Fianna Fáiled: Ireland Prints 25% of its GDP in German Euro's

Jack H Barnes's picture

The Celtic Tiger has been on the economic ropes since the crash of 2008.  In the first hours of the crisis, the US Federal Reserve provided emergency funding to Irish banks, pouring 10’s of Billions of US dollars into the Irish Banking system, providing funds as needed.  These funding events helped stabilize the banks, during the winter of 08-09.

“The scale of AIB’s borrowing from the scheme is enormous
given its relatively small size in the US. Barclays Bank, which bought
Lehman’s US operations out of bankruptcy, borrowed $232bn (€174 bn) from
the Fed scheme.”

AIB’s biggest single loan — $3.3bn (€2.48bn) — was borrowed from the Fed on July 2, 2009.

The ECB setup a unique Sovereign bond carry with Irish banks,
allowing support for their financing needs via deposits of Irish
Sovereign bonds held as collateral.  This mechanize broke down in the
fall of 2010 as liquidity dried up beyond the capacity of the ECB to
help out.

The Washington Post has a great graphic that shows Europe’s Financial contagion as cross holdings through both Banking and through Trade .  The implications are clear, the cross holdings are significant.

The ECB is reported to have provided up to 130+ Billion Euros in
direct support to the Irish banks, by allowing the banks to park Irish
Sovereign debt at the ECB for collateral.  This has driven up the
internal leverage of the ECB enough that it needed to be recapitalized
with new funds in December 2010.

The fact that the ECB needed to be recapitalized
just as the impact from the Irish bailout of November hit home to the
political leaders, though the real context of it was missed by the main
stream media.  The EU appears to have been caught in a situation that
it could not contain the Irish funding needs, while needing to
recapitalize the ECB Balance sheet to continue operations.

“The capital increase was deemed appropriate in view of
increased volatility in foreign exchange rates, interest rates and gold
prices as well as credit risk,” the E.C.B. said in a statement.

Ireland Central Bank was allowed, with or with out permission, to
print up up new Euros without new sovereign debt issued behind them.  By
December of 2010, the EU appears to have been more worried about the
appearance of the ECB balance sheet as a whole, than of rogue individual
activity by its member states.

Publicly, the EU core nations agreed that the ECB was great
candidate for recapitalization due to the support it has been providing
the PIIGS. In hindsight, the attention of the market moving to Portugal
or Spain was a misdirection of where the real attention needed to be,
and that is Ireland still.

The bail out of Ireland, funded currently from their own retirement
savings, has not been ratified by their government.  The ECB has not
started to poured funds from the Stabilization fund into Ireland yet, as
they await ratification of the bailout.

The bailout, like a ticking time bomb has not been ratified yet, and
if Fianna Fail’s 1 vote coalition collapses before the vote, all bets
are off as to it ever being passed.

current party in power, Fianna Fáil has been in charge of the country
for 53 of its 84+ years of official existence.  A series of No Confidence votes has been called on its leadership of the nation.  The first vote is tomorrow, when an internal vote for leadership of the party is expected to be held.

A second vote of No Confidence has been called in the Parliament
meeting that is scheduled for next week.  While the coalition is
expected to hold together through both votes, it is possible that the
Irish bail-out will be held up by a collapse of the current caretaker
coalition in Parliament.  If this happens, all bets are off concerning
ratification or even continuation of the bail out.

The above is all said, to preface what is next.

The Irish Central Bank has crossed the Rubicon
in European Union currency terms.  They have printed up about 25% of
their GDP in electronic credits, and stuffed those credits into their
banks.  These deposits, if you will, do not have new debt issued behind

is a form of hyperinflation if you will, at least in context that a
Central Bank, with no actual printing press, or a functioning bond
market, has now electronically printed up new currency units for their
banks without issuing debt behind these actions.

While this has happened before in history, it has not happened in
the Euro currency project officially before today. This act is going to
move the monetary policy of the union, to the individual capitals.  The
capacity to print electronic credits, with out the creation of cash
currency or debt, is a new wrinkle in the economic landscape.

