Th UK cannot afford to help bail out Ireland


         On June 22nd 2010 the new government rightly said they needed to take faster and stronger action to cut the deficit. They proposed  additional state  borrowing to  a total of £461 billion in the five years 2010-2015. This, believe it or not, was a substantial  reduction in the old plans. This was still more than total government borrowing in 1997.

          The spending review of October added £ 8.6 billion to this figure, by increasing capital spending above the June levels, and above the levels inherited from the previous government. If the government now adds another £7 billion of spending to assist Ireland, that means it has added £15.6 billion to spending and borrowing  for the five years within just five months.

           The government needs to observe rigorous spending control in relation to the totals it published last June. The public will find it difficult to understand why certain items are being cut that matter to them, if at the same time the money being spent on EU contributions and  Euro support keeps soaring.

¬†¬†¬†¬†¬†¬†¬†¬†¬† The argument for the Irish bail out comes from the EU, not from Ireland. Ireland has neither asked the EU nor the UK for a loan. The talks now underway are to persuade the Irish government that it needs to borrow more to deal with the “crisis” in the bond markets which foolish talk by some has created in recent days.

           Two arguments are used. The first is the Irish governemnt will need to borrow more to sustain its own finances. Now that the markets say it will have to pay more than 8% for ten year money, the EU argues  it needs to borrow some money at a lower rate from the rest of the EU/UK to avoid its interest bill getting too high. It is also thought for some unknown reason that borrowing more from the EU will restore bond market confidence. They thought the same about Greece when Greece did apply for EU help, but there is little sign this theory proved correct in that case, as Greek bond yields have remained very high. Indeed, Greece still has to pay the markets more interest for each new  Euro borrowed than Ireland does.

            The truth is each country has to reduce its own deficit in its own best way. Ireland has been bravely trying various methods to do so, and is planning  a new budget. Sensible people from the EU would encourage Ireland to produce a convincing new budget. If Ireland wishes EU officials would be working with Ireland in private to ensure the new budget does the job. Markets will be impressed by seeing the deficit figures coming down in a convincing way. That  will lower rates.

¬†¬†¬†¬†¬†¬†¬†¬†¬†¬†¬†¬†¬†¬† The second is the¬†argument ¬†that Ireland’s banks need recapitalising, and the EU/UK should help do that. This is strange. The ECB, the EU Regulators and the Irish authorities have been happy with the capital and cash arrangements of the Irish banks and have allowed them to carry on trading. If the Irish banks need extra liquidity that is the job of their Central Bank, the ECB, ¬†to supply it. There is no need or ¬†hurry to run down the general special financial facilities ¬†the ECB has made available for EU banks if that is going to cause new strains. If the Regulators want the Irish banks to have more capital relative to their loan books, then they can work away in private with those banks. Some combination of selling off loans, selling other assets, cutting costs, writing more profitable business and selling companies and businesses from within the banking groups could cut the risks and raise the ratios.

¬†¬†¬†¬†¬†¬†¬†¬†¬†¬† It is the height of folly to encourage so much speculation about the state of these banks, and to suggest in public that the financing arrangements have to be changed. That is destabilising conduct of the kind that turned a serious problem into a crisis during the peak of the Credit Crunch.If the authorities by public comment trigger withdrawal¬†of too many deposits the ECB simply has to supply more cash to meet the depositor demands, and then has to help with a more rapid run down of the banks’ balance sheets than would otherwise be necessary. Why do modern regulators want to do so much in public, in a way which can ¬†damage confidence in the institutions they are meant to be regulating?

        The fact that RBS and other UK banks have substantial loan books in Ireland is no reason to force UK taxpayers into helping recapitalise Irish banks. The Irish loans of the UK banks will continue regardless, and doubtless they have already made provision against possible losses on this portfolio. If they think they need to make further provision then this will come off the profits they are making elsewhere and should be manageable.

           I see no reason why EU governments  should suddenly buy shares or inject capital into Irish banks.  If the Irish state thinks it needs to inject more capital then it has to provide that from within its own budgets.

          When you are recovering from a serious bout of borrowing too much, borrowing more does not help. Ireland, like many western countries and banking systems, needs a work out or earn out, not a bail out.

