The way things are going, by the end of next year, the interest payment on our total debts — just the interest payments — might well be 85pc of the 2010 income tax take. Income tax in 2010 was €14.125bn and with all the bank debt we are taking on, the interest payments by the end of 2012 will be €12bn per annum.
Our welfare state will collapse under the pressure of these debt repayments and before that happens there will be massive capital flight out of the country.
Now this should focus your mind over your cornflakes as to what is the big issue in the next 48 hours. It’s not the economy, stupid as Bill Clinton said; it’s survival, stupid.
So two days to go, much of the attention is still focused on which way the election will swing. A Fine Gael government on its own, a coalition with Labour or Fianna Fail, or a Fine Gael government propped up by some genetically compatible Independents?
Whatever happens, it will become clear by Saturday night that the only important initiative will be how to renegotiate our massive debts.
And this won’t be just a nice, pleasant changing of interest rates. To put it at its most simple, the only outcome of the negotiations that will save Ireland from sovereign default will be shaving a few zeros off the end of the bank debt figure, with the ECB and the creditors taking up the slack.
We have a simple choice, either we hive off the remaining bank debt — some €22bn of unguaranteed debt — and force these creditors to take a debt for equity swap in the major banks, or we are toast.
However, that will not be enough to stave off a sovereign default, we will also need to renegotiate the €22bn of secured debt in the banks and the €34bn of the now government guaranteed bank debt. In truth this is no longer an economic issue; it is now a legal problem, because the economic and financial question has been answered — we simply can’t pay it all. Let’s have a look at the numbers. It will make you blanch.
At the end of 2010, the net national debt stood at €93.4bn, which cost us €4.8bn in interest. We then have the EU-IMF loan of €62.6bn at an interest rate of 5.8pc which is €3.625bn per annum. This equals €8.6bn in interest payments alone.
But on top of this we have all the bank debts. We have the promissory note which covers the losses at Anglo and Nationwide which amounts to another €31bn. This is money we have to pay out, even though these banks will be wound down.
There is €10.3bn of this due to be paid by the end of 2013 (adding another €500m to annual interest charges on debt, because we will be borrowing to pay them back). Then there is unguaranteed bank debt of €22bn and government-guaranteed debt of €38.4bn — another €3bn in interest payments.
This means a total in interest payments alone by the end of next year of €12.12bn. This is over 85pc of our total income tax take. We simply can’t afford this. The welfare state will collapse in the face of this type of interest payment. And well before this happens, the middle classes will have taken all their money out of the banks and squirreled it away to banks outside the country, precipitating the implosion of the financial sector. This is the pattern we have seen in other countries.
Therefore, we have to re-negotiate everything — all the bank debt, the guaranteed and unguaranteed stuff and pay very little of it back.
But how do we do it? How do we get the ECB and the creditors to play ball?
Obviously, the first way to do this is to make them aware that if they force us to pay everything, we will default and they will get nothing. So they had better get a little bit of something, than all of nothing.
To make this financial pill easier to swallow, we must take the initiative politically. We can do this via a referendum. If we the Irish people hold a referendum on the bank debts now, we can go to the EU with a mandate from the people which says NO. This will allow our politicians to play hard-ball, because to do otherwise would be an anti-democratic endgame.
Rather than deal with the ECB and its unelected functionaries, we deal with the politicians of Europe who are democrats. A referendum, which can be triggered by Article 27 of our Constitution, would be part of a process of making the banking bailout political.
Interestingly there is another avenue, which could internationalise our plight and the plight of Spanish, Portuguese and Greek citizens who are lumbered with potentially huge bank-related debts.
As a result of the renegotiation of the Lisbon Treaty, a regulation was adopted by the EU which allows for the citizens of Europe to demand by petition a change in EU legislation. The “European citizens’ initiative” enables citizens to ask the Commission to bring forward legislative proposals if the supporters of an initiative number at least one million and come from more than a quarter of member states.
