# In simple terms - why is the EU bailout so bad for Ireland?



## fender (15 Nov 2010)

If Ireland is given the bailout do we repay the money at the higher rate than normal borrowings?

Will the bailout give some level of stability to Ireland for a while or does it do completely the opposite and why?

What say will the EU have in Irish affairs after this bail out?

Are FF worried about saving their own jobs or is there genuine concern on their behalf that the bail out is bad for the country?

Can we afford to pay back the bailout money as well as the sovereign debt?


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## steviel (15 Nov 2010)

Im not sure austerity measures will be particularly worse than what is planned by Lenihan.  

But the most worrying thing I saw today on the news was a British and a German politician in separate news stories practically salivating at the prospect of getting their hands on our corporation tax rate.  The British MP (I cannot remember who it was) moaned for a while about Britain having lost investment to Ireland due to the corporation tax rate over the last few years, then linked a potential £7bn UK share of an Irish bailout to the amendment of the tax rate - he did it subtly, but to me the message was about as subtle as a brick.  We have nothing without our tax rate


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## Duke of Marmalade (15 Nov 2010)

steviel said:


> im not sure austerity measures will be particularly worse than what is planned by lenihan.
> 
> But the most worrying thing i saw today on the news was a british and a german politician in separate news stories practically salivating at the prospect of getting their hands on our corporation tax rate. The british mp (i cannot remember who it was) moaned for a while about britain having lost investment to ireland due to the corporation tax rate over the last few years, then linked a potential £7bn uk share of an irish bailout to the amendment of the tax rate - he did it subtly, but to me the message was about as subtle as a brick. We have nothing without our tax rate


+1


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## Paddyman (15 Nov 2010)

The bailout will make it difficult for crony capitalism to thrive along with the attendant corruption and lack of regulation so loved by Fianna Fail/Fine Gael and their banker/developer friends.
  Which is better for Ireland: regulation like that in Denmark, Germany and the Netherlands or the regulation that gave Seanie Fitzpatrick and Michael Fingleton time and space to thrive?
  Without the bailout we are finished. Tax rates will be academic. The price of survival will be to dance to the tune of the ECB. It will be payback for our anti -EU do-it-alone antics.
Guff about sovereignty from John Bruton , Enda Kenny, Brian Lenihan and Brian Cowen is a bit rich considering we have never had economic sovereignty in this state.  
My, didn't Brian Cowen look sovereign as he grovelled before our new Viceroy, Olli Rehn.


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## orka (15 Nov 2010)

steviel said:


> Im not sure austerity measures will be particularly worse than what is planned by Lenihan.


I agree but my concern is that whatever Lenihan has planned will not be implemented because of the various interest groups resisting every step of the way.  Any delay while various people yak on that it's not fair to them, they didn't cause the problem etc etc will just drag us down even further.  I don't like the expression 'we are where we are' as it's often used as an excuse not to look to the past and apportion blame but unfortunately as a country we ARE where we are and we have to dig ourselves out of a big hole.  I think any sign that Lenihan's plans are being resisted to an extent that makes them ineffective in the required timeframe - and we'll HAVE to take a bailout - which I think will be more readily accepted as people will realise that it's the end of the line - resistance is futile.  Unfortunately, I think it will come to that.  The austerity plan will be tough, will be resisted, will collapse and will be replaced by something similar/worse linked to a bailout.


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## shanegl (16 Nov 2010)

steviel said:


> Im not sure austerity measures will be particularly worse than what is planned by Lenihan.
> 
> But the most worrying thing I saw today on the news was a British and a German politician in separate news stories practically salivating at the prospect of getting their hands on our corporation tax rate.  The British MP (I cannot remember who it was) moaned for a while about Britain having lost investment to Ireland due to the corporation tax rate over the last few years, then linked a potential £7bn UK share of an Irish bailout to the amendment of the tax rate - he did it subtly, but to me the message was about as subtle as a brick.  We have nothing without our tax rate



Who can blame them, looking at some of the ridiculous carry on of British businesses funelling their profits through Ireland?


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## shnaek (16 Nov 2010)

Paddyman said:


> Which is better for Ireland: regulation like that in Denmark, Germany and the Netherlands or the regulation that gave Seanie Fitzpatrick and Michael Fingleton time and space to thrive?


