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Costs
to bail out bondholders of Irish banks has now soared to $142
billion. Worse yet, the new Irish government completely caved in to the EU
and ECB and will attempt to balance the entire amount on the backs of
taxpayers.
Please consider Ireland Bows to Trichet on Bondholders as
Bank Rescue Reaches $142 Billion
Ireland
yielded to the European Central Bank to protect bondholders even as its
bailout bill for the region’s worst banking crisis moved to as much as
100 billion euros ($142 billion) after stress
tests.
The ECB in Frankfurt was “solidly opposed” to imposing losses on
investors in senior bank debt, Finance Minister Michael Noonan told
broadcaster RTE today. The ECB agreed to provide “ongoing”
funding for the banks, he said.
Ireland agreed yesterday to inject as much as 24 billion euros
into four banks, while leaving bondholders untouched. The government already
funneled 46.3 billion euros into the financial
system and set up an agency that paid more than 30 billion euros to assume risky property loans. The total equates
to about two-thirds the size of the Irish economy.
During an election campaign last month, Eamon
Gilmore, now deputy prime minister, dismissed ECB
President Jean-Claude Trichet as a “civil
servant” who would answer to politicians. As recently as March 28,
Agriculture Minister Simon Coveney said the
government planned to impose losses on senior bondholders in the banks to cut
the costs of its bailout.
“Taking all of the losses of the banking system and putting them on the
balance sheet of the government doesn’t make sense,” Nouriel Roubini, co-founder of Roubini Global Economics LLC, said today in an interview
from Cernobbio, Italy, with Maryam
Nemazee on Bloomberg Television’s “The
Pulse.” “Eventually, the back of the government will be
broken.”
“Rather than go after over 20 billion euros
in unguaranteed bonds, the government is making ordinary citizens bear the
burden of this debt,” Gerry Adams, leader of nationalist party Sinn
Fein, said in statement today. “Rather than act in the interests of the
Irish people they are acting in the interest of the banks.”
Backs of Irish Taxpayers Will be Broken
What is the point of throwing the bums out in a massive repudiation of
government policy if the new bums have the identical policies as those they
replace?
The Euro reacted positively to this turn of events and also to expected
interest rate hikes by Trichet. Those hikes with
further exacerbate the problems of Greece, Ireland, Portugal, and Spain.
I am sticking to my long-held position "what can't be paid back,
won't." The timing is uncertain, and Roubini
phrased it well: “Eventually, the back of the government will be
broken.”
I might add, so will the backs of taxpayers. The pertinent question is how
long the taxpayers put up with another set of politicians who cave in
bankers.
Mish
GlobalEconomicAnalysis.blogspot.com
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