Colm McCarthy: This burden of bank debt is simply not sustainable : Powerful burn-the-bondholders editorial from Colm McCarthy in the Indo. ‘No other eurozone member has incurred bank-related debt under ECB duress. There are no provisions in the Maastricht Treaty, in the Stability and Growth Pact or in any other pact or international treaty which grant this power to the ECB, nor was any eurozone member state ever asked to accede to such an arrangement. Commissioner Rehn’s Latin phrase (“pacta sunt servanda”) has no pact to refer to, insofar as these imposed debts are concerned. Ireland never signed a pact or treaty which empowered the ECB to behave in this fashion. One can only speculate as to the ECB’s motives, since it does not deign to explain. European banks have come to rely heavily on unsecured bond financing and the ECB may have felt that no bank bondholder should suffer losses, in order to encourage the survival of this market in bank debt. If this was the motive, the policy is being paid for, not by the ECB, but by Irish taxpayers and sovereign bondholders and financed by European taxpayers and the IMF. There is no pact which confers powers of taxation on the ECB.’
(tags: bondholders ireland finance colm-mccarthy bailout)