Year: 2010

May Exchequer Returns

The exchequer returns for May are in. Here‘s a (new?) webpage with all the Exchequer statements for the year. I’ve heard the report described as good news because it means revenues are only 1.2% below target. That said, these revenues are 10.4% down on the same time last year. Also, revenues were only 0.1% below target at the end of April. Let’s hope we don’t have too many more months of this kind of good news.

May Unemployment up to 13.7%

This is disappointing news. The latest Live Register-based measure of the standardised unemployment rate is up to 13.7% having stayed flat at 13.4% over the previous few months. What worries me about these figures is that the Live Register may be underestimating the true trend. The last QNHS figures, for the fourth quarter of last year, showed a jump in unemployment even though the Live Register figures for that period had been flat.

Honohan Interview with Bloomberg

There were some media stories over the past few days with selected quotes from an interview Patrick Honohan gave to Bloomberg. Dara Doyle from Bloomberg kindly sent me the full text of the interview and since it doesn’t seem to be elsewhere (or at least anywhere I could find) and contains a lot of interesting material, I’m posting it below the fold.

Continue reading “Honohan Interview with Bloomberg”

European Commission Extends ELG Scheme

Today the European Commission announced that they are allowing the government’s new guarantee scheme, the Eligible Liability Guarantee, to be extended from including securities issued before June 1 (i.e. tomorrow) to securities issued up to the end of June.

Now the fact that the Commission had only allowed the scheme to cover bonds issued before June 1 seems pretty clear from this press release announcing its original approval on November 20 last year. It says “The instruments guaranteed under the scheme may be issued from 1 December 2009 until 1 June 2010.”

I have to admit that until now I had thought the ELG scheme covered securities issued up to the end of September. For instance, here’s the Department of Finance’s press release welcoming the November 20 decision from the Commission. It describes the new guarantee as follows: “It will apply to certain liabilities (including deposits) incurred by participating institutions during the period up to 29 September 2010.”

And here’s an FAQ about the scheme issued after it came into operation in December. It also mentions 29 September 2010 as the date up to which securities could be issued and covered by the scheme. On the face of it, this seems at odds with the European Commission’s statement about the scheme. It is possible that this statement from the FAQ reconciles the apparent contradiction:

The ELG Scheme is therefore scheduled for review by the European Commission in June 2010 and the references to 29 September 2010 below must therefore be read in that context.

But strictly speaking, this doesn’t seem enough to fully reconcile the two sets of statements. Realistically, it seems to me that the correct interpretation of the scheme was that it applied to debt issued up to June 1, at which point the Commission could assess the scheme and potentially extend it. (Of course, we’re into angels-on-pins legalistic territory here and there may be some complex sense in which government and Commission statements on the scheme were, in fact, consistent.)

In any case, it certainly seems as though September 29 is the government’s preferred end-date for the ELG. In that sense, today’s one month extension may be a disappointment to them. Perhaps there’s another extension coming next month. It will also be interesting to see if any debt securities get issued under the scheme during this month.

€2 Billion More for Anglo

From the Department of Finance:

The Minister for Finance, Mr. Brian Lenihan, TD has confirmed today that an additional €2 billion is being made available to Anglo Irish Bank to support the capital position of the bank. This capital injection is in line with the Minister’s statement to the Dáil on the 30th March 2010, when he pointed out that the bank would need further capital to cover future losses and accomplish the restructuring of the bank and its balance sheet. This capital contribution was also approved by the European Commission last March.

The capital requirement arises out of additional losses resulting from the level of the discount on the first tranche of Anglo’s loans transferred to NAMA and further impairments on the remaining loan book. The Minister has previously provided €4 billion in 2009 and €8.3 billion by way of a Promissory Note to the Bank on the 31st March 2010.

At that time the Minister indicated that additional capital could be of the order of a further €10 billion. The €2 billion announced today is part of that anticipated capital requirement. The amount of further capital that will be required is dependant on a number of factors including the discount applicable to future tranches of assets transferred to NAMA and further losses on the bank’s non-NAMA loan book

The capital support is being provided by the State in the form of a promissory note, payable over a number of years into the future. In essence this means the amount will be paid over a period of 10 to 15 years, thereby reducing the impact on the Exchequer this year and stretching the payments into the future.

Anglo’s restructuring plan is being submitted to the European Commission today. Discussions between the Commission, the Department and the Bank on the restructuring plan will continue and the future of the bank will be determined by those discussions. As the Minister stated last March the overriding objective of the Government is to minimise the cost to the taxpayer of the restructuring of Anglo Irish Bank.

In relation to the wonder of promissory notes (about which I’ll bet you’ll be reading in the business section of your newspapers tomorrow) I’m pretty sure this stuff about minimising impact on the Exchequer won’t fit in with the Eurostat people’s worldview. Most likely, this and any other promissory notes issued to Anglo, INBS or EBS will count towards this year’s General Government deficit.

This stuff suggests though that the NTMA, lacking the Department’s gift for PR, have been missing a few tricks in relation to promoting their activities. I suggest the following as a press release the next time they issue a ten-year bond:

The NTMA has today issued a new bond. To reduce the impact on the Exchequer, the state will only have to pay out about 5% of the face value of this bond over each of the next few years and the rest of the payment is stretched out way into the future. In fact, apart from that little interest payment, we don’t have to pay a cent back until 2020. We are exploring the idea of further helping the Exchequer by issuing lots more of these wonderful bonds.

Beyond the promissory note silliness, what else can you say at this point? Will the usual suspects be along tomorrow to explain to us how, in fact, there is no connection between the banking and budgetary crises, or have even the most hardcore loyalists thrown in the towel on that particular denial of reality?