THE DIRTY DOZEN - w/e May 26th 2013

Last week the great ROG, Ronan O’Gara, announced his retirement and Munster rugby is bereft; last week also BOD, Brian O'Driscoll, announced that he had decided to give it one more year and the fans of Leinster and Irish rugby cheered. The cliché has already been trotted out for both ROG and BOD – neither ‘owes’ us anything, both have given magnificent service to their country.

Yesterday, with only a tiny fraction of the fanfare, came the news that NWL, Namawinelake, was retiring. I'm a rugby fan, Munster and Ireland (we’re kind of short of AIL clubs around Ballyhea), a huge admirer of both Ronan and Brian; in the greater scheme of things, however, the loss of Namawinelake is of far, far greater significance to Ireland and – though the vast majority of them don’t know it – to the Irish people.

For those on this side of the divide in the fight for justice for Ireland and for its people, for the many who are giving up their own time to expose the truth of what’s happening as opposed to the government spin, to those who are battling for transparency in big business, public and private, for accountability at every level but most especially at the top, Namawinelake was our hero, Namawinelake was our Brian O’Driscoll, our Ronan O’Gara AND our Paul O’Connell, all rolled into one.

There are many out there running independent blogs and the likes of economists Constantin Gurdgiev, Brian Lucey, David McWilliams and Seamus Coffey come to mind, all done in their own time. NWL though was the best, the special one, and like O’Driscoll and O’Gara in their chosen field, went way beyond what any of us could even dream of doing.

The wonder for those who were avid readers was that one of the mainstream newspapers didn’t pick up on the blog, give Namawinelake its own daily column – I'm  certain it would have become an immediate sensation. Sadly however, so many of those on whom we rely on in that mainstream media to inform us don’t even bother to inform themselves, are content just to add to the official spin as this government leads us lemming-like to the abyss.

It was an anonymous blog, no-one knows who he/she/they  is/are (and no, categorically, it’s not me), but with often several blogs a day, every blog chockful of statistics/research/tables/links, the belief was that no one person could possibly be running that site, that were it an organ of the state it would have taken a small army of top civil-servants to keep it going.

It seems now there was just one person behind it and all that work has taken a toll, exacted a price – Namawinelake has left the building. Rugby fan that I am, no apologies to anyone for again stating this; NWL leaves a bigger void than ROG, leaves a bigger void than will be left even by BOD. We mourn, of course, but we all also offer our eternal gratitude, those of us who knew. To go back to cliché – he/she/they owe us nothing. But by God do we owe NWL.

On the fact that in leaving @namawinelake then followed @ballyhea14, my Twitter account, it’s the most flattering and the most humbling thing that has ever happened to me.

The bond payments from the remaining Irish banks go on regardless, however, and so this blog. The next 12 bonds amount to around €3,500,000,000 – good to know, isn’t it, that we do in fact still have a functioning banking system? Functioning, that is, if you're a bondholder.

THE DIRTY DOZEN - w/e May 12th 2013

BALLYHEA PROPOSALS TO LIFT IRELAND’S BANK DEBT BURDEN

There is a major imbalance in Ireland’s contribution to the current Europe-wide crisis. To correct that imbalance, and after consultation with several experts in the field, the Ballyhea & Charleville group, part of the growing ‘Ireland says NO!’ campaign, now intend to meet both the ECB and the EU to propose the following:

• To the ECB: Write off the €28.1bn in sovereign bonds currently held by our Central Bank in lieu of the Promissory Notes (€25bn + €3.1bn for the 2012 note), Notes that were issued in 2010 to cover a flagrant abuse of the Emergency Liquidity Assistance fund when €31bn was pumped in to two already insolvent institutions, Anglo Irish Bank and Irish Nationwide Building Society, abuse the ECB itself approved;
• To the EU: Through the ESM, restore to the Irish Exchequer a) the €3.1bn already destroyed on the basis of those Promissory Notes, b) the €20.7bn taken from our National Pension Reserve Fund to bail out those banks and c) the remaining €12.2bn or so borrowed from the various emergency funds to bail out the Irish banks.

The first proposal will ease the long-term bank-debt burden, the second will ease the current situation, give us money to invest in job-creation and thus enable us grow our way out of this recession.

MEETING WITH ECB/EU

To discuss these proposals we are looking for a meeting with the ECB (in the case of the first proposal) and the EU (in the case of the second). As we take this fight to Europe we are calling for the backing of every TD and Senator, of every Council and Corporation, of every MEP, and especially of our President himself; we are also asking for the backing of every union, of IBEC, the various Chambers of Commerce and ISME, of every sporting organisation, of every national organisation great and small.

We would appreciate especially the support of our media, all forms local and national.

