The Sovereign Debt Market

Wolfgang Munchau has an interesting piece on the Greek fiscal situation in Monday’s FT: you can read it here. Against the backdrop of events in Dubai, there is increasing concern that risk aversion in the sovereign debt market may be on the increase.

65 replies on “The Sovereign Debt Market”

It makes for an interesting comparison with Ireland. It seems that the statistical trickery with the deficit has them much more in the doghouse with the EC than Ireland is. But the fiscal picture is not that different. Although Greece has had very small decline in GDP.

Greece are forecasting essentially zero growth next year. Would that we would have the same….

@Brian,

The carry-over from Q4 implicit in many of the official forecasts for this year is around -1%. Greece didn’t have the same GDP decline this year, so won’t have the same carry over effect. As such, the same economic performance in both countries next year is equivalent to around a zero yoy for Greece, and a -1% for Ireland.

The key reason that Greece is getting sold off in relative terms to Ireland is that Ireland is at least seen to be pro-active in trying to meaningfully cut the deficit, while the Greeks don’t even appear to know how big theirs really is. As i have said repeatedly, tackling the deficit agressively now will save us more money in the long run than anything NAMA ends up costing us.

The Dubai default has changed the game. The possibility of a swing in sentiment means that the Irish Government has lost any wriggle room it had for the upcoming budget. Lehihan may well now feel that the only prudent option is to go the extra yard with the cuts.

(I don’t know if people have any concept of what sovereign default would mean for Ireland. Personally, I find it hard to imagine what the reality would be like. I think this is a major problem in addressing the political obstacles to carrying out sufficient cuts.)

From the link.

“The real exchange rate has gone up by 17 per cent since 2006, which means the country is losing competitiveness at an incredible rate. Had Greece not been in the eurozone, it would be heading straight for default.”

So that same loss in competitiveness applies to Ireland as well. Am I correct if saying that the only way Ireland can recover this loss is either to increase productivity or reduce the local costs of the export sector by a similar percentage? A tall order.

“If the Greek parliament confirms the government’s soft budget next month, the European Commission will almost certainly judge the effort insufficient and demand a supplementary budget. It might also ask for structural reform, including pension reform.”

And if we chose the route of compulsory unpaid leave, yes positive for the cash flow but hardly a solution, will that be seen as “soft” or just kicking the can down the road again.

“The real problem is that the Greek people have not been prepared by their political leaders for what lies ahead.”

Oh dear, it’s a Greek tragedy soon to be played out here.

@Greg,

There are many factors which go into deciding how competitive an economy is, and what it will need to do to recover it. Unfortunately only two are easily measurable in the hort run (prices and exchange rates) and they are the two which have been moving against Ireland in recent years. This has given rise to the notion that we have a huge external imbalance.

Other measures of competitiveness, such as actual exports or ability to attract greenfield FDI, show Ireland remains a very competitive country. Underlying productivity has also been growing faster in Ireland since 2000 than previouly, while we have invested heavily in correcting a seriously defficient infrastructure. Its a pity productivity/infrastucutre are not updated hourly and beep up on Bloomberg screens.

That is not to say that the pay and price moderation we are now seeing is not an important step in soaking up some excess capacity in the next few years, or taht these did not greatly weaken our trading position.

@ Ronnie O’Toole

Thanks for that.

An impression I have (not being an economist) is that if the public sector, although not externally traded, does not improve its productivity it can only maintain its absolute share of output by cannibalising the productivity gains in the non-public sector.

@Brian Lucey

I note that Davys- and John the Optimist 🙂 – are predicting the Irish economy to return to growth in Q1 2010.

Can we take it from your comment that your expectations are radically different?

Concubhar O’Caolai
no, not really. I suspect we will come in negative, but small. However, im not a macroeconomic forecaster so salt please. I do think we run a danger (which I also think is unavoidable) of further incorrectly deflating the economy in December. Tax increases, if we believe some of the mood music, are back on the agenda. But who knows. 2%+/- is neither hear nor there.

It is obvious that Greece, for what ever reason are refusing to dance to the Eu tune where as we on the other hand are dancing enthusiastically while doffing the cap at the same time.

The EU are obviously writing our next budget which would make me believe that the EU had a big hand in the drawing up of NAMA.

