Central Bank Financial Measures Programme Announcement

The Central Bank’s stress test announcements will be available on this webpage at 4.30.  A webcast of the press conference will be available here. The Minister for Finance’s statement is here.

103 replies on “Central Bank Financial Measures Programme Announcement”

As the Total Contingency figure in November 2010 was €35 Billion is it not good news that the figure is €24 Billion based on what we are led to believe are very stringent Stress Tests done by an outside Finance House ?

Is anyone really surprised by any of this? I know Brian Lucey said a long long time ago that it was going to end up in this kind of ball park.

How on earth have BOI escaped full nationalisation?

It all still beggars belief – especially that FF kept hiding the real problem from us and only went up one notch at a time in trying to deal with it. But that’s always been the game in the financial services sector – only ever drip feed bad news.

Lenihan appears to be saying that negative stress test scenarios are responsible for the absence of foreign equity investment in the Irish banks.

Am I hearing that correctly?

I thought Lenihan had exited the stage. Wasn’t JtO putting the lack of investment down to media negativity?

Subordinated debt holders, sale of assets, private investors will all contribute to the cost of restructuring” seems like a roundabout way of saying other creditors are still untouchable.

I feel so sorry for muintir na h Eireann .

Deep in the grounds of a burnt-out hotel,
Among the bathtubs and the washbasins
A thousand mushrooms crowd to a keyhole.
This is the one star in their firmament
Or frames a star within a star.
What should they do there but desire?
So many days beyond the rhododendrons
With the world waltzing in its bowl of cloud,
They have learnt patience and silence
Listening to the rooks querulous in the high wood.

They have been waiting for us in a foetor
Of vegetable sweat since civil war days,
Since the gravel-crunching, interminable departure
of the expropriated mycologist.
He never came back, and light since then
Is a keyhole rusting gently after rain.
Spiders have spun, flies dusted to mildew
And once a day, perhaps, they have heard something —
A trickle of masonry, a shout from the blue
Or a lorry changing gear at the end of the lane.

There have been deaths, the pale flesh flaking
Into the earth that nourished it;
And nightmares, born of these and the grim
Dominion of stale air and rank moisture.
Those nearest the door growing strong —
‘Elbow room! Elbow room!’
The rest, dim in a twilight of crumbling
Utensils and broken flower-pots, groaning
For their deliverance, have been so long
Expectant that there is left only the posture.

A half century, without visitors, in the dark —
Poor preparation for the cracking lock
And creak of hinges. Magi, moonmen,
Powdery prisoners of the old regime,
Web-throated, stalked like triffids, racked by drought
And insomnia, only the ghost of a scream
At the flashbulb firing squad we wake them with
Shows there is life yet in their feverish forms.
Grown beyond nature now, soft food for worms,
They lift frail heads in gravity and good faith.

They are begging us, you see, in their wordless way,
To do something, to speak on their behalf
Or at least not to close the door again.
Lost people of Treblinka and Pompeii!
‘Save us, save us,’ they seem to say,
‘Let the god not abandon us
Who have come so far in darkness and in pain.
We too had our lives to live.
You with your light meter and relaxed itinerary,
Let not our naive labours have been in vain!’

… so Axel Weber’s comment in Berlin today may be taken as a ‘dissenter’ opinion within the upper_echelons of the ECB – dissenters, of course, are welcome within Sinn Fein.

From this morning’s Irish Times:

Mr Noonan will make a “watershed” argument for a EU-wide solution around passing bank losses on to bondholders in response to the tests on Bank of Ireland, AIB, Irish Life and Permanent and EBS building society. Government colleagues last night described it as the first radical policy departure from the previous Fianna Fáil-led government.

Is that not BS? Did I miss something radical?

Lets not forget people that this doesnt account for the capital needs of Anglo/INBS. In May.
So far its clear that its ECB winning not Irish Taxpayers. Time for Plan D? or is it E?

Doherty points out that the first €3.1 billion on the Anglo and INBS promissory notes was paid out on today.

Presumably in a sovereign default situation, the promissory note payments should be the first things to go.

It really would be outrageous at this late stage if senior bondholders were left untouched.

It’s all unconstitutional – opening Irish citizens to “unjust attack” with very doubtful national interest argument.

