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Ireland: An extreme version of the British disease

Robert Peston | 08:22 UK time, Monday, 22 November 2010

Any Briton tempted to gloat over the woes of Ireland should probably think again, in that Ireland's financial crisis could easily have been the UK's.

The point is that Ireland's flaws are an extreme version of what happened here:

Grafton Street

Grafton Street, Dublin

1) Banks that became too big and too dependent on overseas borrowing relative to the size of their respective economies;

2) Banks that lent far too much to commercial and residential property, fuelling an unsustainable boom that has gone pop;

3) Governments that became too dependent on property taxes which collapsed when recession set in - contributing to the emergence of a black hole in the public finances;

4) An overall burden of debt, aggregating household, banking, commercial and state borrowing, that was a humungous 700% of GDP in Ireland and an eye-popping 400% of GDP in the UK (more than for any other big rich economy apart from Japan).

Why has Ireland had the humiliation of being forced to admit that it is unable to pay its way in the world whereas the UK government is still able to borrow vast sums at record low interest from commercial lenders and can swank that it has the means to be a generous rescuer of Ireland?

There are a number of reasons, which probably include how the UK has tackled its own recent financial crises and that the UK has an independent currency and central bank. Even so, Ireland's dismal fate could easily have been the UK's - and, if global financial storms were to rage again, could yet be.

Obviously the important question now is whether the European Union's rescue of Ireland has sealed in the infection, allowing the rest of the eurozone economy to recover, or whether it simply provides temporary respite. To put it more bluntly, will Portugal be next?

Portugal insists it can muddle through. But that is not being taken for granted by the European politicians and officials to whom I've spoken in the past 24 hours, because although Portugal's banks are not as bloated or as weak as Ireland's, its private-sector economy is arguably less robust.

For what it's worth, if Portugal were to go cap-in-hand for loans to the European Union and International Monetary Fund (IMF), the UK would be less prominent in the rescue, officials tell me - for the self-interested reasons that Portugal is rather less intertwined into the British body politic/economic than Ireland.

PS: The shape of the Irish rescue is being slightly clearer.

The total size of the bail-out package is expected to be between 80bn and 90bn euros. Of this, something over 30bn euros is expected to be earmarked for injecting additional capital into the banks, to strengthen them against future losses.

The bank most conspicuously in need of additional financial support is Allied Irish Banks. Of course, Anglo Irish Banks is weaker, but the government already put it on a path to being wound up. What's less clear is whether Bank of Ireland will become largely nationalised in this new round of reinforcing the Irish financial sector.

The UK's share of the Irish package of succour, including indirect loans and a possible direct bilateral loan, might well be 9bn euros.

Update 1057: Over the past 24 hours, I have been asked countless times how the UK government can afford to provide around £7bn of support for Ireland - through indirect and possible direct loans - at a time when it is struggling to reduce its own deficit.

Well the answer, as many of you will know, is that unlike Ireland, the UK is currently having little difficulty borrowing record amounts at comparatively miniscule rates of interest.

If the UK were to lend to Ireland for three years at an interest rate of 5% or more, which seems likely, that - in theory - would yield a profitable turn for the UK exchequer of perhaps 3 percentage points (or 300 basis points, in the jargon).

It would be good business, on the reasonable assumption that Ireland repays the UK.

Also, for those who say the £7bn could be better deployed funding schools or hospitals, or paying to keep civil servants in work, it's important to remember that - over the long term - the road to ruin is the fork in the road where public spending is permanently financed through borrowing rather than taxation.

That said, borrowing to invest - to build schools, hospitals, railway lines or low-carbon power plants - can be seen as sensible.

In fact, there are some who argue that the UK should take advantage of low interest rates to increase infrastructure investment, with the aim of improving the productivity of the economy (a fascinating new report by McKinsey argues that one of the great priorities for the UK should be to invest around £520bn in infrastructure over the next two decades).

Update 1300: For the avoidance of doubt, the British contribution to the Irish rescue will be less than 10bn euros  (£8.5bn) in total, sources tell me.

That would be the total, including a bilateral loan of indeterminate size and the UK's indirect contribution via the IMF and the European Financial Stability Mechanism.

The balance between direct and indirect loans is yet to be agreed.

Comments

Page 1 of 3

  • Comment number 1.

    The fact that Britain feeds this Euro-Irish rescue package with close to €9 or 10bn should remind us that it is one boat, one ocean, one planet we are drifting in/on. Any solution has to be a global one, or it is just not a solution.
    caw

  • Comment number 2.

    "Ireland's dismal fate could easily have been the UK's - and, if global financial storms were to rage again, could yet be".

    ================================================

    Are you a prophet Mr Peston?

  • Comment number 3.

    At least the property market has not collapsed in the UK - so far! The next event will be the Irish government making things worse by further run down of their economy and casting more into real poverty - another example of but for the grace of Mammon there go we. I am sure that if we follow the Irish pathology the coalition will copy our next but one nearest neighbour and impose more penury on the public.

  • Comment number 4.

    There are similarities between the Irish situation and the UK but fortunately we so far have escaped the worst of her fate. However we are not out of the woods and are not in my view in a position to be able to give such largesse to Ireland as we plan. After all we plan to borrow some £160 billion this year before all this. I noticed elsewhere a reference to an economists view on this and found it enlightening as I was not aware of what happened in 1992.

    "I wish to make it clear that I wish Ireland the best in difficult times but in my opinion the Euro zone should solve its own problems. Back in 1992 when the UK was in trouble nobody helped us. Also as time goes forwards I suspect there will be other calls for money/aid from Euro zone countries with Portugal and possibly Spain leading the list and if we start now with Ireland we have to realise there will be other calls too.Accordingly I believe that our government should be very circumspect before offering help as it is unlikely to be the last call and may not even be the last call from Ireland and there is a danger of us getting on a treadmill we cannot get off. As an example I believe the “temporary” help provided to Greece has now become effectively permanent."
    http://notayesmanseconomics.wordpress.com

  • Comment number 5.

    Yes Robert,

    The only difference is the Uk can print and devalue it's own currency, with the inetention of inflating our way out of this mess - Ireland can't.

    I'm sure we will be glaoting though but for a fifferent reason. Proabaly just to say 'told you so'.

    Now, who would like to open a book on Portugal and Spain being downgraded again by those clever rating agencies and the 'euro crisis' start all over again?

  • Comment number 6.

    The UK, thanks to Gordon Brown's disasterous policies is in a total financial mess.

    What is the old saying - "the labour party can run the country until it runs out of other people's money to spend". It's happened twice in my lifetime.

  • Comment number 7.

    This has come about simply from the demand of the European Commission and ECB that Ireland does not cause contagion within the Eurozone.

    It occurred on a Sunday so that the annoucement could be made before the Asian markets openned in advance of the European markets.

    Yes, this is a problem for Ireland - both economically and politically.

    It is one step closer to federalisation within the Eurozone countries.

  • Comment number 8.

    Come on Mr Peston: It’s not a bailout, it’s just more debt.
    The Irish Government on behalf of its people have agreed to take on more debt, that’s all.
    ‘Good’ government debt, to satisfy the bank’s ‘bad’ debt.

    But hold on a minute, if all money is created as debt bearing interest, where will the money come from to pay off this additional government debt?

    Well they’ll have to take on even more debt in the future, won’t they.
    They’ll have to become more indebted.

    But I thought they already had too much debt?
    They have.

    Well how will it work then?
    It won’t, it’ll all end in tears and the atypical IMF riot.

    Then what?
    The ECB will have to print some money and give it Ireland.

    Well why don’t they do this now and avoid the problem?
    Because the Eurocians don’t want to see the Euro devalued to the point of disinterest, and thereby possibly trigger a break up of the European Union.

    What’s a Eurocian?
    It’s a person domiciled in Europe, currently in receipt of a large number of Euros and intent on political advancement.

  • Comment number 9.

    #2 "Are you a prophet Mr Peston?"