Can I ask the question of the economists on this site.

Is this the reason that NAMA is more eager to look after the needs of bondholders ( German Banks ) than it is Irish taxpayers?

@ Brian

Why? Please dont tell me it is commercially sensitive. If they are allowed to know who we are surely the same in reverse should be the case.

What is your own guess as to who they are? Mc Williams seems to be quite convinced.

@ zhou,

I think you are right. There is a real problem conceiving of what a soveriegn default would mean, and this makes fiscal austerity even more difficult to implement.

It would be a useful contribution for somebody to put the likely consequences of such a thing on paper.

Perhaps then we would begin to appreciate the need to cut spending, improve public sector efficiency and not hand bank shareholders billions of tax euros.

@ MB/BL

unquestionably a lot of the major bondholders are large German and Austrian banks and pension funds, and most of them are still marking the Irish bank bonds at 100 on their books. Hence the reason why pushing losses onto them would have major political and economic ramifications. Whether the Irish government figured this out by themselves or via the EU is a debateable point, but it clearly explains why Lenihan and Cowen feared a credit/funding freeze on Ireland as a whole in the event of a bank debt default.

@Ronnie O’Toole

Have just started Rogoff & Reinhart’s “This time is different”. It appears it is normal to measure External Debt against Exports when assessing the credit worthiness of a country. Unfortunately, many countries with healthy ratios go to the wall when investors lose confidence.

And if we chose the route of compulsory unpaid leave, yes positive for the cash flow but hardly a solution, will that be seen as “soft” or just kicking the can down the road again.

I suspect the Commission won’t really care, as long as the money is saved.

Whether it makes any sense to cut both pay and service-levels in one fell swoop is another question altogether.

@ Eoin

Exactly my point.

Question is. Is this restricting economic recovery or aiding it.

Are the EU more worried about their own Banks than they are about the Irish economy?

Are they just funneling money into Irish Banks as a roundabout way of bailing out their own much larger Banks.

From Willem Buiter’s Maverecon, writing on the fall-out from Dubai. Read the last sentence and ponder:

For small peripheral European nations, the threat of sovereign insolvency is therefore a real one, unless EU fiscal solidarity can be relied upon to bail them out. When Ireland was about to be swept away by a wave of global financial mistrust triggered by the Irish government’s decision to guarantee effectively all liabilities of its banks, the then German Finance Minister Steinbruck made the amazing statement (which he obviously had not checked with his coalition partners, his Chancellor or his voters) that the Eurozone countries would not let one of their own go into default.

The year that has passed since then has made this implicit commitment to a Eurozone, let alone an EU cross-border sovereign bail-out rather less credible. All EU sovereigns are, to varying degrees, in fiscal dire straits. We may well see in the next few years the first sovereign default by an old EU15 country since Germany defaulted on its debt in 1948. If the travails of Dubai wake us up to that possibility, they will have done some good. Sovereign defaults are not acts of God. They are the result of choices. If we continue to play the political game in a business-as-usual mode, there could be quite widespread sovereign debt restructuring throughout the advanced industrial world. If we grow up, we can avoid the worst.

So, when was the last time Wolfgang Muchau, Willem Buiter and Martin Wolf all agreed on something? The consensus view of the cribbers and moaners is that we should cut, if not hard, then at least credibly (i.e. cuts that will roll into future years, not deferrals).

Does anyone really know how much is outstanding in borrowing by the state?
70 bn long-term bonds
22 bn (?) in treasury bills
4.4 bn in HFA commercial paper
70 bn USD in commercial paper
54 bn in NAMA to come…
So, that’s about 120% of expected 2009 GDP? Or 140% of GNP?

@ peter mcquade

Seems like even the Greeks are a step ahead of us.

A new govt. distanced from the mistakes of the past that can look objectively at solutions.

We though are still stuck in the mire with the same old has beens trying to cover up their mistakes.

@Simpleton
“When Ireland was about to be swept away by a wave of global financial mistrust triggered by the Irish government’s decision to guarantee effectively all liabilities of its banks…” Willem Buiter
Another confirmation of how shockingly irresponsible the bank guarantee was. I believe it was the single most irresponsible decision of any democratic west European government since World War 2. This is further confirmation of the urgent and immediate need for an independent, fearless, mainly non-Irish & non-Irish led expert team to swiftly investigate the extraordinary events surrounding it.

