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Archive for the ‘Irish Bailout’ Category

More Billions to go down the Irish banks black holes

A report from Goodbody Stockbrokers has argued that the State cannot bear the losses from the banking crisis on its own.

In a report on Irish debt levels, Goodbody says there should be some form of risk-sharing with bondholders. But it adds that Ireland cannot do this on its own, and should push for a Europe-wide solution to the problem.

Goodbody says some €21 billion of bank debt should be restructured now – otherwise there will have to be a restructuring of Irish sovereign debt some time after 2014. Goodbody economist Dermot O’Leary says a new government must act urgently, as two-thirds of these bondholders are due to be repaid over the next 24 months.

Goodbody estimates the savings to the taxpayer could be around €10 billion if a 50% haircut were applied to the outstanding stock of unsecured, unguaranteed senior and subordinate bondholders.

The stockbroker believes Ireland will not reach the target of a 3% of GDP budget deficit by 2014, as foreseen under the four-year plan. Instead it believes the deficit will still be 4.3%, and the debt/GDP ratio will reach 115%.

The report also warns that reducing Ireland’s debt to levels required by the EU Stability & Growth Pact could take 20 years of tight budgets, even if the targets set out for the next four years are met.

Goodbody says the costs of the banking crisis make it less likely that Ireland will be able to pay back its debts in the future. It has raised its estimate of the cost of the banking crisis to €57.5 billion or 36% of gross domestic product.

‘The new Government has a small window of opportunity to convince the EU that it is in everyone’s interest to implement a more comprehensive reform of the banking system, which recognises that the Irish sovereign can no longer support the burden alone,’ said economist Dermot O’Leary.

Other options suggested by Goodbody are allowing the European Financial Stability Facility to directly recapitalise weak banking systems such as Ireland’s or facilitate the sale of Irish banking assets through an EU-wide insurance scheme.

The Goodbody report also says a reduction in the interest rates charged under the EU/IMF bail-out is needed. It calculates that every one-point reduction saves €675m a year in interest payments.

Ireland will need more EU help to raise funds – NCB

Stockbroker NCB has said that Ireland will need further EU help after 2013 to raise funds. It says a lowering of the interest rate on EU loans would give Ireland a higher probability of weaning itself off aid by 2014.

The ‘Ireland Moves Forward’ report also identifies state assets that could be the first to be sold off to help the Government finances, including those in the areas of forestry, energy, networks and ports.

The report says Ireland can look forward to a two-tier jobless recovery in 2011 with exports continuing to grow but domestic demand remaining weak. It says that the country’s competitiveness has improved significantly through the economic downturn.

It also points out that foreign direct investment in Ireland increased significantly last year, despite the global pot declining by 8%.

NCB says the country will be rolled into the European Stability Mechanism (ESM), the permanent EU crisis mechanism to replace the current European Financial Stability Fund.

It says a lowering of the interest rate on EU loans would give Ireland a higher probability of weaning itself off aid by 2014.

But it argues that any post-general election attempt renegotiation of the terms of the EU/IMF financial support for Ireland would lead to a deal that looks ‘very similar’ to the existing one.

It says the only changes would be in the exact details of how the €15 billion in budgetary corrections in coming years are achieved. However, NCB does see changes to the interest rate taken at a European level as likely in the coming months.

Today’s report says the Irish banks remain reliant on the state for capital and on the ECB and Irish Central Bank for liquidity. It adds that the March stress tests will determine whether any additional capital is needed apart from the €10 billion already earmarked for the financial institutions.

NCB predicts that the National Asset Management Agency will be a major ‘dictator of activity in 2011’ and beyond.

NCB says the VHI, Coillte, Rosslare Port as well as energy sector assets like Bord Gáis and the ESB with generation and supply assets should be sold off ahead of network assets such as distribution and transmission.

Today’s report also says there are further falls in house prices with a further 10% fall from peak levels expected.

NCB says that the Irish equity market is no longer a reflection of the Irish economy. The report notes that Irish derived profits now represent 17% of overall profit in its sample of recommended Irish shares. That compares to 36% in 2006.

It says publicly quoted food and construction companies are likely to be active acquirers of other businesses this year, while the area of renewable energy/cleantech industries continue to be an area of significant investor interest.

source:http://www.rte.ie/news/2011/0208/economy-business.html

Comment:

As Max has been saying we are still not been told the real figures and we continue to get a drip drip feed on this financial disaster .Now Dukes comes out and tells us that we must pump 15 billion more into these toxic black holes that is now All of the Irish Banks

The two main contenders for the top jobs in the new Government are choosing to ignore the real problem that is because they are themselves not in a position to understand the debt of this financial meltdown

The Banks must be allowed to fold and a new commercial bank that has new capital be brought into existence. The new 15,000,000,000: and not forgetting the new 1,500,000,000 for Bank of Ireland  billion  could be better spent in a new jobs stimulus packet and new Bank credit for small business

For God sake anybody with a atom of sense should know this !

See the Republic of Ireland’s national debt mount up, a measure of the legacy the Irish Government is in the process of bequeathing to the children of Ireland:

€ 95,314,656,426

The FINANCE DUBLIN Irish Government Debt Clock was set at midnight on June 30th 2009, when it was €65.278 billion It updates the latest figures for the National Debt of Ireland. The clock is re-set periodically, to reflect changes in debt and deficit estimates from the Dept of Finance, the National Treasury Management Agency (NTMA), and independent economists.

