Britannia Radio

"Countries could be offered "bilateral bonds" that would allow them, 
for example, to borrow money at rates enjoyed by the likes of 
Germany, when it issues government bonds without having to pay the 
current risk premium as well."
Quite apart from the fact that Germany itself is now finding it more 
difficult to borrow money, see: [my "German troubles should worry us 
all"  timed at 1202 today]

it's perfectly clear that if the German government guarantees 
repayment of a debt incurred jointly and severally with the Irish 
government, then it's becoming liable for and assuming a commitment 
of the Irish government, which is explicitly prohibited by Article 
103 TEC.

So much for EU treaties, and EU laws, which the ECJ claims to be 
inherently superior to national laws, including national 
constitutional laws, within an EU which claims to be based upon the 
rule of law."

But the trouble is that rthey don't think the laws apply to THEM if 
it's inconvenient!
xxxxxxxxxxxx cs
========================
IRISH INDEPENDENT      25.2.09
ECB 'may back bailout' of countries like Ireland
EU predicts Irish budget shortfalls of 11pc but wants to avoid IMF 
action

By Ailish O'Hora

The European Central Bank (ECB) has signalled that it may back a 
bailout of distressed countries like Ireland, should a situation 
become "inevitable".
ECB Governing Council member and head of the Bundesbank, Axel Weber, 
stressed that any aid should be tied "to very strict" conditions and 
modelled after International Monetary Fund support.

He was speaking to Germany's 'Die Welt' newspaper in an interview to 
be published later today.

The European Commission predicts budget shortfalls this year of 11pc 
of GDP in Ireland, 3.7pc in Greece, 6.2pc in Spain and 3.8pc in 
Italy, compared with 2.9pc in Germany. The EU ceiling is 3pc.

It is understood that one of the ideas being considered is the 
offering of preferential terms on bonds to countries like Ireland in 
a bid to avoid any IMF bailout.

Countries could be offered "bilateral bonds" that would allow them, 
for example, to borrow money at rates enjoyed by the likes of 
Germany, when it issues government bonds without having to pay the 
current risk premium as well.

The IMF predicts the euro-area economy will shrink 2pc this year. IMF 
Managing Director Dominique Strauss-Kahn said earlier this month that 
the forecast may need to be cut as the global economic slump deepens.

Swelling
Europe's governments have so far committed ?1.2 trillion in bank aid 
and about ?200bn in economic-stimulus packages, swelling budget 
deficits in some countries 'and hobbling governments ability to meet 
bond payments.
Mr Weber added that he sees a 1pc benchmark interest rate as the 
"lowest" limit for him.

"There's still room to manoeuvre that we can use until we get to 
1pc," he said. The ECB has cut its benchmark rate by 2.25pc since 
early October to 2pc to combat the worst recession since WWII.

A decision is due next week and economists expect the ECB to cut 
another 50 basis points off the key rate, which would bring rates to 
the lowest level on record.

Mr Weber said short-term deposit rates are also leading towards the 
zero rate and the rate the ECB pays for deposits is 100 basis points 
below the key rate, and "that rate can't fall below zero".

He also warned that as soon as the economic crisis is over, "interest 
rates will have to be raised quickly again".  [There's a dollop of 
unsupported optimism for you.  Most see further deterioration before 
then - cs]

Mr Weber said that while German inflation rates may turn negative 
towards the middle of the year, he did not see a deflation spiral and 
instead "we have to be concerned about inflation in the medium-
term."  [rampant inflation is the only possible result of massive 
stimuli!  Getting the timing right on such interst rat rises is 
critical.  Too soon and there'll be no recovery.  Too late and 
inflation would be out of control.  - cs]
(Bloomberg)