If our fate is to go down – do it with dignity
True or false it seems to fit the debate swirling round the media about the state of the national finances.
Rumours were rife on Wednesday that the Government was about to call in the EU/IMF.
Given the amount of fear that has gripped the markets in the past month the cheer- leaders for the debt default scenario have continued to grow.
Those with a slightly more dissenting voice find it harder to have their case heard.
We have had a long running argument about defaulting on subordinated bonds, but since Anglo’s subordinated bondholders have been forced to take a hit and share some of the pain along with Anglo, the cost of borrowing to Ireland has gone through the roof.
Donal O’Mahony of Davy Stockbrokers argued in an article yesterday the markets interpreted that move as also indicating a loss of support for those holding subordinated loans in AIB and Bank of Ireland.
As a result those bonds have been given junk status making it very difficult, if not impossible, for the two main banks to raise money independently.
Earlier this week one newspaper speculated AIB faced total nationalisation as a result of the dramatic shift in bond market sentiment.
Others think the lack of political certainty is as much to blame for the current state of the markets.
Markets are still uncertain that the amount of re-capitalisation being implemented will be sufficient.
That has been one of Morgan Kelly’s points and, indeed, much of that debacle has to be placed fairly at the feet of the banks.
Central Bank governor Patrick Honohan dealt with this before a Dáil committee on Wednesday and said the last estimates took account of the impending losses on the mortgage books.
The cynics will snigger but we have to believe that the Financial Regulator and Honohan, both relatively new to the top jobs, have done their sums and have finally delineated the losses facing our banks.
If they are wrong again then it will a case of last man/woman off the island turn off the lights.
Others who have a real desire to se us pull out of this crisis suggest the markets need a general election to calm them down, given that the impending Donegal by-election was being cited last week as one of the reasons for our bond rates going so high.
The fear, it is alleged, is that this Government hasn’t got the support to get this forthcoming budget through.
Calling a general election has merit, provided it would restore some certainty to the markets, and that the new government would be able to push through the reforms.
But going to the country now has huge risks.
It could leave us with a fractious alignment of Fine Gael/Labour that might have some fundamental disagreements about the shape of the budget.
More than ever we need to focus on getting the four-year plan out there and then delivering on the December 7 budget.
Europe threw us a lifeline yesterday and clarified the fact that existing bonds will not suffer any markdown, resulting in some easing in the cost of bonds for the first time in nearly two weeks.
There is a sense too that maybe we are beginning to stand up for ourselves.
Taoiseach Brian Cowen’s comments that Angela Merkel’s remarks about bond holders having to share losses in the future were unhelpful gave some indication that this administration will not allow itself to be walked on by Brussels, the markets or those in ivory towers.
Better to go down with dignity and some pride if that is our fate.