Regulation wasn't the main issue  -we had a regulator with an adequate staff, we had the central bank, and we had the department of finance and they didn't do their job. What we didn't have was a competent government.


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## Purple (16 Nov 2010)

Could we try playing hard-ball here? After all the survival of the Euro is in the balance so while we are a small player at the game we can kick over the whole table if we like and they know it.


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## Purple (16 Nov 2010)

shnaek said:


> Regulation wasn't the main issue  -we had a regulator with an adequate staff, we had the central bank, and we had the department of finance and they didn't do their job. What we didn't have was a competent government.


 +1 but I'd add that our regulator and our public servants weren't competent either.


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## csirl (16 Nov 2010)

Purple said:


> Could we try playing hard-ball here? After all the survival of the Euro is in the balance so while we are a small player at the game we can kick over the whole table if we like and they know it.


 

+ 1.

We could also schedule another Lisbon Referendum on the basis that we did not get the jobs we were promised for passing it the second time round. 

And then finish off by saying if they dont adhere to our demands, we'll leave the EU and ban EU fishing vessels from our vast territorial waters.


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## Firefly (16 Nov 2010)

Purple said:


> +1 but I'd add that our regulator and our public servants weren't competent either.



I reckon their hands were tied by Bertie - nothing like a property boom to keep the votes coming in.


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## Firefly (16 Nov 2010)

Purple said:


> Could we try playing hard-ball here? After all the survival of the Euro is in the balance so while we are a small player at the game we can kick over the whole table if we like and they know it.



I totally agree with this. If we're not sorted then all eyes to Spain and Portugal..which will be a lot more expensive to bail out. Also, Anglo was only able to lend because it obtained funding from French and German banks...surely their responsible for making their bets?? That's why I think the banking bailout should be a European problem to fix rather than an Irish only one.


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## Complainer (16 Nov 2010)

shnaek said:


> Regulation wasn't the main issue  -we had a regulator with an adequate staff, we had the central bank, and we had the department of finance and they didn't do their job. What we didn't have was a competent government.


No, we didn't; 



Firefly said:


> I reckon their hands were tied by Bertie - nothing like a property boom to keep the votes coming in.


Wasn't it Bertie who told the Office of Director of Corporate Enforcement that they'd have to 'take their place in the queue' for more staff? Wouldn't want to have too many of those nasty investigators round the place, eh Bertie.


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## Purple (16 Nov 2010)

The historical parallels here are amazing; It was a debt crisis that forced the 13 loosely confederated states of the former British colonies in North America to call their second constitutional congress  in 1787 (which resulted in the present US constitution). Basically some individual states had incurred massive debts (mainly from France) to fund their war of independence whereas others had little or no debt. The main topic of discussion was whether that debt should be shared amongst all of the states as a federal debt, since it was incurred for the betterment of all of the states, or whether it should be borne by the states that incurred it. It was this topic that catalysed the movement towards a stronger federal government and turned Jefferson and Washington from friends into enemies, enemies that came close to leading opposing sides in a civil war.

So, we now have debt in some loosely confederated EU states that was funded by banks in other EU states. If the bearers of the debt give the two fingers to their creditors then the Germans etc get a proverbial kick in the nuts. If they cow down and beggar themselves then we face the tyranny of the strong. Should this remain a problem of debt between EU states or should be become a problem of EU debt? What does the EU do, is it here to protect the interests of the large states or to build a socially and economically cohesive Europe?


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## Shawady (16 Nov 2010)

Purple said:


> Could we try playing hard-ball here? After all the survival of the Euro is in the balance so while we are a small player at the game we can kick over the whole table if we like and they know it.


 
David McWilliams on RTE this morning saying exactly this. They played a clip of him on the Marian Finunace show from Jan 2009 and what he predicted then is what has panned out. He made this suggestion back then. Pity no one took notice.
He reckons we were in a much stronger position then to look for help and the government have basically been bluffing for the past 2 years.


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## Purple (16 Nov 2010)

Complainer said:


> Wasn't it Bertie who told the Office of Director of Corporate Enforcement that they'd have to 'take their place in the queue' for more staff? Wouldn't want to have too many of those nasty investigators round the place, eh Bertie.



