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Make or break for Ireland finances

Robert Peston | 09:16 UK time, Thursday, 30 September 2010

It is make or break for Ireland's public finances.

Brian Lenihan

The Irish Finance Minister, Brian Lenihan, has announced what he hopes will be a comprehensive and final rescue scheme for Ireland's banks, whose reckless lending has mortgaged the entire Irish economy.

The most reckless of the lenders, Anglo Irish, is to receive a further €6.4bn (£5.5bn) of state aid. An additional €2.7bn (£2.3bn) goes into Irish Nationwide.

And the National Pension Reserve Fund is to inject up to €7.2bn (£6.2bn) into Ireland's second biggest bank, Allied Irish Banks - which will in effect be nationalised, with the state fund likely to hold more than 80% of its shares.

The cost of the rescue to Irish taxpayers, including earlier measures, lifts the deficit in Ireland's pubic finances from a painful 12% of GDP to a staggering 32%.

Anglo Irish on its own is receiving just under €30bn (£25bn) of equity investment from the Irish taxpayer.

For what it's worth, the Irish taxpayer could get up to €2.4bn (£2.1bn) from subordinated debt holders in Anglo: Mr Lenihan has said that since these investors provided capital that was supposed to be at risk, they should shoulder some of the pain. That said, converting their debt into equity will not be a speedy process.

Mr Lenihan has also reaffirmed what he said to me on Friday that he believes it would be lethal for the Irish economy to force losses on any other creditors of Ireland's banks, even if they are sophisticated banks and professional investors who should have known better than to finance Irish banks' lethal lending spree.

If you add together all the capital provided to Ireland's banks by various arms of the state, taxpayer support to those banks in the form of capital injections is around 30% of GDP.

That would compare with around 6% of GDP in the UK for the equity injected into Royal Bank of Scotland, Lloyds and Northern Rock.

In Ireland, some would also include in the cost of the rescue the further 25% of GDP that is being provided to the banks in form of state-backed bonds, as payment for the toxic loans they've transferred to the banking rescue fund, the National Asset Management Agency.

In other words, more than half of Irish GDP has been devoted to keeping its banks afloat.

That said, NAMA is acquiring these loans at a substantial discount to face value - and NAMA's chairman, Frank Daly, told me that over 10 years he would expect NAMA to make a profit when it finally secures whatever repayments it can from the property developers and speculators who borrowed colossal sums from the likes of Anglo Irish and Allied Irish.

And what a discount! NAMA is paying just 33 cents in the euro to Anglo Irish for the remaining tranche of €19bn (£16bn) in dodgy loans it is taking from the bank. Which implies that the quality of these loans is hideously poor.

The big question for the banks and overseas investors which have lent more than a trillion euros to Ireland's banks, businesses, households and the government is whether the banks' losses will now stabilise.

Mr Lenihan is attempting to reassure them that cataclysm can be avoided by taking further steps in December's budget to cut public spending and thus the deficit. He has reaffirmed his commitment to reduce the deficit to 3% of GDP by 2014.

He feels this is necessary because of the speed with which Ireland's public-sector debt has risen from one of the lowest in the eurozone as a percentage of GDP to 98.6 of GDP (or 70.4% deducting cash and investments). Mr Lenihan says his objective is to stabilise the national debt in relation to GDP by 2012/13.

But some investors will be concerned that with the Irish economy showing a small contraction in the second quarter of the year - following the acutely painful recession of the previous two years when Irish output shrank by around 14% - Ireland is on the brink of a vicious cycle of a public spending squeeze, which undermines economic activity, generates further losses for banks, reduces tax revenues and pushes up the national debt even further.

So it's just as well, perhaps, that the Irish government has already borrowed enough from investors this year to finance itself until the middle of next year.

The finance minister hopes (and probably prays) that by the time the government has to borrow again, early in the new year, the state's creditors will be confident that Ireland banks and the nation's finances are on the mend.

Comments

Page 1 of 3

  • Comment number 1.

    Walk away from your debts Ireland and return to the beloved punt.
    make sure you print your own money this time though.
    Alternatively join us with Sterling. We are about to reclaim it the adultering private banks. You are welcome.

  • Comment number 2.

    "Mr Lenihan has also reaffirmed what he said to me on Friday that he believes it would be lethal for the Irish economy to force losses on any other creditors of Ireland's banks, even if they are sophisticated banks and professional investors who should have known better than to finance Irish banks' lethal lending spree."

    Where can I invest in something where I won't be forced to take a loss? Form a queue behind me please.

  • Comment number 3.

    G20 governments came together 2 years ago to carry out the biggest rescue operation ever carried out in the history of finance. Whilst seeming to defy the laws of common sense the rescue succeeded in preventing economic armagedon.

    A great many stunned bystanders have watched events unfolding during the period in question and have been flabergasted again and again and again. They have been scared witless by the scale of the financial losses, the childlike ignorance of policy makers and regulators, the arrogance of bond and derivative traders and the frailty of big states when their backs were against the wall.

    But, inspite of it all it did start to seem for a while as though the rescue might just work. That we might just go back to the days of fullish employment and earning twenty times the wages of our developing world counterparts for doing the same jobs as they.

    Well the lid is coming off th pressure cooler again!

    Is the situation fixable again?

    Will anyone be willing now to bet in favour of the PIIGS and by association Britain, Germany, France and The USA?

  • Comment number 4.

    It really does make your eyes water to read these numbers.

    I will take my hat off to Lenihan if he manages to pull off what he is trying to do. I hope he is right in thinking this will allow Ireland to see the bottom of the crisis as it is very difficult to do any sort of business there at the moment except with the faithful.

    If it does allow Ireland to touch bottom then it might represent an ideal type solution for our difficulties on this side of the water. Take the pain to get the gain.

  • Comment number 5.

    Answering my own question...I think the US housing market was like that. Negative equity? Don't worry, just give us the keys back.

    Maybe Morpheus has the right idea.

  • Comment number 6.

    Mr Lenihan sounds like a very honest and down to earth person. However even he is living in denial of the near inevitable downward spiral into which his government's policies are thrusting the Irish economy. Although there are clearly factors special to the Irish situation we should be grateful for the Irish to test in extremis the policy about to be implemented by the dynamic cleggmeron duo. People in Latvia dont seem too happy either. Perhaps there ought to be a warts and all review of what is really lurking in our own banks loan books!

    The behaviour of the Irish banks is nothing short of criminal and in future this behaviour should be made a crime everywhere.

  • Comment number 7.

    The 30 billion euros Anglo Irish is recieving from the taxpayers of Ireland equates to 6779 euros for every man, woman and child in the country. At what point do they say enough is enough?

  • Comment number 8.

    "That said, NAMA is acquiring these loans at a substantial discount to face value - and NAMA's chairman, Frank Daly, told me that over 10 years he would expect NAMA to make a profit when it finally secures whatever repayments it can from the property developers and speculators who borrowed colossal sums from the likes of Anglo Irish and Allied Irish."


    mmmm- now where have I heard that one before.....?

    "And what a discount! NAMA is paying just 33 cents in the euro to Anglo Irish for the remaining tranche of €19bn (£16bn) in dodgy loans it is taking from the bank. Which implies that the quality of these loans is hideously poor."

    Yes - a true bargain - sign me up for 20 Robert! - oh wait a minute....second hand bank loans are not flavour of the month at the moment, I mean everyone is flogging them - not really much of a market for it these days Robert.

    "Ireland is on the brink of a vicious cycle of a public spending squeeze, which undermines economic activity, generates further losses for banks, reduces tax revenues and pushes up the national debt even further."

    Sssshhhhh - don't tell the coalition - it will ruin their plans...

    "The finance minister hopes (and probably prays) that by the time the government has to borrow again, early in the new year, the state's creditors will be confident that Ireland banks and the nation's finances are on the mend."

    If's, but's maybe's, hopes and dreams - not really a great way to run an economy now is it?
    So how will Ireland recover....not wait...let me guess.....an export led recovery with their strong Euro pumped up by German industry and boosted by a liquidised dollar?

