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File photo. A meeting of EU finance ministers in February. Enzo Zucchi DPA/PA Images

North-south split opens up as EU finance ministers fail to agree coranvirus bailout plan

Italy and Spain are insisting on a solidarity fund but this is being resisted by Germany.

EU FINANCE MINISTERS have failed to agree on a bailout plan to help hard hit member states face the coronavirus outbreak, after Italy refused to abandon its plea for “coronabonds” to share the burden.

“After 16 hours of discussions, we came close to a deal but we are not there yet. I suspended the Eurogroup and (we will) continue [today],” said Eurogroup chief Mario Centeno.

Despite efforts, bickering EU finance ministers were unable to bridge differences on how to rebuild their economies after the coronavirus, with a North versus South split on burden-sharing for the worst affected countries, especially Italy and Spain.

The European economy has been battered by the pandemic as national governments impose strict lockdowns that have closed businesses and put normal life on hold.

The ministers’ video conference dragged on from Tuesday into Wednesday, with Italy and Spain insisting on a solidarity fund that would be paid for by European partners jointly borrowing money on the financial markets.

Sometimes called “coronabonds”, this proposal is being firmly resisted by Germany, the Netherlands and other rich countries who see it as an attempt by the indebted south to unfairly take advantage of the north’s fiscal discipline.

‘Goal remains’

Berlin and its allies insist instead that any European rescue should use the eurozone’s €410 billion bailout fund, as well as wait to see the effects of the massive monetary stimulus already unleashed by the European Central Bank.

Centeno, who is also Portuguese finance minister, is tasked with finding a compromise in a fight that has revived the bitter acrimony that split Europe during the eurozone debt crisis a decade ago.

“My goal remains: a strong EU safety net against the fallout of COVID-19 to shield workers, firms and countries, and commit to a sizeable recovery plan,” he said.

On Monday, German Chancellor Angela Merkel reiterated her government’s position in favour of activating the European Stability Mechanism (ESM) bailout fund to help countries that need it.

But she pointedly did not mention shared borrowing such as coronabonds or eurobonds, angering Rome.

Influential France has backed Italy and Spain, but yesterday said it was looking for a compromise hand in hand Germany.

“With German Finance Miister Olaf Scholz, we call on all European states to rise to the exceptional challenges to reach an ambitious agreement,” France’s Bruno Le Maire said after the talks ended.

No troika

Italy is refusing recourse to the ESM, which was created in 2012 during the eurozone debt crisis when states like Greece no longer had access to borrowing on the markets.

Its programmes come with strings attached for countries that use it — heavy conditions that Italy and Spain say they would refuse if other capitals were to try to impose them.

Northern countries insist that conditions can be kept to a minimum given the cause of the crisis, but that in the longer term a country would have to get their finances in order.

“In the ‘northern’ view, the idea that there will never be any conditions to the ESM money, and the mutualisation of debt, is a bridge too far,” said an EU diplomat.

Officials in Brussels had expected Germany and its allies to prevail on Tuesday, although ministers would not dismiss ideas such as coronabonds outright.

Whatever is eventually agreed by the ministers will then go to EU leaders, who are expected to convene by video conference later in the month.

Also under discussion is a lending facility from the European Investment Bank for struggling small and medium-sized businesses, and a guarantee fund for certain national unemployment schemes to be run by the European Commission.

© – AFP 2020

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    Mute Kyle
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    Apr 8th 2020, 9:38 AM

    Where was the burden sharing when we were up to our knecks? All solidarity with countries over this but we better not get burdened with anyone else’s debt problems over this. We were well and truly left on our own when we were in trouble.

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    Mute Gordon Comstock
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    Apr 8th 2020, 9:43 AM

    @Kyle: burden sharing is only for when Germany makes stupid decisions and wants to spread the costs across others. Migrant crisis caused by merkel’s moronic open invitation – burden sharing necessary and any EU states that refused to take part faced fines and threats of losing voting rights. Banking sector debt crisis – make sure German bond holders are paid whether the debt is secured or not, failure to comply and “a bomb will go off.” Sovereign debt crisis – force technocratic government on Italy, crippling economic reforms for Greece, all debt to Germany to be paid no matter the social cost. Chinese virus outbreak – see above.

