It isn’t easy being the ECB. For starters, the Euro­pean Cen­tral (ECB) faces so many pesky ques­tions: Blah blah blah bailouts. Blah blah blah we want to see the notes on delib­er­a­tions. Blah blah blah Free­dom of Infor­ma­tion Requests. Blah blah blah we’re tak­ing you to court. Etc. How is any­one sup­posed to have any con­fi­dence in the institution’s author­ity with all of these ques­tions being bandied about?

Being the ECB does have it’s perks though. For starters, if you’re an elite insti­tu­tion in the ever-evolving euro­zone, trans­parency isn’t really an issue:

Bloomberg
ECB With­hold­ing Secret Greek Swaps File Keeps Tax­pay­ers in Dark
By Gabi Thesing, Elisa Mar­t­in­uzzi & Alan Katz — Nov 29, 2012 6:01 PM CT

The Euro­pean Cen­tral Bank’s court vic­tory allow­ing it to with­hold files show­ing how Greece used deriv­a­tives to hide its debt leaves one of the region’s most pow­er­ful insti­tu­tions free from pub­lic scrutiny as it assumes even more reg­u­la­tory power.

The Euro­pean Union’s Gen­eral Court in Lux­em­bourg ruled yes­ter­day that the cen­tral bank was right to keep secret doc­u­ments that would reveal how much the ECB knew about the true state of Greece’s accounts before the coun­try needed a 240 billion-euro ($311 bil­lion) taxpayer-funded rescue.

The case brought by Bloomberg News, the first legal chal­lenge to a refusal by the ECB to make pub­lic details of its decision-making process, comes a month before the cen­tral bank is due to take respon­si­bil­ity for super­vis­ing all of the euro– area’s banks. The cen­tral bank already sets nar­rower lim­its on its dis­clo­sures than its U.S. equiv­a­lent, the Fed­eral Reserve. The court’s deci­sion shows the ECB has too broad a dis­cre­tion to reject requests for dis­clo­sure, aca­d­e­mics and lawyers said.

“It’s a very dis­turb­ing rul­ing,” said Olivier Hoede­man of Cor­po­rate Europe Obser­va­tory, a Brussels-based research group that chal­lenges lob­by­ing pow­ers in the EU and cam­paigns for the account­abil­ity of EU bod­ies. “It is such a sweep­ing, blan­ket state­ment that it under­mines the right to know.”

Bloomberg sought access to two inter­nal papers drafted for the cen­tral bank’s six-member Exec­u­tive Board. The first doc­u­ment is enti­tled “The impact on gov­ern­ment deficit and debt from off-market swaps: the Greek case.” The sec­ond reviews Tit­los Plc, a struc­ture that allowed National Bank of Greece SA, the country’s biggest lender, to bor­row from the ECB by cre­at­ing col­lat­eral from a secu­ri­ti­za­tion of swaps on Greek sov­er­eign debt. The bank loaned 5.4 bil­lion euros to the gov­ern­ment.
Mario Draghi

ECB Pres­i­dent Mario Draghi said on Oct. 4 that the ECB “is already a very trans­par­ent insti­tu­tion,” cit­ing the fact that he holds a monthly press con­fer­ence after its rate deci­sion, tes­ti­fies to law­mak­ers, gives inter­views and makes speeches.

In yesterday’s deci­sion, the court upheld the ECB’s opin­ion that the doc­u­ments sought by Bloomberg could dam­age the pub­lic inter­est and aggra­vate Europe’s finan­cial crisis.

“The ECB must be rec­og­nized as enjoy­ing a wide dis­cre­tion for the pur­pose of deter­min­ing whether the dis­clo­sure of the doc­u­ments relat­ing to the fields cov­ered by that excep­tion could under­mine the pub­lic inter­est,” the three judges said in their rul­ing. Excep­tions “must be inter­preted and applied strictly,” they said. An ECB spokes­woman said the cen­tral bank wel­comed the court’s decision.

...

The ECB’s dec­la­ra­tion last year that it must enjoy a “wide dis­cre­tion” over what Greek bailout delib­er­a­tion notes are made pub­lic due to con­cerns that the infor­ma­tion might “inflame” the mar­kets presents quite a conun­drum given that such dec­la­ra­tions tend to also inflame the pub­lic. It’s an exam­ple of why it isn’t easy being the ECB.

Anglo Irish Has Many “Interest”-ing Secrets
There are those ECB perks, how­ever. Like the lack of any com­mit­ment to demo­c­ra­tic account­abil­ity. It’s a perk that Greece is has been famil­iar with with quite a while now. Ire­land also knows of this perk quite inti­mately. The coun­try ended up bail­ing out a hand­ful of its banks for a mas­sive price tag in late 2010, mak­ing Ireland’s pub­lic liable for an 85 bil­lion euro bailout. It was a fate­ful day for Ire­land because aus­ter­ity was price. It’s been a tough slog for Ire­land ever since. The rene­go­ti­a­tion of those mas­sive bailouts has been goal ever since too. For a coun­try the size of Ire­land, the 85 bil­lion euros bailout it had to accept after nation­al­iz­ing pri­vate bank debt was a “death spiral”-league bailout. And death spi­rals tend to prompt ques­tions. Pesky ques­tions. Blah blah blah bailouts. Blah blah blah we want to see the notes on delib­er­a­tions. Blah blah blah Free­dom of Infor­ma­tion Requests. Blah blah blah we’re tak­ing you to court. For­tu­nately for the ECB, trans­parency is mostly optional:

Independent.ie
Probe into ECB’s refusal to release secret bailout letter

GAVIN SHERIDAN and TOM LYONS – 13 Jan­u­ary 2013

THE Euro­pean Ombuds­man has begun a for­mal inves­ti­ga­tion into the Euro­pean Cen­tral Bank’s refusal to release the let­ter that bounced Ire­land into the bailout.

Two senior exec­u­tives from the Ombuds­man trav­elled to the ECB’s head­quar­ters in Frank­furt in Decem­ber to view the let­ter which the bank is refus­ing to allow the cit­i­zens of Ire­land to see.

The deci­sion to carry out an inves­ti­ga­tion fol­lows a com­plaint against the ECB of “mal­ad­min­is­tra­tion” by jour­nal­ist Gavin Sheri­dan. The ECB has refused to release the let­ter dated Novem­ber 19, 2010, for over a year on the basis that it claims it is not in the “pub­lic inter­est” for Irish cit­i­zens to see “can­did com­mu­ni­ca­tions” between the ECB and national author­i­ties.

This let­ter is marked “secret”, and its pub­li­ca­tion has been blocked at the high­est lev­els of the ECB. The Euro­pean Ombuds­man asked Sheri­dan on Fri­day to pro­vide it with any addi­tional “obser­va­tions” before mak­ing its crit­i­cal decision.

The Sun­day Inde­pen­dent and Sheri­dan have appealed the Depart­ment of Finance’s deci­sion to refuse this same let­ter to the Infor­ma­tion Commissioner.

In cor­re­spon­dence, Min­is­ter for Finance Michael Noo­nan urged the Sun­day Inde­pen­dent to appeal the Depart­ment of Finance’s pre­vi­ous deci­sion to refuse the release of the letter.

On doing so, other let­ters sent between the late Brian Leni­han and Jean-Claude Trichet were released, but the key let­ter of Novem­ber 19, 2010, was again with­held.

That still-secret let­ter between Ireland’s for­mer Min­is­ter of Finance, Brian Leni­han, and for­mer head of the ECB Jean-Claude Trichet must hold quite a few juicy secrets. Mas­sive, hastily approved bailouts tend to involve such things. And if the let­ters between Leni­han and Trichet that have been revealed so far are an indi­ca­tion of what we can expect those still secret let­ters to con­tain we can expect those secrets to be espe­cially juicy. Mas­sive, hastily approved bailouts that send nations into debt death spi­rals tend to involve things like juicy secrets, espe­cially when they’re bailouts agreed to under duress:

Independent.ie
Revealed: Full extent of Lenihan’s capit­u­la­tion to Trichet and Europe

Daniel McConnell – 02 Decem­ber 2012

The ECB’s hawk­ish boss laid down the law to a bro­ken and hap­less Finance Min­is­ter, writes Daniel McConnell

ON Decem­ber 9, 2010, two days after he had deliv­ered his final-ever Bud­get, Brian Leni­han was at a low ebb. As the snow fell heav­ily out­side his Mer­rion Street office win­dow and peo­ple out­side slipped on the icy pave­ments, Leni­han, iso­lated, defeated and in fail­ing health, sat in his office and for­mally com­mit­ted Ire­land to the penal terms of the bank res­cue. It had been ordered by the ECB but the Irish tax­payer would pay for it.

While the over­rid­ing nar­ra­tive that the inno­cent cit­i­zens were screwed into bail­ing out our toxic banks has long been rehearsed since those dark days of Novem­ber 2010, for the first time today we reveal how pathetic Lenihan’s capit­u­la­tion really was.

THE DECEMBER 9, 2010, LETTER

On that cold Decem­ber day, fol­low­ing rounds and rounds of bruis­ing meet­ings and nego­ti­a­tions, Leni­han wrote to the head of the Euro­pean Cen­tral Bank, Jean-Claude Trichet, com­mit­ting the Irish tax­payer to what­ever future bailout of Irish banks would have to take place.

Today, for the first time, we reveal the con­tents of that let­ter, which has finally been released to the Sun­day Inde­pen­dent and Gavin Sheri­dan, jour­nal­ist with thestory.ie, under the Free­dom of Infor­ma­tion Act – two years after the fact.

