New Zealand Prime Minister – John Key’s – Part In The Predatory Financial Invasion Of Ireland And What He Has Planned For The People Of New Zealand

To know what John Key and his banking fraternity co-operatives hope to orchestrate in New Zealand you must first learn how the partnership developed (information in bold is most relevant but entire articles included so as not to be accused of being taken out of context).

John Key And Private banking affiliations

From his own parliamentary Biographies;

“John launched his investment banking career in New Zealand in the mid 80s. After 10 years in the New Zealand market he headed offshore, working in Singapore, London and Sydney for US investment banking giant Merrill Lynch. During that time he was in charge of a number of business units including global foreign exchange and European bond and derivative trading. In 1999 John was invited to join the Foreign Exchange Committee of the Federal Reserve Bank of NY and on two occasions undertook management studies at Harvard University in Boston.”

http://www.beehive.govt.nz/minister/john+key?bio=1

MERRILL LYNCH HIRES THREE KEY MANAGERS TO BOLSTER GLOBAL FOREIGN-EXCHANGE SERVICE

March 31 /PRNewswire/ — Merrill Lynch & Co., Inc. (NYSENYSE

Joining the foreign-exchange group are Directors John Key, formerly of Bankers Trust, as Regional Head of Merrill Lynch’s Singapore-based Asia-Pacific operations; Graham Edwards, formerly with Goldman Sachs, as Head of Sales in London; and Shizuo Onishi, formerly with Chase Manhatten Bank, as Co-Head of the Japan unit.

Joseph Argilagos, Managing Director in charge of Merrill Lynch’s Global Foreign-Exchange Group, said the moves reflect the firm’s commitment to provide clients with top-level service in the execution of major currencies, currency options and emerging-market currencies worldwide.

“The addition of Messrs. Key, Edwards and Onishi is the most recent effort by Merrill Lynch to enhance its already-formidable lineup of foreign-exchange professionals who can advise clients at any time, from any place around the world,” Mr. Argilagos said.

Mr. Key, 33 years old, had been Director of the Financial Markets Group of Bankers Trust New Zealand before joining Merrill Lynch. “John’s wealth of experience and contacts within the time zone enhance Merrill Lynch’s regional investment in the local Asia-Pacific markets and currencies,” Mr. Argilagos said.

As part of an effort to bolster Merrill Lynch’s commitment in Japan, Hitoshi Yoshida, 36 years old, moves to Tokyo as Co-Head of the Japan Foreign-Exchange Group from Singapore where he was Merrill Lynch’s Head of Foreign-Exchange Trading. Mr. Yoshida will share his new role with Mr. Onishi, 45 years old, who will be based in New York. Joining Mr. Onishi in New York is Yasuko Kanda, 29 years old. Ms. Kanda, a Vice President, also comes to Merrill Lynch from Chase Manhattan Bank.

“The Yoshida-Onishi team strengthens our presence in Japan,” Mr. Argilagos said. “It also enables us to provide seamless, high-quality, 24-hour coverage of the currency markets in both Tokyo and New York.”

The addition of Mr. Edwards, 31 years old, is an indication of Merrill Lunch’s on-going effort to increase the quality of service provided to foreign-exchange clients in Europe, Mr. Argilagos said.

Merrill Lynch offers investment, advisory and related services to individual, corporate, institutional and governmental clients through a network of more than 500 offices in 38 countries. Worldwide, clients have entrusted Merrill Lynch with more than $568 billion in assets as of year-end 1994.

-0- 3/31/95

/CONTACT: Richard T. Silverman, Media Relations of Merrill Lynch, 212-449-9205/

(MER)  CO: Merrill Lynch & Co., Inc. ST: New York IN: FIN SU: PER

John Key – The Unauthorised Biography

Weekend Herald Sat July 19 2008

Into the big time

It was 1995. Again Key blasted through the ranks. His confidence was legendary. London-based senior executive Steve Bellotti visited, and when he asked what the new recruit thought of the company’s FX performance, he was direct. “It sucks!”

Bellotti, a fast-talking Australian from Gympie, near Noosa, said: “If you’re so clever I’ll send you up to head office in London, and if you don’t make it in 12 months, I’ll sack you.”

Key shot back: “If I don’t make it in 11 months, I’ll quit.”

Bellotti made him global head of foreign exchange and he revolutionised the “blue blood” investment banking sector. “There was this massive opportunity to cross-sell the firm,” says Key.

“We’d go to these fund managers and we’d talk to them about equities, but we wouldn’t necessarily leverage foreign exchange – and when we did, they’d say our capability wasn’t that good.