    ...or maybe they'll just start another housing bubble - I mean it workd before didn't it?

    I said Ireland would go bust about a year ago - so why don't the banking apologists dig that one out? - or are they still claiming this won't end in default?...like Greece won't......and Portugal.....and lets see how Spain is getting on shall we?

    http://www.bbc.co.uk/news/business-11442190

    Triple A rating in the bin - we will be next? The oligarths will only accept the promises of boy Osbourne for so long - they will be impatient for blood.
    ....and we're impatient to give it to them....

    http://www.bbc.co.uk/news/world-europe-11433083

  • Comment number 9.

    Since when were investments given a 100% guarantee?

    The sad thing about this isn't the worries of investors who don't understand the small print, this is going to affect so many people - it will inflict nothing but misery for ordinary people.

    Their economic security is under threat and that is a failure of government.

  • Comment number 10.

    But some investors will be concerned that with the Irish economy showing a small contraction in the second quarter of the year - following the acutely painful recession of the previous two years when Irish output shrank by around 14% - Ireland is on the brink of a vicious cycle of a public spending squeeze, which undermines economic activity, generates further losses for banks, reduces tax revenues and pushes up the national debt even further.

    Boy George, are you paying attention? Mind and take responsibility for your decisions...

  • Comment number 11.

    It's difficult to see this ending well

    Let's hope that the Irish can pull this round...partly because they owe UK banks a lot of money, but mostly because ordinary people are losing their shirts over a mess caused by banks. We, by contrast, are in a mess precipitated by the banks but made catastrophically worse by the previous administration spending money like a sailor on a night ashore.

  • Comment number 12.

    Serious question Bobby P, who cares about Ireland other than the Irish? The Irish and Greek economies are tiny (with Ireland's main export being Going For Gold).

    These tiny countries cannot survive on their own, they aren't fit to govern themselves so let's grasp the nettle and have one government for all of Europe (except the UK which isn't really in Europe and Switzerland).

  • Comment number 13.

    Talk about hoping for the best! The idea that saddling the taxpayer with bank debt whilst simultaneously shielding other lenders from the same debt and then cutting the deficit that this causes by increasing taxes or reducing the wages of that same taxpayer and then hoping that things will change for the better by the middle of the next year is nuts.
    How can it? Only two options left, either default or go for the nuclear option and start heating up the printing presses. Man is it going to get ugly.

  • Comment number 14.

    "Ireland is on the brink of a vicious cycle of a public spending squeeze, which undermines economic activity, generates further losses for banks, reduces tax revenues and pushes up the national debt even further."

    And none of it a surprise.

  • Comment number 15.

    So the Irish Government has made additional cuts in public services in their last budget of £4 Bn on top of the previous cuts and plan to do yet another round of cuts soon - and Brian Lenihan has just laid out nearly £15Bn in bank bail outs - not a very good deal, I'd say - the 13% fall in GDP, the rise in Eire's PSBR and the 35% fall in house prices are quite frankly disasterous - the rapid and deep cut in Irish spending will have cost the Irish more money than it saved.

    The root cause of this mess was deregulation of the banking system - pure and simple. Eire is close to getting into the debt liquidity trap - they cut spending, but in doing so drive down their GDP and property prices so hard that the economy contracts, reducing tax income whilst forcing the government to prop up the banking system - which in turn increases borrowing - then the whole cycle repeats itself.

    Is there anything fundamentally different about the UK economy? Probably not - we have indebted banks, excessive property prices, high levels of personal debt, dependency on exports and a large public sector debt.

    The only think that is really different is SIZE - the UK economy is much bigger - and the level of mortgage borrowing is much higher.

    This morning on the BBC a pundit warned that at the worst end forecast sentiment is for a 20% fall in house prices over the next 12 months - I'd guess that this would come close to triggering another UK banking crisis next year, as negative equity really bites, repossessions rise and the loss of £1 Tn of aggregate demand drives us back into recession.

    The Irish government has used the public sector pension fund to prop up their biggest bank - I doubt any such option exists in the UK's public sector pension system.

    Does Robert feel able to ask the OBR, BoE, MPC, IMF, OECD, CBI etc why they all have such a rosy forecast for the UK economy and whether they see any lessons for the UK in the Irish experience?

    I see 1.2m public sector jobs going in weeks, 500,000 building jobs following rapidly, plus a cull in retailing - and the rest - taking the Irish stats and projecting them to the UK, that would leave us with 5M unemployed at the end of next year - add in another banking crisis - we'd be at the meltdown point if that happened...

    Our AAA credit rating would have evaporated, there would be a run on the pound and we'd have to default on our sovereign debt. Virtually all the banks would have to be nationalised.

    This is a BIG risk we're about to take in the public spending cuts - why aren't the major analysts flagging this up at all?

  • Comment number 16.

    Quick interesting fact 1

    NAMA's portfolio in Northern Ireland was valued at over 4 billion early this year. Last night their spokesman in Northern Ireland valued it at 3 billion. Also its shape had changed dramatically re property V's land V's developments.

  • Comment number 17.


    We are all (including Europe) are about to face a SNOWBALL AFFECT , which none can avoid. Selling debt to

    to the Bond Market is about to slowly come to a halt. Then it will a case of ,THE DEVIL TAKE THE HINDMOST.

    I think it's time to crawl under the nearest LARGE rock!!!! Don't you?

  • Comment number 18.

    I just can't see it myself - for the situation to look like it's on the mend enough early in the new year in time for their borrowing requirement to be fulfillable.

    Does that imply that Ireland have to wait little over a quarter to find out if their credit tap will be turned off or not and possibly face national bankruptcy if it is?

    Where is the line drawn and what are people expecting which will make events turn for the better? As RP mentions, the "acutely painful recession" has really been just that...acute, a short course of only 2 years. If Ireland have EUR 3 trillion extended to them and are still in trouble with only a few months to wait before their fate is decided (until the next borrowing period) and with little on the horizon aside from hope, surely this is evidence if needed that such a global meltdown can't be over and in reality has only recently begun.



  • Comment number 19.

    Surely a large, or even the main, cause of Ireland's woes has been its Euro membership. The country had far too low interest rates for many years and now it cannot really come out of the single currency as the resulting loss of confidence would be catastrophic and surely send interest rates still higher on the now large public debt. It thus seems a near perfect economic trap. The same goes for Greece, Spain... With hindsight (and some may say foresight) Euro membership has taken the usual historical swings in these economies and massively amplified them with resulting chaos to the nation's stability.

  • Comment number 20.

    So, once again the risk takers are bailed out by the taxpayers in Ireland. NAMA pays 33 cents in the Euro on 19 billion euro's worth of loans- That means the banks LOST 67 cents on the euro on 19 billion.

    So much for having to pay 'top dollar' for the best to run these organisations.

    Roberts comment that:

    So it's just as well, perhaps, that the Irish government has already borrowed enough from investors this year to finance itself until the middle of next year.
    ----------------------------------------------------------------------

    I wonder if any of those investors are getting worried yet? Suppose not, as at the end of the day the taxpayer will take the hit,pass the parcel,
    I hope Lindsay from Hendon keeps the music playing, do cow bells qualify as music?
    Now that L from H has come out and declared his commitment to Vasilev where are we to turn.At least while there hope he was female there was an excuse for the previous posts. Now we know he is indeed male even that 'thin' excuse no longer applies. (it,s alright guys Mrs Creditunionhero dosn't read any of this rubbish) but I am a bit worried about her 'working' nights in Hendon for the last few weeks.
    If Vasilev has seen a classy looking bird from oop north standing under a lampost wearing a Man City shirt I realy will start to worry, about the shirt of course, I need it for Sundays game.

  • Comment number 21.

    sorry, EUR 1 Trillion. Fat finger.

  • Comment number 22.

  • Comment number 23.

    #8. writingsonthewall wrote:

    "they will be impatient for blood.
    ....and we're impatient to give it to them...."

    As a matter of interest, who is "we"?

