Read more: Irish banks need another $40 billion in bailouts
Richard Portes, a professor of economics at The London Business School writing in the Wall Street Journal has urged Ireland to default on its debts and restructure them.
“Ireland's public debt is clearly unsustainable,“ Portes writes. "The projections contained in the International Monetary Fund's bailout program see gross debt peaking in 2013, at 120% of GDP.“
He says the government has doneit s best but it is not enough.“The government has already made heroic discretionary cuts since 2008, but the further turnaround required by the IMF is more self-sacrificing still”
Portes believes Ireland must renegotiate and restructure.
”The right policy is to restructure the debt, negotiating haircuts that would reduce its present value. A reasonable target, one in line with current market expectations, would be to cut the present value of the debt by €40-50 billion, or some 30% of GDP. That would bring the debt ratio down to a more sustainable 80% or so.”
He says European Central Bank objections to this should be overruled. “According to the (Irish) minister of finance, the ECB has told Ireland it can't restructure this debt.
“Where in the world can the central bank tell the government what it can or cannot do in fiscal matters?
What authority does the ECB have to do this? Ministers ask who will pay for Irish teachers and nurses if Europe calls back its loans. But Europe is not so foolish. The costs to the ECB and member states would far exceed the benefits of cutting off Ireland. And even if foreign financing were completely withdrawn, the current account deficit is only 2%, so adjustment should not be too difficult.”
Porter says the downside can be dealt with.
“The potential downside to renegotiating Ireland's debt is tolerable—certainly no worse than the alternatives.
A well-managed restructuring is not likely to bring about the worst of what skeptics have predicted: trade sanctions, long-term loss of market access, a significant increase in borrowing costs. The overall damage to Ireland's reputation as a debtor should likewise be modest: The country did not get into its present situation because of fiscal profligacy.”
He also says there is a moral obligation on creditors of Irish banks to pay up.
“But there is also a moral argument for forcing losses upon creditors who invested in now-failed Irish banks. Europe's governments have been in effect bailing out their own banks and then transferring the costs to Irish taxpayers via rescue loans.
“For Irish taxpayers to foot the bill for German and French banks' misguided lending exceeds the bounds of national economic responsibility—not to mention creating the conditions of moral hazard under which these bad loan decisions may be made again in the future.”
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Switch to the desktop site to post a comment.Searlit | Apr 16, 2011, 03:55 PM EDT
Consciousness is increasing. More people awake to what is happening to society, every moment. Positive change is over due.
kurtjohnson | Apr 14, 2011, 09:34 PM EDT
Someone needs to stand up to the IMF/EU/World Bank extortion racket - that would be real heroism.
warrenpoint00 | Apr 14, 2011, 08:16 PM EDT
The free staters need to pay their bills .just like every one else in the world. Come on now pay up..you are a disgrace to the Nation of Ireland, you bunch of theives you should not have acquired it if you cannot pay it back.The Germans need to put the boot in here. Pay the woman or leave the bed you losers.
FastEddy | Apr 14, 2011, 12:55 PM EDT
Just, what ever you all do, don't let the IMF/World Bank dictate the terms. If they won't go along, cut 'em loose. All the IMF/World bank/EU-trash industrial complex wants to do is make sure Ireland screws up the tax advantages for new business ...
SeamusMor | Apr 13, 2011, 11:23 PM EDT
Burn the bond holders! The Irish government takes in 30 billion euros in taxes and spends 50 billion on programs and people. Some of that spending is debt service. Can the Irish government run on 30 billion euros? It would have to do so without the IMF and the ECB covering deficit spending.
sirpeter | Apr 13, 2011, 09:38 PM EDT
Dublinjas..Has a point..It's a good one..Course one good point doesn't mean he's still not an idiot. He have to make at least 5 good points before he reaches a level where I stop laughing at his crap.
sirpeter | Apr 13, 2011, 09:29 PM EDT
John5319 ..I think you are mixed up..IMF trying to impose socialism??? Tell me more..You might be a genius..Otherwise I'm going to put you down as a crazy.
antoman | Apr 13, 2011, 04:17 PM EDT
@Dublinjas-I think you hit the nail on the head mate.