¬†¬†¬†¬†¬†¬†¬†¬†¬†¬†¬† If you are worried about “contagion”, the possibility that other states may also be forced to pay more to borrow, the last thing you should do is to ask those other states to find more public money to bail out a weaker state. The more the stronger states have to borrow, the weaker they become in turn.

PS: We now learn from the Irish Central Bank that their Governor does want to arrange a large facility, as he is concerned about the way deposits have been withdrawn from Irish banks. You can make a crisis out of a problem, and the more you talk down an economy and its banks the more likely that is.


  1. norman
    November 18, 2010

    I don’t find it difficult to understand. The EU will tell our leaders to jump, we’ll then ask how high.

    Nothing could be simpler to understand.

    Here’s a rhetorical question. What’s more important to this government – bailing out Eurozone countries or aircraft for the new aircraft carriers we are building? Forget defense, outdated old chap, no need for it, bolstering the Euro is where our priorities really lie!

    Exposes what we were told that there was no money left for aircraft so we had to join forces with the French for the lie we knew it always was.

    1. Mike Stallard
      November 18, 2010

      I have just been to the Bangkok National Museum. The Thais were OK when they were strong in their huge capital. Once they dropped their guard, in the 1750s, guess what? In rushed the Burmese and burned the lot.
      How repetitive History is.
      Shame nobody has got any nowadays.

  2. lifelogic
    November 18, 2010

    We should certainly have no part in this bail out as a matter of principal. Just imagine what this money could do for jobs if just lent to productive industries who are currently starved of cash by the non lending rip off banks.

    Unless the Irish give up on self control there will be probably need to be a second and perhaps more bailouts anyway.

    If they do give up self control it will probably end in civil disorder.

    As usual those who predicted correctly these inevitable problems when the EURO was set up are sidelined and those who followed the party line (and later proved to be clearly wrong) end up in the House of Lords or with over paid EU jobs. I wonder what is being lined up for Cameron after he caves in on this bail out and he has the cheek to lecture China on democracy.

    1. lifelogic
      November 18, 2010

      Vote as you like the unelected EU officials will tell you your tax rates, your regulations, control your borders and everything else they so choose – well the Irish were warned and even given several referendums unlike the UK.

  3. Peter van Leeuwen
    November 18, 2010

    I read that British banks have a £140 billion exposure in the failing Irish banks.
    From that perspective, a UK loan guarantee for ¬£7 billion may serve British interest, wouldn’t you say?.

    Reply: Not at all. How do you think £7 billion affects £140 billion of different assets in the British banking system, when the £7bn does not go to the British banks?

    1. norman
      November 18, 2010

      Imagine you have a £140k mortgage with TSB, another £100k loan from RBS, another £250k loan from NatWest, etc and you find yourself unable to pay any of them off as your finances have collapsed.

      Then you go to NatWest and manage to sweet talk the manager into (foolishly) giving you a further £7k loan.

      Is this really helping?

      1. Paul B
        November 18, 2010

        Great analogy!

        Sums it up quite nicely actually. Demonstrates the futileness of all these stimulus and bailout packages (just with many more zeroes on the end).

        Good money after bad, basically. And the taxpayer on the hook, of course.

  4. NickW
    November 18, 2010

    One has to be suspicious that the EU is fanning the flames of the crisis furiously in order that the situation worsens so much that the only solution is a step change in European economic governance, with a huge loss of individual financial freedom for the countries concerned.

    1. Boudicca
      November 18, 2010

      I certainly think that is the plan.

      The Irish would do well to tell the EU that they will not be applying for a bailout and if pushed, will leave the Eurozone.

      Give in now and they are the EU’s puppet.

  5. alan jutson
    November 18, 2010


    As usual, your views are simple and understandable.

    Likened to a houshold budget, when the credit cards are maxed out, you should not then go to a loan shark for extra cash, to purchase Christmas presents or a holiday.

  6. Alan Cooper
    November 18, 2010

    Why should we help Ireland?
    (a) We have stayed away from joining the Euro and
    (b) We have our own fiscal problems which, I would argue, are not the fault of the previous administration but should be put at the door of Ronald Reagan and Margaret Thatcher for allowing the banks and other financial institutions a free hand in managing their, (and by implication), our affairs.

    1. brian kelly
      November 18, 2010

      How and when did M. Thatcher allow banks, etc to have a free hand in their affairs?