Every year the Financial Regulator got reports from the banks clearly showing that they were massively overexposed to one sector, massively over concentrated within one group of individuals and massively over-leveraged and every year he said “that’s fine lads, keep up the good work”. 
If staff shortages were the main problem we would not be in the mess we are in.


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## frankmac (16 Nov 2010)

Purple said:


> Every year the Financial Regulator got reports from the banks clearly showing that they were massively overexposed to one sector, massively over concentrated within one group of individuals and massively over-leveraged and every year he said “that’s fine lads, keep up the good work”.
> If staff shortages were the main problem we would not be in the mess we are in.


 
Yes but its nice to know that he was paid off with golden handshake and a handsome pension.


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## galleryman (16 Nov 2010)

orka said:


> i agree but my concern is that whatever lenihan has planned will not be implemented because of the various interest groups resisting every step of the way. Any delay while various people yak on that it's not fair to them, they didn't cause the problem etc etc will just drag us down even further. I don't like the expression 'we are where we are' as it's often used as an excuse not to look to the past and apportion blame but unfortunately as a country we are where we are and we have to dig ourselves out of a big hole. I think any sign that lenihan's plans are being resisted to an extent that makes them ineffective in the required timeframe - and we'll have to take a bailout - which i think will be more readily accepted as people will realise that it's the end of the line - resistance is futile. Unfortunately, i think it will come to that. The austerity plan will be tough, will be resisted, will collapse and will be replaced by something similar/worse linked to a bailout.


 
+ 1


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## sunrock (16 Nov 2010)

Purple said:


> Could we try playing hard-ball here? After all the survival of the Euro is in the balance so while we are a small player at the game we can kick over the whole table if we like and they know it.


 
The time to play hard ball was when the private bankrupt irish banks came to the government and asked for a bail out. Our government couldn`t haven`t been more helpful , bailing them out and giving a guarantee that saddled the irish taxpayer with an unpayable debt. The big foreign bank bondholders were delighted.
You are now suggesting we play hard ball as we lay prostrate before our paymasters, begging for a bailout and with no real cards left to play except for the PR spin they are feeding to the irish public.
The government will stoop to any level,will grovel on their knees if necessary to keep whatever funding they can get  to keep  paying salaries ,welfare etc.
Of course they will have to implement a savage budget  and the public will moan but will have to take their medicine.
The government can threaten to leave the euro but it is an idle threat. First we`d be even worse off even if our borrowing wasn`t cut off. 
Secondly the EU could cut off the funding that pays the salaries of public sector workers and welfare recipients if they wanted to.
Our government and future governments will be doing the EU and Imfs bidding for a long time to come.


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## Chris (16 Nov 2010)

Purple said:


> Every year the Financial Regulator got reports from the banks clearly showing that they were massively overexposed to one sector, massively over concentrated within one group of individuals and massively over-leveraged and every year he said “that’s fine lads, keep up the good work”.
> If staff shortages were the main problem we would not be in the mess we are in.



I agree, the problem was not some obscure, hidden item in the balance sheets, that required hundreds of people to try and figure out. This is such a typical move by government: something is not working so lets through money at it.
The only new regulation we need now is not of the banks but of the government to stop writing cheques to private corporations, no matter how big or important. The banks took private money and loaned it to private individuals. At no stage in this should the government become a player and the public a pawn!

Why is the EU bailout bad for Ireland? Because it doesn't solve the underlying problem: unmanageable levels of debt. The debt will still be there and will have to be repaid with interest. The only thing that would now be good for Ireland is a default on debt to reduce it to levels that are manageable. Ideally in the process bond yields would still go through the roof and stay there, so that the political elite would be forced to tax for their pet projects. You'll find them in a lot more difficulty trying to convince taxpayers to part with their hard earned cash.


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## RIAD_BSC (16 Nov 2010)

Shawady said:


> David McWilliams on RTE this morning saying exactly this. They played a clip of him on the Marian Finunace show from Jan 2009 and what he predicted then is what has panned out. He made this suggestion back then. Pity no one took notice.
> He reckons we were in a much stronger position then to look for help and the government have basically been bluffing for the past 2 years.