A referendum in Ireland could be the beginning of this process because the only way to get an EU-wide deal, which is what we need, is to mobilise citizens around the EU. Given that together Irish, Greek, Spanish and Portuguese banks owe German and French banks over €920bn, there are plenty of other citizens who will have an interest in getting the banks to pay for what the banks have done.
Some people have criticised the idea of a referendum as being anti-European. This misses the point; in fact a people’s initiative is profoundly pro-European.
Think about it. These huge bank creditor debts — the debts incurred by German and other banks because they gambled in the peripheral states can only be paid by four sets of people or institutions.
They can be paid by (1) the ECB, (2) the bank creditors themselves — the bondholders, (3) the citizens of the peripheral countries where the banks who owe the money are located or (4) the citizens of the core countries where the banks who are owed the money are located. Now that the EU leadership has ruled out options (1) and (2), it means that only options (3) and (4) are runners.
If we force the peripheral citizens to pay the debts of the core banks, they will get angry and direct their anger at the EU. If we force the citizens of the core countries to pay for their own banks they will get angry with the EU too. Both outcomes would be bad for the EU project, so therefore only options (1) and (2) are good for the EU in the eyes of the common man.
Thus, for both economic reasons and broad political reasons, a referendum is the way to go. It is our only way out and though not a panacea, it allows us latitude in the negotiations which we need. And ask yourself, who is threatened by a referendum?
Thanks David
It’s over to you now.
[…] This post was mentioned on Twitter by David McWilliams, Paul Fallon, mucky dunne, dazriot, Kieran and others. Kieran said: #IrishEconomy Just read McWilliams, certainly has focused my mind away from who will form next Government. http://bit.ly/dFZ7cw […]
The past few years have indicated that we do not get a referendum, unless the nEU empire decides that it is either unavoidable, or necessary to further facilitate the journey towards empire building. Option 2 listed above is the only fair option. Option 3, and option 4, will not be discussed openly at this point in time, until after the next EU treaty -or as indicated by Sarkozy – after the amendments are made to Lisbon. (M.Martin-please note, sarkozy regards Lisbon as a self amending treaty – your cast-iron guarantees amount to nothing more than an insincere soundbite). The problem… Read more »
Chicken & Egg
Why Wait NOW …..we are unable to influence the Elections …what we need to do NOW is commence immediately the milleneum petitioning and submit it to EU.
So what are YOU waiting for ?
Most if not all readers of this article will be aware of this harsh reality coming down the line. However its unbelievable how many people in our country neither know nor care that this is the situation we face. I don’t think FG will have much success in changing our fortunes-God forbid we send poor old Enda over to bat for us against the European pirahs! Unfortunately too many people have had enough of this whole episode and are not engaging in dealing with nor even wanting to discuss the debt levels anymore. I think we’ll just bury our heads… Read more »
I thought this country is full of juristic eagles and one of them would like to make a name for him-her-self; and advise us how to get about it. I mean a referendum. For free of course, it is for the survival of your country after all, their will be no one to pay for you and your pals in the future and you can prof, their might be one…. a future where even juristic eagles be paid a common wage….
Where is this class hiding? And than who would take advice from big blue eyed Brain lenahain?
Please stop using the word bailout it is a loan. When Charles Darwin published his book ‘the origin of the species’ in which he said we are related to monkeys, some commented ‘what if anyone should find out’. Mary Harney famously said that in relation payments to politician ‘if you pay peanuts you get monkeys’. Even when we feed the monkeys with more than peanuts, we end up with stale unused nuts. Its seems if Kenny Co hide their head in the san as he has, it we all go away and no one will know that the Irish fools… Read more »
Martin Wolf FT 22FEB2011
http://www.ft.com/cms/s/0/436234b8-3ebb-11e0-834e-00144feabdc0.html#axzz1EoQI6BWr
I agree totally with David’s call for a referendum in which the people decide what the incoming government is going to do. I also agree that the citizens of the EU get down to signing a petition to make the faceless bureaucrats in Brussels ‘sit up and take notice!’ As to Ireland defaulting on it’s sovereign debt the chances of that happening will get closer and closer as the year progresses unless someone with balls ‘sticks it’ to the ECB/IMF. Why should the debts of private banks be lumbered on the citizens of this country? To hell with the banks… Read more »
David.