Kevin O’R
“It really would be outrageous at this late stage if senior bondholders were left untouched.”
And yet….they are. So….what exactly changed when we voted in Feb?

I know it would be highly speculative but does anyone have a feel for what proportion of this €24 bn recap might be considered an ‘investment’, in that it might wash its face? With the remainder going down the Swannee.

As BLTCD has indicated there are still Anglo/INBS holes to be plugged – and we have no idea what contingent liability will be imposed on the state in the context of any extended unwinding of the ECB/ICB liquidity support.

Am I missing something, but if Portugal have had their budget deficit figures revised due to having to include losses at a nationalized bank, does that mean that Anglos 17bn odd loss has to be added to the deficit here? If so, then now what?

@David O’Donnell

… so Axel Weber’s comment in Berlin today may be taken as a ‘dissenter’ opinion

I feel a bit of a fool for being rude about the man now. Sorry Herr Weber.

Has anyone asked the question yet about how many jobs this is going to cost? I wouldn’t want to be an EBS employee right now….. it was all looking so good when the VC’s were poised to take it over and now they’ve got to merge with a bunch of AIB guys who’s only agenda is looking after their own jobs…….

“But who can say how much is endurable, or in what direction men will seek at last to escape from their misfortunes?”

(Keynes, from ‘The Economic Consequences of the Peace)

Faced with our own reparations what should the Irish taxpayer do now?

1. Invade Poland?
2. Leave?

“€72.6 billion in loans to be deleveraged before end of 2013.

Stress tests incorporate losses of €13.2 billion from selling these loans.:”

Does this looks realistic? Vulture funds won’t pay 80 plus percent. Is this the first hole in the strategy.

On first glance, are we agreed that this a fudge?

No ECB deal

No senior bondholder deal

No interest rate deal

Is there a realistic deal on de-leveraging?

ESB merges with AIB, who cares? doesn’t seem to meaningfully effect total losses

BOI not fully nationalised – reduces and perhaps eliminates ability to burn bond holders – bad idea

The chance to burn holders was today, when losses / equity requirement crystallized on the balance sheets.

P9 of the CB report “The Central Bank has, in total, taken 69% of BlackRock lifetime stress losses (after the impact of deleveraging) into the three-year period for the purpose of capital calculation. There is no expectation that capital requirements should be set to cover remote lifetime stress losses
(which may have offsetting income). However the capital buffers that are in place have been designed to provide comfort concerning post 2013 losses in the years immediately following the assessment period, as
an additional layer of conservatism.”

AKA : well, who knows after 2014 sure they might be grand….

Re bondholders and the ‘burning of’ – potentially.
In his press conference Honohan was very explicit in saying that he was aginst any suggestion even of that very idea because of likely knock-on effects – those that can be anticipated and perhaps some ‘unanticipateds’.
That’s that then!

Nice to know that we’re such a very rich country that we can afford to pay them all back.

@Kevin Donoghue

First, you’ll notice that the “radical policy departure” was always going to be fluffy stuff: an “argument for a EU-wide solution around passing bank losses on to bondholders” in place of any action by the Irish government. My hunch would be that this new rhetorical departure was hastily cancelled when the ECB failed to ratify BURPS today. It would have been one thing to rattle the cage after the banks’ funding had been secured; without the secure funding, I think discretion was judged the better part of valour.

Today Ireland has been nailed to a reparations cross. The bondholders get to keep the silver. We have been told that the last money in the kitty, the NPRF €17billion, must be handed over via the banks to High Priest Bondholders.
A day of shame. More for Europe than for Ireland.

@ceterbis paribus

Re the €72.6bn loans sale:

Are these the original book values or the most recent written down values? On the assumption they represent the most recent values who really knows if the additional losses of €13.2bn represents a sufficiently stressed situation but the question is a reasonable one as one would presumably need to know what provisions have already been taken against them to get a handle on the overall write down.

I compared on another thread the situation of the Irish government to the captain of a ship mistaking the light of a lighthouse for another vessel and refusing to give way. The fact that it is a lighthouse, and sitting on a very solid piece of rock, has been discovered just in the nick of time. There is some damage to the lighthouse but MV Hibernia is still afloat.

