Dear Jean-Claude,

Been meaning to drop you a line, how’s she cutting at your end? Wee bit of a problem here, Jean-Claude, case you didn’t hear; we’ve nobody running the gaffe - but I know you’ve bigger worries.

See that’s why I’m writing. Jean-Claude, correct me if I’m wrong, but you can’t have roasting hot growth across all developing economies and print money out the wazoo in the developed world without letting inflation out of the bottle. So you’re right to be fretting about inflation, after all its popping up everywhere and with Germany switching to the fast lane you’ll be faced with the mother of all Solomon’s choices shortly – increase interest rates but risk choking off economic recovery or let inflation run much higher and risk price and wage demands ballooning out of control.

Now you know and I know what you’ll do -increase interest rates, right? Much faster and higher than most people think? Thought so. But here’s the thing, Jean Claude, unlike most of the Eurozone, the bulk of Irish mortgages are on variable rates, about half a million of us. Jack up interest rates and what’s left of the economy here goes right up the spout.

So to avoid looping back into another Euro crisis what we need to do quickly is to move as many variable and tracker rate mortgages to new fixed rates – these ones linked to the full remaining term of the debt. No, not the type of rapacious short term fixed products favoured by Ireland’s gouger- banks, but decent long term rates that don’t shaft borrowers if they have to bail out early.

Remove the risk of getting mugged and many Irish borrowers will do what most continentals do –buy certainty and fix long term. But, aside from the reluctance of banks here to comply with new, modestly priced, products, they have neither the cash nor the access to long term money to do it. Oh and the Government is screwed too but you’ll know that because you helped do it, remember, by setting an unaffordable national borrowing rate of 5.8%.

See, Jean Claude, that has to come down too. But, in addition, the ECB and your pals at the IMF need to revolutionise the Irish fixed rate mortgage market, encouraging the Irish authorities to force banks to comply - by writing to all customers shortly with new fixed rate deals before the long rate market goes gaga. So before you press the nuclear button by raising interest rates several notches higher, you've simply got to prepare the bunkers here for the mushroom cloud. Otherwise we’ll go poof and take you and the Euro with us.

Yours etc,
Ed.
Concerned Borrower

PS; Sorry to hear Irish Socialist MEP, Joe Higgins, got under Jose Manuel’s skin at the European Parliament. He loves conspiracies does our Joe - but at least he’s not taking about alien abductions, that stuff would really do your head in.

PPS; Could you ask Nicolas in Paris to zip it about Irish Corporation tax – bit like charging passengers on a plane hitting turbulence at 35,000 ft for their oxygen masks.. Anyway, Jean-Claude you know the drill; distractions about our tax model can't disguise the huge structural problems facing France. Irish tax doesn't have to go up but French tax does have to come down, its social benefits trimmed and its working week extended. Hell, Jean-Claude, if all the off- balance sheet debts were properly disclosed, especially the early pensions promised to a much older population than ours, the French AAA status wouldn’t last jack spit. Hey, but let’s keep that one from bond markets, ok?