Dispatch From Rick O'Shea
Just heard from an Irish friend, who is close both to the banking scene and the Irish government, and who suggested--he, not I--that I refer to him as Rick O'Shea. Mr. O'Shea takes me to task for my post of Tuesday, explaining that the situation has become much more serious than I supposed:
We have two large banks which are now reliant almost completely for their on-going funding needs from the European Central Bank. It has emerged now (more fully) that the ECB is not happy to continue this much into next year. That means that a scenario in which Irish banks simply stopped dead could be a real prospect. If liquidity stops for banks, everything stops (as we all saw in Sept 2008). So, while the Irish State can deal with the level of debt it has, and while there could be sufficient re-capitalisation of banks from State resources, the on-going liquidity needs of banks, in circumstances in which neither other banks nor corporate treasurers are still not prepared to lend to Irish banks, could bring the house down.
The Irish fight is a fight for confidence on the part of interbank and bond market participants. If they refuse to be convinced (despite even my eloquence) then we are stuck.
Just another point: it is not necessarily unelected 'officials' in European bureaucracies that are pressing Ireland, but also politicians from other countries, e.g. Portugal. These politicians want to save themselves from the upward spiral in their own governments' costs of borrowing.
However, I remain optimistic! Our real economy has a lot going for it. The best thing that could happen would be actions to increase competitiveness and win new business and investment. The worst thing would be an increase in the corporate tax rate - something being muttered about around Europe, but that no government anywhere has (yet) said they would press for an increase. In my view, an increase in the corporate tax rate would be a disaster for Europe.
Here, I think, we glimpse the really tragic aspects of the financial crisis. For more than a decade, Ireland has done everything right, cutting taxes and promoting growth--and even now, the Irish would rather be left alone than accept a bailout. The terrible whirlpool--the uncertainty, the sudden inability to calculate risks and returns, the incipient, creeping panic--may suck the Irish in even so.
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May '10
Re: Dispatch From Rick O'Shea
Of course it was too good to be true. Ireland is too deep into the Euro to fly too far from the rest of Europe. But still we can credit them for at least being reluctant, even a bit embarrassed, by the "bailout" monies. Others are more eager, even demanding of these bailouts.
And O'Shea and others have mentioned the hope of an improving business environment and a return to investment in private industry. That's the right idea.
Let's remember all this, we'll need it in California very soon.
Aug '10
Re: Dispatch From Rick O'Shea
I console myself here in Ireland at this difficult time by focussing on the positives- the physical beauty of our island,the genuine goodwill we enjoy from far and wide and, perhaps most important, the work ethic that has carried us individually and collectively through challenges at least as tough as these.
Jun '10
Re: Dispatch From Rick O'Shea
All I gotta say is good thing he didn't ask to be called I. P. Knightly, Chuck Wagon, or Ben Dover. I suppose it could have been worse, he might have been a lawyer with the firm Dewy, Billem and Howe.