Courts could have a role in Irish economic crisis

Permanent Crisis Resolution Mechanism.

It is the name of a German initiative to ensure that financial fatcats as well as innocent taxpayers take a hit from overlending to profligate eurozone periphery nations and banks.

A well-intentioned effort by Chancellor Merkel at sharing the burden of dealing with credit excess, that seems today to have inadvertently sent the eurozone a few stages down the loop of doom.

I think the name is supposed to mean that the resolution mechanism is “permanent”, although it sounds a bit like it is the crisis that is permanent. That certainly appears the case today, as I hurtle towards Brussels on the Eurostar, ahead of a vital meeting of European finance ministers.

The last time I did this was in May, when Alistair Darling, startled at still being Chancellor during the fraught Coalition negotiations, attended an acrimonious meeting that lasted until 3am. They just got out details of this “trillion euro” package minutes before Asian markets opened, but I thought at the time that it was all a little flaky.

Well now it appears to be a case of “Show me the Money”.

The trigger for this is the suggestion by Merkel as part of this PCRM that bondholders should shoulder some of the hit in situations like this, after 2013. If you look at the Irish bank bailout in September, the people who lent the money to the Golden Circle of Irish businessmen who bankrupted most of the Emerald Isle’s banking system, got away scot free.

Taxpayers in Ireland will be paying this off for years.

So it was right to try to address this utter injustice. The problem is that it has spooked markets hugely.

This battle of international investors versus taxpayers will be seen vividly in the courts this week. There is a battle between basically the Irish government and the hedge fund bondholders of the junior debt of Anglo Irish Bank.

The attempt at a so-called coercive tender, is being resisted by basically US hedge funds who say they can block these small efforts towards burden sharing.

So watch Brussels, where I cannot predict whether and how Ireland will succumb to international pressure this evening. But also watch the courts.