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    Mute Kyle
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    Apr 8th 2020, 9:48 AM

    @Gordon Comstock: telling you now the cracks are appearing and the unfairness in the EU system is shocking. Your dead right about Germany.
    I was always in favour of the EU but lately I’m starting to get really annoyed.
    I think we would be better off pursuing a trade agreement with Britain and north America. Theres something so wrong about the whole EU system. It seems to be 1 rule for Germany and different ones for everyone else

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    Mute Tom Cullen
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    Apr 8th 2020, 10:06 AM

    @Kyle: There is a huge difference here. Ireland as a nation, borrowed way beyond its means and had government policy in place that made us far too reliant on the construction sector. Finne Fáil and the Central bank were largely to blame for this and not a single banker, construction group executive or politician did jail time. Instead today we see “Ronan Group” hoardings on construction sites around the country. The virus is largely not self inflicted and measures of debt support should be put in place. Negotiations have literally just started and you expect an agreement to be reached within a matter of days between 27 countries, when Brexit negotiations have taken almost 4 years.

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    Mute Cian
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    Apr 8th 2020, 10:10 AM

    @Kyle: If you think we would be better off pursuing a trade policy with the US and UK, its safe to conclude that theres no need to read anything else you say. It would be a complete waste of time.

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    Mute Kyle
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    Apr 8th 2020, 10:23 AM

    @Tom Cullen: tom we were forced to pay the unsecured bondholders at the price of the taxpayer. The banks done that not the people. That was pure criminal actions on part of the banks. Theres no way the taxpayer should have been held responsible. As soon as we were burdened with that debt the EU made laws as to never allow such debt on a taxpayer again. But oh no, that didn’t include Ireland and Greece. That just protected everyone who done it to us

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    Mute Tom Cullen
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    Apr 8th 2020, 10:57 AM

    @Kyle: Wrong in your timeline and principles. The banks borrowed from bondholders based on the thirst of Irish people to be rich and borrow beyond their means. It was the banks and central banks duty to put in place measures to stop risky borrowing on the consumer end, but they didn’t. The Irish government nationalised Anglo Irish and assumed the debt because they wanted to reassure Irish account holders that their savings were safe. In hindsight, that was a terrible move and the bank should have been allowed to fail on a commercial private basis. Finne Fáil were never forced to pay unsecured bond holders but the reality is if they didn’t, interest rates and access to borrowing for years ahead would have been dramatically affected. The biggest mistake in all this was nationalising Anglo.

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    Mute kenneth clohessy
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    Apr 8th 2020, 11:00 AM

    @Kyle: touché re: cian

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    Mute kenneth clohessy
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    Apr 8th 2020, 11:00 AM

    @Kyle:

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    Mute Ian Breathnach
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    Apr 8th 2020, 11:35 AM

    @Tom Cullen: Ireland was saddled with 42% of EU bank debt and we were forced to pay unsecured bondholders. That’s a fact. Do you even remember our banking investigation?

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    Mute Kyle
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    Apr 8th 2020, 11:38 AM

    @Tom Cullen: tom they nationalised anglo on the accounts of fraudulent banksters. The banksters conned the regulator. It was criminal fraud which led to the bank guarantee and nationalisation of anglo. They were cooking the books with irish permanent to make it look like they were in a much more healthier position. The irish taxpayer was saddled with billions in debt due to pure criminality. Nothing else

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    Mute Tom Cullen
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    Apr 8th 2020, 12:14 PM

    @Kyle: So Irish people’s borrowing, the bankers in our country cooking books and our governments failure to use their army of auditors to investigate before nationalising a bank. You see how this is very much an Ireland problem and not an EU problem. Yet you started off bashing the EU and have slowly transitioned to blaming Ireland. We as a nation should have taken responsibility for our mistakes prior to 2007 but instead learned absolutely nothing.

