Sign in. It’s quick, free and it’s up to you.
An account is an optional way to support the work we do. Find out more.
IRELAND’S CHANCES of being able to successfully return to the commercial bond markets at the end of its EU-IMF bailout programme have been handed a boost by an ECB agreement to begin a new programme of buying bonds issued by bailed-out countries.
The new Outright Monetary Transactions (OMT) programme will apply to bonds Eurozone countries as they begin to emerge from a bailout programme.
ECB president Mario Draghi said the likes of Ireland and Portugal could have second-hand bonds bought directly by the ECB whenever they were “regaining market access”.
The programme, applying to bonds of three years or less, would mean that Ireland would still be likely to find buyers for its shorter-term second-hand bonds when the EU-IMF bailout funds run dry in the middle of next year.
Draghi said the new programme was part of the bank’s efforts to “safeguard the monetary policy transmission in all countries in the euro zone area”.
In a statement the ECB said the basic condition for national bonds being considered for the programme was “strict and effective conditionality attached to an appropriate EFSF/ESM programme”.
The purchase of bonds of individual countries would be considered “to the extent that they are warranted from a monetary policy perspective as long as programme conditionality is fully respected” – though each country would need to submit itself to strict oversight of its financial affairs.
It added that there would be no financial limit to the size of its purchases, and that it would publish weekly updates of the amount it had spent on the programme – including monthly updates on how much it had spent on bonds of individual countries.
In an important move, the bank said the bonds it bought would not be subject to preferred creditor status – meaning that in the event of a country not being able to pay back the amount it borrowed, the ECB would not be in a legal position to muscle out other creditors.
This is unlike cash lent by the EU and IMF under the current bailout programmes, which is ‘preferred’ and would be the first monies repaid if Ireland was to find itself without enough cash to repay its debts as they fell due.
Earlier, Draghi said the ECB expected only a very gradual economic recovery within the eurozone, expecting economic growth in the 17-member bloc to increase only by between 0.2 and 0.6 per cent.
He also added that there was “no news” to report on the prospect of a deal revising Ireland’s banking debt burden.
To embed this post, copy the code below on your site
More borrowing to prop up Croke Park Deal. We are broke and need to stop digging a bigger hole for our children and their children.
It’s keeping our services and infrastructure projects so that we can GROW our economy. The problem is the top 10% are under-taxed in Ireland. Tax loopholes and tax breaks to corporations are denting our economy. Corporations also pay an effective tax rate of just 7%. We should be increasing these taxes on corporations. I’m sick of a right-winger pretending this won’t work.
It worked in the 1970′s but taxes on the wealthy have been falling since the 1980s.
Better news then expected on the bond buying program. Not such good news on Ireland and the revising of the bank deal. Thought details on that were meant to be announced mid September?
True, though as I understand it that’s a deal that needs to be fleshed out at a political level (i.e. among the eurozone’s finance ministers and heads of government) rather than at a practical one. The ECB’s hands are fairly tightly tied with regard to the initiative it’s allowed to show so it needs ministers to do something more concrete first.
It’s all political. However the ECB seems better under Draghi than Frog Trichet. When Trichet was in charge, he only cared about Spain and Italy while Ireland burned. Hopefully we see more bond buying like any other central bank in the real world.
frog trichet.?
Hopefully we see more bond buying? – Do you even know what bond buying means for a country? Bond = Bondage. Debt. You would swear it was free money the way people throw around the phrase. It means we will have to give away more of our country for money that central banks make up out of thin air because there is gold, silver or other reserve. When you see people celebrating our return to the markets you know they are clueless about how the system works.
Applogies for the error, should read: There is NO gold, silver or other reserve
Oliver Whyte,
Unlike you right-wingers, Ireland needs the ECB to buy our bonds. Printing money is good for Ireland and I will remind you that every central bank prints money – the fed, the boe, the boj… Unless you want to pay higher income taxes? You’re happy with that?
There ARE gold reserves. Germany has gold, in addition to several other countries. Duh…
Jonno,
Trichet was the monster who sent Ireland down the gutter by insisting we pay Anglo Irish Bank 32% of our GDP. Amazing how some people have short memories of this Banker. He was an arrogant blackmailer who made Ireland go bankrupt.
Tim Jackson,
If right-wing means striving for more income than expenditure and not borrowing the country out of existence for very short term political power then yes I am a hardcore ultra-nationalist.
Tell me why Ireland needs the ECB to buy our bonds. Why do we need to get exponentially into even further debt to run our country? We are borrowing €1 BILLION euro every 3 weeks to pay for our expenditure and you want this to increase even further by selling bonds. Are you for real?
Printing money is good for Ireland? In a way, hyperinflation would be good yes, as we are so much in debt but don’t forget – inflation is a hidden tax – that euro you earned last year is now devalued and you can now only buy a fraction of that litre of milk with it when you buy the full litre last year.
Printing money is not the problem – it’s just that there is nothing behind it. Fractional reserve banking 90% is only on the books.
Pay higher income taxes? We may not need to if our outrageous political spending was reined in and we controlled our own money supply. The screaming lobby groups demanding all their “entitlements” overinflated wages, pensions, welfare are joyful for the ECB. The target countries keep on borrowing (buy more bonds sir?) to the end until we will wake up not owning a field in our country.
Are there gold reserves? I’d like to see them. These reserves are very secretive, and not just for security. Dame has been cleaned out by the money masters and that’s for sure. There are several reports of worldwide central bank gold deposits vanishing. There certainly is gold but do you know who possesses it?
