Generation YES is back!

The logo of Generation Yes, a group of young, ...
The logo of Generation Yes, a group of young, Irish people campaigning for a Yes vote on the Lisbon Treaty (Photo credit: Wikipedia)

YOUTH campaign group Generation YES is back and is saying ‘Yes’ to the referendum on the stability treaty. The group, which formed to burst the bubble on myths around the Lisbon Treaty, have re-launched to challenge what they see as fear-mongering on both sides of the debate on the stability treaty with an online campaign.

Andrew Byrne, Executive Director of Generation YES, says: “We want to present the facts on the stability treaty in a no-nonsense way and we are determined to take on lies and mistruths that anyone else – on the Yes or No sides – spreads in the campaign.

“We’re not going to waste anyone’s time with slogans like “Yes to Jobs”, with baseless threats or poorly informed statements.  We know this treaty isn’t a solution to all of Europe’s problems but after taking the time to read carefully through the text, research the economic, legal and political arguments, we have no doubt that voting Yes is the right thing to do.”

The Generation YES campaign will focus on the online space to reach their 18-35 year old audience. Generationyes.ie went live yesterday and will post the facts on the treaty that no one else is talking about.  What marks the website out among Yes campaigns is its forceful, no-nonsense arguments backed up with solid evidence. The GenYES facebook page, which has over 4,000 followers, and twitter accounts have already been reactivated.

“The members of Generation YES have come together again because thus far no other group is answering our questions or discussing the issues we want raised.   We want a realistic, frank debate on the facts and we will make sure that our generation gets that debate, “ adds Byrne.

A group of young people formed Generation YES in 2009 out of a sense that the political establishment had failed to speak to them during the first referendum on the Lisbon Treaty.  The group’s objective is to bring the debate on Europe back to the facts.

Do read the their pages “Why vote yes?” and “3 Questions for the No Side

It is great to see Gen Yes back!

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.

Fiscal Treaty will NOT lead to permanent Austerity

austerity
austerity (Photo credit: 401K)

One of the mains arguments being used by the No side to the Fiscal Compact Referendum is that this treaty will lead to permanent austerity.

A senior IMF official has said that adopting the fiscal treaty does not mean permanent austerity, the complete opposite!

Speaking after an event in Brussels, IMF deputy divisional chief Xavier Debrun told reporters that once a government had a more balanced budget situation then belt-tightening was no longer necessary.

Mr Debrun said the treaty simply meant that governments adhered to “common sense” housekeeping rules.

He said Ireland passing the fiscal treaty would improve the country’s chances of returning to the international markets to borrow.

Mr Debrun said: “Fiscal rules are about fiscal responsibility, the fact that over the long-term governments make sure that on average they can pay for the policy measures they implement. This is just common sense.

“This is called the budget constraint: you are subjected to it, I am subjected to it, the government is subjected to it.”

Mr Debrun said austerity was caused by governments ignoring the budget constraint and then being faced with fiscal shocks which required belt-tightening.

He said: “The belt-tightening is the austerity, but you do not have to tighten your belt forever, obviously.”

This is what the Yes Campaign has to get across. The Fiscal Compact is formalising rules we have been subject to since the Masstricht Treaty, the Growth and Stability Pact, the Six Pact and now the Fiscal Compact. If those treaties and pacts were about permanent austerity, why did we not have it since 1992?

Its time we got real with our finances and learned to live within our budget, just like every other household, business and country.

Bailing out the Banks

2 euro coins
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So last night it finally happened. We formalised the bailout. We are taking an €85 billion loan. We will be paying an interest rate of about 5.8%. We will be loaning money to ourselves.

Yes, you read that last line right.

€17.5 billion will be coming for the National Pension Reserve Fund and the other cash on hand funds.

Who’s fault is this? The Banks.

€35 billion of this is for them. €50 billion is to cover state deficits. They are there because we gave the banks money!

It is a disgrace.

Links of Interest:

A difficult but essential deal – Irishtimes.com

€85bn rescue package – Unwelcome return to penal times – IrishExaminer.com

At least we know the grim reality – Independent.ie

Announcement of joint EU – IMF Programme for Ireland – Corkpolitics.ie

It’s All about Money – JasonoMahony.ie

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George Osborne’s Statement on the UK’s Bilateral Loan to Ireland

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A statement by the Chancellor of the Exchequer, the Rt. Hon. Mr George Osborne. From Hansard:

With permission, Mr Speaker, I should like to make a statement regarding financial assistance for Ireland.I hope Members will understand that an announcement had to be made at the weekend, ahead of markets opening this morning. Last night, I spoke to the Chair of the Treasury Committee and the shadow Chancellor to keep them informed of the latest developments.

The United Kingdom, alongside the International Monetary Fund, the European Union, the eurozone and other member states, is participating in the international financial assistance package for Ireland announced last night. We are doing this because it is overwhelmingly in Britain’s national interest that we have a stable Irish economy and banking system.

