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Enda Rules it Out. Absolutely.

Posted on: January 15th, 2012

GOOD Christian that he is, Enda Kenny is surely a believer in the Second Coming.

Good citizen that the Taoiseach is, he is surely equally a believer in the second bailout of Ireland?

I hate to point out to him that there is far stronger evidence for the inevitability of the second bailout than for the second coming. And the second bailout is, sadly, probably a little more imminent.

Enda thinks the second coming will arrive first.

His blind faith has led him into porky country. And in a week when porkies were two- a-penny, Enda was the star performer.

It was a close-run thing. He was nearly pipped at the post by Ulster Bank.

Last Wednesday, the Ulster Bank decided to lay off 950 staff. Like all bankers, the top dogs blamed “global and local economies”. Nothing to do with Ulster Bank, of course.

Prior to the announcement, when asked if redundancies were on the way, a sniffy spokesman brazenly insisted that Ulster does not do “speculation”. Quite a porky from one of Ireland’s and the UK’s top speculators. Its parent company, RBS, was bailed out by the UK taxpayer after recording a loss of €24bn — the biggest in British corporate history. Most of the loss was due to “speculation”.

Ulster itself followed its parent’s lead, losing hundreds of millions in Ireland after a bout of property lending to high-profile borrowers like Bernard McNamara and Liam Carroll. The sight of the plutocrats in Ulster looking down their noses on speculation in any context is a bit rich.

Not quite as rich as Taoiseach Enda Kenny’s denial of a second bailout.

Last Thursday Enda went to London to mend fences with British Prime Minister David Cameron. The current occupant of Downing Street is reported to be miffed that Enda fled from the Anglo- Saxon corner at the last European summit. After Cameron’s opt-out from the European fiscal compact, Enda is scared stiff that the City of London will escape the Sarkozy-Merkel plot for a financial transaction tax; that Dublin will be clobbered by the measure and that financial service companies located in Dublin’s IFSC will desert to a far more tax- friendly City of London.

So Enda took a hasty trip to Downing Street to butter up Cameron. He addressed a Reuters beano with cliches about the harmony between our two nations and with waffle about how essential it was for the UK to remain at the heart of Europe.

Unfortunately the awkward press corps did not give a hoot about Enda’s inanities/overtures, but were keen to know the chances of a “second bailout” for Ireland.

Enda was forced to peddle a porky. He “absolutely rules it out”.

Enda was on the back foot. The planned cosy rendezvous with Cameron had been hijacked by Dublin’s latest domestic controversy about a second bailout.

Enda went into denial mode. And no one believes him. Except Michael Noonan and a handful of loyalists.

The controversy was sparked by the arrival of an impolite visitor. Top Citigroup economist Willem Buiter flew into Dublin on Monday, dropped a bombshell and exited. Buiter started the ball rolling downhill by predicting that Ireland would need a second bailout on “non-market” terms — meaning more help from the Troika.

It was terribly tactless timing by Buiter, on a day that the Troika was back in Merrion Street examining the nation’s books to see if we were keeping to the terms of the first bailout.

Cabinet ministers were reported to be furious with the visiting Citigroup economist. Michael Noonan must have been especially incensed. While the Troika was camped in his Merrion Street office he denounced the sudden talk of a second bailout as “ludicrous”, adding that we were fully funded until 2013.

Enda and Michael were frantically trying to roll the ball back up the hill. They were joined in their unconvincing effort by a spokesman for Olli Rehn, European commissioner for Economic Affairs. No surprise there, Olli being one of the architects of the first bailout.

And that is just about where the salvage operation stopped.

Mr Buiter is far from a lone voice predicting a second bailout. The ranks of independent commentators have lined up on the side of the Citigroup man.

Most powerful of all the signals is the message from the market. Currently Irish 10- year bonds are trading at 7.75 per cent and two-year bonds at 5.5 per cent, rates suggesting that there is little hope of Ireland repaying its debts within the promised period. The markets are the most coldly detached judges of all. They are giving Ireland the thumbs- down.

Why ? Well, ruthless bond dealers are looking at Ireland’s shrinking growth forecasts, rating the possibility of our meeting the targets as slim.

Perhaps they have been reading last week’s Ireland 2012 Outlook report from Goodbody Stockbrokers. Its predictions were gloomy. Goodbody’s slashed their growth forecasts for 2012 by half, from 1.3 per cent to 0.7 per cent. The brokers predicted that Ireland will miss its target of cutting its deficit to 3 per cent of GDP, a key condition of the deal with the Troika and that domestic demand will remain weak.

Goodbody, yet another independent observer, is adamant that “if current policies continue, there will be a need for a second aid package”.

Unfortunately for Enda and Michael, other independent players have stampeded into the ranks of the non-believers.

As long ago as last July Moody’s ratings agency downgraded Ireland’s credit rating because of the “growing likelihood” that Ireland will need more bailout aid in late-2013 when the current rescue ends.

The loyal old mandarins in the Department of Finance were furious.

No doubt they were equally angry when Professor Tony Foley, another independent economist –this time from Dublin City University — claimed on Wednesday on RTE’s Morning Ireland that a second bailout was “inevitable” and insisted that we should be praying that the Troika would be willing to facilitate it.

But the killer blow came when RTE revealed mid-week that US Treasury Secretary Tim Geithner was warned by his officials that the first Irish bailout could be derailed by poor growth and a lack of Government spending.

The “second bailout” contagion is out of hand. Independent voices from everywhere are coming to a consensus. The Cabinet and its puppet agencies are isolated.

The Government can still seek refuge in the support of its puppets. Puppet number one (the Department of Finance) is still stubbornly forecasting growth of 1.3 per cent. Puppet number two, the overpaid sycophants in the National Treasury Management Agency, are stating that the NTMA “shares the minister’s view that speculation on a potential second bailout is without merit”.

What a surprise. Overrated civil servants rarely challenge their masters.

Bond dealers’ livelihoods depend on getting the market right. Civil servants need to please their employers. Whose judgement is more credible? The markets or the puppets?

Willem Buiter, the independent economist from Citigroup, warned his audience last Monday that Ireland should prepare for the second bailout. Enda would prefer to take his chances on the Second Coming.