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    Mute Gordon Comstock
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    Apr 8th 2020, 12:20 PM

    @Tom Cullen: no unsecured bond holder should’ve been paid. The banks were insolvent and if you have unsecured debt in an insolvent enterprise you have little to no recourse. But Trichet sent us a letter on behalf of the ECB ordering the state to assume this bad debt. That was EU mechanisms being used to ensure largely German holders of bad debts would not have to suffer the losses their investments should have suffered.

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    Mute Kyle
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    Apr 8th 2020, 12:27 PM

    @Tom Cullen: I didn’t make any mistakes tom, did you? We have faced up to these mistakes. We took the whole debt on when we shouldn’t have. Nobody else was willing to burden share when we were up to our knecks. Now why should we burden share everyone else’s problem?? Take on a little more debt for those who left us high and dry?

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    Mute Tom Cullen
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    Apr 8th 2020, 12:33 PM

    @Ian Breathnach: WE were “saddled” because the Government that WE elected, nationalised a basket case bank that they failed to audit. The lack of ownership or responsibility as a nation is frightening. People fail to forget that the average person was driving around in a 3 year old BMW circa 2005. When I posed the question to my uncle at the time, how could everyone afford such cars. He responded that they couldn’t and that’s why he was moving country 6 months later and things were ready to collapse. He did just that and it played out to a tee. Nobody complains when the party is happening but nobody wants to take responsibility for the mess the next day.

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    Mute Freddie Rincon
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    Apr 8th 2020, 12:39 PM

    @Tom Cullen: looks like you don’t understand what really happened in those years . The money went to German funds which had gambled on those Irish bets and similar ones world wide. If I backed a loser I wouldn’t go to the trainer and the jockey complaining .

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    Mute Tom Cullen
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    Apr 8th 2020, 1:01 PM

    @Freddie Rincon: It’s closer to if you bought a horse and agree to repay in installments based on your winnings. Only problem is you crashed the jeep on the way to the first race. You have the option of taking responsibility of the crash that you were at fault for and repaying for the cost of the horse. Or else you can not pay the breeder at all. Problem is, not a single breeder will trust you ever again. If you find a breeder that does, they’re going to screw you on the winnings split and you end up paying significantly more than the cost of the horse in the long run. Unsecured bonds made up 20% of the total debt. Our bond issue interest rate would have sky rocketed if the debt we stupidly nationalised went unpaid, which yes was an option, but would have ended up paying significantly more

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    Mute Kyle
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    Apr 8th 2020, 1:02 PM

    @Tom Cullen: tom I suggest you read the book Anglo Republic. Its written by Simon carswell. It basically dissects the whole thing from piece to piece. It’s a really good but infuriating read into what really happened

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    Mute RobPup
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    Apr 8th 2020, 1:04 PM

    @Tom Cullen: Tom, 100% correct. You are feeding caviar to pigs on here thou, you know that right?

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    Mute Gordon Comstock
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    Apr 8th 2020, 1:18 PM

    @Tom Cullen: whose bond issue rate would have skyrocketed? The failure of Irish banks would not cause increases in sovereign rates any more so than the failure of any domestic company does not impact heavily on the sovereign. The link you’re insisting on between repayment of bad bank debt and sovereign coupon rates only occurred after the state assumed the bad debts. Had they not assumed the bad debts it would have had no (or minimal) affect on our sovereign rates.

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    Mute Tom Cullen
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    Apr 8th 2020, 1:40 PM

    @Gordon Comstock: I have said at least twice above, that the nationalising of Anglo, thus Anglo’s Debt, was moronic. Finne Fáil opened the mystery box instead of taking ten lashings. They are the ones who are ultimately to blame both through policy before the crash / subsequent poor decisions after and we only went and de-facto elected them again. How the EU or German Bond holders were at fault for our mess has not once been established or substantiated. Going back to the original point, the Corona Pandemic is a natural cause and solidarity should be shared among nations. Our cock ups should never have been someone else’s burden. We might come out of this in better shape if there is European Central Bank debt forgiveness EU wide and our economy doesn’t take as much of a hit as others.