As for sovereign default, someone tell the government we are borrowing €74 Bn next year – €54Bn of it to give to bank investors for no gain whatsoever. The Government have us all rowing over perhaps net €300m of savings from the public sector wage bill this year. This is HALF OF ONE PER CENT of what we could avoid borrowing by scrapping NAMA. Brian Lenihan, the man who fearlessly tackles the €300m while borrowing
€54,000m to give to bank investors in exchange for the flood plains and glass bottle sites of Ireland.

@ Ronnie O’Toole

Ronnie,

Maybe the IMF got the wrong end of the stick but last summer’s report on Ireland said the country had lost market share in the global and Eurozone flows of FDI . FDI inflows into the Eurozone have tended to fall as a share of world FDI flows, the report said.

However, Irish FDI shares have fallen faster. The report noted that in recent years, Ireland has become the most expensive location in the Eurozone, with the possible exception of Luxembourg. The report says the transformation from a location for low-cost manufacturing to a center for high value added production and services is ongoing. However, the Fund says research shows that FDI flows to a country are highly influenced by recent momentum – – increased global competition for FDI implies that task for Ireland is increasingly harder.

In measuring competitiveness, how important a factor is the allocation of disproportionate profits by US companies to low tax locations?

We should have a better understanding as to why exports from Irish firms have performed so poorly in the Eurozone.

Germany became a net exporter of food and drink in 2008 for the first time in decades — a sector with a high value-added for the producer- – and while Ireland’s food industry hobbles along, a New Zealand dairy company accounts for more than on-third of the total trade in international dairy products – – and it’s not because China has become a big customer in recent years.

@ E43Bn lost and no extra lending

“Another confirmation of how shockingly irresponsible the bank guarantee was.”

And of course, they are about to extend it by another three years.

Irish debt is part of the “risk trade.” When high-yield debt converges in yield with safer debt, as it has dramatically since March, Ireland benefits. This has little to do with foreign investors’ knowledge of Ireland’s situation, and more to do with broader risk aversion/appetites. From my terminal, the Dubai situation has not been a game changer, yet. Junk spreads haven’t taken it in the chin, because most risk-hungry bond investors consider Irish and Greek spreads to be a form of arbitrage on the EU’s willingness to bail out the weaker positioned country. Similarly, in the US, there was record demand for California’s debt offerings. Any bond investor worth anything knows California is insolvent, but some folks are willing to bet that they’ll be bailed out, and the bondholders will receive their payment in full. Not my position, but it’s not totally irrational either.

@Greg
Absolutely true.

@me
I will amend what I said above. I believe the blanket bank guarantee was the single most irresponsible FINANCIAL decision of any democratic west European government since World War 2. In terms of their decisions on all matters it is probably pretty bad too.

@ Tom

Not good for Irish debt when baselinesenario starts taking a close interest.

The graph is difficult to read but it looks like AIB & BoI CDS spreads spiked by about 150bps in the last week or so.

since start of last week 10y spread over bubd greece has gone up 12.5%, the greek spread 7%. Since June , with the exception of hte last week, our spread over the bund has been greater than that of our hellenic partners.
AIB and BOI CDS 5y Euro CDS have gone up since the start of november by about 100p each to 265/240 resp. Ireland has gone up from 130 to 160, greece 70 to 120.

@simpleton
Your post is like a bikini, concealing more than it reveals. What do you mean by bailout. The assumption of many is that a bail out is a “get out of jail card ” for the receiver. But the experience up to now is that it comes with strings attached. Latvia has had to cut public sector wages by close on 30%. ING has had to reverse nearly 2 centuries of corporate history and break itself up and repay the state aid plus a premium. Ireland has received cheap funding from the ECB to allow the banks buy govt debt. It has also benefitted from flows from other banking systems to sell govt debt. NAMA will allow is to draw on this facility again and plunge deeper into debt.

Like everywhere else this bail out will come at a cost. That is increased interferance in our fiscal affairs. Brussels seems to want a resolution of our affairs in a 5 year time horizone with the emphasis on spending cuts from now on. How will a Budget that increases the tax burden on the middle classes in the treaded sector measure up. How will a deal with ICTU that involves lower productivity in the Public Service go down with the Commission?