Beaten and weary, Leni­han had had no suc­cess with his argu­ment that Ire­land, by issu­ing the blan­ket bank guar­an­tee in Sep­tem­ber 2008, had come to the res­cue of Europe and that – given Ireland’s woes – Europe should now meet some of the cost of that bailout.

Trichet was not for turn­ing. Only five weeks ear­lier, he had bul­lied the Finance Min­is­ter into the €85bn Troika bailout and he was not about to give an inch on shar­ing the bur­den of fix­ing the bro­ken Irish bank­ing system.

Lenihan’s com­mit­ment, con­tained in the let­ter, that “any addi­tional cap­i­tal require­ments for restruc­tur­ing Anglo Irish Bank and Irish Nation­wide must be cov­ered with cash injec­tions by the Gov­ern­ment”, along with a sim­i­lar promise for the other “viable banks”, ulti­mately cost the Irish tax­payer €24bn, as revealed by his suc­ces­sor, Michael Noo­nan, in late March 2011.

An ini­tial read­ing of the let­ter would sug­gest that this was the Irish min­is­ter act­ing off his own steam, affirm­ing com­mit­ments to the troika, when, in truth, the penal com­mit­ments signed up to by Leni­han had been agreed fol­low­ing intense dia­logue over sev­eral weeks.

They illus­trate how poorly the Irish team per­formed in those negotiations.

“The Irish author­i­ties agree the fol­low­ing addi­tional clar­i­fi­ca­tion regard­ing the imple­men­ta­tion of the mea­sures agreed [with the troika],” Leni­han wrote.

Para­noid about the impact this let­ter would have on the finan­cial sta­bil­ity of the Irish State, Leni­han said it was not pos­si­ble to make the con­tents of the let­ter pub­lic for fear that it would under­mine gov­ern­ment authority.

“These clar­i­fi­ca­tions are being pro­vided in respect of a lim­ited num­ber of spe­cific issues, which it is not pos­si­ble to dis­close pub­licly on account of legal risks, com­mer­cial, mar­ket and financial-stability con­sid­er­a­tions, which would under­mine the author­i­ties’ abil­ity to imple­ment those mea­sures or ren­der them more costly,” he wrote.

That is cer­tainly some seri­ous but under­stand­able para­noia: Ireland’s Min­is­ter of Finance Brian Leni­han was basi­cally forced to agree to terms that would bla­tantly under­mine the long-term sol­vency of the entire nation. Pretty much any info that you dis­close regard­ing such deals tend to be unhelp­ful for shoring up mar­ket “con­fi­dence”, and that would result in a rise in inter­est rate costs and the over­all long-term costs of any such bailout. It’s a problem.

Pub­lic dis­clo­sure, it’s often argued, can dis­rupt the free exchange of ideas. But the par­tic­u­lar sit­u­a­tion where dis­clo­sure of infor­ma­tion about the ratio­nal and nego­ti­a­tions that went into the devel­op­ment of a pol­icy would dam­age the pub­lic by reveal­ing just how dam­ag­ing the ini­tial pol­icy ratio­nal is can become a par­tic­u­larly acute prob­lem. Espe­cially when the poli­cies involve banker bailouts paid for by pub­lic austerity.

It also doesn’t help when the “bailout” is really an inter­na­tional loan to a small nation to finance the bailout of for­eign pri­vate bank bond­hold­ers. A rel­a­tively high-interest loan.

Skip­ping down...

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WHAT THIS LETTER MEANS

The most telling aspect of this let­ter is that it placed the future bur­den of bank bailouts on the Irish tax­payer – with­out any ref­er­ence to any Euro­pean insti­tu­tion or bank shar­ing any of the burden.

This is despite the latter’s con­tin­ued gam­ble on Ire­land dur­ing the boom.

Leni­han, on the direct orders of Jean-Claude Trichet – and despite hav­ing saved Europe in 2008 by not allow­ing Anglo or Irish Nation­wide to go to the wall – was at this point in 2010 hav­ing to accept the full cost of any future bailout. We later found out that this would be €24bn.

We know from Finance Min­is­ter Michael Noo­nan in early Sep­tem­ber that Leni­han was directly threat­ened by Trichet by way of let­ter that unless Ire­land went into a bailout emer­gency fund­ing from the ECB would be cut off.

Noo­nan said he had seen the “very direct” let­ter, which left Mr Leni­han with “lit­tle or no option” but to admit defeat.

Since leav­ing his post, Trichet has also insisted that this let­ter should remain con­fi­den­tial and not be released, despite the clam­our in Ire­land for its pub­lic dis­clo­sure. But what­ever the con­tents of that let­ter, the con­tents of what we are pub­lish­ing today rep­re­sent the strongest sup­port­ing evi­dence as to why Ire­land deserves a deal on its debt.

Fol­low­ing on from Greece’s major debt-reduction deal last week – which amounts to its third default in less than 18 months – time is run­ning out for Noo­nan and the Gov­ern­ment to deliver a major debt reduc­tion. Many are ask­ing what does Greece have that Ire­land doesn’t?

...

While Ire­land con­tin­ues to “bump along the bot­tom,” the great­est obsta­cle to growth is the size of our debt. If we can get a deal, then Ireland’s chances of recov­ery are strong. But if we don’t, then we will be lost for over a decade.

The poor poor ECB. There’s just one par­tic­u­lar still-secret 2010 let­ter where for­mer ECB chief Jean-Claude Trichet directly threat­ens Ireland’s finance min­is­ter that the ECB’s emer­gency fund­ing to Ire­land will get cut off unless Leni­han agrees to bailout terms that places the entire bur­den of the pri­va­tized Irish bank debt on the Irish tax payer with­out any sort of assis­tance from Ireland’s much larger euro­zone part­ner. And that pesky pub­lic still wants to see that let­ter even though the ECB and Irish gov­ern­ment has released all sort of other doc­u­ments that clearly indi­cate that Ire­land was given no choice and ordered to accept a deal that was bla­tantly against the Irish public’s inter­est and greatly in the inter­ests of for­eign pri­vate bank cred­i­tors. Why can’t the pub­lic sim­ply under­stand that if the Anglo Irish bailout let­ters were to be made pub­lic, that will dis­credit the Irish gov­ern­ment and the ECB, com­pli­cat­ing the recent Anglo Irish bailout rene­go­ti­a­tions? Why can’t the pub­lic just have con­fi­dence, with­out any of the infor­ma­tion required to jus­tify that con­fi­dence? A lil’ faith in the ECB never hurt anyone.

Infor­ma­tion Can Be Dan­ger­ous, Past and Present
And please no ques­tions about about that recent renegotation...the details about an ongo­ing Anglo Irish debt bailout rene­go­ti­a­tion could appar­ently under­mine the entire Euro­pean finan­cial sys­tem. And the inter­est pay­ments on that Ango Irish bailout debt are just start­ing to kick in this year so rene­go­ta­tions are urgent. So please, no ques­tions. Bad things will hap­pen:

Irish Exam­iner
ECB refuses to dis­cuss talks on promis­sory notes

Fri­day, Jan­u­ary 18, 2013

As Irish offi­cials con­tinue to insist there is an immi­nent deal on the Anglo Irish promis­sory notes the ECB is claim­ing that releas­ing or even com­ment­ing on any details of a deal would under­mine the entire Euro­pean finan­cial sys­tem.

By Vin­cent Ryan
In response to a free­dom of infor­ma­tion request from the Irish Exam­iner for doc­u­ments in rela­tion to the ongo­ing nego­ti­a­tions between the ECB and the Irish author­i­ties. the direc­tor gen­eral of the ECB sec­re­tariat, Pierre van der Hagen, said they could not go beyond acknowl­edg­ing that nego­ti­a­tions are in train.

“Doc­u­ments relat­ing to the on going devel­op­ments sur­round­ing the Anglo Irish promis­sory notes can­not be dis­closed, as even par­tial dis­clo­sure would under­mine the pro­tec­tion of the pub­lic inter­est as regards mon­e­tary pol­icy of the union and the finan­cial or eco­nomic pol­icy of Ire­land, and the sta­bil­ity of the finan­cial sys­tem in the union and in Ire­land.” he said.

...

The struc­tur­ing of the deal on the Anglo Irish promis­sory notes by the pre­vi­ous gov­ern­ment means that inter­est pay­ments would only come into effect from this year. The Taoiseach Enda Kenny has been push­ing to try and get a deal on the promis­sory notes before crip­pling inter­est pay­ments kick in, which threaten to derail Ireland’s recov­ery.

How­ever, Sinn Féin’s finance spokesper­son, Pearse Doherty, said it was very much in the pub­lic inter­est that the sta­tus of the nego­ti­a­tions be revealed so that the fudge that was orches­trated last year in rela­tion to the pay­ment of the €3.1bn is not repeated.

“We’re less than three months to this note being paid. We went through the same rig­ma­role last year and it tran­spired no deal had been achieved. It’s very much in the pub­lic inter­est to know what, if any, nego­ti­a­tions are ongo­ing and we deserve to be kept informed and for the process to be more trans­par­ent,” he said.