Article argues a series of points from a certain perspective, your perspective.
The German and French banks and relevant power brokers are perceiving the *bank bailouts and stratagems* from a different perspective than the perspective you are writing on.
Why dont you put yourself in the shoes of the interests who are calling the shots and thread their perspective from where they are playing this into your perspective and widen the discussion out a little more and see what happens !!
subscribe.
Report on the Crisis to date MAIN POINT TO GRASP Our politicians set low personal standards and then fail to achieve them. MAIN ACHIEVEMENT OF LAST 4 YEARS FF drove us to the edge of a PRECIPICE. LIKELY OUTCOME With FG certain to be the largest party we are about to make a GREAT LEAP FORWARD. CHANCES OF A “REFERENDUM” With Enda as Taoiseach, a community somewhere in Mayo will be deprived of the one village idiot on the Emerald Isle who simply does not understand the meaning of the word. TWO YEARS HENCE The economy will continue to plummet;… Read more »
[ it’s survival, stupid ]. Yes, this is where we are now. This is how the Binge era ended, when all the nonsense was over, people trying desperatly to survive. No need for 1000 round trip pissups in Barcelona anymore or apartments in Sunny Beach. Things are more rudimentary. Before the fall came an awful lot of pride. But the point being that after all the pride came an almighty fall. We are not done with stupidity just yet. There is still an awful lot of it passing around as cultural currency. Since this debacle began, the cry has gone… Read more »
Agreed, it is survival.
Is it just me, or does this (goo.gl/IDdcP & http://goo.gl/3kbxE) make it feel like this is the eve of the battle of Armageddon.
Best Wishes,
@BriMcS
The incoming government is not so radical. They are still talking of putting billions into zombie banks and getting the interest rate dropped, the game has moved on as outlined above.
Think this government will try to limp on in good right wing, neoliberal fashion and busy itself with the detail of government, time will run out and they along with what is left of the Republic be floored by external debt, then societal implosion begins, hence the capital flight now, those who have money to get out and can do so see the writing on the wall.
Failed State.
I feel as if I am in the back seat of a car hurtling at a wall. I don’t know how to drive but I know we should adjust course. I tell the driver repeatedly that I don’t want to hit the wall and to simply turn the steering wheel, I am unsure if he is listening. I feel apathy setting in and I think that even if the driver does turn and avoids this wall that we still have a long way to go with many walls and he is still drunk. While I agree that changing the driver… Read more »
@David McWilliams BEfore you lead us up a garden path with your casual call for a referendum based on Article 27, you should at least look at what that Article says – starting with the first clause “Article 27 This Article applies to any Bill, other than a Bill expressed to be a Bill containing a proposal for the amendment of this Constitution, which shall have been deemed, by virtue of Article 23 hereof, to have been passed by both Houses of the Oireachtas. 1. A majority of the members of Seanad Éireann and not less than one-third of the… Read more »
Figures above are understated, according to Namawinelake total exposure of the state is close to €400 bn read especially comments here: http://bit.ly/hpvnlr There is no need for a referendum right now. Our politicians are playing blind man’s buff as they try to catch the debt elephant blindfolded. They’ve blindfolded the electorate. It’s unlikely information/education re the continuing banking crisis will reach the majority of politicians, never mind the electorate. But the debt will have to be dealt with and during negotiations it will be put shockingly onto the table. Some deal response will have to be done. At this point,… Read more »
Our politicians are outclassed and outmatched in these financial negotiations. When they get good professional advice which is in the interest of Ireland they ignore it. If they get asked to account they claim ignorance and point fingers. Further more remember the promises that are made by these politicians are trade-able for the alliances that the parties will need to make to form a government. All the time washing down their commitment and accountability to the Irish people. If we get a chance at a referendum I will vote “No” to taking on these debts and if asked again (as… Read more »
David brilliant exposition of the economic reality, and the horrible social consequences of it. So are we going to allow ourselves to be pushed to the edge of the cliff by the “already elected government” of the elite and the banks? Are we going to allow them to treat us as fools, and do nothing about it? Or are we going to rock the boat? I’m not telling anyone what to do, but I’m going to vote for Sinn FeÃn, because among other things, it’s the only political party that have promised to have a referendum in the lines of… Read more »
