Ireland - lessons from the recovery. You can watch the conference online now

http://www.imf.org/external/np/seminars/eng/2014/ireland/

Highlights

13.45 - 14.15 Keynote speech from Patrick Honohan

16 - 17.15 High Level Panel Discussion

Participants: Michael Noonan (Minister for Finance)

Benoît Cœuré (Board Member, ECB)

Valdis Dombrovskis (Vice President, European Commission)

Christine Lagarde (Managing Director, IMF)



The Central Bank of Ireland (CBI), Centre for Economic Policy Research (CEPR) and International Monetary Fund (IMF) are organizing a conference on “Ireland—Lessons from Its Recovery from the Bank-Sovereign Loop.”

The conference—which combines a retrospective on Ireland’s EU-IMF supported program with more forward-looking discussions—aims to draw lessons for Ireland, the European Union and the IMF, as well as other countries facing similar challenges.

The conference will be held in Dublin, Ireland, on Monday, January 19, 2015, at the historic Dublin Castle.

Participation in the conference is by invitation only. A live webcast of the conference will be available.

January 19, 2015
8.15
Registration and Welcome Coffee

9:00–9:15
Welcoming remarks

Brendan Howlin, Minister for Public Expenditure and Reform

Session 1

9:15–10:45

Stabilizing and Healing the Banks

What were the macroeconomic implications of the banking crisis and of policies to address the crisis? What lessons can we draw from banking policies in Ireland’s program in terms of stabilizing the crisis and bringing the banks to healthy operation? These policies include the recapitalization in the first half 2011 together with deferral of later stress tests, the restructuring into pillar banks and banks under resolution, the deleveraging of the going concern banks’ balance sheets over 2011-13, and the efforts to address nonperforming loans. What challenges remain to having a well functioning banking system?

Paper : Dirk Schoenmaker (Duisenberg School of Finance)

Moderator: Laura Noonan (Reuters)

Discussants: John Fell (European Central Bank)

Jonathan McMahon (St. James’s Place)

Ann Nolan (Department of Finance)

10:45-11:00

Coffee and tea

Session 2

11:00–12:30

Putting the Budget on a Sound Footing

What lessons can we draw from fiscal policies and their implementation in the program? Should the pace of fiscal consolidation have been faster or slower taking into account growth, debt sustainability, and political feasibility? Was the composition of measures appropriate? Have fiscal institutions and transparency been adequately strengthened? How best to complete the fiscal consolidation process?

http://www.imf.org/external/np/seminars/eng/2014/ireland/pdf/Fatas_BudgetSoundFooting.pdf (Paper) : Antonio Fatás (INSEAD)

Moderator: Dan O’Brien (Independent Newspapers and IIEA)

Discussants: Gillian Edgeworth (Wellington Management and St. Anthony’s College)

Tom Healy (Nevin Economic Research Institute)

István Székely (European Commission)

Robert Watt (Department of Public Expenditure and Reform)

12:30–13:45

Lunch

13:45–14:15

Keynote Speech

Patrick Honohan, Governor of the Central Bank of Ireland

Session 3

14:15–15:45

Ireland’s Market Access and Euro Area Policies

What lessons can we draw from the effect of European policies on Ireland especially regarding the loss of market access and it being subsequently regained? Such policies include limits on burden-sharing with senior bank creditors, large scale ECB funding, cuts in the interest rate and extensions of maturities on EU funding, the Promissory Notes deal, banking union and OMT? What lessons to draw for protecting Eurozone stability?

: Barry Eichengreen (University of California-Berkeley and University of Cambridge, UK)

Moderator: Seán Whelan (RTÉ)

Discussants: Alan Ahearne (NUI Galway)

Agnès Bénassy-Quéré (University of Paris, Council of Economic Advisers)

Colm McCarthy (University College Dublin)

15:45-16:00

Coffee and tea

Session 4

16:00–17:15

High Level Panel Discussion

Lessons from Ireland’s program for other countries and for Ireland going forward? Which policies were most successful and why? What should have been done differently? How did Ireland maintain sufficient social cohesion and avoid industrial strife yet still achieve overall strong implementation of the program? What needs to be done to secure Ireland’s full recovery from the crisis? How should these remaining challenges be addressed? What are the broader lessons for stability of the euro area?

Moderator: Wolfgang Münchau (Financial Times)

Participants: Michael Noonan (Minister for Finance)

Benoît Cœuré (Board Member, ECB)

Valdis Dombrovskis (Vice President, European Commission)

Christine Lagarde (Managing Director, IMF)

The first speaker isn't making much sense anyway

It’s time to write off Irish mortgage arrears, leading Dutch economist says

It's the Irish People are the heroes according to Christine Lagarde

Governor Honohan's paper - my summary

The bailout was a success



But reading social media would suggest otherwise. Such commentary is poorly informed.

Ireland has done much better than it might have, or than most of us expected.

This started as a high risk programme

It was acknowledged that it lacked a strong probability of success. Official IMF and Irish staff felt this.

Three reasons

1. The interest rate was too high

2. High tail risks of the loan portfolios of the Irish banking system

3. The speed of bank deleveraging could have imposed bigger losses on the banks through firesales

So a second bailout might be necessary.

But this was the least risky, least painful, option. No one was prepared to lend for a more gradual adjustment.

From the lenders’ point of view, it was worth taking the risk to avoid the spill over effect on other member states.

Fiscal adjustment had been underway for two years before the bail out.



How might it have been better designed?

There should have been a bail in of the Anglo and IN bondholders - but most of the bonds at the time

The benefit of a bail in has been hugely overstated. There was only €16 billion in bonds which did not have a government guarantee or which were not secured on assets. Anglo and IN accounted for less than 1/3rd of this €16 billion.

The overall fiscal cost of the bank guarantee is different from the overall cost of the bad running of the banks

The austerity is mainly due to the exchequer overspending and not due to the cost of the banks

The money put into the Irish banks has been put in at very low interest costs

Interest rates

The high rates imposed on Ireland put a strain on Ireland . From mid 2011, this was recognised and the rates were reduced and the repayment period extended.



Private sector debt – non performing bank loans

The troika felt that this should be done quicker.

We assumed that once the banks were recapitalised and the insolvency system. The banks would deal with the arrears on their own.

The delays in insolvency legislation allowed this to misapprehension to continue.

Progress has still remained slow.

There are two camps – one believes that it should be resolved by repossession, the other by rescheduling.

Banks are persistently optimistic that they will recover their money if they wait long enough.

House prices are recovering

The vigour of the recovery would be better if the banks took a more liberal approach



The rest is up to us – the Irish people

We are resilient and adaptable so I am optimistic about the future.

Brendan Burgess said:

Click to expand...

That paper by Barry Eichengreen is a great read. Really shows what went wrong in mostly easy to understand wording.