How to burn a bondholder

Michael Noonan's announcement of a modest burning of senior bondholders has obvious symbolic importance and also some significant economic benefit to Ireland. But surely he will run up against the ECB as previous attempts have done?
However this may be a good strategic moment to seek to share losses on bondholders. The increasingly tense standoff between Greece and the Eurozone financial authorities over stalled austerity plans is beginning to change what is possible at EU level. The ECB (and other authorities) are desperately seeking leverage over an increasingly defiant Greece. All responsible policymakers are (rightly) alarmed at the possibility that Greece might begin to act unilaterally in a beggar-thy-neighbour approach which could return us to the precipice of late 2008. Certainly, Greece's self-interest seems to dictate such a move as any chance of the current plan working is remote without some level of default agreed or otherwise. If this is the case, an agreed default, coupled with a continuing austerity plan is the desired outcome. But the bloody-minded Greek Street and the browbeaten Greek legislature are in poor form for pursuing an agreed path which will inevitably require a heavier debt burden and greater austerity than a unilateral plan.
In this climate, Eurozone authorities are searching for leverage over Greece to get them to stick to an agreed path. They are brandishing sticks at Greece, but lack carrots. Rewarding Ireland for its austerity to date would be an effective carrot to encourage Greece to return to the agreed path. So far, Ireland's commitment to a common approach to the crisis has not been acknowledged in policy concessions. In particular, burning the bondholders (especially those of Anglo) would have a small economic benefit, but would also have a huge political and morale impact on this beleaguered nation. The Irish have long since become fed up with hearing about cuts to the blind and the sick so that fatcats can recover their failed investments.
Possibly, the need to encourage Greece won't be enough to make the ECB concede this small bondburning exercise to going ahead, but this is the right moment to press the case. We have at least some chance of persuading them and it's not a gigantic amount. A 3bn default simply cannot destabilise Europe's banks -can it?

The new Government

Looking at the new government, there are few surprises. Most of the main appointments have been well flagged over recent days.

Michael Noonan's installation in Finance is a real coup for FG, even if some of the functions have been hived off into a new ministry under Brendan Howlin. Actually, I'm opposed to seperating Public Service management from Finance as it was the previous seperation of these functions under Bertie Ahern that gave rise to a series of damaging pay agreements.

However, after this, it must be said that Labour has done fairly well out of the partnership deal. Of the significant ministries, they have roughly half of the relevant posts, even though FG have twice as many seats in the House. Labour control such titanic departments as Social Protection, Education, Public Expenditure, Energy, and Trade. Noone can call that a bad deal for Labour and indeed they have negotiated well. I particularly hope that Ruairi Quinn will use his time in Education to make some reforms to the inequality of the education system.

Justice, Environment, Finance, Enterprise, Health, Transport and Agriculture are the main ministries on the FG side (in no particular order). They are all areas that FG have targeted for structural reforms so we live in hope that this will now happen.

In particular, FG have radical ideas about reforming the health service: Ideas which I am sceptical of. Their support for a move to the so called Dutch System is misplaced in my view. By putting private insurance companies at the centre of decisions on resourcing we must consider how effective these companies are at present in managing costs. All evidence is that they are even less effective than the HSE at managing the costs of medical provision. Furthermore, by leaving it to these bodies to decide on resource allocation we are paving the way for the closure of more remote less profitable hospitals, especially on the West Coast. That would be an undesirable outcome as health provision on the West Coast is already absurdly sparse.

In Transport, FG has long advocated the privatisation of the State bus operators, and indeed I would agree with this. Though I think Bus Eireann provides an excellent service, there is scarcely a case for the State to maintain a bus operator of its own. Especially when the contract for PSO routes are funded seperately. The new NTA will need to be reformed if this is to be a success.

FG's control of Environment, and specifically, the appointment of Phil Hogan to this position does not bode well IMO. FG's 5 point plan, in the section penned by P Hogan, committed to reforming Local Government and devolving power to it. However, Local Governments in Ireland are too many, too corrupt and too ineffective to be reformed. There needs to be a discardance of the scalpel when dealing with these layers of ensconced entitlement. Instead there needs to be a fairly brutish reduction of their numbers and role, and especially of the money available to them. However, Phil Hogan is scarcely likely to do this. I wish him well in his attempts to reform this monstrously overweight layer of unnecessary featherbedding, but I believe he will not achieve anything worth doing.

The vote happens tonight.

The turning of the tide?

For all the hackneyed superlatives that have been thrown around this election, allow me to add one more: Since the foundation of the State, probably no Dail has had so many superlatives used to describe it.

The challenges are unprecedented
The electorate is near-revolutionary
The expectations are impossible
The counterparties are intransigent
The situation is desperate
The situation is insoluble

Frankly, expectations are simultaneously so high and so low that the only thing that is certain is a further polarisation of our polity now that we have lost the unifying hatred of the previous government.

This blog will follow developments in politics, society and whatever else flies across my screen and interests me.