    I don't think Mr Peston is a latter day Cassandra, unfortunately only because he isn't pretty enough.

  • Comment number 10.

    Robert, in previous posts on this subject you mentioned nervous investors removing funds and in the same breath, UK banks exposure, RBS, Lloyds, Barclays etc.

    Is it true that as the Uk lends with one hand, the likes of Barclays, Lloyds etc are taking with the other? Guess the FSa is still asleep on this one?

    Did the UK banks 'trigger' the current shortfall?

    Or was this truly a 'concerted' and 'co-ordinated' attack by the institutional sector on the Eurozone and Ireland in particular - as you so "openly hint at"?

    In years gone by, these sort of attacks against a nation and its currency or economy, was often viewed as first a trade war, which as history tells us, often led to "open warfare" of a military kind cf. Steel/Iron war with Japan prior to WW2.

    Thankfully these days we don't tend to lob weapons at each other so often, with more treaties, the Un and Nato in place etc, but trade and currency wars still occur (as we know) and coup d'etat do still take place - both peaceful and violent.

    If, in reading between the lines of your posts, financial institutions are going continue to 'speculate actively' against other nations, have you considered that taking on 'nation states' could become a dangerous and unpredictable 'game' with more dire long term consequences for the players on both sides?

    History tells us, that those who take on the State, may win the battle today (ie the banks and investors), but will ultimately loose the war. Governments come and go, but the State will always protect itself and survive.


    It would seem pertinent that those who 'cross' nation states should be wary - as both you and the banks often like to remind us, "there is no such thing as a free lunch".

    Rock the boat too far and the consequences are clear. I would be looking closely at "terms" for the future of bank or investment institutions in their current forms.

  • Comment number 11.

    #8 Please don't bring the European politicians (MEPs) into this. They are currently running around Brussels like headless chickens, totally traumatised by the need to make real-life decisions.

    Have some pity for the afflicted.

  • Comment number 12.

    Robert,

    Slightly aside, many of your peers are suggesting Ireland's problems are simply down to it being in the Euro!

    What rubbish!

    In days of antiquity, we all traded in gold ingots etc (consider this a common currency). Simple point. The issue is not the Euro - nor additional far-right drivel. The issue is of course with Ireland's management of its banks.

    If this is typically symptomatic (and representative) of a failure in Freidman economics, would the real concern not be whether we lend, but rather, what happens when Britain's solvency is tested again as the confidence merry-go-around returns after its tour of the continent?

    Alas, I have digressed. So if the conclusion is that Ireland is bankrupt, then is this fix for a broken heart being addressed by the plaster we are applying? .

    Or put another way, if we conclude that we cannot borrow our way out of debt, then won't this repeat itself again in the very near future?

  • Comment number 13.

    Don't gloat? £7 billion from British tax-payers - I make that a couple of hundred quid per tax payer, give or take, to bail out Irish tax-payers, Irish banks and British bankers - again!!! So since I'm paying for all this then no-one's going to deny me a bit of a gloat while I still have the chance.

  • Comment number 14.

    The western economies all seem to rely on foreign investors continuing to buy government bonds. Inevitably the wealth of our countries will continue to be transfered to these investors. What would happen if the £ or the Euro started a serious slide? I would suggest a further rush into assets that are more tangible, like gold and commodities.
    Whilst governments are seemingly committed to Q.E (or the printing of money to buy bonds) this is a serious possibility. At some point foreign sovereign investors will start to pull out, leaving even the dollar vulnerable.
    Reminds you of the old advert for Pears soap - the bubbles theme...

  • Comment number 15.

    > Banks that became too big and too dependent on overseas borrowing relative to the
    > size of their respective economies ... Banks that lent far too much to
    > commercial and residential property, fuelling an unsustainable boom that has
    > gone pop;

    You say that bankers are the cause of this mayhem – well at least the banker-sycophants that show up here now and again will have to shut up.

    > Any Briton tempted to gloat over the woes of Ireland should probably think again

    Surely you mean “Great Britons”? The Irish are Britons as a matter of geography, not politics - Ireland is one of the British Isles. No-one should gloat - we share their Celtic heritage and their Weltanschauung – we all despise bankers. We've got more in common than ever!

  • Comment number 16.

    @ 2. At 08:53am on 22 Nov 2010, FedupwithGovt wrote:

    > Are you a prophet Mr Peston?

    No, he's just got some common sense - something bankers lack completely.

  • Comment number 17.

    I'm amazed if the Irish aren't upset at this unethical profiteering by her nearest neighbour and closest friend.

    I guess the biggest judge of these continuing actions will be results of next spring and the latest round of the Eurovision Song Contest.

    Question for For Peston, Why isn't Eire turning to it's old friend the US and the large Irish community there? They are keeping Corporation tax low to apease the US Companies and special regimes available in the Shannon Free Zone and the Dublin International Financial Services Centre but not asking for help.

  • Comment number 18.

    About the only thing Gordon Brown got right was to not join the Euro - if we had then we would be in the same mess Ireland is now.

  • Comment number 19.

    Robert just one word - Catharsis
    The longer we prolong it, the longer the REAL cleansing will take.

    It's as simple as that but people are generally choosing to avoid taking full responsibility as grown-ups.

  • Comment number 20.

    According to the Bank of International Settlements the Irish banks owe $149 billion to the UK Banks. Dave and George giving money to Ireland is not an EU issue it is necessary to protect our banks.

    What I would like to know is how much in bonuses was paid to the bankers that wrote the loans to Ireland?

  • Comment number 21.

    Mr Peston opened his post with:

    "Any Briton tempted to gloat over the woes of Ireland should probably think again, in that Ireland's financial crisis could easily have been the UK's."

    Presumably he means someone wandering around uttering ill-judged platitudes such as:

    "Oh hah look at those dopey paddies and their inability to manage their economy!"

    Are these the type of ignorant people who usually read and comment on this blog? If so I'm in the wrong place.

    Or perhaps Mr Peston is, with an horrifically ill-judged opening gambit which seems to insult any right-thinking person. Presumably only intelligent people with an interest in the state of the economy bother reading Mr Peston's blog; why on earth would anyone laugh at the Irish about this, less so need "telling off" by Mr Peston?

    Or is this another media-spun attempt to make it "our" problem as well?

    I am both baffled and appalled.

  • Comment number 22.

    When there was no financial crisis no-one cared about the views of Portugal, Ireland, Greece and some big boys imposed their views on the smaller EU countries. Now the going got tough these three countries are very important to the big boys and many are running scared. It looks like the big boys are now at the mercy of the "small" and "irrelevant" countries. If this crisis wasn't so dangerous to my country, I would laugh at this fear of my country's economic woes....

  • Comment number 23.

    What happens when Ireland's economy is so wrecked that they default anyway?

    http://duncanseconomicblog.wordpress.com/2010/11/22/ireland-three-questions-and-a-red-line/

  • Comment number 24.

    Robert Peston said.. "An overall burden of debt, aggregating household, banking, commercial and state borrowing, that was a humungous 700% of GDP in Ireland and an eye-popping 400% of GDP in the UK (more than for any other big rich economy apart from Japan)."


    thus all the western nations have huge debt, we have used the debt to fund the 30 or 40 year world expansion, enabling one and all to buy a house & garage , and all that goes in that house.

    The Japanese, the far eastern tigers and now the Chinese have over the past thirty years supplied all /alot that goes in the houses.

    They now have the currencies, dollars euros and sterling etc to spend, buying up the world . We in the west all have the debt, Ireland is just an example.

    what next ? worthless currencies as the west devalues out of debt ? Western wealth evaporates . assets change hands, that which was once British, then American and then Japanese, will now become Chinese. Does it matter ? maybe not IF the chinese are a benign nation.


    Yet in my view the protection of value and trust in a currency is paramount and the Politicians, should not be allowed to devalue their way out. Hard nosed spending cuts, together with the collataral damage that may well be caused is the only way forward. Economics and needs must forcing workers from the public to the private sector, and making sure all those public sectort Managers with non jobs get out from behind their desks and get their hands dirty.

