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Irish Finance Minister Michael Noonan (Full of Bullsh**)

Irish Finance Minister Michael Noonan said any referendum on the new European Union accord may effectively be a vote on the country’s continued euro membership.

The Irish government will start assessing whether it needs to hold a vote after it receives a first draft of the text by the end of the year, Noonan said in an interview on Bloomberg Television’s “The Pulse” in London today. Irish voters have rejected changes to Europe’s governing treaties twice in the last decade.

“It really comes down on this occasion to a very simple issue; do you want to continue in the euro or not,” Noonan said. “Faced with that question, I think the Irish people will pass such a referendum.”

Last month, European leaders for the first time raised the prospect of the euro area collapsing by framing Greece’s proposed referendum on the terms of its bailout as a vote on nation’s future in the currency union. While Greece dropped the planned vote, European leaders are still scrambling to resolve the debt crisis.

Noonan said that while leaders took “significant steps”at a Dec. 8-9 meeting in Brussels to alleviate investor concerns, they “urgently” need to put in place measures to restore confidence in the euro.

Irish bonds due in 2020 yielded 8.77 percent today, up from 8.06 percent a month earlier. Spain’s 10-year bond yielded 5.69 percent and Italy’s was at 6.8 percent. The yield onGermany’s 10-year bund, Europe’s benchmark, was at 1.92 percent.

‘Deliberate Attempt’

Michael McGrath, finance spokesman for the opposition political party Fianna Fail, said Noonan’s comments are “a highly political and deliberate attempt to silence legitimate criticism” of the EU accord.

“The fact that the minister’s language mirrors almost exactly the proposition used by France and Germany to scupper recent plans for a referendum in Greece will not be lost on people,” he said in an e-mailed statement.

The so-called fiscal compact agreed to by 26 of the EU’s 27 members last week requires nations to virtually eliminate structural deficits, creates an “automatic correction mechanism” and enshrines the new measures in national law. There will be tighter control of tax and spending by governments that overstep the bloc’s deficit limit of 3 percent of gross domestic product.

War Chest

The summit also added to the war chest to protect cash-strapped economies, with an extra 200 billion euros ($260 billion) for the International Monetary Fund.

Noonan said it’s “not certain” that Ireland will need a referendum on the EU accord and that it depends on whether any such text would amount to Irish constitutional change. Prime Minister Enda Kenny said last month it would be “very challenging” to pass a vote on such proposals.

Irish voters rejected changes to the European treaty in 2001 and 2008, before reruns passed the proposals.

In June 2001, Ireland voted against the Nice Treaty, which paved the way for the then 15-nation EU to accept members from eastern Europe. A second ballot was won in October 2002. Seven years later, voters rejected the Lisbon Treaty by a margin of 53 percent to 47 percent, even as the country’s biggest parties urged a “yes” vote. In 2009, after securing guarantees on Irish neutrality and taxes, the treaty was carried.

“Ireland needs to be in the euro; a euro breakup would be disastrous for Ireland,” said Alan McQuaid, chief economist at Bloxham Stockbrokers in Dublin. “I would agree with Noonan that if it is a referendum on the euro it is more likely to be passed than something on fiscal austerity and greater fiscal union.”

To contact the reporters on this story: Maryam Nemazee in London at mnemazee@bloomberg.net; Dara Doyle in Dublin at ddoyle1@bloomberg.net

To contact the editor responsible for this story: Colin Keatinge at ckeatinge@bloomberg.net

Comment:

Here we have the Dail puppets of Germany (Kenny& Noonan ) trying to muddy the waters. This is not a referendum on the Euro it is a referendum on fiscal austerity and greater fiscal union for the euro zone .This is what Germany needs to control the entire euro region. The last scrap of financial independence is been snatched from us. Germany needs a strong currency and it is bullying all of the other nations of Europe. Having forced us the Irish people to bailout the disastrous investments of Deutsche Bank by taking responsibility for private bank debts,we are now caught in a downward economic spiral that is pauperizing more and more families every day in Ireland through the severe austerity measures they are dictating to the Irish Government who have by the way gone native with their paymasters. The Irish Government have abandoned the needs of their own people for the needs of Deutsche bank. The new tax on people’s homes is just the start of an eventual 1200 euro “Annual Tax ”to be extracted from every family in the country. Don’t forget the water charges that are coming as well!