“So I wandered up to London and said, ‘we’re going to go interbank FX – make prices to the other banks’. Morgan Stanley, Goldman Sachs and Merrill Lynch, the blue-blood investment banks, didn’t do that,” he explains. “We actually took on the big banks, Citibank, Chase, then we went and hired their staff and went to their clients and told them ‘look, we’ve got all those same capabilities as Citibank in FX and options. Plus we had this beautiful thing going because we were the first to supply margin trading to big hedge funds. We had the capability to cross-sell them several products using one bit of margin.”

Remembers Bellotti: “I brought him to London and he shot the lights out there too. Within three to four years Merrill Lynch, London, was regarded as one of the premier businesses.”

Key explains: “I had a whole lot of people working for me who were at the cutting edge of delivering quite complex and new and innovative products. They tended to either be a new product or into a new market, usually the emerging markets, Russia, Brazil, Argentina. I wasn’t the guy sitting there dreaming it all up, but I was the guy who was responsible for those people.” Did he foresee the problems which resulted in the sub-prime crisis? “Was it hard to predict? Not really.”

The products which underpinned the sub-prime boom – then bust – were hatched in 2004-2005, long after Key had left Merrill. Indeed, he says when he went back to London in 2007 he was “horrified” at the level of risk Merrill was running. “It was enormous and I just didn’t think that enough had changed to warrant that level of risk.”

Back in the late 1990s Key was in his element, working at the centre of the universe for FX. He presided over around 140 dealers trading billions of dollars a day. The Asian markets came in in the morning and New York in the afternoon. “Within two years we went from being 43 in euromoney to number three,” Key says.

“He never mucked up,” says Bellotti. “Although they lost money, as you do, he never panicked, never stressed out, just did his job.”

Geoff Massam, a New Zealander then running the IT part of Merrill Lynch’s FX business, now with Deutsche Bank in Connecticut, remembers how Key would be on the phone to the Governor of the Reserve Bank, Don Brash: “Though he wouldn’t do it in a name-dropping way – he was talking to people like that all the time.”

Massam believes Key’s knowledge of the global economy would give him a “huge advantage” in running the country.

Although a “great client person” responsible for serving the people who ran the world’s biggest pension funds, Key, who worked 12-14 hour days, did not subscribe to the lap-dancing, carousing, money trader stereotype. “We didn’t do that, condone that,” says Bellotti. “It was all just good clean fun. Sure we’d go out drinking with clients, go on trips with them, skiing to Verbier and St Moritz – but apart from that it wasn’t our thing.”…………….Bellotti, like many other middle-aged former traders, now travels the world investing his money – in his case in luxury resort complexes. He considers Key a world-beater.

“His career’s a good lesson in life when it comes to risk management. Most people don’t know what risk versus reward – or return – is about. John does. One weighs up the odds, balances the situation, measures the people, balances the evidence. John Key totally understands his environment and the outcomes. He transcends the market, geography and people. This guy is going to put New Zealand on the world stage.”

Bellotti remembers back to one winter’s day, standing in the rain outside the office in the 3pm gloom of Ropemaker St, near Liverpool Street Station, and talking to Key: “There must be more to life than this?”

By 2001 Key was homesick. It was time for the next step of the plan: He flew to New York to see their ultimate boss, G. Kelly Martin, and resigned. “Clearly John you’re having a mid-life crisis, let’s talk this through for God’s sakes,” said Martin, who has extricated himself from a business dinner in San Francisco to talk about his former employee. “John faced off some of the biggest clients in the world, including governments,” he says. “He worked with the Government of Singapore, the Central Bank of China, some of the big Middle Eastern pension funds, Shell and US Fidelity and Capital. He had a very good handle on a variety of financial products: one of the most senior client people we had.”

But Key was adamant. “No, I want to go. That’s what I want to do.”

“Was I upset to lose him? Oh no,” says Martin. “Talented people want to do interesting things and it’s kind of hard to hold them back.”

But why send him to manage debt markets in Australia? Was he fired?

“No, no, no,” says Martin. “He was specifically asked by me to go down to Sydney and give Merrill Lynch another year and a half and help me find out what the strategy in Australia should be. He came up with some very good insights, helped us focus on certain areas, the right clients, and set up in a way that made a lot of sense.”

“We joke with each other, we don’t know what training we got at Merrill Lynch but we seem able to adapt to make an impact in other areas. But I think if you bring the basics: risk/reward; investment/return you can take those skills to other activities.”

That same group at Merrill Lynch are now scattered over the world. One is an assistant secretary of defence in Asia, 25 are CEOs of different industries. Martin himself, now 49, is CEO and president of Dublin-based Elan, the largest biotech company in Europe developing drugs to fight multiple sclerosis and Alzheimers.

“And then there’s John who’s a very special and unique guy,” says Martin.

“A lot of people have plans but very few execute them. John did.”

