It would be a mistake to extrapolate from the AIB default that the global financial system is good for the €108 billion net CDS exposure it has to the euro area banks. That would require some pretty heroic assumptions about the extent to which banks have learned to manage complex risk since 2008. But it seems that the “success” of the AIB default has emboldened the Government to up the ante and go after the senior bondholders in Anglo.

It remains to be seen whether the ECB will agree to any such move or, more pertinently, whether or not it can block it.

Its main weapon, the withdrawal of €150 billion odd of liquidity support for the Irish banking sector would be far more likely to cause the sort of European banking catastrophe that it fears than the burning of speculative investors in Anglo and Irish Nationwide senior bonds.

At a minimum, the threat of burning the Anglo bondholders gives the Government a useful bargaining chip in its ongoing “engagement” with the EU over our bailout in the wake of the Greek crisis.

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