Let the ECB pay for Merkel’s idea of support for us

UP to October 29 last, German chancellor Angela Merkel and the EU maintained the right thing for Ireland to do was to pay all debts to bondholders and we duly followed that advice.

Merkel and the EU say they will be there to support Ireland, yet she and the EU Commission waited until just one month after Ireland could have saved around €37bn by burning bondholders for their reckless lending to do an about-turn and declare the policy in future would be that bondholders should share the losses for their reckless lending.

Coincidence or calculated timing? I am in the latter camp. One man’s definition of ‘support’ is ‘punitive punishment’ of another to teach him a lesson. We now see the European hawks circling not to assist Irish banks but to preserve their own. The ECB oversaw and participated in a regime that lent short to banks in the full knowledge those banks were lending long in a huge swathe of cheap credit.

A first-year economics student could tell this was a crazy practice. The logical conclusion of Merkel’s pronouncement is that the ECB should pick up the tab and lend the bubble amount, around €80bn, to Ireland over 30 years at no more than 1% interest.

It should lend an equivalent ‘contagion’ amount to Irish banks over 10 years at no more than inflation, plus 0.5 times growth, or no more than 2% currently. Anything else will sink us in a colossal swallow-hole of debt interest, negative growth and decline.

Kevin T Finn

Kingston Close

Mitchelstown

Co Cork