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IT HAS BEEN dismissed by the Government as a ludicrous suggestion but there is no doubt in the mind of economist David McWilliams that a second bailout is on the cards for Ireland.
Hell, he’s so sure that he thinks a third bailout is not an off-the-wall prediction either.
Ireland’s current €67.5 billion rescue package is only due to last until mid-2013. But what happens when the funds runs out? Will we regain our economic sovereignty?
“No,” says McWilliams. “We will remain wards of the International Monetary Fund.”
In an early morning tweet on Sunday, the economist and author said that the country will not be funded by the bond markets any time in the near future because of Friday’s eurozone ratings rout by Standard & Poor’s.
On this, the so-called most depressing day of the year, TheJournal.ie spoke with a flu-stricken McWilliams about his less-than-optimistic view on the future of Ireland’s economy.
“The ratings agencies confirm a trend and their downgrades affect the decisions of massive investment funds which have stipulations allowing them to only put money into triple-A-rated countries,” McWilliams told TheJournal.ie.
Ireland’s situation will only degenerate further as less money comes in and, against that background, there is zero chance of a return to the markets.”
We pay an average of 3.7 per cent interest on the current bailout loans, compared to the more than 5 per cent charged at the markets so for the moment it seems like a good deal.
“There is a flight of capital into Germany from Ireland and other peripheral countries,” explained McWilliams. “Its bond yields are falling while Ireland’s and others’ are static – or rising. That exacerbates everything, including countries’ competitiveness and growth.”
Denial as a strategy
Uncertainty over whether Ireland, or Europe, can grow its economy over the next year remains and investor jitters have kept bond yields for eurozone countries high – except for Germany’s.
McWilliams advised that at such a time the most prudent approach is to negotiate a second bailout immediately.
You don’t wait until your car runs out of petrol before you pull into a filling station…Denial is not a strategy and that is exactly what the current government is doing.”
Earlier today, various Cabinet ministers insisted that Ireland’s economy can emerge from the current bailout.
Backtracking on comments made over the weekend Social Protection Minister Joan Bruton said that “nobody is talking about a second bailout”. Minister for the Environment echoed her statements, telling Morning Ireland that the government did not “intend to go down the road of a second bailout”.
Last week, Taoiseach Enda Kenny and Finance Minister Michael Noonan said the mere suggestion of needing more IMF funding was “ludicrous”.
The ministers were responding to unsolicited advice given by Citigroup chief economist Willem Buiter last Monday. The Dutchman said that Ireland should lock down a backup funding source in case the first €67.5 billion deal runs out before markets are ready (and bond yields fall).
Other economists and analysts have gone against Buiter and McWilliams, siding with the cabinet members. Writing in today’s Irish Times, Dan O’Brien said seeking more emergency funding would be the wrong option.
He called Buiter’s view on a pre-emptive bailout as “both curious and profoundly mistaken”.
Austerity alone doesn’t work
Asked what a second bailout would mean for Irish people, McWilliams offered an even more pessimistic view of the situation.
“We are looking ahead to more of the same – rising unemployment, emigration and a consistent and constant reduction in spending,” he said.
“The big worry is whether the IMF would actually have the funds to offer us more money,” he claims, before calling on the Government to stop “doing the same thing over and over again”.
“S&P’s said that austerity alone cannot reduce the European problem. The idea that people believe this policy is working is ludicrous – it is simply not working,” he added.
There is a choice though. The government can go to the IMF and negotiate with them and not the EU. Greece did it – if you stand up to the EU they reveal they are not serious players but politicians with eyes on their own futures. Eventually, they will do a deal.”
However, serious negotiation is required:
“Why not send in Michael O’Leary – someone who negotiates for a living. Tell him it’s his patriotic duty,” he laughs.
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I have no doubt that in a few years when we are on the losing side of negotiations for the second bailout with the EU, this article will be brought back up and used as fodder against the Kenny government and an example of the government not listening to some of the best minds of the country, loathe as I am to feed McWilliams’ ego.
David McWilliams speaks sense once more. Will the crowd with the power listen though? Not a chance!!!
