Later this morning, Ireland’s so-called “Troika” which is providing the country with loans of €62.5bn, will commence the sixth quarterly review of the country’s compliance with the Memorandum of Understanding – latest copy here; in addition to the €62.5bn of loans from the Troika, Ireland is also receiving €5bn of bilateral loans from the UK, Denmark and Sweden – these countries also have the right to review things, but have so far resisted what would be a highly humiliating intervention, and calling it a “mission” wouldn’t improve the reality of the UK overseeing our finances as is their right under the bilateral agreement..
So later this morning representatives of the EU, the ECB and IMF will turn up at Ireland’s Department of Finance in Dublinto see how things are progressing. They’re likely to be relatively satisfied because despite gloomier forecasts for growth in the Irish economy, the Exchequer figures for March year-to-date show the country is on target with reducing the deficit this year pretty-much in line with plans; at least so far.
This time around the Troika is unlikely to provide a public press conference. You can probably blame Vincent Browne for that because of his trenchant and persistent questioning of the ECB at the last Troika press conference in January 2012 about the repayment of bondholders in bust Irish banks; the official line that is emerging though is the Troika don’t want to be seen to be interfering in the debate on the forthcoming Fiscal Compact referendum or the ongoing so-called “negotiations” to restructure Anglo’s promissory notes and deal with loss-making tracker mortgages at AIB and Permanent TSB. An official with Sinn Fein tweeted this morning that the Troika will also not be meeting with opposition parties as has been the usual practice each quarter – a request was made last week to the Department of Finance and permanent representatives of the Troika and the request was turned down with no reason given. So it seems that the Troika will be on lock-down – or “Ard Fheis” as we’re beginning to say in Irish – for this review.
Here’s what we were supposed to have achieved in the first quarter of 2012 in terms of chores for our missionaries.
An emerging concern on here is that the Troika is primarily concerned with the reduction in our deficit, and that reform, for example by establishing a proper fiscal council which will provide independent commentary on Government policy, or opening up professions to more open competition and equal opportunity are of secondary importance – “nice to haves” – and that economic growth is of tertiary importance. With respect to the controversy du jour, water meters, it is noteworthy that the Memorandum requires our Government to “In light of the results of a public consultation process, the authorities will provide programme partners with an update on progress toward the transfer of water service provision from local authorities to a regulated water utility and plans for the roll-out of a domestic water metering programme with a view to starting charging by the end of the EU –IMF Programme period.”
So there has been a “public consultation process”?
Sadly it seems, we will not be able to question the missionaries on such matters in public this time around.
NAMA Wine Lake 
“Sadly it seems, we will not be able to question the missionaries on such matters in public this time around…..”
And dare one say it but it looks increasingly like Ireland is taking the missionary position when it comes to the ECB/IMF
@Howya, I don’t think that is right. If you look at the Memorandum of Understanding there isn’t very much in there that is bad for an open, competitive economy which needs to balance what it collects in taxes with what it spends on welfare and the public sector.
The household charge had to be introduced in 2012, that is true, but the Government had at least nine months to plan something better than the farce that we have witnessed in the past couple of months.
As a society we should perhaps recognise the benefits that these outsiders can bring to an economy blighted with closed practices and cronyism. And remember there is nothing in the Memorandum of Understanding about repaying bondholders.
NWL – I fully agree that the outside influence is necessary to bring about fundamental changes (property tax, water meters etc). There is no chance that our own politicians would undertake these measures of their own initiative. My comment was related to your point that the Troika is focusing on deficit reduction while ignoring the other relevant issues such as reform and economic growth. (and it could be said that the bondholder issue was deliberately omitted so that everyone involved could issue non-replies to pointed questions).
I’m a bit mystified how exactly the tracker mortgages are loss making. Granted they mightn’t be a lucrative as government bonds. But since the banks are getting cash from the ECB as next to nothing, any mark up is for the good surely. So what if a few years ago they bought lollypops and they could get choc-ices with the same money now. Tough titty.
I would also like someone who knows banking accounting to explain how the banks can be “losing” money on tracker mortgages. If the loans are moved to the IRBC don’t they then lose the income they are currently recieving.
