Thursday 21 September 2017

Gamechanger?

Last week's Euro bank debt deal came out of the blue -- but is it a massive boost for Ireland? Louise McBride and Roisin Burke spoke to some of the country's top business minds

LAST week's decision by European leaders to allow euro bailout funds to become involved directly with the creaking banking sector saw stock markets rally and Irish state borrowing costs fall. But not by a truly biblical amount.



It has been described as a "gamechanger" by the Government -- but is this really a deal that will help transform the Irish economy or is it just another bit of the old euro foostering and waffle?

Ray MacSharry

Former EU commissioner Ray MacSharry described the latest deal as "a step in the right direction".

He explained: "If bank debt is not counted as sovereign debt, that should help Ireland in time to get back into the markets. However, so far Europe has only agreed that Italy and Spain can separate their bank debt from their sovereign debt -- and committed itself to examining Ireland's situation. The Irish people have put up with a lot to save their banks and the euro -- it is time they got a payback from Europe."

Although McSharry believes the latest deal should help convince markets that Europe has sufficient firepower to defend its currency, he said more needs to be done.

"What's needed now is some serious action (in Europe). You can't have a situation where EU member states are going into the markets and borrowing at exorbitant interest rates.

"Markets have to be convinced that the euro will be defended and until that happens, no EU country will be able to return to the markets (to borrow money). If we can't convince everyone that there is a mechanism to defend the euro, the euro will go down."

Ulick McEvaddy

Aviation entrepreneur Ulick McEvaddy does not believe the deal is enough to save Europe.

"It is too little too late," he said. "Europe needs to bite the bullet and either issue eurobonds or print money."

McEvaddy believes the European Central Bank should print about two trillion euro to wipe out all of the sovereign debt in Ireland and the EU -- even if that means devaluing the euro.

"As it stands, there's no money for industry or development in Ireland as all of our money is tied up in sovereign debt," he added.

Declan Ganley

The businessman and Libertas founder Declan Ganley believes the deal could lead to an "economic hell" as it will allow European taxpayers' money to be used to prop up banks across the EU.

"Using taxpayers anywhere to pick up failed private losses in the financial or any other industry is the road to economic and fiscal hell," he said.

"The good news for Ireland is we'll be in a slightly less hot part of hell -- if we get full retroactive parity."

Retroactive parity -- which would include Ireland getting compensated for using government money to bail out the banks -- is something Ganley will believe when he sees it.

"We need full clarity that we will retroactively get exact parity with the deal that Spain and Italy are getting now, including a full refund of the money taken out of the National Pension Reserve Fund to bail out our banks.

"If the European Stability Mechanism is picking up the tab for Spain and Italy, Europe will have to refund Ireland in full for the tab we paid for everyone earlier."

Ganley believes the future of the euro is still at risk.

"Medium term, this deal isn't good for Europe or Ireland as it's just another can-kicking on the core matter of bank insolvency.

"In short, the euro and European project are now being put at even greater risk of failure due to the unwillingness to face up to the insolvency purge that must take place."

Patrick Coveney

Greencore boss Patrick Coveney believes the latest deal will be "an excellent answer" for Ireland -- if it can separate bank debt from sovereign debt.

"We are an open, trading economy, highly dependent on exports," said Coveney. "Any deal that brings stability, confidence and growth to the EU and global economy is very good for Ireland."

He is of the opinion that Ireland may still need to borrow money from the European Stability Mechanism (ESM -- the EU bailout fund).

"Given global uncertainty, it is possible that we will need some ESM help next year but I would be hopeful that we will be more self-sufficient than before," said Coveney.

He believes the latest deal should improve the stability of Europe.

"If the EU as a whole or several large countries collapse, that will be terrible for Ireland. However, I believe this week's deal makes that armageddon scenario more unlikely."

Michael Soden

Former Bank of Ireland boss Michael Soden believes the deal is good for Ireland.

"It will allow the Irish Government to take a substantial amount of debt off its books -- when the deal comes through," he said, while warning: "The devil will be in the detail."

Soden believes it is too early to say if Ireland will be able to return to the markets to borrow money earlier than late 2013 -- as the Government had planned.

"The cost of short-term funding is dropping. However, from a long-term perspective, it will take time for the deal to seep through the markets. The amount of money that Ireland needs to borrow is substantial."

Nevertheless, he believes the deal will help Ireland steer clear of a second bailout.

"I don't think speculation about a second Irish bailout should ever have arisen in the first place -- but the latest deal will quash any of that kind of speculation.