    Have you been elected to represent someone? As what? Why hasn't it been reported in all the media? (perhaps it was but I'd nodded off...)

  • Comment number 24.

    #3. iceland_express wrote:

    A great many stunned bystanders have watched events unfolding during the period in question and have been flabergasted again and again and again. They have been scared witless by the scale of the financial losses, the childlike ignorance of policy makers and regulators, the arrogance of bond and derivative traders and the frailty of big states when their backs were against the wall.

    You're absolutely correct, of course. But Lenihan is right - no matter what the cost of keeping the banking sector afloat, and no matter how reluctantly we may do so, there is simply no alternative because to allow a major banking group to collapse would risk bringing the entire economy down with it. Which, of course, may still happen anyway. Ireland, as part of the eurozone, has very limited options, and it is almost unthinkable that they would choose to leave the single currency. These are interesting times.

  • Comment number 25.

    God this makes depressing reading. Its like looking into a wormhole and seeing our future in the UK.

  • Comment number 26.

    Referring to comparisons of the UK to Ireland there are some similarities but these are few. It reduces to confidence of investors in the overall state of the economy and their view of the future potential of the economy. Although the UK has its own curency, interest rates have managed to stay low. However, even with Irelsnd in the Euro its interest rates on debt have become high. Whatever else one may surmise, this is telling us that the UK is viewed as a much safer long term bet than Ireland and with considerably more likelihood of a solid recovery. The logic of debt reduction is to maintain this confidence, as losing it would almost certainly create a much bigger set of issues for the economy. Thus, transferring the Irish nightmare scenario to the UK is a highly unlikely outcome.

  • Comment number 27.

    This guy, for me, is rapidly turning into the Chomsky of macro-economics. If it's a slow day at work, check out his blog. Today he explains what a sovereign government actually means.

    http://bilbo.economicoutlook.net/blog/

  • Comment number 28.

    #12. Lindsay_from_Hendon wrote:

    "These tiny countries cannot survive on their own, they aren't fit to govern themselves so let's grasp the nettle and have one government for all of Europe (except the UK which isn't really in Europe and Switzerland)".

    Wasn't there a chappie not long ago who had the same idea? Name of Adolf Hitler, I think it was. But he came to a bad end.

    Then before him there was that Corsican fella Napoleone Buonaparte. So did he.

    Doesn't seem like an awfully good plan...

  • Comment number 29.

    7. At 10:13am on 30 Sep 2010, Absurdity101 wrote:

    The 30 billion euros Anglo Irish is recieving from the taxpayers of Ireland equates to 6779 euros for every man, woman and child in the country. At what point do they say enough is enough?


    Considering the average salary in Ireland isn't great I'd say they're pushing the line already.

  • Comment number 30.

    Robert,

    Once again we are faced with another Eurozone country that has gone on a spending spree that it cannot afford. No wonder the grandees of the Euro in Brussels are having to hold crisis meeting after crisis meeting simply to hold the single-currency together.

    This is incompentance on an un-precedented scale!

    I wish the Irish luck with fixing their economy.

    However, what really wants fixing are the jokers in Brussels who think that they can manage a single-currency!

  • Comment number 31.

    I was working on six Anglo Irish funded projects when the Northern Rock went down.

    None of the projects were recklessly funded, all were viable and all were based on the end value of property being consistent with the market value at the point of inception.

    The Anglo Irish Bank was simply following the uncontrolled fractional reserve banking model in the way it operated. Which is of course the main problem.

    Under normal circumstances being a private corporation it would have failed, and should have failed to.

    I think that the Irish, along with many more people will rue the day they didn’t put these banks into ‘pre-packaged insolvency’.

  • Comment number 32.

    Yes, very scary times for Eire.

    But shuffling debt around from one party to another is a bit of self-deception isn't it......

    The various guarantees, transfers, state-backing etc etc can't really hide from the essential business of debt.... you borrow a sum of money now and have the benefits of this in the present, by effectively undertaking to forgo some of the fruits of your future labour. It could be quite reasonably compared to making a promise to work overtime in future, but not get paid for it.

    Except that here it is a whole country that is involved, and the 'interest payments' are higher taxes than necessary.

    Will the ordinary people of Ireland (and every other significantly indebted country for that matter) stand for this?

  • Comment number 33.

    #13. geofffromleeds wrote:

    "Only two options left, either default or go for the nuclear option and start heating up the printing presses".

    But they're in the Eurozone, so they can't do either. The two options are:- get out, or apply for all necessary assistance from the ECB/IMF, like Greece, and hope that that's enough.

  • Comment number 34.

    Time then for Ireland to hunker down and adopt a war-time mentality. They won't know much about that though having been neutral in the last war we were entitled to fight (WW11).
    We in the West need to start producing real benefits rather than just pen pushing. No sense in paying ourselves over the odds for illusory production, or just laying people off to increase the unemployment. By hook we have to increase GDP - the banks have already done the crook.
    Radical provisions are needed.
    First, stop the fripperies, we can't afford them ie wind power, solar energy, electric cars etc. (Sorry Greens)
    Come out of the euro and print money to encourage inflation.
    Halve all wages, declare bonuses illegal, and balance this by taxing investment income at 90% with a withdrawal tax of 30% for money being taken out of Ireland.
    Produce your own food rather than importing. Imports will be too expensive anyway.
    Give it 3 years and when the world sees the GDP rapidly improving they'll soon want to invest again in a vibrant economy.
    Sounds like communism though, so I hope Lenihan succeeds.

  • Comment number 35.

    The bankers are waging war on the Irish and British people using weapons of massive debt. It's no use putting it off any longer - we need to ensure their total and unconditional surrender; only total defeat will be sufficient to tame these barbarians.

  • Comment number 36.

    what to do when your in a hole? yep we all know the answer to that one, its a shame that policy makers seem to have had a commons sense bypass, for once it seems the general populus have a better grasp of the situation than the political classes.

    Ireland really is in a terrible spot of bother and i fear it is completely doomed, still it is a very pretty country and i'm sure the irish will make the best of it while the country crumbles.

    I have my eye on a nice little place on the dingle peninsula, might open up a little bed and breakfast, i should be able to pick it up for about £5 next year, happy days!

    Why is it that government seem hell bent of destroying the prosperity and living standards of their citizens just to protect a few big investors? is it because those politicians are in the pockets of the investors and their parties are funded by them? hmmmm

    The closer you look the more absurd it all becomes, democracy doesn't seem to work very well these days.

  • Comment number 37.

    Prepare for economic Shock Therapy, as inflicted on Russia and descibed by the BBC's Adam Curtis

    http://www.youtube.com/watch?v=ufGpH8fEEvI

    He is still to be found on the BBC, but in a far corner where he won't get in the way of business

    http://www.bbc.co.uk/blogs/adamcurtis/



  • Comment number 38.

    15. At 10:30am on 30 Sep 2010, richard bunning wrote:

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

    Well said.

    Although I wouldn't be considered a major analyst (as I don't work for GS), I have been pushing this scenario for 3 years. My last employer never gave it a second thought and my current one is quite happy with its head being in the sand. One of the problems is, no one is interested in protecting the franchise and company (and its customers) as ultimately everyone represents their own interests. When the cookie crumbles, the decision makers would have enough stored away to have a happy retirement, whilst the poor customers and wider economy suffer.

    I mean, why rock the boat whilst you are in it? Or as my cousins from south LA would say "Rock it till the wheels fall off".

    The pleasing thing is, we are no longer a minority. If you see where Gold is at the moment, it has tracked the major indexes over the last year. Historically buying Gold was like shorting the S&P as they were inversely correlated. The tandem movement of Gold and stocks shows that there is a large number of people who are taking this scenario very seriously.

  • Comment number 39.

  • Comment number 40.

    "That would compare with around 6% of GDP in the UK for the equity injected into Royal Bank of Scotland, Lloyds and Northern Rock."

    We may be brown - but not as brown as you.

    I love it when a bad situation is justified by pointing out that others are in a worse position...as if somehow it makes it better.