Not someone who understands a whole lot about banking but I’ll give it a try. The trackers track the ECB rate where as they should have tracked the inter bank rate (I think it’s called EURIBOR). Alternatively they might have tracked the higher of the two. In a crunch the interbank rate diverges from the ECB rate as banks lose trust and everyone becomes a bigger risk.
Essentially they borrowed billions of money short term from other banks, lent it long term for mortgages, and have to refinance it every couple of years/months. But the inter bank rate which they pay is higher than the rate at which the money is being repaid by the people who they lent to. Borrow at x and lend at x-1 and you get a loss plus the fixed operational cost of the loans.
They can paper over the problem for a couple of months with short term assistance from the ECB.
On a side note. It’ll be interesting to see what happens to inflation in the coming years. If it gets out of control and the ECB has to get hawkish with the rates those people on trackers could find themselves in deep water very quickly.
Thanks Paddy for a very lucid and concise explanation. I shared it with a banker friend of mine at lunch today in New York and he could not believe that a bank would lend short term funds long without adequate inter-bank rate protection on the tracker.
I’m still grateful that Vincent called them on their patronizing remarks about the Dublin taxi driver and about the disgrace that is the bailout of the bondholders. We would not be in this situation were it not for this guarantee and it needs to be shouted out as much as possible. The country needed that Vincent Browne moment more than 10 more public conferences where nothing was achieved in the exchanges.
How much more blood does Labour want on its hands before it acts,we off the people and all that nonsense.The NYT on Sunday and Monday had articles on what’s now termed Economic Suicide.
Simple really simple,mirror the UK’s BK laws,make it a condition of a yes vote.It’s an absolute disgrace and should cost Labour significant amount of public representation,the failure to enact modern laws,the government has been dithering around with BS for months,while the suicide rate soars,shame on you Labour,I expect no better from FG,but LABOUR !
So where are the Trokia in all this,you got your property tax,water tax on its way but still NO humane BK laws ?
http://www.nytimes.com/2012/04/15/world/europe/increasingly-in-europe-suicides-by-economic-crisis.html?pagewanted=1&_r=2&ref=world
http://www.nytimes.com/2012/04/16/opinion/krugman-europes-economic-suicide.html
@ John
About desperation and regular folk who don’t own buildings and slush funds…:
to ‘qualify’ for bankruptcy etc, in places where they have it, you have to have hit the bottom, this is obvious to you and me and all Americans, but often left out of the discussion in Ireland. Compared to the length of a working life it is a steep descent with a thud at the end followed of course by a bounce. So maybe it is not just the bankruptcy and the fall that lead to desperation, but instead, it’s the locals, the society, and whether hitting the bottom hard is acceptable where you are when it happens. The world view on being temporarily destitute is far from homogeneous, and this is as important as the variance in bk law with regard to suicide and recessions, not that I would know, but who would?.
Horrible topic, but wanted to share that.
BTW the Neil lad is right up there with NWL.
@NWL
“the ongoing so-called “negotiations” to restructure Anglo’s promissory notes”
What f%#king “negotiations”? Heard some fool on News at One today describe the “postponement” of the PN payment. POSTPONEMENT! Typical state spin from the old media.
Why not just tell it like it is. Noonan took 3.06 bn from NAMA and made the payment. The government are hoping that the BOI shareholders will be dumb enough to loan them 3.06 bn for a year to maintain the charade of a “deal”.
On a pedantic note – “Ard Dheis”?? In the lowly “scoil scairte” I attended it was Ard Fheis.
Eh, what happened to the proposals to bring the lawyers and medics into the real world that were talked about in the first version of the MOA? Why am I not surprised that they seem to have fallen off the back of the agenda?
So if we ask any awkward questions we get punished for our impertinence by not being allowed to ask any questions? I guess that tells us everything we need to know!
@RB, I think that is exactly what we are being told, Robert. VB embarrassed them when he called them out on the “multiple questions” strategy. It always amazes me that the upper echelons in the EC and the political and civil service classes believe that the general public are so thick that they cannot see through these “slick” wheezes.