Sunday 20 October 2019

Stephen Donnelly: 'Threaten to default or drown in debt'

Outspoken opposition TD Stephen Donnelly spells out stark choices

Independent TD for Wicklow Stephen Donnelly
Independent TD for Wicklow Stephen Donnelly


There is now a growing realisation that Ireland must threaten a unilateral default to ensure it gets a reduction in the cost of its crippling bank bailout or it won't survive.

It comes as former government adviser Alan Ahearne has warned a double-dip recession in the euro area is now looming in 2012 because of a "poisonous cocktail" in terms of political policy at European level.

Such a return to recession in Europe could seriously impact on Ireland's ability to meet the targets set down by the Troika.

In an interview with this newspaper, financial-expert-turned Independent TD for Wicklow Stephen Donnelly has said that Ireland is drowning in debt and that Europe must now come to our rescue or we must threaten to default on our banking debt.

Mr Donnelly is among a growing number of economists, commentators and senior politicians who believe there is no option but to default on our banking debt.

"There comes a point, and we are past that point, that we have to act unilaterally. We don't want to. We are Europeans, but the cost of bailing out European banks has sunk us. It is economically stupid."

Mr Donnelly cited last week's IMF report, which called on Europe to do more to ensure Ireland was adequately protected.

"The IMF say Europe are completely wrong," he said. "I would start making noises that Ireland will act unilaterally. I would contact the bondholders and tell them that there will be massive haircuts. That will bring them to the table. Why are we paying back speculators? There is major sabre rattling needed here," Mr Donnelly added.

The call to unilaterally default comes as Taoiseach Enda Kenny said Ireland's best hope of a debt reduction was through the increased European Financial Stability Facility (EFSF).

In a briefing with political correspondents this weekend, Mr Kenny said the Government's focus was trying to get lower interest rates and a much longer time to pay back the billions borrowed to fix our bust banks.

"We borrowed €63bn to recapitalise the banks at very high interest rates. We want to take the opportunity to shift that high level of recapitalised debt to a position of lower interest rates and a longer period of time to pay it," he said. "We (can) move that into the area where the facilities are available to the EFSF and the ESM, so that will give us a very substantial saving to the taxpayer here," Mr Kenny said. The Taoiseach also said there was a growing realisation that Ireland could only survive if its debt levels were sustainable.

"It is also an area that the IMF have said that Europe can assist Ireland in. European leaders now all view Ireland very differently than six or eight months ago. We were lumped in with the PIIGS group. Now Ireland is in a very different position and they say Ireland is making very steady progress and endorsed by the Troika."

But that didn't mean you lost focus in a country like Ireland, a small country with an open economy facing serious challenges, Mr Kenny added.

"Getting the new facilities that were not available to us when we borrowed all that money at high interest rates, that is where the focus is now."

Speaking to this newspaper yesterday, Dr Ahearne said: "The combination of tightening financial conditions in the eurozone, ongoing concern about the possible collapse of the euro, and the short-term negative effects of necessary fiscal and structural reforms will push the euro area back into recession in 2012."

Sunday Independent

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