It’s the Economy, Stupid

Burning bondholders ‘could have saved the State €9bn’

NTMA advised Government of possible savings in March 2011

Everybody regrets the banking crisis. But just how many times was the word ‘regret’, or variations of, used during the long-winded banking inquiry? We tried to stitch together each one in this video. Can you guess how many times it’s said? #regrets

Chairman Ciaran Lynch  (c) and members of the Oireachtas banking inquiry at the publication of the inquiry’s report at Leinster House, Dublin. Photograph: Brian Lawless/PA WireChairman Ciaran Lynch (c) and members of the Oireachtas banking inquiry at the publication of the inquiry’s report at Leinster House, Dublin. Photograph: Brian Lawless/PA Wire

The State could have saved more than €9 billion by imposing losses on senior debt holders at the six Irish banks, the National Treasury Management Agency (NTMA) told the Government in March 2011.

Written evidence supplied to the Oireachtas banking inquiry shows the NTMA, which manages Ireland’s national debt, advised the Government that “immediate steps” could be taken to enable this burden sharing, adding that markets had already priced this haircut into the bonds.

But it also warned that there could be potential implications with “external authorities”, a reference to the European Central Bank, which had warned Dublin a “bomb” would go off if it was to do so.

The failure to impose losses on senior bondholders to recoup some of the cost of the €64 billion bank bailout has been a source of political controversy since Fine Gael and Labour entered Government.

The NTMA estimate of potential savings is higher than previous suggestions about what could have been clawed back.


Instead of imposing haircuts of the scale suggested, Minister for Finance Michael Noonan drafted a plan for burden sharing of €3.7 billion worth of unsecured, unguaranteed senior debt connected with IBRC (the former Anglo Irish Bank and Irish Nationwide).

However, he pulled it at the last minute after the ECB warned that it would cut the billions in emergency liquidity assistance that had been advanced to Irish banks.

This was the second time that the ECB had blocked attempts by Ireland to burn senior bondholders.

  • Most of us have heard this by now famous quote.

ECB gave Ireland an ‘ultimatum’ – Ajai Chopra tells Banking Inquiry

Clodagh Sheehy

PUBLISHED10/09/2015 | 10:18


THE European Central Bank pushed Irish public debt higher, the man who designed and monitored Ireland’s rescue plan told the Banking Inquiry today.

Ajai Chopra, former Deputy Director of the International Monetary Fund, said this had happened because the EC and ECB often put euro-wide concerns “above what is appropriate for the individual member State even when this resulted in higher Irish public debt”.

Assistance from the ECB had been begrudgingly provided and  Europe’s decision to solve each country’s financial problems individually worsened the crisis, he said.

Mr Chopra, who was appearing in a personal capacity and voluntarily before the committee, was high in his praise of Ireland and the Irish public servants for how they dealt with the crisis.

Read more: Chopra set to repeat criticisms of ECB

“The national should be proud of them,” he added.

Ajai Chopra1
Ajai Chopra

Ireland had an excellent record of policy implementation. The 12 quarterly reviews of the bailout programme were completed like clockwork which was rare and not normally accomplished.

Today is the final day of the public sessions of the Inquiry which has heard evidence from 128 witnesses over 49 days of public hearings  and dealt with more than 50,000 documents.

Mr Chopra described Ireland’s adherence to Troika programme as a “significant achievement” and  said it “deserves much praise”

He said, however, that the lack of burden sharing resulted in Ireland shouldering a greater burden.

Europe’s decision to stop the burning of senior bondholders meant a “higher burden for Irish taxpayers and a higher public debt”.

Read more: We should have been allowed burn bondholders – Lenihan aide

Mr Chopra, who was the designer of Ireland’s bailout programme from 2010-2013, said he unwillingly had become the face of the bailout programme.

Ireland had eventually done better out of the bailout than he thought it would but it could have done even better if there had been a stronger overall macro-economic approach by Europe and greater European unity and solidarity, said Mr Chopra


He told Senator Marc MacSharry  that looking back as he hoped things would unfold in November 2010 he did not expect that things would actually get worse at first and they did get “quite a bit worse for a while”.