Key chases luck o’ the Irish

4:59AM Wednesday Jul 20, 2005
By Fran O’Sullivan National MP John Key gets a gleam in his eye when he starts talking about New Zealand becoming the “Jersey of the South Pacific”. “Why not have an offshore banking industry based here?” he asks.
“In the right conditions you could attract 200 banks to register here – each with a CEO and staff. You could attract insurance companies. Bring back lots of Kiwi accountants and lawyers. Single out clusters – such as high-class yachts – or other special sectors as the Irish did.”

Key is clearly on a roll as he lists the options New Zealand could explore if it decided to abandon outdated ideology and take a more pragmatic approach to growing the economy.

The former investment banker knows what he is talking about.
As head of global foreign exchange for investment giant Merrill Lynch he shifted a considerable amount of his business to Ireland in the mid-1990s to take advantage of a 10 per cent tax rate for foreign investors.
The investment was a runaway success.
“We transferred across the aircraft leasing business, the complex interest rates derivatives business, the entire back office for global foreign exchange and a huge chunk of private clients’ business,” says Key.
By the time he left Europe to head home and stand for the 2001 election as a National candidate, Merrill Lynch had more than 400 staff in Dublin. It now has 700.
It was also paying the equivalent of about $250 million a year to the Irish exchequer for tax and indirectly propping up a swag of top-class Dublin restaurants and bars as its young money-men lived the life of Reilly.
The Merrill Lynch story was writ large across the economy by a raft of other big-name financial investors, and US computer and pharmaceutical firms, which ploughed investment into Ireland.
The example of how the Irish transformed their economy into one of Europe’s pre-eminent investment destinations and lifted per capita GDP has stayed in Key’s mind.
But as a former money-man, he is also interested in how Jersey built its economy on the back of offshore trusts.
And how Taiwan poured money into its existing industries through increased research and development, singling out particular sectors, such as nanotechnology or cellphone technology, to differentiate its economy.
Key believes too much of New Zealand’s foreign investment has been based on investment in existing businesses – not on completely new ventures.
“From New Zealand’s perspective there is the opportunity, if we wish to consider it, of saying how can we explore and grow new industries.”
If National wins the election Key will be Minister of Finance. Already he is planning a feasibility study to see if some of Ireland’s measures can be adopted here to fuel an economic transformation.
“Why not look at the success lessons from other small island economies?” he asks.
The Irish model is perhaps more easily understood here than the Jersey model, with its whiff of tax-haven activities. In post-Winebox days, this might get up the nose of New Zealand First Leader Winston Peters – a potential National coalition partner. Clearly Key’s proposals are well ahead the ideas of many in his party who are still locked into the 1980s ideology of neutral tax regimes.
Or even those of his own leader, Don Brash, who retains a decidedly Presbyterian approach to meddling with the economic levers. His is basically an agnostic approach when it comes to playing with the country’s balance sheet to obtain particular outcomes.
Key’s point is that all options should at least be explored.
He claims the current Government is acting as an obstacle to business and needs to be more user-friendly.
Again drawing on the Irish model, he tells how the Industrial Development Agency “guys” used to attend Merrill board meetings and talk through issues affecting the business. The agency would come up with ideas and adjust rules to help the company – “as long as it was not intended to thwart the opposition”.
“It was the complete opposite to the way we operate in New Zealand at moment,” he says.
“The government sector was much more interactive, much more user-friendly, much more industry-based and less focused on grants.”
He dismisses claims that Ireland’s success was based on the republic’s ready access to European structural subsidies (“they occurred well before Ireland took off”).
The corporate tax rate and the huge investment in educational achievement were major factors, he says.
On top of that, Ireland’s investment in a national broadband service to aid technical investment was a standout factor.
“If you get the framework of the economy right the market will sort it out.”
Key will soon get a chance to test his ideas as the election gets past the phony stage. National will release its tax cuts package early on in the campaign. Debate will inevitably focus on the size and affordability of the package. But the initial tax cuts will not be radical.
Key has no plans to increase GST to 15 per cent (although he can quickly parrot off the numbers) to offset major personal tax cuts as Labour did in the 1980s. That would also involve adjusting benefit rates to offset the increased cost of consumption.
But it is apparent that Key believes there is plenty of room for a series of cuts, given the size of the Labour Government’s spending pledges over the next three years.
Prime Minister Helen Clark and Finance Minister Michael Cullen will soon put their record in front of voters and campaign for a third term in Government based on their experienced handling of the economy.
“Clark and Cullen” – as the Prime Minister often says – have presided over a golden growth period.
But opinion polls indicate voter disenchantment with Labour’s old firm. Debate is bound to get nasty as Cullen, in particular, tries to portray Key as an inexperienced politician who is prepared to buy off voters with tax cuts that a contracting economy cannot afford.
In political terms both Key and Brash are relative novices. They have been in Parliament for a mere term, compared with the Labour firm’s eight terms.
But voters should be able to look past their relative political inexperience to their huge “real-world” experiences, as Merrill Lynch operative and a former New Zealand Reserve Bank governor.
In Key’s case he can also point to the invitation he received in 1999 to join the Foreign Exchange Committee of the Federal Reserve Bank of New York as further evidence of his economic management credentials.
Game on.

