Mish Shedlock on Ireland government collapse (Good one !!)

Irish Government Collapses, Six Cabinet Members Resign, Election March 11; How To Negotiate Haircuts

Posted: 20 Jan 2011 09:11 PM PST

In a fitting tribute to a disgraceful performance by Irish Prime Minister Brian Cowen in which Cowen crammed losses of Irish banks down the throats of taxpayers, his government has at long last collapsed. Six cabinet members (40%) resigned representing justice, health, trade and enterprise, defense and transport. Earlier in the week his foreign minister resigned making the total six.

I have a wide selection of articles to choose from. Here is a representative sample.

Irish Central reports Irish leader Brian Cowen calls an election for March 11

Irish Prime Minster Brian Cowen has called an Irish election for March 11th.

Speaking to a packed parliament, Cowen stated that he was reassigning six cabinet portfolios after six of his ministers resigned.

The proceedings in Irish Parliament had been suspended as opposition leaders refused to move forward until Prime Minister Brian Cowen explained the six recent ministerial resignations.

Rumors of an impending collapse of the government and an immediate election were circulating as the Green Party met to decide whether they would withdraw support for the government.

Earlier today parliament was suspended after rowdy scenes. Opposition leader, Fine Gael’s Enda Kenny demanded that proceeding be suspended until Cowen could explain what was going on within the Government.

Kenny said “This is the worst government in history…This would not have happened even in the days of great dictators. It is unprecedented, what you have done.”

He continued “These are the last days of the worst government in the history of the state.”

Minister for Enterprise, Trade and Innovation Batt O’Keefe tendered his resignation this morning. Wednesday saw Mary Harney from Health, Dermot Ahern from Justice, Noel Dempsey from transport and Tony Killeen from defense all resigned. These followed the resignation of Micheal Martin from foreign affairs who resigned after a failed leadership challenge.

Kenny said that the actions of Cowen had been a “cowardly, disgraceful act” and said he was “refusing to come in here today to tell the people of his country what is happening with a Government that has imploded, with a Government that is dysfunctional, that has disintegrated, and that had let our people down”.

The Independent reports Irish government falls and calls 11 March poll

The Irish Government collapsed yesterday, with multiple ministerial resignations propelling Prime Minister Brian Cowen into setting 11 March as the date for a general election. His Fianna Fail party, which dominates the government, is widely expected to be largely wiped out in the contest, since under the Cowen leadership it has slumped to unprecedented depths in opinion polls.

In recent months he was damaged by "Garglegate", when he was judged to have performed badly in a morning radio interview after a late night of drinking with journalists and others. Next came "Golfgate" when we learnt that as finance minister he had played golf and had dinner with the banker Sean Fitzpatrick, regarded as possibly Ireland's most toxic figure, since he above all others is blamed for the economic disaster.

Many Fianna Fail members of the Dail, the Irish parliament, have announced they are not standing again, because they are unlikely to be re-elected or because they realise they will face years in opposition.

The election was precipitated during a day of turmoil after the small Green party, which has kept Fianna Fail in power, called for a contest in March. Four Fianna Fail ministers, plus a long-time supporter, then announced their resignations. In what is viewed in Dublin as an extraordinary move, Mr Cowen then redistributed their portfolios with some of his remaining ministers taking on extra responsibilities. Mary Hanafin, for example, has become Minister for Trade, Enterprise, Innovation, Tourism, Culture and Sport.

Fianna Fail has traditionally been the largest in the Irish Republic but recently hit a record low of 13 per cent in the opinion polls.

This has led to predictions that Fianna Fail could drop from more than 70 seats to fewer than 20, a result which would represent a seismic change in Ireland's political patterns. There are certainly obvious signs of a widespread loss of public confidence in Fianna Fail. A disaffected backbencher said recently: "The people just don't trust us. We got arrogant and got disconnected and wouldn't listen. The people are very angry and you can't blame them."

Yahoo! News reports Irish premier sets early election for March 11

Cowen's Fianna Fail party has fallen to record-low levels of support after leading the country from the Celtic Tiger boom to the edge of national bankruptcy. Adding to the sense of chaos, the prime minister managed to bring his own administration to the brink of collapse Thursday through an ill-calculated bid to inject his Cabinet with fresh blood.

Five ministers — a third of Cowen's Cabinet — resigned from the departments of defense, justice, health, transport and trade between Wednesday night and Thursday morning because they were not planning to seek re-election. Cowen hoped to promote five new lawmakers in their place to boost their pre-election profiles.

