What If Ireland Defaults?

BOOK: What If Ireland Defaults?
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What if Ireland Defaults?

“Beautifully written and surprisingly easy to digest, this book digs deep into the default debate. The insights into the consequences of default for Ireland are compulsory reading for the mandarins in Finance and the false gods of the NTMA. The detached views of such a distinguished cast of characters offer far more enlightenment than you would find at the Cabinet table.”

Shane Ross, independent TD, author and business editor of the
Sunday Independent

“This is a significant and timely written symposium from a very broad spectrum of opinion holders on the crucial issues for Ireland in respect of the viability of the ECB–IMF bailout and the consequences of its possible failure. Whether one hopes for failure or believes in success, and regardless of whether one agrees with some or none of the contributors, the articles are a must-read for citizens of an embattled society facing difficult but inescapable choices on the future of their Republic, and they will be quoted for years to come in the ongoing debate upon which we are launched.”

Michael McDowell, barrister and former Minister for Justice

“Sober, balanced, comprehensive, and heavy with facts,
What if Ireland Defaults?
is necessary reading for anyone who wants to understand how the world will deal with a future of fiscal crises and moral hazard.”

Dan Mitchell, senior economist with the Cato Institute

“Rather than hide behind the sofa every time the word ‘default' is mentioned, we need an intelligent discussion of what it means and doesn't mean for economies, societies and citizens. This book brings together a wide range of perspectives and fact-based analyses on a topic that will dominate policy debates for years. Read this, agree or disagree with the contributors, but let's start acknowledging that debt is an over-riding political issue.”

Michael Taft, research officer with UNITE

What if Ireland Defaults?

edited by

Brian Lucey, Charles Larkin and Constantin Gurdgiev

Published by

Orpen Press

Lonsdale House

Avoca Avenue

Blackrock

Co. Dublin

Ireland

e-mail: [email protected]

www.orpenpress.com

© Brian Lucey, Charles Larkin and Constantin Gurdgiev, 2012

Paperback ISBN 978-1-871305-48-7

ePub ISBN 978-1-871305-52-4

Kindle ISBN 978-1-871305-53-1

A catalogue record for this book is available from the British Library. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior, written permission of the publisher.

This book is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, resold, hired out, or otherwise circulated without the publisher's prior consent in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the subsequent purchaser.

Printed in the UK by MPG Ltd.

Brian –
To my wife, Mary, my support in all

Charles –
To my parents and Jane for their help and support

Constantin –
To my wife, Jennifer Hord, for her infinite patience and support

We would like to acknowledge our contributors, editors and all those who made this book possible.

Please note that all dollar amounts are in US dollars unless stated otherwise.

Table of Contents

List of Acronyms

About the Contributors

Introduction

Setting the Scene

1. Debt, Crises and Default from a Parliamentary Perspective

Sean Barrett

2. Crises and Contagion: A Survey

Anzhela Knyazeva, Diana Knyazeva and Joseph Stiglitz

Ireland

3. Debt Restructuring in Ireland: Orderly, Selective and Unavoidable

Constantin Gurdgiev

4. Ireland's Public Debt – Tell Me a Story We Have Not Heard Yet …

Seamus Coffey

5. A very Irish Default, or When Is a Default Not a Default?

Stephen Kinsella

6. How to Survive on the
Titanic
: Ireland's Relationship with Europe

Megan Greene

Country Studies

7. The Russian Crisis and the Crisis of Russia

Constantin Gurdgiev

8. Iceland: The Accidental Hero

Elaine Byrne and Huginn F. Þorsteinsson

9. Irish Public Debt: A View through the Lens of the Argentine Default

Tony Phillips

10. Coring out the Big Apple: New York's Fiscal Crisis

Sam Roberts

11. When Cities Default …

Marc Tomljanovich

Perspectives

12. A Market Participant's Perspective on Debt and Default

Peter Brown

13. A Mortgage Broker's Perspective on Debt and Default

Karl Deeter

14. The IMF and the Dilemmas of Sovereign Default

Gary O'Callaghan

15. A Politician's Perspective on Debt and Default

Peter Mathews

16. A Financial Journalist's Perspective on Debt and Default

John Walsh

17. A Behavioural Economist's Perspective on Debt and Default

Michael Dowling

18. A Political Activist and Businessperson's Perspective on Debt and Default

Declan Ganley

About the Book

List of Acronyms

BIS
Bank for International Settlements
CADTM
Committee for the Abolition of Third World Debt
CBI
Central Bank of Iceland
CIS
Commonwealth of Independent States
COMECON
the common trade area of the former Warsaw Pact
DCU
Dublin City University
ECB
European Central Bank
EFSF
European Financial Stability Facility
EFSM
European Financial Stability Mechanism
ESM
European Stability Mechanism
FÁS
Irish National Training and Employment Authority
FDI
foreign direct investment
GDP
gross domestic product
GGD
general government debt
GKOs
Russian state-issued short-term bills
GNI
gross national income
GNP
gross national product
HIPC
Heavily Indebted Poor Countries
HIRC
Highly Indebted Rich Countries
IBRC
Irish Bank Resolution Corporation
IMF
International Monetary Fund
ISK
Icelandic krona
LTV
loan to value
MAC
Municipal Assistance Corporation (New York)
MNC
multinational corporation
NAMA
National Asset Management Agency
NPRF
National Pension Reserve Fund
NTMA
National Treasury Management Agency
NYC
New York City
OECD
Organisation for Economic Co-Operation and Development
PSI
private sector involvement
S&P
Standard and Poor's
SDRM
Sovereign Debt Restructuring Mechanism
UCD
University College Dublin
UDC
Urban Development Corporation (New York)
WPPSS
Washington Public Power System Supply

About the Contributors

Brian Lucey
is professor of Finance in Trinity College Dublin and a prolific author and commentator on financial and banking issues. He has worked at Trinity since 1992. Prior to that he was an economist at the Central Bank of Ireland (1987–1992), and before that an administrative officer in the Department of Health (1985–1992). He has a BA in Economics from Trinity College Dublin (1985), an MA in International Economics, Trade and Politics from University College Dublin (1988) and a PhD in Finance from Stirling University (2003).

