Sunday, March 8, 2015

Water Charges Garner Ire of Ireland

The long suffering Irish may finally rise up over water.  NYT reported:

Since the banking crash of 2008, they have borne big tax increases, severe cuts in public services, mass unemployment and the large-scale emigration of their children. A 2012 study by the International Monetary Fund found that Ireland was in the “undesirable position” of owning “the costliest banking crisis in advanced economies since at least the Great Depression.” And it was “still ongoing,” imposing a huge public debt and dire fiscal costs on Irish citizens.

Irish citizens are angry about having to pay for that which Mother Nature provides for free.  BBC News reported:

Raising money from water charges was a condition imposed on Ireland by the EU-IMF-ECB troika as part of the country's bailout in 2010 following economic collapse.

Should charging citizens for water involve the very same practices that contributed to the financial crisis?  Irish Times reported:

The Government has not been helped by Irish Water itself, an entity which seems to have gone out of its way to demonstrate that the lessons of the banking crisis have not been learned.
See if this sounds familiar (Irish Examiner):

Finance Minister Michael Noonan has admitted that €490m meant for local services is to be diverted into Irish Water.

Nearly 300 staff at Irish Water are entitled to bonuses of some €2.1m. Mr Martin said Irish Water was like a “secret service” until facts began to trickle out during the row over the €180m start-up costs, almost half of which will go on outside consultants

“The Taoiseach’s spokesman said the same, namely, that no bonuses would be paid. We then learned, yes, bonuses will be paid, that the Government approved the payment of bonuses, and that the Economic Management Council approved the structure of the establishment of Irish Water as a subsidiary of Bord Gáis, resulting in the reality of bonuses being paid.” 
It harkens Lehman Brothers after the crash, where executives got massive bonuses for driving their company into the ground and rhe Fed provided $138 billion in loans.  The financial crisis has a direct link to the Irish having their dander up over water (NYT):

There is a deep sense of injustice at being turned into one of the most indebted nations on earth in order to rescue international bondholders who gambled on rogue Irish banks. There is the way the pain has been inflicted most deeply on the poorest people — the last four government budgets have been regressive, hitting those on the lowest incomes hardest. There is the bitterness of yet again having to export the country’s greatest asset: its talented, highly educated young people.

Above all, there’s the gap between the Irish story and the Irish experience. The story is upbeat — austerity works. The experience is rather different.
How much did international bondholders, including Goldman Sachs, Barclays, Credit Suisse, HSBC, BNP Parnibas and others, benefit?  ECB President Mario Draghi stated in a letter dated February 17, 2015:

With proposals to gain in the region of €1.75 billion from burden-sharing with these bondholders, the ECB’s opinion was, and still is, that such gains were insufficient to warrant the risk of the unknown and unquantified costs of burden-sharing at a critical juncture in the Irish macroeconomic adjustment programme, given that the pillar banks had just been recapitalised and the system was being stabilised.
So bankers behaved badly and that same group, as holders of other banks notes, needed to be bailed out.  Irish people likely don't want to pay the price that bad actors never paid.

The stories of Lehman and Bear Stearns will undoubtedly remain in the annals of financial disaster for many years to come. To understand what has happened, and what lessons should be drawn, it is important to get the facts right. In contrast to what has been commonly assumed thus far, the top executives of those two firms were not financially devastated by their management of the firms during 2000-2008. They were able to cash out rather large amounts of performance-based compensation, both from bonuses and from share sale, during the years preceding the firms’ collapse. This cashed-out performance-based compensation was large enough to make up the losses on the executives’ initial holdings in the beginning of the period. As a result, the executives’ net payoffs from their leadership of the firm during 2000-2008 were decidedly positive.
There is gold at the bottom of an Irish rainbow.  It's the trickling water, which financial powers (who screwed things up to begin with) want monetized.   I can see why the Irish are angry.

Update 3-22-15:  Over 80,000 Irish citizens protested new water charges in Dublin.