I have reproduced below a letter from me published in today's Sunday Business Post advocating non-payment of the promissory notes.
In it, I emphasised that payment would create a cash loss of €30 billion for the State and that non-payment would create NO cash loss for the ECB/ICB. This is a key point which distinguishes the Irish situation from sovereign defaults which have had serious ramifications for the defaulting states.
If the PNs are not paid, do you really believe that the ECB would apply sanctions to the "best boy in the class"? I think not as these would also provoke a huge euro crisis.
A write off of the €30 billion. as distinct from any other deal, would be transformational for the Irish economy whose the debt/GDP ratio is almost120%, or 150% based on GNP when fickle profits of multinationals are excluded. Let us face facts, this level of debt is completely unsustainable and tinkering at the edges will be fruitless.
Personally, I would like to see politicians work together (for once) in order to provoke a referendum on the question of payment of the PNs so as to settle the matter for once and for all for the electorate, EU, ECB and other international interests. This could be achieved by asking the Dail and Seanad to consider a Bill relating to payment and then, in accordance with Article 27 of the Constitution, getting a majority of the Seanad and one-third of the Dail to petition the President for a referendum on the grounds that the Bill "contains a proposal of such national importance that the will of the people thereon ought to be ascertained".
Such an initiative would have the overwhelming support of the electorate, even without anticipating the result of the referendum. It would also evoke a positive response from the financial markets, and even the ECB might get around to understanding that the circumstances surrounding the PNs were absolutely unique and required a euro-wide response.
Professor Morgan Kelly, writing about the Anglo bailout in 2008, suggested that "the money might as well be piled up in St Stephen's Green and incinerated". Well, unless a write-off deal on the promissory notes is struck, that is exactly what will start happening in March, albeit at a different location, when €3.1 billion of "real cash" is passed to the Central Bank where it will disappear in a puff of electronic smoke.
A write off is entirely within the gift of EU central bankers and, while it might result in a temporary loss of face, no loss of cash would be incurred. In fact, the full €30 billion will be effectively written off irrespective as to whether notes are paid or not.
The Government should stop spinning and whining about unfairness. Instead, it should start playing hardball and show more backbone even at this late stage.
Burning €30,000,000,000 of taxpayers money for no return whatsoever makes no sense and is extortion given that the State is bankrupt.
What exactly would the ECB do if the notes are not paid? Pull the rug from under the Irish economy or just make the "best boy in the class" sit on the bold step for a while?
Lead letter in the Sunday Business Post on 3rd February 2013.