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

[muppet]

http://blogs.ft.com/ft-long-short/2013/03/13/europes-house-price-bubbles-iceland-ireland-and-spain-updated/

Interesting view of how Iceland's citizens have got on.

[Declan]

Noonan refuses to publish supporting documents to NAMA Directions in IBRC liquidation
March 14, 2013 by namawinelake
On 6th February 2013, Minister for Finance Michael Noonan executed one of the most financially significant acts of his two year term in office, the liquidation of Irish Bank Resolution Corporation. It was over two weeks later when we found out in passing that as part of the liquidation, NAMA had been directed by the Minister to provide a €1bn credit facility to IBRC at 1.52% per annum. It was almost a month after, that Minister Noonan finally published the text of the directions he gave to NAMA.

But the directions published are pretty meaningless without the supporting schedules, deeds, transfers and perhaps most importantly, the facility agreement which makes €1bn of our money available to an insolvent bank at 1.52% per annum.

This week in the Dail, the Sinn Fein finance spokesperson Pearse Doherty asked for the supporting documents, and surprise, surprise, they are "commercially sensitive" and Minister Noonan refuses to publish them.

So, the Minister has finally found a means to politically direct NAMA without revealing such directions to the public. Next time, the Direction might just say "Dear NAMA, I command you to carry out the actions listed in the attached Schedule, Sincerely, Michael"

The Directions issued to NAMA as part of the IBRC liquidation represent a departure for this administration. Not only were the Directions published a month later after at least one request from the Opposition, but the Directions omit the meat of what is being directed. This all represents a serious deterioration in transparency, even compared with the previous administration and if allowed to stand, give unfettered direct political control over NAMA. And it's not exactly reassuring to know that the NAMA Board including the so-called independent member, Steven Seelig, promptly approved the Directions given by the Minister.

The full parliamentary question and response are here:

Deputy Pearse Doherty: To ask the Minister for Finance further to the eventual publication on or after 4 March 2013, of the Directions given by him to the National Asset Management Agency in respect of the liquidation of Irish Bank Resolution Corporation, if he will now publish the documents referred to in the directions, namely the facility agreement, deeds, transfers and schedules.

Minister for Finance, Michael Noonan: I do not intend to publish the documents referred to in the directions, at this time, as they contain commercially sensitive information which if released could have a detrimental effect on the outcome for the taxpayer.

[muppet]

http://www.guardian.co.uk/world/video/2013/mar/17/cyprus-cash-machines-dry-tax-video

Incredible decision made in Berlin. An instant tax on deposits to help pay for a Bondholder bailout in Cyprus has meant cash machines are already empty. The banks are closed tomorrow and the Government announced another bank holiday on Tuesday, thereby delaying the inevitable run until Wednesday. This monumentally stupid decision may turn out to be the straw.

http://www.guardian.co.uk/world/2013/mar/17/cyprus-bailout-big-implications-small-rescue

[Declan]

Shocking stuff alright. Will it be the decision that finally makes the worm turn I wonder?

[Main Street]

Shocking stuff alright. Will it be the decision that finally makes the worm turn I wonder?

Hard to credit even the EU economic 'brains' coming up with this stroke.
At best, they decide not to do it and in the next few days billions will be withdrawn as no one will have confidence in leaving their money in Cyprus banks. The banks won't have enough to cover the withdrawals, not by a long shot.
At worst? who can predict the worst that can happen? Deposits are anyway withdrawn from Cyprus banks because foreign account holders especially, will be peed off, then general confidence in the security of savings accounts in the whole Euro zone area will take a lashing.

[muppet]

Shocking stuff alright. Will it be the decision that finally makes the worm turn I wonder?

Hard to credit even the EU economic 'brains' coming up with this stroke.
At best, they decide not to do it and in the next few days billions will be withdrawn as no one will have confidence in leaving their money in Cyprus banks. The banks won't have enough to cover the withdrawals, not by a long shot.
At worst? who can predict the worst that can happen? Deposits are anyway withdrawn from Cyprus banks because foreign account holders especially, will be peed off, then general confidence in the security of savings accounts in the whole Euro zone area will take a lashing.

They claim the reason is because Russians use Cyprus to launder money.

That still makes no sense as:

a) the 'Russians' will take their money (good or bad) elsewhere which hardly helps;
b) using the above flimsy excuse they tax capital which is both a wealth and savings tax;
c) no one but no one will leave money somewhere an overnight tax can be introduced taking 5%-10% of it in tax;

Finally the EU (and the Cypriot PM) argument is that the banks will go bust this week if the deal is not done. Fine. The depositors would be protected on 100% of their deposits under €100,000, by the EU under current arrangements, which is far better for the vast majority than saving the banks and losing 10% of your deposits.

