BBC BLOGS - Peston's Picks
IN ASSOCIATION WITH
« Previous | Main | Next »

The unbelievable truth about Ireland and its banks

Robert Peston | 00:00 UK time, Wednesday, 30 March 2011

Ireland's central bank and new government will confirm on Thursday that the hole in the country's banks is even wider, deeper and darker than seemed to be the case last November, when those bust banks forced the country to go with a begging bowl to the eurozone's rescue funds and the International Monetary Fund (IMF) for 67.5bn euros (£59bn) of rescue loans.

Regulators at the Irish central bank have conducted a review of how much extra capital - as a buffer against future losses - is required by Bank of Ireland, Allied Irish Bank, EBS and Irish Life and Permanent.

Unless something unexpected happens in the next 24 hours, the total amount of additional capital that will need to be injected into these banks will be a bit less than 35bn euros - including 8bn euros that was supposed to be injected into them at the end of February, but was postponed because of Ireland's political turmoil.

Anyway, let's assume that the total amount extra that these banks need is circa 30bn euros. That would take the total quantity of state investment in Ireland banks to a breathtaking 75bn euros (actually a tiny bit more than that).

That is an almost unbelievably large number. When I think about it, I have a small panic attack - because it represents 45% of Ireland's GDP and 55% of its GNP.

(Irish GNP is usually thought to be a better measure of Ireland's useful economic output, because the GDP figure contains a sizeable chunk of profits exported abroad by all those multinationals that settled in Ireland for the exceptionally low tax rate).

Or to put it another way, if Britain's banks had gone bust to the same extent, British taxpayers would have invested something like £700bn in them - or more than 10 times what we actually invested in Royal Bank of Scotland, Lloyds, Northern Rock and Bradford & Bingley.

Nor is that the end of the exposure of the eurozone and the Irish state to these stunningly failed banks.

No financial institution or bank will lend to them. Ireland's banks can't borrow from anyone except the Irish people (who, poor souls, have nowhere much else to put their deposits). But even if they wanted to, Irish households could not possibly put money into the banks fast enough to allow those banks to repay all the institutions - such as German banks - which lent far too much to Ireland's banks in the boom years.

So when these wholesale lenders to Ireland's banks have been demanding their money back (as they have been in a run that has been huge and inexorable), the money has come from the European Central Bank and the Central Bank of Ireland - or, indirectly, from the taxpayers of Ireland and the eurozone.

To prevent Irish banks toppling over one after another, the European Central Bank has lent 117bn euros to them and the Central Bank of Ireland has lent them a further 71bn euros. So that's 188bn euros of loans from the eurozone's taxpayers to Ireland's banks - which makes the 67.5bn euros lent directly by the eurozone and IMF to the Irish government look like peanuts.

And a further 20bn euros of bank bonds - another form of bank debt - is still guaranteed by the Irish state through the Eligible Guarantee Scheme.

So that is 208bn euros of taxpayer loans to Ireland's banks - equivalent to a remarkable 154% of GDP.

To ask the inevitable dumb question, what on earth went so spectacularly wrong?

First, in the frenzied party years before 2008, the banks borrowed too much from other institutions - especially from German banks - and lent far too much to housebuyers and property speculators.

However, to date Ireland's banks have only properly owned up to the losses on the property developments.

On Thursday for the first time they'll be forced to admit that they also face colossal losses on residential mortgages. In February, for example, official Central Bank figures showed that 5.7% of Irish mortgage accounts were more than 90 days in arrears - which means Ireland banks then were owed 8.6bn euros in unpaid interest and principal.

It is pretty extraordinary that it has taken so long for the banks to be forced to recognise their mortgage losses - since house prices have more-or-less halved over the past few years, the economy was in deep recession after the 2008 crash and has subsequently been pretty stagnant, and unemployment has been rising.

Does the phrase "better late than never" apply in this case? Possibly not.

Second, the Irish government probably chose the worst of all strategies for propping up the banks.

By guaranteeing all their liabilities in the autumn of 2008, they turned the bloated liabilities of the swollen banks into public sector debt.

And because the Irish government didn't secure a bottomless borrowing facility from the European Central Bank, it then became impossible to force losses on any of the banks' creditors, even those which lent most recklessly: Ireland did not have the financial resources to pay back all those wholesale lenders that would inevitably have demanded their money back the moment any of them were instructed to swallow a loss.

So some of the guilty parties, namely the wholesale creditors of Ireland's banks - including banks and investors in Germany, France, Spain and the UK - have got away without taking their share of losses. All those losses have fallen on Ireland's citizens, who are not blameless for the mess (they didn't have to borrow too much) but aren't the only ones at fault.

And for the Irish people, there is a second source of possible injustice. The money they've been lent by the IMF and eurozone carries an interest rate of 5.8% on average - which is significantly greater than Ireland's economy and tax revenues can grow right now, and therefore forces Ireland into a potentially never-ending vicious cycle of public spending cuts and low growth.

What's more, the banks may also be trapped in a cycle of forced asset sales and losses, because they are paying out an estimated 2.5bn euros a year for the emergency loans from the ECB and Irish central bank, to finance mortgages and other loans which are falling in value and are not yielding interest.

Perhaps worse still, the 188bn euros of central bank loans could be withdrawn more or less at the ECB's pleasure. So Ireland's banks will continue to feel under relentless pressure to dump assets at punitive fire-sale prices, unless and until the ECB can be prevailed upon to deliver what its officials say it is cooking up, which is a new, longer stable lending facility for banks - such as the Irish ones - that need to reconstructed.

What will be the end of this sorry saga?

By default, it now looks as though almost the entire Irish banking sector will be nationalised.

Allied Irish is already in state hands. Anglo Irish and Irish Nationwide have been crunched together and are being wound up by the state. It will be tough for Bank of Ireland and Irish Life and Permanent to avoid being taken over by taxpayers too.

It will therefore be fascinating to hear what the Irish premier and finance minister lay out as their vision for the future of Ireland's banks. That will be presented at 4.45pm on Thursday, 15 minutes after the Central Bank of Ireland announces the precise, hideous amount of extra capital the banks will be forced to raise.

It will be another momentous day for Ireland and for the Eurozone. But whether it will be a day that sets both on the road to financial recovery, or nudges them nearer catastrophe, cannot yet be assessed.

Comments

Page 1 of 4

  • Comment number 1.

    Best for Ireland to do an Iceland. Leave the Euro and default, much better for the Irish people in the long run.

  • Comment number 2.

    Ireland should default! Tell the IMF and the ECB where to go! Pretty soon the worlds Banksters will own everything! How can private organisations IMF / World Bank be allowed own nations? We are all being conned! Every financial / economic crash since and including the Wall Street Crash is engineered to further enrich the Banksters! Do your research and see. Cui bono..?

  • Comment number 3.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 4.

    @simondav

    Iceland is not a member of the EU and was never in the Euro. The 2008 financial crisis forced them to apply for Euro membership as their currency (Icelandic Krona) is basically worthless. This will allow them to benefit from certain economic benefit in turbulent times (ECB lending etc..)

    But hey, why let the facts get in the way of a good story, right?

  • Comment number 5.

    These figures are just for little old Ireland! What happens when all of the 5 year bonds, purchased in 2007, come to fruition? Surely there should be a day zero 'everyone default moment' ... lets just all start again?

  • Comment number 6.

    Down, down, deeper and down?...

    I bet the Irish now wish they had stuck with the Status Quo...

  • Comment number 7.

    By kicking the proverbial can down the road in 2008, and hoping for the best, the Best and Brightest of the day have saddled the Irish people with a burden that will require a generation of hard labor and lowered living standards to rectify. Already I read of a new generation of Irish emigres.

    This is so regrettable, and so avoidable, had grownups been at the helm.

    Now we await the day Mr. Peston writes a similar essay about us here in the US. There are no successful efforts to reign in either the welfare state or the banks, and real estate values continue to sag. Even the very modest efforts of House Republicans are vilified (in coordinated unison) as 'extremist' by the Senate Democrats.

    And Obama just got us involved in a third war in an Islamic nation.