More mistakes! Fractional Reserve banking: where only 10% of money physically exists, >90% is made up using fraudulent banking techniques. The Gold Standard is long gone my friend. Cash is truly only worth the paper and ink is made from. The only reason it is valuable is that people think it has value and not question who makes it or where it comes from …
Oliver,
The ECB will sterilize these bond purchases which eliminates any “hyperinflation”. Honestly, you can’t be bothered to do a google search on the meaning of bond purchase sterilization??
hyperinflation is a fantasy your German mates use to steal the national resources from Ireland. You failed in that before and you will fail again. If the Euro is devalued, it is GOOD FOR IRISH EXPORTS.
Oliver, you are reading the false media (WSJ). You’re not very good at hiding that either.
Dearest Tim,
Oliver,
Regarding sterilization, are you honestly telling me there will not be inflation with increased money printing?
Oh not more German bashing…bond holders have no nationality Tim no matter where their physical bases are in Zurich, London, NY, HK or Frankfurt.
If the Euro is somewhat devalued, it will give exporters a lift for sure, that is more than obvious. Hyperinflation on the other hand will make it so worthless that we will not be in a position to buy the raw materials for product production. These little rays of hope increased exports are well and truly devoured by the debt repayments that you and your banking pals promote through bond auctions.
Tim I certainly will never hide the fact that I source my research from non conventional media. We have to.
If you supply some recommendations I would certainly appreciate it. Main stream media don’t understand the fundamental mechanics of money supply. All they do is rehash sound bites fed by the bankers.
How about the Economist? Considering it is owned by the Rothschild banking group, who are also senior bond holders of Anglo Irish Bank, and also advised the bailout of the same bank, I don’t think that I would trust that particular publication.
Finally.
The ‘no limit’ and the ‘no seniority’ bits are the clincher.
The fact that he said there was ‘no news’ about our deal is actually good news. It means there will still be news someday.
Remember what was announced today was a hell freezes over moment for the Germans.
Bob,
Who gives a flying monkeys what the Germans think. If you love them so much, go and move there. But we Irish need the ECB to keep our borrowing costs low. This happens in every other country across the world. The Eurozone was flawed because of a lack of backstop from the ECB. Deflation destroys an economy.
Tim, my point re the Germans was that till now it is they who have blocked what was announced yesterday.
Ditto, it is they who are blocking a deal on our bank debt.
If you don’t care about what the Germans think, you’re an idiot.
Oh that’s it, we,ll be paying more bondholders…that’s all we need…we,re in this mess because of bondholders and banks.
the last line delivers the killer punch…we are going to borrow more to keep paying the gambling debt which was forced on the people…we are now slaves
So why did you vote fine gael?
The ECB needs to make unlimited bond buys. They should be focusing on longer dated treasuries such as our 9 and 15 year notes. These are currently finding resistance at the 6% yield because the bond vultures are betting against Ireland. The ECB needs to defeat the forces of market speculators.
you really have no idea how the system works, and that this speculation is in fact created by the ECB to bully into more bond sales, get away from mainstream media and start opening your eyes to the truth
It looks like he’s standing in front of a huge Chicken Hut bag!
Does not solve Europe’s problems. Spain and Italy need to sign up to oversight and that is not going to happen. Conditionality is the name of this game and neither the Spanish or Italians want that.
True – if those guys think it’s carry on as before then we are still in trouble; however, a lot of conditionality has already been agreed.
Paul,
Conditionality means higher gas prices at the pump. You’re happy with that? You’re happy with higher income taxes too?
Bob,
What do you mean by “carry on as before”??? Ireland did NOT have a fiscal problem until we were bailed out our banks. The country was sacrificed to save private investors. They subsequently betted against Ireland and charged us 14% to borrow money. This despite the fact WE bailed them out.
“In an important move, the bank said the bonds it bought would not be subject to preferred creditor status – meaning that in the event of a country not being able to pay back the amount it borrowed, the ECB would not be in a legal position to muscle out other creditors.’
It’s not like that really matters when it comes to Ireland is it?? Our government will start selling off the population before the’ll let that happen.
Good news. But they should be buying our bonds sooner.
Your use of the term…frog.. Is reflective of an uncouth and I’ll mannered degenerate. Your mother failed you badly or was it just your own fault?
You are a sad person Tim. You are the reason that SF will never be the a majority party in this country…so i guess you are to be thanked.
Declan?
Is that you Damocles?
hahaha who me im 43 years old and can say with hand on heart that i have never voted fine gael..i did vote for the labour party when i was younger but looking at them now makes me sick to my stomach gilmore quinn and rabbite are career politians who are selling out the working class in this country
Dont know, how to read this but saying ulimited is actually false as the ECB, under there own laws can only buy 50 % of said countrys debt. .and also with certain conditions attached…
Another fudge/tinkering around the edges.
Where are they getting the few bob to buy the bonds?Out of thin air.
They will make it more expensive for the ruthless speculators to bet against Ireland.
The ECB have unlimited firepower to monetize debt. Unlike the Fed, the ECB never printed money until now.
Mario Draghi rescue plan with more misery at its core will not save euro
http://www.guardian.co.uk/business/2012/sep/06/mario-draghi-rescue-plan-euro
False media. You picked the worst source.
Good find Saffron.
Draghi has an impossible job; Trying to save the unsaveable.
We all know there have been 3,800 Fiat Currencies that have tanked. What many of us aren’t up on is that the average life span of a Fiat currency is 39 years. The Euro, however, will not see it’s 30th birtday.
*MAY…..
have your say