The current government have lost all credibility with the people ,and their advisers (mostly the same people that advised Fianna Fail) are still pulling the strings of power from the back rooms in Lenster House .These unelected gangsters are enriching themselves  taking lottery salaries whilst dreaming up new ways to extract more blood from a increasingly desperate people robbed of all hope of a secure future for themselves and their families. The Government have proven to be ten times worse that the last shower. Despite their protests, whilst in opposition, they are now eagerly serving the Irish people up to their real masters altar of “perpetual austerity”.

Our country is been taken from us piece by piece, at the same time the wealth of the country is been squandered away paying interest on odious debt that we the people are not responsible for. In order for the country to prosper we need a weak currency ( The punt)in order for us to attract new business to the country  .If it is cheaper for a company to set up here in Ireland then we will have a flood of companies wanting to set up business here thus jobs will be created and like Iceland we will be able to employ more and more people and thus the economy will grow out of what now looks like a permanent depressed  economic zone !.No country has managed to get out of recession without having first devalued its currency .The strong Euro is crippling our economy along with the austerity measures our government in foisting on to its own people. We need to have a cheaper cost base and this is the only way out of the disaster our gombeen politicians and crooked bankers have gotten us into!  The Euro is going down and Noonan and his band of collaborators are attempting to sell us out!

Don’t believe a word this over the hill politician is saying belive  what you see on the streets, in your own housing estates, look in your own wallet ,are you any better off now ???Noonan  and Kenny are attempting to threaten and bully us into financial servitude .The 2500 penalilty  for non payment of this new home tax must be resisted !This is nothing but a poll tax and I will not be forced into slavery !

Morgan Kelly: Right or Wrong???

Morgan Kelly‘s article in the Irish Times on Saturday last, was responsible for stirring up a hornets’ nest in Irish politics and in the zest pit that is the Irish financial world. Here is a summary of the main points he made of which I wholeheartedly agree with. Coming from an ordinary private citizen’s perspective I cannot understand how we the downtrodden taxpayers can still tolerate morons in Government and their stooges running the various financial institutions that have so miserable failed us and our nation state. Some of the people now uttering their pearls of wisdom to us were in fact cheerleaders of the disastrous policies and still enjoy lottery salaries whilst the rest of us struggle to put bread on the table .Until there pampered leaches start to feel the pain the ordinary citizens feel will they understand that the time for waffling is over and we must tackle the high prices for the basic needs like high ESB prices ,Petrol prices , and the various taxes that they now seem to be advocating to pay back debts we the people have nothing to do with ! We must default on this debt to do otherwise is just prolonging the inevitable, you don’t need to have a PHD to suss this one out ! 

– The bank guarantee of September 2008 was a mistake, but a much bigger one was failing to reverse it when it became clear that the bank losses were insupportable.

Patrick Honohan gave “an extraordinary interview” to Bloomberg on 28 May last year, giving assurances that “the two big banks, fixed by the end of the year. I think it’s quite good news the banks are floating away from dependence on the State and will be free standing”. Riiiiight…

– Honohan’s miscalculation of the bank losses is the costliest mistake ever made by an Irish person.

– With Ireland’s reserve fund enough to keep us funded until this summer, Brian Lenihan was in a strong negotiating position when he initially refused to countenance an EU/IMF bail-out last November – but that position was blown out of the water by Honohan’s admission on Morning Ireland on 18 November that Ireland would need a bailout of “tens of billions”.

– The IMF proposed reductions of €20bn on unguaranteed bonds totalling €30bn and Lenihan apparently told the IMF team: “You are Ireland’s salvation.”

– However, the pesky Yanks vetoed such reductions – US treasury secretary Timothy Geithner, the man who sanctioned €13bn of payments from State-owned AIG to Goldman Sachs, “believes that bankers take priority over taxpayers”.

– The EU/ECB were also insistent on all debts being repaid in full. The IMF wanted major haircuts. The Irish negotiating team sided with the EU/ECB – prompting one IMF staffer to describe the Irish as “displaying strong elements of Stockholm Syndrome”.

– The bailout was on a par with the Bank of England insisting that Northern Rock be rescued by Newcastle City Council.

– “The sole purpose of the Irish bailout was to frighten the Spanish into line with a vivid demonstration that EU rescues are not for the faint-hearted … The ECB is keeping its fingers crossed that Spain pulls through by itself, encouraged by the example made of the Irish.”

– “Irish insolvency is now less a matter of economics than of arithmetic … The predictions for Ireland’s debt by 2014 range from €220bn to €250bn, but either way we are talking of a Government debt that is more than €120,000 per worker.” (To which we add: So, like, around 27 years of total income tax from someone earning the annual industrial average…)

– Ireland’s two main banks were “run by faintly dim former rugby players” – so nobody thought they could run up enough debts to bring down a continent.