The rene­go­ta­tion of that 2010 bailout of Ire­land — a bailout neces­si­tated by the 2008 bailout of Anglo Irish and a hand­ful of other major prop­erty lenders — has been a major pub­lic issue in Ire­land for the past cou­ple of years. Last Octo­ber, Angela Merkel freaked out Ire­land by tak­ing a hard­line stance against a rene­go­ti­a­tion of that crip­pling bank debt. But every­one also knew that it’s pretty much a given that Ireland’s mas­sive bank debt will some­how be rene­go­ti­ated to a less oner­ous level at some point. It’s just absurdly high for a coun­try the size of Ire­land. And sure enough, in early last month some debt was indeed rene­go­ti­ated: The 2008 bailout of Anglo Irish bank, the largest of the Irish prop­erty lenders, was sched­uled to cost Ire­land 47 bil­lion euros over the next 20 years, with 3.1 bil­lion to be paid each year until 2023 and inter­est pay­ments enough to increase the deficit by a full per­gen­t­age. Anglo Irish’s debt repay­ments were guar­an­teed to be an alba­tross hang­ing around Ireland’s neck for a long time. And the inter­est on the debt was due to start this year. Things were not look­ing good for those insti­tu­tions charged with heal­ing Ireland’s econ­omy or the entire “aus­ter­ity first” model that the euro­zone appears to be devel­op­ing would be put into ques­tion. Ire­land is con­sid­ered one of the rel­a­tive “suc­cess” sto­ries in the euro­zone. Some­how that debt bur­den had to be reduced.

So there was even­tu­ally a rene­go­ti­a­tion of that Anglo Irish debt. The over­all debt wasn’t for­given, of course. That’s not how the ECB rolls. Instead, the pay­back period got pushed back 25 years so prin­ci­ple repay­ment can start in 2038 instead. There will still be inter­est pay­ments in the interim, but 25 years of infla­tion (plus inter­est) should make the crush­ing nation­al­ized pri­vate bank debt some­what less crush­ing:

Ire­land hails his­toric debt deal with ECB

By Padraic Halpin and Carmel Crimmins

DUBLIN | Thu Feb 7, 2013 2:14pm EST

(Reuters) — Ire­land clinched a long-awaited deal on Thurs­day to ease the bur­den of its bank debts, send­ing its bor­row­ing costs falling to pre-crisis lev­els and bol­ster­ing its chances of end­ing its reliance on EU-IMF loans this year.

After nearly 18 months of nego­ti­a­tion, Prime Min­is­ter Enda Kenny won Euro­pean Cen­tral Bank (ECB) approval to stretch out the cost of bail­ing out Anglo Irish Bank, slic­ing bil­lions off the country’s bor­row­ing needs and cut­ting its bud­get deficit.

“Today’s out­come is an his­toric step on the road to eco­nomic recov­ery,” Kenny told a packed par­lia­ment in Dublin. “It secures the future finan­cial posi­tion of the state.”

The assent of the ECB is a major coup for Kenny, who was forced to call an emer­gency ses­sion of par­lia­ment last night to liq­ui­date Anglo Irish, a lender whose casino-style atti­tude to risk helped pre­cip­i­tate the country’s finan­cial implosion.

“It cer­tainly is unusual in the his­tory of the cri­sis that we are actu­ally being sur­prised in a pos­i­tive way by the scale of the response,” said Austin Hughes, chief econ­o­mist at KBC Bank. “Nor­mally we have seen under­achieve­ment and overpromising.

“The early indi­ca­tions are that this will make a mate­r­ial dif­fer­ence for the out­look on the Irish economy.”

The agree­ment stretches the cost of bail­ing out Anglo Irish over 40 years rather than ten and cuts Ireland’s bor­row­ing needs by 20 bil­lion euros over the next decade.

It also gives the gov­ern­ment another 1 bil­lion euros to work with in forth­com­ing budgets.

Tech­ni­cal talks between the ECB and Irish offi­cials had been bogged down by ECB con­cerns that any deal given to Dublin to ease the 48 bil­lion euros cost of the Anglo promis­sory notes could set a prece­dent for other coun­tries, such as Spain, which are also deal­ing with large bank debts.

But with Euro­pean lead­ers keen to offer a suc­cess story from the region’s debt cri­sis to encour­age both vot­ers and poten­tial investors, Dublin went back to the draw­ing board.
...

In addi­tion to Merkel’s fears that the Irish debt rene­go­ti­a­tions would set a prece­dent that could be applied to other nations receiv­ing their own forms of “spe­cial” treat­ment, there was also a great deal of con­cern amongst Merkel’s far-right CSU allies that the eas­ing of debt bur­dens would slow down the pace of “struc­tural reforms”(austerity). Trickle down kind­ness is appar­ently bad for busi­ness whereas pro­mot­ing nationally-stratified income inequal­ity is appar­ently a strate­gic objec­tive for achiev­ing greater eco­nomic harmonization.

Con­tin­u­ing...

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ECB NOD

The new deal was designed so that the ECB did not have to vote on it, enabling ECB Pres­i­dent Mario Draghi to say sim­ply that the Gov­ern­ing Coun­cil had sim­ply “taken note” of Dublin’s plan.

...

“It is pos­i­tive for fund­ing, and there­fore increases Ireland’s chances of leav­ing its (EU-IMF) loan pro­gram and rely­ing more heav­ily on the cap­i­tal mar­kets for fund­ing toward the end of this year,” said Fer­gus McCormick, head of sov­er­eign rat­ings at DBRS rat­ings agency.

“How­ever, the swap itself will not affect our A (low) rat­ing or neg­a­tive trend on Ire­land, because swap­ping the promis­sory notes for a bond does not reduce the stock of pub­lic debt.”

FUTURE BURDEN

Under the terms of the deal, first reported by Reuters on Wednes­day, Anglo’s promis­sory notes, with an aver­age matu­rity of between seven and eight years, will be exchanged for gov­ern­ment bonds with an aver­age matu­rity of over 34 years. The first prin­ci­pal repay­ment will be made in 2038 and the last in 2053.

The finance spokesman for the oppo­si­tion Sinn Fein party said the agree­ment would bur­den future generations.

“This week my youngest son began to crawl. He wasn’t even born at the time the promis­sory note was issued, yet he’ll be 40 years of age and this state will be pay­ing back the toxic debts of Anglo Irish Bank,” Pearse Doherty told parliament.

Anglo Irish’s near-collapse in 2008 pres­sured the gov­ern­ment into guar­an­tee­ing the entire finan­cial sec­tor, suck­ing it into a down­ward spi­ral and in late 2010, a 67.5-billion euro loan from the EU and IMF.

...

The poor ECB. First peo­ple are say­ing “hey, this nation­al­ized pri­vate debt was absurd, we need to rene­go­ti­ate”, and then when the ECB signs off on a rene­go­ti­ated deal peo­ple are like “OMG, my infant chil­dren will be pay­ing for this debt when they’re in their 40s”, and now peo­ple want to know how the details about this new deal too! It isn’t easy being the ECB. So many ques­tions. So few answers that won’t inflame the pub­lic and dis­rupt the integrity of the finan­cial mar­kets:

Irish Exam­iner
ECB claims its ‘space to think’ super­sedes pub­lic interest

Tues­day, Feb­ru­ary 19, 2013

The ECB claims that main­tain­ing its own “space to think”, is of more impor­tance than cit­i­zens’ right to under­stand how it arrives at deci­sions that mate­ri­ally affect people’s qual­ity of life.

By Vin­cent Ryan
In response to an appeal over the ECB’s refusal to release doc­u­ments relat­ing to the deal the Gov­ern­ment struck on the Anglo Irish Bank promis­sory note, the bank explained that it believed its refusal to release the infor­ma­tion was in the public’s own inter­est.

The pres­i­dent of the ECB, Mario Draghi, responded in writ­ing, claim­ing that any dis­clo­sure could under­mine the ECB’s abil­ity to operate.

“The ECB con­sid­ers that releas­ing these doc­u­ments would under­mine the pos­si­bil­ity of the ECB’s staff freely sub­mit uncen­sored advice to the ECB’s decision-making bod­ies, and that it would thus limit the ECB’s ‘space to think’.

“It is, there­fore, in the pub­lic inter­est to pro­tect the inter­nal con­sul­ta­tions and delib­er­a­tions,” said Mr Draghi.

Despite the fact that the rene­go­ti­a­tion of the promis­sory notes will have a long-term effect on Ireland’s bud­get and con­se­quently on the finan­cial prospects of all Irish cit­i­zens, Mr Draghi believes that there is noth­ing in the dis­cus­sion doc­u­ments that led to the liq­ui­da­tion of IBRC, the ter­mi­na­tion of 800 jobs in the bank and knock-on effect that is expected to impact another 30,000 jobs, that are of “pub­lic interest.”

“On the basis of the con­tent of these doc­u­ments, there is no over­rid­ing pub­lic inter­est which could jus­tify their dis­clo­sure and it is not pos­si­ble to grant par­tial access to them with­out under­min­ing the inter­est pro­tected,” he said.

...

The ECB isn’t the Only Insti­tu­tion it isn’t Easy to Be
Pity the poor ECB. They are forced to know those dark truths that would drive the pub­lic mad with rage. Dark truths like what orders “advice” the ECB gave Ireland’s Min­is­ter of Finance Brian Leni­han regard­ing the rene­go­ti­a­tion of Anglo Irish Bank’s debt. Shud­der the thought. After all, if the pub­lic was allowed to see the rea­son­ing used to jus­tify their lead­ers’ deci­sions on key affairs of the state, the pub­lic might, you know, start ask­ing more ques­tions. Ques­tions like, “hey, what were you think­ing?” or “didn’t you real­ize this would destroy the coun­try?” Unpleas­ant questions.

That poor poor ECB. And the ECB isn’t the only insti­tu­tion it’s not easy to be

The Telegraph

EU not to blame for aus­ter­ity, says Jose Manuel Bar­roso
Euro­pean Com­mis­sion Pres­i­dent Jose Manuel Bar­roso has denied that the Euro­pean Union was behind the tough aus­ter­ity mea­sures that have swept the con­ti­nent in recent years.