This was related to what was happening in the broader eurozone so that was a surprise.  The government here was “swamped by conditions in the broader eurozone”.

Once those conditions began to be addressed by the Eurozone “I think lIreland ended up doing better than I thought it would.”

Mr Chopra explained that he would have favoured and even more gradual fiscal adjustment for Ireland.

Ireland had acquired a great deal of credibilty even before the process started, he said, but Europe was too focussed on rules and procedures.

Ireland had a “classic boom bust cycle” but the core of the crisis was very much a banking property boom type crisis.

Banking Inquiry chairman Ciarán Lynch in opening this morning’s final public session this said the inquiry had been fair and impartial as well as open and transparent.

“The banking crisis was, and remains, one of the most traumatic events in modern Irish history – it has impacted on homes, families and communities throughout our country.

‘Few were spared its effects and many are still suffering from them today.”

The final phase of the Committee’s work after today would involve the analysis and review of evidence and the compilation of books of core documents for publication with the final report, he added.

The former IMF Deputy Director said letters between ECB president Jean Claude Trichet and Finance Minister Brian Lenihan in 2010 showed Ireland was being issued with an ultimatum.

While it was within the ECB’s right to ask how the problems were going to be addressed “ultimatums are not the right way to conduct business.

“You have seen such ultimatums were delivered in the case of Ireland and more recently in Greece”.

He insisted that the ECB had exceeded its mandate by discussing Ireland’s fiscal policy and need for structural reforms.

Liquidity assistance was begrudgingly provided and its availability and stablility was not assured.

He felt a public statement would have helped restore confidence in the banking system.

Mr Chopra pointed to the IMF view that burning the senior bondholders was an issue that needed to be explored.

He also said it was a significant achievement for Ireland to exit to the bailout although some legacy issues remained.

Asked by Deputy Michael McGrath about burning the senior bondholders at the time of the bailout, Mr Chopra said there might have been about €16bn outstanding when the bailout programme started.

“As a rule of thumb if you discounted those by half you get about €8bn which is several percent of GDP.”

Mr Chopra explained that which it was not possible to be sure of the figures “I think it could have been a sizeable contribution – yes.”

Asked by Deputy Kieran O’Donnell about red and amber flags for the future, Mr Chopra felt that Ireland “right now” was in a “pretty strong position”.

At the same time balance sheets, especially household balance sheets were still stretched and banks were healing but not completely healed.

“My bigger worry would be the wider eurozone issues right now” he stressed.

Mr Chopra said that Ireland now had the policy and regulatory tools and “you should use them”.

Deputy Joe Higgins wanted to know if the losses had been allocated equitably in Ireland.

Mr Chopra said “where it might have fallen short is that there wasn’t sufficient burden sharing in senior bond holders”.

He did think “the Irish taxpayer did have to bear a disproportionate burden”.

The issue for the IMF was to encourage the government to be mindful of choosing measures that  took equitability and social partnership into account.

It was for Irish people to judge if that had been successful.

Meanwhile, Mr Marco Buti of the European Commission has told the Banking Inquiry that the Irish government should have consulted its European partners before implementing the blanket Bank Guarantee,

Mr Buti , who has been Director General for Economic and Financial Affairs at the Commission since December 2008, said it was not for the Commission to judge what was ultimately decided.

It was clear the decision was taken in very difficult circumstances  characterised by great risk and uncertainty and he did not envy those who had to make the decision.

His only criticism it was that the Irish government did not consult their European partners.

Mr Buti said the Guarantee was “ too generous. It magnified the impact of the fiscal crisis.”

It “heightened competition for bank funding at the moment of growing tension in financial markets across Europe”.

He said the EC had a limited role in monitoring countries’ fiscal plans and played no role in regulating and supervising domestic banks prior to any programme implementation.

This had changed when Ireland entered its bailout programme as the EC was part of the Troika.

Ireland’s crisis was home-grown.