I saw one man on TV who said he took out a loan to pay for his daughter's college education. The loaned money is in the bank now in his name and he will have 10% of that taken off him, even though it isn't his. He will have to pay the 10% tax, and then pay the bank back the deducted money, and pay interest on it all. Stupidity beyond belief.

[armaghniac]

The depositors would be protected on 100% of their deposits under €100,000, by the EU under current arrangements, which is far better for the vast majority than saving the banks and losing 10% of your deposits.

The problem is that while the EU requires a  €100,000 deposit insurance scheme, it is up to each government to fund it and Cyprus does not have money.

Coming out of this mess the minimum needed is a simple proposition that there is European inspection mechanism over banks and if a bank passes this then Europe insures your basic retail deposit.

[Main Street]

http://blogs.ft.com/ft-long-short/2013/03/13/europes-house-price-bubbles-iceland-ireland-and-spain-updated/

Interesting view of how Iceland's citizens have got on.

Actually the writer makes a balls of his argument which he goes into later in the article.

'The benefit Iceland has seen from its currency devaluation is a matter of money illusion: its people have become poorer in order to make the country's labour (and fish) more competitive and help exports. It could have achieved the same result, at least for the workforce, by wage cuts and the type of "internal devaluation" being pursued by the troubled eurozone periphery – but this is politically much more difficult as workers measure themselves by their nominal wages in local currency, not by their global purchasing power.'

The Is kronur  was not devalued as such in 2008, it collapsed totally, it was artificially propped up to half its pre-Sept 2008  value and this value was artificially maintained by replenishing the Central bank coffers with IMF loans, export earned currency that was forced to be banked in Iceland by law, and severe restrictions on foreign currency transactions  -  meaning that the central bank currency reserves could not be drained by foreign investors bailing out transferring Kronur assets into foreign currency.
It is the foreign currency restrictions which has meant the Kronur has kept to its October 2008  propped up value. And meant that the cost of imports,consumer goods, foodstuffs, the necessities of life, has been kept to to a tolerable level.

The writer is talking through his neo-liberal hole that this could all have been done with just lowering local wages.

[Hardy]

Surely you couldn't design a scheme better calculated to torpedo confidence in the banking system than to steal people's money from their accounts? Who is going to invest in EU banks now?

[orangeman]

Surely you couldn't design a scheme better calculated to torpedo confidence in the banking system than to steal people's money from their accounts? Who is going to invest in EU banks now?

Very ill advised and poor move by the architects of this move.

[ludermor]

I'm in 2 minds about the move, they are hitting people with savings now taking a huge of their bailout from people who can afford it {in theory} , Irish people will be paying far more off for a longer period of time. im not sure which is the better [of 2 really shite ] option.

[seafoid]

Surely you couldn't design a scheme better calculated to torpedo confidence in the banking system than to steal people's money from their accounts? Who is going to invest in EU banks now?

Do you think it was right for the 26 country resident  posters on the board to bail out Anglo, Hardy?
the thing about the whole cat melodoen mess is that there are no easy answers.

"Investors" will sell bank shares in a panic and pick them up again when the yield becomes irresistible. 
It's pathological.

[Hardy]

Surely you couldn't design a scheme better calculated to torpedo confidence in the banking system than to steal people's money from their accounts? Who is going to invest in EU banks now?

Do you think it was right for the 26 country resident  posters on the board to bail out Anglo, Hardy?

Yeah - I thought it was a great idea. Wtf?

the thing about the whole cat melodoen mess is that there are no easy answers.

"Investors" will sell bank shares in a panic and pick them up again when the yield becomes irresistible. 
It's pathological.

I didn't mean people who buy bank shares. I meant - what do you call people who put their money in the bank and expect to get it back, even with a little interest?

[ludermor]

I'm in 2 minds about the move, they are hitting people with savings now taking a huge of their bailout from people who can afford it {in theory} , Irish people will be paying far more off for a longer period of time. im not sure which is the better [of 2 really shite ] option.

Really? Jeez...

Yeah really, everyone in ireland will have to pay more through increased taxes over a longer time, Cyprus is taking it now . In the long run what is the difference, people have to pay in each instance.

[seafoid]

Surely you couldn't design a scheme better calculated to torpedo confidence in the banking system than to steal people's money from their accounts? Who is going to invest in EU banks now?

Do you think it was right for the 26 country resident  posters on the board to bail out Anglo, Hardy?

Yeah - I thought it was a great idea. Wtf?

the thing about the whole cat melodoen mess is that there are no easy answers.

"Investors" will sell bank shares in a panic and pick them up again when the yield becomes irresistible. 
It's pathological.

I didn't mean people who buy bank shares. I meant - what do you call people who put their money in the bank and expect to get it back, even with a little interest?

I think there are little people and very wealthy people in that group and they should probably be treated differently.