Pressure on Ireland eases as jeremiah Kelly attacked for feeding gloom

 Good news. The forces of light are fighting back!  Pressures on Dublin have eased slightly after the EU Finance Ministers’ reassure bond holders that burden sharing doesn’t start until 2013. Did all those hot shots not know that? Biffo is doing his best to cool persistent rumours of an imminent bailout. Meanwhile arch jeremiah Morgan Kelly is taken to task by Davy strategist Donal O’Mahoney for spreading contagion, identifying a phoney ” mortgage war” and (as I read it) taking delight in feeding public anger and the  schadenfreude of bloggers.

Not this one. Come on Ireland!


 The appalling vista this morning is of a recapitalised Bank of Ireland, trying to make its way in the world to support Irish economic recovery, but now with the millstone of 10 per cent (guaranteed), or 13 per cent (unguaranteed) funding costs weighing heavily around its neck.

 How depressingly ironic, therefore, to read Morgan Kelly’s recent contention on these pages that “what is driving our bond yields to record levels is . . . the bank bailout”, the Irish authorities having missed September’s opportunity to default on €55 billion of maturing guaranteed bank debt in order to resolve the banking crisis “by sharing costs with the bondholders”.

 Those who have wondered aloud about the outcome of a laboratory experiment to assess the impact of an orchestrated default in the Irish financial system now have their answer. Those who advocate bond defaults, but then seek alternative explanations for rising bond yields, betray breathtaking ignorance of bond market dynamics.

 THE ARTICLE was equally breathtaking for its thinly veiled attempt to conscript a “powerful political constituency” of 200,000 would-be defaultees to engage in a “Mortgage War”, on the basis that “you too were mauled by the Celtic Tiger after being conned into taking out an unaffordable mortgage”.

 Most breathtaking of all, however, is the hubris displayed in second-guessing the “stress-test” findings of the independent financial regulator regarding Irish bank balance sheets. One can only guess at the superior font of knowledge out of which the author sups, as his €42 billion loan loss forecasts are without substantiation, and therefore appear more designed to scarify the readership than to make a genuine attempt to inform.

With the labour market finally stabilising, there are clear grounds for optimism that ultimate mortgage-related losses will fall within the realms of the regulator’s “stress-test” assumptions. On that basis, the surviving and recapitalised Irish banks will have been bestowed with a more than sufficient buffer for the residual loan impairment risks ahead.

If the “Mortgage War” article serves any purpose, it is to highlight yet again the destructive forces wreaked by the politics of anger in this country. The author may protest his innocence in this regard, as will his legion of acolytes, but the upshot of such diatribes is to provide further cheap fodder to the Financial Times headliners and internet bloggers who are apt to display a schadenfreudian  delight  at Ireland’s current misfortunes. Widespread media recycling of such material at a time of heightened overseas investor anxiety towards the Irish story simply reinforces the pervasive bearish sentiment, and liquidation, that is now playing out in our markets.

 TRUE TO ITS nihilistic endeavour, the “Mortgage War” article offers no solution of the author’s own to the nation’s current predicaments. For the author, Ireland’s economic and fiscal sovereignty is beyond repair, such that henceforth “we can only rely on the kindness of strangers”. Thankfully, the economic prognosis begs to differ, with Ireland’s “twin-deficit” vulnerabilities fast receding as the external sector rebalances.


Not all share this guarded optimism. Some would like Ireland  to go for the greater good  and  apply for the bailout and ease bondholders’ pressure on the euro area as a whole.  A decision by Ireland to use the European Financial Stability Facility would be a “circuit breaker” for the market turmoil and boost the euro, Emma Lawson, a Hong Kong-based currency strategist at Morgan Stanley, said in a report today.

At the end of European trading today the euro was poised for its biggest weekly loss since August although it climbed today from a six-week low against the dollar.



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  • another

    In the interests of balancel from today’s FT;

    El-Erian on Ireland:

    Let’s see what Monday brings, rather than get carried away with a bit of late Friday profit taking in the 10 year.

  • wild turkey

    over the past few days i’ve
    (a)been watching the horror channel re-runs of twin peaks.
    (b)have also scratched my ass when comtemplating the irish twin dips financial situation and thought WTF?

    maybe others have done either (a) and/or (b)

    anyway, i found this article in todays guardian a bit helpful if simpliste. others may or may not find it useful

    question. if someone had dropped a fire extinguisher on the head of the Morgan Kellys of this world, would that be an act of criminality or liberation? just curious, like.

  • Alias

    More voodoo feel-good economics from the state and its stooges. This mentality has it that facts and figures and other underlyning realities are irrelevant and the only thing that matters is ‘confidence.’ If folks can somehow be made to feel confident that this bankrupt state can generate enough wealth to repay the 1.67 trillion in eurosystem debt that it collectively owes then – by golly – that state will generate 1.67 trillion in wealth (plus interest) over the next 15 or so years.

  • wee buns

    Two words: Tobin Tax.

  • aquifer

    Where can I buy some of these Irish bargain bonds? There is still plenty of value in this modern well educated English speaking clean green tax haven. New roads, new houses, free wind energy, what is not to like? OK they pay public servants too much and the dole is a multiple of the UK level, but they can do something about that. e.g. Reduce public pay, but let public servants take some of their pension early if they feel they need more to cover current outgoings. Make sure that moving in and out of work does not disadvantage the poor. If they collect a bit of extra dole in between work and none, take it back off them slowly. The poor and the wider local economy need quantatitive easing and credit more than bankers.

    Masters of the universe? Masters of the massive porker more like. How are they managing to stop the chinese piling the money in at these giveaway bond rates?

    Please don’t try to tell me that the U S of I’ll pay you later are a better bet.