But the gambit provoked fury in parliament and a backlash from Cowen's coalition partners in government, the environmentalist Green Party. Cowen spent the morning pleading with the Greens to back the election of the new Cabinet ministers but they refused and demanded that he set an election date.
When Cowen finally appeared in parliament, he appointed five current Cabinet ministers to take on the additional departments for the next few weeks before parliament is dissolved in mid-February. The move avoided the need for a parliamentary vote that Cowen was sure to lose.

Fianna Fail lawmakers expressed dismay that their leader hadn't seen the Green opposition coming.

"I'm really infuriated by what's happened. ... Whatever his great plan was, it has totally backfired," said Fianna Fail lawmaker Tom Kitt. "I've never seen anything like it."

Ireland has nationalized four of the six Irish-owned banks and repaid tens of billions to foreign bondholders. It spent two years trying to fund the bank bailouts itself, but the cost drove Ireland's 2010 deficit to 32 percent of gross domestic product and forced the country to negotiate a euro67.5 billion ($91 billion) bailout loan with the European Union and the International Monetary Fund.

So far Ireland has received euro5 billion ($6.7 billion) of those funds. The two opposition parties expected to win the March 11 election and form the next coalition government, Fine Gael and Labour, have pledged to reopen negotiations with the EU and IMF.

The Mail Online reports Beleaguered Irish PM calls general election for March 11 after failing to push through Cabinet reshuffle

Irish Prime Minister Brian Cowen has set a date of March 11 for an general election that will provide a stern test for his deeply unpopular government.

The Taoiseach [Prime Minister] was forced into a humiliating climbdown in his plans to replace five Cabinet ministers with junior members of his Fianna Fail party.



Resignations: Justice minister Dermot Ahern (left) and health minister Mary Harney, seen here after being pelted with red paint) are among the five cabinet members to quit

How To Negotiate Haircuts

The two opposition parties expected to win the March 11 election and form the next coalition government, Fine Gael and Labour, have pledged to reopen negotiations with the EU and IMF.

I offer the following suggestions on how to negotiate.

The correct procedure is to announce intent to default with a statement something like "The Irish government refuses to bailout UK, German, French, and US banks too stupid to realize that Ireland was in the midst of a gigantic property bubble."

Now doubt EU, ECB, and IMF will offer to cut interest rates to 2% or some such number, perhaps even 0%.

The correct response to that sort of nonsense should be "This is not be a question of interest rates. This is a question regarding principal and principles. In regards to the latter, Irish taxpayers cannot and will not make whole foreign investors whole for their piss poor decisions. In regards to the former, and as a gesture of goodwill, we are prepared to offer 2 cents on the dollar for all debts owed."
That should set an appropriate tone for the "negotiations". It will also send bondholders a very badly needed message.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Ireland bailout: From €1,100 a week to living on the streets of Dublin

• The Guardian - Submitted: 26 hours ago

Homeless man s descent from full time worker to a tent in a car park shows the plight of Ireland s economic losers

The banker s tale: Governor who got out just in time

Living in a tent inside an empty underground car park Malcolm Quigley s fall from full time worker and home owner to destitution personifies the plight of those who have lost out in Ireland s economic crash.

The… » Full Story on The Guardian

Fiscal Crisis (CONT'D): Mish's analysis (blunt and good)

UK Wants to "Help" Ireland

Please consider Ireland May Be Next Greece as Europe’s Economic Superstar Fades

“Ireland is our closest neighbor, and it’s in Britain’s national interest that the Irish economy is successful and we have a stable banking system,” says George Osborne, the U.K. chancellor. “So Britain stands ready to support Ireland in the steps that it needs to take to bring about that stability.”

The Irish underestimated the severity of the losses for the past two years. In September, the government said that the bank bailout may cost as much as 50 billion euros. NAMA says it will absorb an estimated 73 billion euros of loans from the banks at a discount of about half of their value.

The figures sound small relative to the U.S. rescue of its banking system, except that Ireland’s population hovers at 4.4 million, according to the World Bank; the bailout so far equals 30 percent of the country’s 158 billion-euro gross domestic product. EU officials say Ireland’s emergency aid package may tally $136 billion, roughly the same amount given to Greece in May.

While the U.S. economy was driven off a cliff by the reckless securitizing of subprime mortgages and Greece collapsed under the burden of misrepresented government spending, the Irish traveled a simpler road to ruin: by taking out enormous, unregulated loans. Ireland’s economy has contracted for three consecutive years, and the Irish Central Bank governor has declared his country’s fiscal deterioration “worse than almost any other country.”

Today, according to former Central Bank of Ireland economist David McWilliams, the average Irish family owes 132,000 euros to banks.

Many Irish people won’t be able to pay off their debts in their lifetime, and almost all commercial developers are broke.