The implications and ramifications will take a while to appear, but
“Mark” my words, Germany both as a people, and as a political
organization will notice this event.  The German people now find
themselves captured in a currency where neighbors who are in political
and financial stress, have the capacity to print up German Euros on
demand.  This is Germany’s worse nightmare as both a nation and a
people.  I dare say, you could not design a more frightening prospect
for the “United German States”, than to find their currency diluted on
demand by reckless neighbors.

In the coming weeks, and I say that because thing rarely happen
quickly in life, Europe is going to have a Sovereign crisis of epic
size.  They will have to decide what happens next, and do so rather

  1. Is Ireland going to be punished by the EU for printing on demand?
    1. Can Ireland stay on the Euro, if Germany stays?
    2. Can Ireland escape the bailout clauses?
    3. Can the EU survive Ireland leaving?
  2. Is the EU going to join the US domestic form of economic unity?
    1. Euro Bonds?
    2. European Elected President?
    3. Euro Treasury Minister?
  3. Is Germany willing to be held hostage to foreign printing presses?
    1. How will Germany publicly respond to this?
    2. How will CDS markets respond to the BUND now?
    3. Are all Euros equal?

If Ireland can get away with this printing operation, let’s consider
some of the ramifications of their actions when scaled to other
economies of larger size.  The Irish have printed up the equivalent of
25% of their GDP.  If we accept that GDP is equal across economies,
their actions are the equivalent of…

  • Germany with a GDP of $3.3 Trillion printing up $850 Billion
    dollars worth of new currency units, and shoving them into Landesbanks
    to recapitalize their loans.
  • United States with a GDP of $14 Trillion printing up 3.5 Trillion in new currencies and depositing into our To Big To Fails.

EU politicians have known about Ireland’s decision to print currency
for weeks now.  They have had time to consider their response to
Ireland’s dilution of the Euro.  I do not expect an initial reaction in
the currency markets, as this kind of event takes time to be absorbed
by all stakeholders in the Euro.

The Celtic Tiger has made their move and resorted to naked currency
printing, to support its banks.  The next move belongs to Europe and
it’s going to be interesting to see how this plays out in the public
arena’s.  We know who is first now, what CB will be second?


Confessions of a Macro Contrarian

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irishlink's picture

I've read and reread this and there is only one answer; the Irish Banks are running out of money fast and as the bail out is not yet ratified,the EU are allowing the Irish Central Bank to create electronic credit which can be put against the bailout money when it arrives. It also buys more time for Trichet et al to come up with a more coherent , workable plan for the entire Eurozone as this plan concocted for Ireland and Greece clearly is a dismal failure.

Fat Ass's picture

For hell's sake, it's simply 10s, THERE IS NO APOSTROPHE.


"10s of billions"  It's that simple - NO APOSTROPHE.

If you look LIKE AN IDIOT when you write, it really makes you LOOK LIKE AN IDIOT.

There are NO APOSTROPHES IN PLURALS, for goodness sake.

AUD's picture

They have printed up about 25% of their GDP in electronic credits, and stuffed those credits into their banks.  These deposits, if you will, do not have new debt issued behind them.

This is pure bullshit. No central bank can create credit without collateral. The question is whether the collateral has any value outside of the bid of the central bank.

M.B. Drapier's picture

This isn't all that new, and the money-printing angle isn't as dramatic as it appears. Lorcan Roche Kelly and his blog commentators like "Eoin Bond" have been on this for a while now.

The Irish Central Bank has crossed the Rubicon in European Union currency terms. They have printed up about 25% of their GDP in electronic credits, and stuffed those credits into their banks. These deposits, if you will, do not have new debt issued behind them.

The "Other Assets" money is Emergency Liquidity Assistance in Eurosystem terms. This is a repo scheme, like the ECB's liquidity program. To the extent that it's money-printing, the ECB's emergency repos are money-printing too. The two critical differences between ELA and ECB liquidity are:

  1. The collateral standards are set by the National Central Bank, and don't have to meed the quality required for ECB repo
  2. Unlike most Eurosystem (ie. ECB + National Central Banks) dealings, these do not appear on the Eurosystem's consolidated balance sheet, and the rest of the Eurosystem isn't liable for any losses. The taxpayer in the issuing country is on the hook for those

So it's actually quite similar to the ECB/whole Eurosystem's problems with high leverage and dodgy repo collateral, except that some of the Irish ELA collateral is even worse, and in fact unlike the ECB the Central Bank of Ireland can't print away any losses on its repos.

