A Gimlet Eye on the Troika Agreements

(Don't shoot this messenger again, please ! I am describing, not defending, the "bail-out deal")

This post is written in response to the continued suggestions from members of the Irish media, political class and economists (e.g. Namawinelake, Professor Brian Lucey, Stephen Donnelly T.D.) that the redemption at par of the senior bonds - neither secured nor guaranteed, be it noted - issued by Anglo-Irish Bank was not required by the terms of the so-called "IMF bail-out".

Before showing (as I hope)that this view is grievously mistaken, I must observe that I find the prevalence of this view, and the vehemence with which it is held, rather surprising. It seemed to me - even before I read the documents - that nothing could explain the Government's persistence with the payment, other than external compulsion. It also was my impression that submission to the bail-out terms was widely accepted, and indeed lamented, in the same quarters, as removing our freedom of decision in such matters.

The Agreement

Ireland's agreement with the Troika - commonly mis-described as "our IMF bail-out" - gives the latter, of which the ECB is one member, a veto over any plans to "burn bondholders".

See paragraph 10 et seq. of the first attachment to this letter (it's on page 5 of the PDF) sent by Lenihan & Honohan on December 3,2010. It is a crucial part of the "bail-out deal" architecture. By it, Ireland has committed to agreeing its plans in the relevant respects, including "burden-sharing" with bank creditors, with the Troika.

The word "veto" is not used. It does not have to be. Failure to approve has the same effect.

Now, there are those who are suggesting that our government has not tried, and that if they only tried hard enough, the ECB would "cave-in" and agree to "burden-sharing" a.k.a "burning the bond-holders".

I have no personal knowledge of whether such suggestions have any basis in reality, but I have noticed that Messrs Kenny, Gilmore and Noonan have claimed to have discussed the question with M. Trichet. I have also noticed a lot of abuse directed at Trichet because of his alleged obdurate refusal to countenance any suggestions that the ECB should relax its opposition to bond "haircuts".

I also note that, contrary to views expressed in many quarters, the IMF is none too keen, either. See p.23 of this PDF at paragraph 34, third bullet point (and especially the last sentence).

It does not look to me as if the necessary approval is available from the Troika just now, whatever the future may bring. What leverage do we have to persuade them to a change of mind ? As long as our borrowing requirement is circa €15 billion, not a lot, in my view.

But what do I know ?

Update on Monday, November 7, 2011 at 06:11PM by Fergus O'Rourke

I repeat that I am not defending the "bail-out" terms. I share the views of Martin Wolf.(Gavyn Davies says the same thing in a different way).

Update on Sunday, November 13, 2011 at 12:04PM by Fergus O'Rourke

I have elaborated further later post here

One for the IMF ?

In Ireland, female employees who are pregnant are entitled to 42 weeks maternity leave (26 weeks of which are compulsory). The timing is at the employee's option, but at least two weeks must be before the birth, and four weeks after. This applies to all categories of employees, whether permanent or temporary, up to and including the chief executive officer.

Recently, leading Dublin solicitors William Fry tell me, an employer sought to engage someone on a temporary contract basis in order to do the work of an employee taking such leave. A candidate was selected, who, like all candidates, had been informed of the reason for the employment, and had explicitly confirmed that she envisaged no difficulty in working for the required period of 42 weeks.

On being offered the position, however, she disclosed that she was herself 18 weeks' pregnant. Note that she was already within the period that could form part of her maternity leave, so that after one day's work she could legally demand to be given leave.

The job offer was withdrawn. The offeree complained to The Equality Tribunal, following which an Equality Officer, determined that she had been the victim of illegal discrimination on the grounds of sex was entitled to compensation of €12,697, the equivalent of approximately 18 weeks' pay at the Average Industrial Wage.

A fuller account is here. A hat-tip for informing me via Twitter of this story goes to Rossa McMahon.

Update on Wednesday, May 11, 2011 at 07:40AM by Fergus O'Rourke

Amended to delete reference to The Equality Authority

What'd You Expect ? You Left the Keys in the Car

You leave your house to go to work. You get into the car, start the engine and then realise that your windscreen is covered in frost. You jump out, run into the house to get some water, knock down your small child and have to console her. When you emerge again, still only 5 minutes later, your vehicle has been stolen.

Your insurer says that it will not cover your loss, as you left the vehicle "unlocked and unattended" and with the keys "in or on" it. You therefore failed to take "reasonable care" of your property, and you cannot expect the insurance company to pay for that.

It's obvious, no ?

Well, no it isn't,as the UK's Financial Ombudsman Service make clear here.

Update on Tuesday, October 29, 2013 at 01:03PM by Fergus O'Rourke

Link to Financial Ombudsman now restored