Dublinjas | Apr 13, 2011, 03:43 PM EDT
Ireland might as well default,instead of going through years of misery all to end in failure anyway, there is no way any nation can sustain such a debt burden and carry on.
Searlit | Apr 13, 2011, 02:03 PM EDT
It isn't socialism that the IMF is trying to impose. It looks a lot like totalitarianism.
John5319 | Apr 13, 2011, 01:29 PM EDT
Ireland has already swallowed the BILGE of the IMF, and surrendered it's national sovereignty to the EU Central Bankers. And that friends IS THE Problem for the people as government freebies gives by way of redistribution of individual prosperity, for there is no free lunch today. Taking from those that have, and giving it to those that "need", is MARXISM. Yet that is exactly what the IMF is doing, and has done, to Ireland and all other EU participants. Marxist redistribution will not work, and at least this man knows something other than the deceit of the Evil Marxist-Socialist political ideology. He does understand economic mathematics. Any responsible parent tells their children NO ... so way can't the government "elitists" tell themselves NO? Because they love to spend "other peoples money" to gain popularity, and Votes. But WHY DO the people of Ireland want to support those, by way of the IMF, the irresponsible spending of other EU countries ?? Why bail them out, and not yourselves with restructuring a debt? Did you forget even Donald Trump did that . . . and kept himself, and his businesses solvent? Ireland surrendered it's sovereignty already to the IMF, that WAS THE PLAN by the globalist bankers, and that IS THE Problem for the citizens of Ireland, yet it is why they should restructure ... take the hard medicine that will cure the problem with the IMF controls !!!
moygannon | Apr 13, 2011, 01:16 PM EDT
I think the International Bankers already own Ireland. What happens now is out of the hands of the Irish citizens.
antoman | Apr 13, 2011, 12:56 PM EDT
If you have a tank or even an armoured car.Bury it in the back garden and grow onions above it.This will defeat the sniffer dogs and weapon detectors.Already there are sides forming and civil war in Ireland because of this huge mill stone that has been fastened about the neck of the people of Ireland by those in Brussels is a possibility.
Searlit | Apr 13, 2011, 11:06 AM EDT
If I could ask the IMF and the ECB one question, it would be. Are we all the people of the world, or are we a bunch of selfish jerks?
billyjustin | Apr 13, 2011, 10:50 AM EDT
the irish people did not want the money from europe, but our ex prime minister gave a blanket guarantee to the banks that the government would cover all costs, and now biffo the ex is pally with all the developers and bankers, and we are left with the pain, shame on you cowan..
CitizenWhy | Apr 13, 2011, 10:42 AM EDT
If the Irish payment of privately owned bank debts is unsustainable, then the default will come. Is anyone in Europe and Ireland preparing an orderly default plan? I doubt it. Stumble along, mumble through. ... On the other hand the Irish government has just guaranteed deposits in the Irish banks. This could be a step toward an orderly nationalization, bankruptcy (with default for the bondholders, or conversion to equity in the 2-3 new banks that will emerge), and the emergence from the ruins, with a government capital infusion, of 2-3 healthy banks.
cillowen | Apr 13, 2011, 09:52 AM EDT
default default - burn the bondholders - the only way out.
marsman | Apr 13, 2011, 09:25 AM EDT
That is not defend German or other bank interests. But there would be number of problems arising heroically acting politicians. "The ECB Frankfurt is at present providing much needed liquity for the Irish banks. From a Bloomberg article: Noonan said a minority of governors at the Frankfurt-based ECB, notably Germany's Axel Weber, agree with the Irish and American position, and he still hoped it would prevail in the medium term. But he said Ireland had to give up its hopes of greater burden-sharing for now because the ECB is the key source of short-term funds for all of Ireland's banks, none of which is able to borrow on open markets. ..." In effect this would mean that Irish banks would have to limit the amount of money that can be taken out, just like the banks in Argentia had to do years ago. "The bank in Frankfurt is supplying almost euro200 billion ($280 billion) of liquidity to the Irish banking system. We said we wanted burden-sharing but we would not do it unilaterally. We would only do it with the agreement of Frankfurt and we didn't get the agreement," Noonan told Irish state broadcasters RTE.