Monday 27 March 2017

Colm McCarthy: 'Clean exit' bets on no more crises

The Troika's gone, but the real story is the continuing lack of eurozone reform, writes Colm McCarthy

GLACIAL PROGRESS: ECB President Mario Draghi, left, Irish Finance Minister Michael Noonan, French Finance Minister Pierre Moscovici and EU Economic and Monetary Affairs Commissioner Olli Rehn, right, at an EU summit in Brussels last week.
GLACIAL PROGRESS: ECB President Mario Draghi, left, Irish Finance Minister Michael Noonan, French Finance Minister Pierre Moscovici and EU Economic and Monetary Affairs Commissioner Olli Rehn, right, at an EU summit in Brussels last week.
Colm McCarthy

Colm McCarthy

THE Government's decision not to seek a precautionary credit line on exit from the Troika programme looks like a gamble. The advice from virtually all quarters was to make an application – the initiative has to come from the country concerned. The Government decided not to do so and thus the conditions that might have been attached are unknown.

However, the signs were unpromising. An extension of a credit line from the ESM bailout fund would have to be unanimous, so every country could have a go at setting conditions. Two appeared to be doing so: Finland, which produced mutterings about collateral, that is, the pledging of specific state assets against any new loan, and Germany. There, the Social Democrat (SPD) party, currently in negotiations about a new coalition, wants changes to Ireland's corporate tax rate and support for a controversial financial transactions tax, to which the Irish Government is opposed.

Both positions are ridiculous for different reasons. Lending to sovereigns cannot be collateralised without weakening the position of all other creditors, including future sovereign bond buyers. The Finns tried this curious and impractical line before in connection with the rescue programme for Greece.

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