Michael Noonan in the FT

Michael Noonan has an article in the FT. There’s no mention of bondholders or new ECB facilities. We do get this, however:

We will, of course, repay our debts but we must ensure that the debt is sustainable and not such a burden that it could cripple the economy for generations.

The EU has helped make Ireland the business-friendly, entrepreneurial country it is today and the solidarity shown recently through liquidity support from the Eurosystem, the ECB and through the Europe Financial Stability Mechanism, the European Financial Stability Facility and bilateral loans is greatly appreciated. It is in everyone’s interest that this support be repaid by the banks and we can ensure that that happens by pursuing policies that foster growth and boost market confidence.

Message: Ireland Europe and don’t worry about all that money we owe ye.

29 thoughts on “Michael Noonan in the FT”

  1. If my memory is not deceiving me Michael Noonan said in the last week or so that the debt burden is unsustainable . As Colm McCarthy said on another thread, not one iota has changed regarding our debt.

    So what changed his stance?

    It is in everyone’s interest that this support be repaid by the banks…

    ???????

  2. The debt burden is a consequence of deflated real estate prices that were ponzied up by the oligarchs and their stooges in government and the banks. It was a very, very expensive I’ll do your wash if you do mine. And, it is not coming back and the debt cannot be paid. Their are two choices, default or clawbacks. Remember, somebody sold the junk and got real money. It is that simple. An “abundance” of great Celtic Tiger jobs did not create the bubble. That is a lie. And, consequently, growing out of the debt is a cruel joke only surpassed in its meanness by borrowing your way out of debt.

  3. I’m very disappointed. By not even threatening to burn senior bondholders they have totally undermined their bargaining position.

    Why take it off the table before a final agreement has been reached with the EU/ECB?

  4. @ Karl

    how’d you get one of those heart thingys there??? You know thats going to be a regular sight on these pages now…

    As regularly predicted, Axel Webers most recent musings aside, senior debt is not an issue that the ECB is willing to even consider at this juncture. Though, that said, i still think there’s an outside (20%) shot at the Anglo/IRNW seniors.

  5. Noonan on Mornign Ireland

    ‘They voted for change and they are getting change.’

    Not much out of 75 Billion !

    Noonan morphs into Lenihan.

    No burden sharing until 2013 (when the Germans and French banks need to spread a bit around? Or will Ireland have tidied up their balance sheets by then?).

    It will be interesting to see how the spreads move when this news is properly digested and gamed out.

  6. Noonan has decided to bankrupt the state.

    Bankrupt it to pay for banks the country isn’t using and doesn’t need. Bankrupt it to bailout reckless speculators and investors. Bankrupt it to appease an angry market god. Bankrupt it to prove loyalty to a European banking-plutocracy formerly known as the EU.

    It’s all in vain. The state is bankrupt and will default anyway, and the wrath of all will be inevitably incurred no matter if we break or promises or not. But less evil will be done in the breaking.

    The state should default, on sovereign and banking debt. On everything. Bank bondholders, state loans, the ECB, and yes even the ordinary Irish bank depositors; all can and must take substantial hits, 40%, 50%, 60% haircuts.

    The Minister, the civil service, and the commentariat has declined to contemplate such options. But their ignorance, lack of intelligence, and above all lack of action has condemned the state. I am frustrated by the simple stupidity of those running this country into the ground. They appear literally unable to conceive of anything other than they know, so its been no surprise to hear the word “inconceivable” come out of their mouths so many times, even as events manifest themselves. How can these people be expected to make such important decisions?

    Default! Let the banks fail. Let them go, depositors and all. The country and its people will still be here in he morning if you do. If you don’t, at the rate things are going, we’ll see an exodus of Irish people on par with the Famine—500,000 leaving over 5 years is not inconceivable—and the ruination of the country for tens of decades. Meanwhile, the unemployment rate in Iceland is half that of Ireland and Argentina recovered from its default within a few years. I’ll take that bet.

  7. Why can’t we freeze all banck accounts of those that sold property in the period 2002-2008, reference price houses to normal inflation as in where they would be today (including land bought from farmers) and put CAB in place to repatriate the ‘excess’ earnings by sellers and recapitilise the banks with this?

    Yes it is unfair, yes it is going to wreck our reputation as a capitilist Las Vegas, but how is that any different from the effect of a default?

    I regret to inform you that this country is now in a state of war with the markets, as a consequence economic casualties are inevitable, its us or them (those that sold real estate)

  8. The stress tests are a joke as they concentrated on the banks not the elephant in the room, the question of whether the sovereign can repay those loans.

