I wonder what our friend from the IMF, Ajai “Chopper” Chopra really thinks about Ireland and our stance towards bondholders. Will he be surprised when he arrives tomorrow for a 10-day “review mission” with other members of our new creditor consortium and doesn’t see any evidence of unrest or protest towards the latest bailout bombshell last Thursday? Will he continue to observe a diplomatic solidarity with fellow creditors from the EU and ECB and not break ranks in offering us his sincere views on burning bondholders? What will he make of the near defiance of the new government in not implementing certain terms from the bailout agreement? I don’t know what the man himself will think but this entry examines all three and our new tactic, announced by Tanaiste Eamon Gilmore, on RTE’s This Week radio programme yesterday – the diplomatic offensive.
First with respect to protest and unrest; I suppose on one hand we should be thankful not to be witnessing the scenes of destruction seen during riots and protests in Athens, but on the other hand it has been disappointing not to have had any substantial protest march since the 50,000-strong one in Dublin last November. Yesterday in Fermoy a small group of protesters, pictured below, showed what they felt about the latest bailout announcements. The Irish Examiner reports that the march is set to be a weekly event each Sunday and Fermoy protesters will be joined by those from the nearby village of Ballyhea. And on Wednesday this week at 6pm outside the Dail on Kildare Street in Dublin, newly-elected TD Richard Boyd Barrett is to hold a demonstration demanding a referendum on the bailout (both bank and IMF/EU bailouts, as I understand it). In Iceland protesters took to the streets with pots and pans to make their voices heard in what is now referred to as the “Kitchenware Revolution”. Creditors traditionally squeeze their debtors until the pips squeak. If we don’t protest, are we tacitly telling them that the terms of the loan are acceptable?
With respect to the IMF’s position on burning bondholders, it is worthwhile reproducing the transcript of last week’s news conference at the IMF in Washington where the IMF spokeswoman, Caroline Atkinson was fielding questions.
CAROLINE ATKINSON (IMF): I have another question online: What is the IMF’s feeling on the stress tests in Ireland and their utility in restoring confidence? I am just going to put that off -– we are expecting announcements, as you all know, from Ireland on their stress tests later today so I don’t want to anticipate those announcements now.
QUESTION: Aside from these stress tests, does the IMF still believe that Ireland should restructure unguaranteed bank bonds?
MS. ATKINSON: That is like, have you stopped beating your wife.
QUESTION: But it has been a position that the IMF officials have taken before, so I’m wondering if it’s continuing to take that position now?
MS. ATKINSON: As you know, there will be a mission to Ireland in the first part of April so beginning very shortly, which will be our first detailed discussion with the new authorities on the program in the next review. I do not want to anticipate the discussions that will take place there
The IMF does see debt restructuring as acceptable when debt becomes unsustainable. Not so our friends in the ECB who are no doubt fearful of contagion. However, maybe our new government might ask the EU delegation about debt sustainability as outlined in the Stability and Growth Pact which commits EuroZone members to keeping their national debt capped below 60% of GDP. Olli Rehn seemed focused on our deficit:GDP and keeping that at 3% but perhaps our new government might demand more flexibility from the EU.
What will the delegation tomorrow have to say on our new government’s stance on the IMF/EU agreement negotiated by the previous government but democratically approved in the Dail? Eamon Gilmore’s “Frankfurt’s way or Labour’s way” looks pathetic at this stage but what about the terms of the agreement that we have not implemented as planned? What about the €12bn of sub-€20m land and development exposures at AIB and Bank of Ireland and the €5bn of associated lending? This was to have been moved into NAMA but the new Programme for Government rejects this. What about restoring the minimum wage to €8.65 per hour after the €1 per hour cut in January? Taoiseach Enda Kenny now says he needs approval from our creditors in order that he can deliver on that pledge. What about the €24bn additional bailout last week, will this be unequivocally provided?
