Do politicians who claim we can’t be bribed, instead believe that they can scare the bejesus out of us?

You might be forgiven for thinking the referendum to ratify the Fiscal Compact was to be held in the next week, given the drama of the last few days, with Eamon O’Cuiv forced to resign – when did the term “fired” become redundant in favour of “forced to resign”? – over his stance on the Compact, Minister Joan Burton being rounded on for suggesting it would be helpful to the passage of a “Yes” vote if the negotiations on the Anglo promissory notes were to bear fruit, and a range of ministers coming forward to show that although the Irish people might not be up for bribing, we are sure as hell up for having the bejesus scared out of us.

Minister Varadker claims that we would be locked out of any future bailout if we vote “No” Minister Burton claims that Foreign Direct Investment would suffer, which might be true, though the UK and Czech Republic don’t seem too concerned about that risk. An Taoiseach Enda Kenny says that the vote is about whether or not we want to keep the Euro as our currency.

But despite the drama, we still don’t have the text of the referendum; most people probably haven’t read the 11-page Compact which is available here and the betting is the referendum is at least two months away. There are concerns about some basic aspects of the Compact such as the absence of a definition for “structural deficit”. There are also concerns about how this Compact may eventually put our corporate tax arrangements or our financial services industry in jeopardy, the former through Europe pushing through a consolidated tax base which would mean most of Google’s revenue would be taxed elsewhere and the latter through the risk of a financial transaction tax which would hurt our interests if not applied in competing countries, such as the UK and indeed non-EU countries. There is also a fear that the Compact copper-fastens the promissory note debt to our sovereign debt, in a way not hitherto done. These are all concerns, I mention them because the “No” side hasn’t really launched its campaign yet. It should be said there are plenty of attractions in the Compact, not least having the safety net of substantial and cheap EU assistance, should we need a second bailout.

And the troubled question of a second bailout has provoked strong feelings in the last couple of months with Minister for Finance, Michael Noonan dismissing as “ludicrous” the notion that Ireland will need a second bailout after the end of 2013 when the first bailout is projected to end. The “ludicrous” dismissal was Minister Noonan’s response to highly-regarded Citigroup economist Willem Buiter saying in January 2012 that Ireland should be preparing for the possibility of a second bailout. So Minister Noonan is not going to be at all happy with the weekly outlook report from ratings agency, Moody’s, this morning in which that agency says that they“expect Ireland to face challenges regaining market access in 2013 and it will likely need to rely on the ESM, at least partially, when the current support programme expires” The Weekly Credit Outlook report from Moody’s is here (free registration required).

 

So Moody’s says Ireland“will likely need to rely on the ESM, at least partially”. Or in other words we will likely need another bailout from official sources because the traditional market sources won’t lend us what we need to run our country. Fair enough, that’s Moody’s view. In the past, such projections and ratings by the ratings agencies have been dismissed as “clairvoyance” and in the run-up to the global banking crisis in 2007/8, the ratings agencies didn’t cover themselves in glory. Ireland’s “paper of record” however curiously reported Moody’s statement earlier today with the headline “Ireland is likely to need second bailout, ratings agency warns” and you will note that is pretty much verbatim what the Moody’s report says – there’s only four paragraphs given over to Ireland in the report and where a second bailout is referred to twice the term “likely” is used.. This afternoon however, the “paper of record” has changed its headline to “Ireland “may need” second bailout”. Not only does the verbatim “may need” not appear in the Moody’s report but it softens the language actually used in the report – it “may” snow tomorrow would be materially different to “it is likely to snow tomorrow”. Below you can see the extract of the current headline with the old headline shown in the bottom right hand corner.

Given the official reaction to Willem Buiter’s contribution in January – widely misreported when what he actually said was we should prepare for the possibility of a second bailout, not “we will definitely need a second bailout (without doubt!)” – Moody’s statement today is unlikely to be welcomed. In fact it’s strange we haven’t yet heard the now-hollow thunderings of the NTMA and the Department of Finance. But it is to be hoped as we get into the proper debate on the Fiscal Compact that reporting the facts doesn’t suffer. There are very serious concerns on both sides of the debate, and thankfully we will have weeks if not months to examine the concerns, and it is hoped this blog will contribute to understanding of the important issues, and misreporting/scaremongering/obfuscation or misdirection/untruths will not be sympathetically reported on here, regardless of whether they support a “Yes” or “No” vote.

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