Tag Archives: Ireland

Irish payment coming due at month end

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Lots of ‘restructuring talk’ going on- looking like another ‘bondholder tax’ of sorts?

From Reuters:

Analysts are divided as to whether Ireland’s national debt, which is forecast to peak at 119 percent of GDP in 2013, is sustainable. A policy paper by Ireland’s European partners and the IMF is being drawn up on a possible deal to refinance the promissory notes, IOUs used to recapitalise failed lenders Irish Nationwide Building Society and Anglo Irish Bank, Noonan said. Ireland would then seek the political support of its European partners. “I would like to see a situation where the repayment schedule on the Anglo Irish debt was more affordable and that would mean, in very simple terms, re-engineering the repayment schedule so we would have a longer time to repay at lower interest rates,” Noonan said. There was no prospect of a writedown of part of the principle, Noonan said. “It will have to be repaid,” he said, while warning that the talks on refinancing the promissory notes were unlikely to reach a conclusion soon. “It is a project where, if we’re successful, it will be in the medium term rather than immediately.”

Kenny cautions on delay in €3.1bn bank debt repayment

By Arthur Beesley and Kilian Doyle

March 13 (Irish Times) — Taoiseach Enda Kenny has rejected calls for Ireland to follow Spain’s lead on demanding concessions from Europe, insisting the two countries were in completely different positions.

With no breakthrough imminent in the Government’s long campaign with Europe to restructure Ireland’s banking debt, Irish officials have privately raised the possibility of delaying a postpone a €3.1 billion bank debt repayment which falls due at the end of this month.

Minister for Finance Michael Noonan left open that possibility as he arrived in Brussels yesterday for talks with his EU counterparts, saying it was a long way to the end of the month and that nothing was ruled in or out.

Speaking in the Dáil today, the Taoiseach said he did not wish to give the public false hope the promissory note due to be paid on March 31st will be scrapped.

“This country is in a bailout programme, Spain is not,” said Mr Kenny. “So the money to pay the salaries of the gardaí, the teachers, the nurses and all of the other people in the country here comes from Europe.”

Euro zone finance ministers agreed last night to give Spain more leeway in cutting its deficit after the Madrid government said it would not meet its deficit target. Spain’s deficit target for 2012 will now be 5.3 per cent of GDP instead of the original 4.4 per cent agreed under new EU regulations.

Sinn Féin president Gerry Adams urged Mr Kenny to follow Spain’s lead. “I can’t,” the Taoiseach replied. “Spain is not in a bailout situation. It’s got excessive deficit and it’s got challenges itself. It’s got to get its deficit down by the end of 2013. Ireland is in a programme and has to get our debt down by 3 per cent by 2015.”

Mr Kenny insisted negotiations are under way to restructure the terms of Ireland’s European debt. However he said they were difficult, complex and very technical. “When you speak of the €3.1 billion in respect of the promissory notes, I’ve made it perfectly clear we are not going to raise any undue expectations here,” Mr Kenny added.

In Brussels today, however, EU economics commissioner Olli Rehn indicated in unambiguous terms that a delay in repayment of the debt would not be acceptable. His stance mirrors that of the European Central Bank, which is also resisting any delay.

“I actually wonder why this has to be asked at all because the principle in the European Union and in the long European legal and historical tradition is – in Latin – pacta sunt servanda, respect your commitments and obligations,” the commissioner said.

“The European Union is a community of law and that assumes by definition that each and every member state respects the commitments it has undertaken and this is valid in the case of Ireland as well. Any possible negotiation on the medium- to long-term solution is a separate issue.”

Dublin has been trying for months to renegotiate an EU-approved arrangement under which it is recapitalising the former Anglo Irish Bank and the former Irish Nationwide Building Society with expensive IOUs known as promissory notes.

A key consideration in this debate, a senior European official said yesterday, is whether any deal would help Ireland realise fiscal targets set under its EU-IMF bailout in a scenario in which economic growth is forecast to slow down.

Also in question is whether loss-incurring tracker-mortgages issued by other Irish banks could be moved as part of any restructuring deal to Irish Bank Resolution Corporation, as the former Anglo and Irish Nationwide are now known.

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Irish want debt concession if ECB aids Greece

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As previously discussed, once Greece does it, it’s compelling for everyone else to do it.

It’s the classic fallacy of composition.
When someone stands up at a football game to get a better view,
it quickly makes sense for everyone else to stand up as well.

Yes, you can say they all are better off if everyone stays seated,
but once one goes, all go.

So expect a serious shock wave to quickly depreciate all euro debt.

Irish want debt concession if ECB aids Greece

Feb 8 (Reuters) — Ireland would see any European Central Bank contribution to the restructuring of Greek debt as a precedent that would boost Dublin’s efforts to ease the burden of its own sovereign debt, the country’s finance minister said on Wednesday…

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WARNING- Euro Zone Automatic Fiscal Stabilizers Deactivated!