5:03PM GMT 10 Jan 2013

“I know many parts of our soci­eties attribute the cur­rent dif­fi­cul­ties to Euro­pean Union level and this is not fair because it was not the Euro­pean Union that cre­ated the prob­lems,” Mr Bar­roso told reporters at Dublin Castle.

Mr Bar­roso was speak­ing at a joint press con­fer­ence with Irish Prime Min­is­ter Enda Kenny in Dublin to coin­cide with the begin­ning of Ireland’s tenure of the six-month rotat­ing EU pres­i­dency, AFP reported.

“I want to make this clear because there is a myth that it is the Euro­pean Union that imposes dif­fi­cult poli­cies. It’s not true,” Mr Bar­roso said.

“The cause of the dif­fi­cul­ties some coun­tries are fac­ing is exces­sive pub­lic debt cre­ated by national gov­ern­ments and irre­spon­si­ble finan­cial behav­iour, that also accu­mu­lated exces­sive pri­vate debt includ­ing finan­cial bub­bles that hap­pened under the respon­si­bil­ity of national super­vi­sors,” he added.

“This is why now coun­tries have to make painful adjust­ments. Britain is hav­ing a very tough bud­get and Britain is not a mem­ber of the euro.”

Mr Bar­roso praised the efforts of Ire­land, which hopes to become the first euro­zone nation to exit a bailout pro­gramme this year after years of painful aus­ter­ity measures.

...

“I do believe Ire­land can send a mes­sage of hope to other coun­tries about what can actu­ally be achieved,” Mr Kenny said.

Yes, ear­lier this year, Euro­pean Com­mis­sion pres­i­dent Manuel Bar­roso blamed Ireland’s finan­cial implo­sion — which was caused by a giant finan­cial bub­ble that was heav­ily financed by for­eign banks — entirely on Ireland’s gov­ern­ment for its lax finan­cial reg­u­la­tions. The abil­ity to make state­ments wor­thy of mock­ery with­out actu­ally get­ting mocked is another EU-elite perk. Ire­land, after­all, was rou­tinely hailed as the “Celtic Tiger” and “dar­ling” of the invest­ment com­mu­nity and a model for the rest Europe pre­cisely because of those poli­cies. In fact, not too long ago (2005-ish), Ire­land was part of a coali­tion of the new ‘dynamic’(deregulated) economies that were threat­en­ing to over­throw the old Franco/German order that had dom­i­nated Europe’s affairs for so long(it’s mostly just a Ger­man order nowadays).

Mr. Bar­roso most likely recalls these facts, just as he prob­a­bly recalls that, some­how, the nor­mal process of mak­ing the big for­eign lenders to pri­vate Irish banks take a big “hair cut” when the bub­ble burst some­how didn’t apply to Ire­land. Ire­land was a “spe­cial case”, we recall. Recall of mem­o­ries when you are rep­re­sent­ing an inter­na­tional insti­tu­tion, how­ever, is often an option when its regard­ing a “spe­cial case”. “Spe­cial cases” are often what hap­pens when lots of “spe­cial inter­est” are at stake and inter­na­tional insti­tu­tions tend to involve quite a few spe­cial inter­ests. Being the EU or the ECB isn’t easy, but it has its spe­cial perks:

Van­ity Fair
When Irish Eyes Are Cry­ing
First Ice­land. Then Greece. Now Ire­land, which headed for bank­ruptcy with its own mys­te­ri­ous logic. In 2000, sud­denly among the rich­est peo­ple in Europe, the Irish decided to buy their country—from one another. After which their banks and gov­ern­ment really screwed them. So where’s the rage?
By Michael Lewis
March 2011

When I flew to Dublin in early Novem­ber, the Irish gov­ern­ment was busy help­ing the Irish peo­ple come to terms with their loss. It had been two years since a hand­ful of Irish politi­cians and bankers decided to guar­an­tee all the debts of the country’s biggest banks, but the peo­ple were only now get­ting their minds around what that meant for them. The num­bers were breath­tak­ing. A sin­gle bank, Anglo Irish, which, two years before, the Irish gov­ern­ment had claimed was merely suf­fer­ing from a “liq­uid­ity prob­lem,” faced losses of up to 34 bil­lion euros. To get some sense of how “34 bil­lion euros” sounds to Irish ears, an Amer­i­can think­ing in dol­lars needs to mul­ti­ply it by roughly one hun­dred: $3.4 tril­lion. And that was for a sin­gle bank. As the sum total of loans made by Anglo Irish, most of it to Irish prop­erty devel­op­ers, was only 72 bil­lion euros, the bank had lost nearly half of every dol­lar it invested.
...

Just take a moment and think about the size of this 34 bil­lion euro bailout for the Irish pub­lic (for a sin­gle bank): In terms of US dol­lars, that would be around $3.4 tril­lion. That ain’t chump change.

Con­tin­u­ing...

...

Yet when I arrived, in early Novem­ber 2010, Irish pol­i­tics had a frozen-in-time qual­ity to it. In Ice­land, the business-friendly con­ser­v­a­tive party had been quickly tossed out of power, and the women booted the alpha males out of the banks and gov­ern­ment. (Iceland’s new prime min­is­ter is a les­bian.) In Greece the business-friendly con­ser­v­a­tive party was also given the heave-ho, and the new gov­ern­ment is attempt­ing to cre­ate a sense of col­lec­tive pur­pose, or at any rate per­suade the cit­i­zens to quit cheat­ing on their taxes. (The new Greek prime min­is­ter is not merely upstand­ing, but barely Greek.) Ire­land was the first Euro­pean coun­try to watch its entire bank­ing sys­tem fail, and yet its business-friendly con­ser­v­a­tive party, Fianna Fáil (pro­nounced “Feena Foil”), would remain in office into 2011. There’s been no Tea Party move­ment, no Glenn Beck, no seri­ous protests of any kind. The most obvi­ous change in the country’s pol­i­tics has been the role played by for­eign­ers. The Irish gov­ern­ment and Irish banks are crawl­ing with Amer­i­can invest­ment bankers and Aus­tralian man­age­ment con­sul­tants and face­less Euro-officials, referred to inside the Depart­ment of Finance sim­ply as “the Ger­mans.” Walk the streets at night and, through restau­rant win­dows, you see important-looking men in suits, din­ing alone, study­ing important-looking papers. In some new and strange way Dublin is now an occu­pied city: Hanoi, circa 1950. “The prob­lem with Ire­land is that you’re not allowed to work with Irish peo­ple any­more,” I was told by an Irish prop­erty devel­oper, who was find­ing it dif­fi­cult to escape the hun­dreds of mil­lions of euros in debt he owed.

...

What has occurred in Ire­land since then is with­out prece­dent in eco­nomic his­tory. By the start of the new mil­len­nium, the Irish poverty rate was under 6 per­cent and by 2006 Ire­land was one of the rich­est coun­tries in the world. How did that hap­pen? A bright young Irish­man who got him­self hired by Bear Stearns in the late 1990s and went off to New York or Lon­don for five years returned feel­ing poor. For the bet­ter part of a decade there has been quicker money to be made in Irish real estate than in invest­ment bank­ing. How did that happen?

...

The Har­vard demog­ra­phers admit­ted their the­ory explained only part of what had hap­pened. At the bot­tom of the suc­cess of the Irish there remains, even now, some mys­tery. “It appeared like a mirac­u­lous beast mate­ri­al­iz­ing in a for­est clear­ing,” writes the pre-eminent Irish his­to­rian R. F. Fos­ter, “and econ­o­mists are still not entirely sure why.” Not know­ing why they were so sud­denly so suc­cess­ful, the Irish can per­haps be for­given for not know­ing exactly how suc­cess­ful they were meant to be. They had gone from being abnor­mally poor to being abnor­mally rich, with­out paus­ing to expe­ri­ence nor­mal­ity. When, in the early 2000s, the finan­cial mar­kets began to offer vir­tu­ally unlim­ited credit to all comers—when nations were let into the dark room with the pile of money and asked what they would like to do with it—the Irish were already in a pecu­liarly vul­ner­a­ble state of mind. They’d spent the bet­ter part of a decade under some­thing very like a magic spell.
...

Make a spe­cial note of this part of the arti­cle. It sum­ma­rizes a BIG part of why the entire euro­zone cri­sis took place:
“When, in the early 2000s, the finan­cial mar­kets began to offer vir­tu­ally unlim­ited credit to all comers—when nations were let into the dark room with the pile of money and asked what they would like to do with it...”

Yep.

Skip­ping down in the article...

...
True Love’s First Kiss

Mor­gan Kelly is a pro­fes­sor of eco­nom­ics at Uni­ver­sity Col­lege Dublin, but he did not, until recently, view it as his busi­ness to think much about the econ­omy under his nose. He had writ­ten a hand­ful of highly regarded aca­d­e­mic papers on top­ics (such as “The Eco­nomic Impact of the Lit­tle Ice Age”) con­sid­ered abstruse even by aca­d­e­mic econ­o­mists. “I only stum­bled on this cat­a­stro­phe by acci­dent,” he says. “I had never been inter­ested in the Irish econ­omy. The Irish econ­omy is tiny and bor­ing.” Kelly saw house prices ris­ing madly and heard young men in Irish finance to whom he had recently taught eco­nom­ics try to explain why the boom didn’t trou­ble them. And they trou­bled him. “Around the mid­dle of 2006 all these for­mer stu­dents of ours work­ing for the banks started to appear on TV!” he says. “They were now all bank econ­o­mists, and they were nice guys and all that. And they were all say­ing the same thing: ‘We’re going to have a soft landing.’ ”

The state­ment struck him as absurd: real-estate bub­bles never end with soft land­ings. A bub­ble is inflated by noth­ing firmer than expec­ta­tions. The moment peo­ple cease to believe that house prices will rise for­ever, they will notice what a ter­ri­ble long-term invest­ment real estate has become and flee the mar­ket, and the mar­ket will crash. It was in the nature of real-estate booms to end with crashes—just as it was per­haps in Mor­gan Kelly’s nature to assume that, if his for­mer stu­dents were cast on Irish TV as finan­cial experts, some­thing was amiss. “I just started Googling things,” he says.

