ECB funding for bank bailout at low %

F

Firefly

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Why doesn't Brian Cowen just go to the EU (cap in hand) and demand that the banking bailout (which is covering the international bond holders (many of them throughout Europe)) be funded by the ECB by way of a low interest loan to Ireland (say 3%) over the next 20 years? That would be 2.5 billion per year plus interest. That would have IMO a dramatic impact on our deficit funding and allow us to get back in shape a lot quicker. As a condition for this we should still continue with reducing our deficit to 3% of GDP.
 
Its a good point you make there.
Ive a gut feeling that there is some as yet unannounced EU scheme ( maybe same one) being cooked up for delivery after the budget is approved.
 
They've got Spain, Portugal, Greece - probably Italy to worry about as well.

If Ireland was seen to be rewarded with a cheap rate for mismanaging its economy then that sends out all sorts of messages to countries as dumb as us.

Why would any of the PIIGS even bother going to the bond market if there's continuous new money pouring out of the ECB at 3%. Have we not seen that politicans and their cronies can't control themselves when they've easy access to money.

When any wastage of money that doesn't involve setting it on fire is now considered an economic "stimulus" it's especially risky.
 
And the ECB would get this money from?

What you've described is the European Stabilisation Fund - coming to a former sovereign state near you soon!
 

Very good point. There is the moral hazard issue and there is the issue of the amount that would be needed for all other countries that decided to take the easy option.

Easy and cheap credit caused this crisis. Giving politicians, of all people, more of this would not solve the problem in my opinion. The only way out that I see, is to come clean and partially default.
 
I think Ireland deserves some sort of break for ensuring that not a single bondholder lost a single cent during our bank collapse (probably cos many of them were German and French banks afaik).
 
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