Exasperated,  Pat Kenny asked on Frontline Monday night, why the several billions we've put into the banks to buffer against consumer insolvency, hasn't yet been used? Nobody answered the question. Given that the IMF has been unequivocal in its view that no domestic economic recovery can occur without first tackling consumer insolvency, it remains the burning question of our time.

Four years into the crisis and why do we not have yet a non-judicial and modern insolvency process?  The answer is simple and grubby; those at the top simply didn't  care. Insolvency doesn't affect them, only the private sector and the low paid in the public sector. Instead they are snuggly quarantined within the ruling pale buttressed by the Croke Park Agreement. This lethargy and lack of urgency at the top is helped enormously when fear  and ignorance is spread by the high priests of moral hazard, those who feel threatened by the scale of insolvency that includes banks and their right wing protectorate in the media.

But now that the Insolvency Bill, which is joined at the hip to the Troika bailout, has arrived, the objective of this hard right cluster is to render it toothless, a mere box ticking exercise that releases the minimum amount of funds into the maw of the consumer insolvency crisis. Let's hope they fail.

The key performance indicator for economic recovery will be the number of debt settlement and insolvency agreements that will be lodged with the proposed Insolvency Service attached to the Dept of Justice. But without robust Central Bank adjustment of the Code of Conduct for banks, compelling them to fairly engage with Insolvency Trustees and the creation of an Ombudsman to arbitrate on disputes between debtors and creditors, the Irish economy is directionless, propelled forward by exports but dragging, on the sea floor, a domestic economy deeply anchored in the silt of unresolved consumer debt. Getting it right isn't just about economic recovery, it's also about recovery from trauma.

Nobody is measuring it, but the impact of prolonged exposure to open-ended and overwhelming indebtedness is mauling Irish society by destroying family cohesion and happiness and, in many cases, leading to separation and suicides. Further delay is intolerable because, not only is it economically stupid but because it is inflicting horrendous wounds on thousands of Irish families.

- Eddie

The Central Bank is poised to take enforcement action against most leading Irish lenders for duping vast numbers of Irish borrowers into paying for worthless Payment Protection Insurance (PPI). This cover can temporarily pay your loan and mortgage if you get sick or lose your job. Attaching it to a credit agreement reduces risk to the lender and pays lucrative commissions typically 40% of the premium, usually priced at 6% of annual mortgage repayments. The scam, which is set to cost the UK lending industry £8 billion, is the failure to disclose the sale of the insurance to borrowers many of whom simply don't know they are paying hundreds of Euro per year for it or where it has been disclosed, the failure to explain its exemptions, terms and costs.

But huge compensation payouts for PPI mis-sold in Ireland may be scuppered because the Central Bank cannot legally apply its enforcement powers before it first introduced a detailed Code of Conduct in 2007. That means a deluge of claims will fall to the Financial Services Ombudsman (FSO) when consumers twig they've  been scammed.

But unless the FSO seeks  a simple adjustment to its six year rule, any claims about PPI unknowingly entered into over six years ago will be repudiated by it. The six year rule can be changed by simple Ministerial order or by a High Court ruling to run the clock from the date that consumers recognise the loss, not from the inception of the mis-sold policy.

So will the FSO fall victim to the classic civil service crisis response of shrinking the scale of the problem to fit its resources or will it gear up and take on the big boys guaranteeing to rule on any PPI mis-selling within three years of consumer knowledge? The moment of truth has arrived for the Ombudsman. How it jumps will determine its legacy.

- Eddie

A 77 year old man takes the Luas to St Stephens Green, walks to the Dail gates and, in what his daughter would later describe as his final political act, commits a very public suicide. It could, but didn't happen in Dublin but, it did happen in Athens. Dimitris Christoulos suicide has lifted the lid on the excruciating disillusionment and hopelessness of extend and pretend policies that have failed to tackle the personal insolvency crisis. A week after Mr Christoulos finally ended his debt burden in front of the Greek parliament, the IMF singled out excessive personal debt as the brake preventing economic recovery.