  • Comment number 8.

    1. At 00:53am on 30th Mar 2011, simondav wrote:
    Best for Ireland to do an Iceland. Leave the Euro and default, much better for the Irish people in the long run.

    And the short term. Just do it.

  • Comment number 9.

    Default, default, default.

    Its the only sane option.

    Got to be worth a punt.

  • Comment number 10.

    Has anyone seen an contrite Irishmen? - Cheltenham seemed to be just as busy as ever the other day. They're now inevitably going to go cap in hand to just about everybody else yet again - they need to recognise and accept the deep hole they're in

  • Comment number 11.

    Nationalise the banks.
    Write-off everyone's mortgage (& loans).
    Leave the EU & the Euro.
    New currency.
    Everyone one to be given the sum equivalent to one year's work in their bank accounts.

  • Comment number 12.

    "5. At 02:33am on 30th Mar 2011, Mangonuts wrote:
    These figures are just for little old Ireland! What happens when all of the 5 year bonds, purchased in 2007, come to fruition? Surely there should be a day zero 'everyone default moment' ... lets just all start again?"

    I wonder how the emerging economies of China,Brazil, India and Russia, creditor nations which have toiled long and hard with their populations enjoying few if any of the debt funded public services we in the "developed" nations have enjoyed will react. Pulling the rug out from under everyones feet at the moment when they have worked their way towards the top will I guess not be taken lightly. Could be very stimulating for the defence companies though...

  • Comment number 13.

    Time to do what we should have done a few years ago, let the bank fail as its trading was not good for business. Then the experiment can go on to see what happens when banks are crying out for money where there is none. After all the banks are in this together as we all are.
    This, I think, is the start of the pips squeaking..

  • Comment number 14.

    Only one thing left to sell - the country.

  • Comment number 15.

    what do you think of the fact that Post office england is selling products for the vank of ireland!!
    so trying to underpin bad banking with a national treasure that has nothing to do with greedy banks!!

  • Comment number 16.

    I wouldn't have thought the Irish Government would want another Nationalised Bank just now. What puzzles me is that the stress tests (carried out by a US company) are heavily weighted on the assumptions that property values in Ireland have not bottomed and that further falls are inevitable. Although that may well be the case, the large majority residential mortgages are still performing and there'll be very few that will go the full term. Also, the Government don't wish to force banks into a fire sale of assets or be the cause of massive foreclosures. This whole Irish thing has become a self-fulfilling prophecy. What it needs is for the Irish Times and other commentators to announce/speculate that house prices are set to rise in the next couple of years..WHICH HISTORY TELLS US THEY WILL..and we'd see a lot of Ireland's current problems disappear. The Irish should take a leaf out of the American's book and keep telling the world that everything is looking great even though they (the US) are in far worse trouble than the Irish. Maybe the Irish should have borrowed the money from China instead of from Europe. They at least appear to have more patience and understanding. If they hadn't the US would have been bust years ago.

  • Comment number 17.

    Bobby, when you talk about Ireland you only ever focus on the banks? Why? Why don't you talk about other business areas? Of course one could argue that you should be discussing British business but if you're happy to widen your remit, then why not all of Irish business.

    Essentially I'm saying there's more to Ireland, dan dis.

  • Comment number 18.

    Truth? There's a welcome change!

    We know the UK banks (amongst the rest) haven't taken 'their share of the cost or blame'

    It is TRULY time to LET THEM FALL OR FAIL. ENOUGH IS ENOUGH

    They and their shareholders have to take some responsibility - after all, unemployed men and women are having to take responsibility for their 'charges', even though the banks, bank managers and the likes of Hester, Diamond, Varley, Goodwin etc have yet to take personal liability.
    (should have listened to Zadie Smith's 'talk' broadcast on Radio4's Today programme this morning)

    A director is both professionally and personally liable for his companies actions.

    Manslaughter charges can be brought where proper safety procedures are not followed or laws breached.

    Shouldn't similarly severe penalties be inflicted on members of the British Bankers Association, even in far flung outposts, such as the Cayman Islands?

    The International Criminal Court shouldn't just be there to 'indict' ex-national leaders for 'crimes against humanity', it should also go after 'bankers' whose actions have damaged so many nations economies and political stabilities and blighted so many lives!

    Still no ONS statistic available on the number of suicides directly attributable to the 'credit crunch'?

  • Comment number 19.

    Tomorrow must be a worrying day for all those concerned about Ireland as you say Robert. The size of the problem just gets larger and larger with no end in sight yet. I hope that these stress tests will finally put a full scale to the problems.

    However I was reading on Monday that Ireland's banks have more problems that you say on the Notayesmaneconomics blog which are.

    "1. If we look at commercial property loans then the Irish bad bank called NAMA is dealing with some of these but this begs the question what about the rest?

    2.The Irish banking sector also made loans to companies which must have been affected by the downturn.

    3 Residential mortgage lending must have been affected by what has happened and will be affected further as time goes by. What about other personal lending on the books of Irish banks?

    4. There remains talk of derivative losses sitting on the books of the Irish banks and this needs to be addressed apart from having echoes of AIG/Lehman Bros from 2008."
    http://t.co/OgFGZzk

    So one of those with an accurate track record in this area still has concerns that tomorrow may not represent an end to Ireland's problems...



  • Comment number 20.

    Go on go on go on...default.

  • Comment number 21.

    "What will be the end of this sorry saga?

    By default, it now looks as though almost the entire Irish banking sector will be nationalised. "
    .....
    You used the word Robert but inthe wrong context. All they can do is default, and its not the first time I've said this.

    The end of this saga will be the collapse of most of the banking system as we know it. People keep trying to talk it up, but its as doomed as the Titanic was after it hit the iceberg, its simply a matter of time. Go and buy silver and gold folks, before its too late. They may seem dear now, but its only going to go up.

    "To ask the inevitable dumb question, what on earth went so spectacularly wrong?"
    Simple, the fact that FRB creates a debt based monetary system. It is little more than legalised counterfeiting, and it has been the cause of virtually every boom and bust since it was established. How long must we suffer its consequences? I can only hope that the collapse of the system will allow common sense to prevail, and it will be banished for good.



  • Comment number 22.

    "the hole in the country's banks is even wider, deeper and darker than seemed..." well that's not really a surprise is it? Once the banksters have the govt on the hook then they just keep going back for more - or can you show me a case where the losses turned out to be smaller?? Can you even show a TBTF that is now smaller?

    For a detailed report of what happened you can read the deep inside story of how Ireland destroyed itself in eight short years.
    "...First Iceland. Then Greece. Now Ireland, which headed for bankruptcy with its own mysterious logic. In 2000, suddenly among the richest people in Europe, the Irish decided to buy their country—from one another. After which their banks and government really screwed them. So where’s the rage?..."So put on a pot of coffee...and then click

    http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103?currentPage=all

  • Comment number 23.

    "All those losses have fallen on Ireland's citizens, who are not blameless for the mess (they didn't have to borrow too much)"

    With respect, if the main bulk of this debt was discretionary, eg credit card borrowing, then this might be right. But I would have though that the vast majority of private debt in Ireland is mortgage borrowing - and people have borrowed so much because of the extraordinary house price bubble.

    Who did that benefit? Not the people buying a house for twice or more what it would have cost a few years before. If they wanted to buy a house, then they had no choice but to take on the additional debt burden of the inflated prices (and live in the cosy illusion that they were getting richer as the price of their house continued to grow.)

    The bubble in house prices benefited the banks, who lent more and more against the same assets - thereby building up their turnover and the apparent value of their assets (boosting the bonuses): and then securitised the mortgages and sold them on, boosting liquidity and providing more to lend on mortgages (thereby boosting the bonuses).

    I fail to see how the ordinary citizen can be blamed for this bubble, simply because they borrowed to buy a house. They are the vitctims, because absent the bubble they would bought the house for less, asd have seen less of their income swallowed up in mortage repayments that were adding fuel to the fire.

  • Comment number 24.

