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.

THE DIRTY DOZEN - w/e Apr 28th 2013

ON THE ONE HAND:

The bold and brave who acted to bail out our banks to the tune of €69.7bn, imposing an average bank-bailout debt of over €60,000 on every Irish family, stating that this was the best possible course of action for Ireland, that in fact it was the only option: 

• Every member of Fianna Fáil in the last government, including current leader Micheál Martin and other front-benchers; 
• Every member of the Greens in the last government.

Also, the bolder and braver who continue to take the tough decisions, who act to maintain this course of action as though we still have no choice but to continue to suffer under this bank-debt burden but who ease the political pressure on themselves by extending that burden to their kids and grandkids:

• Every member of the Fine Gael parliamentary party in the current government, including 'dissenter' Peter Mathews;
• Every member of the Labour parliamentary in the current government, including 'dissenter' Joan Burton;
• President Michael D Higgins, who signed the recent emergency P Notes-to-Sovereign Bonds enabling legislation.

ON THE OTHER HAND:

A selection of some of the fools who believe that Ireland could have acted differently, that Ireland could have done an Iceland and at the very least burden-shared with the institutional financial gamblers whose billions had caused the boom/burst in Ireland:

Professor Joseph Stiglitz, Nobel Prize recipient for Economics;

Professor Paul Krugman, another Nobel Prize-winner, in Economics again;

Ashoka Mody, former IMF chief-of-mission to Ireland;

Dr Constantin Gurdgiev, future Nobel Economics Prize-winner, now one of our own and operating from UCD and Trinity;

Barry Ritholtz, named as one of the 15 ‘Most Important Economic Journalists’; in the US in 2010, a trader and financial strategist, one of the few who saw the coming housing implosion and derivative mess in America far in advance. 

Namawinelake (if you don’t know, you need to educate yourself, and fast!);

David McWilliams, one of the few who warned about the rapidly inflating property bubble here and predicted the burst, and this from his blog of over two years ago;

Colm McCarthy, economist and author of the McCarthy Report, has written a series of scathing articles (hardly seen as a champion of popular causes!);

Even the IMF itself has been highlighting the success of the Iceland model, as has Bloomberg, that well known leftist disseminator of news.

And there are more, many more.

Alright, I didn’t go very deep into the list of those in the first group because indeed there are also supporters of the actions of the government. They are:

The EU;

The ECB;

A host of banks – this is a link to a partial list, produced a few years ago and showing the bondholders in the then Anglo Irish Bank.

And of course we can’t forget the cheerleaders, those on the sidelines who have been spreading the government message over and over again – ‘There was no alternative… we have no choice… we’re all to blame… the ATMs will shut down… the Guards and Nurses and Teachers won’t be paid…’; on and on it goes, ad nauseum, from our national broadcaster, from most of its main presenters, from the political spin-doctors masquerading as independent commentators in some of our major newspapers.

So who do you choose to believe? Because you have a choice.

I have a few to add to the second list also:

Ballyhea says NO! to BANK DEBT

Charleville says NO! to BANK DEBT

Fermoy says NO! to BANK DEBT.

Those are three of the originals but now we are joined by so many more. Add the name of your home place to this list. The ECB is presented as being invincible, omnipotent. It is not, they are not. The ECB was formed and made by us, the people, through the EU; any power it has was granted by us, the people. To paraphrase the great French thinker Blaise Pascal, Justice without Power is impotent - that's the EU at the moment; Power without Justice is tyranny - that's the ECB. Ultimately, however, it is still our power; it's time we took it back.

On the bonds front, bad day for Bank Of Ireland, isn’t it? Have a look below, a half-billion pounds sterling, a bond taken out seven years ago and maturing today. Makes the other Bank Of Ireland bond look pretty measly, doesn’t it?

Then you go to Irish Life & Permanent, which we now own lock, stock and bonds. €1.25bn bond due today but would someone please explain – if you issue a bond to yourself to cover a temporary lack of funds, as was the case here when this bond was issued three years ago, how do you make good on that bond? Where does that money come from? Just a thought.

THE DIRTY DOZEN - w/e Apr 21st 2013

Apologies for the lateness, hectic week on the job front this week with two hurling league semi-finals on this Sunday.