The current Irish situation has become unsustainable. Its sovereign debt markets had effectively closed and had little prospect of reopening. While Britain’s market interest rates had fallen over the past six months, Ireland’s had risen to record levels, and Ireland’s banks had become completely reliant on central bank funding to maintain their operations. In the judgment of the Irish Government, as well as of the IMF and others, this situation could not go on.

Members will understand that it would not have been appropriate for us in recent weeks to have engaged in public speculation about whether Ireland should request assistance from the international community, but I can now report that we have been engaged in intensive private discussions with the G7, the IMF, the EU and the Irish Government on plans for the eventuality that Ireland would request support. At the G20 meeting in South Korea two weeks ago, I was one of the European Finance Ministers who issued a joint statement that provided a brief respite. At the ECOFIN meeting last Wednesday, my colleagues and I discussed the Irish situation with Finance Minister Brian Lenihan, with whom I have also kept in touch directly. Following meetings in Brussels, the Irish Government committed to engage in a short and focused consultation with the IMF and the EU. On Thursday a joint mission arrived in Dublin, and in the last few days I engaged with my counterparts in the G7, the euro area and the EU about the way forward.

Following intense work over the weekend between the Irish and international authorities, last night Ireland’s Prime Minister, Brian Cowen, made a formal request for assistance. This was followed by statements from the G7, the IMF, the Eurogroup and European Finance Ministers to

“provide the necessary financial resources for Ireland to implement its fiscal reform plans and stabilise its banking system.”

The statements made it clear that there were two components to the rescue package. The first puts beyond doubt Ireland’s ability to fund itself. The international assistance package will support an ambitious four-year fiscal strategy which the Irish government will set out later this week. This will see a fiscal consolidation of €15 billion by 2014, of which €6 billion will be implemented next year, as part of a strategy leading to a target budget deficit of 3% of GDP in four years’ time. The second part of the assistance package is a fund for potential future capital needs of the banking sector. This will support measures to promote deleveraging and ensure restructuring of Ireland’s banks, so that its banking system can perform its role in supporting the economy.

Let me turn to how the package will be financed. This is a joint programme, with funding from both the IMF and the EU. The amount of money involved will, in part, depend on the IMF’s analysis of what is needed, and Prime Minister Cowen has said that he expects it to be less than €100 billion. The international community is working on the rough assumption that the IMF will contribute about one third of the total. The total European package will provide the other two thirds. Based on the significant reform of the IMF agreed by G20 Finance Ministers last month, the IMF is well placed to play a leading role in this international effort. The UK, of course, is an important shareholder of the IMF and we will meet these multilateral obligations. I would like to reassure the House that the IMF is currently well resourced and able to meet the cost of the package for Ireland.

The European element of this package will primarily come from two sources of funding agreed in May before this Government came into office: the €60 billion European financial stabilisation mechanism; and the €440 billion European financial stability facility. The balance between the European mechanism and the eurozone facility will be determined in the coming days. The United Kingdom is not a member of the euro, and will not be a member of the euro while we are in government, and so we will not participate in the eurozone stability fund. To be fair to my predecessor, he kept us out of that fund, but he did agree to the UK’s involvement in the European mechanism two days before we took office. I made it clear at the time that I did not believe he should make that commitment. However, it operates according to qualified majority voting and so we cannot stop it being used, and to exercise that vote at this time would, I judge, be very disruptive. So the EU will lend money to Ireland on behalf of all 27 member states, and the UK must accept its share of this contingent liability, which would arise in the unlikely scenario that Ireland should default on its obligations to the EU.

On top of this, I have agreed that the UK should consider offering a bilateral loan to Ireland, as part of the IMF and European package. I judge this to be in Britain’s national interest. Let me explain why. We have strong economic relations with Ireland. Ireland accounts for 5% of Britain’s total exports—indeed, we export more to Ireland than to Brazil, Russia, India and China put together. Ireland is the only country with which we share a land border, and in Northern Ireland our economies are particularly linked, with two fifths of its exports going to the Republic.

Just as our two economies are connected, our two banking sectors are also interconnected. I should stress that the resilience of our own banks, which are now well capitalised, means that they are well placed to manage any impact from the situation in Ireland. But two of the four largest high street banks operating in Northern Ireland are Irish-owned, accounting for almost a quarter of personal accounts. The Irish banks have an important presence in the UK. What is more, two Irish banks are actual issuers of sterling notes in Northern Ireland. It is clearly in Britain’s interest that we have a growing Irish economy and a stable Irish banking system. By considering a bilateral loan, we are recognising these deep connections between our two countries and, crucially, it has helped us to be at the centre of the discussions that have shaped the conditions of an international assistance package that is of huge importance to our economy. Of course, this is a loan and we can expect to be repaid. In fact, Sweden has already deemed it to be in its national interest to consider a bilateral loan to Ireland.