The adjustment process had been a difficult one.  He concurred with the view of many observers that if programme funding had not been available from international partners the economic adjustment and impact would have been “significantly stronger” for Ireland.

Mr Buti said the programme was largely successful in very difficult circumstances to reduce the burden on the less well off.

If the Commission could have done something more, “from what we know now of the social consequences we could have had a system which would have protected even more”.

On the decision not to allow the burning of the bondholders, Mr Buti said both Ireland and the Euro area as a whole were “in a life threatening situation” at the time, a situation of unprecedented uncertainty and going into something which could have increased substantially that uncertainty.

“Spill overs within Ireland would have been too risky”.

The Troika, he said, came to the common judgement that burning the bondholders was not the right thing to do. “The ECB was very forceful on that.  With hindsight I think it was the right thing to do”.


“Waiting for the Sheriff” is the true story of how an unholy
alliance between the Irish Government, Banks and Judiciary has
reintroduced eviction back into Ireland.
Learn about:
The plight of Irish families, torn apart by threatened evictions.
The role of An Garda Siochana (the Irish Police) in supporting
banks in their criminal actions.
The Judiciarys role as gatekeepers to the criminal activities
of the Irish banks.
The whistle blowers who helped unearth one of the biggest
financial crimes in Irish history and why those responsible
still remain untouched.
The events leading up to the 2008 bailout and how the Irish
government already knew that the banks were trading illegally.
All the events in this book are based on real experiences and
published facts and represents… NOTHING BUT THE TRUTH.

European Commission’s handling of Irish bailout strongly criticised

Court of Auditors highlights failure to notice warning signs in run-up to financial crisis

The European Court of Auditors has strongly criticised the European Commission’s handling of the Irish bailout, highlighting its failure to notice warning-signs in the run-up to the financial crisis. The European Court of Auditors has strongly criticised the European Commission’s handling of the Irish bailout, highlighting its failure to notice warning-signs in the run-up to the financial crisis.

The European Court of Auditors has strongly criticised the European Commission’s handling of the Irish bailout, highlighting its failure to notice warning-signs in the run-up to the financial crisis.

In a hard-hitting report published this morning, the EU spending watchdog also pointed to the absence of key documentation relating to bailout decisions, noting that certain documents are still missing.

The report into the European Commission’s management of five bailout programmes found that it failed to spot a number of warning signs including the emergence of high budget deficits for Ireland, Latvia, Portugal and Romania.

In particular, it cites a Commission analysis of the Irish economy from March 2008 which found that ‘the risks attached to the budgetary projections are broadly neutral for 2008’. But the European Court of Auditors report notes that by the end of 2008 the fiscal balance was lower than forecast by 7 per cent of GDP.

Noting that the European Commission already had oversight responsibility for member states’ budgets in the years preceding the financial crisis, the report concludes that “the European Commission estimated the countries’ public budgets to be stronger than they actually turned out to be.”

“Warning the Council about the mounting fiscal imbalances was the Commission’s responsibility. The Commission was not prepared for the first requests for financial assistance.”

The Court also found that “the lack of documentation” was a common weakness of the Commission process, noting that some key documents relating to the bailout are missing.

“We could not validate some of the essential information that was forwarded to the Council, such as the initial estimates of the financing gap for some programmes […]The availability of records improved with time, but even for the most recent programmes some key documents were missing.”

Among the main recommendations of the report is that the Commission enhances record-keeping “to ensure the factors underlying programme decisions are internally transparent. “

Further, the report found that the work of the bailout programme teams for the programme countries and their calculations “were not reviewed by anyone outside the team.” “The work of the experts was not thoroughly scrutinised and the review process was not well documented,” the report states.

It also notes that the Commission was “unprepared for the task of programme management.”

“The Commission possessed very little in-house experience of designing and managing financial assistance programmes, and that experience could not be acquired at such short notice,” the report notes.

