Fiscal compact and bijou.

Why not just call it a pact? Then they could cut their palms with a dagger (good German steel of course) and sign in blood. Seems more fitting while signing away the last of a nation's sovereignty.

This started out as a response to Dermot Frost's post explaining the contents of the compact but since I want to share some of this anyway and it got a tad long, I made it a post in its own right.

Does it attempt to explain how if these rules had been in place we wouldn't all be boned right now? Because there's absolutely no connection in Ireland's case.

The "correct" solution involves counting private debt as well as public debt since it's always private debt that's involved in a Bubble. We were model ECB citizens right up to the end, until the shnitzel hit the fan, we didn't breach the rules of the Stability and Growth pact (Germany totally did). We probably didn't even go outside the new limits, although I haven't checked (wikipedia has all the numbers).

Chances of private debt being counted are ≤ 0, maybe for good reasons but then what's this compact for? Italy and Greece?

Also, what's the benefit for us in getting ESM support? Without it, we'd still be in the euro and default would be unacceptable (to Germany). Cynical as it is, that's our trump card (our even trumper card was when the debt was still private but we swapped that for a stick of gum and a pat on the head).

If we default we become lendable again. Our market rates only went nuts when we took on all that debt and became an obviously bad bet. We'd still need to ditch the Croke Park agreement but that would be easier in a default situation too.

And if we didn't have ESM and we don't default then we might be forced to drop Croke Park too. Win-win.

Eddie Hobbs links to a very interesting paper. It explains how Euro central banks operate (there's a weird exchange of Irish Euros with German Euros and stuff) but also a very interesting argument about Germany.

I already think that Germany got the interest rates it needed and we got screwed as a result so they owe us. But this points out that Germany has done exactly what China is criticised for. It pegged its currency to another (or an aggregate of others) and was able to stay grossly undervalued for years.

I bet an economist could "prove" that both my grievances are mathemtically equivalent in some economic model.

The paper also quotes from the Maastricht treaty that set up the Euro which has various bits recognising the need for solidarity and mutual support in a currency union. Which is not surprising given that booms and busts, especially in smaller countries were going to unavoidable.

I'll read the whole doc at the weekend but if I was going to be in the country, I think I'd be voting no.

Pat, "the cope" Gallagher: dishonest or just an idiot?

In his letter to the Indo calling for a "yes" to Lisbon, Pat defends our membership of the Euro. I think there are upsides and downsides to it but for Pat even the downsides are upsides. He happily points out that

The eurozone has ensured that billions of euro have been made available to Irish banks via the operation of the European Central Bank.

and that

As a member of the eurozone, Ireland has benefited from very low interest rates, notwithstanding the very difficult economic situation that faces us.

Surely he must know that these 2 things are the root cause of our massive bubble. The IMF and even Brian Lenihan have said as much. So if he knows this, then to list them as upsides of eurozone membership is basically swearing that black is white and up is down. There is of course that odd "notwithstanding the very difficult economic situation that faces us" which seems to be an attempt to cover all angles - as if to say "yes I know this is what fucked up the country but still it was great craic at the time."

Of course maybe he truly disagrees with me and thinks that the oversupply of cheap credit was an entirely positive thing and we should be thankful for it. This would certainly be compatible with FF's policy over the last decade, right up the point where the shit hit the fan.