 Mr Christoulos, a retired pharmacist and anti-drugs activist is an anathema to the let-them-burn brigade, who’d prefer rigid adherence to the failed financial dogma of moral hazard, the policy of avoiding debt restructure and relief at all costs - especially costs to them. But by taking his own life Mr Christoulos has helped to strip away the detachment between those lightly bruised by this economic depression and those overwhelmed by it.

Rage and there has been much of it, has been focused on bankers, developers, bailout rescuers and better off neighbours but, strip away the rhetoric, look past the dumb decision to bail out banks with daft promissory notes and, Ireland ninety six years after The Easter Rising is a failed State, measured harshly by our savage annual deficit. Perhaps it is because of low self- esteem that we think don’t deserve higher standards or perhaps it is a hangover from colonisation where pulling strokes on authorities made some kind of sense but, whatever the cause, we accepted crony capitalism, cheered political corruption, voted Ahern back a third time chuckling at his Tribunal evidence, accepted zero accountability from a vastly expanded and grossly overpaid public service establishment, ignored cartels in the professions and impunity for political leaders - until we were burst. Then it became personal.

Broach this subject and even today, despite everything that has happened, many of us still don't want to consider that the enemy is within. Ireland is unreformed. We are still a society run for the benefit of cosseted insiders. Just look at the Croke Park Agreement and its political support. Look at the Household Charge, money collected to feed into an unreformed and bloated local services network where sickies run at multiples of what would be tolerated elsewhere.

This week we hear from teacher unions who, despite cuts, enjoy among the highest rates of pay and pensions in Europe, openly threatening us if their privileges are reduced. All these, report to a political elite whose own pay and pensions are vastly in excess of what we can afford as a broken State, summed up by the obscene fiction that we can pay over a hundred billion in pensions from an asset pot that's gone down the crapper into failed banks.

Meanwhile at least a quarter of a million Irish people, just like Dimitris Christolous, are behind on utilities and mortgages, practically all of them from the private sector, some from the low paid public sector and all excluded from the economy while the squeezed middle is bled for more money - rather than face the truth.

The truth is that even if we regain a foothold in bond markets next year, we continue to feed an economy that is run, primarily, to maintain the lifestyles to which the insiders have become accustomed in a democracy that maintains the delusion that its centre of power is its parliament.

You want to learn how this broken State operates, seek out the untouchables, those who get paid most for the least effort and decide the fate of the rest of us. That is real power. The rest is mere window dressing. When the Brits left we merely swapped an oppressive foreign occupier for an internal one and when the Trioka leaves, we will remain colonised.

- Eddie Hobbs

NAMA, which isn’t covered by the Freedom of Information Act is in the news for its appearance at a Dail Committee briefing yesterday. I’ve written an open letter today March 15th in my column to Chairman Frank Daly giving NAMA a list of important questions it hasn’t been asked. These questions and, the answers to them, matter.  You can read them here - use the magnify tool for clarity.

Eddie Hobbs

Last Saturday the Irish Independent ran a front page story. Tellingly, that story was taken down from its website by lunchtime and no longer exists on line. Earlier, the Irish Independent failed to show up on The Marian Finucane Show to defend its lead story despite requests from the programme producers to do so. The serious allegations made by the Irish Independent are patently untrue and, unhappily, it's response to my request for a front page retraction has been unsatisfactory. Under the circumstances I have instructed my lawyers to issue proceedings on my behalf against the Irish Independent. I will not be making any further comment.

- Eddie Hobbs

1864, and after four years of epic struggle the Union was bone weary. Grant had lost a third of his army in a series of sidling battles with Lee in Northern Virginia while Lincoln, first elected in 1860, was desperately  trying to become the first democratically elected  president to seek a second term in the middle of a war. His chances looked doomed as a populist anti- war camp was gaining widespread support. Saying no to war, sundering the Union and abandoning millions of slaves was easier than continuing on. But Lincoln caught a break. Sherman took Atlanta, the commercial capital of the South, split the Confederacy in two and guaranteed Lincoln's second term.

If Kenny is to save himself and his Government he needs his own Atlanta. Despite Government attempts to restrict the debate to the substance of the Fiscal Compact we all know what this referendum is really about . As Atlanta fell for Lincoln, so too must Ireland's toxic national debt for Kenny, especially the €31bn created from dust by the Irish Central Bank. We are currently obliged to repay this perversity at a punishing interest rate and schedule. It will then be returned to the dust from whence it came on Dame Street - all to save a dead bank and a principle about not monetizing debt. The resultant debt / GDP is unsustainable at the rates of interest we are expected to pay. All Greece has done is to distract us from this inconvenient truth.

