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

[Zapatista]

Would it not be sensible to implement 30% cuts to everything in Ireland. End the likes of the medical card scheme, rent allowance, etc. if they could do this then the day to day living costs would have to follow suit. Or am I being a bit idealistic/simplistic?

If you end the medical card scheme it just means more people die on the HSE. The exchequer is dependant on spending to raise mush of it's revenue. If you cut the benefits you cut the spending and it makes little difference. It just means more small business' close and probably do further damage. There is room for improvment though. Due to the personal debt out there it's hard to be sure that the cost of living would fall to match price cuts. People will still need to earn a good wage to pay their debts from before the bust.

What is the real life impact of a country defaulting on its debt?

We get bailed out We are in the bad books for a while and lending stops and the country is run on a shoe string and then we get to a place were an investment in Ireland looks profitable and we're back in business.

[balladmaker]

Lenders are less likely to lend it money in future. Ireland is currently borrowing €19bn a year just to pay the day to day bills.  The banks are on top of that.

If the government defaulted on its own debt then there would be no more borrowing for a few years and you would need to cut spending by €19 bn or around 30% of total spending. so social welfare would fall by 30% t 140 a week and gardai and teachers would get 30%pay cuts and 30%of hospitals would close as would 30% f schools. 

So financial armageddon for a few years then.  The reason I asked the question in the first place is because defaulting on debt is going to happen.  I would be shocked if the government do not already have the date of the default in mind.

[Zapatista]

Lenders are less likely to lend it money in future. Ireland is currently borrowing €19bn a year just to pay the day to day bills.  The banks are on top of that.

If the government defaulted on its own debt then there would be no more borrowing for a few years and you would need to cut spending by €19 bn or around 30% of total spending. so social welfare would fall by 30% t 140 a week and gardai and teachers would get 30%pay cuts and 30%of hospitals would close as would 30% f schools. 

So financial armageddon for a few years then.  The reason I asked the question in the first place is because defaulting on debt is going to happen.  I would be shocked if the government do not already have the date of the default in mind.

I don't think so. If we default we are no good to anyone. If we remain in huge debt we can be the whipping boys of Europe. Everyones a winner. execpt us that is but that's secondary.

[fearbrags]

http://www.youtube.com/user/jbyeats

[muppet]

http://www.youtube.com/user/jbyeats

He is what I imagine Tyrone's Own looks like.


In all seriousness if you have followed this thread there are plenty of posters here who have warned of this type of crisis for quite a while now. The bond markets don't believe our Government of Minister for Finance  anymore. We are now Greece except that the stupid citizens here still actually believe Lenihan. Look at the polls ffs, they want him made Taoiseach.

I think the video above is light on facts (his mate in London!?) but I think the truth is actually worse than he thinks it is.

[bcarrier]

With the effect of reduced tax take on lower wages you would probably have to lower public sector wages by about 50% ( not 30%) to get the books balanced.

Exiting the euro to devalue the currency and implement the cuts by stealth should at least be considered.   

[muppet]

With the effect of reduced tax take on lower wages you would probably have to lower public sector wages by about 50% ( not 30%) to get the books balanced.

Exiting the euro to devalue the currency and implement the cuts by stealth should at least be considered.

Would this not increase the debt (and repayments) even higher which is now the immediate problem.

[Pangurban]

Lets get some perspective here, and describe these draconian cuts, as what they are ... Child Abuse on a grand scale.
Generations off Irish children are going to be reared in poverty, deprived off proper educational and health facilities, and all for what, to bail out greedy private companies who lent recklessly and without due diligence. To protect their cabal of rich associates, our lying Government insist a bail out is necessary. Well Finland have exposed this lie. They left the Banks to wallow in their debt and deprivation, and refused a bail out. There was no adverse reaction from Europe or the Bond Markets, who are financial realists. Finland is now paying less interest to borrow money from the markets than we are and their economy is in recovery. Are Irish Children less important than the greedy bankers, or do we only get angry about child abuse when it is sexual and the Church are the culprits. When are the citizens of the dung heap which is now the so called Irish Republic, going to wake up, stop their impotent whining and take their country back. The Prime Minister of Finland is to be charged in a court of law with neglect, their fraudelent Bankers are in jail. Here in this fantasy land we are told no one done anything wrong. Is Child Abuse no longer a crime

[MCMLX]

When are the citizens of the dung heap which is now the so called Irish Republic, going to wake up, stop their impotent whining and take their country back. The Prime Minister of Finland is to be charged in a court of law with neglect, their fraudelent Bankers are in jail. Here in this fantasy land we are told no one done anything wrong. Is Child Abuse no longer a crime

I keep asking the same question, but there does not seem to be an answer. No one seems to be willing to stand up and say STOP.