Googling things, Kelly learned that more than a fifth of the Irish work­force was employed build­ing houses. The Irish con­struc­tion indus­try had swollen to become nearly a quar­ter of the country’s G.D.P.—compared with less than 10 per­cent in a nor­mal economy—and Ire­land was build­ing half as many new houses a year as the United King­dom, which had almost 15 times as many peo­ple to house. He learned that since 1994 the aver­age price for a Dublin home had risen more than 500 per­cent. In parts of the city, rents had fallen to less than 1 per­cent of the pur­chase price—that is, you could rent a million-dollar home for less than $833 a month. The invest­ment returns on Irish land were ridicu­lously low: it made no sense for cap­i­tal to flow into Ire­land to develop more of it. Irish home prices implied an eco­nomic growth rate that would leave Ire­land, in 25 years, three times as rich as the United States. (“A price/earning ratio above Google’s,” as Kelly put it.) Where would this growth come from? Since 2000, Irish exports had stalled, and the econ­omy had been con­sumed with build­ing houses and offices and hotels. “Com­pet­i­tive­ness didn’t mat­ter,” says Kelly. “From now on we were going to get rich build­ing houses for each other.”

The end­less flow of cheap for­eign money had teased a new trait out of a nation. “We are sort of a hard, pes­simistic peo­ple,” says Kelly. “We don’t look on the bright side.” Yet, since the year 2000, a lot of peo­ple had behaved as if each day would be sun­nier than the last. The Irish had dis­cov­ered optimism.

...

Again, note the real­ity of the “end­less flow of cheap for­eign money” into Ire­land via the pur­chase of bonds issued by the big Irish prop­erty lenders. It’s a crit­i­cal point in under­stand­ing both how Ireland’s housing/credit bub­ble grew as big as it did and why there are so many for­eign inter­ests that are inter­ested in see­ing that money paid back in full. Also note that bond­hold­ers nor­mally absorb some losses when their lendees go bank­rupt, so it’s not as if it’s nor­mal for bond­hold­ers to get paid back in full when a bank goes bankrupt.

Con­tin­u­ing...

...

What the crazy egghead came up with next was the obvi­ous link between Irish real-estate prices and Irish banks. After all, the vast major­ity of the con­struc­tion was being funded by Irish banks. If the real-estate mar­ket col­lapsed, they would be on the hook for the losses. “I even­tu­ally fig­ured out what was going on,” says Kelly. “The aver­age value and num­ber of new mort­gages peaked in sum­mer 2006. But lend­ing stan­dards were clearly falling after this.” The banks con­tin­ued to make worse loans, but peo­ple bor­row­ing the money to buy houses were grow­ing wary. “What was hap­pen­ing,” says Kelly, “is that a lot of peo­ple were get­ting cold feet.” The con­se­quences for Irish banks—and the economy—of the inevitable shift in mar­ket sen­ti­ment would be cat­a­strophic. The banks’ losses would lead them to slash their lend­ing to actu­ally use­ful busi­nesses. Irish cit­i­zens in hock to their banks would cease to spend. And, per­haps worst of all, new con­struc­tion, on which the entire econ­omy was now premised, would cease.

...

As the scope of the Irish losses has grown clearer, pri­vate investors have been less and less will­ing to leave even overnight deposits in Irish banks and are com­pletely unin­ter­ested in buy­ing longer-term bonds. The Euro­pean Cen­tral Bank has qui­etly filled the void: one of the most closely watched num­bers in Europe has been the amount the E.C.B. has loaned to the Irish banks. In late 2007, when the mar­kets were still sus­pend­ing dis­be­lief, the banks bor­rowed 6.5 bil­lion euros. By Decem­ber of 2008 the num­ber had jumped to 45 bil­lion. As Bur­ton spoke to me, the num­ber was still ris­ing from a new high of 86 bil­lion. That is, the Irish banks have bor­rowed 86 bil­lion euros from the Euro­pean Cen­tral Bank to repay pri­vate cred­i­tors. In Sep­tem­ber 2010 the last big chunk of money the Irish banks owed the bond­hold­ers, 26 bil­lion euros, came due. Once the bond­hold­ers were paid off in full, a win­dow of oppor­tu­nity for the Irish gov­ern­ment closed. A default of the banks now would be a default not to pri­vate investors but a bill pre­sented directly to Euro­pean gov­ern­ments. This, by the way, is why there are so many important-looking for­eign­ers in Dublin, din­ing alone at night. They’re here to make sure some­one gets his money back.

...

Most of the remain­ing arti­cle excerpt describes how the ECB ended up lend­ing so much money to the nation­al­ized big prop­erty lenders in the first place. It’s a LONG but very infor­ma­tive arti­cle so it’s well worth reading.

**Spoiler alert**:

When the shit hit the fan in Sep­tem­ber 2008 fol­low­ing the col­lapse of Lehman Broth­ers, the grow­ing prob­lems of the big Irish prop­ery lenders like Anglo-Irish hit a cri­sis point and that threat­ened the entire Irish econ­omy because so much of it had become depen­dent on the hous­ing con­struc­tion boom. So the gov­ern­ment nation­al­izes three of the biggest banks and guar­an­tees the lia­bil­i­ties for the rest of the banks in an attempt to shore up con­fi­dence and save the entire sys­tem. This would, in “the­ory”, also save the entire housing-related sec­tor of the Irish econ­omy because those big lenders were such an inte­gral part of the Irish hous­ing sec­tor and they were no longer going to be able to lend if they went bust. So if the Irish pub­lic assumed the full lia­bil­i­ties — for both the deposits held by the banks and bonds issued by the banks — the banks would no longer be in trou­ble and the hous­ing sec­tor could be saved. Once again, that was the “the­ory” behind the nationalization.

This the­ory was arrived at by the Mer­rill Lynch ana­lysts that the Irish gov­ern­ment hired to pro­vide rec­om­men­da­tions. Mer­rill Lynch was also a major under­writer of the bonds issued by these banks. Per­haps unsur­pris­ingly, Mer­rill Lynch’s advise turned out to be great for those bond hold­ers and dis­as­trous to nearly every­one else. Forc­ing the Irish pub­lic to assume such a mas­sive lia­bil­ity made a national default sud­denly a pos­si­bil­ity. Ire­land was fac­ing a burst­ing hous­ing bub­ble before, but after the nation­al­iza­tion it faced a burst­ing hous­ing bub­ble and the mas­sive lia­bil­i­ties of those lenders that financed that hous­ing bub­ble. And if Ire­land went bank­rupt the big bank’s cred­i­tors were still at risk.

So the mar­kets got spooked regard­less of the nationalization/guarantee scheme and the nation­al­ized banks soon had to start bor­row­ing bil­lions from the ECB to pay back the pri­vate senior bond­hold­ers 100%. It turns out most of those bond­hold­ers were French and Ger­man banks and finan­cial insti­tu­tions. And Gold­man Sachs. By Novem­ber, 2010 the ~85 bil­lion euros in bonds was paid back to the pri­vate cred­i­tors and Ire­land requested an 85 bil­lion euro bailout.
**End Spoiler alert**

Debt Nation­al­iza­tion + Aus­ter­ity: The Drug-Drug Interaction-Inducement Pro­to­col for Eco­nomic Witch Doc­tors
And, of course, when Manuel Bar­roso tells his Irish audi­ences not to blame the EU for the aus­ter­ity stran­gling Ireland’s econ­omy, he also for­gets that the 85 bil­lion euro pub­lic bailout of the pri­vate debt of three banks — like Anglo Irish’s debt -came with EU-strings attached:

NY Times
Ire­land Unveils Aus­ter­ity Plan to Help Secure Bailout

By LIZ ALDERMAN
Pub­lished: Novem­ber 24, 2010

DUBLIN — Act­ing to secure a $114 bil­lion inter­na­tional bailout, the Irish gov­ern­ment announced plans on Wednes­day for steep tax increases and sharp cut­backs in its social wel­fare state.

The aus­ter­ity mea­sures, which would slash pub­lic spend­ing by $20 bil­lion over four years, would help pay for a severe bank­ing cri­sis that hasp depleted the country’s finances and led to a dra­matic weak­en­ing in the gov­ern­ment that is likely to see Prime Min­is­ter Brian Cowen ousted from office early next year. A cru­cial, sep­a­rate 2011 bud­get is to come to a vote on Dec. 7.

A throng of pro­test­ers shouted out­side the Finance Min­istry as Mr. Cowen and Finance Min­is­ter Brian Leni­han unveiled details of how the gov­ern­ment planned to slash the deficit to 3 per­cent of domes­tic gross prod­uct in 2014, from 32 per­cent. Details of the plan were released as the gov­ern­ment pre­pared to effec­tively nation­al­ize two trou­bled banks that have bled the state of money, and as Stan­dard & Poor’s low­ered Ireland’s credit rat­ing, cit­ing con­cerns about how much the gov­ern­ment was bor­row­ing and about the vast amounts needed to shore up the country’s bank­ing system.

In a speech Wednes­day after­noon aimed at bol­ster­ing national morale, Mr. Cowen urged Ire­land to “pull together as a peo­ple to con­front this chal­lenge, and do so in a united way.” He said the four-year plan would raise money mainly by tax­ing those who earned more, while going eas­ier on those who had less. But he also warned that the “size of the cri­sis means no one can be sheltered.”