    As for banks getting to big for the economy, scale them down, cut them in half break them up and bingo , sort out the bonus problem once and for all, as they, like the rest of the economy , will be scrabling and begging for work or jobs . Hey Ho..Onwards and Upwards

  • Comment number 25.

    But this is not a disease of England. It is a disease of the finance system and the Politicians who, in my view, have connived at it.
    We, The People, are sick and tired of this system which allows the finance industry to pick the pockets of taxpayers at will and the Politicians who have failed to prevent it and I am certain that the majority of British people believe that most of the Chief executives and Boards of the finance firms responsible, last year and now, should be in prison together with many of the Politicians. I suspect that a vast majority of The People, The Electors, consider that this is nothing more than another common theft from the public purse and that crimes have been committed and no one punished.

  • Comment number 26.

    Ireland: An extreme version of the British disease?

    Robert's headline makes a valid point, but it needs a question mark after it.
    Irelands flawed economic strategy has come to a head through international and investor pressure which given the size of Irelands economy was an easy target.
    Next on the list will be Portugal quickly followed by Spain. They will do well to withstand renewed investor attention on their current fiscal position and strategies. If Spain have to resort to financial assistance then the death knell will toll for the Euro given they are 12% of the Euro market.

    The UK economic strategy is already set to fail, the signs are already extremely worrying with tax revenues projected to fall well short of targets, likely calls for more support by Euro countries such as Portugal, failure, as history shows it will be failure, to make tangible cost savings in the public sector and of course the dreaded increase in inflation caused by sustained rises in raw materials.
    The key question is if the UK has to call for financial assistance will there be anyone out there to bail us out and if there is what will be the cost?

    We need the answer before embarking on our "we support all" strategy else we may become the nation who died as a result of Irelands disease which we helped cure!

  • Comment number 27.

    "Bailouts","rescues","stabilisations"....

    Continuing theft from the common people by the Bankster elite and their corrupt minions.

    My new year`s resolution will be to shun all "voters" of the 3-in-1 British establishment party,including members of my own family.


  • Comment number 28.

    Who's gloating?
    IN BRITAIN...
    there are cuts, cuts cuts,
    young people can't get mortgages,
    businesses can't get loans,
    unemployment is rising,
    and half of our major banks have gone bust.
    We have all got our fingers crossed and many are hanging on by their fingernails.
    Surely all Western Countries are now "hostage to investors".
    The root cause of the Wests problems are surely the vast pool of international investment cash that is sloshing around the world these days.
    The world was a far more stable place when it did not exist.
    Who is running the World....governments or investors?

  • Comment number 29.

    @25, I heard Irish Politicians throw the phrase 'Criminality' about at the weekend too. But the bottom line is slinging Politicians or Bankers in Jail for might make people feel better but it doesn't remove the dept. This isn't monopoly.

    What matters is cold hard cash (taxes) and regulation so the naughty people can't do it again. Do not pass Go, do not collect £200. Thats where it hurts.

  • Comment number 30.

    ‘Update 1057: Over the past 24 hours, I have been asked countless times how the UK government can afford to provide around £7bn of support for Ireland - through indirect and possible direct loans - at a time when it is struggling to reduce its own deficit. Well the answer, as many of you will know, is that unlike Ireland, the UK is currently having little difficulty borrowing record amounts at comparatively miniscule rates of interest.’


    Oh come on RP.
    It’s not unsurprising since the Bank of England is going to print more money and suck up a load more gilts.

    As long as Merlin King has got his gilt hoover plugged in, there’s no UK debt problem. It may end up £10.00 for a litre of diesel or a loaf of bread, but UK government borrowing isn’t going to be an issue.

  • Comment number 31.

    Although I have always hated the idea of borrowing personally, ie as an individual.
    I have come round to the idea that the government should borrow (or if it has the will simply create) money and spend it now on things that may help it in the future, this is cos I am sure devaluation of pound (and all other national currencies) relative to what can be bought is now a sure thing, so we may as well get as much as possible for the money. The critical thing of course is to spend it on things that will make a difference, infrastructure is important but planning for an era of expensive energy must be up at number 1. (propping up banks which is all that is happening should be at priority zero)

  • Comment number 32.

    Aha!

    So the UK is lending the money in the same way as those payday loan companies, only without the 2,500% APR.

    The terms of the loan should be made public, percentage, term etc.

    What if Ireland defaults? If it doesn't, then could we lend more money to other economies and then live off the interest?

    This sounds like good business.

  • Comment number 33.

    If you are out there Mr (or Mrs) CreditUnionHero - I looked into moving my money into a Credit Union before 7th December to support the move against the banks however unfortunately out of all the 243 Credit Unions in the UK I am not eligible to join any of them.

    This was a bit disappointing - so I'm stuck with the banks or the mattress [or shares or gold or commodities etc etc]

  • Comment number 34.


    So let me get this right. Our government is borrowing to pay Ireland? Robert, you said -

    'Update 1057: Over the past 24 hours, I have been asked countless times how the UK government can afford to provide around £7bn of support for Ireland - through indirect and possible direct loans - at a time when it is struggling to reduce its own deficit. - '

    'Well the answer, as many of you will know, is that unlike Ireland, the UK is currently having little difficulty borrowing record amounts at comparatively miniscule rates of interest. '

    and -

    '- the road to ruin is the fork in the road where public spending is permanently financed through borrowing rather than taxation.

    That said, borrowing to invest - to build schools, hospitals, railway lines or low-carbon power plants - can be seen as sensible.'

    My mind can only boggle at your diametrically opposed views!

    However. If the UK can borrow 'loads of dosh', why not do so at these favourable rates and long term them while waiting for the rates to rise, as they surely will, and then make a killing which will pay for our own woes.

  • Comment number 35.

    Don't gloat? But it's all we've got.

  • Comment number 36.

    I wish I was Norwegian. Nice smallish independent country that used it's oil/gas revenues sensibly, Norwegian Govt, industry and financial sector work together to grow and broaden their economy, taxation system that allows sustainable public sector, plenty of private sector investment in new industries...... and so on and so forth.

  • Comment number 37.

    "2) Banks that lent far too much to commercial and residential property, fueling an unsustainable boom that has gone pop"

    Bit one-sided!

    Which was made possible by:
    1. Deliberate policy of keeping house prices high by the last government.
    2. Greed in the general population in pursuing an asset bubble in the form of housing

    UK cuts probably won't make their 20% target - what happens if the UK posts it's cuts achieved as 10%? I think by then people will be hacked off as living costs rise due to inflation (a deliberate BoE policy to inflate away the debt) making the cuts feel worse. Could get messy. So far the markets are leaving the UK alone on the promise of reform - but can they deliver?

    ps to the banker bashing brigade. Whilst banking deserves lots of criticism, it's not the root cause of our issues, rather it's a contributing factor. The deficit is not the debt. If we had no debt we would still have a deficit (it would mean less deficit as no interest payments on the debt). So cuts are required. This means later retirement, and public sector cuts. People retiring for 25 years on pensions just isn't sustainable. It's a blip. Never happened before, never will again.

    Someone recommended this yesterday and although I've only read 5 subarticles I agree with them all so far:

    http://www.howitends.co.uk/

    The vision of the state managing the middle-classes through house prices whilst overseeing a slow fire-sale of assets, with real wages dropping and a demographic hairball rising up the throat of the populous is to my mind a clear articulation of the present.

    Although it is a bit apocalyptic for me.

  • Comment number 38.

    For me the problem with this is quite simply that during this whole crisis with the financial system the bankers at the heart of the problem are continuing to get bonuses - I know this has been blogged to death but that is because it is so wrong.

    Every time more money is shuffled around/into the system more funds are syphoned off to one bank or another as their cut to generate more profits which are then paid out at astronomically high percentages of profit to the bankers themselves.

    This is wrong.