 
I wish people would stop lionising McWilliams. In his book Follow the Money, he boasts that the banking guarantee was his idea, cooked up in his kitchen one night with Brian Lenihan. The guarantee is what is killing us. McWilliams is a skilled self-publicist, nothing more.


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## Complainer (16 Nov 2010)

Chris said:


> I agree, the problem was not some obscure, hidden item in the balance sheets, that required hundreds of people to try and figure out. This is such a typical move by government: something is not working so lets through money at it.


The warnings were given, as far back as 2000. From http://www.independent.ie/opinion/l...ell-on-deaf-ears-1567890.html?ref=patrick.net



> the article in the Irish Independent on December 20    2000 by Geraldine Collins and Brendan Keenan: "The Central Bank yesterday    issued a warning that house prices could fall 'quite dramatically'. It cited    the example of other countries which had experienced house price inflation    on the same scale as Ireland. There has not been a single episode of such    inflation which did not end in prices 'falling, in some cases quite    dramatically', said the bank in its winter quarterly bulletin.



But no-one wanted to hear it, right?


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## Chris (16 Nov 2010)

Complainer said:


> But no-one wanted to hear it, right?



I agree that there were plety of warning signs that were completely ignored. But do you think that 400 more employees at the regulator and or central bank would have made a difference? That they would have come up with some magic legislation?
It is not failure of regulation that led us here but failure to allow free markets to impose the full force of the profit and loss system.


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## Shawady (17 Nov 2010)

RIAD_BSC said:


> I wish people would stop lionising McWilliams. In his book Follow the Money, he boasts that the banking guarantee was his idea, cooked up in his kitchen one night with Brian Lenihan. The guarantee is what is killing us. McWilliams is a skilled self-publicist, nothing more.


 
I'm certainly not lionising McWilliaims but if you heard his interview from Jan 2009, he predicted exactly what is happening know. Back then the government led the public to believe the bank bailout was the 'cheapest in the world'. They have been spoofing for 2 years and have been found out.
I'm sure McWilliams is not right every time but if he is just a self-publicist, why did our garlic-munching MOF run to him for a crash course in economics on that night?


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## Purple (17 Nov 2010)

Chris said:


> I agree that there were plety of warning signs that were completely ignored. But do you think that 400 more employees at the regulator and or central bank would have made a difference? That they would have come up with some magic legislation?
> It is not failure of regulation that led us here but failure to allow free markets to impose the full force of the profit and loss system.



You quoted complainer there not me... I'm sure he'll love that! 

BTW, I agree with your post above.


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## Chris (17 Nov 2010)

Purple said:


> You quoted complainer there not me... I'm sure he'll love that!
> 
> BTW, I agree with your post above.



Hehe, oops! Corrected it there.


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## Complainer (17 Nov 2010)

Chris said:


> I agree that there were plety of warning signs that were completely ignored. But do you think that 400 more employees at the regulator and or central bank would have made a difference? That they would have come up with some magic legislation?
> .


Yet again, you seem to be a bit confused about how things work. Regulator staff don't write legislation. Government Ministers set policy, and the relevant departmental staff write legislation, along with the AGs office.


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## Chris (18 Nov 2010)

Complainer said:


> Yet again, you seem to be a bit confused about how things work. Regulator staff don't write legislation. Government Ministers set policy, and the relevant departmental staff write legislation, along with the AGs office.



So the regulator's office provides no recommendations or feedback (however bad or good) on financial regulations? You're not serious are you?
You are also not answering my question. Do you think that 400+ more employees would have made one bit of a difference 10 years ago, or will make a difference in the future?


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## Complainer (18 Nov 2010)

Chris said:


> So the regulator's office provides no recommendations or feedback (however bad or good) on financial regulations? You're not serious are you?


I'm very serious about what I said - that the regulator's office don't write legislation. Please stop twisting my words into something else.



Chris said:


> You are also not answering my question. Do you think that 400+ more employees would have made one bit of a difference 10 years ago, or will make a difference in the future?


Yes - absolutely, more/better resources in the regulator's office and the ODCE would certainly make a difference, as the current regulator is proving.


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## belview (18 Nov 2010)

David Mc Williams is a very clever fellow but he is a prima dona economist.

