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

[Zapatista]

Can someone please explain to me why the dole has not be cut in the south. Surly this needs to be done or does the government realise that if they do this all hell could break loose.

It has been cut.

[muppet]

Can someone please explain to me why the dole has not be cut in the south. Surly this needs to be done or does the government realise that if they do this all hell could break loose.

FF backbenchers and some of the independent TDs needed to keep the government in place couldn't live with that. Failure to do as you say (along with the unenforceable the Croke Park Agreement) are accelerating the crisis though so it might be a positive. When the IMF/EU arrive the cuts will be savage but FF can point at the outsiders who have done it.

[muppet]

http://www.forbes.com/feeds/afx/2008/11/06/afx5656942.html

The article above gives some details of the terms the IMF set when it went into Hungary a couple of years ago. It would be different here as we are in the euro but it is worth looking at as it might not be as bad as people think (yes I lifted it from p.ie).

Here are a few:

[I presume months are 4 weeks rather than calendar months which creates a 13th month]

* Fiscal responsibility law submitted to parliament, to be passed by end-2008.

* Planned legislation to strengthen the emergency powers of the Financial Services Authority.

* Primary government spending to fall by 2 percentage points of GDP next year through:

(1) freezing public sector wages in nominal terms

(2) scrapping 13th month wages in the public sector

(3) limiting 13th month pensions to 80,000 forints

(4) scrapping 13th month pension payments for early retirees

(5) postponing the indexation of some social benefits

(6) trimming operating expenses of ministries.

[seafoid]

I don't think there is any immediate chance of the IMF coming in. The Government still has some time and rope left but is another crash away from a default. There should be some finality on  banking costs by the end of the year which will bring the spread down provided the Government gets its communications house in order. The PR effort since the beginning of august has been very shoddy.   

Longer term if there is no growth there is no hope of meeting the 3% budget deficit target by 2014. By then the Eurozone could be in deep doo doo anyway in which case it might not make much difference.

Surely Mayo could seize the opportunity and employ some talented Roma sportsmen with the aim of an all-Ireland by the time the shit hits the fan in 2014.

[Zapatista]

I don't think there is any immediate chance of the IMF coming in. The Government still has some time and rope left but is another crash away from a default. There should be some finality on  banking costs by the end of the year

What makes you think that judging by the cost of borrowing today?

The PR effort since the beginning of august has been very shoddy.   

Lack of decision and wrong decision shouldn't be described as PR.

[muppet]

I don't think there is any immediate chance of the IMF coming in. The Government still has some time and rope left but is another crash away from a default. There should be some finality on  banking costs by the end of the year which will bring the spread down provided the Government gets its communications house in order. The PR effort since the beginning of august has been very shoddy.   

Longer term if there is no growth there is no hope of meeting the 3% budget deficit target by 2014. By then the Eurozone could be in deep doo doo anyway in which case it might not make much difference.

Surely Mayo could seize the opportunity and employ some talented Roma sportsmen with the aim of an all-Ireland by the time the shit hits the fan in 2014.

I presume you are talking mainly about Anglo. You are assuming the news coming next month is not worse than the market expects.

[seafoid]

I don't think there is any immediate chance of the IMF coming in. The Government still has some time and rope left but is another crash away from a default. There should be some finality on  banking costs by the end of the year which will bring the spread down provided the Government gets its communications house in order. The PR effort since the beginning of august has been very shoddy.   

Longer term if there is no growth there is no hope of meeting the 3% budget deficit target by 2014. By then the Eurozone could be in deep doo doo anyway in which case it might not make much difference.

Surely Mayo could seize the opportunity and employ some talented Roma sportsmen with the aim of an all-Ireland by the time the shit hits the fan in 2014.

I presume you are talking mainly about Anglo. You are assuming the news coming next month is not worse than the market expects.

Even if were is another couple of billion it wouldn't be enough to drive the country into immediate insolvency. What the markets want is more clarity on what the final cost is going to be and the spread is a way of putting pressure on the government to get its act together.  Apparently the current spread prices in a 30% chance of default over the next 5 years. I don't think Ireland will be allowed to default. Contagion effects would be shocking for Core EU banks and insurance cos who are to be protected at all costs. There is plenty of fat that could be cut in Ireland before a default would happen. 

[muppet]

There is plenty of fat that could be cut in Ireland before a default would happen.

But this is exactly the point. The Government won't make the cuts for any number of political reasons. For example if the budget is too tough (for back-benchers, Healy-Rae etc) the Government is likely to fall. Meanwhile look at the Croke Park agreement whereby the Government (albeit with a doomsday caveat) agreed to no further pay cuts in the public service and no compulsory redundancies. Where are they going to get the money if the public service isn't touched? Massive tax increases seems the most likely but that won't get too far politically either.

The likely political way out of this mess is to bring in an outside agency to inflict the pain that they don't have the balls to serve up themselves.

[seafoid]

The IMF would be brutal, the modern day equivalent of Oliver Cromwell. Wishing them in to me seems suicidal. They would slash social welfare and leave the well off untouched. There would be a lot of unnecessary misery.

The Croke Park Agreement will have to be looked at again. FF are doomed anyway and whoever replaces them will have to look at everything anew. Spending this year is €55bn - anyone know what it was 10 years ago ?

[muppet]

http://www.cso.ie/statistics/imfsummaryire.htm

Dunno about 10 years ago but here are some interesting figures:

General Government or Public Service Operations	- 2009	- 2008
Revenue Fiscal Sector	52,009M	59,782M
Expenditure Fiscal Sector	75,450M	72,981M

[seafoid]

That must be in Punts

I think GDP was about half of what it is now in 2000 and that the govt spending as a % of GDP was around 36% in 2000 and the rate is around the same today so spending has doubled in 10 years and meanwhile the tax take has collapsed.

 

[seafoid]

This thread is a very valuable resource . looking at the first few pages it is clear that everything that could go wrong did go wrong. The bank guaranteee, Anglo nationalisation, the collapse in tax revenues, the house price crash. And there is still more to come. 

[muppet]

This thread is a very valuable resource . looking at the first few pages it is clear that everything that could go wrong did go wrong. The bank guaranteee, Anglo nationalisation, the collapse in tax revenues, the house price crash. And there is still more to come.

AIB price over the last 3 months (note: short selling is banned thankfully or it would probably be gone)

[seafoid]

ILPM and BoI are showing the same trend over 6 months.

The government can't afford to bail out the private capital in Anglo Irish . Simple as that.

This quote was on the Guardian website :

"The country and its society are now being systematically wrecked for some abstract moralistic ideal regarding fiscal prudence, that the markets clearly don't believe any more. "

Check out the shift in 10 year bond rates since last year's all-ireland . 

http://www.bloomberg.com/apps/quote?ticker=GIGB10YR:IND

[muppet]

http://www.marketwatch.com/story/ireland-portugal-default-insurance-costs-jump-2010-09-23

Won't pretend to understand this but the cost of insuring our bonds hitting records day can't be good.