  • Comment number 39.

    Meanwhile in the UK ... not much has changed.

    Britain still has a 'London centric govt' expecting an eventual 'recovery' to emerge so that it can tax the City of London cash cow ... where visas for foreign immigrant bank workers take centre stage in discussions over the UK economy.

    How about training British University graduates to take these bank jobs as the 'top govt priority'?

    How about some new UK import/export tariffs to finance the money needed to help rescue Ireland?

    Where is the real action that is needed NOW ... in the Uk economy?

    ... British bank jobs for British University graduates!

  • Comment number 40.

    This is the second crisis of the Euro this year.

    What does the European Central Bank have to say about this?

    Today, all it has to say was:

    http://www.ecb.europa.eu/press/pr/date/2010/html/pr101121.en.html


    On Friday, all it had to say was this speech by Jean Claude Trichet:

    http://www.ecb.europa.eu/press/key/date/2010/html/sp101119_2.en.html

    "My main topic for today is macroprudential oversight and the new body that the European Council and the European Parliament have decided to create: the European Systemic Risk Board or ESRB. The legislation has been finalised yesterday and the ESRB will soon become reality.

    I am honoured to speak to you today not only as president of the ECB but also in my future role as Chair of the ESRB.

    The new European body will be part of the new European System of Financial Supervision and it will be located here in Frankfurt. The city can therefore be proud to host three European authorities: the ECB, the European Insurance and Occupational Pensions Authority (EIOPA) and the ESRB.

    The function of the ESRB will be to provide macro-prudential oversight of the European Union’s financial system. It will bring together the governors of the national central banks, the new European Supervisory Agencies (ESAs), the European Commission and the national supervisory authorities of all 27 member states."

    After THREE years of a crisis in faith all over the globe, in the ability of Central Banks to manage their Monetary systems, (and particularly in the Euro Area where the design of the Currency's Monetary System was so blatantly floppy that you have to be a grunting drunk episilon moron to not know it), this is all we get? Ben Bernanke is a more frank and honest guvnor by all global accounts.

    Is the Entire World dependent on such vacuous economists/bankers as currently hold power, and their expectation that the rest of the world will continue to be dominated by masses of ignorant daydreamers and grunts?

  • Comment number 41.

    34. At 11:51am on 22 Nov 2010, Seer wrote:
    However. If the UK can borrow 'loads of dosh', why not do so at these favourable rates and long term them while waiting for the rates to rise, as they surely will, and then make a killing which will pay for our own woes.

    32. At 11:48am on 22 Nov 2010, Paul T Horgan wrote:
    What if Ireland defaults? If it doesn't, then could we lend more money to other economies and then live off the interest?

    This sounds like good business.

    PESTON:
    If the UK were to lend to Ireland for three years at an interest rate of 5% or more, which seems likely, that - in theory - would yield a profitable turn for the UK exchequer of perhaps 3 percentage points (or 300 basis points, in the jargon).

    It would be good business, on the reasonable assumption that Ireland repays the UK.

    -----------------------------------------------------------------------------------------
    Are we in the grip of some form of collective amnesia...

    No, nothing could possibly go wrong with borrowing money to lend it to other people...!!!

    DOES NO-ONE REMEMBER THE LAST COUPLE OF YEARS???? What do you think was involved in the banks collapse (and the subsequent bailout) - borrowing money to lend to other people...

    Oh god, we are just going to keep repeating this cycle...

    And as for the call of "breaking up the banks" - why? What difference does it make - if the rules are the same then the same amount of money is at risk - does nobody work in an SME? Why are they suddenly less risky than a FTSE 100 company??? All that happens is when they go it makes less of a headline - it reminds me of the tree in the woods falling question: "If a company fails and the press don't report it, does anyone lose a job?" - smaller banks are no more safe than large banks (look at the US where there were a lot of small banks which went under - just not so much reporting on them)

  • Comment number 42.

    The problem here is only indirectly the fact the UK is contributing to the bail-out. The core of the issue is that, yet again, governments are picking up the tab for bad commercial debts. The Irish banks got sucked into a manifestly unsustainable property bubble and were going bust. The Irish Government (that was not in too bad nick at the time) rode to their rescue and are now in trouble. (A parallel on this side of the water would be Lloyd's maybe who rode to the resuce of HBOS).

    Now larger countries - Germany, the UK etc - are riding to the rescue of Ireland.

    Whatever you think of all this we are set on a course in which Government's are not going to allow the banks (or other Governments) to default becauwe, in doing so they will bring down their creditors who are, as often as not other banks.

    On this basis, all the bad debts out there will ultimately end up at the door of the last creditable institution - and the question is whether they are able to carry them. If not, then presumably they go bust too - and then everyone is bust.

    At that point, the creditors lose everything: having precipiated the crisis in the first place. It would be a pleasing irony - if we were not going to be dragged down with them.

  • Comment number 43.

    So, the UK is being loaned money, to lend to the Irish, to support the banks who made too many bad loans. And when it turns out that this loan is also a high risk loan - as will occur to a ratings agency when the time is expedient - someone else will borrow some money to secure this loan. All the while, the cash is invented and multiplied to pump up the value sucked from the hard-working public that have to pay it back. A never-ending chain of debt, with the work of the man paying the interest at every link. One day we'll have visibility of the end-game, when there is not enough labour on the planet to pay back the collective interest to this system.

  • Comment number 44.

    This whole exercise is to save the Euro. Remember that the Euro is a right wing device designed to enslave a continent!

  • Comment number 45.

    40. verano wrote:
    "On Friday, all it had to say was this speech by Jean Claude Trichet:

    h"My main topic for today is macroprudential oversight and the new body that the European Council and the European Parliament have decided to create: the European Systemic Risk Board or ESRB. "

    ++++++++++++++++++++

    Now where have I heard 'prundential' before?

    Hmmm? ESRB, is this like the 'Re-arranging the Deckchairs on the Titanic Committee' ?

  • Comment number 46.

    So, lets see if I have this right for my own peace of mind. we are broke so we are going to lend someone else who is broke, £7 billion. Sounds like a plan to me.

  • Comment number 47.

    In fairness there are quite a few differences, control over monetary policy being the main one, differences in tax structure, debt structure, levels of indebtedness, and of course as stated our decisive and (to all appearances) effective intervention in respect of our own banks.

    We are vulnerable to further shocks, but we've experienced less of an increase in unemployment than elsewhere, including the US, and this means our aggregate demand has taken less of a hit, and our welfare bills, tax receipts etc, remain in better shape than in many countries. Despite the dangers going ahead, these facts combined with low interest rates mean the UK is doing remarkably well-- the danger is the world around us dragging us down, and that is certainly a real danger. I don't think we 'could' have been Ireland, but I think we could yet be. As to whether we should lend the money, my main concern is doing so in isolation, without an international plan for handling the crisis. But of course we must do so, in any case.

  • Comment number 48.

    Robert wrote:

    "The point is that Ireland's flaws are an extreme version of what happened here:"

    That is the WRONG way round!

    The UK's flaws are an extreme version of what happened in Ireland. And what is more, unlike the Irish who have stated correcting the terrible asset pricing errors, we have hardly started. It really shows how truly catastrophic the management of monetary policy has been over the last decade in the UK. Anyone who has had anything to do with the redefining of asset price inflation as something good should resign or be fired so that we can have a chance of becoming competitive again.

  • Comment number 49.

    IT'S strange that the price of a humble house has so much impact on world finances. Deliberately create a shortage ( like in Britain) and the money lenders and property speculators have a field day. Build to many, your country goes skint. Homes were once built for people to live in. Now they are the engines that drives the world's finances, You have to feel sorry for the 'young uns' what chance do they have ? How are we going to convince the homeless that the fresh air is 'doing them good' makes you weep sometimes.

  • Comment number 50.

    You forgot:


    5) Consumers borrowing too much from banks. But we can't blame consumers because then we would have to admit that we were partly to blame as well.