...

The Inter­na­tional Mon­e­tary Fund and Ireland’s part­ners in the Euro­pean Union insisted on an aus­ter­ity bud­get as a con­di­tion for the $114 bil­lion bailout, money that Ire­land badly needs after it inter­vened to res­cue its banks.

Dur­ing the eco­nomic boom years before 2008, Irish banks bor­rowed cheaply and pumped out loans on houses and con­struc­tion projects, help­ing to fuel an American-style hous­ing bub­ble that went bust, rav­aging their bal­ance sheets.

The aus­ter­ity plan calls for cuts of nearly 15 per­cent in Ireland’s social wel­fare bud­get, one of Europe’s most gen­er­ous, sav­ing $4 bil­lion a year. Some 24,750 pub­lic jobs — a huge num­ber in a coun­try of about 4 mil­lion peo­ple — would be elim­i­nated, cut­ting state pay­rolls down to about what they were in 2005 and sav­ing about $1.6 bil­lion a year. Child ben­e­fits and other social wel­fare pay­ments would be reduced, and the nation’s min­i­mum wage, now 8.65 euros, or $11.59, an hour, would be cut by 1 euro, or about $1.34, in the hope of pro­mot­ing job creation.

Mr. Cowen said the sag­ging econ­omy could recover only if Ire­land proved it was clean­ing up its act. “With­out putting pub­lic finances on a sus­tain­able basis, we can’t have con­fi­dence from investors to cre­ate jobs in Ire­land,” he said. He pre­dicted that the deficit reduc­tion plan would help lower unem­ploy­ment to less than 10 per­cent, from 13.4 per­cent cur­rently, within four years.

While vot­ers were angry about the cri­sis, there was also an acknowl­edg­ment that the boom years fueled too many excesses, which must now be reined in. “In a bub­ble, things get dis­torted, and after it col­lapses you need to rebal­ance the econ­omy,” said Philip R. Lane, a pro­fes­sor of inter­na­tional macro­eco­nom­ics at Trin­ity Col­lege. “So this plan is not really rad­i­cally shift­ing the nature of the wel­fare state, it’s just return­ing it to what it was before the crisis.”

Under the mea­sures, Ireland’s tax net would be widened to take in some low-income work­ers who cur­rently pay no tax, and a series of new taxes would be imposed on cer­tain res­i­den­tial prop­er­ties, as well as on 120,000 peo­ple who receive pub­lic sec­tor pen­sions.

The gov­ern­ment also plans to cut spend­ing on health care by over $1.9 bil­lion through mea­sures that are likely to push up the cost of pri­vate health insurance.

Cap­i­tal spend­ing on edu­ca­tion will rise, but edu­ca­tion pro­grams will nonethe­less take a hit start­ing next year, as more than $66.7 mil­lion is cut from the four-year bud­get. Class­room sizes may also grow if edu­ca­tors can­not find ways to reduce teacher payrolls.

Thou­sands of young Irish, along with peo­ple who have been shut out of the job mar­ket, are swelling the ranks of Ireland’s uni­ver­sity stu­dents as they ride out a dif­fi­cult economy.

Still, the aus­ter­ity plan does not touch Ireland’s low cor­po­rate tax rate of 12.5 per­cent, which has helped to lure com­pa­nies like Microsoft, Intel and Pfizer to set up oper­a­tions in the coun­try.

Though the country’s polit­i­cal par­ties are bit­terly divided over many aspects of eco­nomic pol­icy, they all agree that the low cor­po­rate tax rate is one of the few pil­lars that can allow Ire­land to return to eco­nomic health. Multi­na­tional com­pa­nies employ about one out of seven work­ing peo­ple in Ire­land, and their busi­nesses are stok­ing export growth, even as the lat­est aus­ter­ity pro­gram is expected to depress con­sumer demand and touch off a wave of retrench­ment and job losses.

...

The Irish gov­ern­ment clearly made a mas­sive blun­der in Sep­tem­ber 2008 when it decided to guar­an­tee the banks’ bonds that were directly tied to a sour­ing prop­erty mar­ket. A cred­i­ble maneu­ver like that would, at a min­i­mum, require a nation that had it’s own cen­tral bank and the abil­ity to issue its own cur­rency given the scale of the assumed lia­bil­i­ties. Plus, we had the ECB give Ire­land a “bailout” (in the form of a high-interest loan) while simul­ta­ne­ously demand­ing that new economy-strangling mass aus­ter­ity poli­cies (and while cor­po­rate taxes remained at a low 12.5%). It isn’t easy being the ECB or the EU, but it could be worse...like being their socioe­co­nomic guinea pig. When crappy the­ory is trans­lated into real­ity, it tends to become a crappy real­ity. A lot of guinea pigs expe­ri­ence a lot of crappy realities.

The Con­fi­dence Fairies Want Clar­ity, Even If it’s Clearly Bad
The the­ory behind the EU/ECB’s pol­icy man­date is the the same the­ory behind most mod­ern austerity-drives. It’s the “Con­fi­dence Fairy” the­ory: If a nation can prove to the world that it has sud­denly become more “pro­duc­tive” by cut­ting costs (usu­ally in the form of lay­offs and wage cuts), the world’s investors will sud­denly become so con­fi­dent about the future prospects of the trou­bled nation that they’ll flood the nation with new invest­ments and the eco­nomic trou­bles will solve them­selves. Yes, there will be a neg­a­tive impact on the econ­omy from all the aus­ter­ity mea­sures, but that impact will only be felt in the short-term because investors will be so filled with austerity-induced con­fi­dence that they’ll take the plunge any­ways and make the required vol­ume of invest­ments nec­es­sary to over­whelm the austerity-induced eco­nomic down­ward spiral.

At least, that’s how it’s sup­posed to hap­pen in the­ory. It may not be a par­tic­u­larly com­pelling the­ory, esp­cially when it involves bank­rupt­ing a nation and trig­ger­ing an austerity-induced down­ward spi­ral to pay back for­eign bank bond spec­u­la­tors. And there may not be any actual evi­dence that it’s work­ing. But the “Con­fi­dence Fairy” the­ory that under­lines the push for aus­ter­ity is still a sur­pris­ingly pop­u­lar one amongst key decision-makers, although that hasn’t always been the case:

Herald.ie
We got it wrong on aus­ter­ity and made things worse — IMF

By Claire Murphy

Tues­day Octo­ber 09 2012

THE IMF has held up its hands and admit­ted it got it wrong when cal­cu­lat­ing the effects of aus­ter­ity in Ireland.

The organ­i­sa­tion said that it com­pletely under­es­ti­mated how the Irish econ­omy would per­form under strict spend­ing rules.

The Inter­na­tional Mon­e­tary Fund (IMF) said in an aca­d­e­mic report that it believed for every €100 of aus­ter­ity through higher taxes and spend­ing cuts — this would impact €50 in terms of growth and unemployment.

How­ever, the real effect meant that the aus­ter­ity cut €90 to €150 out of the system.

The admis­sion is likely to make Finance Min­is­ter Michael Noonan’s job far more dif­fi­cult ahead of yet another aus­ter­ity bud­get in December.

The IMF said there was an over­all drop in incomes due mainly to increases in taxes and aus­ter­ity mea­sures in Ireland.

This ulti­mately served to push up poverty lev­els and squeeze the mid­dle class.

“As the cri­sis deep­ened and fis­cal con­sol­i­da­tion inten­si­fied, income inequal­ity started to widen,” the IMF said.

“The mag­ni­tude of the eco­nomic slow­down in Ire­land dur­ing the cri­sis inevitably wors­ened the country’s poverty and inequality.

“In the early stage of the cri­sis, inequal­ity in Ire­land fell as upper income groups suf­fered major income losses.

“How­ever, the impact quickly spilled over to the mid­dle income group, with its large share of con­struc­tion work­ers who lost their jobs.

“Ireland’s strong social sup­port sys­tem has cush­ioned the impact of the cri­sis on its at-risk-of-poverty indi­ca­tors com­pared to the rest of Europe,” it added.

...

Three’s a Crowd Troika
It isn’t easy being the ECB, the EU, or the IMF sep­a­rately given the scope of their domains. When they join together to form the ol’ Troika o’ Doom things become even harder. The Troika o’ Doom only has one weapon and that’s aus­ter­ity, and aus­ter­ity tends to piss peo­ple off more than pretty much any­thing else. It’s the the drone war­fare of inter­na­tional eco­nomic pol­icy: Because it can be used any time unsus­tain­able debts are involved(or sus­tain­able but tem­porar­ily scary debts), aus­ter­ity has an extremely large poten­tial the­ater of oper­a­tion. But it’s also kind of creepy and inhu­mane with lots of poten­tial for col­lat­eral dam­age so it tends to really piss off the locals wher­ever its used.

At least we can credit one third of the Troika o’ Doom, the IMF, with finally rec­og­niz­ing that aus­ter­ity hasn’t really worked the way they pre­dicted and sug­gest­ing a change in pol­icy. Although then they changed their mind after about 10 days. The abil­ity to change one’s mind about crit­i­cal pol­icy mat­ter when it becomes clear that it’s really going to piss large swaths of the pub­lic may not be a very sus­tain­able perk, but it’s a very handy one:

IMF says pace of Irish aus­ter­ity remains appropriate

DUBLIN | Sat Oct 20, 2012 10:48am EDT

(Reuters) — The Inter­na­tional Mon­e­tary Fund (IMF) said on Sat­ur­day that the pace of aus­ter­ity pre­scribed in Ireland’s bailout pro­gram is appro­pri­ate and that a num­ber of other fac­tors have also proven to be a drag on growth.

