Is it time to default on our loan or is there an alternative?
Roisin Burke, John Reynolds and Nick Webb ask some of Ireland's top entrepreneurs, chief executives and corporate big beasts what should be done to solve our debt crisis
Published 24/04/2011 | 05:00
ONE year ago last week, the IMF and EU marched in to "rescue" Greece. It marked the end of the phoney war in Europe's debt crisis. Ireland would soon be shunned by bond markets and strong- armed into a bailout. But it hasn't worked.
Ireland's debt mountain is simply unsustainable. We can't pay it back without going back to the stone age. So should we stick up the two fingers to Europe and default, or might the IMF plan actually work? Or is there another way -- can debt be restructured and repaid over a much, much longer term at a lower rate of interest? We asked the experts.
CEO Glen Dimplex
"We absolutely should not default on the debt because future generations would suffer greatly if we did.
"But we should restructure the debt because, like any business, you can't run anything well if you're relying on short-term funding.
"We need to look at a 20-year loan of some kind. There's a divergence of views between the IMF and the ECB and the IMF seems more accommodating to us.
"We need a lower rate of interest. Perhaps it could be performance based so the better the economy does, the less interest we pay. That way there's an incentive for us all to grow the economy."
"We're going to have to restructure the national balance sheet and that is going to require some reduction in the overall level of indebtedness.
"Rather than worrying about the interest rate on debt funding we should be focusing on getting down the absolute amount of indebtedness, and trying to find some pragmatic solutions to take that down.
"It may be that if there's a restructuring in Greece that creates a reference point for us.
"As difficult as it is, most of the analogies from the business world are that you're better off getting on with it. The problem doesn't go away because you defer it, it just stores up."
"We need to restructure by seeking a repayment period far beyond that contained in the EU-IMF bailout agreement. This week David Begg of ICTU talked about one of up to 90 years and that's worth pursuing.
"If we are refused a longer repayment period we should notify the EU of our intention to default.
"We know that from 2013, senior bondholders can be burnt as part of EU bailouts, but the Government hasn't explained if this affects our debt, so perhaps there's a tacit acceptance that a default is inevitable so we're struggling on until 2013."
businessman & apprentice seeker
"As the extent of Ireland's financial crisis gets deeper, speculation on what to do gets more negative. The question of bank bondholders raises its head and there is a good case to be made for a haircut.
"Bank shareholders saw their investments shaved by more than 90 per cent. We will soon see thousands of bank workers lose their jobs. So it's no wonder we hear talk of shaving the bondholders.
"Greece defaulting on IMF loans should help our case for getting better terms. At least we would see in advance the way it's handled and use that information to good effect."
IFG CHIEF EXECUTIVE
"We have to keep negotiating until we get ourselves into a position where the economy strengthens. We will ultimately restructure in terms of both the pricing and size of debt, one way or another.
"It's absolutely extraordinary that the IMF lent us money at half the price of our good mates in Europe, who then mounted a campaign to trade off against our corporate tax rate. That is just insanity, and the Government is right in trying to communicate that to them. It's the heart of the whole thing."
Executive VP, State Street
"Maintaining an investment grade credit rating is of material importance to foreign investors, especially financial services businesses and their clients.
"A debt restructuring for Ireland would be regarded as a debt default by rating agencies and would have adverse implications for FDI.
"To avoid this we need to convince the markets that we have taken the necessary steps to avoid a restructuring.
"We have to further -- and quickly -- close the gap between government expenditure and tax revenue. We should aim as soon as possible to generate a primary surplus (revenue exceeding government expenditure excluding interest payments on government debt).
"As I understand it, the current gap to a primary surplus is about three per cent of GDP. If we do this, the markets are likely to reward us with lower interest rates, thus enormously helping international and domestic confidence, and the rating agencies will be likely to continue to maintain an investment-grade rating."
"I would cut the €19bn public sector wage bill. We really need to take an axe to some of the benefits in terms of pensions etc, and have an independent person come in as Colm McCarthy has done on the state assets.
"Someone with credibility and expertise needs to go in on a best practice basis and say 'this is what the servicing cost of the public sector should be'.
"Private operators have made adjustments in job losses and salary reductions and are nearly coming out the other end, whereas the public sector is in a little pre-bust bubble: 'We didn't cause it, so don't blame us.' The reality is they benefited from it in benchmarking. It's not a blame game, it's about living within our means."
"To give us a strong negotiating stance, this year we should implement measures to deal with our national debt over five years by matching French or German public-sector pay, social welfare and minimum wage levels and reduce public-sector numbers by natural wastage.
"Then we should publicly name all the creditors of the banks whether they're bondholders, pension funds or banks, so we all know who benefited from the €465bn guarantee. I'd then levy them over a 20-year period using the AIB-ICI-Irish government model to recover that debt.
"If we can't agree something within six months for future implementation, if we've addressed our national debt situation, we should default."
founder of Cooley Whiskey & African Diamonds
"If this was a business, we would be forced to call in the receiver. The €100bn bank debt that has been lost -- that we've been forced to fund -- should be restructured into a 30-year, three per cent bond and then you could let inflation fix the problem for us.
"Then we have to reduce our domestic deficit. However, staying on our current path, I fear that politicians will wait too long and Spain will probably go bust at some point and then there will be all kinds of complications if we don't act now."
Padraig O Céidigh
founder, Aer Arann
"Ireland should go into examinership as I did with Aer Arann and then restructure the debt. We have to say to our creditors: 'You invested in this country in this past and you made good money and you will again. But now you'll have to restructure the past debt so we can make you money in the future.'
"The bondholders have to work on a plan with us, perhaps over 30 years or more, at a repayment schedule that may mean the whole sum isn't repaid. This has to allow us to become a growing economy again."
Sunday Indo Business