The Big Bailout of the Eurozone (Another crisis coming? - Seriously)

[Declan]

Noonan just said it was pointless to ask for a write down as it was never a runner and quoted that Greece only got a restructuring on "private" debt - The scare tactics from ECB re the lender of the last resort is the reason given - so we'll never know as we never called their bluff when we could have and threatened to bring the whole Eurozone down

[muppet]

we are in hock to a loan shark type scenario.
If we default or refuse to pay a certain amount of it- what will they do - break our legs (they are broken already).

however Iceland told them to feck off and they are not castigated as financial pariahs - they are starting to prosper again by all accounts.
surely thats a f**king lead/clue for those fg/lab (and indeed ff etc) gobsihte amadans to follow !!

Before the recent fad of Iceland's great recovery it was all talk about Argentina. You don't hear much about that anymore as they are still international pariahs 12 years on. See this from last October: http://www.nytimes.com/2012/10/27/business/global/us-court-rules-against-argentina-over-bond-payments.html?_r=0

Iceland is not is the euro. The Icelandic Government did burn some bondholders, but it paid as much as it could, incidentally this was given as a reason for the recent court victory over the EFTA. It then imposed capital controls, banning the movement of money out of the State, which if we had done every multinational in the place would have pulled out. Then it devalued its currency forcing its people, pensions and businesses to take a big reduction in wealth. Nowadays they have growth of around 3% which is why people talk about Iceand but they don;t talk about what happened before that.

To do an Iceland I think there is little doubt we would have had to leave the euro and devalue our new currency on a large scale. For a while I really thought this would happen. But it would be madness now.

One thing I would give Iceland huge credit for is the legal prosecutions that followed their bank collapse. We could definitely learn a thing or two there.

[mayogodhelpus@gmail.com]

we are in hock to a loan shark type scenario.
If we default or refuse to pay a certain amount of it- what will they do - break our legs (they are broken already).

however Iceland told them to feck off and they are not castigated as financial pariahs - they are starting to prosper again by all accounts.
surely thats a f**king lead/clue for those fg/lab (and indeed ff etc) gobsihte amadans to follow !!

Before the recent fad of Iceland's great recovery it was all talk about Argentina. You don't hear much about that anymore as they are still international pariahs 12 years on. See this from last October: http://www.nytimes.com/2012/10/27/business/global/us-court-rules-against-argentina-over-bond-payments.html?_r=0

Iceland is not is the euro. The Icelandic Government did burn some bondholders, but it paid as much as it could, incidentally this was given as a reason for the recent court victory over the EFTA. It then imposed capital controls, banning the movement of money out of the State, which if we had done every multinational in the place would have pulled out. Then it devalued its currency forcing its people, pensions and businesses to take a big reduction in wealth. Nowadays they have growth of around 3% which is why people talk about Iceand but they don;t talk about what happened before that.

To do an Iceland I think there is little doubt we would have had to leave the euro and devalue our new currency on a large scale. For a while I really thought this would happen. But it would be madness now.

One thing I would give Iceland huge credit for is the legal prosecutions that followed their bank collapse. We could definitely learn a thing or two there.

I saw that before about that Argentinan Naval Ship, despite it being more a symbol of national pride rather than a functional warship, is detaining it not an act of war.

[seafoid]

They got rid of the Iceland version of FF a few years ago but the vampires are likely to return after the next election.
That is what happens. People get tired of crisis and they forget .

[Declan]

It all depends on what happens inflation wise over the next 40 years.
The debt is fixed. If inflation is higher than it is now the debt will be reduced in real terms.
My parents took out a mortgage for 10,000 in 1973. The mortgage loan was worth very little 15 years later

That was then this is now. For inflation to help with the principle repayment we'd have to have annual inflation of over 3% for the next 40 years. Now in a eurozone controlled by Germany with their innate fear of inflation what do you reckon the chances of that are? Also what is the mechanism used to control inflation - higher interest rates and what impact would that have on the coping classes here?

We are Fubarred and we are still running a budget deficit of €15billion a year without the bank debt in a deflationary recession

[armaghniac]

That was then this is now. For inflation to help with the principle repayment we'd have to have annual inflation of over 3% for the next 40 years

Not quite. The Irish Central Bank is charging 3%, but it gets its money at 1% from the ECB, so makes a profit of 2% which of course also ends up in the governments coffers.

The economy will grow at a nominal 4-5%, and effectively pay out 1%, so the burden will diminish over time and of course unforeseen circumstances might lead to higher inflation at some point. 

[seafoid]

It all depends on what happens inflation wise over the next 40 years.
The debt is fixed. If inflation is higher than it is now the debt will be reduced in real terms.
My parents took out a mortgage for 10,000 in 1973. The mortgage loan was worth very little 15 years later

That was then this is now. For inflation to help with the principle repayment we'd have to have annual inflation of over 3% for the next 40 years. Now in a eurozone controlled by Germany with their innate fear of inflation what do you reckon the chances of that are? Also what is the mechanism used to control inflation - higher interest rates and what impact would that have on the coping classes here?

We are Fubarred and we are still running a budget deficit of €15billion a year without the bank debt in a deflationary recession

Some people are banjaxed for sure. There is still a massive deficit. The public sector are in for a rough ride. It is going to take years to get over the tiger. But today was a step forward. I think some debts will end up being inflated away. Germans or not.