– The European Central Bank sees its main task as placating the editors of German tabloids.

– Ireland, and Europe’s other small crisis countries, will eventually be forced into some sort of bankruptcy – which would be a disaster for us. Creditors could sell debt to so-called ‘vulture funds’, which could have “national assets such as aircraft impounded in the hope that they can make a sufficient nuisance of themselves to be bought off”.
 

Compiled by LAURA SLATTERY and SUZANNE LYNCH

A compelling case for default and swift balancing of the national budget or a lethal injection for our economy and citizens? Twelve economists discuss 

SEÁN BARRETT 

Senior lecturer in economics Trinity College Dublin 

IRELAND’S CHANGE from a full employment economy and solvency to 14 per cent unemployment and a bailout invites a contrarian response so well led by Morgan Kelly. Widespread institutional failure caused the twin crises in banking and the public finances. These then spread their contagion over the entire economy.

Regulatory capture and institutional malaise have dominated our responses to date. We need the provocative advice of Morgan Kelly to walk away from the bank crisis and tackle the public finances quickly rather than over several years.

With so many of the institutions and personnel who caused the twin crises largely exempt from its consequences, and likely to remain exempt, we need Kelly to remind them and us how much they have harmed this country.

Under “measures to prevent a recurrence” Kelly merits the tag of “required reading”.

ALAN McQUAID 

Chief economist Bloxham Stockbrokers 

THE UNDERLYING theme of the Morgan Kelly article, apart from criticising individuals, is not saying anything new. What Joe Durkan and the ESRI are talking about is similar, in a way, to Kelly – they’re both talking about speeding up the budget correction. Enda Kenny has dismissed the idea and I’d be with Kenny on this. The economy is too fragile.

The [Kelly/Durkan] argument is that it’s the ECB’s problem: a lot of the money was lent to us by European banks that should have known better. I wouldn’t disagree with that. I think the ECB has to do a lot more before this crisis is over.

These are unprecedented times and my gut feeling is that I don’t think anybody did anything deliberately to mess the State up, I think it was all in good faith. It does look like it was the wrong thing to do. Patrick Honohan is obviously in a difficult position given he is on the ECB. I’m not sure anyone could have done any better.

RAY KINSELLA 

Economist UCD Michael Smurfit Graduate School of Business 

IRELAND SHOULD withdraw from the euro zone and inform the next finance council of its decision. This will require pegging either to the UK’s sterling, our largest trading partner, or to the “Deutsche” euro. Either way it will involve devaluation.

The transmission of the effects across the economy will involve negative, as well as positive, consequences. What can be said with near certainty is that it is the least worst option.

Domestic economic indicators and financial market data point to a terminal lack of credibility in the terms, scope and time-frame set out in the bailout. There is simply no way back from prevailing Irish bond yields and associated CBF spreads.

The recent euro zone policies have flown in the face of the markets’ dispassionate analysis of the adjustment policies imposed on the Irish economy. The EU’s €750 billion “shock and awe” initiative cobbled together in May 2010 singularly failed to firewall the periphery from contagion.

Recent proposals for a stabilisation mechanism by 2013(!) defy belief.

PAUL SWEENEY 

Chief economist Irish Congress of Trade Unions 

MORGAN KELLY’S article hit a real chord. He said it as it is. But his solutions would lead to chaos and impoverishment. He is correct about the immense stupidity of the bank guarantee and of the government continuing to repay these socialised private debts.

His most dangerous solution is to “bring the budget into balance immediately”.

This would mean that the deflationary path currently being pursued by government – where one quarter of domestic demand was wiped out in just three years – would look positively benign. It would eviscerate the economy and wipe out too many businesses and citizens. Besides, few governments run balanced budgets.

This idea smacks of that most dangerous tendency in academic economics – to deliver prescriptions with little thought as to their impact on people. Fine in theory, appalling in practice. Interestingly, in its latest report, it is a weakness to which the ESRI has also succumbed as it does a volte face on previous recommendations and demands huge and immediate cuts.

Kelly is right on “disengaging from the banks” but it has to be done with EU agreement. Call it a “managed default”.

TOM O’CONNOR 

Lecturer in economics and public policy Cork Institute of Technology 

I BELIEVE Morgan Kelly is correct in his assertion that Patrick Honohan was badly mistaken in going public on November 18th last, stating the Ireland would need a bailout. He is also totally correct that the bailout cannot be repaid and will have to be abandoned. Bondholder haircuts were rejected by the ECB also and the Irish negotiating team essentially rolled over for the ECB team subsequently.