John Key Says Bankers Should Be Held To Account For Global Debt Crisis

Willy Jackson and John Tamahere interveiwed John Key on afternoon of 5 Nov 2008.

Here is an answer given by John Key re what caused the credit crisis. It should be remembered that at about this time in the election campaign he was batting away questions from Labour in regard to his career at Merril Lynch 7 years ago as being that long ago there is no way he could be tied to having any contribution to the current Credit Crisis;

Caller Matty asked John Key what he thought got the world into this position(Credit Crisis) John Key replied;

“Relatively quickly, you had a massive expansion of credit over the last decade or two, so basically the banks have gone and leant miles of money engaged in very risky behaviour, they have done it to to much of an extreme and whats happened is that eventually the chickens have come home to roost and its all imploded and yup, you know Wall St its got to take rensponsibility for its own excesses and its got it wrong, the good news is from New Zealands point of view is our banks haven’t really engaged in that kind of behaviour and dont have exposure to the kind of counter parties that fell over, but unfortunately Mum and Dad owe a lot of money, not the government, the governments not at all indebted really, but Mum and Dad are and whats happened is that liquidity to fund their borrowing is drying up”.

John Tamahere asks;

“Ok, oh, exposure to the Australian banks”.

John Key;

“Yeh, look I tell you the thing with the Australian banks is, it, um we need to, ah in one sense weve got a bit of strength funnily enough, I know people, I mean I support KiwiBank, we are not selling it, we never going to sell it, but, but I do support the fact that because the Australian banks have quite a big part of our market, because they a bigger, theyre just bigger organisations thay can actually weather these storms a little bit, theres some upsides, I know a lot of people dont like them, but there are some upsides to having them in our economy. Secondly, we just got to make sure that, that wholesale guarantee which allows the New Zealand subsidiaries in their own name to be able to raise capital to be able to operate and weve got work with, not because we are trying bailout the banks, no one should be under that illusion, but if they cant borrow they cant lend and our economy is going into depression if that is the case.”

 Key itching for quick action on financial hub

By Fran O’Sullivan5:30 AM Thursday Dec 2, 2010

Prime Minister John Key has slammed bureaucratic pin-pricking over the proposed New Zealand financial services hub as “absolute rubbish” and stepped in to put the project on the fast-track.

Economic Development Minister Gerry Brownlee has been ordered to produce an urgent paper covering a zero tax rating for the relevant foreign funds which Key wants incorporated in the November taxation bill and passed by April 1 next year.

The Prime Minister’s frustration with Ministry of Economic Development officials spilled over publicly during a question session at an Auckland dinner on Tuesday night where he stressed New Zealand needed to be more optimistic and back success.

“There’s been a whole series of advice coming from MED which basically says ‘if you want to do this, you’ve got to deliver the Magna Carta of documents’,” Key told the International Business Forum audience.

“‘You’ve got to do all these things and need bipartisan support’ and [so] it goes – on and on and on.”

Key went on to say MED’s approach was “absolute rubbish”.

“I don’t need the Magna Carta of documents – just get on and do something – which is why I have told Gerry to deliver me a paper that has zero rating of funds and we’ll work on that.”

Craig Stobo – who chairs the Government-appointed group which was tasked with working out how an international funds services industry could be created here – is delighted the proposal has got Government approval.

Stobo said if a zero rating for the relevant funds (international funds which are not invested in New Zealand but are administered out of NZ) is incorporated in the November taxation bill, “it will be a signal to the rest of the world we are serious”.

Stobo’s group reported to Brownlee in May. But he noted the minister has had other urgent issues to deal with including the Canterbury earthquake and Pike River disaster.

Key told the Business Herald he had “got the numbers” to get the legislation passed and Inland Revenue and the Treasury had signed off that it would not affect the tax base.

Key is confident New Zealand will be able to attract financial funds to place their back office administration here saying a chief executive of one of the world’s most powerful banks had told him: “If you are prepared to zero-rate foreign funds that are not invested in NZ, we’re going to move $2.5 billion of funds here in two years because you’re 50 per cent cheaper than Australia.”

Visiting Hong Kong Financial Secretary John Tsang welcomed the Prime Minister’s intention saying if New Zealand develops a financial services hub it will help to grow the worldwide industry.

Earlier reports to the Prime Minister suggested the administration of financial services could become a billion-dollar industry and create 3000 to 5000 new high-paying jobs.

The Government is not planning a “big bang” launch but expects the hub to grow organically.

Brownlee believes New Zealand’s transparent, stable and neutral legal systems, high quality regulatory and tax environments, deep pool of talent and time zone advantage amount to a unique offering “particularly in light of the global financial crisis”.

