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Periscope by Niall O'Dowd

Fear and loathing of Germans, French in Ireland -- European bosses seen as bullies in financial mess

Posted on Sunday, April 03, 2011 at 03:23 PM

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Dublin: Ireland is a country in the middle of a major stress test and heading for a possible breakdown.

The term stress test is used very widely here this week, because it refers to what the banks underwent as a result of their spending splurge in good times.

Bad loans cascaded from all quarters and the end result was a banking system that now has to start from scratch, essentially nationalized this week by the government.

The finance minister, Michael Noonan, described the days the bank went broke as the worst since the Irish civil war in 1921 and he is right.

The final number ends up at close to $100 billion that needs to be repaid by the banks after the previous government foolishly assumed all that banking debt on behalf of the Irish taxpayer.

What is beyond irritating however, are the actions of the big European countries that helped land Ireland in this mess.

The $100 billion that Ireland now must repay in order to get its banking system back was in large part loaned by European banks, especially in Germany and France.

Desperate to loan out cash and unable to do in their own countries, they lent billions at ridiculously cheap rates to Irish banks, around .15 per cent. The Irish banks then relent at 2 to 3 per cent to the big property developers.

All was going swimmingly until the housing bubble burst and the developers could now longer repay their loans.

The reasons the Germans, in particular, loaned billions to Ireland was because their own banking systems did not allow such reckless gambling on property as Ireland did.

Ireland became the dumping ground for easy cash, flim flam men and reckless bankers shoveling cash out the door to ludicrous development projects such as the ghost estates that now dot the Irish landscape.

Call the Irish stupid and they certainly were, but Germany, France and Britain to a lesser extent certainly helped feed the alcoholic much more drink with top up loans whenever the opportunity arose.

Now they Germans and French in particular have adopted a hectoring tone and told Ireland to behave and pay back all the bad loans.

All very well, but you are saddling a country with $100 million in debt which everyone knows it simply cannot repay.

The German and French who lent much of it to Irish banks will not hear of any alternative however, but to squeeze one of Europe’s smallest economies to the point where it squeals for mercy.

It s a little like when the bully has raided your piggy bank and taken everything but now insists on smashing it up as well.

The new government came in threatening to hold bondholders such as the German banks equally responsible for the mess.

This week they backed down in a hurry with the bondholders, those who gambled on the Irish property market, emerging untouched and the penniless Irish taxpayer left holding the bag.

There is justifiable anger here in Ireland over that and it appears that the Europeans have kept the hammer on Ireland in order to protect their own banks which hold many of the same dubious loans that Irish banks did before the crash.

If Ireland were too tell them to take a hike it is quite likely the whole European financial system would be dramatically under mined with bank forced to consider what loans are on their books.

The Germans and French would do well to pay close attention to Ireland’s needs at this point and stop their bullying tactics.

The Celtic Tiger may be gone, but it is cornered, not dead. A cornered tiger is a dangerous animal indeed.

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ancavker | Apr 04, 2011, 01:45 PM EDT

tippman: I have to agree with you on this. Still shaking my head over the shopping trips to NYC done by so many Irish people while things were booming. These were every day middle class people. My sympathies to the Irish people who were prudent and played no role in this mess. But there were many Irish people were horribly obnoxious during the boom times. If nothing else with them not liking the Germans and French now, perhaps they will ease up on hating Americans so much.

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antoman | Apr 04, 2011, 12:46 PM EDT

Takes long swig from sirpeters bottle of plonk.Thanks biy.I was sober there briefly like.

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sirpeter | Apr 04, 2011, 12:06 PM EDT

antoman..Ha ha..That's real fighting talk. Here la.. Take a lash off my bottle of wine it will mellow you out.You know whiskey gets you all upset. Sur isn't life grand biy.

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tippboy | Apr 04, 2011, 12:02 PM EDT

When the Tiger was at it's peak Irish people went around Europe buying up properties with borrowed money and boasting about how were were the "richest" country in the world with the best educated workforce, the best quality of life, blah, blah, blah. We developed our own little celebrity circuit where media and "stars" of screen, stage and property aped Hollywood and tried to outdo each other with ostentatious displays of wealth. Meanwhile people were dying on trolleys in hospital corridors, unable to get an operation or a room. We were like the neighbor who won the lottery and whose level of obnoxiousness increased in direct proportion to their wealth. And we expect the French and Germans who were prudent with their money to give us a sympathetic ear - good luck!

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antoman | Apr 04, 2011, 09:21 AM EDT

Start by burning the bondholders like Iceland.Its a game of poker.You win some and you lose some.But in Ireland you can't lose at all.We are a population of four million or so and we have a debt to pay that will take generation to repay.Either we get a realistic sum to repay or we take to the streets.We have become a post WW1 Germany.An impossible debt to repay and a silent simmering anger just below the surface waiting to explode in civil war.

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tonyhilley | Apr 04, 2011, 05:44 AM EDT

Not being an economist or a corporate lawyer etc, I only have my common sense. If its true that Ireland cant in reality ever pay back all its dept, then any present solution that is found that does not include the bond holders taking a hit is only a stop-gap solution and in 18 to 24 months we will be back where we were (If the Irish public allow us to get that far?). When the battle is hot, now is the time for Ireland to get together with its other poor European countries in the same boat and other small nations that feel venerable (in terms the German Bull’s focus in the future). Although one can blame a drug addict the drug dealer must take his share of the blame. Ireland should hire a few TOP outside-looking-in American experts to help. Now is the time to take on the bull, if the fight is left to a future date Ireland might be left on its own. Remember strength in numbers. A pack of hungry and desperate small dogs can pull down a prime bull.

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Dublinjas | Apr 04, 2011, 12:57 AM EDT

I would like to hear from economic gurus out there, I am guessing but I would imagine that just to service the interest alone on such a debt, would be a mighty annual sum.

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Dublinjas | Apr 04, 2011, 12:45 AM EDT

Yes the Banks borrowed the money and it was completely up to them to pay it back, it was all their debt Until late in the night of September 29 2008 without any consultation with the Irish people Brian Cowen and Brian Lenihan encouraged by several lying Bankers assumed on behalf of the Irish Taxpayer the debt we now find ourselves in by guaranteeing all deposits loans investments etc in an to the Irish Banking system, The actual debt is far beyond €100bn Euro it is now to date €208bn Euro according to the Sunday Ind; which when expressed in GDP it is apparently 154% of Ireland's GDP. If every cent that was earned by every person and company and business in Ireland for the next year and a half was handed over it would pay off the banks debt, but then we would have to take care of our own regular national debt, and of course we would have all died of starvation..That gives you an idea of the indebtedness of this country.

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BadJjoao | Apr 03, 2011, 09:41 PM EDT

Let me get this straight. The banks borrowed money from German and French lenders and now have to pay it back. What a dasterdly concept. Where is their sense of decency?

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sirpeter | Apr 03, 2011, 09:30 PM EDT

"The Celtic Tiger may be gone, but it is cornered, not dead. A cornered tiger is a dangerous animal indeed" I like it Niall..It appeals to my love of analogies. The Irish cornered.Left with no choice but to come out fighting. Oh! how comfortable that feels. We had the party and now we need to bust a few jaws. Doesn't really matter if we get a few broken jaws ourselves.lol

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seanomelbourne | Apr 03, 2011, 06:07 PM EDT

Finn Gael doe's not have the mettle to take on the Europeans, after all Kenny and his misfits are part of the system which brought down the "the tiger". I hope I am proven wrong.

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