Some of the economic and fiscal implications of today’s announcements are covered in this presentation.
The 2013 peak in public debt is upwardly revised from 103 percent to 111 percent of GDP (€10 billion of the €24 billion is funded from NPRF), in the scenario in which all of the extra capital comes from the State.
19 replies on “Department of Finance Presentation”
‘… the scenario in which all of the extra capital comes from the State’.
The rebels have taken Bandon, and are advancing on Kinsale.
“Lending standards should gradually ease…” – anyone else is worried by that line on page 16
Deposits are “Predominantly stable” next to a downward graph on page 33 😀
No matter how often you see the numbers, it gets ever more disturbing.
never will I vote for a party that contributed my tax money to senior bondholders
reshaping of Irish politics on the way….
Predominantly stable – 252b. in 2008 to 158b in 2010.
and today we see further withdrawals to Feb. of 14.3% for corporates and 6% for private.
and how much left in March?
This would not give you much confidence in the author’s view of reality.
On page 29 it shows the “consensus” forecast of residential property prices with a 5% decline in 2011 and an increase of 2.5% in 2012. Any ideas what the “consensus” represents? Given the 39% decline to end of 2010, it would indicate a peak to trough of 41%.
“Predominantly stable” reminds me somewhat of “with notable rare exceptions”
will some of the 24bn be covered by the sale of irish life?
Consensus sounds like Jack Fagan and Orna Mulcahy of the IT property section.
I need someone to explain this. According to the RTE website’s report of today’s government decision:
‘Bank of Ireland will shed €30 billion of assets by 2013. It will mainly be a domestic bank, but will keep its operations in Northern Ireland and its Post Office business in the UK. Bank of Ireland’s management is to be given until June to raise capital from private sources and reduce the State’s need to invest.
AIB will retain its Northern Ireland business. It will shed €23 billion of assets by 2013. IL&P, which will also be split into a core and non-core business, will shed €10 billion of assets.’
This amounts to 63 billion euro which should save the taxpayer the burden of paying in the 70 billion euro so far. In other words the banks who created this mess are being forced to pay back the government by selling off their prize assets. Richard Curran said tonight on PT that the government can only expect to get back 20 billion euro from the banks. Why the discrepancy?
If by not burning the senior bondholders the ECB is favourably disposed to turning it short term lending to medium term lending this should improve confidence by attracting deposits.
The most important issue in all of this is to save the taxpayer from paying for a problem they had no responsibility in creating.
Anyway, am I missing something?
Why is there any need for additional borrowing after today? The Four-Year Plan may not have accounted for today’s figures but the MoU had a “worst case” scenario contingency of €35 billion included. Anyway looking at the €24 billion I think:
– €1.9 billion will come from the sale and existing assets of Irish Life & Permanent
– €4.9 billion will come from burden sharing with subordinated bond holders (as announced by M Noonan on the Six One News)
– €10 billion will come from the National Pension Reserve Fund (as previously indicated)
– with the final €7.2 billion coming from existing cash reserves (per the MoU).
The DoF may have factored the €7.2 billion for alternative uses in the Four-Year plan but I do not see any significant increase in borrowings from today’s announcements.
Does it make sense to sell Irish Life?
Irish Life is probably the biggest recipient of private Irish savings in the country through pension funds etc. And yet at a time the State / banking system is crying out for funds, it is to be sold, meaning the savings stream will be lost to the now State banking system.
To me this does not make any sense.
With VB on in the background it’s hard to know what makes sense!
While Irish Life is undoubtedly a money spinner we have to conclude that the sale price will approximate the stream of income the business can generate so the two options should be equivalent. We could not use the savings in Irish Life to fund other parts of the State banking system. Ask Sean Quinn how that strategy might work out! All we could get out of Irish Life are the profits and given the position we find ourselves it is probably better to get that up front.
The presentation doesn’t give the growth assumptions on which their debt/GDP projections are based. Can someone remind me what the CB is assuming?
Is the assumption that house prices will move from a -20% change in 2012 to positive territory in 2013 perhaps a little optimistic for a stress test?
re Irish Life.
Suppose new owners of Irish Life are Allianz. What bank will the stream of Irish savings be lodged in. AIB, BOI or Deutsche Bank? And as we know from the Anglo €7 billion, Irish Life tend to have a lot of cash to deposit.
There is theory and then there is the real world.
Selling the profitable part while retaining the loss makers or the risks does not make sense.
The equivalent of a dairy farmer selling his best milch cows while retaining a bull.
I’m not sure if it’s what you have in mind, but page 54, exhibit 3 of the CB report gives these Irish macroeconomic scenarios:
Year: 2010, 2011, 2012, 2013
GDP baseline: -0.2, +0.9, +1.9, +2.5
GDP adverse: -0.2, -1.6, +0.3, +1.4
It is not optimistic – it’s bull**** !