But Stobo stressed the Government also had to address two other issues: Ensure investor protection standards are adequate and promote the quality of the regime.

He said the new securities legislation should include clauses to cover investor protection and wanted the new Financial Markets Authority to be tasked with promoting the New Zealand regime to its international counterparts.

Tax tweak needed to build funds hub

By Adam Bennett

4:00 AM Tuesday Feb 16, 2010

A relatively minor tax tweak is the first step towards establishing New Zealand as a financial services hub for international managed funds, says industry figure Craig Stobo, who claims credit for the idea.

Stobo, whose 2004 review of taxation on investments helped shape the current Portfolio Investment Entity (PIE) tax regime, authored the 2008 report “Creating Wealth for New Zealanders” which included the recommendation that non-resident holders of foreign assets should be taxed at zero per cent.

“The New Zealand Government’s got no interest in taxing Belgian dentists on their Japanese shares, but what if those investors were to use a New Zealand trust to hold those shares?” he said yesterday.

“That’s the opportunity in front of us, take a small slice of what’s called administration or management fee income from servicing non-resident savers.”

Stobo, who is chairman of fund management administration business Appello Services, which is 30 per cent-owned by sharemarket operator NZX, said he presented the idea at last year’s Job Summit.

“As I understand it, it’s the only tax idea that’s left standing from the summit and it has been incorporated more than willingly into the Capital Markets Development Taskforce (CMDT) work and forms the basis for the recommendation.

“It doesn’t work unless you’ve got the tax right and the tax has to be zero at the fund and investor level. Because of the PIE regime we’re able to do that, to tax different classes of investors at different rates, and in this case non-residents at zero.”

On Thursday Commerce Minister Simon Power will release the Government’s response to last year’s CMDT final report which contained the “financial services hub” recommendation but little detail on how it might be achieved.

This week, Prime Minister John Key spoke of the potential to create 3000 to 5000 jobs by developing and promoting New Zealand as a domicile and supplier of middle- and back-office functions for international managed funds, using Ireland as a model.

Ireland and Luxembourg are currently the favoured domiciles for the global funds management industry, but Hugh Stevens, New Zealand head of BNP Paribas Securities Services, said new EU directives around fund domiciles were disrupting that status quo. “Disruption means opportunity.”

BNP Paribas is one of the largest providers of middle- and back-office functions to international fund managers and Stevens said his company would welcome the opportunity to expand their presence here but there are challenges in attracting the business.

“If the fund is a global equities fund, the managers could set it up anywhere in the world but they have to choose one location where it is going to be legally founded. We’d also be selling to regulators. If we wanted to make it easier for a fund manager to distribute into Hong Kong and Singapore then we’d have to make sure that the regulators in those markets approve of a New Zealand fund being sold to the investors that they’re protecting.”

The third group New Zealand has to convince is the investors themselves.

“They want to invest in a product they trust and so that takes some branding. New Zealand’s competitive advantage is that we are seen in Asia as having a strong brand as a trustworthy common law country.”

BEHIND THE SCENES

Funds management middle- and back-office functions – what are they?

The trustee function

Trustees are the legal owners of the assets, holding them on behalf of investors. Investors will look for trustees in a jurisdiction that is deemed to be well regulated and transparent

Fund administration

Involves calculation of the value of the fund’s assets. Sets buy and sell prices for investors entering and exiting the fund. Again, investors and fund managers will look for trustworthy administrators in well regulated markets.

Registry services

Keeps track of the ownership of the fund. Ensures the fund’s assets are allocated fairly and equitably across its owners while protecting their privacy.

Behind each of these functions are numerous roles in accountancy, auditing, legal advice and consulting.

New Zealand Prime Minister – John Key’s – Part In The Predatory Financial Invasion Of Ireland And What He Has Planned For The People Of New Zealand 

Ireland’s banking mess

Money pit

Austerity is not enough to avoid scrutiny by the markets

Aug 19th 2010

IRISH businessmen like to say that the country has “first-mover advantage” when it comes to austerity. But that counts for little if the demands on the public purse keep getting bigger. New and direr estimates of losses amassed by the country’s biggest banks, many of which are now being borne by beleaguered taxpayers, have put the bond markets on edge. In an auction of government bonds on August 17th the extra interest, or spread, that Ireland had to pay relative to German bunds widened to its highest level since early May, just before European governments and the International Monetary Fund agreed to set up an emergency fund to help out struggling European economies.

The jitters were provoked by comments made earlier that day in Beijing by Patrick Honohan, Ireland’s unusually straight-talking central-bank governor, about the rising cost of bailing out Ireland’s banks. The prime culprit is Anglo Irish, a specialist-property-lender-turned-black-hole that now seems likely to have to write off almost half of every euro it loaned. Bailing out the bank will, Mr Honohan reckons, end up costing the government as much as €25 billion ($32 billion). Relative to the size of the country’s economy, that would make Anglo Irish more destructive by far than bigger blow-ups like Royal Bank of Scotland and UBS (see chart).