    Well lets see what the government contribution to those banks are after Ireland and Greece default (for starters) - I fear this may continue for some time.

    Who said this interconnected globalized market driven world was stable? - I hope nobody put that guy in charge of anything important!

    The Irish have worked out this morning (judging by the national radio station) that they have in fact got a worse deal than Greece - basically by trying to do 'the right thing', not calling in the IMF and trying to impose unpopular austerity measures - oh the dilemna....

    No wonder they're driving cement trucks into Parliament - the capitalists and the politicians may be living in La La land - but the people have now sussed this little game is up. The politicans have misled them (again) and the capitalists are now trheatening to withdraw their 'invisible hand' of assistance as a form of punishment....well for doing the 'right' thing - truly a spaghetti bolognaise of a moral dilemna.

    Does anyone know how much it costs to hire a cement truck?

  • Comment number 41.

    RP wrote:

    That said, NAMA is acquiring these loans at a substantial discount to face value - and NAMA's chairman, Frank Daly, told me that over 10 years he would expect NAMA to make a profit when it finally secures whatever repayments it can from the property developers and speculators who borrowed colossal sums from the likes of Anglo Irish and Allied Irish.

    And what a discount! NAMA is paying just 33 cents in the euro to Anglo Irish for the remaining tranche of €19bn (£16bn) in dodgy loans it is taking from the bank. Which implies that the quality of these loans is hideously poor.

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

    Come on Robert, surely you're not buying that, because I sure ain't!

    It's very misleading and I'll explain why.

    Allied Irish Banks offers loans and values them at par. Economic enviroment sours and loans are written down. Balance sheet now shows a gaping big whole, Irish Govt becomes majority shareholder in Allied Irish Banks and sells loans at a deep discount to NAMA. NAMA predicts a profitable return on these loans.

    Where is the net profit for the Irish taxpayer? The Govt pays for the writedown whilst NAMA shows a profit. I am willing to bet that the writedown cost the taxpayer more than the profit NAMA will book.

    Don't let them run rings round you Robert, you're made of sterner stuff.

  • Comment number 42.

    11. At 10:19am on 30 Sep 2010, Anglophone wrote:

    "We, by contrast, are in a mess precipitated by the banks but made catastrophically worse by the previous administration spending money like a sailor on a night ashore."

    ...and the administration before that....
    ....and the one before that....
    ......and the one before that......

    ....how far shall I go back for you? It's no good simply 'blaming the last guy' - that's a London Mayor trick - eventually you have to realise that the problems are always there but successive administrations simply cover them up (some better than others) - and failure to address the root cause (and no, it's deeper than simply cutting spending) by every administration is at fault.

    Public spending was less than 40% of GDP until the (private sector) banks went bust - the fault is not all attributable to the last administration - but to all previous administrations - and to you for perpetuating a falsehood - allowing the change of neo-liberal Government to convince the voting public that they are somehow different (because spending actually went up under Margaret Thatcher - the only PM to deliver a 'surplus' in modern times.....by selling off the family silver and ultimately reducing income - and some assets we could sell off at the moment)

  • Comment number 43.

    “a vicious cycle of a public spending squeeze, which undermines economic activity, generates further losses for banks, reduces tax revenues and pushes up the national debt even further.”

    I am surprised. That is the socialist view Peston, and it only tells half the tale.

    The savings in tax from cutting public sector spending then remain within the private sector to spend / invest in the private sector economy boosting wealth and future taxes – all of which you entirely ignore!

    There is no net loss to the whole economy as you infer but merely a beneficial transfer from public back to private, from whence it first comes …

    I suggest that Ireland’s problem was the investment of EU money in public projects to which it became addicted. Far better would have been to use the money for large tax reductions in the exporting private sector; where Ireland already does quite well for itself.

  • Comment number 44.

    26. At 11:00am on 30 Sep 2010, James wrote:
    Referring to comparisons of the UK to Ireland there are some similarities but these are few. It reduces to confidence of investors in the overall state of the economy and their view of the future potential of the economy. Although the UK has its own curency, interest rates have managed to stay low. However, even with Irelsnd in the Euro its interest rates on debt have become high. Whatever else one may surmise, this is telling us that the UK is viewed as a much safer long term bet than Ireland and with considerably more likelihood of a solid recovery. The logic of debt reduction is to maintain this confidence, as losing it would almost certainly create a much bigger set of issues for the economy. Thus, transferring the Irish nightmare scenario to the UK is a highly unlikely outcome.

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

    Unfortunately, your rationale is slightly skewed here. The UK credit spreads are only lower because people have nowhere else to put their money. Along with US, Germany, France it enjoys this elite status of being risk-free. That status has no scientific merit at all, its purely a matter of sentiment. The US is in an even bigger hole than Ireland, yet its spreads are the lowest in the world. The concept of risk-free sovereign debt (especially the US) has been indoctrinated into every investor in the world, therefore everytime there is a crisis people rush to the US whilst disregarding it's own problems.

    Also the UK banks have large exposures to Irish commercial, residential and sovereign debt. With the ease at which capital can move around world, there is no such thing as dislocated markets anymore.

  • Comment number 45.

    12. At 10:19am on 30 Sep 2010, Lindsay_from_Hendon wrote:

    "Serious question Bobby P, who cares about Ireland other than the Irish? The Irish and Greek economies are tiny (with Ireland's main export being Going For Gold)."

    Classy - are you entering an irish popularity contest?

    "These tiny countries cannot survive on their own, they aren't fit to govern themselves so let's grasp the nettle and have one government for all of Europe (except the UK which isn't really in Europe and Switzerland). "

    ...now come on...don't go all statist on us now - I mean surely a single European Government is going to impose on freedom to profit....and how long do you think it will be before the Swiss capitulate and join the EU?

    I mean you think Switzerland and Ireland are really so different?

    "As of 11 October 2008, the banking industry in Switzerland has an average leverage ratio (assets/networth) of 29 to 1, while the industry's short-term liabilities are equal to 260% of the Swiss GDP or 1,273% of the Swiss national debt."

    Oh dear, it seems it's not just the Irish economy who couldn't handle a banking crisis...

  • Comment number 46.

    #24 It looks like rbs temp is back in the country or is he posting from abroad,
    ---------------------------------------------
    "No, I haven't been around much lately. Sorry to disappoint you, but I have a new job, in a new city, in a new country. (And no sign of a revolution here, either)."
    ---------------------------------------------

    I hope you didn't move to Ireland, it's not looking good there, might even be nearer the revolution than you think.

    I hope the new jobs working out though, I hope you took the opportunity to get out of finance, unless of course it's a job with a credit union.However I think you might still be in denial as you state

    "there is simply no alternative because to allow a major banking group to collapse would risk bringing the entire economy down with it. Which, of course, may still happen anyway.
    -------------------------------------------------
    So lets keep the banks in business, even though they may still bring down the economy? To big to fail? Why don't we just get the Govt to pay over our PAYE direct to the banks and get their overpaid directors to run the NHS Armed forces and everything else at the same time,that way we could get rid of the public service sector in one go.

    Cut out the middle-man (Govt). The next election could then be a choice between Barclays, Hsbc, or maybe even Santander?

  • Comment number 47.

    This is getting boring.

    'It might spread here.'
    'I hope the people of Ireland can get through this.'
    'Very similar to the UK situation'
    'It's all the fault of....'

    The whole world is collapsing under a mountain of debt, the fall-out from this is going to be bigger than anyone can imagine. There are some great minds on here but all this talk is merely fiddling while Rome burns.

    Today it's Irelands turn again. Great.

    When do the trials begin? When do we root out the plutocrats and bring them to justice? The money flowed one way and is now being promised from the future. this flow needs to be reversed. There are individuals that have more money than Ireland as a nation. Isn't it time we addressed THIS glaring problem?

    @Lindsay

    Ireland is a major manufacturer of medical devices such as arterial stents and pacemakers. They also manufacture many life saving drugs. Electronic chips etc.