The controversial issue of burden-sharing by senior bondholders during the Irish bailout it also raised in the report. While noting that all the troika partners accepted no burden-sharing by senior debt holder during the bailout negotiations, it does note that the IMF’s ex-post evaluation of the Irish programme suggests that alternative policy actions were available to contain the risks from higher burden-sharing, but were not pursued.

Last week economist Joseph Stiglitz said that the Irish economy would have fared better if it had been permitted by the European Central Bank to force senior bond holders to share some of the debt burden.

The European Commission was one of the three main participants in the five main euro zone bailouts, along with the European Central Bank and the IMF. In addition it financed bailouts for non-euro zone countries including Latvia, Hungary and Romania in 2008 and 2009 in conjunction with the IMF.

Launching the report, Baudilio Tomé Muguruza of the European Court of Auditors said it was imperative that Europe learns from its mistakes. “The effects of the crisis are still being felt today, and the resulting loan programmes have since run into billions of euros so it is imperative that we learn from the mistakes which were made”.

In an official response -included in today’s European Court of Auditor’s report – the European Commission said that its response to the crisis “was immediate and comprehensive.”

“The Commission does not agree that the most recent programme documents lacked essential information.”

It also says that the Commission “was not alone” in its failure to identify economic weaknesses in the Irish economy.

“Domestic and international institutions, as well as private-sector forecasters, did not anticipate the severity of the downturn observed in Ireland in 2008.”

Nice job, but world knows we are on a slippery slope

Shane Ross

Published 24/01/2016 | 02:30

Courage and conviction: Taoiseach Enda Kenny and Nobel Prizewinner Joseph Stiglitz in Davos

Were the diners in Davos fiddling while the global economy burned?

Last week the Chinese economy reported its worst figures for 25 years. European stock markets hit 13-month lows. The IMF was on the warpath, reducing its global growth forecasts. Oil prices were tumbling.

Oblivious to danger, Ireland’s Taoiseach was chipper. He was on the slopes of Davos pontificating about how Ireland would “insulate” itself from the disasters hitting the world economy. Happily, he insisted the Irish Government had a “long-term” plan.

Enda may be fooling the floating voter in Dublin but he wasn’t fooling the diners in Davos. Insiders know that Enda’s “long-term” economic plan extends as far as Friday February 26. No further. Once D-Day is past – in about six weeks – we will need to face economic reality. Ireland will be forced to acknowledge that we cannot kick against the global economic pricks.

If Enda returns victorious to the helm in March, his economic narrative will take a dramatic turn. All that glib talk of “insulating” ourselves from the global turmoil will vanish. It was only meant for domestic consumption anyway. Every one of the diners in Davos understands that Enda cannot publicly recognise the dangers on the eve of an election. If he saw clouds on the horizon, he would be forced to pursue a policy of prudence, an economic reality unrecognised by any Irish political party as polling day approaches.

If any political party was to take honest stock of the dangers from overseas it would be compelled to abandon auction politics. All that wild talk about cuts in the Universal Social Charge (USC) and increases in Child Benefit would have to be dropped. Public spending would need to be held in check. Schools might not be built. Promises on health might have to be dumped. The clean Davos air is a wonderful location for the fantasy world of Enda’s economic escapism.

Scepticism about Ireland’s ability to go it alone is not confined to overseas observers. Even the Irish stock market does not believe Enda’s promise to “insulate” us from the global dangers. Last Wednesday saw Irish shares fall 10pc from their December highs. The falls were in response to the slide in overseas markets. Oil and China affect the Irish economy as much as they make Wall Street wobble. Traders in Ireland’s leading shares were heading for the exits. They had no room for sentiment, patriotism or electoral bull from Fine Gael, Labour, Fianna Fail or the smaller parties. They were giving the thumbs down to an Irish economic fairytale that would make an ostrich blush. They never bought the narrative that Ireland could sustain a growth rate far superior to the US, the UK and all European countries. They knew the score. They even put the knife deep into the Irish Government’s ribs. They sold shares in Irish banks, the flagships of our recovery. They dumped AIB stock, the Government’s big white hope for a bonanza later this year.

