Liquidation of the Republic, and the Irish banks?

Even Citigroup economists and Sinn Féin MEPs are not immune to schoolboy errors

Willem Hendrik Buiter: Citigroup chief economist

Willem Hendrik Buiter: Citigroup chief economist


Citigroup chief economist Willem Hendrik Buiter ranks among the bigger creatures in the global economic commentariat, a worldly man of abundant opinion and no little aplomb. But that’s not to say to he’s infallible.

In a learned paper on the inexorable advance of the central banker in these hardy times, Buiter makes a rather forceful case for the containment of last-resort lenders and increased transparency in their arcane world.

“Central banks in most of the advanced economies have become too powerful, mainly as a result of systemic political failures in Western European and North America,” he writes.

Buiter won’t find many people in Ireland to dispute any of that, though he errs quite fundamentally when making the point that the eventual exit of a disgruntled euro-zone member from the single currency must be more than a tail risk. “If Scotland can get within an inch of exiting a 307-year-old political union with England, Ireland and Wales, it is not inconceivable that any euro-zone member state could exit a 15-year-old monetary union.”

Yikes. Buiter, who is based in New York, was in Dublin only last January but he seems to have forgotten all about Ireland’s independence. Was he not asked for his passport at the airport? Did he not spend euro here? After all, this fellow is supposed to have a brain. We’ll forgive him for this, but just once. Any guru can have a bad day.

The thing about schoolboy errors, of course, is that they are not the preserve of schoolboys. Which brings us quite neatly to a press release last week from Sinn Féin MEP Matt Carthy in which he huffs, puffs and wags a finger about that particularly nauseating letter of November 19th, 2010, from one Jean-Claude Trichet to the late Brian Lenihan.

The ECB people had better watch out. Carthy is a member of the economic and monetary affairs committee of the European Parliament, so he’ll be holding the Frankfurt crowd to account. He really will – or so he says .

“A number of questions need to be answered in relation to this matter, namely, the legality of the approach taken by the ECB towards Ireland, particularly in setting down conditions for providing emergency liquidation to Irish banks.”

Emergency liquidation? That should be emergency liquidity, the objective of which was to prevent any bank from sliding into liquidation, a disaster in all its forms.

No one’s perfect, eh? The Sinn Féiner would certainly be aghast at Buiter’s Irish oversight – and the man himself from Citi would be equally aghast at Carthy’s unique insight into the ECB’s efforts to prop up Ireland’s addled banks.