EXPERTS CONSULTED:

Dr Constantin Gurdgiev, UCD & TCD; Seamus Coffey, UCC; Jagdip Singh (Namawinelake).

 

BACKGROUND

In January 1999 the EU launched a new currency, the Euro. It was a seriously flawed design, carrying within it the seeds of its own destruction. Included in those flaws, and highlighted in an article by Belgian economist Paul de Grauwe from the Financial Times of a year earlier, was 

• a lack of foresight of what might happen when countries and their banks suddenly found themselves with access to an unlimited supply of previously expensive billions; 
•  a lack of oversight, no-one applying the brakes to the destructive and reckless rush of capital from the core to the periphery; 
•  an absence of any structure in the event of emergency.

Within eight years the Euro crashed, taking with it a whole array of banks and causing devastation in the economies of several Eurozone countries. One of the major causes of the systemic imbalances built up over 2000-2007 period across the Eurozone was the monetary policy mismatch (summary here by Dr Constantin Gurdgiev).

SHARING THE RESPONSIBILITY BUT ALSO SHARING THE BURDEN

Those of us in what is now known as the Eurozone who signed up to the new currency and all its myriad design flaws share responsibility for the chaos it has caused. We must also share the cost, the various financial institutions who engaged in the reckless lending especially so.

In Ireland, we have been burdened with a massively disproportionate share of that cost. How much? So far, and excluding the contribution from NAMA (set up to take over the major bad debts of the Irish banks), the Irish bank bailout amounts to €64,100,000,000. That’s €14,244/person, or approx. €60,000/family.

FIRST IN THE LINE OF FIRE

When the crisis hit Europe, Ireland was first in the firing line. Lacking any guidelines or structures from Europe, or any supervisory oversight, the then Irish government took unilateral action to save its banking system, the infamous ‘blanket bank guarantee’ of September 2008. It was ill-advised in every sense but all of that advice – and the subsequent decision – hinged on the misinformation given by the banks themselves that theirs was merely a temporary problem of liquidity, when in fact several were already insolvent (see page iii section ‘Consensus’ for the role international and EU institutions played in driving unsustainable risk build-up in Ireland). The Guarantee was issued in the environment where any real advice or direction from either the ECB or the EU was lacking, with Irish authorities left on their own to deal with the acute crisis.

EU/ECB POLICY

Regardless of the problems emanating from that guarantee, however, and the EU’s negative response to it, from the outset of the crisis the stated policy of the EU/ECB itself was to bail out every bank and every bondholder – there would be no ‘haircuts’, no ‘burden-sharing’. And so it was that as the years passed, as more and more austerity has been piled on the Irish people, bond after failed bond in bank after failed bank in the Irish system was paid in full. 

That policy flies in the face of all natural justice, has resulted in a situation where the poorest in society are subsidising the richest, bailout of the rich by the poor. This policy also contradicts EU responses adopted in subsequent bailout packages in Greece and Cyprus.

With that in mind, we are now taking our case directly to Europe.

WHO WE ARE - BALLYHEA SAYS NO (115 weeks), CHARLEVILLE SAYS NO (100 weeks), IRELAND SAYS NO (15 weeks).

Our campaign began on March 6^th 2011, the weekend after the last General Election when Enda Kenny, even before he had met with Eamon Gilmore to form the new government, announced that burden-sharing with the banks wasn’t going to happen. 

Apart from the weekly march, in the past 115 weeks we’ve been to the Dáil thrice, to Brussels twice, to the ECB HQ in Frankfurt once, all at our own expense. 

We are individual citizens exercising our civic right, our civic duty, to fight for our families, our communities, our country. This massive debt has been imposed on us without consultation with us, without anyone even asking for our approval. We repudiate that debt. 

We hear of all the Irish/EU/ECB rules/regulations/laws protecting the banks/bondholders/financial institutions; where are the rules and regulations and laws protecting the people? How did we end up with a bank-debt of €69.7bn imposed on us? 

Individually we all have our different political beliefs (or none!); collectively we are a-political. We are not economic experts and don’t pretend to be; in gender, age-group and employment status we’re just a cross-section of Irish society, with a single, united agenda - lift this unjust bank-debt burden from our shoulders. We won’t rest til it’s done.

Enough on all that - our banks still have bonds to pay! Here are the next 12 on a still very lengthy list.

THE DIRTY DOZEN - w/e May 5th 2012

PROMISSORY NOTES TO SOVEREIGN BONDS EXPLAINED

 

When Minister Michael Noonan announced the means by which he transformed the Promissory Notes to sovereign bonds I presumed everyone understood exactly what was being done, was surprised there wasn’t more outrage. Now I'm not so sure people did understand, perhaps not even those who – alcohol haze notwithstanding – voted it through.