Kenny can win the referendum but only if the ECB board is first persuaded to turn a blind eye to Ireland not burning €31billions. Fear will drive the Yes campaign as assuredly as anger will drive the No one. Politically its that simple. But what of the economics? Pure horse sense tells us to stay out of this Fiscal Compact simply because it cannot work. Ireland's economy cannot carry the national debt, the internal debt like the Public Sector pension liability mountain and the vast scale of private indebtedness. How can increased taxes and further cuts ignite growth when both personal and Government spending are in decline?To believe that exports can carry the day anymore is delusional, not without domestic economic recovery. Austerity isn't designed to create growth, it is designed to bring the fiscal deficit back into balance. That is incompatible with growth. Still Eurozone policymakers talk the language of austerity, not growth and now wish us to vote for it.

The sooner that we collectively face reality the sooner we'll start thinking our way out of this mess. Without a Eurozone growth compact, debt relief is the only route we can take. Every other effort including carrying on the great extend and pretend game, is simply prolonging the agony. Despite rhetoric to the contrary the EU policymaking elite are bricking themselves over the Irish referendum because it threatens to unravel the illusion that Europe can adhere with Germanic discipline to a narrow set of rules. There is no chance of that working by first condemning large parts of the Eurozone to decades of punishing debt serfdom. A common currency cannot function without much closer political union and without surpluses passing freely to deficit economies. Just as the economic power of the Northern states helped to rebuild the South, rich Europe must invest liberally in struggling countries, starting with emancipating them from the yoke of the excess debt they simply cannot carry.

For that reason I find myself reluctantly in the No camp until Europe wakes up and finally gets the message.

- Eddie

We’ve had a thirst for burning things that frighten us ever since putting to death upwards of 80,000 witches across Europe over 160 years to about 1660. Rome approved but that didn’t help much. The call to burn the bondholders is equally useless today, largely because they’ve taken their winnings and fled. That leaves us with the infamous €48bn bill we’re repaying on the €31bn ploughed into IBRC, the zombie bank that holds the mortal remains of Fitzpatrick’s and Fingleton’s handiwork. Designed by our BFs at the EU, the schedule is priced at a truly satanic interest rate of 5% and will cost us €3,100 million each year to 2023, €2,100 million in 2024, €900 million to 2030 and finally a cool €100m in 2031.

But since we’re still itching for the type of bonfire the Greeks were allowed, why can’t we burn that lot? Well, the Central Bank of Ireland will put a match to all that capital the instant we pass it over to them in a vanishing spell straight out of Harry Potter. Mind boggling huh? In a perverse summoning spell all those Euros were created out of thin air by wizards at The Central Bank on Dame Street  by uttering the magic words,  Emergency Liquidity Arrangement.  It was quantitative easing by the back door - money printing to you and me and, represents about 0.3% of Eurozone money supply which stands at a gargantuan €10 trillion.

Surely then to help the Irish economy leap from years of listlessness to growth, to reduce our Debt / GDP from an estimated peak of 113% next year to closer to the European average and which would instantly bounce us out of the bailout programme, we should be permitted NOT burn this money? After all there’s no bondholders, no lenders and you’d hardly notice the extra cash in the undulations in Eurozone money supply.

Technically that would only require one third of the board at the ECB to agree and we can point to the effect of money printing in the US which is lifting its economy out of the mire and to the half a trillion created by the ECB itself just before Christmas which was lent to over 500 banks at 1%pa - practically free money.

Since the game has started with de facto money printing by the ECB, how can they hide behind precedent as an argument any longer? As for moral hazard, where’s the logic in forcing Irish taxpayers to own up to the responsibilities of the State by enforcing a policy that rewards speculative bondholders with zero risk investment? Where’s the logic in burning all that cash when there’s no lender just a principle against monetising debt?