    How is the sovereign going to a:-) pay back the loans b:-) grow the economy of a grand national donkey with an elephant on its back c:-) exactly how is it going to Sheriff of Nottingham squeeze taxpayers and destroy their pubic social welfare services to achieve the above?

    http://seekingalpha.com/article/261220-why-japan-can-easily-afford-to-rebuild

    “The Japanese people have strong community values, however, and they are not likely to submit quietly to domination by foreigners. They generally like their government, because they feel it is serving their interests. Hopefully the Japanese government will have the foresight and the fortitude to hang onto its colossal publicly-owned bank and use it to leverage its people’s savings into the credit needed to rebuild its ravaged infrastructure, avoiding a crippling debt to foreign interests.”

    http://motherjones.com/mojo/2009/03/how-nation%E2%80%99s-only-state-owned-bank-became-envy-wall-street

    AIB and BOI are now offshore puppet banks controlled by the ECB. Where’s the total package involving burden sharing, debt rection, interest repayment reduction?

    A good result would have been burden sharing, debt writedown, debt for equity swap including closure of Irish banks and setting up of newly capitalised Irish banks, banks run along BND lines above

    Goodbye Republic, welcome home to our headless chicken Charge of the Light Brigade gombeen assault on ECB on behalf of Irish citizens and taxpayers………

    Noonan in the FT, better of reading Desperate Dan in The Dandy:)

  9. folks, there is a very simple way to stop all this. Simply pull your savings out of the Irish banks and leave them to it.

  10. Nouriel Roubini on bloomberg wires:

    By Scott Hamilton and Maryam Nemazee
    April 1 (Bloomberg) — Nouriel Roubini, the New York
    University economics professor who predicted the financial
    crisis, said the Irish government’s rescue package aimed at
    saving its banks risks deepening the country’s debt crisis.
    “Taking all of the losses of the banking system and
    putting them on the balance sheet of the government doesn’t make
    sense,” Roubini, co-founder of Roubini Global Economics LLC,
    said today in an interview from Cernobbio, Italy, with Maryam
    Nemazee on Bloomberg Television’s “The Pulse”. “Eventually,
    the back of the government will be broken.”
    Ireland is trying to convince investors at home and abroad
    that it’s finally plugged all the holes in the banking system,
    whose collapse crippled what was once Europe’s most dynamic
    economy. The Irish central bank instructed four lenders
    yesterday to raise 24 billion euros ($34 billion) and announced
    plans to merge two of them, taking the bill to clean up Europe’s
    worst banking crisis to as much as 100 billion euros. That
    equates to about two-thirds the size of the Irish economy.
    Roubini said that a better solution would be to take the
    senior secured and unsecured debt of the banks “reduce it,
    convert it into equity so you recapitalize the banks that way
    and you’re not adding further losses to the balance sheet of the
    government. Otherwise, you’re going to have not only a banking
    crisis, but also a sovereign debt crisis.”
    “At some point, we need to recognize that these are not
    liquidity problems of government or banks, but solvency issues,
    and where there are solvency issues, all the market-orientated
    but coercive restructurings of public and private financial debt
    is necessary to avoid this insolvency,” he said.

    Nuf said – the guru has spoken.

  11. The Grand Old Duke of York has predictably returned from meeting powerful European leaders waiving a piece of paper – not a white flag – proclaiming there will be credit in our time.

    Oh so predictably, those worms did nothing, they couldn’t and the other players knew that. They have unsustainable and undeliverable “commitments” to keep up the pretence they can meet.

    Big yawn. Can kicked.

  12. @ Rich

    You have put your finger on the problem. One Irishman’s debt is another Irishman’s gain. Our overseas creditors know this and have no intention of becoming the meat in the sandwich.

    By the way, some effort in the direction that you suggest is being made by the increase in deposit interest retention tax.

  13. Noonan also has an article in Frankfurter Allgemeine Zeitung saying the time for ‘half measures’ has passed.

    However, I used Google Translate to read to full article and there are a few dodgy translations, including this one from the first paragraph:

    “The results of stress tests by the Irish Central Bank have been published on Thursday show that we can not afford half the stuff anymore.”
    http://tinyurl.com/5wf4r54

    On second thoughts, maybe this closer to the truth.

  14. @ Rich

    “Why can’t we freeze all banck accounts of those that sold property in the period 2002-2008”

    Eh. Becuase it would have no basis in law.

    And. The serious money has left the country.

  15. http://ftalphaville.ft.com/blog/2011/04/01/534191/bank-of-ireland-it-lives/

    “If BoI’s loan loss estimates prove to be more accurate than the ones used in the stress test then it could have significant excess capital and therefore an investment case, says Dublin-based broker Davy:
    BKIR’s own stress scenario assumes that losses are €2.2bn lower that Blackrock’s estimates and in a base scenario, the bank’s loan losses are €1.4bn lower. If we receive further detail regarding medium-term funding support from Europe, we believe that private capital and subordinated bondholders will engage with the equity story. If there is significant interest from the subordinated bond-holders (€2.6bn) as well as private sector capital, there is a reasonable chance that government ownership can be kept below 50 per cent.”

