Tonight Matt Cooper appeared on the Late Late Show with Ryan Tubridy to plug his new book. He spoke about the lead up to IMF/EU bailout. He criticised Sarkozy and Merkel for putting the squeeze on Ireland. However this would not have arisen Matt if the country were not practically bankrupt. He spoke about paying back the bondholders. Face facts Matt. Once Brian Lenihan gave the bank guarantee bank debts became part of sovereign debt. To refuse to pay the bondholders would amount to a SOVEREIGN DEFAULT. Now he failed to outline the implications of such a default. It sounds all so simple but unfortunately it is not.
The ECB is funding Irish banks to the tune of 180 billion euro. It has warned that it would withdraw this funding if Ireland defaulted. This would result in the loss of all deposits and the closure of the banks. A sovereign default would make it impossible to go back to the bond markets. Nobody would lend to us. If Matt is in favour of default he should say so and should also spell out the implications. He should take a good hard look at Argentina in the wake of a default. The middle class was wiped out and thousands ended up rummaging in bins for scraps of food. Their savings were wiped out.
Matt criticises the austerity. Nobody likes austerity but once the last government signed up to the EU/ IMF deal it gave a legally binding guarantee to correct the public finances. Failure to honour the EU/IMF deal means that the government would be deprived of funding to bridge the 19 billion euro deficit. Cuts/Tax rises totalling 19 billion euro would have to be introduced immediately. Is that what Matt wants? Of course we all hate austerity. But what is the alternative? The Greek economic crisis already threatens to derail the Euro. If Ireland were now to go ahead and not pay bonholders( default) it is likely that the euro would topple as there would be a massive contagion. It would be the coup de grace for the Euro. Is that what Matt wants?
We all know about the irresponsibility of some German banks. However at this juncture the Euro is on a knife-edge. It is a time for cool heads from our politicians who must seek to defend our interests. Cooper really seems to have it in for Michael Noonan. Noonan is pursuing a cool calculated approach. Ireland will secure an amelioration of its plight at EU level INCREMENTALLY.
Matt Cooper spoke about the plight of many mortgage holders. Certainly at least 70,000 people have distressed mortgages. The government must introduce measures to tackle this problem. However there is no crock of gold available. Conservatively the cost would be at least €6 billion. Where exactly is Matt suggesting that the money should come from ? He seems to be hinting at not paying bank bondholders. If so he is advocating default. It is populist but it is not a solution. It is the road to an economic cataclysm. Of course it is shameful that bank bondholders who gambled are being compensated. Unfortunately the bank guarantee has ensured that they now hold sovereign debt which, must be honoured to the detriment of mortgage holders.
Matt Cooper has not articulated a coherent solution to the problem. How exactly would Matt Cooper decouple bank debt from sovereign debt seeing as the late Brian Lenihan on behalf of the taxpayer guaranteed such debt which ipso facto became sovereign debt.
Is he implying that the budget deficit can be cut without harsh measures? If he is he has a duty to outline the alternative. In relation to the bondholders the approach being advocated by Matt amounts to default. How would he protect the economy and the Irish people from the total economic collapse that would ensue from a default?
There is no easy way out of this mess. Obama decided to ramp up public spending in the US. In short he has dodged the austerity measures required to tackle the US deficit. Has he solved the problems of the US economy by adopting a contrary approach to that adopted in Ireland? I think the answer is glaringly obvious.
No Matt there is no easy way out of this for Ireland, Europe and the US. It will be a long slow hard grind.