Time to stop dithering, and do what the people AND the markets want

The more it drags on the worse it gets. Ireland is facing savage cuts followed by insolvency, and the rest of the Eurozone is looking like a house of cards.


It's time this government grew a spine and did the right thing.


Burn the holders of bonds in the zombie banks. Just do it. Merkel wants us to do it, the IMF wants us to do it, the markets want certainty, so they can move on.  And everyone knows that the Irish people don't want to pay off the debts of banks, to people we didn't borrow the money from.


We've already paid out over 60 billion euros to bank bondholders, and according to figures available on namawinelake and bondwatch, there's at least another 64 billion that expires soon. How can we pay that? Borrow from the markets at 14% to pay off bonds that the state didn't even issue ? Even if the Greeks think we are sheep, we can't be THAT obedient can we?

Let's find out.

Have a referendum on bank debt should copperfasten the burning because under Art 6.1 of the constitution:

All powers of government, legislative, executive and judicial, derive, under God, from the people, whose right it is to designate the rulers of the State and, in final appeal, to decide all questions of national policy, according to the requirements of the common good.


I would bet a junk bond that the people would vote to burn the bondholders. I would also expect it to be the highest turn out for a vote in a long time.


So, having done as the Icelanders did, the next step is to announce to the bondholders in these words, (which may sound familiar.)


"You all partied, but now, well, we are where we are, and it's time for the tough decisions. Take your loss, and we'll turn the corner". 


Sure they will howl, about it, they thought they'd get paid out on a losing gamble on the banks, and the poormouth will be heard for a while, and then they'll go looking for the next place to gamble their money.
We should very firmly explain this to the markets as very necessary 'housekeeping' and that we haven't reneged on the sovereign debt. Ireland pays its debts, but we're done paying anyone else's.


There will be a short period of turbulence while this is absorbed, but it should be limited. Any bonds that were considered junk wouldn't be held by major pension funds anyway.


The market will quickly factor in the new reality. In fact they've been demanding something to factor in.

"Peter Clarke, the chief executive of the Man Group, the biggest hedge fund in the world, gave an interview to the Telegraph last week in which he warned: ‘Until very recently, everyone has been assuming that the eurozone would come up with a solution for the peripheral countries’ debt that would provide sufficient certainty for the markets to be able to move on."

Why the hesitation? Perhaps the fear of another Lehman's type incident?
Hardly. When American banks came crashing down, it was a huge surprise. Most of them had very good ratings just beforehand.
These zombie bank bonds however would not be a shocking event for the market. There's been a question over them for a long time. And the longer it goes on the worse it will turn out.


Do the right thing, and do it quickly.