      Reply: This is all Labour myth. Under Mrs T we regulated the main banks cash and capital strictly, and they did not get into trouble as they did subsequently. The cash and capital relaxation occurred under Labour.

    2. Andrew Johnson
      November 18, 2010

      Mmmm. So what were the governments of Presidents George Bush Snr, Bill Clinton, George W Bush, and Prime Minsters John Major, Tony Blair and Gordon Brown doing afer Ronald Regan and Margaret Thatcher finished their time of office?

    3. Paul B
      November 18, 2010

      “What you, as the City of London, have achieved for financial services we, as a government, now aspire to achieve for the whole economy.” [Gordon Brown, Chancellor of the Exchequer, Mansion House Speech, 2002]

      That turned out well didn’t it?

  7. English Pensioner
    November 18, 2010

    As this country needs to borrow money, how can we afford to lend it to Ireland? If we were in business, we would only lend money if we could make a profit out of it – are we going to charge more than we are paying to borrow it in the first place?
    As Von Rumpole (or whatever his name is) says the EU will break up if Ireland defaults, it follows that by lending them money, Cameron and this government will be clearly indicating its very pro-EU stance. On the other hand, if he did nothing on the grounds we couldn’t afford it, should the EU did break up, not many people in this country would be very upset, and Cameron could shrug his shoulders and say “It wasn’t my fault gov!”.

    1. Billy Bob
      November 18, 2010

      This is far too subtle for the Cameron’s of this world……

  8. APL
    November 18, 2010

    JR: “The UK cannot afford to help bail out Ireland”

    And why the hell should we? They cost us millions in blood and treasure to gain their independence and now they come whinging to us to be bailed out. I know what I would say if this wasn’t a family blog.

    Peter Van Linden: “I read that British banks have a ¬£140 billion exposure in the failing Irish banks”

    When the failed Irish banks go down, british banks that are owed can realize the collateral they *SHOULD* have taken as insurance.

    Right from the start I have maintained we need banks, we don’t need *these* banks!

    1. Declan
      November 19, 2010

      Please understand the Irish Banks/Government messed up. Do not confuse that fact with the working (or unemployed) Irish. We do not want British or European money. MOST Irish people want the broken banks to be closed and the Government booted out. And yes we understant your frustation.
      As for the Irish independence comments I do not believe this is the correct forum. British and Irish relations have been getting a lot better over the years and finger pointing will only set that back.

      1. APL
        November 19, 2010

        Declan: “Please understand the Irish Banks/Government messed up.”

        I do, I’d go further, the Irish politicians messed up. I would go further still and say British banks have messed up. They too were hand in glove with the politicians.

        It has always been my contention that you cannot be a bit independent, it is, I imagine like being pregnant, you either are or you are not!

        No further comment.

  9. Mark
    November 18, 2010

    One way to keep within the spending limits would be to allocate any money from within the DFID budget. The corollary would be that aid to all other countries would have to cease.

    The calculation of British interest isn’t quite so simple overall however. It is a certainty that an Irish collapse would lead to widespread emigration, with British benefits a prime draw for those who don’t fancy their chances being entrepreneurial in the USA among the diaspora there from previous emigrations. It is less remarkable that the most troubled PIIGS to date have not emigrated en masse, because Greeks have little linguistic commonality with the rest of the EU – for them it makes more sense to riot en place.

    We should instead be looking for solutions to our problems alongside the Irish ones that benefit us both. It must make sense for the Irish to earn an income from some of their vacant housing. We have a ready supply of people housed in expensive property that can no longer be afforded by the state. Let these people be housed in Ireland instead. It would cut our welfare bill, and improve the ability of the Irish to repay their debts.

  10. oldtimer
    November 18, 2010

    Thank you for your clear, cogent analysis and conclusion.

    This has, of course, all the marks of political posturing and scheming. It will be instructive to see whether the Brussels bureaucrats continue to succeed in using German taxpayers money to fund their federalist ambitions and, if not, how long it will be before those same German taxpayers decide to revolt and exit the Euro.

  11. Duyfken
    November 18, 2010

    Your expert analyses are a sure source for accurate information.

    In a recent TV programme it has been asserted that the UK debt is about £4.8 trillion (which is getting on to three times our GDP) and the present annual deficit is of the order of £155 billion. Since the government has so far simply cut back on already-announced spending increases, I understand that an annual deficit will be incurred for many years hence, and the debt mountain will be significantly higher.