David. Lets think about this. Here’s the rub. What if. Lets consider *what if* on the following. What if the 1 Trillion UK, French and German big boy banks is built on the derivatives wall street pyramid currency hokey pokery. What if the big boy banks exploded lending because they know something us outsiders dont. What if the Euo big boy banks know that the dollar is on the way out. What if its the case that the USA own huge oil lakes and decided to keep it a secret. What if the USA decided to do a deal with… Read more »
Aw look, if we get a referendum on this, which is unlikely, the question will be a fudge with no satisfactory right answer. I’d love to believe that FG actually care about democracy, but they don’t really, no more than FF did when setting up NAMA, approving and extending the bank guarantee and negotiating the IMF deal, and paying off some unguaranteed creditors in full a few weeks before an election. Even our so called president doesn’t think these things are important enough that we should be bothering our sweet little heads worring about them, certainly not that they are… Read more »
I have been looking at the FG performance, it lacks media bling and imagination. I am encouraged by the general lack of belief by the media in Mr Kenny. The media for all its worth has played its part in delivering us into this mess. FG may be the counter-intuitive solution needed. A party of boring, grey headed reliables. Now, whether we like it or not, telling the EU where to go is not an option. The Ponzi scheme has hit the world and we need to plug into the right place to make sure we lessen its effects. Unilateralism… Read more »
Right, this is the LINK TO THE EU PETITIONS:
https://www.secure.europarl.europa.eu/parliament/public/petition/secured/submit.do?language=EN
I’ve signed other petitions on PETITIONONLINE.COM .
I’ve done that in capitals as there’s no font options here, which is reputable and much easier than the EU format, I think.
Do we have enough handwringing now? Let go of the keening until we are economically dead. The wording of the petition would be important.
They can’t see it! They won’t see it! When it happens they’ll claim it was a complete surprise to them. It will be because of outside extenuating circumstances beyond their control! They’ll sell Wicklow or lick whatever arse they have to in order to protect their own families interests! They will be the last to suffer if indeed suffer they ever will. When you’re in their position and you try to understand you’re like a man trying to relate to a woman giving birth. (It must hurt huh?) Or a reflective Parish priest once wondering what it’s like to have… Read more »
A number of quotes come to mind as it seems the general population have been mesmerised by the election. Karl Marx said “religion is the opiate of the people” I wonder if it is true to say that an election in Ireland is crack cocaine for the masses? But then it was Adolph Hitler who said ” By means of shrewd lies, unremittingly repeated, it is possible to make people believe that heaven is hell – and hell heaven. The greater the lie, the more readily it will be believed.” that my friends is exactly where we are now in Ireland today. Most people are prepared to believe in the myth propogated by FF FG etc
I’d be happy to sign a petition for a referendum but I’m not too confident that it would get much support from the rest of the Irish population. Ireland already has a referendum on the EU/IMF loan this week anyway (general elections are supposed to be a chance to vote on important national issues, aren’t they?). But if the opinion polls are in any way accurate, around three quarters of voters will choose parties that offer little or no change to the deal. So I’m afraid that we’ll just have to watch the next government take over where the one… Read more »
the Australian perspective on Ireland. foreign correspndent is an australian version of panorama … here is a link to the show on this week , a 20 minute section about Ireland . in a press conference,20.39 into the show…watch as brian lenihan answers a question about families being wrenched apart….makes my blood boil…then talking about the construction boom in which he and his party leader take full responsibility for it…..is this the first time they have admitted this ?? http://www.abc.net.au/foreign/ you will have to cut and paste as links are not showing up. also here is an article from last… Read more »
I just created an on line petition for a referendum, Please sign it and pass it onto others that you know, put it on your facebook page, put it on twitter or on good ole email We need to put pressure on the incoming government and give them the cards they need to sit at the poker table. I don’t have any political allegiances, just an ordinary citizen as you can see by my username. http://www.petitionbuzz.com/petitions/referendumbankirl
Thanks
ok.. its big and its a disaster. so why are we still being brainwashed into believing that the ‘tongue twister twins’ kenny and noonan will be the people to get us through it? the only people with the intelligence guts and passion for change, the only people open to challenging this bailout agreement is labour. the rest of them are bursting at the seams for their term of glory but they really dont have the guts or brains for it.. i really hope ireland has learned enough not to get sucked in by spin again.. heres hoping eh?
