Ireland can’t afford to bail out European banks

I think this point is worth highlighting more clearly. Below – Simon Johnson ex-CEO of the IMF – on who is owed money by the Irish banks

German banks are owed $139 billion, which is 4.2 percent of German G.D.P. British banks are owed $131 billion, or about 5 percent of Britain’s G.D.P. French banks are owed $43.5 billion, which is approaching 2 percent of French G.D.P. But the eye-catching numbers are for Belgium, which is owed $29 billion – in the relatively small Belgian economy, this accounts for around 5 percent of G.D.P.

We can all agree Irish banks were reckless in their lending. It is clear that Belgian, German and British banks were also reckless.

It is not the responsibility of Irish taxpayers to bail out these European banks.

Update: Also see the comment by Greenflag (on this thread) pointing out the issue of reckless lending by German banks appears to be largely ignored by the mainstream media.

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  • DC

    Mack

    Here’s a link about what happens when countries go bankrupt, but who is going to allow a default to happen in Ireland and hit that reset button:

    http://www.spiegel.de/international/business/0,1518,588419,00.html

  • HeinzGuderian

    Jumping up and down,and pointing the finger at others,in what way helps dear old Oirland ??

    Sweet Jebus,I know the crowd up at Sttormont are useless,but compared to their Southern counterparts,they are positively perfect !!

    Time to wrap up the failed Economic,Political state that is Eire,and rejoin your brothers in these Great British Isles !! 😉

  • DC

    Yes Heinz, just wait till Ireland defaults and writes off 10% of Britain’s GDP, a 10% which is exposed in Ireland as a consequence of toxic loans spewed out by British owned or linked banks.

  • Glencoppagagh

    “At least 20 percent of Ireland’s G.D.P. is from ‘ghost corporations’ that have little or no real activity in Ireland.” according to Johnson.

    Mack, surely this is an exaggeration. Is the difference between Irish GDP and GNP so large bearing in mind that it should also reflect multinational profits actually earned in Ireland?

  • RepublicanStones

    12 MEP’s taking aim at Irelands low CT

    http://bit.ly/hrwpRt

  • Mack

    Glencoppagh –

    No the difference between GDP and GNP is of the order of magnitude of 20%. It is an exaggeration to call Google, Microsoft, Pfizer, IBM etc. ghost corporations.

    If a firm has it’s European HQ in Ireland (and many do) much of the revenue accounted for there is repatriated overseas. Which is reasonable enough Google Ireland didn’t create the search engine, it didn’t build it’s brand and probably doesn’t do (i.e. pay for) whatever deals Google does to keep that #1 spot. Microsoft Ireland didn’t develop Windows or the XBox (etc). Although the Irish offices almost certainly do have some productive input into core technology, it is still reasonable that they pay the parent company licence fees. That’s your 20% of production that doesn’t actually stay in Ireland.

  • Brian

    Heinz

    I am a nationalist and usually disagree with you.

    But I agree with you here in some respects. It makes more sense for Ireland and Great Britain to be in some kind of union than it does for both of us to be tied to the EU. The EU has one size fits all approach that is not suited to the changing and unique demands of our two countries.

    We’ll see what happens.

  • Glencoppagagh

    Thanks Mack
    It looks as if Johnson is denying that any multinational is carrying out substantial business in Ireland. Not the sort of hyperbole you expect from a former senior figure in the IMF.

  • Alias

    Here’s an interesting snippet from a report from Willem Buiter (a notorious europhile) who is now chief economist at Citigroup:

    “Accessing external sources of funds will not mark the end of Ireland’s troubles. The reason is that, in our view, the consolidated Irish sovereign and Irish domestic financial system is de facto insolvent.”

    He also warned that the structures in place to deal with the impending bankruptcies of other EU Member States are woefully inadequate: “We argued before that the EFSF should be much larger (€2trn). Should Spain need assistance, it will stretch the resources of the EFSF, perhaps beyond its current limits.”

    http://www.nber.org/~wbuiter/sdcupdate.pdf

  • andnowwhat

    I like this take on hte supposed crisis.

    http://www.youtube.com/watch?v=EBbgVZz7_YM

    IMHO, the banks have a crisis.

    The developers have a crisis.

    The investors have a crisis.

    The Irish citizens have a problem but not a crisis unless they let it be so.

    Sadly funny to watch the lovers of the free market economies turning to the state throughout the west.

    God bless the poor Germans

  • Alias

    “The Irish citizens have a problem but not a crisis unless they let it be so.”

    That’s true. One of the advantages of not having a sovereign currency is that most of your debts are external. Ireland, ergo, didn’t have a debt crisis: the eurosystem had the debt crisis.