Yet Enda waffled on. There were one or two awkward moments when Enda, the amateur economist, tried to mix it with Joseph Stiglitz, the Nobel prize-winning guru. Enda was rabbiting on about our great success. With both beady eyes on viewers at home, he has always put it down to the “courage and conviction” of the Irish people.

Back in Castlebar and in Dublin’s Liberty Hall no doubt they were cheering as they watched Enda on the box last Thursday. He declared that the long-term plan ensured that we would “continue to be competitive”, that we would “keep the cost base under control” and we would “continue to control public spending”.

Stiglitz was one of the few visitors in the ski resort who failed to follow the Davos doctrine of politeness. He did not directly rubbish the Taoiseach’s words, but he did not allow Enda to make unchallenged economic assertions.

If Enda’s hosts, including Stiglitz, had demanded that he converted the cliches into specific cuts, he would have been banjaxed. But diners in Davos are far too diplomatic. They indulge politicians facing elections. They know that in 12 months’ time they will be able to put manners on Enda. He will be free from an election straitjacket, able to tell the Irish people a little bit more of the truth. Today’s taboo subjects will become tomorrow’s hot topics.

Joseph Stiglitz’s gentle challenge to the Taoiseach would be heresy back home. According to Stiglitz, we have seen no growth in the last decade. Our GDP per capita is lower than it was in the 2007/8 period. He went on to chastise Ireland for taking private debt into public ownership. Enda should have burned the bondholders. The legacy of the decision to rescue Anglo and others was not discharged. Enda had been ambushed.

Kenny did not tell him that economics was hardly his strongest suit. He wisely conceded that he was not declaring victory, simply marking “progress”. Fair enough.

No one should begrudge the Government credit for the economic progress of recent years. Maybe it was involuntary, forced on them by the Troika, but much of the improvement happened on their watch.

But improvement is all it is. We have not arrived in paradise. Enda Kenny and Joan Burton’s Ireland is a fool’s paradise.

Luckily for Enda, Joseph probably didn’t know that we have an independent think-tank in Ireland – the Fiscal Advisory Council – that has issued some pretty rough warnings about the way we are cooking the books.

If Joseph had pointed out that October’s Budget arithmetic had allowed windfall profits from multinationals to be counted as permanent revenue, Enda would have given birth to a canary on the sofa.

He was probably aware that last Thursday, even as he assured the world that all was well in Ireland, Tim Cook of Apple was heading for a Brussels showdown with European Commissioner Margrethe Vestager. Cook was being carpeted, required to answer for the extraordinary tax arrangements that Apple enjoys in Ireland. There is little doubt they are about to come to an end.

The multinationals, vital contributors to Irish prosperity, are hopefully embedded here. But there is a question mark about their intentions. They are believed to be responsible for the shock spike in pre-Budget revenue that allowed the Coalition to go on an election spending spree. There is a murky lack of information about how this happened.

Cynics suggest that the multinationals decided to regularise their tax arrangements by ‘fessing up and making extra-large payments.

Future amounts from multinationals cannot be taken for granted. Enda is doing just that. The money is already spent.

Our prosperity is fragile. The banks are still in rag order. When the weakness of the euro against both sterling and the dollar comes to an end so will our export-led boom.

If the world economy continues to reverse, Ireland’s growth rate will follow it downwards. When Apple loses its case at the European Commission, our tax take from multinationals will become uncertain.

Next year expect to hear Enda telling a different narrative at Davos. The vocabulary will change. “Long-term” will change from February 26, 2016 to February 26, 2021. “Prudence” will be the watchword.

“External factors” outside his control will feature big. We will have been “blown off course”. Ireland’s shock cuts in public expenditure will be “temporary”.

The reduction in the USC will be put “on hold”. Europe will have forced us to “review” our arrangements with multinationals at a possible loss to the exchequer.

But the Taoiseach need not worry. The economy may be contaminated by global infections but Bono will still invite him to dinner. He will still be photographed with a gushing Sheryl Sandberg of Facebook.

Shane Ross is the Independent Alliance TD for Dublin South

Sunday Independent



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