    The country’s financial situation is such that any government expenditure should surely be limited to that needed for the protection of domestic interests. There should be a moratorium on overseas aid including gratuitous bail-outs, loans, guarantees, whatever, until such time as the UK can produce annual surpluses and reduce its debt to a manageable level. Otherwise we just need to borrow more to fund the unwarranted largesse. Of course expensive overseas military adventures (eg Blair’s wars) must be curtailed. Since also the EU cannot pass its own audit, perhaps a salutary lesson may be given to Brussels by the UK withholding its contribution. Fat chance!

  12. Dane Clouston
    November 18, 2010

    We should let the IMF, of which we are of course a member, help Ireland and the Euro, if that is necessary. In turn the IMF might suggest that Ireland would do best to leave the Euro. And we would certainly do best to leave the EU.

  13. waramess
    November 18, 2010

    The whole sorry mess is the height of folly and it will over time reveal itself to have been so.

    The most obvious next move would be for the Irish to liquidate the banks in order to discover the extent of their exposure but they are fearful of doing so. They would rather beggar their population at the altar of bailouts rather than go down the road of sanity.

    If it is indeed true that the extent of their net liabilities arising from the bailouts is larger than they are able to sustain then default and all that entails is the only option.

    It’s tough but it is necessary and the fact that it might drag down a number of European banks is tough but necessary.

    For the UK it will be a hard lesson but then they too must be taught that the response to bank failure is not to use taxpayers money as a bail-out fund.

    The banks themselves have been very persuasive about the risk of systemic failure, but then they would, wouldn’t they?

    No bail-out for the Irish is the most sensible option and their best way forward

  14. Str0ngholdBarricades
    November 18, 2010

    If the UK banks are in hock to £140 billion, where was the regulation?

    Where is the regulation now to stop such loan books when even the Irish Country as a whole does not have assets to back up such a position?

    and finally, where has all the money gone?

    If this money is within the two nationalised banks then does it give us the opportunity to “pull the plug”?

    1. Colin
      November 18, 2010

      The answer to the question where has all the money gone is simple… house price inflation.

      Person A sells their house they bought for 100k to person B for 300k.

      Person B is a defaults on mortgage because they lose their job. Bank sells house for 150k. Bank is out of pocket to the tune of 150k assuming B hasn’t paid any off.

      However Person A also invested their 300k as a deposit in 2 more rental properties and is roughly the same position as B with one of these properties which is now empty.

      So the rough answer is that too much money has been use as a deposit on loans for assets that ‘can only go up in value’ which then went down.

      Also that is why rising house prices are bad.

      1. libertarian
        November 18, 2010


        Not sure where to even begin with what is wrong with your analogy.

        Here are a couple of starters

        1) Did A buy the original house outright in the first place then?

        2)In the real world the cost of buying and selling ( legal, agents and stamp duty) would leave about £270 k

        3)So A has now taken out 2 mortgages , I see

        4) By the way where does A live now as he doesn’t seem to have bought himself anywhere to live

        5) Person B ( presumably with a fictitious 100% mortgage and never having made a payment of any kind) defaults and the bank offers for sale a ¬£300k house for ¬£150k, jeez I wish my bank manager was that stupid I’d buy all the houses they were unloading.

        6) Next I guess B rents one of A’s houses and doesn’t pay the rent so A halves the rent and lets it to someone else?

  15. Iain Gill
    November 18, 2010


    I wish you were running the government. I wish we had a better democracy rather than this rather bad immitation.

    Good luck

  16. FaustiesBlog
    November 18, 2010

    Perhaps the EU sees Ireland’s uncharacteristic (where the EU is concerned) intransigence as a danger to the Euro. They will be aware of calls for Ireland to pull out of the Euro and to default on its loans. Such action would shred the Euro.

    Once the Euro is dead and buried, there would be less ‘need’ for much of the EU’s overweening rules and regulations and so the unravelling of the EU would begin.

    Once started, the end of the EU will will be in sight very quickly indeed.

  17. Demetrius
    November 18, 2010

    I read somewhere that the Bank of Ireland is the basis of the Post Office Savings Bank. This I understand has the savings accounts of a large number of UK servicemen. Quite what the answer to all this is I am far from sure. It might be better for us all if Ireland simply defaulted.