@ Greg

in fairness Simon Johnston seems to have a soft spot for Ireland, have seen him comment on our woes sympathetically a good few times. The Irish bank CDS rise over the last few weeks (and that graph aint great, its got Irish bank sub-debt vs BNP/HSBC seniors) is more related to the Greek problems than the Dubai stuff, but the latter hasn’t helped either. The Dubai problems could potentially see a bit of divergence betweem sovereign and quasi-sovereign (ie guaranteed banks, but beyond their guarantee) risk, on the basis that only explicit support can be relied on right now.

Note – thats for senior bonds. For subordinated debt since start of the month aib and boi have gone from 521/485 to 675/644 today.
For AIB subordinated debt (all data reuters btw) that gives a 5y default prob at 43%

@JL
Simpleton was quoting Willem Buiter.

@All
X Files Lenihan has started to say claim he is just following orders … from the Dept of Finance.

“Privately, Department of Finance officials expressed fears that raising income tax would do the opposite, and actually reduce income tax receipts, as some higher earners either left the country or restructured their tax affairs. They relentlessly pointed out that a small proportion of the population paid a huge share of income tax – 4 per cent of taxpayers pay half of all income tax,while half of income earners pay no income tax”.

Does anyone believe that the DoF, or Brussels, ordered him to tax only in his first budgets and are now telling him to cut only in this one?
What are the terms of the €54 Bn guaranteed long-term funding arrangement from the ECB in the secret treaty many supporters claim he signed with them? Why very conveniently do none of these bodies tell him to scrap all tax breaks and introduce a property tax?

And the big question, why the blanket bank guarantee and why NAMA?
It’s “them” again, isn’t it. “They” made him do it.

@Michael

The traditional national accounts FDI data is very difficult to interpret, as it contains lots of flows which have nothing to do with the direct ownership understanding of FDI as the term is understood. (I wrote a note about this in the 2004 Forfas Trade & Investment Buleltin) The FDI stats are also dominated by Merger & Acquisition flows, which change the ownership of a firm, but have little impact on output or employment in the short run.

For these reasons, I prefer to use data on Greenfield investment projects. The data as published by the most credible source of FDI data globally – UNCTAD, last released 2007, shows that in the Northern hemisphere we are the most successful major economy for attracting FDI. We run second to Singapore in a global context. This data is also reproduced by the NCC every year in their competitiveness report. Given that 2007 is when our prices were most out of line with the rest of the world, then our strong showing then says something about the stregth of our other competitive advantages. And yes, I hope momentum matters, as in that case we will be doing just fine!!

The allocation of tax distorts our trade data, but doesn’t change the position. MNCs here employ 150,000 people directly, and spend over 18 billion in the local economy. WHile the trade figures are distorted, this is no tax dodge.

You ask why we have performed so pooly in the Eurozone. We sell 60bn into eurozone, so I am not sure what you mean on this.

@Brian Lucey
I don’t know much about bonds but I would observe that Lenihan has been MoF since May 08. Once he inexplicably guaranteed all the banks debt it was incumbent on him to swiftly correct the public finances. Instead he is, one and a half years after taking office, about to implement his first spending cuts. Before that his strategy was to tax income and consumption while engaging in massive capital spending and rising current spending. Now with NAMA he is about to borrow €54Bn more pointlessly.

I don’t think he is being ordered around by the Dof, ECB, EC or anyone else. They would have been a lot more sensible. He and he alone is responsible for our woeful economic decision-making. That the Dof are useless too is not decisive.

@ Bond. Eoin Bond

No not new. But any significant external event could widen the spread.

How much are the subs on BoI & AIB?

@JL
No, my post is not like a bikini, but NAMA is. Everyone is staring at it, wondering what holds it up, hoping/knowing it will, sooner or later, fall.

@ All

Government to convert Preference Shares to Ordinaries.

Looses Pref Divi.

Stated policy of, at least, Bank of Ireland is that no Ord Divis will be paid for some time.

Working out well for the two Brians then.

Current share price of Bank Of Ireland = €1.61
Shares in Issue = 1,004,216,989
Market Value = €1,616,789,352

Cost of Preference Shares NPRF = €3,500,000.