    Many people care about Ireland, there is a large eastern europe vote here, so many in fact that it won Donald Tusk won the election in Poland as he visited Ireland to get votes and his competitor did not. This was a great move forward for Poland, my adopted country. Your ideas are flawed in thinking nobody cares. There is a lot of national interest in Irelands economy, not least from the major (american) multi-nationals that operate here. Haven't you seen the news lately? Been sipping too much Guinness perhaps? Or was it vasilavs home made vodka that caused you to gloss over the facts?

  • Comment number 48.

    Well I suppose the people of Ireland are in Europe so like many more they will join the march to those European countries where there are still better prospects.

    Unlike the potato famine in the 1800's they won't be allowed to starve but how long can what's left of the stronger economies cope with the social problems that could be heaped upon them.

    This is a long drawn out downward spiral that has to reach a climax in the not too distant future,

  • Comment number 49.

    Individuals can be allowed to fail, companies to, but not nations.
    I reckon that ultimately the ECB will have to simply print money and give it Ireland, and then print some more and give it Greece, Spain, Portugal et al. The prudent won’t like it, but that’s just hard lines.

    It ceases to be a European Union if they let member states fail, it just becomes a European nonsense.
    No Bailout = No Union
    No Union = No need for Euro Politicians
    Now what would you push for if you were a Euro politician?

    If I were Brian Lenihan, I’d threaten default. Because I reckon if he did, those ECB presses would be fired up pretty damn quick.

    The Germans wouldn’t like it much of course, but still, for richer for poorer in sickness and in health till default do we part.

    And a national default could signal the impending demise of the debt based monetary system, and we wouldn’t want that would we?

  • Comment number 50.

    Thank you for an interesting update on what is quite a day for Ireland Robert.However I notice that according to notayesmanseconomics blog the numbers you quote have been subject to a ruse used by Mr.Lenihan.

    "I notice that he uses the more favourable GDP comparison rather than a more realistic GNP one."
    The reason for this he explains is because GNP or Gross National Product is what Ireland can actually tax to help pay its debt and this is lower than GDP.

    As to the report by the Governor of Ireland's central bank it attracts some praise.

    "I think that the Governor deserves some credit for his efforts here which are much more realistic that what has been published in the past. There ia a welcome contrast with past efforts which have turned out to be efforts at “kicking the can down the road” hoping for better times."

    http://notayesmanseconomics.wordpress.com

  • Comment number 51.

    Two Small Questions:

    After this crime against the World - how many of the culprits (bankers & traders) are in jail or facing charges?

    And how many of these culprits have been paid bonuses since 2007?

    Answers please..........

  • Comment number 52.

    15. At 10:30am on 30 Sep 2010, richard bunning wrote:

    "This is a BIG risk we're about to take in the public spending cuts - why aren't the major analysts flagging this up at all?"

    ...because when the rats are backed into a corner - they cannot see another way out. The pretence has to be the cuts will work because it's our only option (or rather the other option is equally unpalleteable) - and the analysis by the media must back this or risk social instability on top of economic instability (not that there are any guarantees this will prevent that)

    Hobsons choice I think it's called.

  • Comment number 53.

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

  • Comment number 54.

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

  • Comment number 55.

    #40. writingsonthewall wrote:

    No wonder they're driving cement trucks into Parliament...

    I believe it was one individual who drove one cement truck into the gates of parliament.

    Does anyone know how much it costs to hire a cement truck?

    And what would you do with the information if you knew? You are just a rabble-rouser, with neither the courage nor the conviction to actually do anything yourself.

  • Comment number 56.

    "This is not the beginning of the end but the end of the beginning".

    2 years ago, the Irish should of put the banks into administration . But they did'nt. I believe the Irish will get out of this, but its going to take 10 years. I have just finished Mc Carthy Bar by Pete Mc Carthy dated 2000 ,which makes continual reference to the Celtic Tiger and property prices doubling in a matter of a few years. In other words the credit bubble has been around for a long time and the repairs will take equally as long..

  • Comment number 57.

    ? The British bankings system must be in a worse situation than the Irish....

    Otherwise the Bank of England would not have made the desperate statements of earlier this week The only rational explanation of indefinite zero interest rates and begging anyone with any money to spend it and a serious possibility of more QE (this weeks nonsense!) is that the Bank of England KNOWS that the British banks are so bust that they (the banks) can't possibly be sustained at a rational price for money.

    Guessing at figure would be far too terrifying. But I'll have a go - 500 £bn (as against the Irish 30 €bn) - why? because the quality of the loan books at the banks is not reflected in their balance sheets - otherwise what on earth is the rational explanation for the Bank of England's position?

    We have a right to demand financial and accounting honesty if we are to find the money to rescue the banks yet again.

    We also must demand a National Maximum Wage.... We can't have bankers sucking the carcass of the British people dry!

  • Comment number 58.

    15

    The property sector in UK is a smaller proportion of the economy than in Ireland. Much smaller. But the thrust of what you are saying is in the right direction.

  • Comment number 59.

    65. At 10:18am on 30 Sep 2010, pdavies65 wrote:
    =========================================================================
    The root cause of this mess was deregulation of the banking system - pure and simple.
    =========================================================================
    Not true, the Irish problems are much wider and deeper. Yes their banks had a role to play but the Celtic Tiger was roaring much earlier than the property boom.

    Their economy was built on grants, loans investments call them what you will from the EU. It's whole infrastructure was built with EU funds.

    On top of this they tried to apply a low taxation policy to try and encourage companies to move there. They threw money at those who did. Unfortunately not many have stayed and even less expanded as was forecast.

    Finally we had a nation who embraced the easy money culture with not both hands but also with their feet mouths in fact anything they could take a grip with.

    While this was going on several other things happened. Successive governments gave more and more to the people. Let us just look at Child Benefit for example;
    Child Benefit Monthly rate in 2010
    One child €150
    Two children €300
    Three children €487
    Four children €674
    Five children €861
    Six children €1,048
    Seven children €1,235
    Eight children €1,422

    Not bad and the other benefits are of a similar level, Job Seekers Allowance for example is €330 per week for a couple plus €30 per child. And there are more, many more. It is estimated that a couple with two children would have to earn in excess of sixty thousand Euros to be better off working.

    Now lets throw in the property boom and you will see a nation go mad. I have never seen anything like it. It made the UK look pedestrian in comparison. And they did not stop at home they bought every where.

    Now this is where the banks are at fault they too believed that this would go on forever. So they lent and often didn't even take any repayments as they thought the value of the property would more than cover the loan and interest. In the early years it did just do that, it was only in late 2007 did the wheels come off the wagon.

    Now this is where it gets interesting, Nobody accepted that anything was wrong, very similar to Greece. That is until they were forced to as they were at the brink.

    Even with today's revelation we still do not know the whole story and there may well be more hidden.

    So - is Ireland similar to the UK, NO. It is in line with the other PIIGS. For it to be in line with the UK we would have to have debts of more than four trillion. Again in line with the other PIIGS.

    What is now likely is that this could be the end of the Euro experiment as we know it. We could find ourselves with a much reduced Eurozone if the Euro is to survive at all.

  • Comment number 60.

    #36. debtcrisisdave wrote:

    Why is it that government seem hell bent of destroying the prosperity and living standards of their citizens just to protect a few big investors?

    No government is pursuing these policies lightly or willingly. There is, quite simply, no alternative. If the banks were to fail they would bring the economy, and society, down with them, resulting in immeasurably greater hardship for many more people than bailing out the banks did in the first place.

    It is clear that there are many contributors to this blog who have never really thought through the consequences of a major banking failure. Millions of people unable to withdraw their money, unable to receive their salaries, unable to pay their debts, unable to do their weekly grocery shopping. Uncontrollable chaos and panic would spread throughout the entire country. No rational person would ever consider that to a price worth paying merely to teach the banks a lesson.

    Unfortunately, the reality (for the time being, at least) is that we need a stable, strong banking sector.

  • Comment number 61.

    One of the reason why the austerity in Ireland is so severe is that the EU has instructed Ireland to get's deficit down to 3%of GDP by 2014. In this autumn's budget E3 billion of cuts were expected to start reducing a deficit of 12% now it's 32%, do the math people!!