    But the real culprits in all this were the leaders of governments who encouraged all this borrowing, including Gordon Brown who was praising Lehmans days before they went bust.

    "During its 150 year history, Lehman Brothers has always been an innovator, financing new ideas and inventions before many others even began to realize their potential."

    Now we all know what he meant by their potential.

    In America there was the Community Reinvestment Act which virtually forced banks to lend to people in poor areas or risk being accused of racism.

    And then there were the many Eurozone leaders, who were unable to rein in the borrowing boom by raising interest rates because they had so unwisely surrendered their sovereignty.

  • Comment number 51.

    Who are the big creditors that every govt/ bank wishes to protect ... that is what I would like to know?

    'Big creditors' should take on risk like everyone else ... sounds like vested interests being protected here .

    The only protectionism that the UK dare take on is the protection of the same big vested interests that are laughing all the way to the 'Lord-not-so-young-club' ... the Goondog Billionaires ... who think they have real business acumen/credentials because they are looked after by the banks to receive unlimited access to our savings for borrowing massive amounts of our money to suck in cheap foreign imports for resale at extortionate price upgrades to British consumers; to buy on their credit cards which are operated by foreign banks.

    That is what I call a racket and it needs smashing along with the biggest and foreign interfering banks ... it is the 'triangle of despair' for real British business/production/manufacturing enterprise.

    We need more jobs for the British low skilled ... it is the primary responsibility of British govt to provide jobs for all British workers and not just write off those who are low preference for foreign spivs and goondog billionaire import suckers.

    Britain in decline!

  • Comment number 52.

    While British workers lose their jobs, homes, marriages, pensions, self respect and sanity ... our elected govt Business Secretary Leader has 'time off' ... for 'Come Dancing'

    Useless prancing immigration goon!

  • Comment number 53.

    I just cant get my head round George Osbourne suddenly has an about turn and rides to the rescue of another country with the proceeds of the savage cuts being forced upon the British public it makes little or no sense to me .

    Then again how the economy got in the state it is ,is also beyond me, if you had set out to destroy this country you couldnt have done a better job than the banks and successive governments have done.

    We can all just sit and wait for the dominoes to topple and await our turn in the line.

  • Comment number 54.

    And the second domino falls. Not a proper default of course, but simply another loan to enable the Irish to pay other loans: akin to using your credit card to pay the mortgage. Where will it all end? Obviously the debt will continue to grow, and eventually the same point will be reached again. It looks like Portugal will be next. The only solution the governments of europe are hoping for is that economic growth will return to enable the deficits to be reduced, and that the problems will just go away. But debt ridden economies are unlikely to show any growth and the cutbacks will just make it worse, ie look at Greece now. The bottom line is debt needs to be reduced, and only a default or "haircuts" can do this, but none of the government's want to cheese off their banking chums and so the process of "bail out" continues. Inevitably our turn will come. Of course QE may be used to defer the day of reckoning, as in the USA, but that comes at the price of more inflation. I dont think the BOE will go as far as the Fed reserve, because official inflation here is much higher already. I'm sure when the time comes the UK public will be quite happy for the country to default on its debts, but I suspect the government will ignore that, and press ahead with the same pointless actions.

  • Comment number 55.

    As I underestand it, Irish emmigration is increasing, unemploymet is rising, the business rate is rising and the debt is increasing. Who then will pay it back? If it's absorbed within the eurodebt the euro becomes devalued at the same time as US QE causes the dollar to fall and China controls the rise in its own currency, won't this lead to competitive devaluation? Is the unstated policy of each western economy to inflate the debt away by stealing the purchasing power of savings?

  • Comment number 56.

    Robert,

    Good piece and your points 1-4 summarise it pretty well for me.

    But the scary thing is that Ireland is nearer it's solution than we are ours:

    1. Already enacted public sector savings. Mostly taken on the chin by the population as a whole. I can't believe that will be the case in the UK.

    2. Ireland has had a good dose of asset price devaluation - 300,000 empty homes bear witness to that. Here, lack of housing supply and growing demand are pushing that bubble ever higher. When that pops it'll be a worse outcome than for Ireland

    3. The politics and people. IMO this is a more fractured country and there is no political consensus.

    The only thing that's saved us is the £.

  • Comment number 57.

    You said that Robert: "the UK has an independent currency and central bank".
    This is what every other country in the EU should have.
    The Euro simply doesn't make sense.

  • Comment number 58.

    I cannot let these silly side-swipes at Gordon Brown go unremarked: the global financial crisis was not of Labour's making. As much as I would also bemoan the lack of effective regulation it was precisely the free-market approach and lack of ethical business management around the world not just here that led to it.
    The actions to manage the recession in the UK went exactly as called by the Labour government, right down to when we came out of recession and at minimal social cost. If the present lot of multi-millionaires and charlatans in power can complete the job so much the better - but somehow I doubt it.

  • Comment number 59.

    Staggering hypocrisy! Everybody in Ireland and UK is blaming those naughty Bankers for letting us borrow to buy properties (even several) and stoke up prices out of all relationship to real values. Just so we could delude ourselves into believing how much money we had made or were now very rich and so clever. No doubt the Bankers were complicit as they made plenty of profits but we drove it as well. Get real!!!

  • Comment number 60.

    So we couldn't afford to lend £80 million to Sheffield Forgemasters but can afford to lend £7 billion to Ireland.

  • Comment number 61.

    UK Banks like RBS and Lloyd's, which are more or less owned by the UK tax payer, hold hundreds of billions of Irish debt. If the Irish economy collapses that debt will be worthless and the UK government will need to inject an equivalent amount of capital into these UK banks to stop them collapsing. A £7billion loan to Ireland to prevent this happening seems a pretty good investment even if there is little return on it?

  • Comment number 62.

    I don't think anyone is gloating , the UK missed this scenario by the skin of its teeth...

    No doubt the "markets" will be moving on to Spain / Portugal.

    Everyone will be blaming the banks (Rightly so) but in the end, poor government regulation is probably the bigger story.



  • Comment number 63.

    How can Ireland be allowed to keep it's predatory corporation tax rates, yet receive EU/IMF money plus a loan from us? American companies set up in Ireland not because they had a more skilled workforce, or even because of the Euro; they needed a European base where english is spoken - that means the UK or Ireland. So they go with the lowest tax option. Many of these jobs might otherwise have come to the UK - so why on earth are we allowing it to continue? Seems like it was a game of chicken, and Ireland won. Not happy.

  • Comment number 64.

    I'll also bet that Ireland has not got another 100,000 companies in 'serious financial trouble' and owing £58bn as the UK has, disclosed by Begbies Traynor in October 2010.

    Any further trouble in Eurozone countries is going to be really bad news for us; no point at all in gloating.

    I wish the Irish well, having worked there in the 1990s it really did become a place for hard, smart work. Those hard workers have now been let down by their government and their banker-boys.



  • Comment number 65.

    Respectfully RP i am not gloating i am just saying that Ireland should be giving more fro the bale out. Britian can only raise money because the value of its money has been mullered. Ireland has been paying unemployment benefit at 196 euros per week with unemployment rates in excess of 10% and minimum wages in excess of 8.86 euros. The 10% corporation tax compared to the uk's 28% has ben much publisised.

    Of course there has been and continues to be worldwide but there are also many reasons Ireland's crisis is down to its own leaders

  • Comment number 66.

    Is the UK next?

    I think that the extriemely sharp, stainless steel pin in George Osborne's hand is poised to burst the UK property bubble and take us all with it.

    According to the OECD, UK property prices are over-valued by 40% - we've seen the property bubbles burst in Eire, Spain and the USA - what is going to stop it happening here - or more to the "point" who is going to risk causing a UK metldown far worse than in Greece or Eire?

    Basic economics lesson:

    1. House prices are a function of several core factors - incomes, interest rate, availability of property and loan finance. Beyond these econometric factors there is the question of " market confidence". Interest rates may be virtually zero, but mortgages are VERY hard to get, first time buyers av. age now 35: at best this is a stagnating market, if left as it is - but drastic changes in economic policy will not let it carry on as it is.