Hard times recently for Bank of Ireland, of which we own 15%:

• billion-euro bond paid out last week;
• £500,000,000 bond due on Monday next;
• €750,000,000 bond that it issued to itself in 2010 due next month;
• then the real doozy, a €2.1bn bond that was issued in 2006 and on which it has since (presumably) been paying a 'coupon' or interest, maturing in July. That means Bank of Ireland will have to find that €2.1bn or - more likely - borrow again by issuing another bond.

Not that Bank of Ireland are having it all their own way on the bonds front - far from it!

Next week also Irish Life & Permanent (one of ours, in its entirety) has a €1.25bn bond falling due. As with the Bank of Ireland bond above, this was a bond it issued to itself, on exactly the same day, falling due now on the same day - ah, such symmetry!

On April 30th AIB (another bank of our own) will pay out on a €1bn bond that it issued on Apr 30th 2006. Luckily for the holder of that bond, it's 'guaranteed' so it will be paid. So much for the famous statement of last June about separation of bank and sovereign debt, eh?

Anyway, enough of all that, here they are in all their glory.

THE DIRTY DOZEN - w/e April 14th 2013

I wish I had eloquence, I wish I had influence; eloquence enough to be able to tell the true tale of what's happening in Ireland in the last five years, influence enough that this news would negate the lies and propaganda being spread both at home and abroad by our own government (growth, falling unemployment - that one debunked in no uncertain fashion by the IMF who have pointed to a 'staggering' 23% unemployment/underemployment figure, which would of course be far worse but for the safety valve of emigration).

Contrary to the message being spread worldwide, Ireland is not doing fine. On March 27th last the Ballyhea & Charleville campaign group, part now of the 'Ireland says NO! to bank debt' movement, delivered six letters to Sharon Bowles MEP, Chair of ECON, detailing the effects of the current austerity programme; it could have been six thousand letters, six hundred thousand, and we could have brought them from Greece or Portugal or Spain or Italy or Cyprus.

When bankers and financiers (as in the ECB) are making their decisions all they see are numbers, figures, credits and debits, profit the bottom line. But when parliaments are making their decisions our politicians are supposed to also factor in the human cost. Across Europe for the last five years of this crisis, even within the EU parliament itself, that has not been happening. The banks, the financiers, the markets, they have all had the whip hand, every decision (including the 'haircut' in Greece, which should have been more) has gone in their favour.

The ECB will protect its own, isn't going to stand for the people, ever; it's time our politicians did, in every individual government and in the EU itself. Banks should be subject to the power of the people, to the power of sovereign nations, not - as is currently the case - the other way around. Time to tilt the balance.

The following is what we in the 'Ireland says NO!' propose as a solution to Ireland's current ills:

• Destroy the €25bn in sovereign bonds currently held by our Central Bank in lieu of the Promissory Notes, Notes/bonds issued 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;
• Restore to the Irish Exchequer the €6bn already destroyed on the basis of those Promissory Notes;
• Swap all of Ireland's remaining interests in the various Irish banks for a) the €20.7bn taken from our National Pension Reserve Fund to bail out those banks and b) write off the remaining €13bn or so borrowed from the various emergency funds to bail out the Irish banks.

The first move above will ease the long-term debt burden, making Ireland more attractive to the damned markets; the other two measures will put money back in the national accounts, money that can be used to invest in infrastructure, to kick-start this ailing economy. Do this and Ireland will soar.

We'll be told of course that it can't be done, that it's not in the remit of the ECB/EU. So what?

For years we were told that bondholders couldn't be burned, until it happened, in Greece.

We were told that was a one-off, couldn't be applied anywhere else, til it happened again, in Cyprus - so much for that one-off.

In Cyprus you had the initial proposal to burn all depositors including those under €100,000, agreed to by the Eurozone finance ministers despite a supposed EU-wide guarantee to the contrary and (shamefully) welcomed immediately afterwards by our own government; when the proverbial hit the fan those same Finance Ministers (including our own Michael Noonan) all did a Pontius Pilate, washed their hands of a decision they had approved when they should never even have allowed it be debated; it took an outpouring of popular protest for the proposal to be overturned - another one-off, though this one was stymied by the people.