The selfish motivations of the US and ECB, who were not concerned at all with the economic interest of Ireland, should alert policymakers immediately that the deal was never well intentioned and should never have been agreed.

Kelly’s solutions are not the ones I would favour, however. His assertion that we eliminate an €18 billion Government deficit immediately is neither possible nor socially acceptable.

I do think that his way of dealing with the banks and the ECB is somewhat ingenious: the Government leaves the bailout and leaves the banks by default to be supported by the ECB, who ultimately will have to swap their debt for share capital. The ECB picks up the €160 billion tab. However, this could create huge uncertainty and frighten international investors.

BRIAN LUCEY 

Associate professor in finance Trinity College Dublin 

PATRICK HONOHAN couldn’t change the guarantee – that’s a political decision. I’d be amazed if he didn’t argue strenuously for some change. In his previous existence, he had argued that we should be cautious with guarantees. Clearly, he lost the argument.

I don’t think Honohan could have said anything much more than what he said – he is constrained by his position. It’s important to remember that he is not the representative for Ireland on the ECB, he’s the representative from Ireland.

I do think the Government could do well to accelerate balancing the budget. But I would lean more towards the ESRI than Kelly .

I think it’s absolutely clear we have got to make our move very quickly. I don’t know why we are waiting. I’d be astonished if the governments of Greece, Portugal and Ireland weren’t working together in their common interest.

It’s very easy for politicians to be dismissive of articles by academics, but they should prove or dismiss those analyses on their own logic. What we really need to do is dig into the views of the Department of Finance.

FERGAL O’BRIEN 

Chief economist Ibec 

WE WOULD agree with some of what Morgan Kelly says and disagree with some of it. Overall there is considerable merit in doing a relatively fast fiscal balance. The quicker we do it, the stronger position we will be in in terms of our debt management options.

But it is not an exact science and, obviously, it cannot be done in a year.

Doing it in a single year would be far too brutal; there would be far too much damage to the economy and it would be far too much of a social challenge.

I think there’s no question but for Ireland to remain an attractive location for investment, we must work within the loan arrangements that are in place. If we isolate ourselves, we will be undermined. Europe hasn’t yet fully acknowledged the interconnectedness of sovereign and banking debt.

As it does so over the next few years, it will work in our favour.

There is a big difference between being a player with full information and being an observer and having partial information. There are certain people who have much more information than the rest of us.

STEPHEN KINSELLA 

Lecturer in economics University of Limerick 

MORGAN KELLY is a true social scientist. He takes data, looks at the economic and political realities in the economy, and makes a judgement which he communicates clearly. He has been spot on in his analysis to date, and while I was initially sceptical of his views, I’m now converted to the notion that Ireland has nothing but drastic options left to it.

I’ve tried to cost Kelly’s latest plan myself, and it isn’t pretty. Kelly’s views should be engaged with by policymakers, not because they are always right, but because they represent a challenge to the status quo that we need in a policy space filled with sycophants.

MOORE McDOWELL 

Senior lecturer University College Dublin 

MORGAN KELLY is definitely not a master of understatement and let’s just say his colourful way of expressing himself doesn’t do him any favours. Nonetheless I agree with about 80 per cent of what he says. He rightly says the decision to introduce the guarantee in 2008 was the wrong decision. But it’s very unfair to accuse Patrick Honohan of making the “costliest mistake ever made by an Irish person”. Messrs Cowen and Lenihan did that.

What Kelly is saying is that, while we have failed to burn the bondholders – the horse has bolted, as it were – we should now burn the ECB. The key problem in Kelly’s argument is the conclusion he reaches. Putting the entire budget deficit right this year would involve a 30 per cent cut in Government spending, which equates to 10-12 per cent of GDP. The effect that would have on aggregate demand and employment would be colossal.

Kelly’s figure of €250 billion in national debt is very much in the top-range estimates. Even the most pessimistic commentators say €230 billion. However, the question of whether the national debt is sustainable is the key issue.

TONY FOLEY 

Senior lecturer in economics Dublin City University 

I DO not agree that we are heading for economic ruin, although one could argue that large decline in GNP, 15 per cent unemployment and the likelihood that it will be 2017 or so before 2007 levels of economic activity will be resumed is already economic ruin.

I agree the Central Bank got its assessment of the scale of the bank bailout wrong and we only seemed to face reality when the EU-IMF required the involvement of the independent Blackrock assessment. Maybe if we had known much earlier the final scale, we would have had a stronger basis for an alternative approach.

