Inside the world of business

Rare nugget buried in Moody's gloom

CLEARLY WARMING to its ability to wade in on the Irish election, Moody’s last week issued another pronouncement on how politicians have the potential to (still further) mess up the country’s finances.

The pared-down version of the agency’s thesis this time was that statements made by both the Government and Opposition last week had created worries about the fate of the senior unsecured and unguaranteed bondholders in the banks. This meant the debt had to be downgraded because Moody’s was suffering from “a reduction in its systemic support assumptions for the banks”. Sounds sore.

The downgrade came a week after Moody’s first warned that Opposition proposals on “burden-sharing” for bondholders could lead to cuts in ratings.

The Government’s subsequent decision to hold off on pumping further billions into the banks until after February 25th appears to have tipped the agency over the edge. Naughty politicians: they never listen.

If, while ignoring the ratings agency, the powers that be did manage to find the time to peruse the latest Moody’s analysis, they would, however, find a little nugget of rather piquant irony. Buried within the agency’s concerns was the statement that Irish Nationwide and, everybody’s favourite, Anglo Irish Bank now had “much lower systemic importance” than the other banks in the system.

Ah, systemic importance. If we had a cent (or a basis point on our sovereign bond yield) for every time the term was used during the early stages of the bank guarantee scheme and the Anglo nationalisation, we’d be rich, or at least less poor.

Alas, we’re not, because it took billions upon billions of our money to transform these two sorry institutions from banks with systemic importance to banks that don’t have it after all.

Maybe it’s just us, but something isn’t quite right about that.

IDA's turn to shoot the messenger

IT'S EASY to have sympathy with the difficulties facing IDA Ireland as it sells the State internationally to potential investors.
The agency spends about $3 million (€2.2 million) a year trying to promote a positive image of Ireland in the US. That spend includes billboard ads at airports, online advertising and television spots on business channels CNBC and Bloomberg.

The uphill task facing the IDA was underlined during a recent segment on CNBC about the banking crisis. Cue commercial break and one of the IDA's slick advertisements extolling the virtues of innovation in Ireland. If you were a US executive considering establishing a European base, which would you put more store in?

The frustration of the IDA at constantly having to counteract negative press bubbled up at an Engineers Ireland event yesterday.

Brendan McDonagh, head of planning and strategy with the agency, accused the Irish media of "creating negative headlines" about the country, which are then being amplified overseas.

The complaint seems like a classic case of shooting the messenger. The media, and in particular the business press, would not be fulfilling its duties if it did not report the extent of the economic crisis and the black hole at the heart of Irish banking.

The IDA, rightly or wrongly, is extremely cautious in its dealings with the media, and is quick to cite the confidentiality of its work with clients when faced with media queries. Despite spending over €100 million a year luring business to these shores, it only published its strategy for the first time last year.

Surely McDonagh is not suggesting the media should pull on "the green jersey" and talk up the economy? The Government urged Irish banks to do that in 2008 and look at how that backfired.