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    Mute Valthebear
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    Apr 8th 2020, 2:31 PM

    @Tom Cullen: no mention in your argument of how Ireland was saddled with artificially low Euro interest rates which precipated the credit and borrowing splurge. No recognition of this by the EU during the crisis, merely the threat to set off financial ‘bombs’ in Dublin if we didn’t toe the line.

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    Mute Tom Cullen
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    Apr 8th 2020, 3:12 PM

    @Valthebear: Are you talking about the exact same central interest rate that 18 other countries could avail of or abstain from? The same that Austria, France, Germany, The Netherlands, etc were all able to borrow from but their central banks put in place proper regulation to stop them losing the run of themselves? What is your point?

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    Mute RobPup
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    Apr 8th 2020, 4:10 PM

    @Tom Cullen: Val never has any point, other than bashing the EU as much as possible. Val seems to believe the alt-right crap that Ireland’s recession was somehow caused by the EU and that Ireland was then forced (forced, you couldn’t make this up!) to take money from the EU to bail out Anglo et al. A steaming pile of deception, twisted facts and omitted truths if there ever was one.

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    Mute Valthebear
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    Apr 8th 2020, 5:56 PM

    @Tom Cullen: the point which you singularly fail to understand is that the introduction of the Euro bound Ireland to an interest rate that was utterly unsuited to our path of economic growth. This facilitated the growth of gombeen politics predicated on a credit splurge. Your beloved EU can not be absolved of this. Equally, Germany post unification was allowed break budget deficit guidelines but no such largesse was extended to Ireland after the crash.

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    Mute Valthebear
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    Apr 8th 2020, 6:03 PM

    @RobPup: ah, the old alt right smear. No surprise it came from someone like yourself whose singular lack of intellectual enquiry is only matched by your cognitive dissonance. In your world any criticism of the sainted EU institutions must be organised by a sinister cabal of mysterious alt right actors. No understanding of why political opinion left right and centre has legitimate concerns with the anti democratic path the EU as currently constituted is heading. But as the comments here show, the blind deference to EU authoritarianism is being quickly exposed. That must sadden you greatly.

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    Mute Kyle
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    Apr 8th 2020, 6:55 PM

    @Tom Cullen: the EU is a failed project. The quicker we revert back to being an economic community the better. Each nation should be left to its own devices. The centralized system is a failure at every level. Brexit was only the start of what’s coming

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    Mute RobPup
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    Apr 8th 2020, 9:45 PM

    @Valthebear: very amusing. Did you eat a thesaurus or did I strike a cord? Concerns, legitimate or otherwise, do not make for facts dear Val. And facts, solid, stubborn facts to support the anti-EU drivel you write… that’s what is lacking in all your arguments. Otherwise, bravo on the over-use of the English language to say… nothing in fact. Perhaps you are a native of perfidious Albion? It would make much sense considering your avatar.

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    Mute Kyle
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    Apr 9th 2020, 8:32 AM
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    Mute Donal Desmond
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    Apr 8th 2020, 9:35 AM

    Where is the E.U. in all this? Genuinely asking this question… Direction and unity seems to have disappeared. Was it legal for individual E.U. countries to all but close borders, Assumed E.U. parliament would be issuing directives as A unified body. Not preaching For or against the E.U. To me it seems every E.U. country is doing what ever is in their own interest… No mention of E.U. on media .. Not stirring the pot, but what view do people have on this subject.