As you can see, the ECB is aware of and has approved the Irish ELA operations. It can't be at all happy that what was meant to be a mechanism for temporary fudges has spawned a 25%-of-GDP-and-still-growing monster, but it would much rather live with it than face the 'unthinkable' alternative of haircuts for senior bank debt. It does have a plan (a joint plan with the EU Commission and the Irish government) to deal with the situation - deleverage the Irish banks, shovel in more money from the Irish taxpayer (already on the hook for ELA losses anyway), divert the money from the country's pension funds into the banks. (The 'retirement savings' which have gone in so far are just money from an SWF supposedly earmarked for public-sector pensions. The private-sector pensions have yet to be fleeced.) How well the plan will succeed is another matter, especially if depositors keep fleeing the Irish-guaranteed banks.

Sudden Debt's picture

Jack, I just stole your article and mailed it to everybody in my mailbox.





My god...

For the first time in 2011, I'm actually chocked about something.


scratch_and_sniff's picture

It never crossed your mind to discover whether or not it was fucking nonsense before you sent it to all your suffering friends?

Its ELA? Its not German Euros, what utter gibberish. The reason for any secrecy involved when using ELA goes back a long way even before the crisis, its always been like that when banks needed to use it, no one wants to see markets spooked over a liquidity crisis when its easily avoided etc

When you look at the context in which they are using emergency liquidity, things become a lot less alarming. The amount needed to backstop Irish banks is gradually dwindling(down 40% from nov), but even so, some Irish banks have totally taken the piss when drawing from the ECB, and hence have exhausted they're welcome. But even still, the scheme from which they are drawing from now(from the Irish central bank), is called "special master repurchase agreements", is still part of ELA.

from FT

"The current ELA scheme is understood to involve collateral which would not normally be acceptable to the ECB."...which means that it is now acceptable.

M.B. Drapier's picture

When you look at the context in which they are using emergency liquidity, things become a lot less alarming. The amount needed to backstop Irish banks is gradually dwindling(down 40% from nov), but even so, some Irish banks have totally taken the piss when drawing from the ECB, and hence have exhausted they're welcome.

The banks which are in trouble are the six Irish-owned banks guaranteed by the Irish government, and there's no way that the Sick Six, as opposed to the larger group of banks regulated in Ireland, has reduced its funding needs since November. Almost certainly the Six are borrowing about as much as ever from the ECB, as well as relying on the Central Bank of Ireland to lend to them against collateral which isn't acceptable at the ECB.

scratch_and_sniff's picture

Sorry about that, rather the rate of expansion is down 40%+. Can i call that a dwindle? pff i suppose i could.

hardcleareye's picture

" fucking nonsense "??????

A tad harsh don't you think?  If I read FT correctly the Emergency Liquidation Assistance is funded in Euros, I wasn't aware that there was such a thing as a "German Euro" please explain..... the nuance is lost.... Further reading of the Position Paper on the ECB web site indicated that there is justifiable reason for concern and I dare say maybe a bit for "alarm".

The ice gets very thin when you post bullshit collateral to print money... 25% of your GDP!!...  yeah I think SD has reason to be concerned... the same concern mirrored by the ECB.

This from FT.

The opinion says “the ECB has serious concerns that the draft law is insufficiently legally certain on a number of critical issues for the eurosystem [of eurozone national central banks].” One such issue was “the scope of collateral rights of central banks given as security against emergency liquidity assistance”.

The legislation needed to be clarified to make clear “the ability of the central bank or the ECB to maintain the eurosystem’s operations and, in particular, to enforce their rights including, without limitation, the enforcement of security over any eligible collateral posted by any relevant institution.”

The ECB adds that the legislation “should make clear the [EU] Treaty principle of central bank independence prevails over any incompatible draft law provision”.


scratch_and_sniff's picture

Sorry for my language, i must stop becoming so easily excitable. For an explanation of the used term "German Euros", read the post you are commenting on. Secondly, I am not trying to say Ireland is not practically insolvent, but this is a trivial issue about liquidity. The damage, as per the above post, was supposed to happen when everyone found out they knew nothing about what the Irish CB was up to...but they did from the start, that’s why its a moot point to begin with.

