'The plan, the plan, the plan . . . let's apply the plan. That's my message. Again . . .'
Published 04/02/2011 | 05:00
CENTRAL bankers are famed for their obtuseness, their infuriating refusal to call a spade a spade or express themselves with a modicum of clarity.
ECB boss Jean Claude Trichet flew the flag proudly yesterday when discussing monetary policy -- think "solid anchoring of inflation", "risks slightly tilted to the downside" and "disorderly correction of global imbalances".
But when the conversation turned to Ireland, Trichet dispensed with the rule book. Despite beginning by saying he doesn't comment on the functioning of democracies, he was soon onto "let me only say..." For all his best intentions, he just couldn't help himself.
Ireland has a plan, every Tom, Dick and Henri agreed on the plan, now Ireland has to get on with the bloody plan. Or as Trichet finally put it in exasperation: "The plan, the plan, the plan ... Let's apply the plan. That's my message. Again."
If it sounds like Trichet's laying down the law, it's because he can.
The ECB has Ireland firmly in its pockets. Ireland's banks are being kept afloat by €150bn of ECB cash -- without that money, some would have collapsed.
If the ECB was to take Irish banks off life-support, the risks to the Irish banking system would be huge, as institutions rushed to sell assets at any price so they could repay debts.
The task would probably be insurmountable for some banks, so Frankfurt would seize the security the banks had given -- the banking version of the pawnbroker hanging on to your ring.
If the ring/security wasn't worth enough to clear the loan, Frankfurt also has the Irish government guarantee for at least some of the cash.
Not to worry if the Irish Government doesn't have the readies -- there's always the option of seizing some of the State's assets.
Trichet's message yesterday was loud and clear -- the new guys better play by the rules and remember who their paymasters are.
The power brokers in Frankfurt acknowledge that the interest rate on Ireland's bailout may very well change.
But any changes will be the result of international consensus -- they will not be the achieved by a new Irish government throwing its tiny weight around.
Or at least not judging by Trichet's stance yesterday.