[muppet]

Surely the Irish banks are solid now?

Just thought I'd post this, for a laugh.

[bennydorano]

Why do they not just accept the IMF bailout? The terms would be less stringent than the selfimposed flagilation that they seem keen  to inflict on the public for years to come.  As a northerner lookin on it just looks such a clusterfuck, i'm amazed at how the Irish public keep bending over to take more, spineless. If it  were France there'd be lynchings of politicians & bankers in the street. Fair play to the Finnish.

[Bogball XV]

With the effect of reduced tax take on lower wages you would probably have to lower public sector wages by about 50% ( not 30%) to get the books balanced.

Exiting the euro to devalue the currency and implement the cuts by stealth should at least be considered.

Would this not increase the debt (and repayments) even higher which is now the immediate problem.

Because we would now be paid in a new currency, lets call it the reichpunt for simplicity, the govt could do the following:
Initially 1 reichpunt = 1 euro

All govt expenditure in Ireland is in reichpunts (RP's), the govt devalues the currency (pretty much against IMF rules).  The RP is now worth 0.25Euro or 4RP = 1 euro.  We're still paying everybody the same, but the 4 billion euro we're borrowing from outside goes 4 times further.  Whilst we still have to pay back our borrowings in euro, we don't need as many of them. 
It would also work wonders with the housing market, your property worth 1.9 million at the height of the market will be worth 1.9 million again, your mortgage taken out in euro would of course be transferred to RP's at 1:1 intitially will be out of negative equity in no time etc etc etc.
Once more the bank guarantee raises its ugly head as it would negate some of the benefits of devaluation in that our state woned banks would still have to repay all their previous borrowings in euro.

The only tiny flaws in this are that nobody would lend us anything as we're small insignificant and even more peripheral than ever, there'd be no prospect of us attracting outside investment as we're shown to be politically unstable with a very unstable currency (an additional risk for would be investors), we would hardly win any friends in europe, our main markets, as we've just fcuked them over.  Whilst it's true that our exports would be cheaper, since we make nothing (bar a few computers and drugs which are normally made in truly low cost economies before being shipped to ireland and having a little value added to them to adhere to EU transfer pricing legislation) that would not be a huge benefit.  Massive inflation woud be very probable.  All in all it would be a disaster from which this republic might not recover.

Forgive any inaccuracies as to how a devaluation would work, but it's been a while since gcse economics.

[armaghniac]

Fair play to the Finnish.

I think people are confusing Finland with Iceland.

Ireland may well end up borrowing from the Euro fund if things don't settle down. They'd be crazy to borrow at higher rates.

[bennydorano]

It's been touted as a genuine option for Greece, why not the banana republic. Saving face seems to be the main priority of Irish politics. Admiting failure on such a huge scale isn't going to happen and the € will not be allowed to fail.

[muppet]

With the effect of reduced tax take on lower wages you would probably have to lower public sector wages by about 50% ( not 30%) to get the books balanced.

Exiting the euro to devalue the currency and implement the cuts by stealth should at least be considered.

Would this not increase the debt (and repayments) even higher which is now the immediate problem.

Because we would now be paid in a new currency, lets call it the reichpunt for simplicity, the govt could do the following:
Initially 1 reichpunt = 1 euro

All govt expenditure in Ireland is in reichpunts (RP's), the govt devalues the currency (pretty much against IMF rules).  The RP is now worth 0.25Euro or 4RP = 1 euro.  We're still paying everybody the same, but the 4 billion euro we're borrowing from outside goes 4 times further.  Whilst we still have to pay back our borrowings in euro, we don't need as many of them. 
It would also work wonders with the housing market, your property worth 1.9 million at the height of the market will be worth 1.9 million again, your mortgage taken out in euro would of course be transferred to RP's at 1:1 intitially will be out of negative equity in no time etc etc etc.
Once more the bank guarantee raises its ugly head as it would negate some of the benefits of devaluation in that our state woned banks would still have to repay all their previous borrowings in euro.

The only tiny flaws in this are that nobody would lend us anything as we're small insignificant and even more peripheral than ever, there'd be no prospect of us attracting outside investment as we're shown to be politically unstable with a very unstable currency (an additional risk for would be investors), we would hardly win any friends in europe, our main markets, as we've just fcuked them over.  Whilst it's true that our exports would be cheaper, since we make nothing (bar a few computers and drugs which are normally made in truly low cost economies before being shipped to ireland and having a little value added to them to adhere to EU transfer pricing legislation) that would not be a huge benefit.  Massive inflation woud be very probable.  All in all it would be a disaster from which this republic might not recover.

Forgive any inaccuracies as to how a devaluation would work, but it's been a while since gcse economics.

Wouldn't this happen with the sovereign debt also?