In 2013, we will still be unacceptable to financial markets and there will have to be “Bailout Two” or a continuation of paying interest without repaying capital, with whatever additional money is needed to pay market bonds that are due. You could call this a default but it would be an agreed restructuring with the EU and IMF.

I do not agree we can walk away from the banks and presume the ECB will continue to operate them for our benefit as the new owners. It would be nice if the ECB did so.

JOHN McHALE 

Professor of economics NUI Galway – Speaking on RTÉ’s Morning Ireland , May 9th: 

CERTAINLY, EARLY in the crisis Morgan Kelly was very much ahead of everybody else in seeing it coming and I think his early analysis was incredibly valuable.

But I think in his recent articles, and particularly this one, he is really going off in the wrong direction.

I think he has been quite unfair to Patrick Honohan. Honohan wasn’t the one that gave the original blanket guarantee, but he inherited it.

Morgan puts a lot of emphasis on protecting Ireland’s reputation and says we shouldn’t default to protect that reputation, but reneging on the guarantee, which is what he calls on Patrick [Honohan] to have done, would have been reneging on a sovereign obligation and it would have done incredible reputational damage, and it would have really created a hornet’s nest of legal issues, so I think it’s just completely wrong to put the problems that have resulted from the guarantee on Patrick’s shoulders.

The proposals that Morgan Kelly is putting forward, which are essentially to wash our hands of the banking system and also to cut our borrowing to zero immediately, would actually have devastating effects for the economy.

It would essentially destroy the banking system, and would not only require cuts of about a third in public spending but it would put us into another very deep recession.

JOE DURKAN 

Economist Economic and Social Research Institute – Speaking on RTÉ’s Morning Ireland , May 11th: 

IF WE went bust, then banks in Europe would go bust. That means we are interdependent, and if that interdependence exists, then the right thing to do is to take an interdependent approach to it, which really means doing it at euro level.

Like everything else, you need to do it quickly, because the truth of the matter is while the debt is sustainable in a purely technical sense, it is by no means optimal.

If they don’t help us, then it impacts on others and there’s a possibility that we could just fail.

If you look at what’s happening in the other countries, it is stop-gap measures you have all the time, and I don’t think we need stop-gap measures, I think we need something new and innovative.

I don’t agree with debt figure of €250 billion. The most I can see is five to six years’ time is €195 billion, maybe €200 billion.

The second thing is, he had a point about when the debt goes over 100 per cent, you’re in trouble. In fact, that’s not strictly true.

Technically, we know that it’s possible. The real issue is whether you can get a primary budget surplus, which is your budget surplus excluding your interest payments, above a certain level. It’s a purely technical relationship, that the real interest rate minus the real growth rate times your debt-GDP ratio has to be less than your primary budget deficit.

WHAT THEY SAID: KELLY’S ARTICLE, HONOHAN’S RESPONSE 

Quotes from Morgan Kelly’s original article published in The Irish Times last Saturday: 

“With the Irish Government on track to owe a quarter of a trillion euro by 2014, a prolonged and chaotic national bankruptcy is becoming inevitable . . . While most people would trace our ruin to to the bank guarantee of September 2008, the real error was in sticking with the guarantee long after it had become clear that the bank losses were insupportable . . .

“The ideal time to have reversed the bank guarantee was a few months later when Patrick Honohan was appointed governor of the Central Bank and assumed de facto control of Irish economic policy . . . Honohan’s miscalculation of the bank losses has turned out to be the costliest mistake ever made by an Irish person . . .

“National survival requires that Ireland walk away from the bailout. This in turn requires the Government to do two things: disengage from the banks, and bring its budget into balance immediately.”

Excerpts from Central Bank governor Patrick Honohan’s response to the article on RTÉ radio last Sunday: 

“I took a lot of legal advice on this. There was no way of the Government walking away from that very formal guarantee, endorsed by the Oireachtas. The Government would have been treated as a bankrupt right away . . . The fact that we did not have precise numbers did not affect the honouring of the guarantee . . . All it would have done would have been to bring forward and accelerate the EU-IMF programme probably to May or June of last year . . .

“Everything was done by me and by colleagues on behalf of Ireland . . . It was not a final solution. I would regard it as a holding operation, something to offer a window of time in which to get what could be sorted out within our own competence in Ireland . . . It’s not the end of the story. Negotiations, discussions will continue with Europe for a long time to come as we know there are already discussions about the interest rate and so forth.”

source:http://irelandjailbreak.wordpress.com/

In the year 2009 Morgan Kelly wrote this report on the

“The Irish Credit Bubble” link here The Irish Credit Bubble

Related articles:

WITH THE Irish Government on track to owe a quarter of a trillion euro by 2014, a prolonged and chaotic national bankruptcy is becoming inevitable. By the time the dust settles, Ireland’s last remaining asset, its reputation as a safe place from which to conduct business, will have been destroyed.read full article here http://www.marketoracle.co.uk/Article28018.html

article by By Christopher M. Quigley
B.Sc., M.M.I.I. Grad., M.A.

