My letter to the London Evening Standard newspaper

21st November 2010 by Shaun Richards

I thought that I would update you on the letter I wrote to the London Evening Standard. Having emailed the paper the letter I published on here on Thursday I received a request from it for some more details. I then added them to the letter and resubmitted it.

Amended Letter Sent to the London Evening Standard

I have been following the development of the crisis in the countries who are in the Euro project for some time. As an economist I stayed up until gone 2 am on May 10/11th to watch and listen to the Press Conference of Euro zone ministers describing their “shock and awe” rescue vehicle for countries in the Euro who suffered in future from the problem that Greece was then suffering from. At this time they made all sorts of boasts about what their plans would achieve.
If we now go forwards six months to today we find the Euro zone again mired in uncertainty over the fate of Ireland and Portugal. I would like on behalf of Evening Standard readers to ask those Euro zone ministers what happened to their boasts and claims from that and subsequent days? Furthermore my contention is that their main vehicle for recovery the European Financial Stability Facility or EFSF is so flawed that they do not want to use it.
Now we find the possibility that the UK will be dragged into the rescue plan for Ireland via a different European Commission fund. This has two implications. Firstly the then Chancellor Alistair Darling committed us to a project at a time he was denying it and secondly that we are being dragged into support of the Euro project when we have nothing to do with it.
I wish to make it clear that I wish Ireland the best in difficult times but in my opinion the Euro zone should solve its own problems. Back in 1992 when the UK was in trouble nobody helped us. Also as time goes forwards I suspect there will be other calls for money/aid from Euro zone countries with Portugal and possibly Spain leading the list and if we start now with Ireland we have to realise there will be other calls too.Accordingly I believe that our government should be very circumspect before offering help as it is unlikely to be the last call and may not even be the last call from Ireland and there is a danger of us getting on a treadmill we cannot get off. As an example I believe the “temporary” help provided to Greece has now become effectively permanent.

What was published in the newspaper on Friday the 19th of November

I STAYED up through the night on 10 May to hear European ministers describe their “shock and awe” rescue vehicle for Eurozone countries that experienced the same problems as Greece. They made all kind of boasts about what their plans would achieve.

Six months on, the Eurozone is again mired in uncertainty over Ireland’s fate. We should be asking what happened to all those bold claims. Meanwhile the main vehicle for recovery, the European Financial Stability Facility seems to be so flawed ministers do not want to use it.

Now the UK may be dragged into Ireland’s rescue plan via a different European Commission fund, through a commitment Alistair Darling never told us he made. If we help now, how many more times will be expected to shell out? The Eurozone should surely solve its own problems.


I was pleased that the letter was published even though it omitted some details. For example the published version left out the bit where I wished Ireland well. Perhaps more curiously they left out the bit that they had asked me to add!

I thought that I would put the two versions in an article for several reasons. One was as a record. Another was that any new readers intrigued by the article that come to my site can see what I originally wrote. In addition I know from the people who contact me or comment on here that I am read internationally where the Evening Standard is probably read little if at all. So they too can take a look if they wish.

7 thoughts on “My letter to the London Evening Standard newspaper”

  1. Shireblogger says:

    Hi Shaun,
    Your letter raises very important issues. Can I just comment on a previous issue I raised. I asked what was the eligibility criteria for assets acquired by the ECB under the securities markets programme – SMP. I wondered whether that might have something to do with the timing of the Irish events last week. You said that, in fact, the programme was designed to hoover up assets nobody else wanted. I am not sure this is correct. I looked at the May decision of the ECB Council bringing in the SMP. The eligibility criteria for assets acquired is set out as those contained in guidelines called ECB 2000 / 7 Annex 1 Chapter 6. I am no expert but they define assets as tier one or two. Tier one must be of high credit standard by reference to credit agencies and institutional control. Tier two assets must be from guarantors/issuers deemed financially sound by both the ECB and the National Central Bank. Detailed risk control measures apply to protect the ECB / eurosystem from losses : haircuts and the like.

    I have read that at least one rating agency was due to review Ireland’s credit rating following the production of their new four-year plan originally due this week. I am not convinced that these guidelines have nothing to do with timing. At the webcast of the ECB interviews with the executives of the ECB, there appeared to be great reluctance to discuss assets acquired under the SMP other than inbroad principle.

    The point I am questionning is whether the UK taxpayer is getting dragged in to, effectively, underwriting the EUrosystem and its Central Bank liquidity operations. If so, this should be made public to the UK voters so that they can question this. I am not aware there has been any reciprocal arrangement for the eurosystem to underwrite the special liquidity measures taken by the Bank of England, from which I’m sure a number of eurosystem banks have taken benefit.

    This was my point.

    1. Hi Shire
      We have been slightly at cross puposes I think so apologies for my part in that. For my purposes I suspect (but do not know for sure as the ECB has been very reticent about what it has actually bought) that the majority and probably the vast majority of assets purchased have been peripheral government debt. This is what I meant by buying what nobody else wanted at that price. So its main holdings at this time are of government debt which overall on a marked to market basis will be at a loss and there is the possibility indeed probability of haircuts/restructuring on them over time. Now whether you would call some of those tier one or tier two now is a moot point I think. In some respects the discredited ratings agencies system is hardly reassuring!

      To do any real analysis one would need to have some sort of audit of what the ECB holds in the SMP and that is not possible as there is no information apart from the size. We only have the ECB’s word that it has bought these instruments and they are what it claims….

      As to us underwriting the ECB’s liquidity operations I am not sure we are at great risk of that but we are in danger of underwriting the Euro and I await more details on what our help will actually involve.

      As to private-sector debt if they have purchased any then there are even more dangers particularly if it is related to the finance sector. If we think of Ireland then purchases back in May would have a completely different credit rating to now. The essential problem is that we know so little of this…

    2. Hi Shire
      Just to add to my previous reply that the ratings agencies are already beginning to imply downgrades for Ireland so you may not have long to wait before you get what you expected.

  2. Mickalus says:

    Hi Shaun,

    Speaking from Ireland, I must 100% endorse your sentiments and frankly question why our Eurozone partners are anxious to shell out more money to sustain them. The impression of the performance of Irish banks domestically is frankly very poor and shambolic, to refrain from profanity.

    As a non-economist, can I ask you to comment on whether it would be simply better to declare the banks bankrupt? How would such a move be interpreted?

    Thanks as always for very compelling and accessible journalism, and happy first anniversary.

  3. Mac says:

    Ah, Editorial discretion, what a wonderful thing and something so inherently self-defeating in this context as to actively loose readership! Decorum is one thing, blandness quite another.

  4. Chris Collins says:

    Always well worth having an independant record of anything you have sent to “media” organisations. Just from your simple example you can see how your letter has been twisted. I have had first hand experience of dealing with their manipulation and selective reporting..

  5. Fletch says:

    Congratulations on being published.

    In the final version they have at least kept your conclusions. I feel they have removed your argument though: the point about ’92 and when does it stop in terms of countries and time.

    You might have come off better, but then people who care will read this entry.

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