[muppet]

http://trueeconomics.blogspot.ie/2013/02/722013-trading-debt-for-cash-flow-relief.html?spref=tw

Posted by Dr. Constantin Gurdgiev
Muy thoughts (quick one between lecturing) on the deal:

As I understand it,

We have converted quasi-governmental debt into pure Government bond.
Maturity profile is very good - long dated, no restriction on NTMA raising funds at 20 year +
We are gaining some cash flow improvements up front (where they matter most), but
We are not getting a major write down on the debt overall.
Deficit impact is one-off 500mln, that will be absorbed into improvement over 2014 Budget and that's it as it becomes 'repeated measure' equivalent in 2015 and after.
So material saving to the economy is really 500mln and that is at the peak (2014-2015), after that the savings will decline, until finally, around ca 2020-2025 (needs more precise calculations here) the savings will become negative as we will be paying more in interest than we would have been paying before.
Additional second order effect is that improved bond markets profile is likely to result in slightly lower borrowing costs over time, but this impact is off-set by the reduced Central Bank revenues remittable back to the Exchequer.
The deal is not putting any final closure to the Anglo or INBS 'odious' debt, but simply constitutes an extension of the debt.

It can result in the lower real value of the debt over the period of time, assuming Ireland can issue bonds at negative real interest rates (bond coupons below inflation rate), which is unlikely.

Neither is the deal reducing the debt overall, which means the deal has no effect on the adverse impact of debt drag on growth. The Government never asked for a debt writedown (reduction in the overall debt levels).

The deal is a net positive, but materially not significant enough.

[Rossfan]

I hope they start up a bolshevik party , I'll vote for them - esp if they say they are going to tell the bondholders to feck off

Nothing like waiting for "Someone else" eh?
Anyway SF in the 26 Cos. fit the bill already 

Anyway the deal done today/last night was the inevitable one - pay back over a longer period so it costs less each year but the overall total is much more .
There will be a lot more of this over the next few years both at Governmantal and private/personal levels.

[magpie seanie]

So I should go into the bank tomorrow and ask the bank to extend my mortgage to 50 years and claim a great victory.

What utter gobshites we have to suffer in this country. f**king arseholes and arselickers and as someone already said not a ball among the lot of them.

[armaghniac]

So I should go into the bank tomorrow and ask the bank to extend my mortgage to 50 years and claim a great victory.

If the bank was charging you an effective 1% then it would be victory, even at 3% it would be a victory.

This is not a great victory or a game changing goal, but it is a point scored against a tenacious opposition.

[lawnseed]

yep. our kids are really going to want to look after us in our old age.. cheerio pensions

[seafoid]

So I should go into the bank tomorrow and ask the bank to extend my mortgage to 50 years and claim a great victory.

What utter gobshites we have to suffer in this country. f**king arseholes and arselickers and as someone already said not a ball among the lot of them.

The damage was done when FF guaranteed the banks. They were clueless. They didn't even know what the total exposure was. It was all going to be grand. It was, in fact, worse than spread betting.

Everything followed on from that.

The ironic thing is that Michael McDowell warned the electorate in 2007 that if the FF/PD coalition was rejected in the election of that year it would condemn the country to an economic collapse .

[Declan]

The damage was done when FF guaranteed the banks. They were clueless. They didn't even know what the total exposure was. It was all going to be grand. It was, in fact, worse than spread betting.

Everything followed on from that.

Correct and let no one forget that  when they come knocking or spout more shite on TV or radio

This is not a great victory or a game changing goal, but it is a point scored against a tenacious opposition.

Nice analogy but continuing that them it's like Kilkenny allowing Tyrone hurlers to score a point in the first 10 minutes of the game whilst promptly sticking the boot back in and battering the shite out of them for the next 60 mins and every time they meet in the future.

[Hound]

The damage was done when FF guaranteed the banks. They were clueless. They didn't even know what the total exposure was. It was all going to be grand. It was, in fact, worse than spread betting.

Everything followed on from that.

Correct and let no one forget that  when they come knocking or spout more shite on TV or radio

But is it right to blame someone for what their predecessors did?
Personally I've rarely given FF a number 1 vote in the past (Jim Glennon the only one I think) but in the future if I think a FFer is the best person in my constituency I'll have no hesitation in voting for him/her. He or she would have had very little if anything to do with 2008 and prior.

We don't have the full details of what went on behind closed doors in 2008, but I put the blame firmly at the feet of Cowen and Lenihan. While the cabinet and the party agreed to it and nobody in opposition called foul (apart from those with zero credibility who call foul on absolutely everything), it was Cowen and Lenihan who seemed to be the ones calling all the shots.

What I'd love to know is who knew at that time that the government's highly paid banking advisors Merrills had advised on a restricted guarantee rather than the carte blanche that was given.

Yesterday's comments by Central Bank governor Patrick Honohan were interesting:

Mr Honohan yesterday described the Anglo Irish Bank episode as "horrendously damaging" for Ireland.

He said he had "quite a lot of sympathy" for people involved in the 2008 bank guarantee. "Some should have been better informed, some should have had better advice, some shouldn't have jumped to conclusions, some shouldn't have been so arrogant and over-confident."

He reminded his audience that Ireland was a triple-A market darling and its banking problems were initially dismissed as natural aftershocks from Wall Street turbulence. The Irish government decided to "guarantee everything, with no shilly-shallying around".

"Did the ECB recommend that? I am sure they didn't, though nobody knows," said Mr Honohan, who joined the Central Bank and ECB governing council a year after the guarantee. In hindsight, he said it would have been "best practice to have given a limited guarantee. If they'd known Anglo Irish would be so bad they should have been closed there and then with losses to depositors."

I think the ECB deal means we are better off now than we were yesterday. But its marginal. And there's a lot of wishful thinking. And if we are wishing for inflation, we have to remember there's two sides to that coin.

The people most happy with this deal are the government back benchers. Hence the round of applause. The short term gain means the Budgets prior to election won't be so bad. And as everyone knows, the way our political system works means that the main focus of almost all of our politicians (govt and opposition) isn't the good of the country, its what can I do/say to get elected next time.