Roman Abramovich



Remember this?

DUBLINAnglo Irish Bank announced Thursday it will make its junior bondholders absorb heavy losses on their euro3.5 billion ($4.9 billion) investments — the first loan defaults in Ireland since the nation’s banking crisis began two years ago.

The nationalized Dublin lender, the most debt-crippled bank from Ireland’s burst property bubble, said the two lowest tiers of bondholders would be offered payouts equivalent to 20 percent and 5 percent of their original investments, respectively.

The move represents the first concrete effort by Ireland to cut its losses from a euro45 billion bill for bailing out five banks, chiefly Anglo. The bailout cost is driving Ireland’s deficit this year to a modern European record of 32 percent of GDP.

Anglo said it would offer holders of euro1.575 billion of bonds expiring in 2014, 2016 and 2017 new government-guaranteed, interest-bearing bonds that will be repaid in December 2011 — but for just a fifth of that figure, euro315 million.

Analysts said Anglo’s junior bondholders — in many cases foreign hedge funds that have struggled to sell the bank’s shattered securities on the open market — would leap at the chance to get something back and escape. Ireland’s government had offered a guarantee on Irish banks’ subordinated bonds until Oct. 1.

“The stuff’s been trading at such a major discount anyway, the bondholders should be willing to break your hand off to get this money,” said Alan McQuaid, chief economist at Bloxham Stockbrokers in Dublin.

McQuaid said bond markets might respond negatively, at least initially, to Anglo’s punitive debt swap with its subordinated bondholders. But he said the move was “not a major surprise, it’s been flagged for weeks,” and foreign investors eventually would embrace it as “a logical move for Ireland.”

Anglo said the lowest rung of bondholders, who own undated bonds with face values totaling euro1.2 billion and 650 million British pounds (euro732 million, $1.02 billion), would be offered final payouts equivalent to just 5 percent of their investment, or approximately euro97 million ($135 million).

Together the two concessions would shave more than euro3 billion from Ireland’s securities-repayment bill at Anglo. However, the government has never clarified whether its estimated total bailout cost at Anglo — euro29.3 billion — factored in the likelihood of substantial defaults on the bank’s subordinated securities.

Irish Finance Minister Brian Lenihan has emphasized this week that no holders of Irish senior bonds — chiefly foreign banks that Ireland relies on to finance its own mounting national debt — will suffer any losses.

Anglo’s announcement to junior bondholders left them with little choice but to sue or accept. The bottom-tier Anglo bonds have been tough to sell, even at heavy discounts, even before Ireland nationalized the bank in early 2009 to prevent its collapse.

Those who refuse the swap will be repaid just euro1 for every euro100,000, or 0.001 percent, of the money they originally invested in Anglo.

Analysts said the only other Irish bank likely to dump losses on subordinated bondholders is the nationalized Irish Nationwide Building Society, which is midway into an estimated euro5.4 billion state bailout.

Like Anglo, Irish Nationwide borrowed aggressively from foreign banks and shelled out billions to the nation’s top property developers. Many of them face bankruptcy in Ireland or have fled the country.

Russian billionaire Roman Abramovich, whose asset management agency Millhouse bought Irish Nationwide subordinated bonds in August 2009 that paid an exceptional 13 percent rate of interest, has threatened to sue Ireland if his investment is not repaid in full. Abramovich has declined to specify the size of his Irish Nationwide holding.

And This

Oct 1 (Reuters) – Russian billionaire Roman Abramovich may take legal action against the Irish government over its decision to make subordinated bondholders in Irish Nationwide (INBS) [IRNBS.UL] pay part of the bill for dealing with the building society’s huge property losses.

“We urge Irish authorities to re-consider their position on INBS subordinated bonds and come out with a detailed plan on what is going to happen to this institution,” a statement from Abramovich’s investment vehicle Millhouse said in a statement.

“In the meantime, we are fully prepared to vigorously defend our position using all possible legal means.”

Ireland said on Thursday it expected bondholders in INBS and nationalised lender Anglo Irish Bank [ANGIB.UL] to make “a significant contribution” towards meeting the cost of a bill of up to 40 billion euros for cleaning up their years of reckless lending.