The IMF, one of a trio of lenders over­see­ing Ireland’s 85 bil­lion euro bailout, said it was restat­ing its posi­tion in response to media queries regard­ing its research on the impact of fis­cal adjust­ment on eco­nomic growth.

The IMF issued a sim­i­lar state­ment in rela­tion to fel­low bailout recip­i­ent Por­tu­gal last week, urg­ing it to con­tinue a tough bud­get adjust­ment that was imper­a­tive for the coun­try to return to finance itself in debt markets.

“The pace of con­sol­i­da­tion under the pro­gram has struck an appro­pri­ate bal­ance and con­tin­ues to do so for the period ahead, enabling Ire­land to make steady progress,” Ajai Chopra, the IMF’s deputy direc­tor for Europe said in a statement.

...

The IMF, Euro­pean Com­mis­sion and Euro­pean Cen­tral Bank, Ireland’s so-called troika of lenders, will give their lat­est quar­terly bailout assess­ment next week with few issues fore­seen in a period when Ire­land resumed bor­row­ing on long-term bond mar­kets and con­tin­ued to meet its pro­gram targets.

For­tu­nately, the IMF revised its re-revision on the ben­e­fits of aus­ter­ity back towards a more humane stance just a cou­ple of months later. It just wants to see one more year of aus­ter­ity and if that doesn’t work the coun­try can drop the aus­ter­ity regime...for one year:

The Tele­graph
IMF agrees more aid for Ire­land and urges eas­ing of aus­ter­ity
Ire­land should defer addi­tional aus­ter­ity bud­gets until 2015 if the bailed-out coun­try misses its eco­nomic tar­gets next year, the IMF said.

By Denise Roland, and agencies

8:12AM GMT 18 Dec 2012

The Inter­na­tional Mon­e­tary Fund autho­rised the release of €890m (£746m) on Mon­day, the lat­est batch of an €85bn EU-IMF bailout pro­gramme entered in 2010 after the country’s econ­omy collapsed.

Its state­ment fol­lows a raft of new taxes and spend­ing cuts intro­duced by finance min­is­ter Michael Noo­nan in the country’s sixth straight aus­ter­ity bud­get, which tar­geted €3.5bn in spend­ing cuts and new taxes.

The 2013 bud­get, announced on Decem­ber 6, hit child ben­e­fits, imposed higher taxes on pen­sioner incomes, and intro­duced new levies on prop­er­ties, pro­vok­ing protests out­side the Irish par­lia­ment buildings.

David Lip­ton, First Deputy Man­ag­ing Direc­tor of the IMF, said Dublin had strongly imple­mented the pro­gramme and had hit all its tar­gets.

...

“This base­line out­look is sub­ject to sig­nif­i­cant risks from any fur­ther weak­en­ing of growth in Ireland’s trad­ing part­ners, while the grad­ual revival of domes­tic demand could be impeded by high pri­vate debts, drag from fis­cal con­sol­i­da­tion, and banks’ still lim­ited abil­ity to lend,” he said in a statement.

“Nonethe­less, if next year’s growth were to dis­ap­point, any addi­tional fis­cal con­sol­i­da­tion should be deferred to 2015 to pro­tect the recov­ery,” he added.

Mr Lip­ton said Ireland’s mar­ket access would also be greatly enhanced by “force­ful deliv­ery of Euro­pean pledges” to improve the sus­tain­abil­ity of the pro­gramme, espe­cially by “break­ing the vicious cir­cle between the Irish sov­er­eign and the banks”.

Ire­land aims to end its bailout pro­gramme next year hav­ing already revised down its post-bailout bor­row­ing needs by €10bn through a lim­ited bond mar­ket return this year, a move the country’s debt agency plan to repeat this year to cover its 2014 fund­ing requirements.

...

The Irish gov­ern­ment is seek­ing to trans­fer the pub­lic debt used to res­cue Irish banks to the new euro­zone bailout fund, the Euro­pean Sta­bil­ity Mech­a­nism (ESM), but so far EU lead­ers have failed to sanc­tion such a deal.

A Return to the New Nor­mal Of Aus­ter­ity Clar­ity
As noted in the above excerpt, there are plans to actu­ally end Ireland’s spe­cial direct financ­ing and return it to the nor­mal finan­cial mar­kets in 2013. To some extent this return to “nor­malcy” in 2013 isn’t really an option because the 85 bil­lion euro bailout that has been financ­ing Ire­land since the 2010 deal is sched­uled to run out next year. It’s very unclear whether or not Ire­land will be able to avoid requir­ing a sec­ond bailout just keep itself run­ning given the linger dam­age from the bub­ble cou­pled with the mas­sive aus­ter­ity dam­age done to its econ­omy. The via­bil­ity of a post-austerity Ire­land remains to be seen. But that uncer­tain future hasn’t pre­vented the issuance of awards for bold lead­er­ship on this front, like the “Golden Vic­to­ria” Prize for Euro­pean of the Year that Angela Merkel awarded Irish Prime Min­is­ter Enda Kenny last year on behalf of a Ger­many mag­a­zine pub­lish­ers. Yep. Ire­land also got its “spe­cial terms” dur­ing this period early last year. It’s part of what led to the expec­ta­tion that there would be a rene­go­ti­a­tion of the Anglo Irish debt in the first place. Hand­ing out tro­phies for suc­cess­fully impos­ing aus­ter­ity on a nation that just expe­ri­enced a finan­cial bub­ble and then bailed out your nation’s banks that fueled that bub­ble is one of the many perks Germany’s chan­cel­lor gets in the new euro­zone:

Deautsche-Well
Merkel rewards Irish fru­gal­ity with spe­cial terms
Date 02.11.2012
Author Andreas Noll / cd
Edi­tor Sonya Diehn

Chan­cel­lor Merkel hailed the Irish prime min­is­ter and his coun­try as a paragon of fis­cal virtue in light of a pri­vate award. But Enda Kenny is appar­ently hop­ing for more than a statue from Ger­many and the EU.

Irish Prime Min­is­ter Enda Kenny’s Novem­ber itin­er­ary has the word “Berlin” pen­ciled in twice. He was first invited to the Ger­man chan­cellery to talk pol­i­tics on Novem­ber 1, where he had a one-and-a-half hour lun­cheon with the chan­cel­lor. Next week, the Ger­man Mag­a­zine Pub­lish­ers Asso­ci­a­tion will award him the “Golden Vic­to­ria Prize for Euro­pean of the Year.”

It’s a prize that Chan­cel­lor Angela Merkel believes the Irish min­is­ter deserves. In terms of employ­ment rates, social wel­fare and the national bud­get, the reforms he has helped push through “absolutely jus­tify the award.“
...

Note that the IMF-EU-ECB troika’s views on social wel­fare pro­grams has expe­ri­enced some revi­sions.

Con­tin­u­ing...

...
A model European

The Irish have two try­ing years behind them. Since Novem­ber 2010, when Ire­land requested and received finan­cial assis­tance from the Euro­pean Finan­cial Sta­bil­ity Facil­ity, it has enacted each of the reforms that the Euro­pean Union, Euro­pean Cen­tral Bank and Inter­na­tional Mon­e­tary Fund required as con­di­tions for the 85-billion-euro bailout ($109 billion).

The coun­try is being hailed as a “model stu­dent” for hav­ing ful­filled every con­di­tion of the inter­na­tional lenders. As of this past sum­mer, Ire­land has once more been able to take on debt through pub­lic bond auc­tions, and by the end of next year the coun­try should be on track for full rein­te­gra­tion into cap­i­tal markets.

“We should never for­get the sac­ri­fices made by the cit­i­zens of coun­tries that push through such reforms,” Merkel said. “That’s why I’d sim­ply like to say thank you to Ire­land for tak­ing that path. It makes all of us stronger.”

Bil­lions in debts

Still, Ire­land has a slug­gish eco­nomic growth rate of just .5 per­cent, along with an unem­ploy­ment rate of 34 per­cent, and holds gigan­tic out­stand­ing debts. Most of the lat­ter are a result of the country’s deci­sion to sup­port banks affected by the finan­cial cri­sis, to the tune of 64 bil­lion euros. The country’s gross national debt now stands at 118 per­cent of the gross domes­tic product.

In order to lower debt lev­els, Prime Min­is­ter Kenny would pre­fer to recap­i­tal­ize those same Irish banks through the Euro­pean Sta­bil­ity Mech­a­nism (ESM). But Angela Merkel is among the voices against that pro­posal. She believes the ESM should never be lever­aged for banks with out­stand­ing debts.

Yet Ireland’s call for help may still be heard. It all comes down to the words “spe­cial case.” Merkel has cat­e­go­rized Ire­land as such, call­ing Irish pub­lic debts a “one-of-a-kind circumstance.”

Prime Min­is­ter Kenny allowed that mes­sage to be reit­er­ated once more on his recent visit to Berlin. “I told her what we’re doing to fur­ther reduce bank­ing sec­tor debts and to rejoin cap­i­tal mar­kets as soon as pos­si­ble,” he said. “The chan­cel­lor con­firmed that Ire­land is a spe­cial case, which is also why Ire­land should be treated dif­fer­ently, as was clearly the case in June.”

...

“The more clar­ity we give on how Ire­land can return once more to the bond mar­ket, the more suc­cess­ful that return can be when it’s car­ried out,” Kenny said.

The Ger­man chan­cel­lor coun­tered by point­ing to ongo­ing nego­ti­a­tions between finance min­is­ters. “We’re inter­ested in a sus­tain­able com­ple­tion of the reforms pro­gram,” Merkel said. But work com­pleted by those min­is­ters, she added, “will take some time.”