The idea of a public “deal” with the ECB was simply out of the question from the outset given the independent status of the bank. But that is not to say that understandings cannot exist. It is fairly clear that they do and they boil down to (i) extended liquidity support and (ii) a longer period for the disposal of assets.

When the furore has died down, there will be scope for further discussion in regard to the level of interest rate, for example (to be addressed probably in the context of a Portuguese entry to the EFSF).

I think the chances of a sovreign default in Ireland in the next five years just moved from 80% to about 99% certantity. Unless there was some realistic stratetgy to burn some bondies default is enevitable. It is just a matter of when. Stopping the mortgage payments and putting the cash into shorting ireland seems to be the only realistic strategy for negative equity cubs. There is also that the emerald isle could crash the euro. One quarter of the ECB short and medium term funding is cash against harpic bonds and given the small called up share capital of the ECB is not the ECB itself becoming a bit of an Anglo. Why they don’t print money is beyond me, the Americans have been doing it for years and using it to support their living standards. Its called seniorage, the Romans started it.

@ Brian Lucey,
“Lets not forget people that this doesn’t account for the capital needs of Anglo/INBS”

NAMA? It’s rude to leave them out. Even ignoring post Nov09 property declines, I still don’t know where potential buyers will find credit for Irish assets. (e.g. I’d like to buy a field that had a peak value of 100m for 30m – who is going to lend me 24m?)

On a related note “Appendix E: Sovereign Exposures” is quite interesting.

@ Karl Whelan
“€72.6 billion in loans to be deleveraged before end of 2013. Stress tests incorporate losses of €13.2 billion from selling these loans”

What planet are they living on? If they deleverage at that rate it will lead to losses of at least 30% as investors in Irish fire sales are not going to invest until they are well compensated for getting involved with a bankrupt state. We were told that nationalisation of the entire banking system would be an absolute disaster for the Irish state. It is.

SW banks dump 72 billion and NAMA a further 40 billion

What percentage of the assets sold the banks are secured on Irish assets?

110 Billion in assets – thats quite a few years of pocket money.

@ Christy

2yr seem to have gone out by 3.457%-yielding 9.87%
10 yr also @ 10.223%

Markets may not have had enough time to digest. With no seniors burned policy they should have come in a bit but the opposite seems to have happened. Pricing eventual default/re structering?

My best case: This ain’t over by a long way, deposits continue to flee.

My base case: This ain’t over by a long way, deposits continue to flee and all bondholders will take haircuts.

My worst case: This ain’t over by a long way and bondholders will be defaulted-on.

This is independent of whatever .gov/ECB say to the contrary.
Whichever case, this ain’t over.

@Yields or Bust

Presume they are written down values. But the point is the market knows that the NAMA writedowns were 50% or more and will price in a worst case – maybe even worse than Nevada.

@ David O’Donnell

“Blind Biddy is still polishing her bazookas.”

I’m intrigued. Got link for picture.

On today.

It seems the realists were proved right.

Shame about the lack of testicles on the part of our new Government.

By 2014 all of the bondholders that could have paid the price of mal-investment will have left the building.

Seems to me that an Irish Sovereign default is now inevitable.

As I said over two years ago.

The ECB have been behind this from day one.

Sometimes it’s just worth admiring the scale of it.

The earth is 4.5 billion years old. That means that if from the beginning of time here itself, €5 had been put aside each and every long weary year from before life, through the time of the ancient single-celled creatures of the seas, the almost endless reign of the plants and insects, through the long, long reign of the dinosaurs, past their fall, the slow rise of the mammals and ourselves at last and our wandering development across the earth and city life of only six or seven thousand years, if €5 had been put away each and every year, we still would not have built up what the banks need today. Classy.


I did say “relatively”. There was information about the ECB (supposedly there will be a decision on funding at 8pm today) and about senior debt (they’re still trying to get EU blessing for Anglo/INBS burnings, but have definitively given up on AIB and BoI).


3. Elect a nutter from a small neighbouring country as Leader first.

Surprise, surprise, Noonan states that burden sharing is only possible with the agreement of the ECB and that is not forthcoming & nor will it be.

The mooted ECB term funding will not be forthcoming, deposits and term funding will bleed out of the banking system. De-leveraging at the price levels in the plan will not be possible. The states debt burden will get bigger and bigger until the dam breaks. We are in the end game now.

