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

[seafoid]

This 22 November 2010 piece from the FT is worth rereading in full.  Go bhfoire Dia orainn.

Jesus Mary and Joseph assist me now and in my last bailout agony.

http://www.ft.com/intl/cms/s/0/97fe4484-f66e-11df-846a-00144feab49a.html

"The €750bn worth of financial ordnance in the European Financial Stability Facility and its European Union and International Monetary Fund matching funds was meant to bring enough shock and awe to scare markets off from thinking a eurozone sovereign might default. The EFSF's inaugural mobilisation reveals that between bond investors and Europe's leaders, the politicians blink first.• It is too soon to say whether the rescue into which Dublin has been manhandled by panicking EU partners can help fix Ireland's troubled banking sector. Decisions taken in the next week or two will make the difference between the rescue's failure and a chance of success.

• If the troika now imposing its writ in Dublin can get the Irish to restructure their banks in a way that recapitalises the banking sector (if not extant institutions) by forcing bondholders to convert to equity or otherwise share in losses, the EFSF can provide useful backstop funding for public spending or calls on banks' guaranteed liabilities in the transition period, which must be kept as short as possible.•

A good outcome requires both a special insolvency regime and the will to strong-arm senior creditors into taking haircuts – as Dublin, to its credit, is finally doing to Anglo Irish subordinate bondholders. • So far, however, Ireland's uninvited helpers seem set on perpetuating Dublin's dysfunctional policy of throwing good money after bad and filling holes into which creditors refuse to step. This is understandable insofar as many of those creditors come from the core eurozone countries that guarantee the bulk of EFSF money. But it does not justify sticking to a failed strategy: keeping banks standing has already impoverished the Irish public by some €50bn, a third of a year's output. If borrowed EFSF money is used to inject equity into the banks now, it will only dig the Irish sovereign debt trap deeper.

• The best that can realistically be hoped for is a combination of new equity and creditor haircuts. Whatever plan is laid, it is crucial that it does not aim to keep individual banks alive in their current form. That goal – which implies that the state continues to back all senior bank liabilities – is neither fair to taxpayers nor credible to markets. The mooted €80bn-€90bn rescue covers just half the Irish private sector's bank deposits, let alone other deposits and wholesale debt.

• Not for the first time, Europe is facing bank creditors and feeling tempted not to face them down. If public money is again used just to buy time, the problem will soon return, more contagious than ever."

[lawnseed]

ah somewhere to stay while when your in england google 'Britain's most expensive house' well we might as well get the use of the place we're paying for it 60,000stg a month in maintenance bills.

[muppet]

ah somewhere to stay while when your in england google 'Britain's most expensive house' well we might as well get the use of the place we're paying for it 60,000stg a month in maintenance bills.

I thought you didn't live in the '26'.

[lawnseed]

ah somewhere to stay while when your in england google 'Britain's most expensive house' well we might as well get the use of the place we're paying for it 60,000stg a month in maintenance bills.

I thought you didn't live in the '26'.

i do however pay my taxes as does my wife, did you see this place? not a bank in britain would touch this guy and national irish struck a deal for 60/40 of the profits. when they went belly up the taxpayer took the hit. who ever stuck this deal should get jail.

[muppet]

http://www.irisheconomy.ie/index.php/2011/07/18/ntma-on-irelands-funding/

Interesting blog above appears to demonstrate that we are funded relatively securely up to the end of 2013. After that we need new funding from somewhere.

In the comments below though these two caught my eye:

"After all, over 105 of the 357 NTMA staff are paid bewteen €100,000-€200,00 a years; 3 earn between €200,000-250,000; and 14 are paid over €250,000."

"Then again, there are over 7000 people in the department of finance earning over €100,000 per annum, so maybe the NTMA is the wrong place to start looking for savings."

Between the two they add up to a minimum of €1bn in wages assuming they all earn the lowest figures quoted above. I have some respect for the NTMA but little or none for the DoF. 7,000 people, earning >€100,000 in a department that led us to financial ruin is hardly value for money is it?

[Bogball XV]

there's hardly 7,000 people in the DOF??  I would have thought staff numbers would be in the hundreds?

[muppet]

there's hardly 7,000 people in the DOF??  I would have thought staff numbers would be in the hundreds?

Reading the subsequent comments it seems to be more like 700.

