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Archive for the ‘Irish budget deficit’ 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.

Irish banks are still in denial

While all the focus has been on losses at Anglo Irish, the other Irish banks are in denial about the scale of State support needed. It is time to face the facts: the three viable banks need over €17 billion, writes PETER MATHEWS 

LAST WEEK, the scary reports of liabilities at Irish banks centred on the colossal Anglo Irish Bank loan losses, the scale of which I (and other analysts) had been only too aware of more than a year ago. The focus on Anglo Irish was understandable, as far as it went. But the banking sector crisis is not just about Anglo. The Government is missing the bigger picture entirely.

The Irish banking system is analogous to a household’s heating/plumbing system with inter-related boilers. The two big boilers are AIB and Bank of Ireland. There are other smaller boilers, including Anglo and Irish Nationwide, which got really badly damaged by using the wrong fuel and, as a result, they’re now broken beyond repair. The correct decision now is to “stop-cock” Anglo and Irish Nationwide out of the overall system, decommission them and wind them down, in an orderly way, over a period of five to seven years.

AIB and Bank of Ireland (BoI) are the economy’s two heavy duty “main boilers”. Both are now in highly unreliable condition, hissing and spluttering and stopping and starting unpredictably. Both need major refits and servicing. They are severely undercapitalised and poorly directed and managed. Yet both persist in pretending they’re in reasonable shape. They are not. And that’s absolutely the case for BoI, notwithstanding the insistent protests that it is okay because it has more or less raised the capital amount indicated as adequate last March.

But that was last March. And last March’s estimates for both AIB and BoI were not enough. BoI needs €6.5 billion, not €3.65 billion. And AIB needs €10 billion, not €7.4 billion.

The proof goes along the following lines. Gross loans in AIB listed for transfer to the National Asset Management Agency (Nama) totalled €24 billion. A (light) 40 per cent writedown on this figure amounts to €9.6 billion, which should be rounded at €10 billion. We note also that AIB will have to absorb large further losses on its mortgage loan book, its corporate loan book and its SME book and also on its personal lending portfolio. In addition, it may well have uncovered exposures on derivatives. For these reasons, and extensive relevant professional experience, I feel conscience bound to point out that AIB definitely needs recapitalisation now of not less than €10 billion. Furthermore, AIB should not be selling its stakes in Polish and US banks. They are the most profitable, cash-flowing parts of AIB. AIB is only doing this as a panic measure to try and plug its deepening capital shortfall.

Similarly, BoI needs a €6.5 billion recapitalisation. Why €6.5 billion? Because in BoI, the listed loans for transfer to Nama were €16 billion. Apply a 40 per cent write down. This amounts to €6.4 billion, which should be rounded to €6.5 billion. All comments applicable to AIB in the preceding paragraph apply also to BoI.

The Educational Building Society (EBS) also needs recapitalisation of €1 billion to cover its loan losses. Four months ago, the Oireachtas Joint Committee on Finance and the Public Service was advised that the three viable banks, AIB, BoI and EBS, needed immediate capital of €10 billion, €6.5 billion and €1 billion. That’s €17.5 billion in total. The question arises: should the State provide all of this on top of the €7 billion already invested in AIB and BoI in 2009? Clearly not. How much of this €17.5 billion should the State invest? Perhaps €11 billion, in appropriate proportions, into AIB, BoI and EBS.

All of this will result in temporary State nationalisation of these three banks. This leads to another question: where will the €6.5 billion balance come from? The State will be in majority control, at levels in excess of 85 per cent, and able to force existing bondholders in AIB, BoI and EBS to take writedowns on their holdings of bonds, while maybe offering them, say, a small debt-for-equity swap as a sweetener to soften the blow. After, say, five years, the banks will have regained reasonable annual-maintainable normal profit levels in the range €3.5 billion to €4 billion, putting the State in a good position to realise, by way of stock exchange or private sales, its investment of €18 billion in these three banks, plus a profit.

Temporary nationalisation of AIB and BoI will merely formalise the reality that, without 100 per cent State support, both are insolvent. Removal of the State guarantee on deposits at this point would lead to a run on the banks’ deposits. However, we see the banks continuing their delusory charade that they are financially sound and independent!