Why does he not stand for election to the DAIL for either Fine Gael or Labour and put his talents to use for the country instead of  pointing out all the mistakes made by others  over the last few years.

It will take  perspiration  as well as inspiration  to get us out of this mess.

Once the new government gets into office the lights should not go out in government buildings until we have regained our independence as a nation


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## Chris (19 Nov 2010)

Complainer said:


> I'm very serious about what I said - that the regulator's office don't write legislation. Please stop twisting my words into something else.


Your post made it sound like the regulator's office merely execute orders.



Complainer said:


> Yes - absolutely, more/better resources in the regulator's office and the ODCE would certainly make a difference, as the current regulator is proving.


This is the typical government answer, when something fails, throw more money and resources at it. In a previous post you correctly identified that there were very telling early warning signs that were ignored or deemed to be exagerated. It does not take 400 more people to correctly identify and assess now very obsvious warning signs. The financial mess is not a result of lacking regulation, it is a result of crony capitalism and an implicit guarantee that banks would not be allowed to fail.
And what exactly has the new regulator done that could fill anybody with confidence that such a crisis will not repeat again? This was a typical political move, just bring in new faces and claim that everything is fixed now.


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## Complainer (19 Nov 2010)

belview said:


> Why does he not stand for election to the DAIL for either Fine Gael or Labour and put his talents to use for the country instead of  pointing out all the mistakes made by others  over the last few years.


Probably because neither Labour nor FG would want him. We've had enough of celeb economists flitting into the Dáil on a whim.



Chris said:


> Your post made it sound like the regulator's office merely execute orders.


No, it didn't. You have exaggerated and twisted my words again. My post just said that they don't write the legislation - no more, and no less.



Chris said:


> This is the typical government answer, when something fails, throw more money and resources at it. In a previous post you correctly identified that there were very telling early warning signs that were ignored or deemed to be exagerated. It does not take 400 more people to correctly identify and assess now very obsvious warning signs. The financial mess is not a result of lacking regulation, it is a result of crony capitalism and an implicit guarantee that banks would not be allowed to fail.
> And what exactly has the new regulator done that could fill anybody with confidence that such a crisis will not repeat again? This was a typical political move, just bring in new faces and claim that everything is fixed now.


And this is the typical libertarian response of criticising and undermining everything done by Govt. We clearly need more and better regulators, and we're seeing the benefits now of having the right people in these positions, e.g. Honahan has the cojones to tell people what's going on when FF are running scared.


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## Purple (19 Nov 2010)

Complainer said:


> we're seeing the benefits now of having the right people in these positions, e.g. Honahan has the cojones to tell people what's going on when FF are running scared.



I agree with this but it undermines your view that we need more poeple and more regulation. We don't; we just need the right people.


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## ontour (19 Nov 2010)

Complainer said:


> Honahan has the cojones to tell people what's going on when FF are running scared.



Honahan is good but the government playing out these negotiations in the media is not the way to go.  Get in to the meetings with the IMF and get stuck in.  Just because RTE and TV3 want to have it all out in the open does not make it the right way to do it.

All the media attention about corporation tax is just making it more of a topic for consideration.  Now is not the time to pander to the media.


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## Chris (22 Nov 2010)

Complainer said:


> And this is the typical libertarian response of criticising and undermining everything done by Govt. We clearly need more and better regulators, and we're seeing the benefits now of having the right people in these positions, e.g. Honahan has the cojones to tell people what's going on when FF are running scared.



I do not critisise everything done by government, only the non-essential ones, so let's not get carried away there. We clearly do *not* need more regulators; regulators throughout the world were unable to foresee the mess (including Honohan), while there were plenty of economists warning of the monetary, fiscal and banking policies and practicies in place. Honahan may well be a better man for the job, and telling the public what's going on certainly is an improvement, but so far he has achieved nothing that would fill anyone with confidence. No new regulations are in place to avoid these problems; not that I believe there is a regulation that could avoid future crises, other than making it illegal for government to bail out private enterprises.