    16. At 08:38am on 30th Mar 2011, Geoff Gregory wrote:
    I wouldn't have thought the Irish Government would want another Nationalised Bank just now. What puzzles me is that the stress tests (carried out by a US company) are heavily weighted on the assumptions that property values in Ireland have not bottomed and that further falls are inevitable. Although that may well be the case, the large majority residential mortgages are still performing and there'll be very few that will go the full term. Also, the Government don't wish to force banks into a fire sale of assets or be the cause of massive foreclosures. This whole Irish thing has become a self-fulfilling prophecy. What it needs is for the Irish Times and other commentators to announce/speculate that house prices are set to rise in the next couple of years..WHICH HISTORY TELLS US THEY WILL..and we'd see a lot of Ireland's current problems disappear. The Irish should take a leaf out of the American's book and keep telling the world that everything is looking great even though they (the US) are in far worse trouble than the Irish. Maybe the Irish should have borrowed the money from China instead of from Europe. They at least appear to have more patience and understanding. If they hadn't the US would have been bust years ago.

    ......
    Geoff. It reads as if you support propoganda. I cant see how that helps anything other than prelonging the agony. The US is perched on the edge of a cliff, just one step from falling off. Constant printing of money is the only thing saving them (propping up GDP figures), but it doesn't fix anything and it always has one end (Weimar).

  • Comment number 25.

    Default and leave the EU ... and be ... 'Irish'!

  • Comment number 26.

    All this user's posts have been removed.Why?

  • Comment number 27.

    UK banks were bailed out to the tune of 850 billions in loans and guarantees. Those are just the ones we know about so the full figure will be north of a trillion. God alone knows what toxic assets the government now holds.

    As for the RoI it is a tiddler of a country and yet a whole continent can't come up with a sane financing plan? What happens if Spain or Italy goes under?

    What a damnfool stupid system we have that a minnow minnow like RoI can start a domino effect. It is not the Irish people being bailed out it's the wholw of the EU's banking system.

    The trouble is they are alll bankrupt and lying to us too.

  • Comment number 28.

    "Ireland's banks can't borrow from anyone except the Irish people (who, poor souls, have nowhere much else to put their deposits). "

    So why does the British Post Office allow Bank of Ireland to continue holding all of the money deposited by savers in this country?

  • Comment number 29.

    @9 "Got to be worth a punt" - Brilliant! Best chuckle of the day. Even though this is no laughing matter.

  • Comment number 30.

    As you say Robert "To ask the inevitable dumb question, what on earth went so spectacularly wrong? "

    To answer your question is really rather easy - yes the Irish people have a case to answer, and yes other European banking partners also have a case to answer, but...... the culpability of these players pales into significance against the upper echelons of Irish society.

    The politicos of the day, the Irish bankers and the property developers were all caught with hands in the jar, there were a successive number of years during which corruption, cronyism, and sharp practice were the order of the day for these people.

    The problem runs deeper though in the psyche of Irish society, cronyism and nepotism are at the very heart of state functioning. The politicos, bankers and developers simply played this card to the nth degree.

    and to

    #10 welshbanker "Has anyone seen an contrite Irishmen? - Cheltenham seemed to be just as busy as ever the other day"

    you my friend have hit the nail on the head - I have seen and know plenty of contrite Irishmen - unfortunately these are only the ordinary citizens - I am fully sure that you saw plenty of Irishmen at Cheltenham, and these are the very people to whom I refer earlier (the politicos, bankers and developers)

    What is worst for Ireland out of all of this is that the people who are fundamentally responsible for the problem have been allowed to walk away scot free, and still maintain the arrogance that they did nothing wrong - circa attitudes captured in Fergal Keanes recent Panorama programme on the Irish collapse.

    And in terms of my position to comment on Ireland - I lived and worked there for many years, and left sickened by the levels of corruption and cronyism referred to above. Yes I'm part of the new brain drain emigration explosion, and will have no desire to return to Ireland while the climate, behaviour and attitudes of corruption and cronyism which caused the collapse are still very much in vogue and the result of which remain without consequence

  • Comment number 31.

    Missed this on first read;
    "And for the Irish people, there is a second source of possible injustice. The money they've been lent by the IMF and eurozone carries an interest rate of 5.8% on average - which is significantly greater than Ireland's economy and tax revenues can grow right now, and therefore forces Ireland into a potentially never-ending vicious cycle of public spending cuts and low growth."
    This is the key point. The debt will lead to the death spiral of the economy. Austerity will not fix anything. Osbourne and Cameron should take note.

  • Comment number 32.

    I'm stunned that banks that are effectively bust have been allowed to be kept by their original shareholders and non-deposit bond holders.

    Surely in the name of all that is sensible, if a bank exhausts its capital buffer the bank ownership should be transferred to the central bank or government as a matter of course. Then the insurance system can kick in and pay off the depositors, it can be recapitalised by the central bank and run on.

    If a bank goes bust the regulators should take a hit, since they were clearly asleep at the wheel. But only after the orginal owners have paid with their entire investment.

  • Comment number 33.

    Ireland should apply to become the 51st state of the US. Almost every American you meet boasts of his Irish heritage, including every president since the year dot, so I'm sure they'll be only too willing to take in the 'old country' lock stock and (Guinness) barrel.

    Only other alternative is to get that super-Irish patriot Bono (who pays his taxes in Holland) to stage a big benefit gig.

  • Comment number 34.

    23. At 09:11am on 30th Mar 2011, tFoth wrote:
    I fail to see how the ordinary citizen can be blamed for this bubble, simply because they borrowed to buy a house. They are the vitctims, because absent the bubble they would bought the house for less, asd have seen less of their income swallowed up in mortage repayments that were adding fuel to the fire.
    =============================

    The only answer I have to this, as an Irishman, is that they could have chosen to rent as I had to do. You probably know yourself that the rents of places in Dublin were often half or even a third of the interest on an IO mortgage throughout the 2000s. Buying a property was beyond any reasonable effort even for someone on decent money like I was. An ex corporation (council) house would cost 600,000 euro. You could get them free 20 years ago! A smallish 3-bedroom town house in central Dublin would have set you back 2 or 3 million euro.

    But you could rent an appartment in centre of Dublin for 1000 euro a month, but if you did the maths an interest only mortgage would cost 2500. Buying was madness. BTL landlords only survived under the delusion that their looses on rent were made up by consistent capital gains, and tax breaks.

    But in a country where home/land ownership is so vital to the psyche for historical reasons it can be expected that ownership will come at a premium. In fact I left Ireland because my wife, from the UK, was sick and tired of renting and wanted to move somewhere where we could afford to buy on our salaries.

  • Comment number 35.

    Too many lampreys, too small a porpoise...

  • Comment number 36.

    > What will be the end of this sorry saga?

    Tar and feathers for the perps (or is that too lenient)?

  • Comment number 37.

    Robert the heading is quite misleading as it doesn't provide alot of facts:
    1> A large part of the property owned by NAMA (and Irish taxpayer) include top hotels in London like Claridges and properties like Battersea Park. So the problem is not confined to within Ireland. It therefore is quite shocking you do not mention the link between the Irish and British property market.
    2> Irish people import 25 Billion from UK each year. There is plenty of scope for buying more local and generating employment locally. This has not happened so things can't be as bad on the ground as in the press.
    3> You should also give an indication of the change in mortgage packages introduced by banks like RBS that forced Irish banks to compete at much lower rates and less guarantees. If an Irish bank has to take a hit for lending out money to someone that could not pay it back then why doesnt the same apply to the banks that lent to the Irish Banks?
    4> Taking banking/construction out of the economy the Irish economy grew by about the same as India in 2009 (8%). There are alot of people in Ireland who are still profiting from a minor celtic boom outside of construction/banking.

    George Osbourne wants to take advantage of the Irish by overcharging us 440M GBP in interest. If we need to borrow then we should pay it back but it should be at a fair rate especially as the Irish are playing an important part in keep the English property market from crashing alot further through fire sales and import more than China, Russia, Brazil etc from the UK. Approx 8,000 Euro per person.