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    Mute Kyle
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    Apr 8th 2020, 9:50 AM

    @Donal Desmond: The EU need to disband and revert back to being an economic community. The European project is so unfairly balanced. It has failed

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    Mute Donal Desmond
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    Apr 8th 2020, 10:19 AM

    @Kyle: We could certainly argue the pros and cons of the E.U.all day. Personally not a fan of E.U. myself , but in saying that my point is , The E.U. Rich, Powerful, United? . During the migrant cricis divisions appeared .Now probably the biggest test is here…the E.U .seems to be dead in the water. Certainly agree with your comment concerning the collapse of the Irish economy.

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    Mute james dimaggio
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    Apr 8th 2020, 11:02 AM

    @Donal Desmond: And the Irish media aren’t reporting how the EU’s chief medical scientist resigned yesterday, due to lack of action by EU hierarchy. The cracks will soon be full on Canyons.

    18
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    Mute Kyle
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    Apr 8th 2020, 11:48 AM

    @james dimaggio: it’s a failing project. An economic community would be best sought and leave individual countries to their own business. This centralized system will fail. It’s only a matter of time

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    Mute Paul O'Sullivan
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    Apr 8th 2020, 9:31 AM

    Germany will get it’s way as usual.

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    Mute Bobby wilson
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    Apr 8th 2020, 9:32 AM

    Irish 26 county state is the best student in the EU class.

    62
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    Mute Paul O'Sullivan
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    Apr 8th 2020, 1:26 PM

    @Bobby wilson: the country is called Ireland.

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    Mute Barney's sister
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    Apr 8th 2020, 10:01 AM

    They will throw the smaller countries (us) under the bus.

    68
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    Mute milton friedman
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    Apr 8th 2020, 9:33 AM

    The North and South of Europe are incompatible.

    The financial crisis showed this and increased harmonization will shine further light on the issues.

    Ireland seems to find itself in the middle of this divide. Not sure where that leaves us.

    53
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    Mute Denis McClean
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    Apr 8th 2020, 12:41 PM

    @milton friedman: It might have been more primitive but we weren’t the 3rd most indebted country in the world before we joined the EEC. Maybe we should leave before they actually own every sod.

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    Mute SC
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    Apr 8th 2020, 12:47 PM

    @Denis McClean: we’ve had three recessions and one boom since joining and pro EU people seem to think the boom was the representative period. Of course they gave us grants to build roads- they sell cars!

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    Mute Neil Farrell
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    Apr 8th 2020, 4:34 PM

    @SC: And we are still paying tolls to use the roads…

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    Mute VJH
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    Apr 8th 2020, 11:13 AM

    If they cant agree on to help each other out in these desperate times ,im afraid the EU is not fit for purpose.

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    Mute kenneth clohessy
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    Apr 8th 2020, 10:57 AM

    The EU is nowhere to be seen in this crisis they have left each Nation fend for itself bar coming up with a loan plan for schemes for those who have lost their jobs (not agreed yet) even their own top scientist resigned due to the lack of action on their part hopefully this virus is the nail that seals it’s coffin so we can bury it once & for all & go back to just a bordrr free trading blocalong the lines of the EEC.

    45
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    Mute den o sullivan
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    Apr 8th 2020, 10:39 AM

    E. U. Is been washed up has been since the crash wind it up send to the scrapheap of history

    38
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    Mute Willy Mc Entire
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    Apr 8th 2020, 9:33 AM

    BJ having a chuckle in ICU…
    EU and FFG go hand in hand.
    I’m ok F… the rest….

    49
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    Mute Johnny 5
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    Apr 8th 2020, 9:36 AM

    @Willy Mc Entire: Doubt he’s laughing. More likely to be gasping. I’m no FF or FG supporter but firmly believe we’re better off in the EU than out.

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    Mute Michael McGrath
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    Apr 8th 2020, 10:33 AM

    The Germans are showing their true colours again once we are sorted we are ok the rest of you can go to hell. There must absolutely be an across the board solution to this not one that benefits one country to the detriment of the rest. I cant understand how Germany can dictate the terms if Spain Italy and France are in agreement on a course of action. Biggest problem in the E.U project is the power of the unelected bureacrat to make decisions for the rest, comissioners making decisions that likely have an affect their own personal wealth i wonder what way that will go.