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I now believe that system risk in the euro zone is being grossly under discounted.

The implied assumption for the major currency regions is that during a slowdown the automatic fiscal stabilizers- falling government ‘revenues’ and increased transfer payments- will kick in to increase deficit spending, and thereby add the income and savings to catch the fall and support the next expansion.

This has always been the case, and as we all know, the most accurate forecasts are the ones that assume it’s not different this time.

But the relatively new and evolving euro zone arrangements are qualitatively different.
Spending by euro zone national governments is now market constrained in Greece, Ireland, and Portugal, with the rest looking like they aren’t far away from those same market constraints.

In a slow down, this means as tax revenues fall, markets may not permit government spending to rise, unless the ECB immediately funds all the national governments as well as the banks. Just as we see happening to the US states.

Not that the ECB won’t eventually do that, but that they are unlikely to proactively do it.
In other words, it will all have to get bad enough for the ECB to write the check that only they can write.

This means the euro zone is now flying without a net.

And the potential drop in aggregate demand is far higher than markets are discounting.

And that kind of catastrophic collapse in aggregate demand in the euro zone will have immediate catastrophic global impact.

And the fiscal discussions going on in Japan and elsewhere tell me there is a clear risk even the operationally unconstrained nations will be very reluctant to immediately and proactively move towards fiscal expansion.
Instead, they will let it all deteriorate until their automatic fiscal stabilizers to kick in.
Much like what happened with the 2008 financial crisis, where the lack of a will to engage in an immediate fiscal response let that financial crisis spill over into the real economy.

Can all this be avoided? Yes, and the remedy is both simple, immediate, and would quickly lead to unprecedented global prosperity.

All the euro zone has to do is have the ECB write the check, and announce immediate and annual distributions of 10% of GDP to member nations to pay down their outstanding debts, and at the same time impose national deficit ceilings sufficiently high to promote desired levels of aggregate demand. And the penalty for non compliance would be the withdrawal of ECB support. This would remove credit concerns, without increasing government spending, so there would be no inflationary impact.

And all the rest of the world has to do is recognize that federal taxes function to regulate aggregate demand, and not to fund expenditures per se. And then set taxation and/or government spending at levels that sustain desired aggregate demand.

They need to know the question is not whether longer term the budget deficit is sustainable- as it’s always nominally sustainable- but instead worry about sustaining aggregate demand at desired levels, both long term and short term.

But, unfortunately, I see the odds of a catastrophic collapse in aggregate demand as far higher than the odds of an awakening to a global understanding of actual monetary operations.

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Angry Irish Voters Ready to Exact Revenge

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Notice that they are angry at the government, not the currency arrangements, as previously discussed.

What’s saving the euro is that it’s not intuitively obvious that the currency arrangements could possibly be part of the problem.

Rates are low, there’s relatively little inflation, and and the foreign exchange value is reasonably strong and stable.

And it makes perfect sense that they are now paying for past govt abuses and policy blunders.

So the widespread dissatisfaction is directed at the national govts in question.

And there is little or no inclination to abandon the euro.

Angry Irish Voters Ready to Exact Revenge

January 21 (Reuters) — Irish Prime Minister Brian Cowen’s government, called “The Muppet Show” by one newspaper on Friday, can’t die soon enough for most voters.

espair has turned to fury among Irish people over an economic meltdown that has forced them to swallow ever deeper cutbacks and tax increases, while ministers emerge from their luxury state cars to speak of the country having turned a corner.

Ireland has witnessed no Greek-style riots but voters are impatient for the March 11 election, called by Cowen on Thursday, to exact revenge on the political class.

“We need to hurt them,” said Bernadette, a mother of four and owner of a wine importing business that has cut its staff to three from 15, “Unless you hurt them they won’t pay any attention to you.”

Voters regard the political class as at best complacent and at worst complicit in the nation’s transformation from economic star to euro zone basket case.

Cowen’s Fianna Fail party is set for a record rout in March, according to opinion polls.

While voters are likely to elect the mainstream opposition, some will opt for independents or the hard-left nationalist Sinn Fein party.

“They should all be gone. There should be an immediate general election. Everyone is sick of it, said postal worker Gerard Williams, 43.

“I’ll be voting for independent candidates. The big parties have lost the run of themselves,” Williams said as he walked through St Stephen’s Green in central Dublin.

Outside Cowen’s home county of Offaly, it is difficult to find anyone with a good word to say about him.

In an editorial The Irish Times newspaper despaired: “God Almighty, no one thought it could have got worse! The Government is staggering like a drunken sailor towards collapse.”

The Irish Independent said previous comparisons between Cowen and the captain of the Titanic had been unfair: “Even the captain of the Titanic was able to rearrange the deck chairs.”