The only way we are getting away from the IMF is when every last asset is sold, unions destroyed and everything privatised
“Unions destroyed” – now there’s an incentive if ever I heard one. Those bloody leeches are as much to blame as the banks
The leadership of the unions is corrupt, no doubt about it but lets see what workers rights and job stability we have in 5 to 10 years. Rolling 1 year contracts and constant re-educating will be a priority or otherwise u will be thrown to the wolves. The idea of a union is great but its structure needs to be changed.
Exactly Derek. I’ll take my chances with a union before IMF. At least you get a choice to pay your union sub.
The whole system is corrupt. IMF would be happy to burn bondholders, this has been handled so badly now I’m not sure it can be salvaged. How much money has the Irish taxpayer payed towards this since it started?
We need to re-write the whole constitution and political system, start from scratch – but all our politicians and union leaders are corrupt to the core. where does one begin to organize a movement like this?
how do you unseat the powers that be and implement a proper democratic system without razing the country to the ground.
Perhaps that’s exactly what needs to happen, which means it most definitely won’t.
I’m totally against privatizing of state assets, shouldn’t happen.
Paul
100% Agree with you.This constitution and political system of 30 year boom bust system has to stop.
Talk of selling state assets has to be stifled at every opportunity. The word hasn’t been invented for how myopic it is.
Its referred to as selling family silver. It’s not even as bad as pawning the family silver for a week’s groceries – it’s more like selling the breadwinner, losing all that they were to provide, for a week’s groceries.
I really think this idea has to be shown for how stupid it is.
Hi Paul, you asked how much Ireland is paying out:
2011:
LAST SIX (PREAUG): € 141,794,669
AUG. TOTAL: € 444,260,916
SEP. TOTAL: €4,299,705,436
OCT. TOTAL: € 83,963,735
NOV. TOTAL: € 717,100,555
DEC. TOTAL: € 770,548,293
2012:
JAN. TOTAL: € 3,043,517,536
FEB. TOTAL: € 1,196,513,804
2012 TOTAL: € 19,170,463,800
2013 TOTAL: € 17,373,468,897
2014 TOTAL: € 5,879,626,024
2015 TOTAL: € 11,649,122,967
http://bondwatchireland.blogspot.com/
On Unions, someone on here once commented that the unions should be completely gotten rid of and took a hammering for it. Since then I’ve really had a good think about it and concluded:
*Unions were set up in a time of great exploitation of most workers (there were exceptions fair enough)
*Employees had little or no recourse anywhere when unfairly dealt with
But now we have laws, both European & national that protect workers’ rights. Shouldn’t the Labour court be able to sort things or would that not work? Maybe we ought to look at other solutions that might substitute union functions? or is that naive?
I’ve never been in an union (most of the places I worked found reasons to quietly get rid of people who mentioned them!! – all private sector)
Shiela. Re unions. I know theyve got too powerful thus corrupt, (why?) but there is no trust in powers that be at the moment for us to do without them. All our rights are being eroded, not just employees’. Reread your last paragraph. There’s your answer. :-)
So Reada – just what the feic have the unions done for emigrating emma, bailed out billy or jobless joan?
The unions are ONLY there to feather their own nest.
A close friend of mine was GM of a large unionized company that was downsizing. Lots of bluster from the union reps about saving jobs, etc. and when the door was shut in my friends office, the union reps refused to talk until THEIR jobs were guaranteed. Fine bunch of men. The kind who would push women and children out of the way to get on the life raft.
Unionisation is a good thing in principle – just like communism. But it never works because the power attracts the corruptible. The current lot are a festering sore on the ass of our country.
“I really think this idea has to be shown for how stupid it is.”
A task far beyond your capabilities.
But I’d like to learn from the esteemed audience what benefits do they derive from state ownership of assets earmarked for sale. Are you drawing dividends from ESB or BGE to name an example? Are you having cheap electricity / gas delivered from an efficient organisation? Is this a matter of merit or ideological preference?
Whilst I do agree with you Reada, re: rights, I’m not sure what the unions can really do to put them back. And I completely agree with you about the leadership of Unions.