    Morpheus at #1 makes a good point, if Ireland still had the punt and wasn't beholden to the ECB then it could pursue a less brutal austerity program and could set interest rates at a level that suited it. However in the current circumstances I don't think leaving the Euro is a runner!! Britain isn't in the same situation because it still retains control over it's currency.

  • Comment number 62.

    #46. creditunionhero wrote:

    It looks like rbs temp is back in the country or is he posting from abroad...

    They actually have the internet in foreign parts these days.

    I hope the new jobs working out though, I hope you took the opportunity to get out of finance.

    No, still in finance - why would I leave, when the job satisfaction and rewards are so high?

  • Comment number 63.

    @49 dempser

    To quote a well known insurance providing dog. Oh yes.

    Maybe doesn't reflect how much I want that to happen.

    How about a famous scene from when harry met sally?

    oh, yes, Oh, Yes!, OH. YES, YES! YES!

    But you're right, we couldn't have that, could we?

  • Comment number 64.

    If the Governments sell their bank shares to private investors in the future, we could be back to square one again. The Governments now must insist on significant boardroom representation of the major banks irrespective of ownership share.

  • Comment number 65.

    27. At 11:01am on 30 Sep 2010, Morpheus wrote:

    Just the kind of thing I've been looking for - bedtime reading.

    Thanks

  • Comment number 66.

    @53 creditunionhero

    Thanks for the tip off. Off to bury the kids moneyboxes in the garden.

    On a serious note, I'm worried they will raid the credit unions next, they are about the only things here that are financially sound.

  • Comment number 67.

    @25. At 10:57am on 30 Sep 2010, Hugh_Joctopus wrote:
    "God this makes depressing reading. Its like looking into a wormhole and seeing our future in the UK."
    It can't be that bad.

  • Comment number 68.

    Time for a change of direction me thinks.

    Ireland is now fast approaching the brink, so how long before something is done or are we going to see another last second rush as usual. There is also the possibility that there could be a change at the helm. Have you seen the photos of their PM at their annual party..... conference. Then there is the issue that he is supposed to have been under the weather the next day during a radio interview. Is this going to be the end for him and if so who will take over and will they want to carry on down the austerity road or will they jump ship into another frying pan. Sorry I got carried away with my mixed metaphors.

    Going back a day or so we talked about how the EU and ECB were taking action now rather than waiting for the next country in line to fold. Well they appear to have gone a little too far according to many at Brussels. The fines are possibly a step too far along with the removal of subsidies. Just what a country like Ireland needs now are fines and removal of life lines. Talk about shutting the door after the horse has bolted. Well it is in keeping with their own finacail management. Still no accounts signed off I see. Why are there no countries calling for an audit. Because they are worried about what may be revealed. Lets face it when they caught the EU commissioners Etc. fiddling their expenses they just brushed it under the carpet. What else is under there not to mention skeletons in the closet.

    All this and now the rest of the PIIGS are starting to squeal. The agencies and funds are staring to move on the stragglers with credit ratings being cut and yields increasing. How long before one of them cant get the finance they need and defaults. Then we have the 64 Billion Euro question. Will the ECB expel them out of the Euro? If so, how will it be done? Is there a mechanism in place to allow and manage such a transaction. I am reliably informed there is not. So in essence a nation could be left without a currency or could we have the start of the Greek Euro, the Irish Euro Etc. Etc. If this happens what role will the ECB play, if any? What role will the EU play, if any? Well guess what, they don't know either. It's good to be in a club where the rules are not followed by the major players. However if the minors don't tow the line they are punished, or not as the case may be. A colleague of mine in Stuttgart says that most of his circle of friends are at the end of their tether. They feel that they are bank rolling the wasters of Europe and enough is enough. So if Germany are not there the whole house of cards could tumble. For if not Germany who else could step up to the plate within the EU or more importantly the Eurozone.

    Lets face it we all want to be part of a club where the main players can get away with anything. I see France has now been let off the hook re the deportation of the ROMA. Can just imaging the same would be for a lesser nation.

    All this and we have not covered, the US, Spain, China, India, Brazil, Italy, Etc. Etc. Etc. Etc.

    What a great time to be a journalist, not so good to be an economist as I think we need to rip up the history books and start thinking outside the box. Something many of us have not done for some time. It is so easy to regurgitate the same old drivel.

  • Comment number 69.

    @35. At 11:10am on 30 Sep 2010, Jacques Cartier wrote:
    "The bankers are waging war on the Irish and British people using weapons of massive debt. It's no use putting it off any longer - we need to ensure their total and unconditional surrender; only total defeat will be sufficient to tame these barbarians."
    How would you go about ensuring total defeat when the majority of people don't really care (if they did I think we'd know about it) or have a vested interest in maintaining the status quo?

  • Comment number 70.

    I think we all know that in reality the western world can never pay its debts.
    They might as well all get together and agree to bust next Thursday and then start again.

  • Comment number 71.

    RBS_temp - would you please stop saying that yes you might be prepared to admit in some ways times are tough but everything is fine the right peope are in charge nothing for it but to keep the same plutocrats in charge after all they are the experts.

    You're making yourself look like an idiot

  • Comment number 72.

    60. At 12:15pm on 30 Sep 2010, rbs_temp wrote:
    #36. debtcrisisdave wrote:
    Why is it that government seem hell bent of destroying the prosperity and living standards of their citizens just to protect a few big investors?
    No government is pursuing these policies lightly or willingly. There is, quite simply, no alternative. If the banks were to fail they would bring the economy, and society, down with them, resulting in immeasurably greater hardship for many more people than bailing out the banks did in the first place.
    It is clear that there are many contributors to this blog who have never really thought through the consequences of a major banking failure. Millions of people unable to withdraw their money, unable to receive their salaries, unable to pay their debts, unable to do their weekly grocery shopping. Uncontrollable chaos and panic would spread throughout the entire country. No rational person would ever consider that to a price worth paying merely to teach the banks a lesson.

    At last a bit of common sense. Plus who do they think owns the banks? They are not private companies; many of their shares ultimately belong to us through our insurance policies and pension funds.

  • Comment number 73.

    @47. At 11:47am on 30 Sep 2010, szjon wrote:
    "...all this talk is merely fiddling while Rome burns."
    I'd rather the banks didn't get any ideas from this: while Rome was burning, Nero opened a fire relief fund and forced the citizens to contribute to it.

    Hang on, that's already happening... :-(

  • Comment number 74.

    # 28 what about the Roman Empire?

    Besides, in a blog about Irish public debt you have mentioned Hitler. Godwin's Law if I'm not mistaken. You lose.

  • Comment number 75.

    @62. At 12:19pm on 30 Sep 2010, rbs_temp wrote:
    "No, still in finance - why would I leave, when the job satisfaction and rewards are so high?"
    Because you're incapable of doing any skilled work?

  • Comment number 76.

    That said, NAMA is acquiring these loans at a substantial discount to face value - and NAMA's chairman, Frank Daly, told me that over 10 years he would expect NAMA to make a profit when it finally secures whatever repayments it can from the property developers and speculators who borrowed colossal sums from the likes of Anglo Irish and Allied Irish.

    So they dont let the bank go bust relying on speculators and developers to repay assuming these people are not going bust. Surly many are set up to declare bankruptcy at such times with no personal liability and can then set up again - in another guise- debt free.

  • Comment number 77.

    27. At 11:01am on 30 Sep 2010, Morpheus :

    Bill Mitchell is aways worth reading. So is Chomsky though linking to him seems to get you labled as some kind of nutter these days.

    Steve Keen is often worth a look too.
    http://www.debtdeflation.com/blogs/category/debtwatch/

  • Comment number 78.

