the IMF.

While we will still have access to the IMF, we will not get the same level of funding as we did last time. It could mean a tougher time for us as citizens. UCD Economist Karl Whelan recently explained this on Morning Ireland

Ireland could apply to the IMF for funds. However, people need to  understand that the IMF has its procedures in which is assesses how much money it’s willing to lend to a country. How much money they’re normally willing to lend a country, depends upon what’s called the size of a country’s IMF Quota. They normally will lend maybe three, four, five times a country’s Quota. They’ve already loaned Ireland, fifteen times our Quota. So that is well beyond their normal behaviour. Now why did they do that? They explained why they did that. They said that because Ireland has this additional support from Europe, they think that they’re not in as much, in as risky a situation. So we are now talking about, in addition to those loans that we already have from the IMF, will they give us far more than that, because now instead of being one third of the current bailout, they would have to be all of what’s afterwards. Most likely in that situation, what the IMF would do is deem Ireland’s debt situation to be unsustainable. The only way I think that they would be willing to lend to us, is if they say oh yeah, these guys are not going to be able to pay back all their debts. So you will see the existing debts, the sovereign bonds that we’ve issued to private investors, will at that point most likely be restructured. At that point they may be willing to think about, after a default, and we are shut out of financial markets for a number of years, they may be willing to give us a small amount of money.

So that means we have the possibility of a default if we do not vote Yes. Also possibility of a default means that we have a chance of having more austerity then less. As Karl Whelan again pointed out on Morning Ireland,

I think a most likely outcome of a No Vote that isn’t in any way reversed, and we just say we don’t want to borrow from the ESM, the most likely outcome from that is a large scale sovereign default, followed by possibly a small IMF Programme that would see the country have to run a zero budget deficit very very quickly. In other words, far more Austerity. So people who think they’re Voting No because they don’t like the Austerity, need to understand that it is more than likely that a No Vote would being us more Austerity in the near term than a Yes Vote.

So to avoid this scenario and to provide stability to the Irish Economy in Future, I am voting Yes on May 31st.

Negotiations under-way on Promissory Note deal

The European Central Bank. Notice a sculpture ...
The European Central Bank. Notice a sculpture of the euro sign. (Photo credit: Wikipedia)

After last nights announcement in the Dáil by Finance Minister Michael Noonan, full statement on Karl Whelan’s blog, negotiations are under way between Central Bank Governor, Patrick Honohan, and the European Central Bank.

The Promissory Note, basically a Government IOU to the Anglo Irish Bank, is worth over €3.1 billion and is due for payment on the 31st of March, which is also the day of the Fine Gael Ard Fheis in Dublin.

The prospective plan is to swap the Promissory Note for a Government backed bond that will be due for repayment in 2025. This will give the Government some breathing space on time, but crucially will mean that the €3.1 billion can be used to help shore up the budget. That bond will also be used by the IBRC as collateral in seeking emergency loans from the Central Bank.

According to the Irish Independent the basic details of the deal are as follows as the more intricate details still need to be ironed out:

  • The €3.1bn debt due on March 31 will be deferred up to 2025.
  • The debt will technically be repaid. There will be no default.
  • There will be no net cost to the State.
  • The deal is estimatesd to save the taxpayer €80m in interest this year.
  • A new government bond, repayable in 2025, will be issued to cover the cost of the repayment.

While Irish Economy notes that a number of questions still need to be answered this is hopefully a good deal for Ireland. It will also hopeful spur on the Troika (EU, ECB and IMF) in renegotiating the overall debt of the bailout of Anglo Irish Bank and Irish Nationwide now known as the Irish Bank Resolution Corporation.

UPDATE: The Sunday Business Post have an excellent explanation of the deal

Noonan announces deal on Promissory Note

This is a photograph of the Dáil chamber, Lein...
This is a photograph of the Dáil chamber, Leinster House, Kildare Street, Dublin Ireland. It is the chamber and seat of Irish Government where Irish parliamentarians (TD's) govern Ireland. The photograph was taken on 28th of June, 2008 at the inaugural opening of the Houses of the Oireachtas (parliament) for a 'family fun day'. This we were told (by the guides) was the first time that photography was permitted inside the Dáil chamber. (Photo credit: Wikipedia)

Tonight speaking in Dáil Eireann, Finance Minister Michael Noonan, announced that a deal had been brokered on the Anglo Promissory Note which is due to be repaid. An excerpt from his speech from politics.ie

Firstly, there is an issue that I wish to bring to the attention of the house as the Government has always committed that we would inform the Dáil about any development concerning the payment of the promissory note at the end of this month.

In more recent months, we have been involved in technical discussions on reducing the burden of debt associated with the recapitalization of the banks. In particular our focus has been on the Promissory note arrangement that was put in place to fund the Irish Bank Resolution Corporation – formerly Anglo Irish Bank and Irish Nationwide. This is an arrangement, which requires the State to make cash payments of €3.06 billion each year to IBRC. There have been some developments on this issue during the day.

The discussions with the European authorities on the general issue continue but we are now negotiating with the EU authorities, and principally with the ECB, on the basis that the €3.06 billion cash installment due from the Minister to IBRC on 31 March 2012 under the terms of the IBRC promissory note could be settled by the delivery of a long term Irish Government Bond. The details of the arrangement have still to be worked out.

More as details become clear.

Why not to Vote Fianna Fail or Greens next January

Brian Cowen's signature.
Image via Wikipedia

One paragraph from yesterdays Observer’s Editorial should be memorised and remembered for a long time.