@ Christy

bond traders dont really trade after 6pm. Especially on a Thursday. Its ‘broker night’.

Overall it was a largely anti-climatic affair:

– losses around estimates
– no big bang nationalistion of BOI
– no senior haircuts
– no announcement on Anglo
– no announcement from the ECB
– no announcement on new legislation to potentially, in theory, hit seniors
– no timeline for capital raise requirements

I reckon no major reaction tomorrow, maybe a small sell off at the open and then some buying by US as a result of some uncertainty being cleared, thats the typical result from big announcements like this.

Couple of interesting things just now from EU/ECB now…


Senior Bondholders 24b, Ireland Nil.
We lose. And I do really hope that we all realise that. We, the irish taxpayer, lose. Bigtime. Most people posting here are long ireland, even the market people. So, they lose.
Good sweet holy ….can we not for once, just once, do the right thing? Just once? In one area…Some bare competence would be nice…

It’s illegal – worth an auld constitutional challenge on the basis of not defending against “unjust attack” – not a lawyer though. Between the lot of us we could get enough funding to challenge all this bologne

@Brian l
I am lucky enough to be earning enough that I can see from my latest payslip that my average (not marginal) rate of tax is going to push 50% this year. This is the rate before I start to pay back my share of the reparations.
Those of us who elect to stay and meekly submit to ever higher taxation will be mocked by our children – who, of course, will be long gone.

Can we do the right thing? The evidence is rather clear. Not a snowballs.


You need a beer with Gary Lineker ( “Football is a simple game; 22 men chase a ball for 90 minutes and at the end, the Germans always win.”)


If Minister Noonan had stood up today, and said “the latest bill facing the taxpayer is 23bn euros. I am not prepared to pay that. I am offering a 5c in the euros to all senior unsecured bondholders and nothing to subbies. However, we must live within our means so I am introducing an emergency budget to eradicate the primary deficit this year.” It would be brave but do you think he would still be in office.

The reality is that most people who advocate an alternative course of action are not prepared to live with the consequences of that action.

Yes similar situation here . Good to have the cash to pay the levels, and happy to do so to assist in the structural deficit but not a chance I will accept the morality of this. Ever.
Even after 46.5 y here (mostly) i still hope(d?) we could do so just once…


If FG do their cuts there will be no growth
If Japan dosn’t get out of it crisis there will be no growth
If the US dosn’t solve its china problem there will be no growth
If the world dosn’t solve it oil problem there will be no growth

Chances of Ireland solving its debt crisis by getting more debts from the EMF with the proviso that we can’t hit the bondholders means that the EMF are in the firing line and Irish default becomes enevitable.

If you have a public sector job there is a 50% chance you will lose it.

Social welfare will be halved/cut to the bone.

Third level fees will be introduced.

Hospitals will close.

And thats for starters because Lenihan cost the country 150 bn and the new crowd havn’t a clue

The lighthouse is also aware that it is not in its interest to have ships (especially Irish) bashing into it in the dark.


For those still arguing for the prosecution cf. an excellent opinion piece in today’s FT.


The analysis is impeccable but the conclusion is wrong because the author fails to pose the question: why are these countries in this situation? Or, rather, he attributes their problems to the euro. How true is this?

The Source is Acknowledged:

31 March 2011 – ECB announces the suspension of the rating threshold for debt instruments of the Irish government
The Governing Council of the European Central Bank (ECB) has decided to suspend the application of the minimum credit rating threshold in the collateral eligibility requirements for the purposes of the Eurosystem’s credit operations in the case of marketable debt instruments issued or guaranteed by the Irish government. The suspension applies to all outstanding and new marketable debt instruments. It will be maintained until further notice.

The Irish government is implementing the economic and financial adjustment programme negotiated with the European Commission, in liaison with the ECB, and the International Monetary Fund. The Governing Council has assessed the programme positively. The suspension announced herewith is based on this positive assessment of the programme, the commitment of the Irish government to fully implement it and the Irish government’s decisions of 31 March 2011 to ensure – following its thorough asset valuation exercise – a capital increase totalling EUR 24 billion (out of which EUR 3 billion in the form of contingent capital), for four Irish banks, and to deleverage and downsize the banking sector.

