Ireland's debt servitude

Richard North notes that Ambrose has a splendidly angry piece about Ireland's debt servitude.

Stripped to its essentials, the €85bn package imposed on Ireland by the Eurogroup and the European Central Bank is a bail-out for improvident British, German, Dutch, and Belgian bankers and creditors.

The Irish taxpayers carry the full burden, and deplete what remains of their reserve pension fund to cover a quarter of the cost.

What if the Irish parliament votes against the massive austerity package? Should the next government "do an Iceland, wash its hands of the banks, and carry out a unilateral default on senior debt by refusing to extend the guarantee"?

The risks, says Ambrose are huge:

... but then the provocations are also huge. And there is a score to settle. Did the EU not disregard the Irish `No’ to Lisbon, just as it disregarded the first Irish `No’ to Nice? Did it not trample all over Irish democracy?

This drama is far from over. Indeed, it may be just beginning. Ireland's forthcoming elections will be much watched.

Spain under the bonnet

• Spain remains in recession while most of the rest of Europe has clambered out.
  
  
• Youth unemployment is 40%.
  
  
• If you're caught by unemployment and the property crash means your home is worth less than the mortgage you can't service, you can't cancel mortgage debt by going bankrupt. So your mortgage debt may stay with you for ever, while court costs ratchet up. Eight per cent of Spain's homes are in negative equity and an estimated 1.4 million Spaniards could face foreclosure proceedings.
  
  
• Spanish local government is in a financial mess.
  
  
• Spain's north/south divide is deepening. Catalonia is set to be led by a government demanding greater fiscal autonomy from Madrid - they want to reduce fiscal transfers to the poorer Spanish regions in the south. That election was the first of a series of regional and local elections due in  Spain in the next six months.
  
  (This is an interesting development. Fiscal transfers from richer to poorer areas are an essential part of a single currency area. Don't just think euro, think peseta too. Northern Spain seems to be inching towards demands for greater autonomy. And think of the forthcoming Irish elections. It's far from certain that the Irish will take the new european hegemony lying down. Could we be about to see a voters' revolt? The EU has made Ireland rerun two referenda, but there's no precedent for Brussels ordering the rerunning of elections. Yet.)
  
  
• During the euro boom, prices and wages rose more rapidly in Spain than in the rest of Europe, helping to feed a large trade deficit. And when the bubble burst, Spanish industry was left with costs that made it uncompetitive with other nations.Without a currency that it can devalue, Spain's only route to restoring competitiveness is by actually cutting wages and other costs. That is painful and takes years.

Should Spain try to break out of this trap by leaving the euro, and re-establishing its own currency, asks Paul Krugman.

Spain would be better off now if it had never adopted the euro — but trying to leave would create a huge banking crisis, as depositors raced to move their money elsewhere. Unless there’s a catastrophic bank crisis anyway — which seems plausible for Greece and increasingly possible in Ireland, but unlikely though not impossible for Spain — it’s hard to see any Spanish government taking the risk of “de-euroizing.”

So Spain is in effect a prisoner of the euro, leaving it with no good options.

So Krugman is arguing that the Iceland solution isn't open to Spain.

On the surface, some of the economy's big financial numbers don't look too bad. Under the surface, though, this big eurozone economy is rickety. The strains on the Spanish economic structure can only increase.

Seen elsewhere

A petition you should sign - and when you've done that you deserve an early Christmas smile - h/t Richard North - even he seems to have smiled. Perhaps it caught him unawares!

County Council throws away £100k

The euro may be on the skids, but we mustn't stop watching our local governors. My county council has just thrown away £100,000.

The weird world of Peter Oborne

Peter Oborne's piece for today's Telegraph - ostensibly about the euro - suggests that he lives in some sad, dim ghetto of the Tory party past. The biggest influence over Britain's euro situation in the past decade has been Gordon Brown - but is he even mentioned?

I hold no brief for Brown but commentary is more interesting if it doesn't ignore the main player.

Or maybe Oborne's article wasn't really about the euro at all, but about ancient Tory factionalism.

Next week: why Disraeli was right about Ireland?

