The Irish model: blueprint for other countries?

It’s good to see that Brian Lenihan’s plan seems to have worked.

Whilst he has been operating in the shadows behind-the-scenes since he came to power, is it premature to say that he has stepped up to the plate, and offered a realistic blueprint to solve a national banking crisis?

In effect, he has taken the focus off the one or two “problematic” banks and re-distributed this risk across the whole banking system and the government itself. The risk distribution amongst the various banks has been flattened out very nicely and there is the real possibility that they can come out of this global turmoil, with each bank and the government playing ball together to share the tremendous load pressing on the country’s economy.

The alternative would be to nationalise banks one by one as they get into difficulty, with huge costs to the taxpayer and I don’t think we can realistically afford a bailout of even one bank.

Other countries are now looking at Ireland and seeing how Lenihan’s great economic fix pans out. If it holds up, Ireland will be held in very high esteem internationally and our reputation for inventiveness and fortitude in the face of grave difficulty would be boosted tremendously.

Lenihan has gone “all-in” and his poker face seems to be holding up. I know we’ve only got something like a 4/7 off-suit hand, but I think it may just stave off the card sharks. It looks good sofar. Who knows; we might even flop a 5, 6, 8! (luck of the Irish style…)

If this works, Lenihan will go down in the annals of Irish history alongside the greats. The Oxbridge graduate is shrewder and braver than most people give him credit for.

I just hope that come budget time, we can follow-through on Lenihan’s great economic fix by addressing our competitiveness, both external (i.e. our cost-base, productivity of export-orientated companies, our energy dependency, etc.) and internal (i.e. public/private sector wage disparities, high cost of housing, incentivising participation in the “knowledge economy”, etc.) which would make Ireland a much better place to do business in and to live in.

Oh and please annihilate (diplomatically of course) Tom Parlon and his CIF cronies off the face of this country once and for all.

edit: big opportunity for Ireland: agriculture, high-tech food production and gourmet food brands.

Nobody graduates from Oxbridge. It’s either Oxford or Cambridge. I’ll reserve my judgement until I know which one he’s from :angry:

Mind you, I met plenty of really, really, stupid people when I was at Camford. Like, really stupid.

You weren’t in my class were you?

He may have helped the liquidity problems but he has not solved any solvency issues. If an Irish bank goes bust because of excessive bad debts, the taxpayer will be on the hook for billions. The 500 billion quoted is not a realistic figure at risk, but we could face risks in the tens of billions. This will take some time to play out before we can draw many conclusions.

Biffo on six-one news has started the back peddling. He claims that If a bank fails it will be the banking sector (not the tax payer) that covers the losses.

This seems to have been an ill thought attempt to say ANYTHING that might make the markets go up.

-Rd

Are you Wiggy? Or Snots? You’re not Tarquin are you!? :wink:

Um Modern History 1987-90… as in that’s when I was there, not the period I studied. Not willing to say more at the moment.

The risk has been distributed to the state, not distribued evenly between the banks. If any bank is insolvent before, its still insolvent. The only difference now is that people arent going to stage a run on it.

Its really important we see the small print of the guarantee. Id like to see the same provisions included as were demanded in the USA bailout. If a bank wants the state guarantee, then it has to agree to limit executive pay, and cancel dividends for the duration of the guarantee.

Biffo should keep his mouth shut. Lenihan should send him down to Offaly to open a new dole office or something.

Lenihan has made it clear that he prefers a system-wide solution as opposed to individual nationalisation.

IMO, this strategy has the indirect effect of taking the focus of the “troublesome” banks and re-distributing the risk across all banks.

No bank has gone down because of excessive bad debts during this crisis. They have all gone down because other banks wouldn’t lend them short-term. The issue was the liquidity due to the absence of confidence and this is brilliantly addressed by the govt’s move.

You could be right, and this could work out to be a really good plan. What do any of us know, even people paid to know don’t know.

But I fret when this government has a bad night on Questions and Answers and marches in the great and the good of the financial industry in the middle of the night. Then announces that they “have a plan” (we’ve heard that before). Then drags their heels bringing forward the legislation (we’ve been there before).

If we know anything it’s that no plan or measures should be judged based on what the markets do immediately after the announcement. It takes days or even weeks for the consequences to emerge.

This is the biggest roll of a dice by an Irish government that I’ve ever seen.

-Rd

Could end up being a good move by Lenny to be honest. Lets see what the charge to the banks is first before forging any conclusions.

It it works, it could have been a master-stroke, lets hope no-one calls his all in bet.

The issue is liquidity is squeezed worldwide because of solvency concerns. I don’t share your confidence that Irish banks will not see a wave of bad debts over the next few years. If this was purely a liquidity problem then the Irish banks would be back at their 2007 levels following today’s move.

Yes, we’ll have to pay an extra 0.5% interest on our national debt bill, but it’s a small price to pay. If confidence is restored, the bad debts are addressed and we can get back to demonstratably sustainable and conservative banking, we’ll eventually earn our rating back again. It will be hard work and there are no short-cuts this time round. Leaders need to motivate, inspire and prepare the national psyche for this.

BTW, Channel 4 News discussing the Irish strategy now!!!

Bollix, it looks like the market reckons that Ireland’s default risk has doubled since yesterday.

How much did you want to borrow again lads?

They had some young clean-cut analyst guy (the type of 29 year-old who shorts Anglo and drives Porches) said “this is something we haven’t seen since WW2”. He was standing in front of some massive LCD screen pointing to a graph of our government’s “risk profile”, which has gone from 3% to 6% literally overnight. He definitely came across as surprised at the innovativeness of the Irish move.

Then, Gordon Brown was pressed in questioning: “well, the Irish have guaranteed deposits” – he just avoided the assertion completely!

Innovative like the IPod or innovative like the Sinclair C5?

If it works without costing the taxpayer more than a billion it will make Lenihan Taoiseach

Only time will tell…

I think it was from 30 basis points (0.3%) to 60 basis points (0.6%) and I think it was the spread between German government bonds and Irish government bonds…

Edit: for what it’s worth, Belgian bonds also have a 0.6% spread over the Germans and Italy have a 0.9% spread. So it’s not exactly a catastrophic figure.

forbes.com/afxnewslimited/feeds/afx/2008/09/29/afx5481832.html
bloomberg.com/apps/news?pid=20601100&sid=aoL.PppR0rM8&refer=germany