Wednesday 1 December 2010
Memorandum of Understanding
Slí Eile: These days a new Report arrives every few days. The EU/IMF Memorandum of Understanding available here carries a text in bold red on the front page: 'These documents remain subject to editorial changes. The final documents will be laid before the Houses in due course.' Presumably it is referring to the Houses of the Oireachtas? One assumes that the Irish version will be the definitive text.
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A big issue for economists are 'commitment mechanisms'. Basically the IMF has often lent to governments (and dictatorships) that you wouldn't trust with your pint. How can they force the likes of Ceausescu to repay. To paraphrase Stalin, how many divisions do the IMF have?
They ensure commitment through the market. While we need to borrow money, and can't from the market, we are dependent on the IMF to pay our day to day bills.
However, I do think if we just cut loose the banks, and change policy direction we won't be dependent on the IMF. If we change policy and give them their money back they will be ok with that. They want their money back, they don't really care if we break the agreement if they get it back. They would probably be happy if we burn the bank bondholders as it would mean we have more money to repay the IMF.
The IMF is made up more of economists than lawyers, so they design things that don't require the courts.
One other point. Communist Romania completely repaid their foreign debt by the end of 1989. But the havoc their austerity plan created led to one of the most secure Communist dictators being shot on Christmas Day.
@Rory at the rate things are evolving -
we have calls for a national or general strike (unite)
http://www.irishtimes.com/newspaper/breaking/2010/1202/breaking24.html
and
a week of prayer (Prof Ray Kinsella).
http://www.irishcatholic.ie/site/content/economist-calls-week-prayer
and unstinting opposition to the 4-year plan and the IMF/EU bail out for the well-to-do.
The more opposition the better deal the new government can renegotiate. Of course FF and the Greens are determined to burn as much money as possible so we will be utterly dependent on the IMF.
But my point is we shouldn't get too concerned about legal commitments.
@Rory At least one party says that it will not be bound
http://www.youtube.com/watch?v=2x7fhvsk6Ys
One wonders which are the 'red lines' beyond which a new Government will not go in any re-negotiated deal with the IMF and EU? there are three options:
1 just say no and keep saying no
2 agree to it in full
3 re-negotiate
How realistic or far-reaching would any re-negotiation be I wonder?
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