"This is the first time in four years that Germany has shown flexibility. That's good for the political process.

"The Germans are still hell bent on discipline but by allowing the EU bailout funds to be adjusted in a flexible way, EU governments will be able to achieve what they want to achieve without putting the burden of debt on their people."

Nicola Byrne

The 11890 boss Nicola Byrne believes that although the latest deal should help reduce our national debt -- and the amount of interest that Ireland pays on that debt -- we might still need a second bailout.

"If economic activity remains at its current depressed level, we may well need a second bailout," she said. "It will depend on what the Government does with any savings from interest payments."

Mark Bourke

IFG boss Mark Bourke described the deal as "hugely positive". He explained: "EU leaders have to centrally govern Europe or it will fall apart -- and this deal is moving closer to that (central governance)."

Bourke said any reduction in Irish borrowing costs on the back of the deal would be our "reward for staying in the euro", adding: "If Ireland can carve out its bank debt from its sovereign debt, it will make sovereign access to the markets easier -- and the markets, too, will be much more stable."

However, he warned: "Ireland should never lose its independent tax position, so it's important that the price for all of this is not tax harmonisation."

David McRedmond

TV3 boss David McRedmond believes the latest deal is good news for Ireland -- but only if the Government plugs any savings it gets from the deal into the domestic economy.

"When there's no wind in the economy, even the slightest puff of wind may be enough to get the economy going," said McRedmond.

"But the Government must use any benefits it can get from the deal to get growth in the domestic economy."

He believes it is crucial that the Government uses the deal to introduce a softer Budget for 2013 -- and that this Budget is brought forward to late September to generate some certainty in the economy.

"The autumn is a critical time for the economy. The domestic economy relies on consumer confidence and consumer confidence relies on certainty," said McRedmond.

Oisin Fanning

"Judging by the effect on bond yields, the markets clearly like it," according to San Leon Energy chairman Oisin Fanning. Irish nine-year bond yields tumbled by more than 10 per cent last week.

"I see that Spain's and Italy's premiers refused to sign off on the €120bn growth package until Germany agreed to measures to ease the cost of their debt. Ireland should have been making a similar stand; instead, we always seem to tag along last to what others are doing," suggested Fanning.

"This is the first direct indication of an easing of the German position, albeit that it was brought kicking and screaming."

Fanning believes that Ireland should have been pushing this agenda from the change of Government.

"I must say, it's quite a promising development. It really does seem to break that link between sovereign and bank debt -- a huge move for Ireland. If only it had come sooner."

Joanne Richardson

"The announcement made by the European Council in Brussels last week is a cause for optimism for any stakeholder in the Irish economy," said the CEO of the American Chamber of Commerce.

"That the council has now agreed to examine Ireland's situation with a view to improving sustainability of the current adjustment programme is encouraging.

"If this re-examination leads to improved terms for Ireland that strengthens our economy, it will create an enhanced sense of stability in the minds of international investors.

"Accounting for 50 per cent of global GDP, the transatlantic economy is the most important trading relationship in the world.

"And with almost 10 per cent of US investment in Europe located in Ireland, the recovery of Europe as a whole is a vital component of Ireland's attractiveness to US companies.

"With competition for foreign direct investment globally now stronger than ever, anything that improves Ireland ability to retain and grow investment is welcome."

Nigel Blow

"Consumers are in need of some reassurance. This deal should help us all think a little more to the medium- to long-term future, rather than continuing to worry about what is going to happen tomorrow," according to Arnotts boss Nigel Blow. He added: "It has to be a positive move for Ireland."

John Mullins

"The fact that bank debt could be removed from the sovereign balance sheet and be placed between each bank and the ESM directly removes up to 25 per cent of our sovereign debt," said the Bord Gais boss.

"It's an important step but it should not in any way deter us from attempting to see the back of the Troika at the earliest opportunity. The only way this will happen is by continuing with the bailout programme to its completion.

"It certainly increases significantly the chance that we will return to bond markets before the end of the programme, but increasing confidence of the bond markets can only be assured through continued fiscal adjustment.

"Consequently, the chances of a second bailout will have reduced significantly."

Myra Garrett

"It appears that the bank debt will still be owed and it remains to be seen how this will play out, with IBRC effectively in wind-down," according to Myra Garrett, managing partner of one of the State's biggest law firms, William Fry.

"As far as I can gather, as an initial step it's a positive. The benefit will only be known when we have the detail as to how it will be implemented in practice, however," she said.

"I think it's a positive move, but the finer detail will be what counts."

Sunday Indo Business

Also in Business