    2. £110 Bn of spending cuts translates into a fall in aggregate demand in the UK economy of between £220 Bn and £1Tn, depending on whose fiscal multiplier you use - OBR has no idea and simply reports the range of opinion - they dodge the issue completely in their forecasts. Taking up to £1 Tn on demand out is IMHO viurtually guarenteed to cause a recession.

    3. Unemployment is projected to rise by quite a lot - public sector job loses are projected as +1,000,000 - construction jobs disappearing as olympic construction ends and the Darling "boost" capital works programme keeping 300,000 builders employed also ending - plus central and local govt cpaital works are being slashed back. Then there's jobs cuts in defence, financial services, etc.

    4. In Eire the austerity package was intended to enable the government to reduce borrowing - actually it's expanded because the economy contracted by 13%, compounding the debt problem.

    5. The UK public sector austerity programme is supposed to be counter-weighted by growth in the private sector: i.e. 2.7m NET new jobs, £400 Bn of new investment in industrial capacity and exports up by a third over the Parliament, but as we have seen in Eire, if this side of the economic strategy doesn't deliver, debt rises as government welfare costs for unemployment rises and tax receipts fall as the economy contracts.

    6. If there was a meltdown in the UK property market, the UK banks would be unsaveable - the level of bail out needed here would leave us no choice but to allow them to go to the wall. That would leave UK PLC with a currency going through the floor, debts that could never be serviced and the wealth we all now feel we have in our himes, our savings and our pensions would vitually disappear, whilst our ability for fund public services would be so low we are talking third world levels.

    CONCLUSION:

    Osborne who trumpeted how wonderful the irish economy was and supported their austerity programme is taking an unacceptable risk with all our futures.

    Cameron & Clegg's claims that the private sector will miraculously grow to prevent a recession and generate the money to pay off our debts is an ideologically motivated delusion - there is no evidence that it is working and every reason to believe it will fail, given the state of our main exports markets and the self-inflicted injury we are about to inflict on ourselves by slashing aggregate demand so heavily.

    Commonsense tells you that when a house is on fire, it's pretty silly to pour petrol on the flames....

    .... even if I was a ConDem supporter, I'd be worried about what is about to happen and I'd be asking some very hard questions about why the government thinks they can fly in the face of all the evidence and go on claiming it's going to work.

  • Comment number 67.

    • 58. At 13:01pm on 22 Nov 2010, Tyto alba wrote:
    I cannot let these silly side-swipes at Gordon Brown go unremarked:


    Gordon is getting exactly what he deserves - I can't believe that anyone would feel moved to defend him. He was the one who constantly banged on about prudence and promised not to let house prices get out of control - then proceeded to let both happen on his watch - as well as bludering on with ever increasing public expenditure based on a never ending tax receipts from the bubble economy.

    The blame is fair, right and just - he has been the worse PM in living memory. And his reputation as the iron chancellor lay in ruins.

  • Comment number 68.

    Time for us to get our money back, and tax "Irish" pubs in the UK.
    It'll get rid of the faux Irish pubs straight away. A win-win for the taxpayer!

  • Comment number 69.

    the number of economically illiterate followon comments riffing on a theme of 'Britain is in so much of a worse position! We're doomed! What are we doing lending to these people?' is staggering.
    Simply the one thing that Peston does not make clear is that the singular difference between the two countries is the property outcome. Ireland has a genuine property bubble where the banks funded construction of over 300,000 unwanted homes, currently lying empty. Thus the banks are shot below the waterline. The banking debt in the UK is largely related to 1) the investment banking divisions, and the debts accrued by the fallout of the subprime mess in the States and 2) the particular issues around Northern Rock/Bradford & Bingley etc where poor lending was made. However because supply is constricted (ironically because of Labour's failure to see through the house building programme in the early 2000s) we are not seeing banks lumbered with hundreds of thousands of worthless houses. Generally the pricing of the housing market has held steady.

    My major concern would be around full visibility of the outstanding Irish debt. I'm not sure the bottom of the barrel has yet been reached.The Sunday Times reported over the weekend that the ex Chairman of Allied Irish has declined to handover to the administrators at Allied the passwords to over 100 key client files...

  • Comment number 70.

    This is the first time I have ever felt motivated to Blog but I feel so strongly that the British people cannot afford to stand by and be 'convinced' by the political elite it is a good idea to borrow more money to lend to Ireland.

    There is financial rationale and there is common sense. Regretably our politicians forgot there commonsense and replaced it with greed decades ago.

    Running a small business, I know that once you are in debt you relinquish control to the banks and you no longer run your business. They do! The same has happened with the western economies. Governments relinquished control to the banks some time ago and similarly lost control of their country.

    In the context of Ireland the phrase good money after bad is very relevant and we have to keep some of our 'good money' for our own crisis.

    Despite what Mr Peston says about public sector activities having to be financed from taxes not debt, how can any politician on the one hand be saying to their people we are all in this together, cuts are not optional if we are to survive and the cupboard is bare. Whilst on the other hand when another economy is in serious trouble we can find £7 Billion by taking on more debt.

    The only reason Politicians think it can be said is the general political apathy of the British Public 'knowing' it it highly unlikely they will take to the streets.

    To end I would say this assumption may prove unwise and just as dangerous to the economy as lending even more money that we haven't got.

  • Comment number 71.

    I imagine that the BoE would have liked the £7bn sum to be much higher. If you are printing £200bn of new money and need to launder it, Ireland can be seen as a nice little earner. For the political correct out there, please read my comment as Qualitative easing and market liquidity and not printing money and laundering.

  • Comment number 72.

    Here's some news for some posters: yes, we HAVE had a property price crash in the UK - just not in pounds sterling. Sterling has devalued around 25% in the past few years - and it is that as much as anything that has 'saved' us - for the moment anyway.

    But if the Euro is bad for Ireland, why can't it just leave,and then devalue? Or,how about this: Ireland gangs up with Greece, Portugal and the other countries in trouble, to push for a devaluation of the Euro against the US Dollar. 25% should just about do it.

  • Comment number 73.

    At 13:07pm on 22 Nov 2010, Richard Kent wrote:
    So we couldn't afford to lend £80 million to Sheffield Forgemasters but can afford to lend £7 billion to Ireland.

    It's the banks that are not lending. The UK Gov hates this as it needs its newly printed money to get 'Out there'. I wonder if the creation of our own equivalent of the US fannie mae freddie mac will come about? It sure would help. We've copied every thing else the yanks have done, why not these vehicle's of laundering?

  • Comment number 74.

    #15 -

    > Surely you mean “Great Britons”? The Irish are Britons as a matter of geography, not politics - Ireland is one of the British Isles. No-one should gloat - we share their Celtic heritage and their Weltanschauung – we all despise bankers. We've got more in common than ever!

    Er... isn't it the United Kingdom of Great Britain and Northern Ireland - the 'Great Britain' part refers to the mainland (and the lesser Britain part was Brittany, back in the day...)

  • Comment number 75.

    One difference between the UK and Ireland is the sheer scale of Irish corruption. Backhanders from businessmen to politicians rendered whole areas of the coutry immune from regulation and taxation. This has been exhaustively documented over many years since the days of Haughey. Dare noone mention it here?

  • Comment number 76.

    If the £7Bn is a loan which is swiftly repaid with good interest, then great. But if Ireland can't borrow now because of her poor credit rating, why on earth is Britain happy to lend her money?

    And once Ireland's had a loan, guess what? Portugal is next in the queue, followed by Spain & Italy... with the ex-Iron Curtain countries bringing up the rear.

  • Comment number 77.