In truth, the sorry state of Ireland’s banks had become clearer in July when the National Asset Management Agency (NAMA), the country’s “bad bank”, released its business plan. NAMA, which is designed to mop up the most toxic loans on the balance-sheets of Irish banks, said that only about a quarter of these loans were producing any income. That is far lower than the 40% it had been told to expect by the banks that are shovelling loans into it. In some cases it is having to write down the value of loans by almost 90%. NAMA still hopes to make a small profit over its lifetime, but that seems a stretch.

A more pressing concern is the impact that ballooning bank bail-outs are likely to have on Ireland’s public debt. Ireland is paying for its decision to set up a toxic-loan repository that forces banks to clean up their balance-sheets vigorously, rather than put off dealing with problems (as Germany has done) or insure dodgy loans and just hope they improve (as Britain has). In the long run Ireland’s response is the better one, but in the short term it puts pressure on borrowing because the government has to keep injecting capital into broken banks.

Even without the banks, Irish finances will prove difficult to right. The government is trying to slash its deficit from 14% of GDP in 2009 to below 3% by 2014. Tax revenues till the end of July are only slightly below target, but perhaps should be stronger if the economy really is recovering. The government is on course to meet its plans for non-crisis-related spending but largely through savage cuts in capital expenditure. A recent IMF assessment argued that the Irish government has underestimated just how steep an adjustment was needed to hit the deficit target. They reckon it will have to cut spending or raise taxes by about 6.5% of GDP, rather than the 4.5% that the government has budgeted for.

Ireland’s problems are not insurmountable. The economy grew in the first quarter after declining for two years. The government has already sold almost all of the €20 billion in bonds it plans to issue this year. But for spreads to contract it will first have to convince markets that the bleeding in its banks has been stanched.

Michael Hudson Michael Hudson USA November 24, 2010

Hudson previously taught at the New School in New York City, and he is currently a research professor at the University of Missouri at Kansas City. He also lectures and publishes in association with UMKC at The Berlin School of Economics.

Hudson served as Chief Economic Advisor for Dennis Kucinich’s 2008 presidential campaign and holds the same position in Kucinich’s Congressional campaign. He has been economic advisor to the U.S., Canadian, Mexican and Latvian governments, to the United Nations Institute for Training and Research (UNITAR), and he is president of the Institute for the Study of Long-term Economic Trends (ISLET).

Hudson is a former balance-of-payments economist for Chase Manhattan Bank and Arthur Andersen, and economic futurist for the Hudson Institute (no relation). For Scudder, Stevens & Clark in 1990, he established the world’s first Third World sovereign debt fund, which became the second best performing international fund in 1991 (an Australian real estate fund was number one ).

Schemes of the rich and greedy

… The 30-year campaign of the wealthy to rig our economic system – especially the tax component – for their own benefit will accelerate with the GOP capture of the House of Representatives and the likely capture of the presidency and Senate in two years. For a foreshadowing of what is to come, a dress rehearsal has been conducted in Latvia, Iceland, Ireland and other financially strapped countries. Latvia has been burdened with the world’s most regressive tax system, while Iceland and Ireland have become record setters in tapping taxpayers to bail out financial crime syndicates, a.k.a. banks.The Irish bailout will encumber its people with perhaps as much debt as a $9 trillion bailout would be here in the United States. The Irish also are expected to also gut unemployment insurance, their minimum wage and similar social safety nets while boosting interest rates and home property taxes to pay tribute to the European creditor agencies that have “rescued” them. They will relinquish ownership of much of Ireland to their creditors, capped by ownership of government policy-making. The new banks will be owned by foreigners, who will put Ireland on a debt treadmill to transfer its taxable surplus to mainland Europe and Britain. …

CENTRAL BANK GOVERNOR LEADS IRELAND INTO DEBT PEONAGE

 BIOGRAPHY – GOVERNOR PATRICK HONOHAN

Patrick Honohan is the tenth Governor of the Central Bank of Ireland and was appointed on 26 September 2009. Before his appointment as Governor, he was Professor of International Financial Economics and Development at Trinity College Dublin from 2007. Prior to this, he spent almost a decade at the World Bank where he was Senior Advisor on financial sector policy. He was previously Research Professor with the Economic and Social Research Institute, Dublin (1990-98), Economic Advisor to Taoiseach Garret Fitzgerald (1981-82 and 1984-86) and he spent several years as an economist at the Central Bank of Ireland (1976-81 and 1984-86), and at the International Monetary Fund (1971-73).In his career in the Irish public service and at the ESRI he contributed policy advice directly and indirectly to successive Irish Governments. During his time at the World Bank, his work entailed the provision of policy advice to central banks and governments around the world and he also played a key role in the design and implementation of the IMF – World Bank Financial Sector Assessment Programme, as applied to developing countries from its initiation in 1999.