Any reason why this bank should not be nationalised?

Current share price of AIB = €1.57
Shares in Issue = 882,755,456
Market Value = €1,385,926,066

Cost of Preference Shares NPRF = €3,500,000.

Any reason why this bank should not be nationalised?

Not directly on topic but we seem to have wandered into a discussion of the Banks.

What do people think will happen from a competition perspective if all the Irish banks are nationalised, assuming the foreign banks continue to make a beeline for the exit?

Are there any historic precedents for this? (other than Iceland which is probably too recent to draw any conclusions from)

@ Concubhar O’Caolai

Very difficult to ensure competition.

Aer Lingus monopoly comes to mind. Though worse.

Negotiations must begin with the bondholders.

They should be cleaned up and sold on.

Question.

Would the conversion of the Preference Shares to Ordinaries mean that (as the ordinaries carry market risk) the investment of €3.5bn by 2 would have to go to GGD?

@Greg
The point of NAMA:
NAMA stops the bondholders from getting medieval with the developers and will leave the shareholders with something. For a property industry with a country the former was a vital governmental interest. I still expect BOI shareholders will be rewarded for their cooperative approach and less reckless bank. Still no word on Anglo shareholders compensation. Why?
NAMA also saves the Irish civil service from embarrassment and that is surely worth €40 Bn from the rest of us?

@ Concubhar O’Caolai
“What do people think will happen from a competition perspective if all the Irish banks are nationalised, assuming the foreign banks continue to make a beeline for the exit?”

Appoint a board of huge experience and unimpeachable integrity and give them complete statutory independence. Let them appoint CEOs and management teams of same calibre. It was strange that many supporters of NAMA were so opposed to nationalisation. It will be the same government in both cases and full nationalisation would have been much easier to safeguard.

@ Greh

You wrote “An impression I have (not being an economist) is that if the public sector, although not externally traded, does not improve its productivity it can only maintain its absolute share of output by cannibalising the productivity gains in the non-public sector.”

Regarding the public sector not being externally traded, let me give you this example;
Green Energy is going to be a very big business, because agreements at Copenhagen will make it very costly for countries that don’t measure up to agreed emission limits.

This is a huge opportunity for Irish business and also for our farmers, as there are a number of technologies internationally about to come out of the laboratory over the next 24 to 36 months which will revolutionise the industry. But Irish entrepreneurs are being prevented from participating in this dynamic new industry because of the actions of the ESB.

No matter which sector of renewable energy you are in, wind, hydro or biofuels, the economics of it is controlled by 3 things;

You must get a connection agreement to feed into the grid from the ESB
You must get a Power Purchase Agreement (PPA), from the ESB
You must get a Feed-In-Tariff (FIT) rate, from the ESB

The Feed-In-Tariff rate for electricity generated from renewable sources must be set at a level that guarantees profitability, and reflects the costs associated with electricity production from that source.
The price-per-unit rate should be guaranteed for a specific period of time after qualifying producers have connected to the grid. This ensures the profitability of production, and the security of investment for producers, manufacturers, investors and suppliers.

A 2009 Irish Farmers Association (IFA) policy document entitled ‘Renewable Electricity – On-farm-micro-generation’ stated; “A targeted Renewable Energy Feed-in Tariff (REFIT) must be introduced for micro energy of 22c per kWh, to allow for an acceptable return on investment in micro-generation.”

The ESB offers 9 cents per kWh. and a 5 year contract, making it economically unviable for the private entrepreneur.

Turkey offers its solar entrepreneurs .28c kWh and a 20 year contract.

The UK FIT rate is .30c kWh.

Germany, France and Holland’s FIT rate is .40c per kWh.

The renewables industry as a whole in Germany had a turnover of €21.6 billion in 2006, up from €16.4 billion in 2005, and employed about 214,000 people – more than the nuclear and the hard and brown coal industries combined.
It is expected that by 2020 the renewable energy industry will employ 500,000 people.

The German FIT has been a huge success – and is generally regarded as the best example of an effective FIT law. The first real Feed-In Law in Germany was the Stromeinspeisungsgesetz (StrEG) introduced in 1990, otherwise known as the Electricity Feed-In-Law.
This took the form of a simple one-page bill for assisting producers of electricity from small hydro stations and wind energy installations and it also required utilities to connect renewable energy generators to the grid, and to buy the electricity produced at a rate of 65-90% of the average tariff charged per unit to end-users.