What also makes it a moot point is that the collateral provisions implemented by the ECB with respect to ELA were only to stop banks grabbing easy money to speculate with as far as I know, nothing to do with keeping them liquid. More to the point, the fact that its only a matter of willingly rejigging obviously meaningless legal frameworks until the (illiquid)banks can gorge on infinite ELA, should give ample insight into how much of a waste of time actually talking about this has become.


On a more frivolous note, who really gives a flying fuck whether or not another $50bln was thrown into a sea of kazillions of ludicrous zeros? Not me pal.

ebworthen's picture

There is no money, only zeros and ones.

There is no "printing", only binary data shuffling and stuffing.

Currencies unbacked by a precious metal in the information age are nothing but binary data, electrical current.

Who says who has how much money? 

There isn't a physical constraint to any of it.

Arthur's picture

If the Irish are printing Euro's any reason to think the other's are not?   Greece was already nailed for cooking their books why not just print who would know?

I assumed that there was one central printing press.  Do all EU countries have the ability to print their own Euro's?   That would be wacky.  One thing to issue bonds but a licence to print?! Wow.


beastie's picture

They are not physically printing anything. The same as Ben is not physically printing anything. Just Bits and bytes.

Now we know what the Central Banks are for in individual countries of the EU.

I have not seen any confirmation of this story. I dn't read the Irish papers every day though so I may have missed it.

Jack H Barnes's picture

This is the source of the article itself.  I Should have made it clearer.  Its a link in the article.

My Bad.



Arthur's picture

Thanks for the clarification

laughing_swordfish's picture

I don't think this ends well....

It's as if I swiped knukles' American Express card and decided to take myself down to Wynn's High Roller Room...

The world is about to get a third helping of Furor Teutonicus..

The Leopard II's of the Wehrmacht will roll through the Ardennes..

The Luftwaffe will once again rule the skies...

And the Kriegsmarine will seal off the Atlantic from its new ports on the Brittany coast...

Fourth Reich Bitchez...


KrvtKpt. Laughing Swordfish

Behfelshaber der Unterseebooten




knukles's picture

You have really got to be kidding me. 

First Mr. Obangopangodango from the Ivory Coast asks his creditors to approve of his legally non-existant gubamint else he'll skip a coupon payment already in arrears....
Fucking unreal.

And now The Emerald Isle is simply creating electronic fiat liabilities out of their bank with no offsetting assets on the books but fictional, notional, nonsensical naughts and zilches held by nobody.
T'is a great day for the republic, lads! 

This shit is brilliant in it's audacity! 

Allow me to be the first to call Bullshit Ahoy.

(It's all right to leave the boy with Uncle Ernie.)

Mr Lennon Hendrix's picture

Brian Cowen and Bernanke sit together on a park bench reading news papers.  Ms. Sarkozy walks by wearing daisy dukes and boots.  A cowboy hat keeps the bright sun from her eyes.  Brian Cowen stands up and tips his hat to her.  Bernanke follows and does the same.  Cowen turns to Bernanke and sings, "Anything you can do I can do better.  I can do anything better than you."  Bernanke, "No you can't."  "Yes I can!"  "No you can't!"  "Yes I can."

MayIMommaDogFace2theBananaPatch's picture

Are you just practicing the "elevator pitch" for this musical you're writin'?

cranky-old-geezer's picture

"The bail out of Ireland, funded currently from their own retirement savings..."

This is the only significant statement in the entire piece. 

...and it's coming to a nation near you.

stormsailor's picture

i love the irish, they have managed to solve their immediate problem, and at the same time point out the hypocrisy and arrogance of the ecu, ecb, and the federal reserve.

what makes the zero's they put behind a 1 and give out to whomever they please worth anything. anymore than their on home-made 1s and zeros.


who elected any of them to make decisions to exchange real euro for bogus securities or the power to choose who gets it, and who does not and at what cost.


up the republic



Silversinner's picture

If this isn't überbullish for euro gold price

what is?Time to load up on gold after

gold is close to the 1000 euro mark.