As to my mention of private sector and letting people who want unions go, I should be clear that the various companies I’ve worked for down the years were very good to me as I worked very hard for them, and when you do that, they will look after you as private sector companies realise the benefit of loyal happy staff. Not to make a generalisation about everyone who wants union membership, the ones that were let go (I’d have known most of them to chat to) were never missed as they were generally moaners anyway; you know the type – never satisfied no matter what accommodations are made for them ;-)
I’m not saying that there shouldn’t be unions; however maybe they need to be completely restructured in light of the fact that workers’ rights are protected by law anyway. ………
Paul and Shiela. Forgive me if I make any spelling errors but the tears are streaming down my face from Dom’s put down. :-( Hold on I’ll get a tissue. Great, I’m better now. :-) I’d say you’ll have a queue out the back door of people dying to disagree with you now Dom.
I agree with both of ye that the union are useless and corrupt and was really responding to Derek Durkin that they need to be restructured. I’m not in a union either and believe that working hard and cooperating with your boss leads to give and take on both sides. I’m an idealist and believe we should strive for cooperation – what can I say!
Glad I got a chance to notice that you lot were banging on about unions.
The union movement in this country is shambolic. The recent reports of embezzlement and corruption in SIPTU at the hands of Jack O’connor, Matt Merrigan, Jack Kelly etc. is a disgrace and ruins the honour and glory of those that struggled and fought for the rights of workers and their family’s since the establishment of what should have deserved the name of a ‘Republic’. A ‘Republic’ trampled into the mud by the greed of the pseudo socialist leader of the ‘republican party’ B Ahern and his cosy underhanded, backhanded arrangement with the senior executive of SIPTU and the likes to fill their coffers with dodgy money for the aggrandizement of the great and the good and their for foreign travel and big feeds in the name of ‘partenership’!
People now wonder where’s the fight in the Irish? Why were not on the streets yelling ‘no more’? Why we lie down and take being walked over like some proletarian doormat. Well, here’s one good reason: Our unions have been bought with fois gras and fine merlot and now sit in fear of the questions being set at the PAC inquiry and the simmering anger of their membership. So fearful in fact that they are rendered useless by the shame of their misdeeds that all they can do is slink in and out of Croak Park and make hopeless deals with equally discredited politicians to placate the membership when the know in their hearts and souls that they have lost all credibility and the population are left without any real representation at a time when the rights of workers and the unemployed are under such treat as ever seen in this ‘Republic’ before.
“Other economists and analysts have gone against Buiter and McWilliams, siding with the cabinet members” and then you quote Dan O’Brien, a government apologist who is as rubbish at predictions as the Dept of Finance, probably because he gets them from there. Anyone with half a brain knows we’ll need a second bailout. I assume Noonan is only saying it because he has to be seen to say that we won’t need one, at least I hope that’s the reason, though having a schoolteacher as Min of Finance you never can tell.
He is just saying what is fairly obvious. Greece is currently in talks about how it can have a managed default, it is looking like it will have to go down the disorderly default route at the moment.
What is certain is that it will default sometime this year. That needs to happen, as the austerity is destroying its economy and any chance of future growth.
When it happens, the focus will turn to the next country and the markets will point out, that default is the only option that is left for others. We are going to be paying all our income tax take as interest in another few years. That is not sustainable or even remotely realistic.
It has to be obvious to everyone by now that austerity measures dont work and just cause more problems. I hope you are right Tim that Greece defaults. Something has to give soon .
When I got home this evening, there was a leaflet from The Dublin Mint Office and on opening it and seeing the old 1d (1p) coin, I thought that it was a leaflet informing us about our new money to replace the euro!! I got an awful fright I must say!!
It was just a leaflet selling commemorative coins ;-)
And as an aside, why isn’t our mint called The Irish Mint office – why limit it to Dublin (The Dublin Mint Office) – nothing against Dublin at all but why?
@ Sheila
The Dublin mint office is not a state or semi state organisation, it is a private limited company selling coins commemorating historical events etc.
Here we go again, another administration in denial………. only they’re inflicting so much hardship on many I’d find this f$£king hilarious…… jeez we know how to pick’em don’t we!
Yes there will be a second “bailout” and when it happens This time Collateral will be needed to secure the drip drip drip of funding -
Then it will be time to say “bye bye” to state assets and semi-states as we will see the family jewelry pawned off for a pittance.
But first we have to be a little lower on our knees before that is pushed through… nearly there though.
