Email of the day (2)
"Please try the below link for story on Wilbur Ross buying an Irish Bank. I am struck by the common sense approach of both the Irish government and Irish people. Perhaps this is the fine example of the corporate governance at the state level that David so fondly mentions from time to time. This may be the silver lining for the Irish economy. All the best."
Eoin Treacy's view Thank you for this instructive interview.
According to The
Irish Times, Wilbur Ross is part of consortium partaking in a competitive
bidding process for EBS Building Society. JC Flowers and Doughty Hanson are
also competing for the bank.
The Irish
government has assumed a mantle of fiscal rectitude out of necessity rather
than choice since they were given an ultimatum by the European Commission. However,
regardless of the motives, the changes currently taking place in revenue raising
and spending cuts are in the long-term interests of the country by helping to
improve competitiveness.
Ireland
went through a similar blowout in the 1970s and the need for belt tightening
resides in the public memory. The authorities have effectively communicated
the need for severe cuts with €4billion in additional savings that will
need to be found this year and next in order to get the budget deficit close
to Eurozone parameters. There isn't quite blood on the streets, although Ireland
has had more than its fair share of that in the last century, but I suspect
institutional investors with an eye on the very long-term might see value in
this market.
The bigger
question is how the EU will deal with deficit offenders in future. There is
a certain acceptance of the need to cut deficits with continued high funding
costs for a number of countries. However, without substantial reform of how
the Eurozone's deals with deficit offenders, it runs the real risk of repeating
this crisis again at some point. This article
by James Neuger for Bloomberg highlights the differences of opinion between
member states on how this might be achieved. Germany, unsurprisingly, is in
favour of severe sanctions for offenders whereas France and Spain are much more
inclined to a light touch. The strength of any eventual deal is likely to be
a factor in how investors view the long-term integrity of the currency union.