    59. At 13:04pm on 22 Nov 2010, kingholly wrote:
    Staggering hypocrisy! Everybody in Ireland and UK is blaming those naughty Bankers for letting us borrow to buy properties (even several).....
    ------------------------------------------------------------

    Please post a link to back up your view and to show that we all own several mortgaged properties.
    How many buy to let landlords are there?
    Where was effective risk management?
    Were the lenders encouraging new amateur landlords to enter the buy to let market?
    Are you a buy to let landlord?

    Here we are used to strong arguments with some links to back up those arguments. Rants are for the Daily Mail comments section.

  • Comment number 78.

    When will the clever politicians across the EU and their equally if not more advisors realise that "the party is over"? There is obviously no point in trying to point fingers and even if one could find the person who got all of us in such a mess, there is no penalty in place and nor will that person or persons have the cash to correct the problem.

    It is time to stop throwing more good money (and money that does not even exist at the moment as our future generations will need to generate that) after bad. Time to stop and tell the citizens that they need to learn to live with less and that it is neither the responsibility of the government or honest hard working tax payers to support those who engage in self harm and/or do not wish to participate in the economy for everyone's common good and for the future generations to have some hope of a decent life.

    It is inevitable that a full generation or two of EU citizens will have to suffer the pain of the past follies. The sooner the better. All the present day politicians, especially those living in the clouds of Straousborg, are busy postponing the inevitable into the future. Shame on all of them.

  • Comment number 79.

    62. At 13:14pm on 22 Nov 2010, hughesz wrote:
    'I don't think anyone is gloating , the UK missed this scenario by the skin of its teeth...'

    The skin of its quantitative easing more like.


  • Comment number 80.

    61. At 13:09pm on 22 Nov 2010, Kilkis wrote:
    If the Irish economy collapses that debt will be worthless and the UK government will need to inject an equivalent amount of capital into these UK banks to stop them collapsing. A £7billion loan to Ireland to prevent this happening seems a pretty good investment even if there is little return on it?
    --------------------------------------------------------------------

    When the Irish economy collapses.... the UK government will still need to inject an equivalent amount of capital into these UK banks.

  • Comment number 81.

    Robert, you stated on the BBC News that we are heavily exposed to Ireland? Why did we have so many eggs in one basket? Which other countries are those where we have the highest exposure? Whose judgement is it that decides what the exposures limits should be and who monitors them? Has someone made a big mistake with exposure limits for Ireland? I don't ask these questions necessarily looking for someone to blame, but so that we can be enlightened, and know how to ask the right questions for the future

  • Comment number 82.

    I believe the UK's ability to "float" the currency is going to crucial factor in enabling quicker turn around for the UK economy, than the Euro average,.Expect robust Christmas sales and 3% GROWTH FOR NEXT YEAR . I think the public sector slow down has been over played and will have a minimum impact on the headline numbers, although it will obviously be tough on the individuals affected.

    Hopefully later in the year the economists at the big banks will advise on greater mortgage lending for the masses to enable first time buyers to get their first homes .Surely the best investment you can make.

    Sorry if this offends the doomsday brigade, but I think you missed your chance for revolution.

  • Comment number 83.

    Robert .

    If you can't afford it, then you can't have it! It was always the same view expounded in my grandparents time, (he was a bank Manager after WW1) then along came my parents and they taught me a similar philosopy. No loans for sweets, No sweets unless I went out and earned some money, I remember collecting horse shit for the local rose enthusiasts for a few bob for my sweet money as a 10 year old.

    I am about to retire (The unquittable life permitting) and I look around.

    Now I see my younger compatriots, out & about with a fast car on tick, (that's not a clockwork car by the way); Credit cards maxed out, a rubbish credit score. Student loans maxed out, or potentially even larger ones in future - No prospects of making any pension contributions anytime soon.

    Having travelled widely while working in the third world and seen real poverty, probably not unlike Ireland during the potato famines, it was a lesson on looking after what assets that I had; but also wondering why: that no one in a position of power had a similar viewpoint?
    Did they all go to Eton? Did they all find it too easy to make money? Were their parents all ministers in the kirk? Who believed that GOD would look after you?

    The only people to save for the future were those who remembered being hungry, the Germans (after WW2) and those with no 'social security' safety net (the Chinese being a good example) but also the Japanese(after WW2)

    Collectively all the bankers flushed their brains down the toilet, and that is now sucking the rest of us down their too. The countries with a surplus such as Norway, Singapore, Switzerland and China had also better be careful for every default causes some savers to lose their money too.

    The ONLY SOLUTION, is the long term solution, save a little more and don't waste money on unecessary expenditure, there are lots and lots of challenges ahead. $1000 oil and $100 bread and climate change (to name but 3).

    If you take a 100 year viewpoint like the Chinese do, then there is some hope, but a single generation or two will need to be thrown to the wolves to sort out the mess that we are currently in.

  • Comment number 84.

    So, the UK is borrowing £7bn and increasing the UK debt, to lend the money to a more in debt laden society, in the hope of making a profit out of Irelands misery, and papering over the cracks in our system.

    The whole thing stinks, and is similar to survivors of a plane crash resorting to cannibalism, eating the weak and dying passengers to stay alive.

    We are just kicking the can down the road and the further we kick it, the deeper the debts become and the worse the situation gets.

    Check out the BBC's own Eurozone in Crisis and click on Recovery Measures.

    http://www.bbc.co.uk/news/10388576

    In every country, regardless of current debt levels, deficit and austerity measures the DEBT just continues to rise.

    It doesn't take a genius to figure out the ponzi scheme that is the debt based monetary system has reached its natural end. Banks will never have the trust of people to willingly take on debt again so like all ponzi schemes, lack of funds (debt) at the bottom will bring it all crashing down. Governments are now stepping in to create the debts on our behalf to shore up this fake system. It can't be fixed by throwing good money after bad, they just need to default on all debts and let the investers finally take it on the chin.

    Good luck everyone that deserves it.

  • Comment number 85.

    "31. At 11:48am on 22 Nov 2010, cark wrote:
    Although I have always hated the idea of borrowing personally, ie as an individual.
    I have come round to the idea that the government should borrow (or if it has the will simply create) money and spend it now on things that may help it in the future, this is cos I am sure devaluation of pound (and all other national currencies) relative to what can be bought is now a sure thing, so we may as well get as much as possible for the money. The critical thing of course is to spend it on things that will make a difference, infrastructure is important but planning for an era of expensive energy must be up at number 1. (propping up banks which is all that is happening should be at priority zero)"

    Wiermar republic - Death of Money - about what happened to Germany in the 1920's
    Scary Stuff with many of today's symptoms played out

    Basically it says Look after your currency don't believe you can print your way out

  • Comment number 86.

    20. At 11:15am on 22 Nov 2010, Cassandra wrote:
    "According to the Bank of International Settlements the Irish banks owe $149 billion to the UK Banks. Dave and George giving money to Ireland is not an EU issue it is necessary to protect our banks.

    What I would like to know is how much in bonuses was paid to the bankers that wrote the loans to Ireland?"

    Spot on - for those of you who are asking should the UK be lending 7bn to Ireland - well in effect british banks have already lent 100s of billions of pounds to Ireland, via "investments", loans to Irish banks, property developers, UK companies investing in Ireland etc.

    The bankers at the time have been paid their bonuses for these "profitable" investments and now that a significant proportion of the loans will not be paid back
    George Osborne has been told by his lords and masters, the banks, that if he doesn't lend some money to Ireland he will have to bail out the UK banks again.

    So another case of taxpayer paying for banks wise investment decisions!

    meanwhile RBS and Lloyds are paying out bonuses, more than 7bn you'll find.

  • Comment number 87.

    You're all over-reacting and playing into the hands of the scaremongers!!

    Everything in the Republicj of Westminster is absolutely fine. David Cameron is charge and it will all be over before Christmas.

    You should all get back to work. Disgraceful defeatist talk!

    GC


  • Comment number 88.

    2 Questions.

    If the UK is contributing to the EU package through being part of the mechanism, and through the IMF package by virtue of being a shareholder, why is the UK offering £7bn in bilateral loans? As far as I understand only £30bn is required to inject directly at this stage, with the remaining to be drawn down when required, so is the £7bn not superfluous?