Both bonds are trading at significant discounts in the secondary market.

Anglo Irish, which has 2.4 billion euros in subordinated bonds, accounts for over two thirds of Ireland’s “worst case” bank bill of 50 billion euros. Irish Nationwide will cost taxpayers 5.4 billion euros. [ID:nLDE68T04M]

Abramovich’s investment vehicle said making Nationwide’s subordinated bondholders accept losses on their investments was both unfair and possibly illegal.

“We fail to see how we can “significantly contribute” to the cost of survival of the Irish Nationwide Building Society given that even if the entire lower tier 2 debt is wiped out this would only save a meagre 2.3 percent of the total cost of (the) bailout of INBS.”

A spokesman for Ireland’s Department of Finance said it was working with the country’s Attorney General on the issue of burden-sharing by subordinated bondholders in Anglo Irish and INBS.

Abramovich, who owns Chelsea football club in London, is Russia’s fourth richest with an estimated worth of $11.2 billion.

http://www.reuters.com/article/idUSLDE69024P20101001

Comment:

Bottom line here is

Cowen and lenihan have pumped billions into this guy’s bank account by dumping billions into The Anglo Irish Bank black hole so he could go out and buy the largest yacht in the world.

I suppose Cowen and lenihan might get an invitation for the maiden voyage  and who knows we might get lucky ,it might an iceberg.  



Bailout / Loan on the way from the European Union

Irish central bank Governor Patrick Honohan said he expects the country to ask for a bailout from the European Union and the International Monetary Fund worth “tens of billions” of euros to rescue its battered banks.

Ireland will probably pay an interest rate close to 5 percent, he said in an interview with Irish state broadcaster RTE today. A final decision hasn’t been reached, he said. A 5 percent rate would be similar to that offered to Greece when it requested a bailout in April.

“It is my expectation that will happen, absolutely,” said Honohan, who was speaking from Frankfurt, where he is attending a regular European Central Bank Governing Council meeting. “It will be a large loan because the purpose of the amount to be advanced, or to be made available, is to show Ireland has sufficient firepower to deal with any concerns of the market. We’re talking about a substantial loan.”

EU, IMF and ECB officials fly into Dublin today to study the books of the country’s lenders as European policy makers put pressure on Ireland to accept a bailout to prevent contagion spreading through the euro area. Honohan is the first Irish official to say publicly that the country will need aid. Finance Minister Brian Lenihan said after a meeting of euro-region finance ministers on Nov. 16 that aid was “not inevitable.”

‘Take the Money’

Irish Energy Minister Eamon Ryan said today that Honohan had “put it well” and that he had “no problem” accepting aid on the right terms if it was needed. RTE said an announcement on aid could be made in two weeks, without citing anyone.

“There is no point in being in denial anymore,” said Alan McQuaid, chief economist at Bloxham Stockbrokers in Dublin. “We need to take the money and get on with it.”

Irish bonds rose after the remarks, pushing the yield on the country’s 10-year debt down 10 basis points to 8.22 percent as of 9:43 a.m. in Dublin. The premium investors charge to hold the bonds rather than benchmark German bunds narrowed to 537 basis points from 554 basis points yesterday. The so-called yield spread reached a record 652 basis points on Nov. 11.

“The purpose of this whole exercise is to provide reassurance to international markets, to our partners in Europe, that the policy stance that the government is adopting is designed, and will be effective in, getting us back on a stable debt trajectory,” Honohan said. “They will also want to provide assurance” that the banks have “adequate capital resources.”

‘Spilling Over’

EU Economic and Monetary Affairs Commissioner Olli Rehn told reporters on Nov. 16 that Ireland’s banking woes are “spilling over to the sovereign.” Euro-region finance ministers said in a statement the same day that they will take “determined and coordinated action to safeguard the financial stability of the euro area, if needed.”

“The question is the size of the program,” said Juergen Michels, chief euro-region economist at Citigroup Inc. in London, who estimates any loan would have to be about 90 billion euros to 100 billion euros. “Even with a package, it won’t solve the problem in the longer run. Markets could well start to focus on Portugal or Spain.”

Honohan said it’s “true that the banks need additional confidence” even after the government pumped billions of euros into lenders including Allied Irish Banks Plc and Anglo Irish Bank Corp. “Our efforts, the huge sums put in by the government to support the banks, have not generated sufficient confidence yet” among investors,” he said.

