Karl Whelan: “They have taken far too long to admit the scale of the fiscal problem that we are facing”

Today the Irish Economy blog called for a little escapism, with Irish 10-year bonds at 7.601%… 

And the Irish Independent noted yesterday that Irish yields had risen for six days in a row. [Make that seven? – Ed]

“The amount of selling has been relatively small, but the market is all sellers and no buyers, which drives up the yield. The ECB has come in to prevent this becoming a rout,” said Padhraic Garvey, Head of Developed Markets Debt at ING Bank in Amsterdam.

Zero Hedge’s Tyler Durden added on Tuesday that “as this is happening, the EUR is pushing north of 1.40, and stock markets everywhere are gunning for new 2010 highs”.

This is the kind of central banking-cum-centralized planning garbage that can make people plead insanity after a period of brief ultraviolence.

A point which the Daily Telegraph‘s Ambrose Evans-Pritchard may, or may not agree with

The bond crisis is snowballing out of control before the country has had enough time to let its medical, pharma, IT, and financial services industries (don’t laugh, some of it is doing well) come to the rescue.

Yields on 10-year Irish bonds surged this morning to a post-EMU high of 7.41pc.

Yes, Ireland is fully-funded until April – and has another €12bn in pension reserves that could be tapped in extremis – but that is less reassuring than it looks. The spreads over German Bunds are mimicking the action seen in Greece in the final hours before the dam broke.

Once a confidence crisis takes root in this fashion it starts to contaminate everything, as we are seeing in punitive borrowing costs for Irish banks.

The uber-strong euro does not help. Under the IMF’s rule of thumb, currencies should fall by 1.1pc to offset every 1pc of GDP in fiscal tightening, ceteris paribus. Given that Ireland is going through the most wrenching fiscal squeeze ever conducted in a modern economy – though Greece is catching up – it needs a devaluation to match. Instead, the euro has risen by 18pc against the dollar since June. (less in trade-weighted terms).

Read the whole thing.

, , , , , ,

  • GoldenFleece

    The Republic is approaching the end game. The south is never going to be the same again. Its safe imo to say that none of us is going to see a UI in our lifetimes now.

  • A.N.Other

    The notion of a United Ireland is a patently ridiculous conceit, perpetrated by men who frequent darkened bunker style bars. They would do well to knock out a couple of the breeze blocks, to let some light in. The Republic has been scarificed on tha altar of greed; the only problem being that this is a difficult notion to square up to for the alleged
    Merc driving dissident leaders, who allegedly made their fortunes out of the very property boom that has busted the place.

    All revolutions are metaphysical.

  • Pete Baker

    Could we focus on the actual topic?

  • Glencoppagagh

    Maybe if we could discern the point of this thread.
    Is it:
    Irish bond yields have risen sharply. Discuss.

    Evans-Pritchard is wrong.Euro appreciation isn’t unequivocally a bad thing for the Irish economy. It boosts the reported earnings of US companies based in Ireland.

  • Pete Baker


    “Evans-Pritchard is wrong.”

    Read the whole thing.

  • 21stcentury fenian

    The yields and CDS spreads only matter to the bond traders for now. By the time the state returns to the bond markets in 4 or 5 months’ time it’ll be the political shenanigans over by-elections and the budget that will have cast the die one way or the other. Then the yields will matter, but what level they’re at will be decided in places like Donegal SW, Waterford and Dublin South. And yet wise men tell us we’ve lost our economic soveriegnty!? They wish – because sometimes exercising sovereignty is just too damn hard!

  • Alias

    Ever heard of the Bermuda connection? Check it out. It is why Ireland’s largest company Ingersoll Rand (it is since it registered as an Irish company) doesn’t pay any taxes to this state despite earning more than 2 billion in profits. Then go check out its workforce in Galway. Love folks, the Poles.

  • 21stcentury fenian

    Alias, this sounds interesting but you need to fill in some blanks for me. Maybe you could elaborate? Bermuda / Galway / 2 billion / Poles in Galway. Could be the plot of an airport paperback.

  • 21stcentury fenian

    The Russians’ list of permissable govt bonds to buy was even more interesting in who else it left out. Also excluded were Switzerland, Norway, New Zealand, Australia, South Africa… Hardly the gallery of rogues that ft / telegraph etc. normally have been lumping Ireland in with of late.

  • Mack

    He’s talking about the ‘Double Irish’. Google it. The ‘Dutch Sandwhich’ is another one.

    It would appear that some people have just figured out how transfer pricing actually works, and it has come as a shock to them.

    There was a US multinational in Dublin that famously had revenues of several billion but 4 employees (surely the most productive in the world ? 🙂 ). However in total US multinationals employ around 100,000 people directly, and support many more indirect employees. They also provide effective on-the-job training in large company best practices / management to many more Irish workers who pass through their ranks. They don’t all avoid tax on the same the scale. I don’t think there are any serious commentators who wouldn’t regard them as a big plus for the Irish economy.

    That said, for US multinationals I think the strong Euro is a double edged sword. It might encourage extra investment in the European market if it is becoming more profitable relative to the US, but it also increases the cost per head in Ireland vis a vis the US & Asia.

  • Erewhon

    David McWilliams has an extended monologue on the state of Ireland’s economy on the Russia Today Max Keiser programme. The “interview” follows the usual Keiser histrionics in which he displays some confusion about Irish terrorism and locations.
    I hope to be able to go to the KillKenomics festival but if that is not possible it would be great if some Sluggerites could attend and liveblog it.