    Wannabe revolutionists please relax and take a few deep breaths. The situation in Ireland is indeed horrific and there are undoubtedly striking parallels with the UK, but there are two very important differences:

    1) The duration (or tenor) of the UK's debt is substantially longer than Ireland's (and the rest of the PIIGS for that matter). That means that we don't have to issue anywhere near the same amounts of debt just to refinance existing liabilities falling due (thankfully Brown didn't tinker with the Debt Management Office for some reason, probably didn't get round to it) and, more importantly,

    2) We have control of our own currency which means we can devalue our way to competitiveness, which is essentially what we've been doing surriptiously for the last 2 years, as anyone who has been abroad in that time can testify.

    So, while Robert correctly points out the risk that Ireland's spending cuts create a vicious downward spiral, even the most one-eyed lefties must admit that it is not inevitable e.g. maybe, just maybe the private sector might be quite productive if left alone and not subject to the old socialist mantra of "if it moves tax it, if it stops moving subsidise it". Carrying on spending is not actually an option for Ireland because they will not be able to refinance their debt - the only reason they sold some new debt a few days ago is because enough investors think their plan is credible. Without a credible plan to get their deficit under control they will either default or the German Government will have to bail them out (the Germans themselves are not too keen on that incidentally),

    The UK actually does have an alternative of carrying on spending (the hilarious if you weren't serious "we've got a massive problem caused by too much debt, so let's create some more" solution) as, if bond investors will no longer buy our debt, we can just print the money a la Zimbabwe or Weimar Germany. Personally, I'm not convinced that's the better outcome. So I would argue that trying to live within our means within the next 4 years and then trying to pay down some of the debt that as a nation we have built up from that point on might not be such a bad idea after all.......It may not work, we may get dragged down into another recession, not least if Ireland and Greece do fall over, but there really isn't much of an alternative I'm afraid. Blame who you like. I personally blame amoral bankers, cretinous property speculators and anyone who voted Labour in the last 15 years. But, please take your pick.

    But then, what do I know. What we need is revolution, property consfication and more spending or whatever incoherent clap trap you're trying to peddle.

  • Comment number 79.

    Some confusion over Vasilav and me. I am saying that I am willing to enter into a homosexual affair with him if (and this is a big if) there is a revolution in the UK including Hendon which is nobody's fault, even the Romans. This revolution must include the end of capitalism.

    So, WOTW and your minions (who are probably also you) I've put my erm you know where my mouth is. Will you?

  • Comment number 80.

    http://en.wikipedia.org/wiki/Inflation_in_the_Weimar_Republic
    Inflation in the Weimar Republic

    The cost of living index was 41 in June 1922 and 685 in December, an increase of more than 16 times. In January 1923 French and Belgian troops occupied the industrial region of Germany in the Ruhr valley to ensure that the reparations were paid in goods, such as coal from the Ruhr and other industrial zones of Germany, because the Mark was practically worthless. Inflation was exacerbated when workers in the Ruhr went on strike, and the German government printed more money in order to continue paying them for "passively resisting."

    Although reparations accounted for about one third of the German deficit from 1920 to 1923,[6] the government found reparations a convenient scapegoat. Other scapegoats included bankers and speculators (particularly foreign).
    The inflation reached its peak by November 1923, but ended when a new currency (the Rentenmark) was introduced.

    In order to make way for the new currency, banks "turned the marks over to junk dealers by the ton"[7] to be recycled as paper.

    So it can be done. Bring on the Punt

  • Comment number 81.

    @ 55. At 12:03pm on 30 Sep 2010, rbs_temp

    "I believe it was one individual who drove one cement truck into the gates of parliament."

    Do some research fella...its happened twice. Bankers would tell you thats a 100% increase on your stats.

    http://www.galwaynews.ie/12114-protest-truck-removed-anglo-irish-bank-and-impounded

  • Comment number 82.

    Dunno why everybody's so worried.

    We've got Roy Keane and Bono - what more could you need.

    Put Keane in as Taoiseach and Bono as chief fundraiser / Finance Minister and we'll be right as rain in no time.
    Bono could even start by paying tax for the last 10 years and then we'd be sweet almost immediately.

  • Comment number 83.

    Ever since the gold standard was removed from currencies, this so-called money has been nothing but a number on a computer that has been generated out of thin air. The banks have been lending money they just did not have. If that is not illegal it is certainly immoral. If bankers had any virtue they would fall on their swords.
    So garbage in... garbage out. Get rid of computerised banking and the problem is solved!
    Better still, buy as much gold as you can with "thin air" before someone else discovers the ruse.

  • Comment number 84.

    I fear that things may get a lot worse given the sheer scale of the problem. This crisis has been at least 10 years in the making and seems to have an unstoppable momentum. Each new remedy just creates another problem elsewhere in the system viz QE (US, Europe and UK) and currency exchange rates.

    Sadly, I'll be surprised if Ireland survives this phase of the crisis.

    What then...?

  • Comment number 85.

    Goldmans instant response to the spanish anonymous tip off.

    http://www.zerohedge.com/article/anonymous-blogger-speculates-spanish-gdp-inflated-%E2%82%AC40-billion-goldman-gets-involved

    Me thinks they doth protest too much... Wasn't it goldman that helped Greece make it's way into the euro? I smell a rat.

  • Comment number 86.

    I grew up in Dublin in the 60's and 70's when Ireland seemed to be in a permanent recession, together with my friends we had to emigrate to persue a career after finishing a great education. Most returned (except me) and fuelled the Celtic Tiger however everyone knew the banks were handing out money like a child in a sweet shop. Why the grown ups in charge of business and the Government did nothing to stop this recklessness is because a majority were growing rich on the rewards.

    It is very sad that everyone who has worked hard will now have to pay and another generation or more will have to leave this lovely country to find work BUT unlike my generation where can they go? We went to America, London, Europe or Australia where most economies now struggle. The future is bleak but the Irish spirit is strong (although the Tiger made it a bit flabby) and I believe they will, with a lot of work return the country to a saner economy. The UK needs to take heed now - Unions should not put more pressure on the economy here with strikes THERE IS NO MORE MONEY TO GO AROUND. We all have to work harder and longer like a lot of countries in the world and reset our values button.

  • Comment number 87.

    23. At 10:55am on 30 Sep 2010, torpare wrote:

    "As a matter of interest, who is "we"?"

    It's the royal we.

    "Have you been elected to represent someone? As what? Why hasn't it been reported in all the media? (perhaps it was but I'd nodded off...) "

    Why - was the prime minister elected to represent us? - didn't seem like that to me.
    yes, while you've been sleeping the world has changed a little - best you go back to sleep and dream of economic fantasy.

  • Comment number 88.

    22. At 10:55am on 30 Sep 2010, szjon wrote:

    "@8 WOTW

    Take a look at this on spain.

    http://ftalphaville.ft.com/blog/2010/09/30/356201/an-anonymous-tip-off-regarding-spanish-gdp/"

    You think that's bad - you want to see what the Greeks have been up to! Well the old adage is "if you can't face reality then lying your way out of it is the next best thing"....or something like that.
    I'll see if I can dig out the article with a similar picture for Greek debt.

    The bond holders are either stupid (unlikely) or are riding the bubble until it's about to pop - picking up nickles in front of a steamroller - I believe is the expression.

    I'll bet 1 gold sovereign (because it has value) that it's insitutional pension holders who end up carrying this can. The banks will exit the market first, leaving the fed and pension funds to stare each other out in a battle of witlessness.

  • Comment number 89.

    I remember having a strident discussion with a lady who worked at the Bank of England on an intercity train over a period of 2 hrs (I did not know her) approximately 10 years ago about the UK joining the Euro. Gordon Brown was the Chancellor and had already sold our Gold and raided our pensions through abolition of ACT reliefs. She was strongly in favour of GB joining the Euro (which worried me).

    I remember pointing out that the individual's position was rarely or never aligned with the position of the government, and as individuals would always end up being the piggy bank of last resort when the the chips were down and the government had bet on the wrong outcome.

    As it turned out we never had the referendum to join the Euro because the UK citizens are too cynical about out our politicians abilities.

    In hindsight it may have been lucky that never joined the Euro, we can devalue our currency, so that we could ameliorate the unemployment problems that we would have had, had we been in the Eurozone; however the down side is that:- Using a paper currency, means that it is only worth paper, this does not assist savers- just forces them into investing into illiquid assets or volatile shares.