The Governing Council therefore deems debt instruments issued or guaranteed by the Irish government to fulfil the credit standards required for collateral in Eurosystem credit operations. The relevant risk control measures will be reviewed on a continuous basis.

European Central Bank
Directorate Communications
Press and Information Division
Kaiserstrasse 29, D-60311 Frankfurt am Main
Tel.: +49 69 1344 7455, Fax: +49 69 1344 7404
Internet: http://www.ecb.europa.eu
Reproduction is permitted provided that the source is acknowledged.

@Brian Lucy,

‘I think we should change the national anthem to this http://www.youtube.com/watch?v=iHsx1cvACkY

Perhaps you were the officer of the watch when Ireland hit the iceberg then!

Irish Times
”Tue 06 Jun 2009
TCD professor admits being wrong about housing bubble
PROMINENT TCD academic and financial commentator Brian Lucey has accepted he wrongly forecast three years ago the Irish housing market would continue to grow at a “modest but still significant pace”.

‘According to the IT of Feb 14 2006 a report by Dr. Brian Lucey,a lecturer in finance at Trinity College,Dublin says that mortgage lenders will be able to grow their business activity through high interest loans to people with poor credit records-known as sub prime mortgages-loans for investment properties,100% for first time buyers and equity release loans.’…
‘The report was commissioned by mortgaged servicing company,Homeloan management limited.’

‘Dr. Lucey said concerns there may be a housing bubble would prove unfounded and that there was little risk of a catastrophic fall in house prices.’

As an advocate for players in the ‘boom’ the record should show your contribution to the destruction of our economy and our country.

@ KW

“Lenihan appears to be saying that negative stress test scenarios are responsible for the absence of foreign equity investment in the Irish banks.

Am I hearing that correctly?”

What he is saying is that these are incredibly high capital requirements. No way could normal banking commerce give a market related return on this capital. So even if the market believed the problem was solved, that teh economy would grow etc. the required return on capital just could not be there.

@ All

Noonan described September ’08 as a night in infamy, a sort of Pearl Harbour. But we see the reality today is that senior bondholders of any of the institutions are supported by the EU/ECB. So what exactly would we have done differently if we had merely restricted the guarantee to new loans to AIB/BoI (I presume that even Prof Lucey would have supported that limited form of guarantee)?

@Brian Lucey

Good sweet holy ….can we not for once, just once, do the right thing? Just once?

Absolutely not Brian, as a whole the Irish ruling classes are more afraid of Bini-Smaghi then the adult population of Ireland.

Of course it is rightly so, we (you, I and everyone we know) did nothing to frighten these ruling classes into obedience, we sat and waited meekly to be sacrificed for the betterment of capitalism in the EU. We are doing it now. No one here would risk embarrassment by raising their voice, even less their security, to protest this sickening capitulation. Can’t lose the temper – it is only the well being of the next generation and the shape of society at stake.

It does not help that a fair proportion of the higher civil service, commercial classes and assorted lackeys have somewhat confused loyalties between Ireland and their brethren in Europe as well as a real difficulty distinguishing between civility and servility.

Taking all this into account perhaps it was inevitable that the Irish state would be sacrificed for the current sick and cynical incarnation of the European project if it came to it. The ECB would not agree with anything else.



Is this in anticipation of a pile of downgrades?

Meanwhile, out there in the real world, the deposit flight continues:


@simpleton: I was struck by your ‘invade or emigrate’ line. In fact, and this is *completely off topic*, but you are obviously someone who enjoys his history, there are some historians who have argued that the impossibility of emigrating in the interwar period made invading Poland more likely — if you can’t bring the people to the land, you bring the land to the people, that type of thing.


Which would you rather have:

a) a 50% haircut across the board of outstanding senior unguaranteed bank debt (bearing in mind the significant cross-holdings – see Seamus Coffney’s work on this), or

b) the ECB accepting anything “guaranteed” by the Irish government as collateral, regardless of credit rating (also bearing in mind the inevitability of further downgrades).

Seriously. Which one? I have to believe that that – or something like it – was probably the dichotomy facing Kenny/Noonan.

Now I get the lighthouse analogy.
The lighthouse (ECB) saw the ship (Ireland) heading towards it. So……
The people on the lighthouse loaded the cannon and capsized the ship
That’s it – isn’t it!!!

