I would like to start today’s article by thanking those who congratulated me on my first blogging anniversary. I do appreciate it. Also there were a few new contributors that I did not have time to personally welcome so I would like to do so now. As to events yesterday and overnight we have seen a continuation of the dance between Ireland’s politicians and those of the Euro zone with a slight weakening of the Irish position and the use of the word “might” in connection with an aid package by Ireland’s Prime Minister. This was reinforced by a radio interview given by Irish Central Bank Governor Patrick Honohan who said that the final decision was up to politicians but that he expected a “very substantial loan” as part of an EU-backed bail-out and that it would amount to “tens of billions” of euros.
I would imagine that real negotiations are currently taking place as the same troika that visited Greece namely the European Union,European Central Bank and the International Monetary Fund have now arrived in Ireland. This leaves me with two initial thoughts. The first is that figures of authority are often talking about global warming and suggest teleconferencing and use of technology as a possible aid to this and yet they seem to fly all round the world and rather than one organisation we actually get three of them flying to Dublin! The other is there is the implication that the ECB,EU and IMF do not trust each other, otherwise they would not be looking over each others shoulders.
The European Financial Stabilisation Mechanism
You may not have heard this title before but it is the name for the 60 billion of loans or aid that can be provided by the European Commission. Let us take a look at it.
Under the EFSM, the EU provides support to EMU member states experiencing difficulty caused by exceptional circumstances beyond their control (Article 122 Treaty).
Also we get an answer as to who provides the funds.
Borrowings are direct and unconditional obligations of the EU and guaranteed by the 27 member states
and the speed with which it can operate.
Process expected to take about 5-6 weeks.
So there you have it the EU has set up an assistance mechanism that is even slower than that of the EFSF which is quite an achievement and it will involve the 9 nations who are in the EU but are not involved in the Euro project. I have to confesss that even I did not believe that we would see this level of incompetence and apologise for implying previously that this mechanism might be faster than the EFSF. Thanks to Barclays Capital and the FT’s Long Room for the information here.
The UK and aid for Ireland
I have written a letter to the London Evening Standard on this subject and hope that it gets published. I have copied it below.
Dear Sir/MadamI have been following the development of the crisis in the countries who are in the Euro project for some time. As an economist I stayed up until gone 2 am on May 10/11th to watch and listen to the Press Conference of Euro zone ministers describing their “shock and awe” rescue vehicle for countries in the Euro who suffered in future from the problem that Greece was then suffering from. At this time they made all sorts of boasts about what their plans would achieve.If we now go forwards six months to today we find the Euro zone again mired in uncertainty over the fate of Ireland and Portugal. I would like on behalf of Evening Standard readers to ask those Euro zone ministers what happened to their boasts and claims from that and subsequent days? Furthermore my contention is that their main vehicle for recovery the European Financial Stability Facility or EFSF is so flawed that they do not want to use it.Now we find the possibility that the UK will be dragged into the rescue plan for Ireland via a different European Commission fund. This has two implications. Firstly the then Chancellor Alistair Darling committed us to a project at a time he was denying it and secondly that we are being dragged into support of the Euro project when we have nothing to do with it.I wish to make it clear that I wish Ireland the best in difficult times but in my opinion the Euro zone should solve its own problems. Back in 1992 when the UK was in trouble nobody helped us.