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    Mute lambda sensor
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    Apr 8th 2020, 10:50 AM

    Surely the German / austerity model has been completely debunked at this stage. Obama went Keynesian / spend out of a recession and Trump/ congress just took the lid off 2TRILLION in economic aid and more to come. The US also has joint bonds across all states. EU GDP was greater than US GDP in 2014. It lost ground then and now is barely back to the 2014 number. The US has surged forward in the same timeframe. All data available from the world bank.

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    Mute Gordon Comstock
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    Apr 8th 2020, 11:56 AM

    @lambda sensor: Keynes gets credited with a lot of things I don’t think Keynes would be happy to be credited with. Borrowing large sums using future generations as collateral to fund economic stimuli is not what Keynes proposed. Preparing for the bad times during the good times by saving money for stimuli is what Keynes proposed. Modern “Keynesianism” only ever seems to apply in the bad times while everyone wants Smithsonian free for alls during the good times. Keynesianism built on debt will eventually run short of creditors willing to support the stimulus packages.

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    Mute SC
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    Apr 8th 2020, 12:50 PM

    @lambda sensor: bad for the countries which have to endure austerity but good for rich countries with lots of uninvested capital so their companies can go in and buy everything up.

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    Mute Martin Horan
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    Apr 8th 2020, 10:58 AM

    Always remember there was a reason, well two reasons, Germany was divided after WW2.

    17
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    Mute John Fahy
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    Apr 8th 2020, 9:59 AM

    There will be a consensus because there has to be, Coronabonds will be issued

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    Mute Seanboy
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    Apr 8th 2020, 9:28 AM

    Quick debunk this it didn’t happen

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    Mute Paul Power
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    Apr 8th 2020, 9:48 AM

    We’re all in this together.

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    Mute @mdmak33
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    Apr 8th 2020, 2:24 PM

    EU solidarity out the window

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    Mute Paul Moore
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    Apr 8th 2020, 12:18 PM

    Don’t forget that as recently as 2004, Germany was the so-called sick man of Europe, when it undertook painful reforms. Its attitude – correctly in my opinion – if they could do it, why couldn’t the Southern EU countries? Italy especially had been paying for its corrupt political system for years.

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    Mute SC
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    Apr 8th 2020, 12:52 PM

    @Paul Moore: because they have monopolies on cars and pharmaceuticals and other things other countries have no hope of replicating. Those German industries were set up with huge state support- which is now not allowed. They also all got rich and consolidated their wealth with forced labour during the war- also not allowed anymore. So how can other countries compete?

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    Mute clemguis
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    Apr 8th 2020, 11:48 AM

    There is absolutely no need for coronabonds. Each member state can continue issuing their own state bonds with support from the ECB as per the past. It means that, if yields increase, the ECB steps in and purchases some of their bonds, thereby bringing confidence to the market. The ECB needs to be vocal about this for greater efficacy.

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    Mute Shamey
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    Apr 8th 2020, 12:35 PM

    It is a slow day in the small Saskatchewan town of Pumphandle, and streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit. A tourist visiting the area drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night. As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher. The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.

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    Mute Shamey
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    Apr 8th 2020, 12:36 PM

    @Shamey: The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Co-op. The guy at the Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her “services” on credit. The hooker rushes to the hotel and pays off her room bill with the hotel owner. The hotel proprietor then places the $100 back on the counter so the traveler will not suspect anything. At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves. No one produced anything. No one earned anything… However, the whole town is now out of debt and now looks to the future with a lot more optimism. And that, ladies and gentlemen, is how a Stimulus package works.

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    Mute Denis McClean
    Favourite Denis McClean
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    Apr 8th 2020, 12:46 PM

    @Shamey: If only. These days the Cental Banks print virtual money then issue to banks to use as loans, which are repaid with real money from labour with interest.

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