A graduate of University College Dublin, he received his Ph.D. in Economics from the London School of Economics in 1978. He has taught Economics at the LSE and at the University of California-San Diego, the Australian National University and University College Dublin, as well as at Trinity College. In recent years, his research mainly focused on monetary and financial sector policy.

USE AS REQUIRED – [In his capacity as Governor, Patrick Honohan is a member of the ECB Governing Council which formulates monetary policy for the 16 countries of the euro area including decisions relating to monetary objectives, key interest rates, the supply of reserves in the Eurosystem and the establishment of guidelines for the implementation of those decisions.

Patrick Honohan was born in Dublin in 1949 and is married with one son.

Updated October 2010

The Irish Times – Wednesday, November 24, 2010

SIMON CARSWELL, Finance Correspondent

ACCOUNTANCY CONFERENCE: GOVERNOR OF the Central Bank Patrick Honohan has said that the Irish banks are effectively “up for sale” and that if the lenders had been owned by foreign banks they would have been able to cope with their “very significant” losses.

Speaking at an accountancy conference, Dr Honohan said that he expected “a slimmed-down” banking system to emerge from the plan by the European Union and International Monetary Fund aimed at bailing out the country.

A reduction in the size of the banks and the system would better serve the needs of the economy, he said.

While plans will take time to be worked through, the country can be assured the banks are being supported by the Central Bank and European institutions, he said.

Dr Honohan said he expected a lot of conditions to be attached to the bailout deal and that the lack of confidence shown by the financial markets in Ireland and the banking system was not justified.

He said he was “relaxed” about foreign buyers taking control of the country’s largest banks as they can help increase credit.

“They are for sale as far as I am concerned. I’ve been an advocate for a number of years for small countries to have foreign owners for their banks,” he said.

Dr Honohan said that the Government’s plan to remove bad loans from the banks through the National Asset Management Agency had not worked as planned and had moved too slowly.

“It has not had the result we had hoped for,” he said.

“Well, we have to have another go. I am not hearing too many people saying ‘change course, you got it completely wrong’ – they are saying this is pretty big and it is not surprising we have not got through it yet.”

Dr Honohan said that further capital was required at the banks.

“We know that large international banks have made bad mistakes as well,” said Dr Honohan.

“Overall presence of foreign banks is a plus for the economy.”

Further cash injections into Allied Irish Banks beyond the sum already pledged by the Government will lead to the effective nationalisation of what was once the country’s largest bank.

Bank of Ireland dropped 25 per cent on the market, while Allied Irish Banks fell 19 per cent, as shareholders fear that their investments will be reduced by further State capital injections.

Bank analyst Ciarán Callaghan, at NCB Stockbrokers, said each bank required at least €2.5 billion to raise capital levels to the higher international norms.

Among the proposals under consideration as part of the European Union-International Monetary Fund bailout is the sale of some of the banks’ loans to foreign buyers at deep discounts that would be backed by EU or State indemnities against losses.

While a sale of Allied Irish Banks is being explored in discussions with the EU and IMF, this is not expected to materialise in the short term.

Telegraph

By Bruno Waterfield, Dublin 8:30PM GMT 26 Feb 2011

Ireland’s new government on a collision course with EU

Ireland’s new government is headed for confrontation with Brussels after the country’s ruling party was wiped out on Saturday by voters in a huge popular backlash against a European-IMF austerity programme.

Exit polls and early tallies from Ireland’s general election heralded political annihilation for Fianna Fail (FF), the party which has ruled Ireland for more than 60 years of the Irish Republic’s eight decades of independence.

The unprecedented and historic defeat, Fianna Fail’s worst result in 85 years, makes the Irish government the first eurozone administration to be punished by voters in the aftermath of the EU’s debt crisis. Voter turn-out was exceptionally high at more than 70 per cent, indicating public anger at the government and the EU.

Late last year, Ireland was forced to accept a £72 billion EU-IMF bailout to cover huge public debts that were ran up to save failed Irish banks.

The bail-out was designed to prevent financial contagion that threatened the existence of the euro, but according to economic forecasts, the cost of servicing Irish bank debt and the EU-IMF bank loans will consume 85 per cent of Ireland’s income tax revenue by 2012, a burden that a majority of voters find intolerable.

Brian Cowen, the Irish Prime Minister and Fianna Fail leader, who stood down last month rather than face furious voters, was also pressured into implementing a savage £13billion austerity programme of tax rises and spending cuts drawn up by the EU.

The cost of the EU-IMF bailout in extra taxes for an average Irish family has been estimated at over £3,900 a year. Other deeply unpopular measures include controversial reductions to the minimum wage, unprecedented cuts to public services and 90,000 jobs losses in a country where unemployment is already running at almost 14 per cent.