    As for pulling out of the Euro. Joining the Euro effectively meant a fix term rate of average 3.5% mortgage over the lifetime of the mortgage. On my mortgage in London I expect to have Goerge Osbourne do the same to the English mortgage payer as he has done to the Irish and overcharge in high interest rates. What are your predictions for next 10 years on interest rates because this also has a big impact on the money owed by the Irish. Average since 1997 is 5.5% and I expect it to hit double figures within the next 5 years or so. Only then I think will alot of people realise the long term benefits of Ireland staying in the Euro when Irish people are paying back alot less interest each year i.e. average 3.5%. BTW The main reason for increasing rates is to protect pensions due to inflation etc. Well that's fine when inflation is mainly spurred by increasing wages. But the main spur now is 3% increase in VAT so increasing taxes on one hand and increasing interest rates means a very bleak future for the UK i.e. I think alot of people will realise just how similar the Irish and UK taxpayers are so not a time for some commenters here to be Irish/English or Euro bashing or missing out on that important link in property.

  • Comment number 38.

    34. At 10:06am on 30th Mar 2011, Reticent_Trader wrote:

    "...A smallish 3-bedroom town house in central Dublin would have set you back 2 or 3 million euro..."

    +++++++++++++++++++++++++++++++++++++++
    Oh dear. All becomes much clearer.

    Those familiar with the crowded SE of England would even baulk at such prices, yet Ireland is a sparsely populated land.




  • Comment number 39.

    @30 said - What is worst for Ireland out of all of this is that the people who are fundamentally responsible for the problem have been allowed to walk away scot free, and still maintain the arrogance that they did nothing wrong - .....
    .
    .
    Not only in Ireland - that's why Madoff sits alone in his cell.

  • Comment number 40.

    @ 33. At 09:59am on 30th Mar 2011, MarkofSOSH wrote:

    > Ireland should apply to become the 51st state of the US. Almost
    > every American you meet boasts of his Irish heritage

    There are more Joneses and Williamses in the States than Murphys.

  • Comment number 41.

    All this user's posts have been removed.Why?

  • Comment number 42.

    @ 17. At 08:52am on 30th Mar 2011, Lindsay_from_Hendon wrote:

    > Bobby, when you talk about Ireland you only ever focus on the banks?

    Yes - no-one should confuse "banks" with proper businesses. Proper business often has a socially useful purpose.

  • Comment number 43.

    Robert, this piece was particularly tangled with 'facts' and 'conjecture' that confused silly me?

    No mention either of the money lent this year by UK Chancellor to ROI and Portugal.

    Some money, makes some of the world go round - but only if it fits constant manipulative headlines that keep all of tax-payers who bailed out banks out of the loop?

    This issue with banks who are international, yet are based in this country or another, depending on the tax-payer who are forced to bail them out?

    So, tax-payers bail out an international bank (they all are) that have bases in the UK that call themselves UK banks?

    Until the UK Government publish, and separate out the bank bail outs with the deficit as a whole - we are still being lied to.

  • Comment number 44.

    30. At 09:44am on 30th Mar 2011, ak35 wrote:

    > the people who are fundamentally responsible for the problem
    > have been allowed to walk away scot free, and still maintain the arrogance

    When a dog makes a mess on the floor, you rub his nose in it.

    So I just rub bankers' noses in their mess - it's a lot of fun, it doesn't cost a penny and it teaches the bankers to be good in future. Keep it up!

  • Comment number 45.

    Interesting to see this article a day after US bank bailout programme moved $6bn into profit (and is expected to generate a lot more).

    Obviously Ireland is in a different situation, and though the joke at the time of Iceland default was that the difference between the two was one letter and 6 months, it seems we are still waiting for Irish default. If most of Irish bank assets are Ireland related loans, then indeed it seems a sensible way to go, otherwise their recession will be a lot worse than anything Japan has seen.

    So when RP complains about the ECB loan interest rate, he should consider that it already offers a massive discount to market bond yields Ireland would have to face if it tried to issue to investors as before, and implies negative basis to the CDS (ie credit risk premium is too low), and is not commensurate with the risk.

  • Comment number 46.

    "Proper business often has a socially useful purpose."

    Optimistic. I'd go with 'occasionally'.

  • Comment number 47.

    @44 - Jacques Cartier wrote - "So I just rub bankers' noses in their mess - it's a lot of fun, it doesn't cost a penny and it teaches the bankers to be good in future. Keep it up!"

    Not just the bakers though - so a whole pile of mess will be needed, also I'd advise wearing gloves of some sort

  • Comment number 48.


    In RoI's case Groucho Marx said all that needs to be said.

    Please accept my resignation. I don't want to belong to any club that will accept me as a member.

  • Comment number 49.

    45. At 10:40am on 30th Mar 2011, HappyBunny wrote:
    Interesting to see this article a day after US bank bailout programme moved $6bn into profit (and is expected to generate a lot more).
    ...........
    Would be good to see a link to this story. To quote an old friend "What was the source of this profit?" I take any news about the US with a pinch of salt. They are QE $4billion new dollars every day. So is this really profit, when you have a currency being subject to debacement? Banks are really just wealth extractors from an economy. They effectively lease the economy money. And then take their pound of flesh. They dont create any real wealth only businesses and the people working for them do. Big bank profits mean less for the rest of the economy to function on, and I see that is a bad thing. I see no reason why they should be bigger than a utility feature to the economy, oiling the wheels so to speak, rather than raking in the money as commission on every transaction, like parasites.

  • Comment number 50.

    Some years ago I gave my son what I thought was a good present for his 21st birthday.
    He wasn't impressed. He said "William the 1st was given Ireland for HIS 21st."

    Thank goodness we gave most of it back. He hasn't complained lately!

    I do know an Irish bank manager who is furious at the situation, and desperately embarrassed and contrite. He's been retired a few years of course, the present lot think it's someone else's problem and they are probably right.

    It was the case that if you owed a little it was your problem but if you owed a lot it was the banks problem. Ironic. Now the banks owe so much it's someone else's worry.

  • Comment number 51.

    All this user's posts have been removed.Why?

  • Comment number 52.

    27. At 09:21am on 30th Mar 2011, bill40 wrote:

    "UK banks were bailed out to the tune of 850 billions in loans and guarantees."

    Sorry to see you have been taken in by the large numbers bandied about by people trying to be sensationalist. As RP says above:

    "Or to put it another way, if Britain's banks had gone bust to the same extent, British taxpayers would have invested something like £700bn in them - or more than 10 times what we actually invested in Royal Bank of Scotland, Lloyds, Northern Rock and Bradford & Bingley."

    The total estimated cost last year, by the ONS, was about the same as the NHS budget, the difference being that the ONS forecast a return of that money lent

  • Comment number 53.

    The Irish Government (as in the UK) should use Modern Monetary Theory frameworks to get themselves out of this awful hole.

    The correct approach is to stop borrowing money through bond issues;
    default and write downs on the existing debts; nationalise one of the banks to guarantee the electronic payment system to function; withdraw all future public support and allow the other banks to all go bankrupt and default.

    The Governemnts should in future raise money directly through creating it rather than borrowing it (and also lower income tax and VAT) to stimualte economic growth. This should not be inflationairy as there is tons and tons of spare capacity in their (and our) economy.

  • Comment number 54.

    Robert could you quantify what the exposure of our leviathans are if all these banks are nationalised and also what the effect would be on for example the Post Office .

    Perhaps it would be good to see the figures for Portugal Greece and Spain to so we can put into context how much more austerity we face to prop up the Major banks balance sheets.

  • Comment number 55.

    Robert, you refer to the UK government on an equivalent basis having to lend the banks here £700 billion. as though it hasn't happened!!
    Those who have directly borrowed appaer to have topped out at £240 billion but the Government has guarantees open that amount to in excess of £520 billion.
    Given the desperate need for cash by the banks to raise their solvency levels before the banking commission reports and not forgetting that the price of assets both on an off of balance sheets is to say the least questionable the UK government and by definition the UK is in for well in excess of your figures, and that is before the deficit is really addressed.
    With respect if you're going to be paid to write objectively and factually then kindly do so or get off the pot.
    Perhaps your celebrity interviews have made you perceieve you can be economic with the truth. I have to put to you that the truth will always come out and the reason being there are a lot more intelligent readers and contributors here than you.
    In short you've written a duff article and should have the guts to put the record straight.