    1. Tom
      November 18, 2010

      Demetrius on 1 November they became covered up to ¬£50,000 by the UK’s compensation scheme.

  18. figurewizard
    November 18, 2010

    For us to get involved when there is an EU stability fund of some 440 billion Euros to deal with just such issues makes no sense whatsoever. In any case if UK taxpayers are going to have to ‘invest’ in Irish institutions whether they like it or not then do so at the right time; when the crisis is at boiling point and the price for doing so is advantageous. Perhaps Phillip Green should be put in charge of the negotiations.

    1. Winston's Black Dog
      November 18, 2010

      I believe our £7 billion is meant to be part of that EU stability fund you refer to.

      I stand to be corrected though.

      1. Mark, Edinburgh
        November 18, 2010

        I think there are 2 EU funds.

        Also stand to be corrected, but my limited understanding is;

        There is a ~ 450B Eurozone big “stability” one, which excludes us. The key point is that this fund requires unanimity to be used, and the Finns are making trouble ( and also presumably the Irish can veto as well?)

        The ~60B little one, which “belongs” to the Commission.

        This latter fund is the one up to which Darling signed us (hence our 7B “share”). To be fair to Darling I think he had little choice as the fund itself was set up via QMV under Lisbon terms. (This is a good example of how QMV works – I don’t think Darling voted against it up front because he knew we would lose, so he tried to pretend he didn’t mind “only 7B”, rather than admit we’d been stuffed again.)

        Darling also argued the 7B was unlikely ever to be called because effectively the concept for this fund was a sort of last gasp reserve – i.e. to now blow the whole lot up front on Ireland is a gross misuse of this fund. BUT…. it can be activated by QMV.

        You will note at the Select Committee the PM couldn’t yet say which of the two funds the EU would use – but I assume its either the QMV one (in which case we have no choice) or a bilateral route (still our choice) for us.

        So actually I think Mr. Redwood’s argument only applies to the possible bilateral.

        I think the Republic is not going to very keen on a UK bilateral unless it can use it to negotiate weaker terms with the Eurozone – i.e. it will be a very weak bilateral from our point of view.

        I’m not convinced we’ll get repaid in full – this is where the Finns are coming from – so I would argue no way to a bilateral without hard collateral under UK jurisdiction.

  19. Tim Yates
    November 18, 2010

    Let Ireland default. Let the banks go bust. Cut deficits and leave the EU. Let market forces destroy the unsound to allow rebuilding of profitable, sustainable business unfettered by pointless regulations and vast taxation. That is the only real way to prosperity and I would hope that any rational person unswayed by personal gain or advantage could see it.

    1. Paul B
      November 18, 2010

      There is no pain free way out of this.

      I, honestly, would have preferred the short sharp shock. It would have been painful. It would have been fairer.

      Instead we’ve got a long, drawn-out, saga. We’re still lurching from crisis to crisis. There still isn’t really a recovery in the sense that it’s actually behind us and things are genuinely improving.

      Everyone one is still waiting for it to blow up, as witnessed in the markets recently.

      The debt isn’t being reduced. It’s only being added to (see Norman’s analogy above).

      So all we’re really doing is storing up a much bigger load of problems that are going to either take longer to unwind, prolonging the pain and state of zombiefication.

      Or it will unwind extremely violently, and the short sharp shock we could have gotten over already will feel like it was the better option.

  20. Mike Stallard
    November 18, 2010

    As a Silver Traveller, I have noticed the following: Norway (cruise this year) -totally unaffordable. McBurger: fifteen pounds. Switzerland: the same. Australia: very expensive. The dollar is on par with the US dollar. Singapore (another first world country) par with US Dollar.
    Meanwhile here in Third World Thailand, our poor little pound is just about bearable.
    Well done Eu (and Brooding Genius Brown, of course) – you have wrecked our spending power. Now you are going to make it even worse.
    And we have no powers to vote the EU bureaucrats out of our lives either.

  21. Neil Craig
    November 18, 2010

    Ireland’s best answer would be to drop out of the euro, introduce new Punts valued at 1:1 for the euro, accept the debts in that & let the punt fall as the ¬£ has done. This would hurt the euro & cost the mailnly German & Swiss bankers & super rich who are the majority owed money, though possibly no moreso than the ¬£ dropping cost them.