Much of that story is familiar from other countries caught out by the credit crunch. But Ireland’s unique misfortune is to have, in Brian Cowen’s Fianna Fáil government, leaders who shipwrecked the economy and then capsized the lifeboats. The initial crisis response in 2008 was designed in such a way as effectively to absorb the doomed banking sector into the state, with no safeguards for taxpayers. While fitting as a kind of poetic commentary on what had happened in the boom years, as policy it was insane. Every cent of tax revenue disappeared down a black hole of debt; a ballooning budget deficit demanded brutal austerity measures – public sector cuts, tax rises – which drained any remaining cash out of the economy and prolonged recession.

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The IMF Arrive tomorrow

International Monetary Fund
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Maman Poulet has the story that the IMF are sending a team to Ireland to

“participate in a short and focused consultation, together with the European Commission, and the ECB, in order to determine the best way to provide any necessary support to address market risks.”

Full statement here

How long until they are running the country? And how long can we hold out on this bailout?

We either need a General Election or to give the EU-IMF control. It is obvious that FF don’t know what they are doing any more.

Then again can the opposition do a better job? I hope so. It would be better then giving all the power to the EU-IMF.

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No Consenus

German Logo of the ECB.
Image via Wikipedia

Euractive have a very interesting article on the talks between EU Economic Commissioner Olli Rehn and the Irish Government and Opposition.

“He asked us our view and I told him […] we had no confidence in this government, and the thing that would give more stability to the country is an election and a government in place that had a significant working majority,” said Michael Noonan, finance spokesman for the centre-right Fine Gael party

This of course means the markets are jittery about Ireland. Will Fine Gael stick to the 4 year plan to reduce the deficit if they win the election? Will Labour? This worry and the Portuguese Debt Auction  has sent “the risk premium on Irish and Portuguese bonds to record highs and prompting market talk of European Central Bank (ECB) intervention.”

This is worry news indeed.

The Irish yield spread over benchmark German bunds reached a record peak near 574 basis points in late trading. The 10-year Portuguese/Bund spread also hit a euro lifetime high of 466 basis points and traders said the ECB had been buying bonds.

Credit ratings agency Fitch Solutions said the cost of insuring Irish and Portuguese sovereign debt against default had widened by 24 and 22% respectively compared to the sovereign debt market average in the last week.

Commissioner Rehn is still thinking positive though, he told RTÉ

“I believe that the markets have not yet internalised this plan and these decisions because they are still at the planning stage,” he said. “Once they have been decided by the government and passed by the parliament they will have a real effect, and then the market forces [will] believe that Ireland is able to cope.”

I personally hope that he is right. Next months Budget is going to be make or break, not just for the Government, but for the country as a whole. There is no doubt that cuts and taxes are coming, and a few holy grails will have to be given up, but can we accept that as a country? Will we protest on the street like the Greeks? Or will we grin and bear it?

The next four years are going to be tough. Can we make it? I hope so, but we need political will and not political point scoring.

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A weekly message from Enda!

Enda Kenny
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So Enda seems to be trying to catch up with the rest of the digital world and has started to send a weekly message to supporters on a Friday. I think this is a good idea, and the message seems to include lots of information. I look forward to getting it weekly.

Don’t worry, I won’t post it every week. Only if its interesting!

Dear Member

Many of you have said to me in the past that you would like to receive a regular update on some of the things that our Party is dealing with and other matters of interest to all our supporters.  For that reason every Friday from now on I am going to send you a short message dealing with some of these issues. I’ll keep it short and to the point as I know you can get bombarded by mail of all sorts.

There was a subdued air around Leinster House this week as much attention was focussed on events in Belfast. Unfortunately those talks didn’t come to a successful conclusion which created an element of doubt around the stability of the Northern Assembly.  Neither side wants to see Assembly Elections ahead of the UK elections in May so all we can do is continue to support both Governments in their efforts to find a working compromise and hope that all involved can sign up to that deal.

At Leaders’ Questions this week, I raised with the Government different aspects of the current banking crisis.

You know and I know that banks are just not lending to people who need lines of credit and I have real fears that NAMA will not do anything to fix that. I believe we’re going to end up having to pour additional billions – maybe as much as another €5-€10 billion – into our banks in recapitalisation monies because the toxic loans being taken on by you and me are worth even less than was expected.

Also, we know now that we’re not going to get the type of public and transparent bank inquiry that Fine Gael wanted because Fianna Fail are clearly afraid of what it might expose.

And on top of all that, on Thursday we heard that Permanent TSB is going to hike up interest rates for 75,000 people. When I pushed Brian Lenihan in the Dáil on the issue he refused to say if other banks covered by the bank guarantee and transferring assets to NAMA will not to increase their interest rates outside of interest rate levels driven by the European Central Bank.

He said “Nothing to do with me.”  So it appears as if the government intend to bail the banks out again and again at the expense of you the taxpayer.

This week I appointed Deputy Lucinda Creighton to be a member of our Policy Committee.  I also appointed Senator Ciaran Cannon to be Spokesman on the area of Children and Youth Affairs in the Senate.  In addition I appointed him to the Oireachtas on Justice.  I also appointed Senator Eugene Regan to be an additional member of the European Scrutiny Committee.

This week I also met the Plenary Council of IBEC, the First Step Organisation dealing with assistance for small business and have also met with the new President of the IFA Mr John Bryan to discuss with him his priorities for his presidency.

Today I met with Dell workers in Limerick together with Deputy Michael Noonan and Deputy Kieran O’Donnell and formally opened the office of Sean Kelly MEP in Limerick, honouring a commitment that I gave during the European election campaign.

I will keep you updated every Friday and look forward to your feedback.

Kind regards

Yours sincerely

Enda Kenny T.D
Leader of Fine Gael

What do you make it?

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