    I blame the spotty youth who emerged blinking in front of the TV cameras to describe how his government office was confident in raising more cash or somesuch. Sorry I don’t blame the youth, I blame his boss who should have been able to swagger out and blag about how great Ireland is for investors. Cos it is.

    If desparate measures are called for, the state should fund a few irish bars next the major bond markets and cover the walls with wide screen TVs showing our golf courses mountains and beaches. And have barmaids with flowing red ringlets serving the drinks.

    Showing these serial losers how to get a life has to be worth several hundred basis points.

  • Alias

    It isn’t surprising that the O’Mahoney stooge should serve as a chearleader for the Irish state’s bail out of the eurosystem since he makes his living from trading in Irish bonds.

    “Courtesy of Nama and the stepped-up prudential requirements of a new and vigorous financial regulator, Ireland will soon find itself with two of the most strongly capitalised banks in Europe (AIB and Bank of Ireland). This realisation is already playing out in Irish bank funding markets, where credit spreads are now tightening appreciably against European peers. For example, subordinated debt spreads for Bank of Ireland have tightened by as much as 120 basis points over the past five weeks.

    As with the experience of Irish sovereign bond spreads over the past 12 months, which have fallen by as much as 180 basis points against their German benchmark, the implementation of credible policy solutions to our fiscal and banking challenges will be rewarded by substantial improvements in our funding capabilities. In as much as Ireland has recently been transformed from pariah to poster-child in the fiscal consolidation stakes, a similar re-rating now awaits our quoted financial institutions. This is a key ingredient towards the much-needed revival in credit creation as economic recovery takes hold.

    Domestically, malcontents continue to vent their spleen against the Government’s stabilisation policies, in stark contrast to the increasingly receptive audiences overseas, including an endorsement from the International Monetary Fund last week. Of course, continued political opposition is the obligatory stock-in-trade, but the relentless criticisms of both media and academia is more bemusing at this juncture, not least given the paucity of credible alternatives proffered to date.”

    Just as he was moronically wrong back in April (when he proffered the quoted tosh) about the state’s bail-out of Irish eurosystem banks (AIB and Bank of Ireland) making those banks into “the most strongly capitalised banks in Europe” that would have other banks queuing up to lend money to them, he is wrong now about the level of mortgage defaults that are being deliberately hidden by Irish eurosystem banks with the collusion of the Irish government.

    The reality is that all Irish bonds flopped in September with the ECB having to step in to buy them all up and thereby conceal the utter failure of the government’s bail-out of Irish eurosystem banks to restore the market confidence that in those banks that O’Mahoney predicted. Far from queuing up to lend to Irish eurosystem banks, not a single lender would lend money to them so the ECB loaned the money via the Irish central bank instead – which, incidentally, adds another 24 billion to the cost of bailing them out. The government simply threw tens of billions of Irish taxpayers’ money away on and is now right back at square one.

    It is an open secret that Irish eurosystem banks are concealing the extent of their debts from public view, and that they are doing this with the connivance of the government. They are doing it so that Irish taxpayers will not be able to make an informed decision about the scale of the losses that they are being forced to underwrite. As Morgan points out, that is why they are lending money for new mortgages for less than the banks are paying to borrow it. That is to temporarily prop up the value of assets that are effectively worthless. And it can only be temporary because the taxpayers will also have to finance the losses that the banks are making on each new mortgage they write. It is also why the Irish eurosystem banks did not want assets of property developers sold prior to dumping them into NAMA, since that would alert the taxpayers to the actual market value of those assets. And it is why Irish eurosystem banks are issuing moratoriums on mortgage repayments to all and sundry like they were junk mail.

  • Alias

    Tax what? The debts are in euros, so no foreign currency transaction takes place.

    If you meant a bank tax, then why should taxpayers tax themselves? They now own the banks.

    Besides, even if the economy of Ireland could magically hand over its entire GDP for the next ten years, that still wouldn’t be enough to repay all that it owes.

  • pippakin


    Instead of spending so much time and effort telling us all what is wrong (I think we believe most of it anyway) why don’t you tell us instead what needs to be done to put it right.

  • wee buns

    Suggest it as a solution IN PRINCIPLE though obviously as a global solution.

  • Alias

    What is right, my dearest Pippy, is the opposite of what is state to be wrong.

  • pippakin


    ‘my dearest Pippy’ My aren’t I the lucky one!

    Ireland cannot leave the EU. It cannot pay the damn debt and the Brits are almost as bad as us. The only advantage? they have is they are not in the Euro and your answer is ‘opposite of what is state to be wrong’

    Yep, that’ll put the tin lid on it.

  • Alias

    Pippy, light of my online life, the question “what is your answer” actually translates as “my head is nice and warm here, buried deep in this sand. Please do not mention anything about an oncoming sumani as that would upset my wee head, and my fat ass can’t move that fast anyway.”

    Do I really need to present you with a portfolio of custom fashion designs as a precondition to informing you that your purple hair rinse (as is the style among ladies of a certain age in Connaught) clashes with your green track suit? No, so it is simply a demand for silence. Likewise, silence would be welcome on your part rather than agreeing with what is wrong simply because you are unable to see what is right.

    If what is wrong is bailing-out the eurosystem then what is right is not bailing-out the eurosystem. If what is wrong is concealing the scale of mortgage defaults in order to defraud taxpayers into bailing-out the eurosystem then what is right is not concealing the scale of mortgage defaults in order to defraud taxpayers into bailing-out the eurosystem.


  • pippakin


    Light of your on line life and here was I thinking that was mad mass

    I have to say on behalf of the ladies of connacht that they do not have purple hair, except for me and if I had to describe I would say more Goth than Mrs Slocombe.

    I think I have to conclude that you do not have a clue what to do, just like the rest of us.

  • Mack