Thursday 19 July 2018

Ivan Yates: Race to escape clutches of the troika is risky business

It's time to pay serious attention to what our political masters are up to. Behind closed doors in Washington, Brussels and Frankfurt, important economic negotiations are taking place. More significant than any Budget are the terms of our troika bailout exit and optimal future management of our credit needs. There is little transparency or public debate about our options, expect the usual Department of Finance secrecy, followed by the standard "we had no alternative" announcement, when matters are au fait accompli.

It's a no-brainer that we should obtain a safety net to avoid obvious downside risks over the next two years. There is a real prospect that the ECB will begin raising interest rates on or before 2015. Historic cycles of costs of money indicate that the present 0.25pc rate won't last for ever. A hike of 1pc would take out of the Irish economy an additional €2bn from non-public debts alone. Moreover, if the eurozone crisis (in the form of European Banking Union and European Stability Mechanism issues) remains subject to political paralysis for the foreseeable future, private money markets may seek a premium in lending to European sovereign states. It is common sense to now lock in our national credit requirements at the lowest possible costs. We can do so from a position of strength, given the NTMA's buffer of cash that is in place.

The big fear is that Kenny and Gilmore will allow their hubris to get in the way of rational decision-making. Any negotiated tranche of finance could be represented as a "second bailout". This term runs counter to all their dubious political rhetoric about December 15 being the day of restoration of our economic sovereignty. Our gallant politicos would have you believe they are freedom fighters on our behalf, citing similarities between 1916 and 2016. This is all bullshit, at every level. This green jersey guff is similar to past assurances in 2007/8 that we had the "best capitalised banks in the world".

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