Greens in their ghetto

After the green ghetto Channel 4 programme a few weeks ago, a debate hosted by The Independent asked if nations could realistically cut carbon emissions by enough to avoid a two-degree centigrade rise.

What is described as "a panel of eminent environmentalists" said consumers must acknowledge they were not only the "victims" but the "villains" of global warming and work towards a dramatic shift in life style.

Julian Rush, environment correspondent for Channel 4 News, graced the event and pointed out that:

People in Africa, India and China living very poor, very difficult, very rough lives, see our lives and think: 'I want some of that'. It is going to be very, very hard to convince them they should have a different ambition.

As they did in the Channel 4 discussion, the ghetto greens shy away from this bigger picture. A recent report estimates that over the 20 years to 2030 the EU will achieve average annual growth of 2.5%. China, however, is put at 6.9%, with India achieving 9.3%. Those rates will mean that the relative shares of global GDP change dramatically, with the EU almost halving, to 14% from 27%, India growing to 10% from 2% and China soaring to 24% from 9%.

Against this, the smug western green ghetto is spitting in the wind. At our expense, of course.

The Woolas factor

Labour backbenchers don't get it. The law - passed by MPs - says you can't tell straight lies about an election opponent.

That's what the court found Woolas did. How would these smug incumbents feel if they were defeated in their re-elections by an opponent's lie?

And what of the electors taken in by a lie? Is there to be no redress for them?

No, the first priority of these blinkered inadequates is to protect one of their own who was never up to his ministerial job anyway.

An unpleasant but instructive sight.

What next for Ireland? God knows

The huge and growing problems in Ireland are an awful warning of what happens when you don't fearlessly calculate banks' potential problems before you commit to bailing them out.

Conceptually that calculation isn't difficult, despite the hopeless mess made of the projections by successions of highly paid consultants. As Liam Halligan has repeatedly stressed about the UK, you certainly can't rely on banks' own sensitivity analyses. Why would they bring you bad news to their own disadvantage? And who in a bank would be qualified or brave enough to rubbish the judgements of their own hierarchy?

Sadly, and despite the best efforts of Irish politicians, the country's finances have been broken by their big banks.

Goodness knows what the consequences for Ireland will be. But meanwhile it shows what may happen if you don't properly supervise banks which are large in relation to the size of the state.

It also shows what can happen if a country can't control its own interest rates.

Together, they made for an abdication of economic government.

That was the week that was

Peter Oborne celebrates Tory backbenchers' meek acceptance of Dave's enthusiasm for things EU, as a sign that the coalition is shaping up to be a great reforming government in the mould of Asquith's, Attlee's and Thatcher's. Doubtless they weren't vain and stupid enough to put a personal photographer and a stylist on the state payroll.

Amid increasing evidence that the emergency services fouled up on 7/7, we now learn that the security services were slow in their communication with the Germans about the ink cartridge bomb. So that's another failing, in addition to not telling the PM about it for several hours, and the police not finding it first time around.

Kowtowing to Europe turns out to mean giving imprisoned murderers, rapists and pedophiles the vote. Damian Grieve may be disappointed by the ruling, but that's what can happen when you surrender sovereignty. It may make Dave feel ill but frankly I don't care - if he really is feeling my pain on this, it's only because government policy caused it. And Abu Hamza has won his appeal against government attempts to strip him of his British passport.

Channel 4's programme about what the Greens got wrong was notable for being ghetto broadcasting for different types of greenies, with George Monbiot allowed to tell his usual half truths in the discussion programme without challenge. A smug and self-satisfied gathering. Over at the BBC John Simpson has compared the licence fee settlement to experiencing waterboarding. Peter Allen on Drive said the midterm elections had produced "not a good result", and now overpaid, mediocre presenters including Huw Edwards, Fiona Bruce and Martha Kearney are striking to keep the final salary pensions which are unaffordable in the private sector. Let them leave, then.

Police say every time a hardened criminal climbs on his roof when they want to interview him they have to call out the fire service, an ambulance, and a helicopter, in case the poor dear slips and sues them. By all means call the fire service and then give him twenty minutes to get down again before turning the hoses on him.

Oborne says this was the coalition's best week yet.