1000 euro goldprice will soon be history

just like the 1000$ price is now.



cranky-old-geezer's picture

Anyone still holding faith in the euro or dollar is ...well ...just plain crazy.  The euro will soon be toilet paper and the dollar not far behind.  Sure, they'll widly celebrate a 35,000 Dow but it won't be worth enough to pay for the party.

knukles's picture

Bingo. Give the man a salted euro.
While the S&P, for example was about flat total return wise over the last decade, in gold terms, it's crumbled.... major negative return.

Convolved Man's picture

To appease Merkel and the Germans, Trichet will have Chief Inspector Clouseau assigned to investigate reports of electronic naked currency printing in Ireland.  Ensuing slapstick comedy assured to be enjoyed by all.  Bernanke makes a cameo appearance as Dr. QE, the world's renowned expert in money printing, hired to perform forensic examination of 1s and 0s in Irish Central Bank accounts.

Sean7k's picture

Hard to take this seriously when the author uses the example of the FED dumping 3.5 trillion into the banks- as if it was fictional. The FED did dump trillions and yet here we are.

Why is it so easy to see the splinter in Ireland's eye and not the log in ours?

shortus cynicus's picture

oh not exactly: FED pumped 12 trillion in global financial institutions.

But, it is their private money, let them print. But don't use it.

gorillaonyourback's picture

thank you for the insight, we wonder when its goin to blow up and now we see how germany may be forced to blow it up.

apberusdisvet's picture


It is very difficult for me to believe that the Irish will willingly place themselves in a position of involuntary servitude for at least a generation to the Euro banksters.  Have they in just a few generations become a nation of pussies?

zaphod's picture

You could say that just about any western country. US, UK, Spain, Canada, etc.

Only Iceland seems to be standing for themselves against the banks.

RingToneDeaf's picture

The Irish here in the states have distinguished themselves in many of the toughest battles as American military going all the way back to the Civil War, when not fighting among themselves.

The Muslims would love a Califate in France and Germany.

Europe has a long history of war, even the Swedes still might have some balls, chased through the weeds by a Norwegian....... Yes, war is likely, soon.

Founders Keeper's picture

[The capacity to print electronic credits, with out the creation of cash currency or debt, is a new wrinkle in the economic landscape.]---Jack H. Barnes

Reminds me of something the Fed is doing.  What was that...?  Oh yeah, creating trillions of USD out of thin air.

Seriously though, excellent article, Jack. Thank you.

[In the coming weeks, and I say that because thing rarely happen quickly in life, Europe is going to have a Sovereign crisis of epic size.]

Yes, things seems a bit too quiet lately in Europe. Something is moving down deep.

I expect the Chinese will be sending more fat rolls of 100 USD to plug leaks springing up in the euro zone.  The Chinese need the euro zone to hold together a little longer while the Chinese off load their USDs. Gotta stop the dominoes from falling as long as possible.


cranky-old-geezer's picture

"I expect the Chinese will be sending more fat rolls of 100 USD to plug leaks springing up in the euro zone."

Neat.  Three birds with one stone.  (a) offload large amounts of toxic US debt (b) in a legit looking way that won't raise eyebrows (c) shore up one of their biggest trade partners.

Bubbles...bubbles everywhere's picture

The chinese communists are trying to to stop the capitalist dominoes from falling. I find the irony very amusing. 

merehuman's picture

I would love to see Ms Merkel take a bat to Bernankes head. He set the tone and is the leading example of a wide open unbacked money printer.

I would like to see the germans go back to the Mark, backed by gold.

PS As a kid in germany i watched at night as the stoutly built German women came and dragged their husbands out of the bar. One had brought a large dough rolling pin and used it liberally.

AnAnonymous's picture

Same stuff as usual: this article is one sided to the conclusion the EU is going to implode.

Once again, taking the other outcome, the goal is to further the EU integration. And suddenly, the reading changes.

Where to drawn a line? By noting what moves are made after events, or a sequence of events.

So far, the moves were all made in favour of deepening the integration. Never to decrease the integration.

The Irish simply opened the door of integrated debt. They no longer distinguish their debts with EU debt.

What fruit will that tree bear? Hard to tell.

And why all this mismatched conclusion? Why people can not factor in developpments as they witnessed them?

Why people are not able to accept that so far, the slider is moved toward more integration?


Gang, gang, gang. If you understand gangs, you understand the US.

Just like gangsters, people do not oppose the EU, they oppose the EU for taking the same path as the US 200 years ago.