Cosy Culture

A botched attempt at a cabinet reshuffle forced Cowen to call the early election following scandals over his drinking habits and questionable choice of golf buddies.

Polls suggest the two main opposition parties – centre-right Fine Gael and centre-left Labour – will form the next coalition government.

But with Fianna Fail set for a hammering the field is also open for independent candidates and Sinn Fein.

Ireland’s crisis has its roots in reckless lending and lax oversight of bankers and property developers, groups actively courted by politicians for donations during the boom years.

Revelations that Cowen played golf with the former chairman of Anglo Irish Bank months before it was taken into state care cemented for many people their view that business and politics enjoyed a cosy culture.

The spectacle of ministers and parliamentarians resigning before the election with large pensions and reports of developers and bankers living well overseas have infuriated those who didn’t buy into the Prada bag culture during the boom years when Ireland was called the “Celtic Tiger” economy.

“It’s the ordinary man in the street, the middle classes, those in the private sector that are paying,” said Marion, 57, who worked in a multinational firm for 30 years.

“I didn’t benefit from the Celtic Tiger. I lived within my means. Will I even get a pension now?”

The downturn has forced Irish people, particularly young graduates, to seek work abroad, a bitter development for people who thought they had seen the back of mass emigration.

“There are no jobs; all of my son’s friends have left,” said Bernadette. “They are leaving because this is not a country to live in anymore. The government looked after the banks. For them, it’s like we don’t exist.”

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Time for England to complete the conquest of Ireland

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The UK conquest of Ireland began in 1169.

It’s time to finish the job.

All they have to do is offer the following:

Ireland converts all its public debt to sterling.

The UK Treasury takes over the responsibility for all of Ireland’s existing public debt.

(Ireland gets a clean start with no Irish govt. debt and not interest payments)

Ireland taxes and spends in sterling only and has a balanced budget requirement.

Ireland can borrow only for capital expenditures.

The UK Treasury guarantees all existing insured euro bank deposits in Irish banks.

Only sterling deposits are insured for new deposits.

Ireland runs a mirror tax code to the UK and keeps all of its tax revenues.

The UK agrees to fund Ireland’s with a pro rata/per capita share of any UK deficit spending.

St. Patrick’s Day is declared a UK national holiday and everyone over 21 gets a beer voucher.

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Help Ireland or it will exit euro, economist warns

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[Skip to the end]

He touches on the domestic demand issue, highlighted below.

And while sterling is going down versus the euro, more important is the fiscal response in the UK vs the eurozone.

Also, Germany and France are probably not in any position to help, even if they wanted to.

Help Ireland or it will exit euro, economist warns

by Ambrose Evans-Pritchard

Jan 19 (Telegraph) — “This is war: countries have to defend themselves,” said David McWilliams, a former official at the Irish central bank.

“It is essential that we go to Europe and say we have a serious problem. We say, either we default or we pull out of Europe,” he told RTE radio.

“If Ireland continues hurtling down this road, which is close to default, the whole of Europe will be badly affected. The credibility of the euro will be badly affected. Then Spain might default, Italy and Greece,” he said.

Mr McWilliams, a former UBS director and now prominent broadcaster, has broken the ultimate taboo by evoking threats to precipitate an EMU crisis, which would risk a chain reaction across the eurozone’s southern belt, where yield spreads on state bonds are already flashing warning signals. The comments reflect growing bitterness in Dublin over the way the country has been treated after voting against the EU’s Lisbon Treaty.

“If we have a single currency there are obligations and responsibilities on both sides. The idea that Germany and France can just hang us out to dry, as has been the talk in the last couple of days should not be taken lying down,” he said.

Mr McWilliams cited the example of New York’s threat to default in 1975. President Gerald Ford “blinked” at the 11th hour and backed a bail-out to prevent broader damage.

As yet, there is no public support for withdrawal from the euro. A Quantum poll published by the Irish Independent yesterday found that 97pc reject such a radical move. Three-quarters are in favour of a national government, an idea floated by Unilever’s ex-chief Niall Fitzgerald.

“The economic disaster we are facing is unlike anything which has happened in my lifetime. It is a national crisis and needs a government of national unity,” Mr Fitzgerald said.

Mr McWilliams said EMU was preventing Irish recovery. “The only way we can win this war is by becoming, once again, an export country. We can do what we are doing now, which is to reduce our wages, throw more people on the dole and suffer a long contraction. The other model is what the British are doing. Britain is letting sterling fall so that the problem becomes someone else’s. But we, of course, have ruled this out by our euro membership.

“We are paying twice for the euro: once on the exchange rate and once more on the interest rate,” he said.

“By keeping with the current policy, the state is ensuring that Ireland turns itself into a large debt-repayment machine. Is this the sort of strategy to win wars? ” he said.


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