Saving the (Celtic) Tiger! Elections in Ireland

So many times, it happens too fast 
You change your passion for glory 
Don't lose your grip on the dreams of the past 
You must fight just to keep them alive 

Survivor – Eye of the tiger

Tomorrow, February 25, the parliamentary elections in Irelands will be held: the Dáil. Seldom was there more at stake than this time. 

Remember:

1. Ireland has a huge housing problem with:
1. Houses being built for no-one and being sold to no-one
2. People having mortgages on houses of more than three times the current sales value
   
2. Ireland has a huge debt problem with every Irish citizen (babies and elderly people too) having an average debt of 100,000 EUR (this is no error!)
   
3. Ireland has a huge and growing unemployment problem with 11.8% of the labour force unemployed in 2009 (average)  and 13.3% in 2010
   
4. Ireland has a huge banking problem with their top 3 banks Allied Irish Banks, Bank of Ireland and Anglo Irish Bankcorp all being on the brink of a meltdown.
1. As a consequence of this the British and German banks that lent a totally over-the-top amount of 400 bln EUR to Ireland and the Irish banks (see bullet 2) are also threatened in their very existence. These are among others:

                                               i.      Hypo Real Estate bank with 10.3 bln EUR exposure in Irish sovereigns (read: the German government, as HRE is nationalized)

                                               ii.      Royal Bank of Scotland with 5 bln EUR exposure in Irish sovereigns

5. Ireland has a huge problem with their sovereign bond holders that, being not sure of the payback of their loans, pushed the interest rate up to 9% before the last bailout of the ECB (currently 5.83%).

These are the real issues Ireland is dealing with currently and I must admit: these are enormous issues.

This means that, next to the “normal” political issues that characterize one party from another and that are of course present in this Dáil, there are three important questions that must be answered, the so-called Elephants in the room. And no political party in Ireland can afford to ignore these questions:

-         Does Ireland keep on saving its own banks at the expense of the Irish Taxpayer and by that the big British and German banks or does Ireland “Just say no too?!”

-         Does Ireland take the chance of becoming the European sitting duck by saying to Europe “ go to hell with your terms on ECB Loans and Aid?!”

-      Does Ireland maintain their low corporate tax and with that its competitive advantage?!

o     Or will Ireland get back on the leading strings of a Europe that wants to see action for its money?

 I don’t know how these elections will end, but if I look at last months’ situation in Iceland and I translate this to the Irish situation I would say:

-     The Irish party that promises to send Europe “to hell” is the party that will win the elections

-     The Irish will take for granted that they become the sitting duck for all European anger for the coming two years and will be expelled from every important decision in years to come.

-     Europe stays angry at Ireland for 2 years, but as politicians have short memory spans everything will be forgotten afterwards.

-     The Irish corporate tax will remain the lowest in Europe, as this is their only competitive advantage

-     The Irish people start to work for less money, in this way making  Ireland competitive again.

-     Corporate and private bondholders of Irish sovereigns must accept a huge haircut, while grinding their teeths in pure anger.

-     The banks with huge exposure to Irish debt are saved again by the ECB.

Ernst