“The Governing Council therefore deems debt instruments issued or guaranteed by the Irish government to fulfil the credit standards required for collateral in Eurosystem credit operations.”

Trying to figure this out. The stress test has my brain stressed.
A debt instrument issued by the Irish Government (including funny paper) that was unacceptable yesterday (for ECB repo) is acceptable tomorrow because the Irish Government have agreed to pump 24b of borrowings into the banks. How does this enhancement process work?

Bernie got 150 years for a similar scheme.

The scale of ECB support suggests that further cuts in public sector expenditure will occur. The concrete effects of ‘more funding’ for the banks on needs to be teased out in parallel to theoretical analyses. What does it all mean for businesses???

The revenue commissioners seem to have been accelerating exploration of all and every avenue to extract any morsel of tax from sole traders and companies over the past few month – presumably under the delusion that cash is abundant but not visible. I can only conclude that this is part of a ratcheting up of an assault on the private sector. If this is how things will pan out – gouge more from business to keep the banks, welfare, legal aid and the public sector afloat – the country is really sunk. This is a very bad day for SMEs.

“Senior Bondholders 24b, Ireland Nil.”

Yep, I agree with that scoreline.

Today is a day for those of us who said that all this talk of burning bondholders and defaulting was a fantasy, to say “I told you so”.

Ironically, today is a day for Morgan Kelly (uniquely) to say “I told you so” in that he predicted that resi mortgages would be the next financial earthquake.

Today is a day for those proponents of populist isolationist silver bullets, headed by Prof Lucey and David McWilliams and exploited for electoral purposes by FG/LAB, to admit in shame that they called it spectacularly wrong.

So the banks and their investors are to be rescued. Who will rescue the citizens of this country?

It started with ‘we need to get credit flowing’ then it was ‘we need to save Anglo to keep the cost of borrowing down’ Then we were told ‘we need to work with our EU partners to find a solution’, Now Honohan says ‘unilateral action would not be a net gain for Ireland’. What will the next lie be?

We’ll soon be hearing the calls for less regulation as part of the solution. Its truly Orwellian that the ‘solution’ to our problems involves impoverishing the innocent.

@tull mcadoo
You spell it out in a nutshell. I am well aware of the huge mess the country is in. I am sick of the negativity. I have no axe to grind. Some people are making a living out of spewing out negativity.

I have listened to consumers quoting the prophets of doom and decide to cut spending based on this and for no other reason. I have listened to people complain who have taken their money out of Irish banks often based on stupid scare stories. This further exacerbates the banking problem. Wake up Ireland.

The constant negativity in some elements of the media is definitely causing consumer sentiment to nosedive thereby reducing economic activity and tax revenue.
There is no easy way out of this. The EU has Ireland by the throat thanks to the stupidity of your last government. How much is the ECB owed? The country is very much reliant on the ECB. I would love to see the senior bondholders burned but AT THIS JUNCTURE it would be unwise. I think your government has judged correctly on this for the present.

The idea of two strong banks is fundamentally sound. Business is starved of finance. If lending to small businesses can be increased the country has a great future. The government is introducing as jobs budget. Hopefully it can come up with worthwhile ideas to help business.

Ireland must attempt to grow itself out of the crisis and with the right pro business policies it can. Now if the growth is insufficient DEFAULT is then an option not to be ruled out.
Get on with it. Drop the negativity. If you lived in Japan you really would have something to complain about.

@ Eureka

Not quite. The lighthouse cannot move (or, at least, it must give the impression of not being able to). I was also careful to say that MV Hibernia is still very much afloat.

We are at a crossroads in Ireland’s history that presents enormous opportunities. We have a chance to address the structural problems of an economic, political and institutional nature which have put the nation back in the Third Division when we were doing so well in the Second, with imagined possibilities to make it to the First.

The more this develops the more Morgan Kelly stands exalted. The political scenario he outlined in his last public article including increasing ani Europe sentiment cannot be far away.

The government should resign and organise a referendum on the EZ management of the crisis. And they should stop calling themselves Ministers.
It implies they have authority.

Article 40.3
“The State shall, in particular, by its laws protect as best it may from unjust attack and, in the case of injustice done, vindicate the life, person, good name, and property rights of every citizen.”