“When people are angry, when you’ve just cut their pay packets, you are not going to be top of the pops,” admitted Tony Killeen, Fianna Fail’s campaign director yesterday.

In Dublin, Fianna Fail won just eight per cent of the vote in an electoral decimation that called into question the future of previously unassailable politicians such as Brian Lenihan, the Irish finance minister.

“However bad people thought it would get for Fianna Fail, nobody thought it would get this bad,” said Michael Marsh, professor of political politics at Trinity College Dublin. “That is highly significant.”

According to exit polling carried out by the Irish RTE broadcaster, Fine Gael (FG), Ireland’s main centre-right opposition, had won 36.1 per cent of the vote. Labour, traditional FG’s traditional coalition partner, took 20.5 per cent, its best result ever.

Fianna Fail took just 15.1 per cent share of the vote, representing a loss of 58 seats. Sinn Fein, usually outsiders in southern Irish politics, recorded its own best result with 10.1 per cent, up almost five per cent on the last 2007 election. The vote share for Greens, FF’s junior coalition partner, plummeted to 2.7 per cent, possibly robbing the party of MPs.

“The political landscape of Ireland is completely and utterly redrawn,” said Roger Jupp, the chairman of the Millward Brown Lansdowne pollsters which conducted the exit polls for RTE.

Enda Kenny, Fine Gael’s leader, will later on Sunday, start to form a new government, almost certainly with Labour, after full election results under Ireland’s complicated PR system come through.

Both Mr Kenny and Eamonn Gilmore, Labour’s leader, have promised Irish voters that they will renegotiate the EU-IMF austerity programme to reduce the burden for taxpayers and to force financial investors to shoulder some of the bank debts currently paid out of the public purse.

At a summit of centre-right EU leaders in Helsinki next Friday, Mr Kenny will use his position as Ireland’s new Prime Minister to beg the German Chancellor, Angela Merkel, and French President, Nicolas Sarkozy, for concessions ahead of an emergency March 11 Brussels summit to restructure the euro zone.

But neither the two European leaders nor the European Central Bank or EU will permit any substantial changes, despite the huge popular Irish revolt against the bailout.

Chancellor Merkel will tell Mr Kenny that if he wants to reduce the high, punitive 5.8 per cent interest rate charged on EU loans then Ireland will have to give up its low corporate tax rates – a measure regarded as vital to Ireland’s recovery and one of the few economic policies it has not yet handed over to Brussels or Frankfurt.

The new Irish premier will also be warned that there is no question of forcing privately-owned financial institutions to assume Ireland’s £85 billion bank debts because the resulting market panic would spread to Germany and France, tearing the euro single currency apart.As Irish voters headed for the polling booths on Friday, the European Commission bluntly declared that the terms of the EU-IMF bailout “must be applied” whatever the will of Ireland’s people or regardless of any change of government.

“It’s an agreement between the EU and the Republic of Ireland, it’s not an agreement between an institution and a particular government,” said a Brussels spokesman.

A European diplomat, from a large eurozone country, told The Sunday Telegraph that “the more the Irish make a big deal about renegotiation in public, the more attitudes will harden”.

“It is not even take it or leave it. It’s done. Ireland’s only role in this now is to implement the programme agreed with the EU, IMF and European Central Bank. Irish voters are not a party in this process, whatever they have been told,” said the diplomat.

In the face of the EU’s refusal to substantially renegotiate the austerity programme, Mr Kenny’s new government will face a grassroots campaign for a referendum.

Dessie Shiels, an independent candidate in Donegal, said: “People have not been given the basic right of deciding whether or not they should have their taxes increased in order to repay bondholders who have lent to the banks.”

David McWilliams, an economist and former official at the Ireland’s Central Bank, has led calls for a popular vote under Article 27 of the Irish constitution, which requires on a matter of “such national importance that the will of the people ought to be ascertained”.

“We have to re-negotiate everything,” he said. “Obviously, the first way to do this is to make them aware that if they force us to pay everything, we will default and they will get nothing. So they had better get a little bit of something, than all of nothing. To make this financial pill easier to swallow, we must take the initiative politically. We can do this via a referendum.

“If the Irish people hold a referendum on the bank debts now, we can go to the EU with a mandate from the people which says No. This will allow our politicians to play hard-ball, because to do otherwise would be an antidemocratic endgame.”

Declan Ganley, the Irish businessman who led the 2008 No vote to the Lisbon Treaty, said Ireland must “have the balls” to threaten debt default and withdrawal from the single currency.

“We have a hostage, it is called the euro,” he said. “The euro is insolvent. The only question is whether Ireland should be sacrificed to keep the Ponzi scheme going. We have to have a Plan B to the misnamed bailout, which is to go back to the Irish Punt.”