We are not been showen the full deal

via Flickr”]The powerful European Central Bank [ E C B ] i...

Yesterday the Minister for Finance published a statement and a set of documents which set out in some detail parts of the agreement reached over the past couple of weeks with the IMF and various parties from within the EU. I say “some parts” because it seems a secret side letter dealing with the banks is not being published at present. It seems bizarre that the documents were published only after statements on the agreement in the Oireachtas where Opposition parties were forced to comment on documents unseen. Why weren’t the documents published on Monday last before the matter was dealt with in the Oireachtas? For interest, the PDF consolidated document was created at 1.51pm yesterday. And I am still at a loss as to why the letters at the top of the consolidated document are dated “[] December”.
It was of course predictable that Opposition parties might attack the bailout plan in the Oireachtas on Tuesday. And it must be said that the Taoiseach gave a robust defence in which he pointed out that 5.8% was less than the rates practically available to Ireland at the moment, that the State was a half year away from running out of the cash to fund day-to-day spending (including pensions, social welfare and public sector pay), that Greece was now seeking the same bailout terms as Ireland and that we need a functioning banking system. He even managed to get a few laughs when he responded to Sinn Fein’s speech and remarked at how ironic it was that just as Sinn Fein were coming round to the idea of the State that they still weren’t aware that the State needed to be funded (unfair yet funny nonetheless). But he deployed at least three tactics in dealing with the onslaught from the Opposition which are worth examining:
(a) He didn’t reveal all of the terms of the deal. In particular we don’t know what has been agreed with the ECB from whom Irish banks appear to have €90bn+ of emergency liquidity assistance. He didn’t reveal why the banks need further capitalisation at this stage. He deployed misdirection as far as I was concerned to try to focus the bailout on “Garda and nurses salaries” instead of what it is really about : the banks. The interest rates are just now becoming known though they are not included in the document set published yesterday.
(b) He challenged the Opposition to produce a better alternative to the unpublished agreement. In principle this was a fair tactic because it is very easy to knock a solution to a difficult crisis without proposing an alternative. It would have been fairer though if the Opposition knew what deal was being proposed.
(c) He specifically challenged the notion that has gained mainstream traction in the State supporting “burning bondholders” and default. The Taoiseach claimed that the Opposition regarded these options as “cost-free”. Again a fair challenge but it would have been fairer if he didn’t use the extreme of claiming that supporters of default say it is cost-free, a more accurate assessment is that they said it would cost less than the present course.
So having studied the consolidated document published yesterday, is there an alternative and would default cost less than the proposed agreement? Before starting it needs to be acknowledged that we do not have comprehensive facts on what has been agreed with the IMF/EU and in particular we do not know what is proposed in detail with the banks, including the European Central Bank.
An alternative
Firstly I should say that I don’t see fiscal balancing, getting our revenues to equal our costs (excluding the cost of the bank bailout) to be an epic challenge. Nor do the politicians who believe we can achieve near equilibrium in 4-6 years. And frankly if those fuckers (that’s what our Taoiseach called them in the Oireachtas when he didn’t realise his microphone was on) in our competition quangos got their act together then we could see a re-basing of costs in the economy going forward (so if food, electricity, gas, broadband, phones, mobiles, education, medical and other professional services, clothing, consumer goods for examples) are all cut by 25-50% then frankly the fiscal adjustment would be a lot less challenging than many think – yes, there would be challenges in dealing with legacy debt, particularly mortgage debt, but that is a banking matter and will be dealt with below.
Despite the international perception that the Irish got drunk on a credit binge during the boom years, we did do some things right. We established a €25bn rainy day fund called the National Pension Reserve Fund – most countries fund pensions from current tax but we decided to set up a special pot which frankly can be used for any expenditure (and as we see in the current proposal, it is to be used to bail out the banks). We have also borrowed so that we have a €25bn cash balance on hand in addition to our pension reserve. These are our strategic cash assets and their use/loss should be very carefully considered because they provide us with freedom to manoeuvre today.
Ireland also has many State-owned companies and interests which would have been privatised decades ago in other countries. The State owns a major stake in Aer Lingus. The State owns the electricity and gas generation and most distribution companies. The State owns the public transport companies. These are likely to be disposed of under the current IMF/EU plan.

Comment:

This is part of a much bigger article at source and is well worth a read http://namawinelake.wordpress.com/author/namawinelake/

Just one point, we are again experiencing a “spin” version of a very different reality that this plan/bailout entails. The real interest payment when you take into account the plunder of our nation pension fund is in fact 7.3% .Draconian is the word I would use here, Then by Cowen and lenihan’s own admittance, up to a few days ago we (Ireland) did not need this bailout, and then yesterday Lenihan tell the Dail members that failure to pass the budget will result in State issued cheques will bounce! So which is it are we broke or we just doing the EU a favour and if so why are we paying this disastrous interest payment.

Cowen and lenihan are again ignoring reality the market has priced in a default and we should hold on to our own funds while we still have them.

Trying to borrower yourself out of debts can only work for a short time but only if you have an hedge like the Americans have i.e. a reserve currency for example!  

All this plan is going to do for us is to deplete all of our own funds first and then the loss of our assets and all for the private gambling debts of Cowens and lenihans pals.

This budget should not be passed we can get a much better deal if we have the right people  at the table any idiot knows that !

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