ECB President Jean-Claude Trichet may make his first public comments on a potential Irish bailout when he speaks on a panel at 2:30 p.m. in Frankfurt today. Trichet is disappointed that Ireland didn’t apply immediately for aid two days ago, the Irish Times said today, citing an EU diplomat.

To contact the reporters on this story: Dara Doyle in Dublin at ddoyle1@bloomberg.net; Simone Meier in Zurich at smeier@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

Comment:

Listen to these two Radio  Interviews

It’s Ironic that the one of the growth industries in the gambling industry as we see from Paddy Powers announcement of its expansion and announcement of 500 jobs over the next 3 years

We are in a bailout situation and no amount of window dressing is going to change that. These two idiots at the head of the Irish Government (Lenihan and Cowen) and the various twits that have been rolled out to front the denials and spin have as usual done a terrible job! These incompetent baboons have sold out our independence and are now spinning semantics that changes none of the facts.

According to the Chairman of the Central Bank Patrick Honohan we are going to need tens of Billions of extra cash to shore up the Banks and this alone is an astonishing statement barely 6 months after the EU stress Tests that stated the Banks were sound and had ample cash reserves that met the stress tests rigorous requirements. But “with mature recollection” Allied Irish Bank was also supposed to be sound and It had to be Nationalized a few weeks ago.

The Bottom line here is all of the politicians are engaged in a game and the game is like musical chairs they get paid to play the game and it doesn’t matter really who wins because if they participate long enough in the game they all get to have a seat and as long as they are as individuals in the game the rewards are enormous and after they get tired they pass their place on to their offspring to continue the family job playing this senseless game that only enriches only the players and their lackeys and cronies

We the onlookers (Citizens) get to pay through the nose for the privilege of watching these leaches suck us dry.

Nobody can tell me that the opposition are going to root out the gangsters that have brought us to this disaster; none of the opposition is calling for the arrest of the criminals that are refusing to cooperate with the Garda investigation on Anglo Irish Bank. The Board members of the Banks are broadly still in place and there is no attempt to remove them ,Brian Cowen and the rest of his cabinet are guilty of Treason and they will no doubt be kicked out sometime but not without getting their golden pension pot and perks for the rest of their lives None of the opposition are declaring that this will not be allowed to happen they are too busy juggling over what chair they themselves are going to take when they take over the running of the country . 

Returning the economy to growth

Ireland Must Focus on Economic Recovery After Deficit Cut, Economists Say

By Fergal O’Brien – Oct 27, 2010 9:45 AM GMT+0100

Ireland’s government must now focus on reviving economic growth after announcing a 15 billion-euro ($21 billion) plan to cut its deficit by 2014, economists said.

The planned spending cuts and tax increases are twice as much as the government previously said it would put in place to narrow the budget gap to the European Union limit of 3 percent of gross domestic product in four years.

“It will be a tall order for Ireland to meet the 2014 deadline given the fragility of both the domestic and global economy,” Alan McQuaid, chief economist at Bloxham Stockbrokers in Dublin, said in a note to investors. “Ireland will have to generate economic growth if the target is to be met.”

Investor concern that Ireland won’t be able to lower the deficit due to the mounting burden of bank bailouts has pushed up the nation’s borrowing costs. Finance Minister Brian Lenihan will next month announce details of the budget plan, which he said will include a “significant frontloading” for 2011.

“With the scale of consolidation now known, the department’s strategy for returning the economy to growth” could “now be described as more important than the consolidation measures,” said Dermot O’Leary, chief economist at Goodbody Stockbrokers in Dublin.

Ireland’s budget shortfall will reach about 32 percent of GDP this year, due to a one-time spike from bank-bailout costs, the government said last month. Excluding that, the deficit will be about 12 percent.

Yield Spread

full aricle  at source http://www.bloomberg.com/news/2010-10-27/ireland-must-focus-on-economic-recovery-after-deficit-cut-economists-say.html

How spin works

There you have it Brendan Keenan (Independent Newspapers) says the banks are fine swallowing the government’s line that the Irish Banks aren’t insolvent. Then we had Professor Morgan Kelly (UCD) advocating allowing the non retail (Anglo Irish Bank) banks to be let go! Then we had Kevin McConnell, Head of Research, and Bloxham Stockbrokers again touting the spin of the Government

Fast forward to today and see who was right surprise surprise why the noble professor.

Now what have learned out of this?

The establish news media in towing the government line and you can’t believe a word from the vested interests of people like Bloxham Stockbrokers who after all want to sell you shares in these Toxic banks Stockbrokers get paid in fees on trades. They have no incentive to talk down the market. It hasn’t gone unnoticed how they have been the cheerleaders for NAMA.

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