Compare that to the situation which exists in Ireland, where the ESB give a dismal fraction of the German FIT rate and in so doing they keep the industry down. It can’t grow like it has in Germany because the ESB will not allow Irish entrepreneurs have the same opportunities as their German counterparts enjoy.

This is wrong, because it stifles entrepreneurship by concentrating control of the industry in the hands of the ESB, who don’t want competition. This is just like Aer Lingus in the old days.
The actions of the ESB are preventing the emergence of new Ryanair’s in the Irish Green Energy field. That is bad for Ireland.

A correct FIT rate would reduce CO2 emissions, create jobs, secure energy supplies and drive technological innovation. But none of this is happening because the ESB is both producer and regulator.

The Irish Wind Energy Association (IWEA) expressed concern at its autumn conference recently that many of its members were waiting 10 years for connection agreements, because the first planning had run out after 5 years and they had to reapply all over again.
IWEA chief executive Michael Walsh said; “the capital investments required are very large and infrastructure delays lag way behind market demand.”

Four weeks after the IWEA went public with this situation, the ESB announced that they had got a €300 million loan to invest in WIND ENERGY.
This is totally wrong and our government is doing nothing about it because the ESB is controlled by the public sector unions.

That low-cost finance of €300 million should be going to our entrepreneurs. But it’s not because they have no need for it as the ESB only make grid connection agreements available to certain parties and the same situation exists with Power Purchase Agreements.
They also enforce their dominant control of the industry with dismal FIT rates.

Now Greg I ask you, do you still believe the public sector is not externally traded?
Not only is it ‘externally traded’ but it also exercises total control of the industry and denies our entrepreneurs a level playing field by production and regulatory control.

This is totally wrong and the fact that it is allowed to happen makes a total mockery of our Taoiseach’s oft repeated mantra that he is committed to building a ‘smart economy,’ there is nothing ‘smart’ about what is happening in the energy sector, the very industry which could help us to get back on our feet.

http://www.timesonline.co.uk/tol/news/world/ireland/article6907745.ece

@Simpleton,

NAMA might be a bikini but what it covers is not a supermodel. In truth its probably closer to the “Crying Game”. We better hope the support stays in place.

-Like Labour under Brown, idiot leaders mistook a bubble for their own skill. But the consequences in EMU are more dreadful. Austerity may prove self-defeating, without the cure of devaluation. Greece risks grinding deeper into slump.-Evans-Pritchard. The Irish are doing austerity better than the Greeks. The collapse will be longer and deeper too.

Sovereign debt is clearly the new bubble, that has bailed out bank debt where most governments had to “guarantee” on the basis that not to do so would trigger defaults that would extend internationally.

The degree of international co-ordination of economic stimuli has been impressive but then this was all expected, for the last 10 years. While saying one thing to media and “markets”, financial players have been expecting this deterioration and have had time to game, in the sense of model, solutions. For obvious reasons this has been kept quiet. Fiat currencies can expand greatly. But if another more genuine currency or asset comes along, then an agreement to mutually expand can fail.

Therefore the gold hysterics may be correct and that for the last 25 years the price was helped. Down. But the old power structures internationally do not extend to the BRIC (and smaller countries) very well and there is much nervousness that sooner or later a new consensus will jettison the old. At the moment the old still import more than the new consume and it is still in the objective interest of the new to adhere to the consensus. MNCs and shadow banks challenge nations, but nations still can close down the others. China’s decision on honouring derivatives that were clearly misdescribed on sale is one crack in this edifice. Not being able to find finance for the continuing waves of shocks, eg commercial properties offices malls etc, will certainly cause problems for existing lenders who, by definition, are from rich areas. This finance has to be found by shoddy accounting principles and also by arresting falls in asset values. Short sales to connected parties have been tried but will not be effective forever.

So everyone is waiting for the accumulation of straws to kill the dromedary. Banks are being guaranteed by sates. But not the custiomers of banks where the customer has non systemic assets as in Dubai. These were indeed a vanity project. The loss of value there will not affect many asset values: uniqueness can be dangerous. Hence we have NAMA. And the massive increase in Irish debt. It is what Iceland was not. If it is accepted by the markets, still playing with OPM, then it can be used in the case of other countries banking systems.