Realism and optimism are essential for recovery. But optimism must be based on reality. As a country we’re facing a stark reality. Protracted denial in the banking industry, the Government, official Ireland and the professions must stop. Unfortunately, the Fianna Fáil-led Government is responsible for the financial destruction of our economy. Regrettably, the Green Party has collaborated in this destruction. These are the facts. The true situation has been denied by the Government for far too long.

Finally, after two years, only in the last few days have the Minister for Finance, the Government and (some of) the banks been forced to admit the true scale of the destruction. What a waste. What a shame.

So let’s stop the stupid denial. Let’s acknowledge the scale of destruction in the Irish-owned banking sector, not just the Anglo Irish story. AIB and BoI have not been honest with us. Their loan losses are also a shock-and-awe story and they’re only being revealed, on the drip, in drawn-out chapters.

Let’s measure truthfully all the appalling financial damage. Let’s insist AIB and BoI are recapitalised at the truthful, honest, correct and much more robust levels (thereby resulting in temporary nationalisation and bondholder participation through bond writedowns) to enable them to make necessary, much larger, loan-loss provisions than they’ve done to date. Let’s reverse the nonsensical, unwieldy Nama project. This can be done speedily and simply. We’ve got to stop what has become a slow-motion Nama/banks bailout nightmare. Let’s roll up our sleeves and face the challenge. And let’s get on with the work of recovery

source http://www.irishtimes.com/newspaper/opinion/2010/0909/1224278513715.html?via=mr

Comment

This is an excelent articel by PETER MATHEWS 

Early August I posted  my disbelief at the figures the EU stress test results for Allied Irish and Bank of Ireland at the time I stated I thought the figures from the EU were false and were conveniently forgetting some serious hidden derivative losses these corrupt institutions’ were keeping off the book through some fancy  account gimmickry  

My figures were for allied Irish were 10 billion and bank of Ireland, I thought 7 billion or there about .So it is nice to see an independent analyst confirm these figures

Comming over the wires I see headlines say

“Ireland has fallen four places to 29th on the list of global competitiveness and its banking system is the least sound of the 139 countries surveyed, according to the World Economic Forum’s annual rankings.”

now what does that tell you ?

Preliminary Report Into Ireland’s Banking Crisis 31 May 2010

After reading the Preliminary Report into Ireland’s Banking Crisis one can only come to the conclusion that Cowen and Lenihan are Guilty of “Gross Incompetence and Dereliction of Duty”
And should resign immediately and be brought before the courts
on charges of economic treason !

Preliminary Report Into Ireland’s Banking Crisis 31 May 2010

The right to work Campaign (3)

Protesters at Anglo Irish Bank

 


It appears the four people on ledger were arrested as well as two or three people who had been outside. All this took place in the space of ten minutes. Inspector Gannon who led the assault on Shell to Sea campaigners at Polthomas pier in Rossport was spotted among the Gardai and witnesses reported they had the clear impression that the Gardai were acting under orders that no further protests against the bank bailouts were to be tolerated.

Up to 100 Gardai are now around Anglo Irish bank with a second protest having being called by eirigi for 14.00 today. It has been confirmed that this protest will still be going ahead as will Tuesdays protest at the Dail.

We would call on people to join the anti-capitalist block at 19.00 at the Wolfe Tone statue on Tuesday (opposite Shelbourne Hotel) where we will discuss how to best respond to the attacks on bank bailout protests before proceeding to the Dail. 

Full report at source
http://www.wsm.ie/c/gardai-attack-eirigi-anglo-irish

House price index (Permanent TSB/ESRI)

Quarter 1, 2010 – Permanent TSB/ESRI Index crashes 10.3% for Dublin

Today sees the publication of the first Permanent TSB/ESRI QUARTERLY house price index which replaces the old monthly index which was suspended following publication of the December 2009 index because of thin sales. The index published today tells us that the price of residential property has fallen by 4.8% since the end of December 2009 to the end of March 2010, ie an average monthly fall of 1.6%. The indication is that the pace of price falls is easing overall. The average price of a property nationwide is now €204,830. However prices in Dublin crashed 10.3% in the quarter which is worse than the 7.5% fall in Q4, 2009.

The National House Price index stood at 91.0 at the end of March 2010. The last time it was at this level was in November, 2002  when it stood at 91.2. The following shows the index since June 1999 at the end of each quarter (Mar, Jun, Sep, Dec).