Founders Keeper's picture

[Gang, gang, gang. If you understand gangs, you understand the US.

Just like gangsters, people do not oppose the EU, they oppose the EU for taking the same path as the US 200 years ago.]---AnAnonymous

Comparing European countries united under the EU to the states of the U.S. is like comparing apples to oranges.

The fundamental differences are innumerable. But, let's just take one: homogeneity. The culture within each euro country is a unique homogeneous group, i.e. Germans are German, Greeks are Greeks, and the French are...well...French. So, the euro zone is a collection of unique cultures. 

In the U.S., the culture is a mix in each state across all 50 states; whereby, Americans living in Texas are relatively the same as Americans living in Nevada, Oregon, and New York.

The notion that the EU and the USA are similar in design and in working order is astonishing. 

If you understand individuals, you understand the U.S.---not "gangs."


AnAnonymous's picture

Sure, sure. Discarding quite easily the time reference.

Read again the FF, they reported the  same issue: knowingly, people of various origins and various loyalties, and of different concentration over the territory. They implemented a plan to merge all these people into one new people, the American US People.

This is exactly the same path the Europeans have been walking, they are on the verge on merging in the European People, an entity that does not exist yet.

So if you want to bring irreductible differences, tell about the time frame I underlined.

But in the doing, of course, it will grow obvious that the US is all about gangs and nothing about individuals.

Actually, individualism has decreased since the rise of the US.

Today, the individual is where all the multiple group memberships one person has to be refered are overlapsing.

An individual in the US framework is the list of all the groups a person belongs to: an individual is a that race person, that gender person, of that fancied nationality (something you should ponder in your propaganda spitting, how usual is it for a US citizen to depict oneself as Irish, Sweden, German etc?) within that age bracket, within that weight bracket, who served in the army or not, who was in high school a member of that group, who earns that bracket revenue, who live in that neighbourhood etc...

Everytime, a person is sent back to a group membership. A person in the US never exists as an individual, only through the multiple groups that person can be referenced to.


The US has killed the notion of individuality, only to substitute for it the superposition of all groups one can belong. That is why belonging to this or that group is all that matters in the US. US citizens do not want to be individuals, it is of no interest for them. They want to be a member of that or this group. The group is all in the US.

But that will be for another time, first, let see how the US 200 years ago were different from today's European situation. How it is comparing apples to oranges.

Let's get some fun.

Bearster's picture

+1 Founders

Let's not forget the lack of centuries of more or less constant warfare between the states of the US, based on implacable tribal hatreds.

Korbin Dallas's picture

Ugh, being compared to a New Yorkian put a progressively-taxing slant on your otherwise accurate statement.

That being said, one cannot deny the force of a long-term plan.  Face it or not, the United States of Europe has been in the works for decades by both hidden and visible forces.  Those deriding its unrepresentative and irresponsible form of dirigeiste form of parliament miss the point, in my humble opinion, that the European solution to selling the union is via stealth.  And that is the difference between living in America and Europe, we tend (especially in Texas) to lay it all out there and let the people choose.  What poisons our lucious soup are the dead hands, invisible hands, and sock-puppets.  Let Europe get gang-raped by their own dead hands, we have more to fear from the puppeteers and enablers.


The Talmud Kid's picture

Last one out of the euro is d'œufs pourris.

Misean's picture

"Is Germany willing to be held hostage to foreign printing presses?

How will Germany publicly respond to this?"

Visions of Leopard II's warming their engines on the edge of the Ardennes just popped into my mind...

Gunther's picture

The German armed forces have only the task to stop the enemy until real military arrives.

Your vision is not grounded in today's reality.

Those few Germans who see what is going on buy gold and silver metal.

After holding it for more then a year gains are tax-free. :-)


Commander Cody's picture

After holding it for more then a year gains are tax-free. :-)

I think I'll start brushing up on my German.  Guten tag, Gunther.

Terminus C's picture

Ireland is printing our money Hundinnen!

Schnell, invade Frankreich!

I can see it now...

Misean's picture

It provides better access to the English Channel.

THE DORK OF CORK's picture

To hell with those Teutonic arseholes  - we bought their BMWs in the good times - now its payback time....... I hope......... I pray........... I beg........ subservience is such a bitch.