In These New Times

Mark Mansfield

Seeking Alpha

The Irish people are a damn strong bunch, and they hate nothing more than a raw deal or the perceptionthat they are being robbed of their sovereignty. There was discussion in the Irish Times that we would see Sr Bondholder haircuts and a reasonable rate of interest on the EU-IMF bailout package. Instead, we have a blended rate of 5.8% if the full bailout were to be drawn down immediately, not much better than what the market was demanding of Ireland just a few short months ago. There were no haircuts as PM Brian Cowen stated there was “no political will” for Sr bondholder haircuts.

Per the Irish Times:

 

Fine Gael finance spokesman Michael Noonan said the deal was “a hugely disappointing result for the country” and he said it was hard to imagine how it could have been much worse.

“The Government was cleaned out in the negotiations and has not acted in the best interests of Ireland. At the very least we could have expected a low rate of interest on the loans, EU agreement on a jobs and growth package, and agreement to share the cost of rescuing the banks with the bondholders.

“The Government came away with none of these,” Mr. Noonan said.

 

There will be no raises in the corporate tax rate. 17b Euro of the bailout will come from the Irish National Pension Fund.

What did the Irish people get? Years of austerity with a likely resulting 4% decrease in GDP between now and 2014. Tax increases, benefit cuts, pension cuts, and salary reductions for average middle class Irishmen. This while the bankers don’t suffer a wink. 100 cents on the dollar for Sr Bondholders.

Now the Irish opposition is standing up. Per the Irish Times:

 

THE €85 billion EU-IMF bailout package for Ireland announced last night was roundly condemned by the Opposition parties who are now all likely to vote against the Budget on December 7th.

 

What would be the result if the budget is not passed? What if the opposition, along with enough Fianna Fáil fearing defeat in upcoming elections, do not pass the budget? The potential success of the entire bailout scheme will be called into question. The EU-IMF and a new Irish government, as Fianna Fail will soon be gone, will have to renegotiate the bailout with a much lower rate of interest, Sr Bondholder haircuts, and possibly an increase in the corporate tax rate.

If you are looking at the Irish bailout and breathing a sigh of relief, your feelings are misplaced. I can assure you that due to overwhelming popular indignation in Ireland for the terms of the bailout as they are currently construed, the bailout story for Ireland is not even close to over.

Per the Irish Independent last night…

 

“The ECB f**ked us,” one government official in Dublin was reported yesterday to have said.

 

If better terms are not forthcoming, I think you could even see Ireland leave the EU in a fit of rage, restore the Irish Dollar, and default through devaluation. The Irish are not to be toyed with. The ECB/EU/IMF messed with the wrong country.