A mad dash to “save Ireland” is underway by the EU and by the IMF. Numerous reports of an Irish bailout are floating around everywhere. The only problem with the rumors is that Ireland says the rumors are false and it does not need a bailout.
EU President Proclaims Survival Crisis
Bloomberg reports Ireland Weighs Aid as EU Spars Over Debt-Crisis Remedy
Ireland was in talks over a financial rescue as European Union leaders battled to shield Portugal from the resurgent debt crisis and doubts surfaced over Greece’s economic health.
“We are in a survival crisis,” EU President Herman Van Rompuy said at the European Policy Centre in Brussels today. “If we don’t survive with the euro zone we will not survive with the European Union.”
Public clashes among EU officials over how to defuse Europe’s debt bomb marked a new stage in the crisis triggered by Greece’s near-default in May that forced the EU to set up a 750 billion-euro ($1 trillion) rescue fund to keep the euro intact. A European Central Bank official threatened to end economy- boosting measures.
“We are discussing with both the ECB and the IMF and of course the Irish,” EU Economic and Monetary Affairs Commissioner Olli Rehn said on his way into the meeting. “The real problems are in the banking sector,” not with the government, “but these are connected.”
Ireland is negotiating with the EU and International Monetary Fund about aid to shore up the state’s finances, furnish capital for the country’s banks and spare it from tapping the bond market for an extended period, the European official said on condition of anonymity.
“There is a risk of contagion,” Portuguese Finance Minister Fernando Teixeira dos Santos said in an interview yesterday. “But there’s a big difference between saying there is a risk of contagion and saying help is imminent or that we are going to ask for help.”
Risk of Contagion
The Portuguese Finance Minister’s statement is like saying you have a risk of getting measles after red blotchy rashes and Koplik’s spots appear. The risk is not that contagion starts, but rather that it spreads to Spain then the big kahuna, Italy.
Ireland Denies Rumors
While the EU and IMF are scrambling around announcing secret agreements to bail out Ireland, it seems they forget to get the blessing of Ireland.
Please consider Irish leader slams EU aid rumors as `ill-informed’
Irish Prime Minister Brian Cowen has denounced recent international media claims that Ireland is seeking, or needs, an European Union bailout as “ill-informed and inaccurate.”
Ireland has denied persistent rumors in recent days that it is negotiating terms of an euro80 billion bailout from the European Union. Other eurozone members have seen their own borrowing costs rise amid investor fears of an Irish debt default and have called on Ireland to accept aid.
EU “Cranks Up Pressure” on Ireland
MarketWatch elaborates on the above denial in Ireland’s Cowen: No application for aid
Addressing parliament in Dublin, Brian Cowen said rising borrowing costs were a “concern,” but noted that Ireland is projected to have enough cash on hand to meet its funding needs through the middle of next year.
It’s appropriate for Finance Minister Brian Lenihan to discuss initiatives to address high borrowing costs in the euro zone with fellow European finance ministers, Cowen said.
The Wall Street Journal reported that European officials were working on an aid package that could include 80 billion to 100 billion euros ($108 billion to $136 billion) in credit to shore up confidence in the nation’s public finances, as well as a package of aid for Irish banks worth €45 billion to €50 billion.
A meeting of euro-zone finance ministers was under way in Brussels. Finance ministers from all 27 European Union nations are set to meet Wednesday.
European officials have reportedly cranked up pressure on Ireland to accept a bailout in an effort to keep Dublin’s fiscal woes from driving up borrowing costs in Spain, Portugal and other so-called peripheral countries in the euro zone.
Overall, there are growing signs of a potential compromise that would allow the government to save some political face by saying that bailout funds are intended to recapitalize the banking system, said Simon Derrick, chief currency strategist at Bank of New York Mellon.
The Great Compromise
As best as I can tell from the above is that the current master plan is for the EU and IMF to bailout Ireland, but Ireland can save face if they call it a “peanut butter sandwich” instead of a bailout.
IMF Prepared to “Help”
The IMF may be prepared to “Help” but I ask and answer whether or not it can do any such thing in IMF Ready to “Help” Ireland; Can the IMF “Help” Anyone?
The short answer is Ireland to tell the EU and IMF to “Stuff It” which is what Austria just today told Greece.
Austria tells Greece to get stuffed
While pondering the above game of semantics, Please ponder Austria tells Greece to get stuffed
Europe’s hastily assembled bailout fund already seems to be coming apart at the seams, and that’s before Ireland has even tapped into it. Austria is refusing to contribute to the next tranche of bailout money for Greece, citing the country’s failure to meet conditions. Yesterday it emerged there is serious slippage in Greece’s deficit reduction programme.
The way things are going, the facility will fail even before its wider fault lines have been fully exposed. Europe is making things up as it goes along, and a pretty desperate job it is making of it too. The extraordinary thing to outsiders trying to analyse these events is just how poorly prepared Europe was to cope with sovereign debt crises within its midst. Indeed the no bailout clause contained in the Maastricht Treaty seemed to deny the possibility of there ever being one.
It’s all a terrible mess, or as Terry Smith, chief executive of Tullett Prebon, puts it, “that’s what happens when some botched repair starts to come apart in a hurricane”. Quite so.
P.S. Standby for a statement from the Irish government at 5pm gmt. Ireland is expected to dress up agreement to use the bailout facility as a banking bailout package rather than a sovereign debt bailout.
P.P.S. The Irish PM’s statement has turned out to be a damp squib. Ireland has not applied for a bailout, he has reiterated, and he complains of “exaggeration” by many analysts.
click on chart for much sharper image
Stepping back it is quite amusing to watch the game of currency Ping-Pong between the dollar and the Euro, with the Euro collapsing in the face of Greece bailouts only to go soaring when Bernanke spoke of QE II, now sinking yet again in the face of Irish and Portuguese contagion.
Mike “Mish” Shedlock
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