  • Comment number 56.

    #49 Big bank profits mean less for the rest of the economy to function on, and I see that is a bad thing. I see no reason why they should be bigger than a utility feature to the economy, oiling the wheels so to speak, rather than raking in the money as commission on every transaction, like parasites.

    You have to make as much as possible otherwise someone else will and sooner or later they will come and eat you up. Oh yes I know, that is how they made the credit crunch band wagon but with our system you cannot restrict profits without de-valueing the taxpayers asset in shares and handing competitive advantage to others.

    Commissions are at least a way of charging for a service, surely the biggest con perpetrated by the banks, to almost all of us almost all of the time is in the extended clearance of funds. In visas alone my small business is permanently waiting for an average of £7000.00 this can rise though to ten times that amount.
    They have perfected the art of borrowing the most expensive money i.e. short term for absolutely nothing.
    Can Robert Peston use his resources to calculate the amount of cash that would be injected back into the real economy if this money were to re-materialise even one day quicker for every business in the UK?


  • Comment number 57.

    It's inevitable catastrophe any which way you look, which asks a big question of the Irish people.

    Is your country being run for your benefit, or for the benefit of creditor bankers in Europe?

    Just don't stand for it!!!

    Default, leave the Euro and precipitate a complete reform of the European Banking System.

    The fundamental problem here, is not with Ireland, not with an inept government, not with dodgy relationships between a political class and a banking class, not with almost non-existent regulatory oversight, but something much more universal and indeed common to the whole of the western capitalist system.....

    .... the inadequacy of, and deception that is, debt, as a basic financial instrument.

    This is why over thousands of years some of the great religions of the world have cold-shouldered it, because it is a fundamental con, delusion, whatever you want to call it, to both parties involved.

    To the borrower, the deception is that they convince themselves they will always be able to pay it back.
    To the lender, the deception is that they expect to get all their money back.

    We need to move to a capitalist system much more heavily based on 'equity', which is a far more 'human' instrument, in that it accepts the existence of risk.



  • Comment number 58.

    It has to be time to default and possibly join a second tier euro. The numbers are staggering. Home buyers face negative equity of 60%. and the first auction of repossed distressed property is 2 weeks away. Property has further to fall - perhaps another 50%! Is everyone going to hand their keys back? aswell as nationalising Banks - the Government will have to nationalise the reidential property market. Default is the only option. Its time the investors in banks took this loss on board, not the Irish people.

  • Comment number 59.

    Why are the post office putting all theire ISA money into the Bank of Ireland. If it all goes pearshape will the british governemnt end up, like iceland, having to pay the money back to the depositers? Why is the UK governmemnt allowing Sanatander to buy up so much (RBS branches next) when Spain is teetering on the brink?

  • Comment number 60.

    What parcel of rogues could sell a nation?

    Some of my grandparents' generation fought a war in Ireland for the nation's liberty. It split the family and brothers had difficulty being civil to each other nearly fifty years later.

    What a sodding waste of ninety years! It just breaks your heart.

  • Comment number 61.

    51. At 11:24am on 30th Mar 2011, burnallmoney wrote:

    Anyone else remember this piece from last year?

    City bankers are buying up rare copies of an obscure book on the mechanics of Weimar inflation published in 1974.

    The Death of Paper Money
    http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7909432/The-Death-of-Paper-Money.html

    'Grand pianos became a currency or sorts as pauperized members of the civil service elites traded the symbols of their old status for a sack of potatoes and a side of bacon.'

    This is going to get messy!
    .............
    Yes. And I got a hold of a copy and read it. Brilliant book

  • Comment number 62.

    56. At 12:04pm on 30th Mar 2011, Abysmillard wrote:
    .....
    When we gave away the right to issue our own money (tally sticks), in favour of banks issuing money as debt it was the beginning of a slippery slope (Our Governments have been in debt ever since). I have never understood why we should give the banks the divine right to issue our medium of exchange as a debt and charge us interest on our own money. We were basically conned. This is a key issue that is picked up on in the Dying of Money by Jens O Parsons, mentioned above.

  • Comment number 63.

    57. At 12:12pm on 30th Mar 2011, Noideaatall wrote:
    .....
    It is the inevitable consequence of having a debt based monetary system. It was always destined to collapse, its just we didn't know when. Only full reform along the lines of Positive Moneys proposals can provide a permanent solution.

  • Comment number 64.

    Everyone thinks economics starts with Adam Smith. But states dealing with problems like an over indebted economy and the concentration of economic power have been going on for thousands of years.

    The favoured manner in the ancient world was overnight debt destruction and land reform. Essentially a reset of the economy to favour growth through entrepreneurship and consumption. Such measures led to years and decades of prosperity and growth. The empires of Rome and Athens are the most famous results, but there were many more including Carthage.

    The modern version is wage inflation. But the size of the global debts and the tight concentration of economic and political power make inflation an ineffective remedy as the UK is now finding out. Others wanted to follow the UK's course but now they can't. The US, China, the EU and many others are in at least an equally unsustainable position. Indeed China's deeply negligent infrastructure and property boom is more black hole than black swan.

    Look at your own life. Take the kindle. New technology capable of reducing the cost of reading by +90% has in fact caused the cost to rise by 5x. And all that rise due to IP rights. The same story is writ large across the world economy. The concentration of economic and political power has destroyed the ability of innovative entrepreneurs to change the game. The vast sums going in to Facebook, Groupon etc are indicative of the lack of SME's able to use new tech to innovate because of the dead hand of IP rights.

    I'm both an entrepreneur and trader. Every penny I've put in to business has been a waste. I can make much more trading on the markets. Every holder of capital is in the same position as me. There is good money to be made for SMEs from the application of new tech to create new products but the IP constraints make it unprofitable. And the holders of the IP aren't going to do it because they are vast businesses whose model will be destroyed by the innovations of the SMEs. IP has allowed big firms to stop innovation in it's tracks. Capital has nowhere else to go but gambling on the markets.

    I propose a reset across the world. Every block to growth, to entrepreneurship, removed overnight. To this end, Every debt forgiven in total, and all IP wiped.

    Warren Buffet is a big picture investor and he is buying companies that make things we all need with big debt. Exactly the businesses that will hold value and prosper through and after a reset.

    Fanciful you think. Show me wage inflation in the indebted states and I'll agree.

  • Comment number 65.

    I, too, think defaulting is not just inevitable, but also the only logical course of action. But I don't think we should underestimate the cost of defaulting both to whoever defaults first (it may not yet be Ireland) and everyone else.

    As well as attracting pariah status, it would 1) knock the standard of living in that country back 50 years; 2) cause another wave of realism to hit financial heads all over the world (and we know how sensible and long term thinkers they are :o); 3) cause immense grief and hardship to millions of people.

    The question is - is justice served by letting the current generation, who created this mess, suffer now, rather than postpone the event for our children to enjoy?

    I vote for NOW!

  • Comment number 66.

    @31. At 09:47am on 30th Mar 2011, Averagejoe wrote:

    "
    Missed this on first read;
    "And for the Irish people, there is a second source of possible injustice. The money they've been lent by the IMF and eurozone carries an interest rate of 5.8% on average - which is significantly greater than Ireland's economy and tax revenues can grow right now, and therefore forces Ireland into a potentially never-ending vicious cycle of public spending cuts and low growth."
    This is the key point. The debt will lead to the death spiral of the economy. Austerity will not fix anything. Osbourne and Cameron should take note."

    -------------------------------------------------------------------------------

    So I can not quite fathom this out:

    I have seen other articles that compare the interest rate on government debt to the long term growth rate of GDP, but I would have thought the long term comparison that mattered was the government interest repayments as a % of GDP compared with GDP growth rate. In the UK the gov't interest repayments are currently about 3% of GDP whilst UK growth rates even during the recent squanderous decade have been around 2%. I don't know about Ireland.