    There is nothing, apart from being tied to the euro, intrinsically wrong with the Irish economy, or at least nothing not at least equally wrong with ours. The “bail out” is not to help Ireland (briefings that the price would be raising their corporation tax which is certainly not for their benefit prove that) . It is to pay the Swiss/German super rich, to maintain the euro’s credibility & to destroy an economy that has been a standing reproach to the failure of bigger EU economies.

    It is therefore in the opposite of Britain’s interest to participate in a “bail out”.

    1. sm
      November 18, 2010

      Interesting indeed.

      Why do seemingly wealthy bondholders enjoy this protection from risk?

      Haircuts must be order of the day and the UK should sort its own problems out.
      If we are asked to help the Irish people directly that’s different! we should advise they retake control of their own currency.

      Anyone know how many millionaires we have in the ruling political class?

  22. A.Sedgwick
    November 18, 2010

    When you are recovering from a serious bout of borrowing too much, borrowing more does not help – totally correct, you don’t cure a hangover with more alcohol.

    Fair play to the Irish Government for sound reasons, both of history and economics, they say they want to sort their own mess out. Their cuts are real cuts, not like our smoke and mirrors.

  23. Brigham
    November 18, 2010

    Why don’t we just tell the Eurozone to get stuffed.

  24. T Freeman
    November 18, 2010

    John, you are right as is usual on economics and the politics around it.
    This case plus that of Greece, and almost certainly Portugal followed by Spain is showing that the EU is becoming Soviet style construct, with out of touch but in charge apparatchicks on large earnings and perks getting the plebs to do their bidding.
    It was not designed to become that – I give its designers the benefit of the doubt here – but inevitably it has to do so in order to survive.

  25. Freeborn John
    November 18, 2010

    Perhaps your best ever blog post Mr. Redwood.

  26. Norman Dee
    November 18, 2010

    At the risk of repeating myself, we should not Ireland a penny until it pulls out of the Euro. That would be like lending a tin of petrol to a man in a burning house. The Catholic hardliners may not like it, but it’s sink or swim time for them.

  27. Bill
    November 18, 2010

    May be better for them to abandon the Euro ‚Äď okay they will have Euro debts to find, as their new currency devalues ‚Äď may be best option in the long run.

    They can keep their enviable CT rate, but with that rate and devalued currency their economy should start to accelerate

  28. Javelin
    November 18, 2010

    As I said yesterday if you look at the total value of the notionals in credit default swaps against banks then Italian banks have the most money insured against them failing. Followed by Swiss, Kazahac’, German,French, Dutch, Icelandic and THEN The Irish.

    The Irish need to get their facts straight before committing themselves.

    1. Javelin
      November 18, 2010

      Just wanted to add – if an Irish MP/MEP is reading this – that you need to contact DTCC (google it) and ask for the total value of Credit Default Swaps against Banks split by Country. You may find that whilst German politicians think your banks are unstable that the global market has taken far more insurance out against other countries banks than yours. Just because a German chancellor tells you so, you don’t have to believe them.

      1. StevenL
        November 18, 2010

        Can the people writing these CDS actually meet the bill this time around?

        1. Mark
          November 19, 2010

          On the Irish institutions it looks to be a “small” problem: even if all the net risk were underwritten by a single institution it would be manageable. It looks as though by the time people woke up to the possibility that cover might be needed, the cost deterred most from taking cover out. Alternatively, they believed the credit rating agencies claiming that Ireland was low risk because it was part of Euroland.

  29. Winston's Black Dog
    November 18, 2010

    Tories advocate market forces as an excuse for not helping when ordinary taxpaying British subjects and industries face financial ruin yet when it is the EU in the same position they fall over themselves to help out like lemmings rushing to a cliff!

    Why oh why?

  30. Acorn
    November 18, 2010

    When Mrs Merkel made her recent statement, she may well have got it from VOX; see following link.

    In order to understand what is going on, you have to understand “net external debt-to-GDP ratio”. When a sovereign nation and its residents get this wrong; is when they get into trouble. Please have a read of the following PIGS finances. Look at the gross external debt and gross external liabilities for Ireland particularly; as it is in the news. You will then know more about why the PIGS are in (A mess ed).