stop caling this loaqn a bailout
It’s a loan not a Bailout It’s a loan
Gormley recon’s you sold them the Emf deal now’s your chance to sell the Emf and Brussels something too, and here it is, In the interest of biodiversity Ireland should take the same stance as Australia, that is, Ireland lending itself by nature of being an Island can be the balance in seed product, and animal stock for Europe, with organic and livestock embargos, the country would swing the GDP ratio to produce the 6% growth cherry’ and all the EU would be losing would be a few flowers from Amsterdam and about half the total food consumption of a… Read more »
“The twist is to take all government assets and put them initially into one large corporation to facilitate distributing 70% of the shares, pro rata, to every citizen now living, 15% in trust for the next generation to be born over the next 21 years, 10% for the folks who allow it to happen, and 5% to be sold in the world’s capital markets.”
http://irishlibertyforum.org/researched-articles/104-applying-doug-caseys-reasoning-to-ireland.html
When you discuss Davids position with election candidates in private a surprising number agree that we can’t afford the cost of the bank debt on top of the national debt. There is a move towards candidates who express this view in public. Unfortunately there isn’t enough such candidates in the field or likely to be elected to make a difference in the inevitable outcome unless FG are within a few seats of an overall majority and the majority can be reached with a few new vision candidates. More likely though that they will wrap the Lab comfort blanket around them… Read more »
David, I consistently agree with your analyses, assessments and recommendations. Clearly nobody in any of the parties that will be able to form government are with us. Perhaps it’s time to turn the spotlight (laser beam) on what will happen given the predictable circumstances after the election. As it is clear that none of your sound suggestions will be implemented, what will the next 6, 12 and 24 months hold for our beleaguered island? How will the inevitable come to pass? What hopeless half-measures will the major parties take to attempt to stop the Titanic inevitability. What lies, misrepresentations and… Read more »
I found this a very thoughtful video concerning state collapse.
http://www.youtube.com/watch?v=zrz5ucQACo8&feature=player_embedded
The speaker, Dmitry Orlov, titled this Peak Oil Lessons From The Soviet Union, however the parallels are strong and refer to what communities might do following the collapse of the state. The causes are not particularly relevant, but the result and reactions are. Harold
David,
you talk so much sense, you get us all optimistic about the the opportunity of deciding our own future and then you go on 2 of the most watched political shows ( the eleventh hour and Vincent Browne) and say next to nothing about a referendum. You had a chance to reach the wider public and bottled it.
Very dissapointed.
A transcendental question from Shakespeare, and a very simple one from me.
“Whether it is nobler in the mind of men to suffer the slings and arrows of outrageous fortune, or to take arms against a sea of troubles, and by opposing end them?”
Are you tomorrow ready to “rock the boat”, or are you going to give yours to the “already elected government” of the Banks and the Elite?
