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  • irishtimes.com - Posted: November 24, 2010 @ 7:00 am

    Still waiting for “new faces” in Government, S&P downgrades Ireland

    Laura Slattery

    Poor Frank Gill. The Standard & Poor’s sovereign debt analyst was one of the first people to set our democracy alarm bells ringing when in March 2009 he surmised there was a need for “new faces” in government. This rare example of simultaneous perceptiveness and gall outraged the Dáil, which can usually only muster up the latter. In any case, that was way back when S&P’s best brains were cutting Ireland’s credit rating to a now covetable ”AA+”. Things have moved on, in the markets’ eyes at least. Shortly before midnight last night, the ratings agency downgraded Ireland from “AA-” to “A”, outlook very much negative.

    And, no, an A is not good, as I wrote here, back when it was still possible to be glib about these things.

    The statement by Standard & Poor’s makes little mention of political instability, with just a quick, throwaway blackmail about Ireland’s credit ratings coming under “renewed pressure in the short term should the domestic policy consensus weaken”. You will be shocked to discover that neither the sensitivities of Dermot Ahern and Noel Dempsey, nor Paul Gogarty and his unpredictable childcare arrangements, nor Brian Cowen’s sexist remark about Joan Burton, make the cut. Instead, Frank Gill emphasises that the lower ratings “reflect our view that the Irish government will have to shoulder additional costs associated with further capital injections into Ireland’s troubled banking system”. By Irish government, he means us.

    The statement says lots of other nasty things too, although none of this will surprise anyone at this late stage of the game, what with Bank of Ireland set to join Anglo Irish Bank, AIB et al on the roster of failed, nationalised institutions that we will desperately try to offload on anyone rich enough and brave enough.

    Despite the speed at which events are unravelling, this may not happen overnight. ”In our view, Ireland’s banking system will take several years to downsize,” says Gill. “The outlook for future costs to the government from financial retrenchment remains uncertain.” (Some commentators are talking about a quarter of a trillion, all in.) Meanwhile, ”the high overhang of private debt, fiscal austerity and the uneven outlook for external demand in Europe” means that S&P now expects “close to zero nominal GDP growth for 2011 and 2012″.

    Frank’s still waiting for his “new faces”, as are we. In some ways, it’s comforting that an organisation whose clients are the power-crazed, plutocratic institutions we know as “bondholders” has been even more naive than local democracy fans when it comes to the office-clinging abilities of Fianna Fáil. On the other hand, a general election or no general election – pffft. Worryingly, it now seems that bit more irrelevant to the credit ratings agencies and their institutional investor paymasters.

    Standard & Poor’s will hold a teleconference on its downgrade decision at 3.30 pm today, although frankly I’m planning on training the full leaden weight of my gloom in the direction of the gothic horror that is the four-year austerity plan – upon which you will find news updates and commentary at www.irishtimes.com, here at The Index blog and on twitter.com/IrishTimesBiz.

    • paul m says:

      forget new faces in government. that’ll take another few years for that to materialise unless someone has hidden an O’Bama in the party offices to be launched on the electorate. New faces in the banking sector would be a more realistic short term achievement.

      The Credit Union could do with be restructured as a bank similiar to how the Cooperative Bank operates in the UK. The Cooperative also dont expose themselves to futures trading or excessive market trading, hence they didnt get burned in the crash. They also have agm’s that any member of the bank, not just shareholders, can attend and see how the bank is performing, costs, etc, similar to how the CU works here. They also have a code of ethics which determines who they lend to based on their business practises ( i imagine developers may have been added to the blacklist by now).

      There is a lot of trust in a system that involves every member at every stage, that has members working behind the counter too, and is more community based in supporting businesses and individuals with loans supported by other members savings. The Post office used to be like this too and its a shame post bank closed up its services here as they would have been an institution that could have had the network of branches in every community similar to the current bank branches, plus it would bankroll the post offices meaning no closures in areas that badly need it. Just as small businesses are the backbone of this country smaller bank branches like the post office or CU could provide feeding into a larger umbrella network would create the credit flow again that is badly needed.

      Sell AIB, Nationalise BOI and merge the others sounds good to me. Bye bye disgusting inflated imaginary profits, hello banking how it used to be.

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