The Dublin House Price index stood at 83.0 at the end of March 2010. The last time it was at this level was in June, 2002 when it stood at 83.3. The following shows the index since June 1999 at the end of each quarter (Mar, Jun, Sep, Dec). The average price of a property in Dublin is now €250,872.

The Outside Dublin House Price index stood at 95.9 at the end of March 2010. The last time it was at this level was in March, 2003 when it stood at 96.3. The following shows the index since June 1999 at the end of each quarter (Mar, Jun, Sep, Dec). The average price of a property is now €183,309.

So the key questions : are prices still falling? We don’t know by month but it is certainly the case that prices have continued to fall since December 2009 and the rate of fall between Sep-Dec 2009 (quarter) was 8.5% compared with a fall between Dec 2009 and March 2010 (quarter) of 4.8%.

source http://namawinelake.wordpress.com/2010/04/30/quarter-1-2010-permanent-tsbesr-index-crashes-10-3-for-dublin/

Keiser report No.19

If you want to really know what is going on then look at this video
covered in the video is Gold, IMF, UK deficit, George Soros, and many more stories

Is the Irish government involved in these kind of financial tools and were there advised by Goldman sacks?

Can they categorically state on the floor of the Dail that they have no exposure to any of these kinds of toxic synthetic financial tools?

Can they categorically state that none of the Irish financial instustions have any of these derivatives on their books and if they so state then why are they looking for traders in these kinds of derivatives at NAMA

see link http://thepressnet.com/2010/01/16/irish-banks-derivative-trading-losses/

It is my belief that not only are the banks up to their tonsils in these derivatives and are hiding huge losses, the Government are actively concealing such losses from the General public.

we may even be in the same situation as Greece ,because the government will not come out and deny that they have not used the services of Goldman Sacks in the setting up of such derivatives.

Lenihan raising house prices

 

Extract from article in namawinelake  ( click on text)

On the Minister of Finance.

What business does he have telling us that prices are now realistic? What prices is he referring to? On what basis are prices realistic? To whom are they realistic? If prices are realistic does that, as the Independent aver, equate to prices being at the bottom? Maybe but let’s remember that the Minister must also on occasion don the leader’s hat and tell us to cheer up, it will get better and we will rebound and I know that we must believe that.

I wonder whether if the Minister donned the realist’s hat he would believe his own words at this point in time. If the Minister had just spent €54bn of the State’s money on gold, I wouldn’t expect him to say anything other than “buy gold today and get as much of the stuff as you can”. Time will tell.

 

Machholz comment

Spot on, this guy (The Irish Government) has at a stroke become the largest property owner (through his creation of the largest fraud in Irish history NAMA) in Europe if not the world.

I deal in the financial markets on a Daly bases and have done so for the last 15 years, buying stock and selling stock, hedging through options .It is common practice to see an action in the various markets called “pump and dump” this is done with 98% of the time of worthless stock

Large chunks are bought for pennies and the talked up, by analysts who get themselves on to such media channels Fox news, yahoo Finance and cbsmarketwatch and a whole host of other news outlets ,pumping the message that this is the time to buy this sh**

This of course is precisely what Lenihan is now trying to do, talk up the stock (Property) (mostly worthless stock)

The last time a Minster from this Government told people to buy property, (Berti Ahern) He said that if you were not getting into property now you were a fool, we all know what happened then!

I have over the years bought and sold property and always kept to a few rules when ,buying as there is only one rule when selling and that is sell at a profit.

 When buying

  • find out what rent you would get for the property

    Let’s say you will be getting 800 euro per month, and that rents are stable and not going down. This would then give an annual rent of 9,600:00 Euros

  • Multiply this figure by 10, this gives you 96,000.000:00Euros .This is the maximum you should pay for this building period!

    Why 10? , because this is the highest interest rates are likely to go. And with this system you will always get someone to rent and thus pay the mortgage.

  • Do not listen to the estate agent with regards to a price for the property; His or her interest is completely different to yours.
  • Ballpark value of average property is dependent on availability of credit from the banks

    And location .values can be arrived so

    The average working wage is currently 28,000:00 Euro and I believe falling because of the government’s income tax measures to pay off the huge bailout of the banks and their cronies in the Building industry.

    The stated policy of the Banks is to give only two and a half times salary and that is with conditions attached

    So 28,000:00 X 2.5 = 70,000:00 Walla, average price one should pay for a property in Ireland

    This formula works all over Europe (Germany, France etc)

  • So based on these figures we are nowhere near the bottom ,with 500,00 on the dole and approx 56,000 leaving the country, approx 23,000 young students leaving as well who do you think is going to buy all 300,000 empty properties around the country??


