Van Rompuy: “We’re in a survival crisis”

The Irish Minister for European Affairs, Dick Roche, tells European finance ministers not to “panic“… as the EU President, Herman Van Rompuy, panics?

A Guardian report indicates the extent of the concern

“The Irish problem is spreading, but it could get more volatile,” said Ashok Shah, chief investment officer at London Capital, a fund management firm. “They have to get this bailout, they have a period of time before it gets impossible, before nasty things happen. The longer they leave it, the more difficult it will get.”

Portugal has seen its borrowing costs rocket along with Ireland’s as speculation has grown that it too may have to consider a bailout. Its finance minister, Fernando Teixeira dos Santos, told the Wall Street Journal his country had been hit by a contagion effect caused by fears about Ireland’s ability to pay its debts.

“I would not want to lecture the Irish government on that,” he said. “I want to believe they will decide to do what is most appropriate for Ireland and the euro. I want to believe they have the vision to take the right decision.”

The Bank of Spain governor, Miguel Ángel Fernández Ordóñez, a member of the European Central Bank’s governing council, told a banking conference in Madrid he expected an “appropriate reaction” by Ireland to calm the markets. He later told reporters: “The situation in the markets has been negative due in some part to the lack of a decision by Ireland. It’s not up to me to make a decision on Ireland, it’s Ireland that should take the decision at the right moment.” Ewald Nowotny, another ECB governing council member, said in a radio interview the EU wanted a “quick, good solution to Ireland, so that there will be no spillover” to other heavily indebted countries such as Portugal and Spain.

And they’re carrying live coverage of the crisis here

12.17pm: Daisy McAndrew, ITV News economics editor, just tweeted a very interesting line following a meeting* with Dick Roche, Ireland’s minister of state for Europe:

Live blog: Twitter

Just interviewed dick roche, he thinks resolution will be tomorrow in the form of irish bank bail out.

Earlier this morning Roche had admitted that Ireland’s banks had a “problem with liquidity”, but it’s certainly interesting that he’s now suggesting a deal could be hammered out by Wednesday.

We’ll see…

According to Taoiseach Brian Cowen, as reported in the Irish Times

Mr Cowen said that those who suggested the Government was being forced to accept a bailout from the EU or the International Monetary Fund (IMF) were using a “pejorative term” that suggested that the State could not meet its obligations or its debts.

“That is not the case. The use of such pejorative terms, precisely because they are ill-defined and mean different things to different people, are adding to the confusion,” he told RTÉ last night.

Accepting that there were monetary difficulties and considerable turbulence in the markets, Mr Cowen, in an interview with Six-One news, sought to bring a tone of calm and reassurance to the debate. This followed widespread media speculation that the Government was under considerable pressure to accept a bailout.

“What we need are calm heads and cool consideration of all the issues. These are complicated matters that are not easily understood,” he said.

The Telegraph’s Ambrose Evans-Pritchard focuses on the threat of contagion

Unless the ECB takes fast and dramatic action, it risks destroying the currency it is paid to manage, and allowing a political catastrophe to unfold in Europe.

If mishandled, Ireland could all too easily become a sovereign version of Credit Anstalt – the Austrian bank that brought down the central European financial system in 1931, sent tremors through London and New York, and set off the second deeper phase of the Great Depression, the phase when politics turned ugly.

“Does the ECB understand the concept of contagion?” asked Jacques Cailloux, chief Europe economist at RBS. Three EMU countries have already been shut out of the capital markets, and footloose foreign creditors hold €2 trillion of debt securities issued by Spain, Portugal, Ireland and Greece.

“If that is not enough to worry about financial contagion, what is? The ECB’s lack of action begs the question as to whether it is fulfilling its financial stability mandate,” he said. That is a polite way of putting it.

And at the Guardian’s brand-new Ireland Business Blog, economist Brian Lucey says
At the Ecofin meeting this evening, it would be wise for Lenihan to hold out for as strong a deal as possible while making it clear he’s willing to accept a bailout regardless of the domestic political consequences.

Two red line issues and no more should be at the forefront of his mind – firstly, to preserve the low Irish corporate tax rate; secondly to ensure that the interest burden of any bailout is less than the burden that will be required to meet the foolish bank guarantee obligations.

As the FT has pointed out this morning the ECB has said “all of your banks are belonging to us”.

This is geo-political hardball, Brian Lenihan from Castleknock versus the heirs of Bismarck and Cardinal Richelieu.

Adds  They’re already running late, but the press conference in Brussels, following the meeting of eurozone ministers, will be streamed live on the EU website here.

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  • Pete Baker

    From the Guardian’s live coverage

    4.52pm: Elena Moya has also been speaking to financial traders, and warns that there could be a wide-ranging sell-off in bonds and shares if tonight’s meeting does not reach a solid resolution.

    “The markets will penalise any statement that is short on details,” she says.

    4.45pm: A quick reminder that the Irish prime minister, Brian Cowen, is due to deliver a statement on Ireland’s economy at 5pm.

  • Greenflag

    Mr Cowen told the Dáil that €15bn in adjustments must be made before 2014 and that budgetary consolidation was crucial.

    He said the bonds were a concern, but he said Ireland is fully funded to the middle of next year.

    And that’s all he said . Let there be no panic . The international bondsters can now start focusing on Portugal and perhaps Spain next week 🙁

  • Pete Baker

    And from the Guardian’s live coverage

    6.31pm: In Ireland, Lisa O’Carroll reports that this afternoon’s statement from PM Brian Cowen has been badly received:

    David Murphy, the business editor of RTE, didn’t buy Cowen’s ‘we’re all right Jack’ speech.

    In a strongly-worded analysis, he told viewers of RTE’s 6pm news that the Irish have been deceived.

    “In many cases you could say the Irish public were misled over the past few days. Essentially Ireland is on the brink of making one of the biggest decisions in the history of the state and Irish tax payers could be saddled with a lot more debt, potentially €80bn, simply to fix the banks.”

    “That will have to be paid back plus interest. ..there hasn’t been full and frank information given to the citizens of this country about the communication between Europe and Ireland. Indeed the government may have exacerbated things by suggesting nothing was happening, when clearly the ECB – which has €90bn tied up in banks here – is not one bit happy.”

  • Pete Baker

    Adds They’re already running late, but the press conference in Brussels, following the meeting of eurozone ministers, will be streamed live on the EU website here.

  • The Impartial Observer

    Students of Italian politics will know how a major economic crisis 20 years ago led ultimately to the collapse of the Christian Democrats, the party who had dominated Italian politics for many years despite their “interesting” associations. Given how FF were bombing in the polls even before the latest polls is there any chance that it could suffer the same fate as the Christian Democrats? They are certainly going to be electorally toxic for many years and I don’t think Irish voters are going to tolerate politicians with dodgy connections and unusual banking arrangement as they have in the past.

  • The Impartial Observer

    Sorry that should read “even before the latest crisis…”