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## bullworth (22 Nov 2010)

The blame lies 100% squarely on the shoulders of Fianna Fail. They had absolute power over legislation and regulation for most of the last 20 years. They were the government. The government. Think about it and everything being the government means. They've promoted greed, dishonesty and corruption in almost everything they have done. I am thinking back over the last decade when the Bacon Report was ignored while tax reliefs were given on prime property which never needed any, the Freedom of Information entitlements of people was restricted etc because telling the truth to those you are elected to serve was inconvenient and against the interests of the party.  We still do not have free access to the information about what happened inside the banks and noone wants to be accountable. Noone has been jailed yet the effects of this crisis will mean more suicides and poorer medical care resulting in the deaths of thousands of people. Government is a serious  and grave thing yet FF appears to think it is something decided over in the Dail bar or at a racing tent.  The power we give them every 5 years is a grave responsibility. Not  the joke they have twisted it into.
It was all happening in plain sight but the media in bed with the government kept up the propaganda to keep the ordinary person's mind weak with soap operas and irrelevencies.
If Bertie/the FF government did not like what the regulator said he would have replaced him with a different puppet more grateful for the carrot of Senate seats, pension payments and golden handshakes etc. The whole apparatus of the state and media works on this principle.  Its all puppetry with the left hand while the government tries to point the finger of blame away from themselves with the right hand. 
They were the government , a serious, grave and honorable position which they have dishonored and made a joke out of. They cannot handle responsibility and accountability. They cannot be truthful. They have always put the party and its hangers on before the country for as long as I can remember. It looks to me like FF are not fit to be in government ever. We are where we are but like all serious crimes , punishment must follow otherwise no banker or conartist will fear to ridicule our Republic again. And thats what FF have done as our government. They have repeatedly disrespected and ridiculed the sacredness of high office.


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## Bcommercial (22 Nov 2010)

Wouldn't argue with that!


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## ontour (22 Nov 2010)

Bullworth, I agree with a lot of what you have said but they did what the people wanted.  The Irish electorate thrive on the 'cute 'hore' mentality, we re-elect people found to be corrupt.
There is also an inference from you post that we would be living in some Utopian bliss if the opposition had been in power.  There would be many things the opposition would have done better but probably an equal number that would have been done worse.  Do you think a US MNC would meet Eamon Gilmore and think that this is the country they want to be in?
For these reasons serious electoral reform is required before the next election or we will have wasted the current pain and turmoil.


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## Complainer (22 Nov 2010)

ontour said:


> Do you think a US MNC would meet Eamon Gilmore ?


Of course they would. Paul Rellis, MD of Microsoft Ireland was a speaker at Labour's pre-budget economics seminar last year. 

He wasn't a great speaker, as it happens!


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## Purple (22 Nov 2010)

Complainer said:


> Of course they would. Paul Rellis, MD of Microsoft Ireland was a speaker at Labour's pre-budget economics seminar last year.
> 
> He wasn't a great speaker, as it happens!



He was invited and he went. It doesn't mean he likes Gilmore.


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## Purple (22 Nov 2010)

Bullworth, good post. In my opinion the government hasn't been running the country for the last ten years. It has been run from the the Department of the Taoiseach by Bertie and then Brian in conjunction with the Social Partners (the golden circle of union fat-cats and developers and in the background; the bankers). That's the root of most of our problems; the people elected by the people to govern for the people were shoved aside by the vested interest groups that carved up the country. The builders got their tax breaks and the public sector unions got their massive pay hikes and the rest of us were left voiceless.
This link posted on another thread to show our national debt has some very good comments on this topic below.


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## Latrade (22 Nov 2010)

I think this argument has been running since 2008 regarding regulation. From my experience there is a view in the government and some departments that "better regulation" means more regulation. We need regulation, we need checks and balances, but it has to be the right regulation, not simply more. Also, on a small issue, in my experience also, legislation is written by the regulator. It tends to get handed down the chain and some poor schmuk gets the job of writing the regulation before it's then passed up to the Department for approval. 

Anyway, of course it's a bad thing we need the bailout. It's bad because it's a lone to cover debt, it doesn't actually deal with the debt, it's just like getting a new credit card to pay off the old credit card. Look at the media attention, it's very bad for our reputation. Yesterday had to be one of the most embarrassing days I can remember, i doubt we'll ever recover from this internationally.


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