In the second Cyprus proposal we did see depositors burned, another first (albeit above the €100,000 guarantee threshold) but again, according to the ECB/EU, a 'one-off'.

So, how many 'one-offs' is that? Where, we ask, is Ireland's 'one-off' deal? So many times we've been told we're 'special' - let's see the money. Our government may not be fighting for it - we are.

By the way, did anyone notice that Bank of Ireland paid nearly a billion euro in an unsecured bond yesterday? No? It's okay, we own just 15% of that bank so it cost us a mere €150,000,000, and we're now left with just over €8bn in legacy debt junior and unguaranteed bonds to pay off. Happy days, eh?

THE DIRTY DOZEN - w/e Apr 7th 2013

When the meeting of Euro Finance Ministers chaired by our own Michael Noonan agreed that under the terms of its proposed 'bailout' every depositor in every bank in Cyprus would be burned there was uproar on the island. The people took to the streets, besieged parliament as the vote was being taken, forced a mind-change, saved the savings of all depositors of under €100,000. Small mercies.

I've heard it said many times that if the same thing were tried in Ireland we too would take to the streets, we too would be up in arms, our media leading the charge.

Wake up my friends. It has been done to us, albeit far more insidiously.

You've heard of the National Pension Reserve Fund? That is real money, our money, our national savings. We used to have well over €20bn in the fund, until it was raided. €20.7bn, that's how much has been taken from the Fund, €20.7bn of our money.

Taking the figures from Census 2011 there are approx. 1.1m families in Ireland; €20.7bn, 1.1m families - 'do the math' as our American cousins might say. That's nearly €19,000 per family taken from our national savings fund. That's our own government putting their hands into your pocket, taking nearly 19 grand, then giving it to banks and bankers to fund themselves, their salaries, their topped up pension funds, but most of all, to fund foreign financial gamblers whose punt on Ireland had failed.

You didn't feel it? You weren't supposed to, we have been robbed by stealth. But look around at the pain and misery being inflicted on you and on your friends and neighbours, then think of what that €20.7bn might do for us. A representative group of us from the Ballyhea & Charleville campaign group were in Brussels last week to meet Sharon Bowles where we made a presentation of our case for bank-debt writedown in Ireland, brought her six letters illustrating the pain of emigration, of family stresses, of marriage break-up, of health cutbacks, of a man's struggles, of losing the family home; those letters should be mandatory reading for all who legislate for the poor to bail out the rich.

How much employment could be created from using those funds to invest in infrastructure here? Even if it were just sitting there, a conservative interest-rate return is 5% - that's over €1bn a year; think of what could be done with that billion.

Because it wasn't taken directly from us as individuals, because we never saw that massive sum lifted from our savings, we didn't complain. But it happened. Oh, we got shares in the banks, may  even be worth a few billion now - we're happy with that?

There's worse, of course, far worse. The €30.6bn in Promissory Notes, billions poured into banks that were already dead, already rotting, to bail out more international financial gamblers, to pay more obscene pay and pensions for those at the top in the dead banks - we're on the hook for that as well. The recent stunt by Minister Michael Noonan in transforming that truly odious and thus very arguable debt into rock-solid sovereign bonds, debt to be paid by future generations of Irish, isn't in the least surprising. The same Michael Noonan has 'form' when it comes to hitting the vulnerable, his uncompromising attitude during the Hepatitis C blood scandal of the 90's forcing dying women through the courts.

But what of Labour? How can the party of James Connolly, of James Larkin, stand over all this? What happened in the lead-up to the global banking crisis was greed at its most extreme, financial greed, obscene profits being made by obscene people whose God is money. They created their own bubble, they burst their own bubble, and now we're forced to bail them out?

A few of us are on a crusade to expose this robbery from the Irish people for what it is - extortion by the ECB, sellout by our own governments, this one and the last. Four weeks ago, after over two years of weekly marches, we launched the 'Ireland says NO!' to bank debt initiative. Village by village, town by town, city by city, the message is spreading. We're asking people now to come alive, to see what's being done to us, to rise up and join the march in their own locality, or if no march currently exists, to start it off. The details of how it can be done are here.

Finally, the list of the next 12 bonds. The 'agreement' of last June, separating sovereign from bank debt? Doesn't apply, not to Ireland.