    If then the UK government are offering the £7bn because they can charge Ireland at an increased interest rate to the rate we are required to pay, does the government then see it as an investment? If this is the case, is this a wise investment given the ability of the Irish government to repay still remains in question?

  • Comment number 89.

    Robert, I would appreciate some comment/analysis whether this £7 billion is just good money being poured into a black hole. Clearly it makes sense to lend the money (making money on it) if it gets repaid, but the sort of numbers you have been showing (700% total debt as proportion of GDP) suggest that there is simply not the ability for the debt to be serviced by the nation, even with extreme austerity.

    The "saved" Irish banks are not going to be reckless world players any more, so will never generate as much profit as before, so it would seem that the money being given is only justified as being less cost than yet another worldwide banking collapse.

    I haven't seen anything yet that suggests that any actions have been taken yet to actually resolve Irish insolvency. There just seems to be a vague hope that kicking the can down the road a few years will be better than sorting the problem now. I assume this is because it is hoped that the European recovery will have been strong enough to support the formal bankruptcy of Greece and Ireland in 3 years time without the contagion that would occur if done today.

    Robert, would it be irresponsible of you to announce that the bankruptcy of Ireland has been set for 2013/14?

  • Comment number 90.

    Razor Cut - Sir!
    or will you just take the razor :-(

  • Comment number 91.

    Robert - do you have a link or a more detailed reference to the McKinsey report you mention?

  • Comment number 92.

    Lending Ireland more money may seem like a ‘sticking plaster solution’ to many but all would do well to remember that the point of plasters is to stem the blood flow (money) and allow the patients body time to start repairing itself. Unfortunately Ireland will find the healing process tough going and it will certainly take a long time to repay a sizeable portion of its debt but once the patient is off the critical list (and it no longer looks likely to default) then it will find the price of its medication (interest rates) are a lot cheaper. As Robert has pointed out Britain must act as the costs to our economy were Ireland to implode would be disastrous – the fact we can take the opportunity to leverage some of our own debt repayments by lending Ireland at an advantageous rate (for both) is a welcome bonus.

  • Comment number 93.

    "It would be good business, on the reasonable assumption that Ireland repays the UK."

    You are having a laugh aren't you? That is most certainly not a "reasonable assumption"! A "reasonable assumption" is that within five years the Euro will have broken up or at least shrunk either by Germany leaving or errant states being ejected.

    Once that happens we are in unknown territory and soveriegn defaults are a probability rather than an "unthinkable"

    I don't understand the REAL motivation for this offer (as opposed to the one that GO has stated). The RBS loans are into NORTHERN Ireland, not the Irish Republic, so that is irrelevent spin. Perhaps the Royal Mail savings schemes are the motivation, or, more likely, by sharing the "risk" it avoids the pound rising against the Euro and killing off out export led recovery...

  • Comment number 94.

    Over last 10 years Ireland won and UK lost massive contracts such as INTEL / DELL, because Ireland sets non-sustainable business incentives / low tax rates.

    Now we are expected to help them out.

    Will Ireland be forced to increase these rediculous business incentives / low tax rates, as a condition of these loans, so UK can win contracts like INTEL/DELL, etc in the future and help reduce UK unemployment.

  • Comment number 95.

    A BAIL OUT FOR IRELAND YOU MUST BE KIDDING.ITS A BAIL OUT FOR THE BANKS ,NOT ONLY IRELANDS BUT THE UK AND EUROPE.BECAUSE OF ALL THE CASINO STYLE BETS THEY PLACED BUT THEY NEVER CAME OFF.CHECK OUT RBS AND BOS EXPOSURE IN IRELAND THAT TELLS YOU THE STORY.MAX KEISER SAYS CRASH JP MORGAN BUY SILVER.ERIC CANTONA CALLS FOR A BANK RUN ON 7TH DEC.WHATS GOING ON IN THE WORLD WHOS NEXT.

  • Comment number 96.

    I still believe Spain have all the power in this episode, picture the scene when the ECB nutcases turn up for Spain's bailout.
    Eurocrat says "Er we'll lend £500 billion at 5%"
    Spain finance minister replies "Sorry the terms of the bailout are unacceptable"
    Tick tock the clock starts ticking.
    Eurocrat starts getting worried and says "come on Spain you must take our loan or world banking will fail"
    Spain finance minister replies "well what special terms will you offer me"
    Eurocrat agrees to give the spanish £500 billion loan at 1%.
    Spanish finance minister says "I am sorry the terms of this loan are unacceptable you must come with something better"
    The clock continues to tick and the world looks on with furrowed brows.
    "O.K." said the eurocrats "we will give you the loan interest free because we've only got 45 seconds to the world"(sorry Gordo).
    The spanish finance minister tries not to laugh " I have consulted with my government and they believe the only terms we can agree is the gift of £500 billion from our euro freinds"
    The eurocrats are furious and say "we cannot agree to those terms but we need to sort this out quick or the banking system will collapse and we will all lose our money"
    The spanish financeminister " well at least we will all be the same"

    The final outcome Spain gets a £500 billion gift. I'm not sure any of us would get to know what really happened anyway.

  • Comment number 97.

    100 Billion bailout...for the banks.
    Cost...15Billion over the next 4years from the people.

    Sounds as good deal...for the Banks.

    Yet again....
    Banks/City...1
    The People...0.

    It's the same the whole world over, It's the poor that get the blame, It's the rich that get the pleasure, Ain't it all a bloody shame.

    On Bonus someone wrote this would you believe!...

    "I don't see why they shouldn't pay good money for top people, as surely you wouldn't want them to keep rubbish people, as then tax payers monies would never be repaid?!! It's swings and roundabouts. They pay good salaries to people (who pay a lot of tax - ok there will be some that do it all offshore etc but very very few), they get good people who turn the banks fortunes around and in turn improve the economy for everyone. What's so wrong with that?!"

    My answer...

    "Strikes me that 'they' are all rubbish people"

  • Comment number 98.

    the end of the world is nigh. disaster, calamity, turmoil.

    No - not the irish debt crisis.

    for the first time ever, I find myself agreeing with Mr Peston's words of wisdom.

    We really are in trouble now.

  • Comment number 99.

    Another round in this perpetual war of attrician between the countries and their banks on the one hand and the markets on the other.

    The markets know there are huge weaknesses but they aren't sure where they are.

    So do the banks which is why they aren't lending to each other.

    This isn't going to go away and at some point those wesknesses will be unearthed so lets hope that governments use the time they have left to put their houses in some sort of order otherwise all they will be left with is a load of bad banks and phantom assets.

  • Comment number 100.

    It is facile to blame Labour about people borrowing too much money or people in Ireland blaming the government there. Individuals and businesses (banks too) must take responsibility.

    People borrowed way too much and that credit card companies and banks were willing to regularly lend people anything from 20,000 up to 150,000 in unsecured debt and far far more than that in secured debt that was unsustainable; is those companies and the individuals involved look out. A prevention of this situation happening again is paramount and people are just going to have to deal with the question, what is enough?

    It's too easy to blame the government and if anything the last governments bail out and this ones attempted clear up have prevented an economic crisis that could have lead to mass rioting, economic ruin and war and that is not hyperbole.

    The positive thing that could come out of this whole situation is a re-think on how economies work and that as a country maybe even a continent, Europe will have to look again at making goods for market and providing services that are valued and not dependent on government cash.

    Even though I work in the Public Sector, it is time to admit that it is now far too big but at the same time the private sector and private individuals that have made billions in the last fifteen odd year of growth must take some responsibilty too and release the purse strings, invest and pay proper wages. There is still huge amounts of wealth in this country but it is becoming evermore concentrated. That's what a government and an opposotion supposedly intersted in fairness should look at and the nature of profitability and shareholders that through their demands leads to wage cuts, consolidation, redundancies, exploitation over seas and the erosion of workers rights.

 

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