Saturday, May 7, 2011

Geithner Killed Plan for Irish to Haircut Their Debt

Yves Smith reports on an op-ed in the Irish Times, written by the Irish economist Morgan Kelly, which includes this gem:
Ireland’s Last Stand began less shambolically than you might expect. The IMF, which believes that lenders should pay for their stupidity before it has to reach into its pocket, presented the Irish with a plan to haircut €30 billion of unguaranteed bonds by two-thirds on average. Lenihan was overjoyed, according to a source who was there, telling the IMF team: “You are Ireland’s salvation.”

The deal was torpedoed from an unexpected direction. At a conference call with the G7 finance ministers, the haircut was vetoed by US treasury secretary Timothy Geithner who, as his payment of $13 billion from government-owned AIG to Goldman Sachs showed, believes that bankers take priority over taxpayers. The only one to speak up for the Irish was UK chancellor George Osborne, but Geithner, as always, got his way.
Got that? The Irish were going to do the sane thing and, for all practical purposes, declare bankruptcy and start life all over. Geithner nixed the deal, which did nothing but protect the banskters and will end up costing Irish and global taxpayers.

From Geithner's killing of the deal, as Kelly reports, things went downhill, and all in favor of the banksters. In the end, the Irish negotiators fell in line with the banksters:
On one side was the European Central Bank, unabashedly representing Ireland’s creditors and insisting on full repayment of bank bonds. On the other was the IMF, arguing that Irish taxpayers would be doing well to balance their government’s books, let alone repay the losses of private banks. And the Irish? On the side of the ECB, naturally.

In the circumstances, the ECB walked away with everything it wanted. The IMF were scathing of the Irish performance, with one staffer describing the eagerness of some Irish negotiators to side with the ECB as displaying strong elements of Stockholm Syndrome.

1 comment:

  1. How come the IRA could fight the British for years for national sovereignty then do nothing against a threat that could make life very hard for Irish individuals for years to come?
    Not that I'm encouraging anything(just making that clear), but talk of a alliance between the IRA and the protestant lot might make a few bankers and bureaucrats sweat a bit.