New Buzzword "Namatized"

NAMA stands for National Asset Management Agency, Ireland’s “bad bank.” Bloomberg notes that NAMA was created by the Irish government in 2009 to help stanch a crisis within the Irish banking system that has pushed the country to the edge of insolvency.

NAMA clearly did not work. I am saddened to report Irish citizens have been "Namatized", a fitting tribute to the fools in Irish government that authorized the nonsensical guarantee of Irish bank debts.

How Bankers Ruined Ireland

Please consider Why the Irish Crisis is Going Global for a nice synopsis of how bankers ruined a once thriving Ireland.

On the surface, it's reminiscent of the problem Greece had with its unmanageable federal debt early this year, which shook world markets, ended a global rally in stocks and ultimately led to a $146 billion bailout by the European Union and the International Monetary Fund. Greece spent more money than it took in for years, papered over the gap, and essentially became insolvent when it could no longer borrow the money needed to finance its debt.

Ireland is on the brink of insolvency too, which has helped drive down the S&P 500 stock index by nearly 4 percent over the last few days. But unlike Greece, Ireland is a relatively wealthy country, with per capita GDP of nearly $38,000. That's 21 percent higher than per capita GDP in Greece, and in the top third for European countries. Low corporate tax rates and a skilled workforce have made Ireland a haven for some of the world's biggest companies. And its public debt, about 65 percent of GDP, is far below Greece's crushing load, which is 126 percent of GDP. Ireland's debt levels are even lower than those in France, Germany and the United Kingdom.

But Ireland has one huge problem that may soon make it a supplicant to its European brethren: A failed banking sector that Ireland's government can no longer rescue on its own. Ireland is in the midst of a real estate bust that could trump even the ruinous downturns that turned parts of southern California and Nevada into suburban ghost towns, with home-grown banks stoking it all. Now, those banks are trying to manage catastrophic losses. The Irish government has effectively nationalized the nation's biggest banks by guaranteeing their debt, which would be akin to the U.S. government taking over Citigroup, Bank of America, J.P. Morgan Chase and Wells Fargo.

That means the Irish government is also on the hook for the losses those banks endure--which have risen far beyond initial estimates, and may have a lot farther to go. So far, the Irish government is obligated to cover losses amounting to 175 percent of Irish GDP, which is becoming an unsustainable burden. "If the Irish banks go down, the Irish government also goes down," says economist Jacob Kirkegaard of the Peterson Institute for International Economics.

Rat's Ass Perspective on "Help" from UK, EU, and IMF

Finally, I would like to repeat something I said in European Banks have $650 billion Exposure to Ireland; Germany’s Economy Minister says "EU Cannot Throw Money from Helicopters"

Rat's Ass Perspective

The other countries in the EU do not give a rat's ass about Ireland. All they really cares about is $650 billion in loans on the books of UK, German, French, Italian, and Spanish banks.

The US is of course the third most interested party and will no doubt apply pressure on the IMF to apply pressure on Ireland to accept some sort of bailout.

Ireland is sitting on a pile of cash. That cash will last much longer if Ireland defaults and that I believe is just what Ireland should do.

The IMF may be prepared to "Help" but I repeatedly ask and answer whether or not it can do any such thing in IMF Ready to "Help" Ireland; Can the IMF "Help" Anyone?

The short answer is for Ireland to tell the EU and IMF to "Stuff It".

Every country for itself. There is simply no reason for Irish citizens to bailout UK, German, French, and US banks.

Postponed is Not Solved

Bailout "help" will do nothing but overburden Ireland while making its problems worse down the road. Resentment will build up and hopefully Irish voters will do the same thing Icelandic voters did: throw the bums out and tear up the agreement.

Meanwhile, Spain is waiting in the on-deck circle. The proverbial s* hits the fan when Spain comes up to bat.

Mike "Mish" Shedlock

http://globaleconomicanalysis.blogspot.com

Interesting news items today

Arab thinkers voice concern over US-Iraq security deal
Thu, 26 Jun 2008 04:45:40
Samer Dadaa, Press TV, Damascus

Bush, Talabani discuss US-Iraq security pact
Thu, 26 Jun 2008 04:03:44
Mike Kellerman, Press TV, Washington

Gerry Adams calls for Northern Ireland reunification
Thu, 26 Jun 2008 00:02:11
Roshan Mohammed Salih, Press TV, London

GAO report cites insufficient results in US 2007 military surge
Wed, 25 Jun 2008 23:30:10
Jihan Hafiz, Press TV, Washington

Israel closes Gaza crossings despite truce
Wed, 25 Jun 2008 21:49:21
Yousef Al-Helou, Pess TV, Gaza