  31. Alte Fritz
    November 18, 2010

    The cat was out of the bag during the World At One when reference was made to German hostility to Irish corporation tax rates as you noted yesterday. A dreary German MEP interviewed was baited with tax rates and clearly thought the Irish approach wrong.

    One really feels that a nation sitting at Europe’s periphery is being told to come to heel, or else. What must the Irish public feel? This sort of thing is almost calculated to destabilise politics and feed extremists. Gerry Adams (the former extremist?) has seen an opprotuntiy and will grasp it.

    Why has a central banker stepped into a political debate and virtually pre empted the outcome? What function has a Eurozone member for a central bank?

  32. AndyLeeds
    November 18, 2010

    The Irish, like the Greeks, have only themselves to blame. They should never, ever have joined the damned Euro. I don’t see why we should be expected to pay a penny towards the costs of their follies. They both should leave the Euro and then they can start to sort out their economies.

    And those who have so long advocated us joining the Euro should be flogged round the square mile, starting with Nick Clegg and Vince Cable. I’ll gladly pay for the Cat o’ nine tails.

  33. D K McGregor
    November 18, 2010

    “we’re all in this together” Can you find out exactly where this mantra begins and ends?

  34. Lindsay McDougall
    November 18, 2010

    We had already agreed to contribute 13% to a European bail out fund, even though we were not members of the Euro zone. That was crazy behaviour. We could and should have said that any bail out of a Euro zone country by Britain would be on an bi-lateral basis and in accordance with British interests.

    As it stands, our calculation is that Ireland won’t default and that we will get some interest on our loan to Ireland. That’s a gamble; there is a reason why Ireland has to pay 8% on bonds.

    Finally, Mr Redwood, may we have an update on the UK’s nationalised banks:
    (1) When will they start making good profits again?
    (2) When will the taxpayers’ shares be worth more than we paid for them?
    (3) When will they be broken up and sold off?

  35. Iain
    November 18, 2010

    Merkle recently said that speculators should be made to pay, well the people who are getting the biggest windfall are the Germans, they are profiting to a massive extent sitting in the devalued Euro while their exporters make a killing. If the Germans had their Deutsche Mark it would be rocketing and their exporters would be struggling, so rather than the Germans reading the riot act to the PIGS, the Germans should be thanking them and handing over their ill gotten gains. Its not for us who should be helping Ireland, its the people making the profits, German exporters, for they are the ones making a currency killing.

  36. StevenL
    November 18, 2010

    If the EU want more money then they can just print it like everyone else is as far as I’m concerned.

  37. brian kelly
    November 18, 2010

    Oh, for the times when these crises were almost exclusively handled, behind closed doors far out of sight of the media, by experienced bankers and financial experts. It was never flawless and sometimes it went wrong but this megaphone negotiating and applied blackmailing pressure [perhaps, who knows, with malevolent intent] has been utterly destructive.

  38. Boudicca
    November 18, 2010

    I agree entirely with Mr Redwood. The UK should not be propping up the Euro (aka knows as helping bail out Ireland).

    We are not in the Eurozone; the countries which are should look after their own if help is needed.

    Cameron is running the most pro-EU Government since Heath and I sincerely hope he gets his first come-uppance at the next European Parliament elections with UKIP sweeping the board.

  39. John Maynard
    November 18, 2010

    The Euro crisis is really just the foolishness of the scheme being exposed at a time of stress.
    All of these bail-outs, facilities and contingencies resolve nothing. Divergent economies can not be subject to the same monetary controls.

    Hopeful Brits think that it is inevitable that the system will crash, either now, or in a few years time.

    Intelligent people in Germany, France and the Commission, just see that they need to move faster with bringing the whole EU empire economy under the direct control of the condominium. They will use any means to achieve this.

    UK is just semi-detached – out of the Euro system, which is shaping up as the instrument of forced integration – but facing the prospect of a very uncomfortable existence on the periphery of the empire.

  40. Kenneth
    November 19, 2010

    Our banks are now a fixed market cartel. The housing market has been hopelessly distorted by housing benefit. The jobs market has also been distorted by layers of employment law. For goodness sake leave it all alone and stop fiddling.

    Many people have been turned into zombies through a junkie dependency on the state. The last thing we need is any attempt by the eu quango to turn its smaller members into zombie nations awaiting their next ‘fix’ of hand-outs.

    1. D K McGregor
      November 19, 2010

      Well said.

