David McWilliams continues to make sense to me. What the Irish Govt has signed the nation up to – in paying 100% of private debt incurred by an out of control banking system – now amounts to ‘reckless trading’. It is immoral, unpayable, unjust and short-sighted. European banks and the ECB are deeply implicated in the mess – they lent to the reckless Irish banks after all.
The key issue this election is what the new Govt is going to do to separate private debt from sovereign debt in order to ‘save’ the ecomomy from descending into a hole it will take a generation to climb out of.
I agree that a Referendum on splitting private debt from sovereign debt should be the first thing a new Govt organises. It is obscene that the people have had no say in being forced to pay for vast amounts of private debt. With a certain huge NO vote, at least the new Govt can go to Europe to negotiate.
So ask yourself – which party is going to have the courage, toughness and vision to do this? Certainly not Fianna Fail which was the architect of the bank guarantee. Fine Gael and Labour are making some encouraging noises, but neither sound too convincing in grasping how radical the renegotiation needs to be.
His full article is well worth reading – here’s a clip.
It is obvious that Ireland is heading towards default (as close as a country can get to being insolvent) so racking up further debt, rather than trying to reduce it, is close to criminally negligent.
If a private company takes on debt when it is insolvent – ie, knowing that the company will not be able to meet repayments – it is known as ‘reckless trading’. If it can be proven in court that the company is trading recklessly, the directors of that company become personally liable for the debts.
If someone accuses the Irish government of ‘reckless trading’ by taking on debt we know we cannot pay, who will be brought to court?
We are now trading recklessly and we are hard-form insolvent. So we, the people, need to decide what we are going to do. Is it too late? Clearly not. There is more than €85 billion at stake. And there is a mechanism in the Constitution for this.
Article 27 provides for a referendum on ‘‘issues of national importance’’. We should be allowed to vote on this. None of the big parties are giving us this option now, but privately they too want to see the end of this. So there is a chance. Maybe the best thing a government could do after the election would be to call a referendum on the bank debt straight away.
This would give them the mandate to say to the ECB that we can’t do anything other than give the debt back to the people who own it.
The ECB, as faceless bureaucrats, would be stumped and the process of recovery would start. As someone who has worked in distressed debt markets for a large bank, I know the bond market would reward us for such a move by opening up and financing us readily.
The balance sheet would be strengthened based on bank debt renegotiation; therefore the sovereign would be saved from debt default and the game changed.
Only a referendum can deliver it. Now is the time.