Everyone knew that under the old scheme/scam, every March 31^st for the remainder of this decade the Central Bank would take €3.1bn from the Irish economy and destroy it. What Michael Noonan should have done on behalf of the Irish people was simply refuse to do that anymore, face down the ECB. Michael didn’t have the stomach for that fight so instead he found excuse to wind up Anglo/INBS – the two banks at the heart of the Promissory Notes bailout exercise – and in place of the Promissory Notes, issue €25bn worth of sovereign bonds.

EASING MICHAEL'S BURDEN

It took the pressure off him and off his government colleagues for the next few years - no more of that pesky debate every year in the months preceding the March 31^st deadline. Immediately, on our airwaves and on our major daily newspapers, figures were bandied about, headlines trumpeting the government line of '€20bn in savings'.

Subsequently of course – though far less prominently – those claims were admitted to be utter nonsense but nevertheless the general acclamation for Michael’s sleight-of-hand still stands. I wonder though, do all those cheerleaders fully understand what this deal entails? Does our local Fine Gael TD Áine Collins understand, for instance? On the basis of a letter she recently sent to one of our regular marches where she proclaimed the ‘end of the Promissory Notes, we don’t now have to pay’, I don’t think so.

THE SELLOUT COMPLETE

Under Michael’s treacherous scheme this is what now happens: beginning before the end of 2014 the Irish Government will start withdrawing the €25bn of new bonds it pledged to the Central Bank and sell them on the open market. Their proposed schedule is €0.5bn a year for five years, €1bn a year for another five years, €2bn a year for the next eight years, and finally, in 2032, €1.5bn, making a not-so-grand total of €25bn.

ASHES TO ASHES, DEBT TO DEBT

So far, so simple. But what happens next? What happens the €25bn generated by the issuance of those bonds, the bonds on which we will be paying interest for the next 40 years? Have you heard any explanation on that, any probing questioning of any of the myriad government trumpeters of this great deal? No? Here’s why.

Just as the €25bn from the remaining Promissory Notes was going to be destroyed, so too will this €25bn. As bond after sovereign bond is issued and those billions taken in by the Central Bank, so those billions will be burned, shredded, whatever-you're-having-yourself. 

To put it very succinctly, we’re borrowing money so we can burn it.

Not one cent of that €25bn will go the Irish people, nor yet the €3.06bn bond the Central Bank also now holds from the 2012 Promissory Notes farce, payment for the €3.06bn the same Central Bank did destroy in early April last year, despite all spin to the contrary.

We will, however, pay the full cost of all those borrowings, and then some.

IRELAND'S BURDEN ENCASED IN CONCRETE

Already, and for the past three years, we’ve been paying the ECB’s own interest charge on the full original Promissory Notes amount, the €31bn of ELA (Emergency Liquidity Assistance – note that word ‘liquidity’, very important when you remember this was money going to zombie, insolvent banks, simply to enable them bail out their bondholders and their institutional probably same-source ‘depositors’). We will continue to pay that interest, albeit reducing from year to year as the ELA is paid off.

As those bonds are issued, however, the 'coupon' or interest (it averages out at around 2.65%) we are now paying entirely to ourselves through the Central Bank will instead be going to the new bondholders, that amount increasing annually.

You know what? Wouldn't it be really fitting if the same people who were bailed out with the original €31bn were now again to profit from the Irish people and purchase these bonds? Not right, but fitting.

AS BAD AS IT GETS? AH, NOT YET...

Oh, and to rub salt in raw wounds – this can only get worse, and will. How? 

• The Euribor six-month interest rate to which the bonds are tied will rise, we can be absolutely certain of that, and with it will rise our interest payments to the ECB;
• The ECB may also impose a faster rate of issuance on the bonds, which means all the above will kick in sooner and harder;
• Finally, there’s no guarantee that when those bonds are issued they will actually sell for ‘par’ value. I won’t bother to even go into that, suffice to say it will cost even more so that eventually this great Noonan deal could end up being even more expensive than the deal it replaced.

A reasonable estimate on the interest we'll pay on those sovereign bonds (including the 2012 bond, including also the ELA interest) is €40bn; then, and starting in 2038, we start to pay the €28.06bn itself. All this burden imposed on the Irish people through the machinations of the last government in cahoots with the ECB, and now solidified by this government all on its own, to bail out the failed bondholders in two failed banks.

Anyway, now ye know, the few of you whom this blog will reach.

As to this week's Dirty Dozen, the next 12 bonds due for payment from the remaining Irish banks, have a quick look and then wonder why those banks simply can't afford to fulfil their supposed primary fuction of servicing the Irish economy. Today for instance, Tuesday Apr 30th, a billion-euro bond from Allied Irish Bank. Thank God we don't own 100% of AIB; instead, because we own only 99.8%, we're on the hook today for a mere €998,000,000.