  41. edgeplate
    November 19, 2010

    The Euro is a currency set on ‘one size fits all’ basis and the one size is German. It expects economies such as those of Ireland and Greece to follow the financial disciplines instilled in Germany. When they take the bait and think they can have their cake and eat it, they land in trouble and place themselves in a position where terms are dictated to them. If they don’t accept the terms given to them the spectre of the whole project unravelling is wheeled out.

    The EU loans are a political move to extend the power of the EU.

    The bondholders are being underwritten by the Irish people by a move pulled out of the hat. The reality is that bondholders are simply investors and bonds can be defaulted on. That’s what happens if you make unwise or unlucky investments. It’s hard to believe the bondholders didn’t discount this as that’s the reason bonds have different yields. The bondholders are being allowed to have their cake and eat it, and it’s not just the Irish who are paying.

    In a rational world, we’d be working to dismantle the Euro and the EU. In this world it looks as if we’ll be coerced into shoring up these dangerous and silly experiments until they collapse, and the results won’t be pretty.

  42. Dane Clouston
    November 19, 2010

    It would be best if, as Sam Brittan suggests in the FT this morning, the Punt is re-introduced and devalued instantly against the Euro in order to align it once again with the Pound Sterling. The aid to Ireland should be given by the IMF, in which we would of course share, rather than by the EU. The Irish could keep their low corporation tax. And the UK, but not Ireland – unless they wanted to, should leave the EU as soon as possible and so rescue our own sovereignty from its increasingly bureaucratic, imperial and onerous grasp.

  43. Alan Wheatley
    November 19, 2010

    The reason why EU governments would “suddenly buy shares or inject capital into Irish banks” is because they think they are running a super-state.

    This incident shows the project is on track, and I expect they are enjoying this opportunity to demonstrate progress.

  44. Bob
    November 19, 2010

    So we, as a non Eurozone country will be borrowing money to support the Eurozone.
    Why don’t we just use our borrowings to attend to our own needs, such as Cornish flood defences etc., (as it says on the airline safety cards, attend to your own oxygen mask before assisting others).

  45. Michael Cawood
    November 19, 2010

    I really am looking forward to the day when the European Union is forced to accept the inevitable – the EU’s own break-up.

  46. Gary
    November 20, 2010

    Devaluation of the currency is the last refuge of the scoundrel. Using the savings and pensions of the frugal to bail out the profligate is no solution. It is plain theft. Instead what really needs to happen is for the failing banks (and other businesses) to go into bankruptcy, and debt based fiat fractional reserve banking in any form abolished. There is nothing righteous about us being in or out of the Euro. We have a bad banking and monetary system , so do they and so does the USA. The whole lot has to be marked to market , written off and scrapped.

  47. simple soul
    November 21, 2010

    This Irish bailout takes me back to the good old days of the second war when Ireland and England stood, as ever, shoulder to shoulder through perilous times.

    On the question of the bailout I could just about swallow it, if I could see some likelihood that it would not happen all over again because the root causes would still remain in existence. That is, Ireland will remain an economic colony, its exchange rate and its interest rate fixed for it to its detriment by Brussels and Frankfurt, and sooner or later this one-size-fits-all policy designed to suit mainly German interests and taking no heed of Irish needs will once again produce disaster. Being warm-hearted I can understand the reasoning for this bailout but it is the next one or two that worry me.

    As for the UK bankers who lent or invested £139bn to the Irish economy at the height of an obviously dodgy speculative property boom, it is clear they are not very good at banking. In any other kind of business they would be out on their neck; but in banking they get free access to the public purse and a personal bonus to boot. This falls short of the ideal. Heads should roll and be seen to roll.

    Rothschild and our other great City Merchant Banks grew great by judging risk cautiously and correctly over a very long period. Those that failed sank without trace. Nowadays bankers who fail receive barrowloads of public money which is no inducement to caution and responsibility.

  48. Mike G
    December 8, 2010

    Do you know that if it wasn’t for Ireland a lot of capital building projects in Northern Ireland which remains part of the UK (Last Time I Checked) wouldn’t have happened. Plus it still remains comitted to the future projects and has put money aside in the latest budget for them. So the UK loan funny enough will end up paying in some strange way for much needed investment and infrastructure for a part of the UK!.
    Plus they will get it paid back with interest too.
    Sounds like a good investment to me!

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