Aehso’s Output

[Also see follow-up Part II post]

I was tweeting about this last night and this morning but I realized that really isn’t the right medium for such a complex topic and I needed to read a little more about what exactly the Irish Government are proposing to pass into law today.

Of course it still all seems to be up in the air but I still wanted to write down some observations:

• I can understand the need to guarantee deposits, but guaranteeing debts? As well as owing record amounts to banks are the Irish population now to act as guarantors to these same institutions for these same loans?
• Where did they get this magical €400 billion figure from? This figure, an order of magnitude greater than our national debt, seems recklessly high for a nation of just over 4 million people in the context of the free movement of capital within the EU, even more so at a time when EU markets are so unstable.
• These are ISEQ listed public limited companies. Some are also listed on foreign stock markets and no doubt they all have foreign investors. So, in the age of multinational businesses and free trade (and free movement of capital) within the EU, how Irish are they, really?
• Will the Irish State have any oversight/control of bank operations during this two year window? Do we continue to entrust this responsibility to the Central Bank or other financial regulatory authorities who have allowed these banks to generate record profits while overextending themselves?
• Statements from banks like the following ring hollow when words like ‘normal’ is used as a qualifier. These are not normal times
  

  We will pay the Irish taxpayer for the privilege of using Ireland’s balance sheet to allow us to borrow internationally and the capital which is in banks, the equity capital, will absorb any losses which arise in our normal course of business lending

  (emphasis mine).

• Did anyone in our government stop to think what position this places other European states, our primary trading partners, in? It would seem not.
• Last but not least – how is it that the Irish government were the first to introduce such a guarantee? I always get worried when Irish politicians think they’ve found a different way to tackle a problem that the whole world is struggling with. The usual ‘Ireland is different’ (as we are used to hearing during our recent property bubble) won’t work here. Also of concern was the the implicit assurances to investors that this legislation will be passed, and in a rushed manner.

Hopefully more information will be revealed about this legislation and the thinking behind it but from where I’m sitting it does doesn’t seem to have been thought through – and the risks to the Irish State are too great for that.

aehso banks, economy, ireland