     

we need reform now!

The current Irish Government are responsible for the financial disaster the country is in,
With the establishment of NAMA the Government is trying to socialize the enormous losses that the Banks and their Developer buddies have encored.
Corruption is rife and now a new monster burocratic system is being created, where X politicians will have jobs for life and the same corrupt developers will be able to manipulate the housing market all over again
While the people are being robbed of their homes, savings, pensions, and education for their children, that same gangsters are running the country
This has to stop!
Join the CAB to-day and get things moving
Come on! Get active in your own area now!
We as a country need new faces and not the same old tired faces that have being around using the system to suite themselves.

overly optimistic Irish Government’s plan

By Sarah Collins in Brussels

Thursday March 18 2010

IRELAND’S plans to bring spending and borrowing under control may require deeper cuts than previously forecast, the European Commission said yesterday, as it demanded that Finance Minister Brian Lenihan take action on public sector pensions and provide more details about plans for further cuts over the next few years.

The commission said in the report that the Government’s plan to slash the budget deficit by eight percentage points over the next four years is overly optimistic and lacks detail. Ireland is currently running a budget deficit that is four times the EU’s limit but has promised to bring it below 3pc of gross domestic product by 2014.

“The budgetary outcomes could be worse than targeted in 2010 and considerably worse than targeted thereafter,” said the report.

“The authorities should stand ready to take additional measures beyond the planned consolidation packages in case growth turned out to be lower than projected in the programme.”

The biggest problem is the Government’s prediction that the economy will expand 3.3pc next year.

The commission’s forecast sees the economy growing by just 2.6pc.

The commission also says there are risks the 2010 Budget could fall victim to spending “slippages”, not least because of injections that could be called in to shore up the country’s banks.

Mr Lenihan did not set aside money to pay for any further cash injections into the country’s banks this year, despite widespread expectations that Allied Irish Banks, Bank of Ireland and Anglo Irish will all require billions of euros.

EU officials said Ireland’s adjustment process will be “rather drawn out” and that emigration and high interest rates on government debt could wear on the economy. The present plans would only stabilise government debt by 2020.

“Specific additional risks relate to the government’s bank guarantees to support the financial sector, which, if called, would lead to increases in deficit and debt,” it says.

It also told the Department of Finance to spell out how it will slash the deficit by three percentage points in 2012 and a further two points in 2013 and 2014 to bring it below the EU’s limit.

The department also needs to provide more data to explain some of its calculations, it adds. Revenue and expenditure projections are “technical” rather than being targets, it says.

“From 2011 on, taking into account the risks to the deficit targets, the budgetary strategy may not be consistent with the (EU) recommendation. In particular, the deficit targets for 2011-2014 need to be backed up by concrete measures and the plans for the entire period need to be strengthened,” the report says.

The call for the Government to strengthen the “binding nature of the medium-term budgetary framework” appears to be a demand for Ireland to make plans beyond the traditional scope of budgets here.

A government spokesman said yesterday that specific extra cuts or tax rises would be announced in relevant budgets, when it would take account of the then-prevailing economic circumstances.

The commission says the Government should introduce more public sector pension reform to improve the long-term sustainability of the public finances.

“The long-term budgetary impact of ageing is clearly higher than the EU average,” the report says.

The report adds that the Government should also consider plugging holes in the budget by widening its tax base. It says the effects of the new carbon tax will be negated by cuts in VAT rates.

“The sharp decline in revenue recorded in the context of the housing market correction and the wider recession has revealed some vulnerabilities of the Irish tax system, such as a narrow tax base and a high reliance on taxing transactions in assets,” the report says. Ireland is one of 20 member states under increased scrutiny by the EU executive for running up a deficit that exceeds the bloc’s limit.

Countries are legally bound to maintain deficits – the shortfall between revenue and spending – below 3pc of gross domestic product and keep gross debt – the amount the government borrows to finance the shortfall – below 60pc of GDP. Ireland’s deficit last year was 11.6pc of GDP, while debt rose to 64.5pc, both above EU thresholds.

In April last year Brussels gave the Government until 2013 to bring the deficit back into line but extended the deadline last December.

– Sarah Collins in Brussels

Irish Independent

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