How are write offs to the Greeks who’ve breached their covenants squared with continuing punishment for the cooperative Paddies? These are tough questions, but the toughest of all is to ask our European friends how they justify their implicit policy of piecemeal concessions to a country that’s sacrificed itself to save the Euro in light of their own covenant in Article 2 of the Maastricht Treaty? This says quite explicitly that an economic and monetary union is to be based on a harmonious and balanced development of economic activities whose objective is to raise standards of living, quality of life, social cohesion and solidarity among member states.

The tough question for Enda Kenny and his negotiation team is whether they are so enthralled by the prospect of been thrown minor concessions for good behaviour, that they are suffering from Stockholm Syndrome? Remember that’s where hostages are so empathetic  with their captors that they end up defending them.  Prove you’re not, Enda, take the Maastricht Treaty make them swear upon it. Publicly like in the old days

Eddie

Like a shining beacon you know the truth when you stumble across it in through the storm of facts and reports that have marked our relationship with creditors since the crisis stated four years ago. To grasp precisely where we stand on the national debt, the aberration that is the loan for Anglo and how it is constructed, this report from Kevin Barrins of Acass Consulting (and which includes my highlights) is required reading for its sheer clarity of thinking and communication. It will help you understand how much of the media debate about burning bondholders is diametrically opposite to what we should do! I recommend it highly.

Click here to download the PDF

In 1975 Peter Benchley's book about a big fish was turned into a Spielberg blockbuster. It scared the living daylights out of audiences worldwide. Jaws stopped people swimming in the sea. Its dramatic technique was to build tension - by not showing the shark, just threatening us with it. By the time we'd caught a glimpse of the Great White munching its way through the middle classes we were simply too frightened to think rationally about taking a dip in the cold waters off Fountainstown, Salthill or Bundoran –every coastal village was Amity, Jaws lurked in shallow waters and we were dinner. But by the time Jaws II hit the screens we were hooting in derision at the burning rubber that marked its ending. The Jaws period had passed. So too is the Greek’s.

Last year Greek default was touted as the Great White, ready to eat our banking system alive and, with it, tear into the fleshy corpse of Europe. The narrative suited Eurozone policymakers, buying time before the fiscal compact and ECB quantitative easing that marked the end of the beginning of the Eurozone crisis. Now Eurozone policy script writers talk fearlessly about Greek default and exit.

The Greek economy has already shrunk -16% and is on track to exceed Argentina's -20% ten years ago. But unlike Argentina, the Greeks, within the Euro, have no positive incentive, merely more poverty for years to come. Greece continues to play chicken with its creditors, refusing to close a €325m gap after already announcing cuts to minimum wage of 22% and slashing 15,000 jobs from its obese public sector. But despite closing its annual deficit, Greece has continuously failed to hit targets, not least of all selling off up to €60bn in state assets. It will require budget surpluses for years to come just to hit its annual interest bill estimated to cost over 6% of GDP. The alternative is default, Euro exit, rapid devaluation of a new Drachma and inflation. The Greek banking system would be wiped and with it much of its citizen’s savings. The choice facing Greeks is either a prolonged series of muggings over many years or a truly savage once off beating in the ghetto. It’s a horrific choice but that is the price when the political elite cook the books and borrow excessively to finance unaffordable lifestyles for a public sector paid three times the private sector, while turning a blind eye to endemic tax evasion.

The tough line being taken with Greece by fellow EU members reflects a huge shift in emphasis. In the early days it seemed that only Greece, Portugal and, Ireland required structural reform through austerity. Since then austerity has clamped its jaws around Spain and Italy and to a lesser degree to most other member countries. The jury is out on how deep or shallow the 2012 economic dip across the Eurozone €9.5 trillion economy will be, but one thing is clear – the Eurozone needs a winner in the internal devaluation game.

That's where Ireland comes in. Ireland must be seen to succeed. Read from that an imminent soft restructuring of Ireland's debt with particular emphasis on the promissory notes for Anglo. But that will not prevent the inevitable ending. Greece has shown that it is the last few billion in cuts that cause the most precious blood to shed. That is precisely what union chiefs have written into the narrative of Irish social solidarity. By pulling the entire public sector to the safety of Croke Park the most vulnerable among the rest are to be offered up as the sacrifice.

Eddie