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How Ireland Will Destroy the Euro
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by Maireid Sullivan | October 4, 2008 at 11:24 pm
696 views | 13 Recommendations | 12 comments
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400 billion EURO represents approximately 100,000 Euros for every man, woman and child alive today in the Republic of Ireland.
On October 2nd 2008, the Irish Government passed a bill to guarantee all deposits and borrowings for the six Irish-owned banks for the next two years.
Members of the EU Parliament have expressed dismay that the Irish government has yet again broken with EU legal protocols, in this instance, by not conferring with the European Commission before passing a controversial new law that will undoubtedly have serious ramifications for everyone in the EU community.
The British government isn't at all happy to see swarms of investors rushing to deposit their funds in Irish banks.
Ireland's decision to guarantee all bank deposits will contribute to the demise of the single European currency, because it will erode the euro's credibility if it's allowed to go ahead, Hugh Hendry, chief investment officer and Partner at Eclectica Fund, told CNBC on Thursday.[q url="http://www.cnbc.com/id/26986243"]The plan pledges to guarantee the liabilities of six Irish-owned banks totaling some 400 billion euros ($565 billion), more than twice the country's annual gross domestic product.
"The decision, if left to stand … my prophecy is it will bring down the currency. The euro is not a tenable currency if you have politicians making such decisions. The reality is there is no such thing as a free lunch," Hendry told "Squawk Box Europe."
"If I was German, I would say give me back my Deutschmarks," he added.
On Thursday, Irish lawmakers backed the plan and the government said it may be extended to foreign banks with retail units in Ireland, but it has raised questions in Brussels and London about competition and state-aid rules.
Promises of lavish spending such as this and others being discussed in Europe will erode investors' confidence, Hendry warned."McDonalds has got less chance of going bust than the British government," he said. "When our government comes to issue this sea of money they're going to pay through the nose … if we can't constrain that behavior, we're going to pay for it."
We're on the verge of a sovereign debt default in Europe."
The current crisis stems from central banks easing monetary policy and flooding markets with liquidity to kick-start the economy after the dot-com bust in 2000, Hendry said."The reality is we should have had a stinking recession at the turn of the century. We burnt and destroyed lots of capital, we should have suffered from it," he said, adding that former Federal Reserve chairman Alan Greenspan thought he could "abolish the economic cycle" by inflating house prices.
Currently, Hendry owns "bonds, government bonds," and he might be "contemplating selling my gold equity shares," he said.
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Most RecentMost Recommended Comments (12)
at 01:14 on October 5th, 2008
Maireid Sullivan, I like this story. It's good stuff.
I don''t think this is bad for the Euro
at 20:52 on October 5th, 2008
Thank you for the flag, Milieunet,
It won't be bad if the banks don't go bust, and with the sudden inflow of English pounds to Irish banks, increasing liquidity, that probably won't happen. I get the feeling people are holding their breath on that scenario, since the outcome within the US economy is an unknown.
at 02:40 on October 5th, 2008
Wrong Headline, the british pound is under attack; British savings go into Irish Euro accounts. The attack on the Euro came from gordon brown, using rothschild bank driven sarkozy to attack the ECB european bank for $500bn bailout. Bailout refused.
at 19:13 on October 5th, 2008
Good point, Solarlife.
And, Sardozy is a worry!
at 02:39 on October 5th, 2008
Maireid Sullivan, I like this story. It's good stuff.
at 03:35 on October 5th, 2008
Maireid Sullivan, I like this story. It's good stuff.
Maireid... believe it or not, there is reason behind the move by the Bank of Ireland (their central bank). The Republic of Ireland, prior to joining the EU and accepting the EURO, the nations currency was the "Irish Punt," while the currency for the six counties (Northern Ireland), as part of the UK were using the British Pound and still do.
The ECB pressured the Bank of Ireland to liberalize their lending policy, and even threatened to kick <?xml:namespace prefix = st1 />Ireland out of the EU if they didn't comply. Reluctantly, credit was loosened and provided everyone with the ability to borrow. And the Irish citizens took advantage of this credit, which led them to a having a good ol' fashioned -- "financial donnybrook" -- and everybody became speculators in land, homes, apartments, anything and everything!
Now that the drunken adventure is over the hangover has set-in, and being a small country of some 3.5 million, their economy is the first to experience recession (or, deflation) and is the last to recover under the cycles. I know this because I purchased a large estate and manor house [see: www.faithlegg.com] just outside of Waterford City, while the nation was bottoming-out from its previous and extremely deep recession. I had begun development of a golf course (Faithlegg Golf & Country Club), and while under construction sold it on to the Tower Hotel Group, plc, in early 1991, thereafter, departing Ireland. And Returned in 2003 for a visit and look around… I was astounded by the insane development and high flying attitudes of people I knew, who were enjoying the easy credit never before experience. And saw the danger that was looming over the horizon when the Irish would finally wake-up to their irresponsible financial behavior. But was their behavior any different that what had taken place in America, or even mainland Europe? Not really, only that 3.5 million people can’t afford socialism.
The banks attitude is that the ECB under threat from the EU had created this problem; therefore, we’re going to make it your responsibility to insure Ireland’s financial security. Regardless, of the move to insure depositors, do you really think the EU has any choice in the matter? The ECB has become Ireland’s FDIC and believe me; they have no choice but to honor it, or Irland becomes the first member to dump the EU! And this won't stand, as the EU is still trying to get 4 of the original 15 member states to accept the EURO, whereas, Sweden, Norway, Denmark and Britain have yet to accept the EURO, as their nations currency.
-END-
at 09:26 on October 5th, 2008
BallyZACA good screenshot of Ireland; today germay said it will also secure saving accounts in Euros. As long as money flows into the eurozone, thats the best what can happen. (America lived from incoming capital over years) Critical is it for the british pound, the pound gets weak transferred into Irish Euro accounts.
at 19:34 on October 5th, 2008
Thanks for taking the time to provide insight and information, and for the flag, BallyZaca,
Are you familiar with the Shell Oil debacle in Co. Mayo, known as Shell to Sea and the destruction of the Hill of Tara environs?Learn more about the efforts to save Tara here. and here.
These are two of several scandalously irresponsible recent acts of the Irish government, and the same man, Noel Dempsey was the responsible Minister (Environment and later Transport) when the decisions were made.
This is the saddest time in Irish history, because the legacy of Irish Culture and heritage has been desecrated far more than anytime in the last 800 years of colonization, and at the hands of the Irish themselves, who allowed their government to get sucked into the corruption associated with the 'economic rationalist' agenda promulgated by multi-national 'colonizers' –along with the English and US - and Australia just a little bit less so, because when the USA and England were deregulating, under Blair and Clinton, the Australian government did the opposite with the launch of rigorous oversight by the Australian Prudential Regulation Authority.
at 03:44 on October 5th, 2008
Maireid Sullivan, I like this story. It's good stuff.
at 19:32 on October 5th, 2008
Thank you for the flag, Rahul
at 07:04 on October 5th, 2008
Maireid Sullivan, I like this story. It's good stuff.
at 19:33 on October 5th, 2008
Thank you for the flag, HJP.