The only new initiative suggested by our new government is to launch a “diplomatic offensive” in Europe where it is understood our reputation is in tatters. Building alliances can’t be a bad thing and certainly creating a “technical group” of peripheral states facing similar debt problems might create a stronger voice. But that will not be easy. Portugal, Greece and Spain have socialist governments which mightn’t appreciate our “poor mouth” pleas when we allow corporations to operate here with low tax rates. And as for our creditors in countries like France, the UK and Germany? Of course offering communication and dialogue and explaining our position might be positive and all creditors like their debtors to stay in touch. But creditors generally pursue their debts until they can hear the pips squeak and Ireland which is still a relatively rich country by reference to per capita GNP as well as per capita GDP might, not only get a cold reception but might inspire animosity with the apparent hypocrisy of seeking debt forgiveness at the same time as being so relatively wealthy. So the velvet glove of diplomacy might or might not yield results but any results are unlikely to be more than superficial. What is needed is the iron fist of threats to separate bank from sovereign debt, and to treat bank debt like bank debt in other EU countries – as a mostly private affair in which the state has peripheral interest.
I leave you with a short video of yesterday’s Fermoy protest. A repeat protest is expected there next Sunday.
NAMA Wine Lake 
Last week was a very black week for Ireland and as you say passed without any real protest. My latest blog entry on the crisis concludes with this (call to pots and pans):
The fact that we have had a recent election and a new government is of little consequence as Ireland is now effectively being run by hard-line economists and bankers in Washington, Brussels and Frankfurt.
Overall, it appears that we cannot depend on Morgan Kelly’s “kindness of strangers” and maybe we should look to sinn féin (lower case s and f) – ourselves alone. To mangle Patrick Pearse’s oration at the grave of O’Donovan Rossa:
They think that they have foreseen everything, think that they have provided against everything; but the EU, the ECB, the IMF! – they have given us our foreign loans, and while Ireland holds these debts, Ireland in recession shall never be solvent.
I don’t think our representatives have much of a hand. If shamefully, we took to the streets and went greek, they could say “look we’re losing the population! This is untenable!” But the imf/ecb think we can take more, because until we make the situation look as desperate as it is we’ll get nothing. brinkmanship. We look guilty because we’re not going wild with indignation.
The interest rate will be reduced as flagged by 1% same as it was for Greece two weeks ago but we will be told this is because of the wonderful negotiating skills of Eamon Gilmore.
No “hard” negotiations will take place unless the ordinary people take to the streets in huge numbers, which is highly unlikely, or unless the pay and jobs of our public servants are slashed to levels equivalent to those lending to us. Perhaps they don’t see the logic of lending to us so that we can have far superior salaries and pensions than they themselves have? For that to happen the Croke Park fudge would have to be permanently parked but that cannot happen without the unions obfuscating and trying every stunt in the book to persuade Chopra that black is white. They will tell him that,”transformation” is taking place and that he should give them more and more time to deliver in any event they will put us through the strikes.
Meanwhile unions and government workers know that there is money in the EU/IMF kitty that needs to be used up, before they face stark realities, and it will be used up, until that day arrives there will be nice soothing, hand wringing phrases put about the air waves and MSM.
Paul Sommerville is right in saying that the whole European game is more political than economic. It is being driven by ongoing and impending elections in Germany and France. The strategy is to put as much of what is owed on to the books of Irish tax payers and off the books of the ECB where it will remain, default/restructuring or not, for decades around our children’s necks. So far, the ECB is playing a blinder against a team of dummies that has yet to discover that the rules can be changed unilaterally. After all, that is what we did when we brought in the guarantee and phoned our EU partners next day. Yes, we will be despised, told we are ungrateful bad Europeans, even hated for a time, but so what. If the ECB don’t want bond holders to suffer until 2013 if they don’t want burden sharing thats fine, however they must pay for it and pay for it NOW, upfront and not by way of temporary liquidity arrangements for Ireland’s banks until Irelands day to restructure arrives.