If not, then we have problem in Ireland. We will have been seen to have swallowed too much debt. That depends on our earning capacity as to whether we can repay. That will take time. So we have bought some time for a recovery to set in. As we took from the rich and we have “repaid”, they owe us for that and the chance to see if a Japan style debt can be accepted in a two year period, when Japan has slowly raised the heat in the pan over twenty years.

If it works, the world will soon be awash in sovereign debt! Asset prices may be “volatile” as a result, but with all the huge financial fiat power, operating together, wide divergences that might threateb the system can be squeezed out. A delicate process but only if you neglect the iron fist in that velvet glove. The crazy war on terror can be used to crush any bank that does not play ball. A money laundering charge can be laid against most. By the time the dust settles the matter will be moot. Countries can be squeezed too, as the economic hitman has made clear.

The new carbon trading uindustry and global tax system will also help to keep countries in line. Once the conspirators swap what can destroy one another they are bound together and will hang together. The Hadley emails show the nature of the AGW movement.

Will the OPM continue to increase? Only if banks keep putting money as credit into circulation. Not for productive purposes, alone, but for the purpose of keeping a ponzi scheme afloat. It will squeeze out much lending for production. Crushing countries by quashing spending is not going to generate increasing circulation. But the natural level applicable to the new economy in Ireland has to be reached somehow. I see a two level world existing for some time as the consensus struggles to transfer all banking debts to sovereign lenders of last resort.

How this differs from natural capital where credit is created to balance work done is an academic question.

Next sovereign default? Austria?

Greek bond spread is again tightening much faster than the Irish bond spread and they are very close again.

Greece tightened another 15bps today to 167bps, while the Irish spread has tightened by 2bps to 165bps.

Looks like the market is reviewing its decision to push out Greece far more than Ireland following the Dubai crisis.
Pretty much neck and neck again in terms of riskiness.

You ask why we have performed so pooly in the Eurozone. We sell 60bn into eurozone, so I am not sure what you mean on this.
That point related to locally-owned firms.

On greenfield investment, I did write last year that UNCTAD data shows that greenfield investments have been falling for several years.

Greenfield FDI projects in Ireland fell 22% to 114 in 2007, following a decline of 25% in 2006 to 146. Greenfield projects in Romania rose from 116 in 2003 to 366 in 2007 while in the same period, the number of Polish projects rose from 154 to 333.

I haven’t time to revisit this data now.

Almost half of the foreign companies based in Ireland said in a 2008 survey, that they would not choose Ireland again if they were to decide now on where to locate their existing businesses, according to a survey commissioned by IDA Ireland.

There have been a number of international surveys in recent years where Ireland has dropped down the preference ranking of international executives.

We are better at self-promotion than self-analysis and caution is merited.

@Michael

The 2008 figures are the basis of a release I did:
http://www.nationalirishbank.ie/en-ie/About-National-Irish-Bank/Press/Press-releases/2009/Pages/Press-release20090224.aspx

You can also read a similar anlysis at: http://www.accountingnet.ie/recession_resources/FDI_Jobs_in_Ireland_rises_56_however_European_inward_investment_stalls_as_recession_looms.php

You misquote that survey. They said they would not choose Ireland is they had to decide now on where to locate their original businesses. So, for example, many computer MNCs originally set up in Ireland as manufacturing bases, but now conduct service operations from here. Would they choose Ireland now for their manufacturing bases? No, of course not.

I don’t think we are good at self-analysis at all when it comes to our exporting potential, and most of the data in this area barely gets a mention.

I am beginning to suspect that the virus that infects politics.ie has spread here…individuals posting under multiple identities

@ jl

“I am beginning to suspect that the virus that infects politics.ie has spread here…individuals posting under multiple identities”

we want names dammit…! 😮

The site owners have the posters url address. They can of course use a cafe etc.

I prefer reasoned arguments to identities. The shills arguments never impressed and the more they post them the more opportunity arises to knock them down.

Just as shills trawl the web, false results are placed into the MSM. The web is still superior. As is this site!

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