May 2011 Archives

Default is Inevitable unless ..

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The EU has forecast that Ireland's Debt/GDP percent will reach 118% next year. This is viewed in most official circles as just about 'manageable' presuming favourable growth rates and adherence to current bailout terms.

However, it ignores the fact that, unlike most other EU states, there is a large divergence between Ireland's GDP and GNP as the former includes the enormous profits of multinationals which are taken overseas and don't really touch the local economy.

If GNP is used instead of GDP, Ireland's forecast Debt/GNP percent for 2012 shoots up to about 144%. Even if account is taken of Irish corporation profits tax paid by multinationals, the ratio hits 139%. This is off the scale and puts Ireland on a par with beleaguered Greece.

An Irish default is almost inevitable unless the EU, IMF and ECB apply much more flexible and realistic bailout terms.

Letter published in the Sunday Business Post on 29th May 2011.

Approach to Bailout is a Disaster

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What part of "disastrous" or "catastrophic" do the Irish Government, EU, ECB and IMF not understand in terms of their approach to Ireland's financial problems? 

Ireland is fighting to retain its Sovereignty against the world's largest financial forces. If Ireland involuntarily defaults the resultant contagion will certainly undermine the euro and EU, and could progressively turn the world's economies into a nuclear wasteland.

Any offer of a minor reduction in the interest rate should be rejected out of hand. Instead, the Government should demand a reduction in the bailout interest to a nominal rate (say, 1%), a payment reschedule spread over decades and an immediate write down of outstanding bank bonds by about 50%. In return, it must adhere to the bailout terms and agree for purely political reasons to a temporary levy of, say, 3% on top of the sacred corporate tax rate.

Letter published in the Sunday Business Post on 15th May 2011. See also Letter to TDs: Take Firm Action or We Default.

I have become so concerned about Ireland's looming economic and social crisis and the absence of any robust response by the Government that I wrote the message below to all TDs on 11th May.

I have highlighted my comments about GDP and GNP because:

  1. Almost uniquely within the EU, GNP is a much better measure of Ireland's economic activity and strength as it excludes profits of multi-nationals which are taken overseas.
  2. According to the ERSI's latest Quarterly Economic Commentary, the gap between GDP and GNP could widen from 22% to 27% by 2012. This makes the situation much worse than that portrayed in my message to TDs.
  3. The EU has today (13th May) indicated that Ireland's debt to GDP could reach 118% by 2012 - a year earlier than estimated the Government in its Jobs Initiative - May 2011.

This reinforces my belief that, unless rescued (rather than punished) by its EU partners, Ireland has no hope of avoiding involuntary default within the next few years with most serious consequences for the State and entire EU.

Here is the message sent to TDs:

Pension Levy Hits a Soft Target

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Now that Irish private sector pension funds can be raided, why do bondholders of busted banks and gold plated public sector pensions remain out of reach? Is it simply because we are softer targets than German, French and Irish public sector pensioners?

Letter published in the Irish Times on 13th May 2011.

Nyberg Report

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The Nyberg Report contained sections entitled The Herd, The Silent Observers and The Enablers. I look forward to a sequel dealing with The Developers, The Politicians, The Professionals, The Spinners, The Cronies, The Eurocrats, The Chancers and The Suckers. Should be a best seller.

Letter published in the Sunday Business Post on 1st May 2011.

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