Terry Connelly is dean of the Ageno School of Business at Golden Gate University and is frequently quoted on business, financial, and economic issues by Bay Area local, as well as national, news media.
You can bank on Ireland — that is, if you’re an Irish Bank. The Irish Government has bailed out its banks to the extent that makes America’s TARP program seem like little more than a drop in the bucket. And in doing so it has nearly bankrupted the country’s treasury and along the way exposed its citizens’ to the harsh reality of fiscal austerity. Moreover, it has managed to preserve Ireland’s status as a low-tax location for multinational corporations, with a 12% corporate income tax rate. Mercantilism meets the Tea Party!
The only problem is that good old credit default swaps have called a halt to the Irish sweep-under-the rug-stakes — and the same derivative vigilantes have called the question on the Euromarket leaders (sic) in terms of whether the Irish funding crisis will pull down the whole Euro structure once again as was threatened in the case of Greece before the Germans (aka Europe) and the ECB got together with the bloodhounds from the International Monetary Fund to pony up a big league bailout fund (l’ ‘TARP, c’est moi!) — with strings attached.
It’s hard to see what more austerity the IMF folks can levy on the suffering Irish citzenry, but it’s not hard to imagine what they might do to their banks’ bondholders, who thus far have escaped Scot (should we say Irish?) free. Moreover, it would also seem that in terms of the revenue side of the Irish ledger, the heyday of the low corporate tax rate may be just about up. That’s what the Irish PM and his colleagues may have been fighting to hold on to, but it seems they are now backed into a corner by the comments of their own Central Bank head, who has conceded a bailout of substantial proportions must be forthcoming. The jig is up.
Not coincidentally, the imminent resolution of this Irish Kabuki will put an end to the rumors game the too-short-the-market US hedge funds have been running against the US stock market the past few days. November, as it runs out, isn’t May, even when the Chines coopoerate with a little price-control Kabuki of their own, which turned out to just about food and not about the harder commodities.
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