Question 26: On the Vincent Browne programme last night, you mentioned the bank bailout. What’s your position on bondholders?

Posted by Dylan in Answers

On the Vincent Browne programme on TV 3 last night I said that public money should go to public services. The situation whereby our tax (past, present and future) is being used to cover losses made by private banks is extremely unfair. Unfortunately the bank guarantee voted for by Fianna Fail, Fine Gael, the Green Party etc. has linked sovereign debt to private debt. In this regrettable scenario it is essential that any bank that receives public money should be made to account for it publicly (eg. before a joint Oireachtas Committee).

I also said that while promises of burning bondholders might get you elected, we need to think about the long-term consequences for Ireland of any election promise we make. Irish banks have failed beyond hope. Bailing them out is likely to bankrupt Ireland, and defaults on our loans are likely unless the EU/IMF debt is re-structured. Unfortunately, even this might be too little, too late and we may be forced to default. In that event, those who took the biggest risks should be the first to be hit by a default.

In the meantime, we need to open our national accounts to scrutiny and make those who receive our money accountable for that money. This debate doesn’t end when the polls close on Friday; bailing out banks is a much longer process than that. That’s why transparency in our financial markets is so important.

The ANSWERS series will be updated daily until Feb 25th. All answers were those given by Dylan to questions received online or on the doorstep.

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One Response

  • Colin Barry says:

    Hi Dylan,
    Your mention of defaulting on bond holders goes a long way into a tricky debate on funding our economy. Whether they the bond holders in the past would have bought into or invested in Irish debt with the knowledge that the government were effectively asleep at the wheel is debateable. Granted now the debt rating agencies have downgraded Ireland to ‘wouldn’t touch it with yours’, those who are buying these investments are being given a substantial rate of return, basically the higher the risk the higher the return. Unfortunately we have very few option available to the Irish economy for raising funds other than (tax take…currently very poor) the bond market at the moment and a change of government is surely going to buoy the market into thinking we have left the Fianna Fail curse behind us. Basically, if we default on the bondholders, it wouldn’t be the end of the world as these massive investment funds would only loose fractions of percentages of their net investments but in a world where markets decide the fates of our nations I think we should just play the game.
    A much bigger question, much greater than bond holders is how do we create growth in an economy where the majority of products that are bought by consumers in Ireland are foreign. Next time Dylan you walk into a shop, I challenge you to have your shopping list ready and to walk out of that shop with all Irish produced goods. Virtually impossible! We need to buy innovative Irish products, we need to create demand, to create growth, to increase aggregate demand and to create jobs, improving our Gross National Product is essential, leave the bond holders to the City Boys and lets be proud to be Irish.