[seafoid]

It looks like Greece is going to get some help . Ireland must be due a dig out as well now that the angel of financial death  is hovering over Italy.

[Bogball XV]

there's hardly 7,000 people in the DOF??  I would have thought staff numbers would be in the hundreds?

Reading the subsequent comments it seems to be more like 700.

makes more sense alright.

[bcarrier]

Bailout rate now 3.5% but  ECB loans to banks ( on dodgy collateral)  to be phased out ?

http://www.guardian.co.uk/business/2011/jul/21/eurozone-bailout-fund-powers

[seafoid]

Bailout rate now 3.5% but  ECB loans to banks ( on dodgy collateral)  to be phased out ?

http://www.guardian.co.uk/business/2011/jul/21/eurozone-bailout-fund-powers

Ireland's banks can only be weaned off the tit of the ECB when the bond yield comes back down to 5%
and they can borrow again in the markets. And Mayo will win the all-Ireland before that happens.   

[bcarrier]

Bailout rate now 3.5% but  ECB loans to banks ( on dodgy collateral)  to be phased out ?

http://www.guardian.co.uk/business/2011/jul/21/eurozone-bailout-fund-powers

Ireland's banks can only be weaned off the tit of the ECB when the bond yield comes back down to 5%
and they can borrow again in the markets. And Mayo will win the all-Ireland before that happens.   

Im a cynic but suspect the plan might see the bank loans eventually moved from ecb to the stability fund as ecb "regularised"  ...i think ecb money to banks is about twice the bailout funding and  the bailout money is at at 6% but ecb c  2.25%. There will be no real cut in overall loan rate ...ie new rate of 3.5% will be similar to  blended rate on ecb 2.25% /bailout 6% .

[muppet]

Bailout rate now 3.5% but  ECB loans to banks ( on dodgy collateral)  to be phased out ?

http://www.guardian.co.uk/business/2011/jul/21/eurozone-bailout-fund-powers

Ireland's banks can only be weaned off the tit of the ECB when the bond yield comes back down to 5%
and they can borrow again in the markets. And Mayo will win the all-Ireland before that happens.   

Im a cynic but suspect the plan might see the bank loans eventually moved from ecb to the stability fund as ecb "regularised"  ...i think ecb money to banks is about twice the bailout funding and  the bailout money is at at 6% but ecb c  2.25%. There will be no real cut in overall loan rate ...ie new rate of 3.5% will be similar to  blended rate on ecb 2.25% /bailout 6% .

Would that not put us on the hook for another €150bn or so as it be considered part of the National Debt rather than emergency lending?

The ratings agencies would have to invent new categories below junk.

[bcarrier]

There is a piece in the guardian article which states:

Jean-Claude Trichet, the ECB chief, has warned that the bank will no longer keep Greek banks afloat by supplying liquidity for defaulted bond collateral. That role would probably shift, at least temporarily, to the eurozone bailout fund.

Maybe Tichet is talking about greek sovereign bond now being written down but if they are talking about all impaired collateral I cant see why would Irish banks be different to greek ones. There had been a request  before for the ECB to provide longer term funding to the banks or per Morgan Kelly to convert the emergency loans to equity.

[seafoid]

Bailout rate now 3.5% but  ECB loans to banks ( on dodgy collateral)  to be phased out ?

http://www.guardian.co.uk/business/2011/jul/21/eurozone-bailout-fund-powers

Ireland's banks can only be weaned off the tit of the ECB when the bond yield comes back down to 5%
and they can borrow again in the markets. And Mayo will win the all-Ireland before that happens.   

Im a cynic but suspect the plan might see the bank loans eventually moved from ecb to the stability fund as ecb "regularised"  ...i think ecb money to banks is about twice the bailout funding and  the bailout money is at at 6% but ecb c  2.25%. There will be no real cut in overall loan rate ...ie new rate of 3.5% will be similar to  blended rate on ecb 2.25% /bailout 6% .

Would that not put us on the hook for another €150bn or so as it be considered part of the National Debt rather than emergency lending?

The ratings agencies would have to invent new categories below junk.

This was in the irish times

Ireland's downgrading to junk status last week means the NTMA will have to raise debt from "investors at the margin with a higher risk appetite", said Mr Corrigan.

it all sounds like a former celebrity wife now turned prostitute and reduced to accepting €20 for a trick without any protection.