  • Comment number 67.

    2. At 12:29pm on 30th Mar 2011, Averagejoe wrote:
    When we gave away the right to issue our own money (tally sticks),
    ====================
    Have you got any more details of these tally sticks please?
    A have a little hobby of wood turning with a lathe in my garage. Afficionados usually refer to most of our efforts as 'decorative firewood' but perhaps we are missing something!

  • Comment number 68.

    "All those losses have fallen on Ireland's citizens, who are not blameless for the mess (they didn't have to borrow too much) but aren't the only ones at fault..."

    ----------------------------------------------------------------------------

    Actually Robert, we did have to borrow so much as citizens (Northern & Southern Ireland alike) because the house prices were rising at an astonishing rate. The banks provided credit to allow people to buy houses, which increased demand, which increased prices, all of which was covered by limitless cheap credit.... and so on and so forth.

    If you wanted to house your family, you had to borrow the money to pay the market price for your home. It was unavoidable to anyone caught in that 3-4 year period prior to 2007/8, myself included.

    For me, the whole thing was fuelled by reckless lending by the banks and now all of the fallout has been transferred somehow from the balance sheets of those private banking companies - who should have been allowed to fail - on the heads of the ordinary population. This has been nothing less than the deliberate, criminal ruin of a proud nation and I wouldn't be at all surprised if/when Ireland defaults, reboots and starts again.


  • Comment number 69.

    37 bcol

    "George Osbourne wants to take advantage of the Irish by overcharging us 440M GBP in interest."

    ...and here we go. The folk who have enjoyed, and bragged endlessly about their massive economic boom are quietly reverting to a safer, more familiar oppression narrative once the wheels come off. All too predictable unfortunately...doubtlessly, trenchant folk songs are being composed as we speak.

    Comments like that tend to reduce any sympathy that I have for the Irish people. They have been messed around on an almighty level by crony financiers for sure but, in the end, it is like a heroin addict blaming his dealer...or the poor farmer who grew the poppies in the first place. Everyone was happy to get their feet well and truly into the trough when things were going well but suddenly get all shrill and defensive when the drinks bill arrives!

    I can take no pleasure in this because the UK would be in a similar position were it not for the fact that someone, much derided at the time, had the prescience to see what the Euro might do when times got tough. Even so, we too are faced with a generation's worth of paying up for a similar orgy of property speculation, private borrowing and debt-fueled State munificence!

    Even more than the Irish public, the British public and wider European publics are in a state of deep denial over what has happened. Here in the UK the political argument has polarised into two coalitions...one that it is actually in government, the other unified by it's collective financial illiteracy. For politicians who, less than a year ago were doing the equivalent of buying the weekly groceries with a credit card, to suggest that the way out of this is "to keep getting further into debt" beggars belief, both in terms of their self-knowledge and the short term memory of the public!

    Clever economists opine about growth and unscrupulous politicians peddle a saccharin-coated story of delayed repayment and deferred pain but, in truth, the "little-boy" of market forces is looking at the emperor of State Keynsianism and wondering why his winkie is showing and shouting "you're stealing from your children to buy clothes that you can't even see!"!

    For Ireland, like Greece, the only escape is a controlled default with the tacit approval of the European Central Bank. They can devalue, deflate and stabilise the economy in the medium term. Loads of pain but at least with light at the end of the tunnel. The alternative is a long drawn out process of European politicians pledging ever larger sums of money that doesn't exist to pour into the abyss, finally bankrupting everyone!

    Us poor Brits will simply have to face up to living in reduced circumstances and finally have a sensible debate about what we really want to spend the money we actually have on.

  • Comment number 70.

    43. At 10:33am on 30th Mar 2011, corum-populo-2010 wrote:
    Robert, this piece was particularly tangled with 'facts' and 'conjecture' that confused silly me?

    No mention either of the money lent this year by UK Chancellor to ROI and Portugal.

    --------------------------------------------------------------------------------

    GO said that the £3.2bn was for Ireland only. Any UK contribution to the IMF is another matter. £3.2 bn seems like small beer in this context.

    #54 "Why is the UK governmemnt allowing Sanatander to buy up so much (RBS branches next) when Spain is teetering on the brink?"

    Far be it from me to defend a bank, but Santander seems to have run its business the way 'our' banks ought to have. It has substantial global operations way, way beyond the distressed Brits in the Spanish Costa(lot more than they are worth)s and doesn't appear to be mired in failed mortgages. Fishy, I know.. How on earth can those Spanish have done better than us?

  • Comment number 71.

    If the UK housing market dropped 50% in 2 years , our bail out to the banks would be far greater than Ireland.

    John from Hendon and other posts ,repeatedly states this should happen. But the bottom line is the loss of value will pass immediately to the UK tax payer in terms of bank bailout or interest to third party loans ie IMF.

    This is going to take a decade to resolve (We are in year 3)

  • Comment number 72.

    64. At 12:37pm on 30th Mar 2011, sizzler wrote:
    ======================

    Sizzler, you make some very interesting points about the role of IP, a role that is vastly underestimated in the current crisis of capitalism. I can see no easy way out.

    Any removal of IP protection allows the large corporations to basically out-muscle any small producers by economies of scale etc, so in theory IP law should protect the SME or the garden shed inventor. However increasingly it seems that IP is being harvested and often buried by the large multinationals in the name of profit. This is socially useless. Moreover the only way that innovation can take place is within the corporate system and is subject to the whims of corporate management.

    Likewise any small entrepreneur / garden shed inventor, no longer able to borrow funds, needs to give a greater share of equity away in order to raise funds thus reducing the "profit motive" for non-corporate entrepreneurship. You are right to say that it makes speculation on markets to be the more viable option.

    To me this is another symptom that state-corporate capitalism has run its course and reached the buffers - alongside over indebtedness, greater inequality, higher costs of litigation, costs of insurance etc.

  • Comment number 73.

    64. At 12:37pm on 30th Mar 2011, sizzler wrote:

    It started out promising but i cant agree with your views in IP. And i dont think you really agree either. You make an argument to increase the number of entrepreneurs and people starting up new SME's in order to encourage innovation and invention but without the ability to secure an idea people will not do this. Why would an entrepreneur invent a new piece of technology when a large company could then take that idea and use it for themselves and at the same time price the original creator out of any profits. IP laws are there to protect the SME's not to damage them.

    It gives people the safety of the knowledge that they will be able to prosper from their ideas and innovations and this should be encouraged. You state that "The vast sums going in to Facebook, Groupon etc are indicative of the lack of SME's able to use new tech to innovate because of the dead hand of IP rights." i would argue the exact opposite, all of those companies are new and exciting, come from simple idea which the creators have then gone on to perfect. you have to remember that none of the above were "originals" in their respective sectors. they are in fact where the creators have found a way of "innovating" and improving on previous ideas.

    Personally i believe that IP laws are the most important for encouraging innovation and invention but then again thats just my opinion.

  • Comment number 74.

    Robert,

    All sane rational observers know that too much money has been created and gambled on exponentially rising house prices - and not only in Ireland! (We are in a far worse position!)

    What is puzzling is how often commentators thing that it comes as a surprise! Why are you surprised? Why is anyone surprised? We (collectively) must be just plain daft, incapable of arithmetic reasoning and without the ability to see any historic parallels. (c.f the 1870 Long Depression, the importance of debt deflation to re-establishing more benign economic conditions in the 1930s and Japan over the last two decades.)

    The reason you are surprised is that the market has not taken on board the altered conditions and it unable to free itself from the idea that asset price inflation is a good thing. But it must do so before the World can recover!

    PS the price on money must also recover to long term levels BEFORE we can get recovery at all!

  • Comment number 75.

    There is an excellent (very long) article here http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103?currentPage=all

    Vanity Fair is a strange combination of fashion and news. I started reading in the doctor's waiting room; I have just bought a subscription (pity I can't get a prescription).

  • Comment number 76.