;-(
Of course it will happen, borrow at 3% or 8%? It’s a no brainer…McWilliams is consistently bang on the money
It won’t be called a second bail out it will be the extension bail out anyway the debt market has yet to stabilise so making any predictions are merely speculative. The fact is the problems that caused this issue have not been sorted out. Debt trading will hit a wall later in the year if the US defaults on some of its debt in march. This will see the collapse of the bond market altogether if things don’t come to a head soon.
It will be called the bond over leverage Ireland exchange fund or in short bolix
They’re denying there will be a second bailout – so of course there’ll be a second bailout. They might not call it a bailout, but that doesn’t mean anything.
Political commentary is getting so much simpler these days – a government says something so we have to expect the complete opposite.
Possibility of “EFSF Secured Irish Government Bonds”. That way we’ll be back into the bond market, investors feel secure and everybody is happy…but only if the nuclear options of Eurobonds or Quantative Easing don’t happen first.
Time for a bit of actual truth – FG are gonna try push through this treaty amendment promising full fiscal union which will mean that Ireland….as a sovereign nation… will never be selling itself in the markets again, we’ll just be part of a collective so all this bluster by Enda kenny about regaining our fiscal sovereignty rings hollow once he signed up for this deal and it’s about time he started telling the truth.
Where is Morgan Kelly when we need him?
Oh yeah, he predicted this already in his last Irish Times opinion piece when he slated the ‘bailout’!
Simple logic says that the Government can’t even be seen to suggest something like this might happen because the minute they say they are looking at such a prospect it will be taken by the markets as a reality.
I also don’t see why this becomes such an issue now because its also at least 18 months down the road anyway and who knows what might happen between now and then.
why is the goal of economic policy to get back to the markets as quickly as possible? Its ridiculous. If the aim is to regain ‘national sovereignty’ it is a stupid strategy – there is no national sovereignty in the euro-zone and the market impose their own strictures e.g. Italy
Whether we need a second bail out or not is the question, but if the media keeps bleating on about it, then we have a foregone conclusion, just like last time. If everybody is so negative then surely this spooks investors and we have no choice but to be bailed out again. Negativity breeds negativity. This is why the government are so busy denying this (note Joan Burton’s turn around) . This is why the last government denied the impending bailout. The only people who seem to profit from this negativity is the media. Williams et al are selling out the country for a few cheap headlines and a nice book or 2 afterwards saying ‘i told you so….’. It is time for the media to take some responsibility for fixing this mess
They’re fucking idiots, the only people they’re fooling is themselves, everyone knows it’s futile, especially the markets.
Who the hell are they trying to kid?
Sorry mate but that’s the kind of thinking that got us into this mess. Everyone kept quiet about the fact that investors and new mortgage owners were on an extending plank over an abyss – everyone thought that thinking optimistically would stop the inevitable from happening.
Had a Fianna Fail supporter say to me last year that the Bailout (I) was all the media’s fault – if they’d just kept quiet and played the Cute Hoors no-one would have known the better in Europe and we’d have got away with it! :/
Did I say that the bail out (s) were the media’s fault?
What I said was that the media is making it a whole lot worse for their own gain
I know that everyone has the right to an opinion, but I’m finding it increasingly more damaging to our country’s spirit and any chance of a recover, if every politician and economists talks down the country and puts out negative outlooks constantly. I agree that we can’t have our heads buried in the sand, but all this talk of another bailout or talk by quite a lot of the opposition T.D’s of defaulting is only going to damage our image and drive people’s view of the economy further into the read, Ireland has gotten through much worse than this, and we did it by keeping our heads down and working hard to bring our country back to the great country it is! If we keep talking about another bailout we will end up pushing companies away from investing for fear of more trouble within our economy, Irish people need to be more positive and get involved in decision making, don’t keep telling the gov what they can’t cut, show them where we can savings, it’s sickening that we have to make savage cuts but they are a must if we, as independent nation are to survive, but the mentality of not in my backyard is not helping the situation, although we shouldn’t give the gov a magic wand to cut where they want! Stand up people and STOP with all this negativity!!!
Quote – “The big worry is whether the IMF would actually have the funds to offer us more money,” ????
Quote – “There is a choice though. The government can go to the IMF and negotiate with them and not the EU. Greece did it”
What ? Negotiate the terms of economic enslavement?
Does David mc’williams want us to go crawiling on our knees to the IMF or not?
DEFAULT NOW!!!
ICELAND NOW!!!
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