Charles Larkin
is a research associate and adjunct lecturer in the School of Business, Trinity College Dublin, as well as at the National University of Ireland, Maynooth, and at the ESC Toulouse School of Business, France. Charles is also a special adviser on economic policy matters to Senator Sean Barrett. Charles' main areas of research are political economy and public policy. He was awarded his PhD in Economics from Trinity College Dublin in 2008. He is a regular contributor to the Irish media and is co-author with Professor Colm Kearney of
The IMF and Nicaragua: Development Where People Matter
.

Constantin Gurdgiev
is the head of research for St. Columbanus AG, a Swiss-based asset management firm, and the adjunct professor of Finance in Trinity College Dublin. He currently serves as the chair of the Ireland Russia Business Association, and holds non-executive appointments on the investment committees of GoldCore Ltd (Ireland) and Heinz Global Asset Management LLC (US). Constantin also lectures in the Smurfit Graduate Business School, University College Dublin and serves as a visiting professor of Finance in the Russian State University. In the past, Constantin served as the head of macroeconomics with the Institute for Business Value, IBM, director of research with NCB Stockbrokers Ltd, and group editor and director of
Business & Finance
Publications. Born in Moscow, Constantin was educated in the University of California, Los Angeles, University of Chicago, Johns Hopkins University and Trinity College, Dublin. He writes a daily blog at trueeconomics.blogspot.com and a number of regular columns in the international and Irish press.

Sean Barrett
is the current senior lecturer in the Department of Economics, Trinity College Dublin and has enjoyed a distinguished career in academic circles along with holding high-ranking positions outside of the college, many of which have had a direct effect on transport policy and the tourism industry of Ireland. After graduating from University College Dublin in 1973, Sean went on to obtain a Masters at the highly regarded McMasters University in Canada before returning to UCD to gain his PhD in Economics. Following the completion of his studies, Sean took up the post of lecturer in the Department of Economics in Trinity College Dublin in 1977 and has gone on to enjoy a 34-year-long career in the college. Over the course of his career Sean has made a reputation for himself as one of the foremost economists in Ireland. With over eighty-five different publications, mostly on his expert topics of transport and social policy, he is one of the most published economists in Ireland. However his achievements in economics have not just been limited to academic discourse, as he has been a key figure in legislation, most notably in his role as director of Bord Fáilte in 1984, where he was instrumental in the successful deregulation of Irish airlines, and his role as a vital member of the National Economic and Social Council since 2005. He was elected to Seanad Éireann by Trinity College graduates in April 2011.

Peter Brown
is former chief dealer and head of the treasury team in Barclays Bank. He is also the co-founder of the Irish Institute of Financial Trading. Peter is currently the main lecturer in the Irish Institute of Financial Trading, specialising in trading courses. His media profile as a financial commentator has led to him being highly sought after by media in Ireland, the UK and continental Europe. Peter gained his extensive trading knowledge working in Citi Bank, Banque National de Paris, Ulster Bank and ten years in Barclays Bank. He experienced firsthand the British pound crisis of 1990s, giving him deep insight as to how the markets will react to the current Eurozone debt crisis.

Elaine Byrne
is an adjutant lecturer at the Department of Political Science at Trinity College Dublin, where she has taught Irish Politics and Comparative Political Reform. Elaine has acted as a consultant for the United Nations, the World Bank, Transparency International and Global Integrity. Her first book,
Political Corruption in Ireland 1922–2010: A Crooked Harp
(Manchester University Press), was published in 2012. Elaine is a regular political columnist and her by-line has featured in the
Irish Times
,
Sunday Times
,
Sunday Business Post
,
Sunday Independent
,
The Times
and
The Guardian
. She is a regular contributor to Irish and international radio and television on Irish political affairs. Elaine combines her academic and media work as a political reform campaigner. Her advocacy work can be accessed at
www.politicalreform.ie
(co-editor) and from the deliberative democracy initiative
www.wethecitizens.ie
(co-founder). Her portfolio can be accessed at
www.elaine.ie
.

Seamus Coffey
is a lecturer in the School of Economics in University College Cork. His teaching ranges across undergraduate and postgraduate courses with a particular emphasis on the relationship between government and the economy for undergraduates and applied statistical techniques for postgraduates. He is the programme director for the MSc in Health Economics, which has been running since 2007. His primary research area focuses on access to and utilisation of health services in Ireland and he is currently undertaking a PhD on this topic with the University of Manchester. He is a frequent contributor to the broadcast and print media on the ongoing crisis in the Irish economy.

Karl Deeter
is a native of Los Angeles who now calls Ireland home. He has spent his career in financial services, having started in insurance and then moving to retail brokerage and accountancy. He is known for mortgage commentary on behalf of Irish Mortgage Brokers. He is also the head of client advice at accountancy firm Advisors.ie. Karl is a qualified financial advisor; he holds a Mortgage Diploma and a Certificate in Compliance, he is a part-qualified accountant, and he is also working towards a qualification in Islamic Finance. Prior to professional qualifications he studied at Dublin Institute of Technology, obtaining a Certificate and Diploma in Management.

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