    RP: 'No financial institution or bank will lend to them. Ireland's banks can't borrow from anyone except the Irish people (who, poor souls, have nowhere much else to put their deposits). But even if they wanted to, Irish households could not possibly put money into the banks fast enough to allow those banks to repay all the institutions - such as German banks - which lent far too much to Ireland's banks in the boom years.'
    --------------------------------------------------------------------------------
    I was musing on the traditional raison d'etre for the EU yesterday (as one does while standing at the sink doing the washing up) and thinking how every good reason trumpeted by the Ted Heaths and Dennis McShanes of this world has gorn dahn the plug'ole ...

    We can also now add one they hadn't thought of: a lack of financial rigour and propriety.

    Someone else was musing yesterday on the possibility that the youth of north Africa, Middle East and .. perhaps .. Europe (especially Britain and Ireland) will now settle for nothing less than overturning old orders.

    The EU is an old mans' invention and club and it costs. It costs everyone in the long run, even those populations that have benefitted from EU grants and largesse thanks to a certain degree of slackness if not total mismanagement from those in charge.

    I am currently not desperate to see Britain out of the EU as I see our current position as advantageous: in the EU but not part of the Eurozone. On the edge of the group while being inside it. I would not want to join the Euro and would oppose any move to do so. That might get me to the point of wanting to leave. But no hurries, no worries. I'm younger than the old men whose club it is but after they are gone from this life, I will be not far behind, possibly ahead of some, who knows.

    But putting myself in the shoes of 15 year olds, 18 year olds, 23 year olds, and I'm thinking of a future where debt is hanging around my shoulders as soon as I start work.

    Do I really want the additional weight of tax that is required to run an 'old mans club' added to my burden?

  • Comment number 77.

    so the Irish banks have lost a staggering amount of money.
    I cant help wondering though who has it ?
    it wasnt lost it was given out and they didnt get it back.
    Is it me or am I missing something ?
    there has to be all that money somewhere.
    Anyone seen it ? should be obvious as its quite a pile

  • Comment number 78.

    Robert,

    "The unbelievable truth" should more aptly be described as the inevitable next stage.

    Ireland will default the moment the German citizens refuse to pay the ever rising interest payments. For that matter Greece will go the same way, probably even sooner. Once the chips start falling -

    History and Religious dectrine provide very clear warnings against credit booms that cause asset price manias. Once the inevitable crash occurs many will be forced to live in the wilderness physically or metaphorically; which is extremely harsh. There are only 2 cures to credit bubbles. History demonstrates that depressions have a 100% cure rate. Religion describes miracles. Starving Israelites receving manna from heaven each night in the desert and the like.

    Start praying or planning.

  • Comment number 79.

    The sad truth is that had they let the wayward banks go bust (as capitalism demands) at the very beginning and used a fraction of this money to protect the savings & deposits of citizens, then the Ireland would still be very much in the game.

    They should have let those banks, shareholders & creditors go BUST and waved cheerio to their bloated fatcat city bankers.

    Now, thanks the government (who all have a personal vested interest in keeping the whole sorry system afloat, at any cost) Ireland is a veritable basket case.

    Unfortunately, we in the UK have similar politicians.

    It's time to default.

  • Comment number 80.

    • 21. At 09:05am on 30th Mar 2011, Averagejoe wrote:
    “Go and buy silver and gold folks, before its too late. They may seem dear now, but its only going to go up.”


    BUY PHYSICAL SILVER AND GOLD – otherwise when Crisis II (this time it’s really gonna hurt) strikes the powers that be won't give it you. If they say ‘you ain’t having it’ what you gonna do?

  • Comment number 81.

    @GG
    'The Irish should take a leaf out of the American's book and keep telling the world that everything is looking great even though they (the US) are in far worse trouble than the Irish'
    The huge difference is that the US continues to print their way through this economic malaise! The Irish cannot.

  • Comment number 82.

    Post #65

    You are correct. The only sensible course of action left for Ireland is to default. But the fear of becoming a "pariah state" is the only thing stopping this.

    All I would say to this is "How many other countries are in exactly the same situation? Greece, Portugal, Italy, UK, Spain, USA - They all would like to default but they can't all be pariahs."

    It's amazing the risks investors will take (even investing in a so-caled "pariah state") if they think they can make a fast buck.

    Just look at how well Iceland is now doing.

  • Comment number 83.

    With a stroke of a pen my country is now staring into the abyss ,were looking down the gun barrell of state insolvency... the bank guarantee signed whilst under extreme duress and the least worst option at that time has proved utterly catastrophic .. Lenihan and cowan are "the hands that signed the paper" .Theres Dylan Thomas poem that really resonates with this whole thing and sums up this hideous situation ....

    Dylan Thomas - The Hand That Signed The Paper

    The hand that signed the paper felled a city; Five sovereign fingers taxed the breath, Doubled the globe of dead and halved a country; These five kings did a king to death.

    The mighty hand leads to a sloping shoulder, The finger joints are cramped with chalk; A goose's quill has put an end to murder That put an end to talk.

    The hand that signed the treaty bred a fever, And famine grew, and locusts came; Great is the hand the holds dominion over Man by a scribbled name.

    The five kings count the dead but do not soften The crusted wound nor pat the brow; A hand rules pity as a hand rules heaven; Hands have no tears to flow.

  • Comment number 84.

    67. At 12:56pm on 30th Mar 2011, AnotherEngineer wrote:
    2. At 12:29pm on 30th Mar 2011, Averagejoe wrote:
    When we gave away the right to issue our own money (tally sticks),
    ====================
    Have you got any more details of these tally sticks please?
    A have a little hobby of wood turning with a lathe in my garage. Afficionados usually refer to most of our efforts as 'decorative firewood' but perhaps we are missing something!

    ....
    sure. 67. At 12:56pm on 30th Mar 2011, AnotherEngineer wrote:
    2. At 12:29pm on 30th Mar 2011, Averagejoe wrote:
    When we gave away the right to issue our own money (tally sticks),
    ====================
    Have you got any more details of these tally sticks please?
    A have a little hobby of wood turning with a lathe in my garage. Afficionados usually refer to most of our efforts as 'decorative firewood' but perhaps we are missing something!
    ....
    Sure. 67. At 12:56pm on 30th Mar 2011, AnotherEngineer wrote:
    2. At 12:29pm on 30th Mar 2011, Averagejoe wrote:
    When we gave away the right to issue our own money (tally sticks),
    ====================
    Have you got any more details of these tally sticks please?
    A have a little hobby of wood turning with a lathe in my garage. Afficionados usually refer to most of our efforts as 'decorative firewood' but perhaps we are missing something!


    Sure. See http://www.xat.org/xat/moneyhistory.html


  • Comment number 85.

    An article about the Irish banking crisis, without even mentioning the hedgefunds and speculators, who circle like vultures over Irish and other European periphery debt. They are ready to pounce as soon as Ireland defaults. In oder to cash in on their Credit Default Swaps, which bet on a Euro periphery default.

    That is why nobody wants to restructure the debt. It is simple. If anybody did, the hedgefunds would cream off billions, and that cannot be in anybody's interest.

    There is only one thing for it, Robert.

    Why don't you make that connection clear in your next piece. Clarify for everyone, that there is billions of profits to be made, if the Irish debt was restructured. By greedy hedgefunds and raptious speculators. Who have not even lend any money to Ireland, but just hope and campaign for default. As many of the contributors here have!

    The only solution, of course, is to ban Credit Default Swaps immediately. Every Irish Citizen should demand that first - because then there is a fair chance of getting the debts reduced!

  • Comment number 86.

    #68

    whilst i sympathise, for every reckless lender there is a reckless borrower. i have spent a lot of time in west clare, and saw (literally) hundreds of holiday cottages springing up and being sold for obviously insane prices to people who were equity releasing equally insane first-home valuations and leveraging them up even further. it was absolutely idiotic, and even those not daft enough to participate should have been smart enough to see that what was going on wasn't sustainable. the irish property boom was too good to be true, and we all know what that means.

    an earlier commenter pointed out that rentals in dublin were significantly lower than the interest on mortgages. if that's true, then anyone who bought a property in that boom willingly and knowingly spent far more than they needed, presumably because they believed that the property prices would keep on going up forever. that's not a smart way to think.

    the circumstances of you or any other individual, obviously, work on their own merits.. but when hundreds of thousands of people make bad decisions, they, as a group, bear responsibility. it's all very well blaming banks, but if they had constrained lending then there would have been outrage... even now, at least in the uk, people blame the lack of credit for a sluggish housing market... not the fact that the properties are too bloody expensive in the first place.