    Thankfully the Bank of England like the Central bank of Ireland does'nt issue shares.

  • Comment number 90.

    24. At 10:55am on 30 Sep 2010, rbs_temp wrote:

    "You're absolutely correct, of course. But Lenihan is right - no matter what the cost of keeping the banking sector afloat, and no matter how reluctantly we may do so, there is simply no alternative because to allow a major banking group to collapse would risk bringing the entire economy down with it. Which, of course, may still happen anyway. Ireland, as part of the eurozone, has very limited options, and it is almost unthinkable that they would choose to leave the single currency. These are interesting times."

    ...but isn't the recession over by now? I mean it is just a recession after all...

  • Comment number 91.

    Oh, while I remember, Irelands unemployment dropping in September,

    http://www.bbc.co.uk/news/business-11433817

    Does anyone remember me mentioning the back to education allowance scheme. Keep your benefit but go study.

    http://www.citizensinformation.ie/categories/social-welfare/social-welfare-payments/back-to-education/back_to_education_allowance

    Funnily enough the office has been closed for the last few weeks due to an extraordinary number of applications. This is how the figures dropped. School starts in September, giovernment is actually paying more for this than unemployment benefits but hey, it sure makes the figures look better doesn't it? It's also the longer termed unemployed they are targetting although they reduced the time you have to be unemployed in the last budget.

    Clever.

  • Comment number 92.

    Where's Vasilav?

    Perhaps this has something to do with it?

    Lindsay_from_Hendon wrote:

    Vasilav - I do love your posts, I really do, in fact I have missed them but, and this is a big but, I am a man so don't want to be your revolutionary bride.

    Actually, sod it. If there is a revolution then I will have a civil partnership with you Vasilav you big hunk of a man!
    ---------------------------------------------------------------
    Perhaps it's the thought of having to live in Hendon or Switzerland that's putting him off?

    I think the truth is Lindsay is a closet revolutionary!

    Come on now Vasilav take it like a man.

    Perhaps you should move to Ireland the revolution is looking closer by the minute there.You could take your new partner with you, on second thoughts the wifes earnings might be down if you did - I don't want that, I'm happier when she's doing the night shift in Hendon.

  • Comment number 93.

    33. At 11:08am on 30 Sep 2010, torpare wrote:

    "But they're in the Eurozone, so they can't do either. The two options are:- get out, or apply for all necessary assistance from the ECB/IMF, like Greece, and hope that that's enough. "

    Option 2 is another Ponzi scheme as the only income is from other investor companies - just like the IMF.

    Until now all these Ponzi's have been lauded as wonderful - just like Madoff's, now there will be a draw down (like there was with Madoff) and suddenly the world will realise all the rescue plans are based on the same false assumptions that got us here in the first place - i.e. that you can produce growth simply by moving money about - or printing it.

    That's what we think anyway.

  • Comment number 94.

    70. At 12:46pm on 30 Sep 2010, Smoginthesun wrote:

    Would rather the bust on a Monday. Everyone already hates Monday anyway. It shall be one of the first things to go in the new world order. 4 day week! Woohoo.

  • Comment number 95.

    34. At 11:09am on 30 Sep 2010, pietr8 wrote:

    "First, stop the fripperies, we can't afford them ie wind power, solar energy, electric cars etc. (Sorry Greens)"

    ..what and we can afford to pay the Russians for our gas and the Arabs for our oil? - What utter madness.

    "Come out of the euro and print money to encourage inflation."

    ...because it's the lesser of two evils? - don't you think it would be better to face up to the problems and not try to blow them away with a gust of paper money? This is why we didn't address them last time - and you want to do the same again??

    "Halve all wages, declare bonuses illegal, and balance this by taxing investment income at 90% with a withdrawal tax of 30% for money being taken out of Ireland."

    Money under the matresses - black market explodes into life - tax take drops off a cliff.

    "Produce your own food rather than importing. Imports will be too expensive anyway."

    ...but still import your energy - right?

    "Give it 3 years and when the world sees the GDP rapidly improving they'll soon want to invest again in a vibrant economy."

    It took 10 years to shake the great depression - why would this (more severe) crisis be over in 3 years? There were new markets in the 1930's to exploit - who is going to drag you out to produce that rampant GDP?

    "Sounds like communism though, so I hope Lenihan succeeds."

    None of this is communism - it's fascism - a very different concept. I see no ownership by the working class - but in fact a ruling elite of capitalists (and not very bright ones either)

  • Comment number 96.

    35. At 11:10am on 30 Sep 2010, Jacques Cartier wrote:

    "The bankers are waging war on the Irish and British people using weapons of massive debt. It's no use putting it off any longer - we need to ensure their total and unconditional surrender; only total defeat will be sufficient to tame these barbarians."

    Give them NOTHING - but take from them EVERYTHING. Show the world that these 'gods' can bleed like the rest of us.

  • Comment number 97.

    Cui Bono? as Cicero used to say. This is another bailout of bank shareholders. It is the transfer of public funds and future taxes from the public to private wealth. The power of the few over the well-being of the many. Of course they present this as the opposite. All those BBC posts a couple years ago about the miracle in Ireland. Too bad these decisions are not subject to a public vote...but representative government makes some sectors more represented than others. History may mark this time as one of the most corrupt in modern history. The rationale of course is what would happen if they weren't bailed out....well..no one has tried that, yet. I am sure they have relied on the bankers to provide that information and probably some of those paid oracles..I think they go by,economist, these days.

  • Comment number 98.

    #60. rbs_temp wrote:

    "Unfortunately, the reality (for the time being, at least) is that we need a stable, strong banking sector".

    It seems to me that what you are describing has nothing whatever to do with "a stable, strong banking sector".

    It's all to do with having a dependable money-storage and -transfer sector. The old Post Office Savings Bank, plus the National Giro allied with the postal service, was exactly that.

    It could perfectly easily be re-created in an updated form, with the money stored and moved around within it being now in the form of bits and bytes.

    None of this requires "mega-banks", paying mega-bucks to gamblers, to exist. None of it has anything to do with issuing money as debt.

    Separately, a money-brokerage system is needed with the primary purpose of matching borrowers needing funds to lenders having them, and making a profit from the spread, and from adroit risk-management, forex dealing, hedging, etc. OF COURSE, 100% of the funds this sector will use will have been invested in it or ploughed back, or borrowed by it. NONE of it will be deposits aka current accounts.

  • Comment number 99.

    60 rbs temp

    Your post appears to be a repetition of what some of us were wrting in September 2008 before the banks were bailed out.

    However it is now 2010 and nothing has been done to provide an alternative safeguard for the banking of the general public and small businesses should a similar event reoccur.

    Surely this is incompetence and neglect by governments for had the banks all crashed I'm sure there would have been a solution up and running by now.

    It is remarkable what can be achieved when order is brought out of chaos instead of the chaos spreading into even more chaos as is happening now.

    Alas it seems that our reliance on our current accounts with these banks is still seen as a bargaining tool to keep us onside whatever the cost.

  • Comment number 100.

    72. At 12:58pm on 30 Sep 2010, AnotherEngineer wrote:

    At last a bit of common sense. Plus who do they think owns the banks? They are not private companies; many of their shares ultimately belong to us through our insurance policies and pension funds.

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

    If you believe that, then you'll believe anything.

    Since when has any pension fund or insurance provider acted in the favour of its customers. Who bloated the Casino's up in the first place? You'd think these "top" fund managers would have smelt a rat and reduced their exposures to the Casino's. That is how the system works, to collar the joe public from every angle to make them believe it's in their best interests to support the banks. I am fed up with this, the taxpayer and our pension schemes own the banks. Its all rubbish and it has to stop.

    My pension fund was chosen specifically to invest in companies with less than 33% debt to equity and excludes all casinos (the las vegas ones and the wall street kind). Suprisingly it has performed really well since I have been a member.

    Don't believe this too big to fail rubbish.

 

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