Now that the Irish Government have requested assistance, a lot of the detailed work of putting together the package can take place. I understand that Members are keen to hear the specifics, such as the rate of interest on the loans, the repayment periods and the contribution from each of the various elements of the package. I shall keep the House informed.

Later this week, the Secretary of State for Northern Ireland and my hon. Friend the Financial Secretary to the Treasury will be in Northern Ireland to discuss the situation there. I will ensure there is a specific discussion in the House if there is a bilateral loan, and we will need to take primary powers.

Finally, let me say something about the future of the various European support funds, which are being discussed later this year. Both the Prime Minister and I are very clear that when it comes to putting in place a permanent eurozone bail-out mechanism, the UK will not be part of that.

This is a situation of great difficulty for Ireland and it is a tragedy when it did so much to improve its competitiveness with low taxes and flexible labour markets, but the truth is that it had a hugely leveraged banking sector that was badly regulated—a pattern that we have had to deal with in our own country. In addition, because Ireland is a member of the euro, exchange rate flexibility and independent monetary policy were not tools available to it when the crisis took hold. The arguments against Britain joining the euro are well rehearsed, not least by me, but although “I told you so” might be correct, it does not amount to an economic policy.

When the coalition Government came into office, Britain was in the financial danger zone. We have taken action to put our house in order. We were once seen as part of the problem, but we are now part of the solution. Ireland is a friend in need and it is in our national interests that we should be prepared to help at this difficult time. I commend the statement to the House.

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Why not to Vote Fianna Fail or Greens next January

Brian Cowen's signature.
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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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A Question of Trust?

Green Party (Ireland)
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Senator Dan Boyle, Chairman of the Green Party, has tweeted the following:

There is a questioning of trust and an adding to uncertainty that is making the basis for being in government much more difficult.

Are we about to see a General Election? Will the Greens pull out?

Reuters has picked up on this story also. I wonder will the EU-IMF be putting pressure on the Greens too stay in government?

Election.ie is rightly asking where is John Gormley during all this?

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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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Why does all this ‘Bond Market Malarkey’ Matter?

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As I have recently begun writing about the Bond Markets and posting about it on Facebook, an interesting discussion has taken place on why are we bothering reporting on it if we currently aren’t borrowing from the bond market and what exactly are bonds. So myself and another friend tried to explain why it is important.

Comment 1:

Good job we are not actually borrowing at the moment!! (Which is why I am surprised that we are still fixated on the number, who cares what rates bondholders are selling to each other, we need to concentrate on getting the rate down for Jan when we need to borrow.)

My Response:

The reason its going up though is that investors think we will default before we can borrow again. We were supposed to borrow €1.5bn in October and €1.5bn in November, therefore we have to borrow more then initially hoped next year. Also if… investors are dumping the bonds at the moment, why will they want to buy new ones next year? That is why we care what the number is. Also LCH putting up the margin by 15% to trade in Irish Bonds means it will be very expensive to trade in Irish Bonds, making it harder still to sell new ones.

Comment 2:

What are the bonds exactly Spillane?

My Response:

Its basically what funds the country.The Government raises money by selling Bonds on the market.

Comment 3:

so what is this 8% malarkey all about? its more expensive to buy Irish bonds is it?

ScandalCentral:

Stephen has got it more or less spot on there. We currently have a huge gap between spending and income for the state. We fill this gap through borrowing. We borrow by issuing bonds. Current bond prices are on the secondary market. Bonds of… over 8% are generally regarding as Junk bonds. This essentially means they are high risk and the chance of default is huge. The prices are rising because no one wants Irish sovereign bonds. The Government will return to the bond market early next year, unless the rates go down we will be unable to afford to borrow and will crash. We would then need the EU & IMF to bail us out.

ScandalCentral also linked to this video of Bloomberg on Monday which shows how serious this is for Ireland.

I hope this may help explain to you why all this stuff is important!

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How soon before we go to the EU-IMF?

Broken Cross
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Yesterday I found this post on the Telegraph website (via Stephen Kinsella). Its quite a worrying read for those of us who are worried about Ireland’s future.

Ireland is funded until April but after that we will have to return to the bond market. Our auctions are currently suspended. As Colm McCarthy said in the Irish Independent

“The €1.5bn not borrowed in October plus the €1.5bn not borrowed in November represent borrowing postponed, not borrowing avoided,”

If we can’t raise this money, we may have to tap our pensions reserve of €12bn, but that is not a good idea as we do need that money.

The spreads over German Bunds are mimicking the action seen in Greece in the final hours before the dam broke.

This is a worrying sign. Are we about to the way of Greece?

Even if the government manage to win the Donegal South West election and pass the budget, we might still not be better off.

Its looking like sooner or later we will have to go cap in hand to the EU-IMF bailout fund.

http://www.gaycork.com/forum/member.php?u=5457
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