  • Comment number 87.

    Simply mind boggling.......T'b sure t'b sure.....In this case instead of walking away tis will be running away as fast as one can, and don't look back! This shuffling of electronic paper work is just that or someone / something is sitting on a dat huge pile of monies................

  • Comment number 88.

    '..orgy of property speculation, private borrowing and debt-fueled State munificence!....'

    '' in truth, the "little-boy" of market forces is looking at the emperor of State Keynsianism ...'

    I see the connection you make between 'State munificence' and 'State Keynsianism'...but what about the other two factors you mentioned? Are not 'speculation' and 'borrowing' not 'the market' at work?

    I can see you think the 'free' market is great... which is (i assume) how you missed the contradiction.

  • Comment number 89.

    re #75
    :-) Smile of the Day.

    re #77
    Good point, Sir! I think we should be given 'Rover' tickets to go look for it. Could be quite a pleasant trip: Caymans, Bahamas, Florida, elsewhere in the US, Canada, Switzerland, south of France ...

  • Comment number 90.

    71. At 13:06pm on 30th Mar 2011, hughesz wrote:

    If the UK housing market dropped 50% in 2 years , our bail out to the banks would be far greater than Ireland.

    --------------------------------------------------------------------------------

    Is this a problem with mark to market being procyclical, in that bubble assets look good/bad on the balance sheets at the wrong time - and thus end up having to be dumped/written off when they should be held?

  • Comment number 91.

    @averageJoe
    'The Irish should take a leaf out of the American's book and keep telling the world that everything is looking great even though they (the US) are in far worse trouble than the Irish.'
    The US are attempting to print their way out of this malaise. The Irish cannot.
    =========
    @burnallmoney
    'Effectively, Portugal has adopted blackmail as an economic strategy – and very effective it is, too. The country is ready to be bailed out of its chronic financial mess, but only on its own terms. Otherwise it has a deadly card to play. It has the option of going bankrupt, an act of naked malice which would set in motion a second round of the banking crisis which began in 2007.'

    Portugese debt is mainly a Spanish problem whilst Irish debt was spread throughout Europe with the Germans holding nearly 30%!
    =========
    @tFoth
    'With respect, if the main bulk of this debt was discretionary, eg credit card borrowing, then this might be right. But I would have though that the vast majority of private debt in Ireland is mortgage borrowing - and people have borrowed so much because of the extraordinary house price bubble.'

    I wonder what the % value is of mortgage debt that relates to money borrowed against the value of the property?
    =========
    @Markofsosh
    'Ireland should apply to become the 51st state of the US. Almost every American you meet boasts of his Irish heritage, including every president since the year dot, so I'm sure they'll be only too willing to take in the 'old country' lock stock and (Guinness) barrel.'

    Better still, get every American who claims Irish heritage to give $100 to the cause and send the whole lot to the ECB. I'd guess that would make a serious reduction in their debt.
    =========
    @happybunny
    'Interesting to see this article a day after US bank bailout programme moved $6bn into profit (and is expected to generate a lot more).'

    Sorry HB you have to be joking. See http://hotair.com/archives/2011/03/17/just-a-reminder-tarp-still-at-least-123-billion-in-red/ and many, many other objective assessments.

  • Comment number 92.

    77. At 13:40pm on 30th Mar 2011, gary cw wrote:
    so the Irish banks have lost a staggering amount of money.
    I cant help wondering though who has it ?
    it wasnt lost it was given out and they didnt get it back.
    Is it me or am I missing something ?
    there has to be all that money somewhere.
    Anyone seen it ? should be obvious as its quite a pile
    ==========================

    It was based on the "paper assets" of Irish residential and development property which have more than halved in value since 2007. The loans used to monetise these assets are owed to various German, UK, US and French banks.

  • Comment number 93.

    52. At 11:26am on 30th Mar 2011, yam yzf wrote:
    27. At 09:21am on 30th Mar 2011, bill40 wrote:

    "UK banks were bailed out to the tune of 850 billions in loans and guarantees."

    Sorry to see you have been taken in by the large numbers bandied about by people trying to be sensationalist.


    Good try at being a bank apologist but my source for the £850 billions is a RP blog, how to spend £850 billion on the banks. In the case of the part nationalised banks we have a tiny fraction of the total cost of the bank bail outs. Every bank was bailed out in one form or another. It will be years befoe the true cost is known.

    Do not fall for accountancy chicanery.

  • Comment number 94.

    Default is inevitable..but whats in a name? ..America is already in default but it's called something else.
    Ireland should lower it's corporation tax to 8% which is the effective rate charged by France to corporations.
    Ireland should consider leaving the Euro now and make it known they are considering
    Ireland should look to it's diaspora for financing who can still make Ireland thrive.
    None of this can happen with current incompetent lawmakers and croneyism and nepotism who need to be made to pay.
    Irish voters need to become part of the solution and not part of the sacm

  • Comment number 95.

    #72 Interesting comments on IP and the likes of Microsoft as you say have generally harvested them or the companies that made them work. The answer is not to drop IP protection safeguards but maybe its to expire them after a certain time limit, say 5 years. This allows smaller businesses to pick them up if they are not scalable enough for corporate businesses.

  • Comment number 96.

    Why are the people responsible for this breathtaking ineptitude still free with bullet proof pensions?

  • Comment number 97.

    @Another Engineer
    "There is an excellent (very long) article here http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103?currentPage=all"

    Michael Lewis article from Vanity Fair. I have read the whole article, before.

    It is entertaining, certainly, but slightly unbelievable. It does not mention Credit Default Swaps.

    There is this guy who writes a whole book about the Financial Crisis in 2008, "The Big Short", and the subject is Credit Default Swaps. Yawn, people might think, but go and get it, it really is good fun - if you want to see how the financial industry manipulates everything and everybody.

    Now, having written a book about it, how likely is it that he does not know that Ireland is being hammered by speculators and hedgefunds which do just that - buy credit default swaps in the hope of being able to cash in on them, when a default happens.

    So -any article - from absolutely any source - which mentions the euro crisis and does not mention Credit Default Swaps is highly suspect.

    More money is bet hoping that Ireland will go down the tube with CDS, than is out there in bonds financing the Irish government debt. 2 to 3 times as much.

    There is only one thing to do, if Ireland really wants to reschedule its debt.

    Get the Credit Default Swaps banned first! So that hedgefunds and speculators do not make a profit out of the misery of others!

    And rescue CDS issueing institutions, as the American taxpayer had to do to pay for CDS betting on Lehman Brothers default!

  • Comment number 98.

    There was an interesting proposal by Ulick McEvaddy in the Irish Independent the other day in which he suggested leaving the Euro and reforming some form of Sterling area .

    ""But let us also remember who our biggest trading partner is. Britain, and we are one of theirs. I'm sure they would be willing to bring us back into the sterling area," he said.

    "We should examine linking back in with sterling if they continue to go after us. The bottom line should be 'treat us properly or we're out of here into the sterling zone'." "

    Default on the current setup, leave the Euro and renogotiate from with Sterling ....

  • Comment number 99.

    For anyone interested there is a pdf download of The Dying of Money. Just Google it

  • Comment number 100.

    The money trail must lead back to somebody. Who? Who are the people who can afford to lend out all these billions and why is it more important that they have their money back with interest.
    Would not a revaluation of debt in line with the devaluation in assets that secured that debt be the most equitable way forward for all our children? Perhaps that would mean that some debt was was written off but lending caused the assets to rise in value in the first place so the lenders must share their responsibility.

 

Page 1 of 4

BBC iD

Sign in

BBC navigation

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.