The guarantees don’t do this – do they?? They expose every person to unjust attack from bondholders.
I’m just a ranter but is there any justification to this argument? Anyone??

ECB announcement appears to be, at the very least, front running any potential downgrades tomorrow (and further out). It takes it away as a worry for those that are using IRISH debt at the ECB window. It also, in tandem, commits the ECB to funding the Irish deleveraging process going out, whether via existing short term facilities, or whether we end up with the suggested medium term facility.

I wonder if anyone has seen a “stress test” of the burn the bond holders scenario. It would seem that any solution has a range of potential outcomes, perhaps not intentionally much of the comment on the “burn the bondholders” is rather black and white, presenting it to the public as a panacea.

It may be the right thing to do but when the stakes are this high I think it is wise to explain the downside risk.

If ECB pulls the plug or we create a run on European banks that triggers a systemic collapse across Europe I am not sure that the fact that we have done the “right” thing will be of cold comfort. These scenarios are unlikely, but then again……..


Trying to figure this out. The stress test has my brain stressed…A debt instrument issued by the Irish Government (including funny paper) that was unacceptable yesterday (for ECB repo) is acceptable tomorrow because the Irish Government have agreed to pump 24b of borrowings into the banks. How does this enhancement process work?

The ECB dog barked for its Masters and the Irish Paddies coughed up another €24billion. The Masters can allow the ECB dog to relax a little and chew the €24 billion bone for a while. The dog has earned its supper.


The statement commits the ECB to funding the deleveraging process, but only subject to the full implementation of the terms of the MoU. As so often happens, the strength of the government is inversely proportional to the size of its Dail majority.

Today was probably the last opportunity to make a bid for the retention of our sovereignty. The government and the MoF blinked. I guess they are being ‘sensible’, according to their lights. So be it.

We are in a ratchet process now, where each successive failure to display intiative leads to a further narrowing of the future options. It seems that debt deflation is to be the fate of the periphery, so that the core (supposedly including Spain) may prosper. The costs of that ‘sensible’ EZ policy have yet to be counted.

We should not lose the opportunity to portray what is happening to us here for what it is – it is a war between the European Elites and the average citizens. The haves are pummelling the havenots into the ground
All Europeans beware. It’s coming to a country near you.
Any average European watching this blog should take note. WHen it comes to your interests vs those of big business you will lose. Europe does not care for its citizens – it thinks nothing of plunging 4 million people 4 decades back economically.
I never thought socialism would become relevant again in my lifetime. Never thought that MayDay would actually mean a MayDay call for the working classes of Europe.


‘I’m just a ranter but is there any justification to this argument? Anyone??'”

I would suggest that in such an argument the key would be “protect as best it may”

@Vinny Byrne

The more this develops the more Morgan Kelly stands exalted. The political scenario he outlined in his last public article including increasing ani Europe sentiment cannot be far away.

What reason do I or any of my family have to be pro -European this evening?
None that I can think of right now.

@ Ceteris Paribus
Thanks for the reply.
There is something in the act of trasforming a difficulty for the banks into a difficulty for all the citizens of the country that must be repugnant to the constitution.
If they pass a law to say that I was now liable for your debts even though I had nothing to do with them that would be unjust and uncostitutional too. Theoretically there is nothing to stop the state randomly assigning the debts of one entity or person onto another if the logic of the bank guarantee is applied.
The “as best as may be” is means that there was no alternative. But there was – not to guarantee the debt in the first place.

From a briefing by Ms. Atkinson of IMF this morning-

I have another question online: What is the IMF’s feeling on the stress tests in Ireland and their utility in restoring confidence?

I am just going to put that off -– we are expecting announcements, as you all know, from Ireland on their stress tests later today so I don’t want to anticipate those announcements now.

QUESTION: Aside from these stress tests, does the IMF still believe that Ireland should restructure unguaranteed bank bonds?

MS. ATKINSON: That is like, have you stopped beating your wife.


Anyone seriously considering a legal challenge to the bank bailout would start by looking at Articles 123-5 of Lisbon.

@ Anonym
So you don’t think there’s a point in it. Was worth thinking about though.
Jeez though. We can’t get ridden like this forever!!

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