Inside the world of business
Top economists' useful reminder
WHAT IS surprising about Nouriel Roubini and Ken Rogoff’s entreaties to Ireland to burn its senior bank bondholders is not that they hold such views – they have said it all before – but that their views are being ignored so consistently. The support programme agreed between Ireland, the International Monetary Fund and the EU expressly rules out any such move. Likewise the various proposals for overhauling the EU rescue mechanism currently circulating all seem to rule it out.
Their basic premise that Ireland cannot afford to repay the senior bondholders is hard to argue against, as is their view that there is no compunction – moral or otherwise – on us to do so. Where the two pundits seem to part company with the new orthodoxy is that they don’t accept it is in Ireland’s wider interest not to initiate a European banking crisis by burning senior bondholders. They may not be aware that the horse has bolted to a certain extent with much of the Irish banks’ senior debt repaid by loans from the ECB. But their agitation serves a very useful purpose in so far as it is a reminder that Ireland’s decision not to act in its narrow interest puts an obligation on the rest of Europe to help engineer a solution to the problem of Ireland’s debt burden.
Good news from Greece for Aer Lingus
SOME GOOD news yesterday for the board of Aer Lingus with the European Commission’s decision to block the merger of Greek airlines Aegean and Olympic.
The pair control more than 90 per cent of Greece’s air travel and the commission decided that a tie-up between the two could lead to higher fares and reduced competition for consumers.
It had echoes of its decision to reject Ryanair’s first bid for Aer Lingus in 2006 – a second one was withdrawn in 2009 before it was referred to Brussels.
Ryanair chief executive Michael O’Leary stated that a third bid was unlikely unless the Government, which owns 25 per cent of Aer Lingus, was prepared to give its support.
This seems unlikely in the short term, although who knows what the new government will do.
In the meantime, Aer Lingus will be pleased that a second intracountry airline merger has been shot down as it seeks to fend off Ryanair’s advances.
O'Keeffe's parting shots prove to be cheap ones
FIANNA FÁIL’S chief internal critic Ned O’Keeffe is not seeking re-election after three decades and delivered a lengthy swansong to the Dáil yesterday. In it he railed against two of his favourite targets – Central Bank governor Patrick Honohan and head of financial regulation Matthew Elderfield – in whom he once again claimed to have no confidence.
Honohan was lashed for seeking out potential Chinese investors for the Irish banks, while Elderfield was accused of having a similar attitude to Ireland as Oliver Cromwell. Indeed.
One look at Irish bond yields shows our international credibility is still at rock bottom but strong regulation is one of the key factors in helping us recover. In the run-up to the IMF-EU bailout Honohan was the only public figure who provided leadership. Early in his reign Elderfield, with the appointment of an administrator to Quinn Insurance, showed he wasn’t afraid to tackle the tough issues head on. Hopefully the next Dáil will contain more deputies willing to support regulators in ushering in a new era of corporate governance rather than undermining them with cheap shots.