Bit of something is better than all of nothing for ECB
This is the above caption .It reads like ‘the sum of the parts is greater than the sum of the whole’ eg a farmer with three seperate located small fields will get more money whe sells them than the farmer who sells the field with the same total acres because there are more farmers interested in the smaller fields than the single lot and that increases the price for the smaller lots.
[…] David McWilliams – Bit of something is better than all of nothing for ECB: The way things are going, by the end of next year, the interest payment on our total debts – […]
Ill effects of Irish banks’ losses on overseas parents. Recently I referred to the disproportionate effect of losses at Irish National Bank on the profit and loss situation at the DANSKE GROUP. Irish National Bank is only 4% of the operations of DANSKE, yet Danske recently announced that impairments from Irish National Bank were 36% of total impairments for the entire group. Yesterday, Ulster Bank whose parent is the RBS Group announce results with losses more than doubling resulting in a hugely disproportionate ill-effect on its parent: http://www.irishtimes.com/newspaper/finance/2011/0225/1224290835851.html “RBS injected a further £3 billion into Ulster Bank, bringing to about… Read more »
Direct Democracy http://www.directdemocracyireland.org/
German academics push for EU sovereign default plan:
“Almost 200 German economics professors have signed a declaration rejecting current proposals to resolve the eurozone debt crisis, instead calling for a way for distressed countries to declare bankruptcy.
“We call on the German government to take measures in event of a failure of the European rescue mechanism and to quickly establish with European partners a detailed plan to manage the bankruptcy of heavily-indebted eurozone countries,” said a text published by the Frankfurter Allgemeine Zeitung daily.
More than 200 professors were invited to sign the document, and 189 did so”.
http://www.eubusiness.com/news-eu/germany-eurozone.8rx
New Currency Name for Ireland Its time we should start to think what name we should choose given that we do not have a history of battles and swords in the last hundred years or so and its important that we should chose a name that is significant and has a purpose that we all can embrace and find a purpose to connect with. This will not be easy because we have been the subservants to others in our immediate history.Nevertheless , we should not allow some foreigner to take that preogative from us or a corrupt senior civil servant… Read more »
Pauls Epiphany : ‘How about; The Bribe – could we say that with a kerry lilt to it ? Made up of 4 Nudges,10 Nods and 100 Winks. would a healyrae hat help us understand that ? On the back I’d have a design of Smoke and Daggers and a wishy washy watermark. Now this is where the Pirates and O Sullivans make their mark On the front I’d place a random design involving a mansion, a yacht, an island, a racehorse and a Charvais Shirt. Is this Parknasilla Hotel ? Why these images I cannot say (they just kinda… Read more »
Shale News :
Petrol is going UP in Price over week end …..Fill Your cars NOW
…or you might Trip O Li
When I was young, me mother told me the government was in place to do the will of the people. I asked, “but what if someone with power decided to do what they (and not the people) wanted?” She said, “the people would have their say and that person would be thrown out”. You might think she was a bit naive to think that but no – she was right. Only problem is she forgot to tell me that the people have to IMPOSE their will. We have all seen what’s happened over the last 10-20 years. The public has… Read more »
David and posters, the article and most of the posts I’ve read, I find depressing. Seriously! I need to ask a question and I’m going to do it along the lines of ( Wills, What if )…….(Imitation being flattery Will’s.) :) What if, it’s in the interest of the EU & the IMF to financially break us, as a country, then the IMF request we sell the rest of our assets off to them, albeit covertly. (They’ve already asked Greece to do so!) Add to this the Middle East crisis and What if, they don’t have any oil left….. What… Read more »
The election results are coming in. FG were the big winners. The ILP did benefit from a swing in the last week. SF are small scale winners. FF are the big losers. This is Bertie’s ministers, and the cosy relationship that comes from the “social partnership” model of governance. The only FF candidate who increased his vote share, being the one FF candidate who tried to get away from the toxic stupidity of following the Boyle Dictum (we will save the banks before we will save the factories). And the Greens are finished (though they managed to lob in carbon… Read more »