...

The mes­sage from the ECB, the EU, the IMF(some­times), and Angela Merkel is clear: when a coun­try like Greece or Ire­land sud­denly finds itself fac­ing a mas­sive debt cri­sis, what is required most is “clar­ity”. Clar­ity in eco­nomic pol­icy will rein­still mar­ket con­fi­dence and bring about renewed invest­ments and eco­nomic growth. Even if that “clar­ity” includes man­dated aus­ter­ity that is guar­an­teed to choke off eco­nomic growth and invest­ment. At least, that’s the the­ory. Con­fi­dence Fairies aren’t the best the­o­reti­cians to begin with and now we have folks like the ECB, the EU, the IMF, and Angela Merkel leav­ing the Con­fi­dence Fairies even more deeply con­fused than nor­mal. It’s New Nor­mal Con­fu­sion: Aus­ter­ity good. Deficits bad. Aus­ter­ity raises deficits. Aus­ter­ity bad? Con­fused Con­fi­dence Fairies can cre­ate a lack of clar­ity:

Wall Street Jour­nal
Updated Jan­u­ary 8, 2013, 1:16 p.m. ET

Ireland’s Double-Edged Bond Suc­cess

By RICHARD BARLEY

Ire­land could hardly have cho­sen a bet­ter way to mark its assump­tion of the six-month rotat­ing pres­i­dency of the Euro­pean Union. Dublin gar­nered orders of more than €7 bil­lion ($9.18 bil­lion) for a €2.5 bil­lion five-year bond sale, proof it is regain­ing access to mar­kets just over two years after its bailout. But while Dublin’s suc­cess is a wel­come vin­di­ca­tion of the euro zone’s cri­sis response, it also poses a poten­tially tricky headache that could yet put Ire­land and its part­ners at log­ger­heads.

The snag is that Ireland’s bond-market suc­cess partly reflects investors’ expec­ta­tions that the euro zone will assume some of the bur­den of the country’s bank bailout, which cost 40% of GDP but which arguably averted a big­ger Euro­pean bank­ing cri­sis; senior bond­hold­ers were made whole at the cost of Irish tax­pay­ers. Fail­ure to pro­vide such aid could spark a sell­off in bonds. But with Irish bond yields now back at pre­cri­sis lev­els, its euro-zone part­ners may try to dodge fur­ther trans­fers.

Ireland’s first pri­or­ity is to rene­go­ti­ate €28.5 bil­lion of expen­sive debt used to recap­i­tal­ize banks now being wound down; pay­ments on that debt amount to nearly 1.5% of GDP a year at present. Ire­land is hope­ful a deal can be struck by March, when the next pay­ment is due. Longer term, it believes the Euro­pean Sta­bil­ity Mech­a­nism could take over the government’s equity stakes in the banks, break­ing the link between them and the sovereign—a deal first floated by euro-zone politi­cians in a sum­mit dec­la­ra­tion last June. The Inter­na­tional Mon­e­tary Fund, in par­tic­u­lar, is argu­ing strongly for this idea.

That leaves the euro zone with a dilemma: If it sup­ports Ire­land, it risks set­ting a prece­dent at a time when the jury is still out on whether Spain’s bank­ing bailout is work­ing. On the other hand, fail to sup­port Ire­land and investors may ques­tion whether the euro zone is once again back­slid­ing on its com­mit­ment to bailout coun­tries. That could push up yields not only for Ire­land but for oth­ers, too. And while Irish debt cur­rently looks sus­tain­able, peak­ing this year at 122.5% of GDP, it might not take much to reignite fears about sus­tain­abil­ity. Dublin still faces bank-sector con­tin­gent lia­bil­i­ties of 47.5% of GDP, RBS notes.

...

The eurozone’s debt rene­go­ti­a­tions are one of the austerity-only-intra-currency-union catch-22s we’ve seen arise over the past few years: If you rene­go­ti­ate the debt, you actu­ally help the econ­omy of the coun­try in need — thus pleas­ing the Con­fi­dence Fairies. But you do so at the expense of admit­ting that the orig­i­nal aus­ter­ity poli­cies weren’t actu­ally help­ful and some­thing new must be done — thus hurt­ing the Con­fi­dence Fairies faith in the aus­ter­ity myth. Con­fi­dence Fairies tend to be deeply reli­gious (a whole the­o­log­i­cal spec­trum), but their faith can be some­what reac­tionary. Admit­ting poor past pol­icy choices weak­ens their faith in the troika. Prac­tic­ing their faith in the troika destroys real­ity. Embrac­ing the faith of the Con­fi­dence Fairies can be a par­tic­u­larly con­found­ing catch-22.

Hope­fully being caught in a con­found­ing sit­u­a­tion pro­vides some com­fort for the rest of the eurozone’s aus­ter­ity guinea pigs, because there’s some pro­posed “com­fort fund­ing” that the troika recently raised as a pos­si­bil­ity for Ire­land but it isn’t about com­fort for peo­ple. It’s about ween­ing Ire­land off of the rest of that 85 bil­lion bailout fund that Brian Leni­han “accepted” in 2010 (and will be pay­ing out until 2053). That bailout money runs out next year and that’s why Ire­land has to return to the nor­mal debt mar­kets soon. It’s finan­cial “com­fort fund­ing” to help smooth over state financ­ing for an austerity-stricken state. Part of the troika’s man­date appears to be the cre­ation of deeply uncom­fort­able sit­u­a­tions:

The Irish Times — Fri­day, Jan­u­ary 25, 2013
Troika raises pos­si­bil­ity of ‘com­fort funding’

ARTHUR BEESLEY and DEREK SCALLY in Davos

The EU-IMF troika has raised the prospect of a new line of “com­fort fund­ing” for the Gov­ern­ment to ensure there is no dis­rup­tion to the pub­lic finances at the end of the bailout.

...

Under scrutiny in advance of the 10-day mis­sion, which begins next Tues­day, is whether addi­tional steps should be taken to ensure a smooth exit from the bailout in the autumn.

Credit line

This ques­tion cen­tres on the pos­si­bil­ity of the troika pro­vid­ing a new line of credit to the Gov­ern­ment as it attempts a full return to pri­vate debt markets.

Dublin would not nec­es­sar­ily draw down such credit but the fact that it was avail­able might encour­age pri­vate invest­ment as there would be no risk of a fund­ing short­fall if the Gov­ern­ment did not sell enough debt.

An alter­na­tive, also being exam­ined by the troika, is for the Gov­ern­ment to pro­ceed with­out the ben­e­fit of an addi­tional safety net in order to demon­strate con­fi­dence in its debt to poten­tial investors.
...

Note the two strate­gies the troika is con­sid­er­ing for return­ing Ire­land to the inter­na­tional bond mar­kets: The troika could grant Ire­land a credit-line to instill con­fi­dence in the bond mar­kets. Or it could try the approach of no credit-line at all since that might make the mar­ket even more con­fi­dent. Con­fi­dence Fairies make very impor­tant deci­sions in how our market-driven soci­eties oper­ate, but they also tend to be rather inde­ci­sive. Now you know how the troika has to deal with.

Con­tin­u­ing...

...

Sources close to talks between the troika and the Gov­ern­ment said the inter­na­tional lenders are not at this point rec­om­mend­ing any par­tic­u­lar course of action. A new “tech­ni­cal paper” from the troika on exit­ing the bailout sim­ply presents these alter­na­tives as options for explo­ration, the sources said.

...

The dis­cus­sions come as talks con­tinue on bank debt relief and an exten­sion of the matu­rity of bailout loans.

There is con­cern within the troika to avert any sit­u­a­tion in which any Irish or Euro­pean lead­ers are seen to be dic­tat­ing to the Euro­pean Cen­tral Bank to recast the Anglo Irish Bank promis­sory note scheme.

The troika fears this would under­mine the ECB’s inde­pen­dence, threat­en­ing the prospect for a deal and rais­ing the risk of a legal challenge.

Yes, the Con­fi­dence Fairies don’t sim­ply want to see end­less aus­ter­ity and end­less bailouts. They want to see end­less aus­ter­ity cou­pled to end­less finan­cial bailouts cou­pled to cen­tral bank inde­pen­dence includ­ing inde­pen­dence from national gov­ern­ments that might want to do some­thing about the bailout-induced aus­ter­ity. And if you reveal any secrets to the pub­lic, secrets like the doc­u­ment con­tain­ing delib­er­a­tions and threats between pub­lic offi­cials nego­ti­at­ing major bailouts, the Con­fi­dence Fairies will freak out and implode the finan­cial sys­tem. And, accord­ing to the troika’s con­cerns, the Con­fi­dence Fairies are also really really uncom­fort­able with attempts to rene­go­ti­ate bailout deals after it becomes clear that the deals are destroy­ing economies. The Con­fi­dence Fairies are also deeply opposed to any­thing that hints at under­min­ing the ECB’s inde­pen­dence. But they’re open to “com­fort fund­ing” that will tem­porar­ily ease the pain of aus­ter­ity. “Com­fort fund­ing” to ward off com­plete sys­temic implo­sion is fine, but only as long as Ire­land is on the path towards no “com­fort fund­ing”. Just aus­tere bud­gets. And lower debts and deficits. Even­tu­ally. But first bailouts and aus­ter­ity. And secrecy. And faith in the sys­tem that is deliv­er­ing bailouts, aus­ter­ity, and secrecy.

Ireland’s Con­fi­dence Fairies, in case you hadn’t noticed, are kind of fas­cist. At least in theory.