  16. As I pointed out elsewhere is it not possible that this €24 billion can be achieved with any recourse to borrowings? How then can this be bringing us closer to default if we’re not borrowing more? To get the €24 billion:

    – €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).

    OK, the final €7.2 billion is borrowed money in the first place. This bank bailout is going to see the destruction of a €25 billion sovereign wealth fund and the elimination of a large portion of our cash reserves but it is not going to create the debt that will push us to default. The bank related debt is currently of the order of €36 billion plus €7 billion from yesterday. That is not going to drown us. The public deficits have a greater likelihood of doing that.

    Wasting the resources we have built up in such a manner does mean we have eliminated much of the cash and debt ratio buffers we had against future shocks (the pensions timebomb anyone?) but we are still a way from being pushed over the edge.

  17. @Greg

    Emergency powers as used against the pharmacists would see to that, and CAB can go outside the state to secure funds. The ECB would need to assist. Illegal is an interesting word, apparently its not a problem raiding my pay check and and my pension and everyone elses to make sure the capitilist/legal complex remains intact (unlike everything else in this country) but ask those with wealth gained through a market abberation and not only is it illegal Im sure it it makes me a communist

  18. @Seafoid
    “then it could have significant excess capital and therefore an investment case..”

    When they sold investors a similar story last year………..yawn

  19. @ Seamus Coffey,

    RE: “- €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).”

    I love the way you conjure €25 bn out of nothing. Surprised you didn’t add in, we could sell ESB and some other utility companies, sell Coillte, sell government property eg Dail Eireann, or the Aras.

    We’re a donkey already in deflation, second up in any breaking of an economy through debt, is asset stripping. The marrow is being sucked out of the Irish economy.

    And it doesn’t end here. It gets worse.

    Because of deflationary pressures the cost of repayments on purely the interest, will increase. This spiral will increase the amount of negative equity and mortgage default. Final nail in the coffin is the damage the bubble caused going forward for mortgage holders who paid up their millions of income * 8 for forty years to feed bank bonuses.

  20. @ Colm

    The €24 billion is not conjured up out of nothing. It is mainly coming from the assets of the State. The point is that we are not borrowing the money. The probabilty of default has to be related to the amount of debt. If the amount of debt is largely unchanged than the probability of default is largely unchanged (some caveats excepted). Explain how any of the following are “nothing”
    – sale of Irish Life
    – haircuts to junior debt
    – funds from the NPRF
    – drawdown of cash balances

    These are not nothing. In three of the cases it is the use of State resources. In one it is the writing down of liabilities. I agree it is wasteful but let’s not over state what it actually is.

    We can afford this bailout. That is not an argument for doing it, it is simply stating the fact that we can do. Those opposed to the measures need to move away from simply saying “we can’t do it” and offer viable, and costed, alternatives. We now know the cost of Plan A. It is horrendous but “manageable”.

  21. @Seamus
    “The €24 billion is not conjured up out of nothing. It is mainly coming from the assets of the State. The point is that we are not borrowing the money. The probabilty of default has to be related to the amount of debt. If the amount of debt is largely unchanged than the probability of default is largely unchanged (some caveats excepted). Explain how any of the following are “nothing”
    – sale of Irish Life
    – haircuts to junior debt
    – funds from the NPRF
    – drawdown of cash balances”

    Yes but isn’t there something incongruous about selling off our state assets to pay back private debt to the Goldman Sachs and equivalents, who are still paying themselves astronomical salaries with US taxpayers money since the AIG bailout.

  22. Loans to Ireland from ECB/IMF/ECB are as follows:

    €64 billion sovereign bailout fund @ up to 5.8% interest.
    €160 billion ECB overnight and CBOI other liquidity @ as little as 1% to the Banks.

    The State own the Banks who are getting loans at 1%; it seems the lower indebted Banks could return to profitability quite quickly.

    However, fiscally the State is being penalised for bailing out the Banks/Bondholders!

    Would it be patriotic and smart to invest in IPOs for Bank of Ireland and
    the Irish Permanent spin-off rather than put money on deposit with the Banks?

    Does anybody follow my logic?

  23. Why be surprised at Noonan ?.

    He is part of the same coalition of FF/FG/Labour that rejected the sovereign will of the people in the Nice and Lisbon treaty referenda.
    The mass immigration that occurred following Nice 2 stoked property development and resulted in German and French banks hosing Ireland with money.
    They said fewer than 2000 east europeans would immigrate here each year but within weeks of the opening of our borders FF ministers were stating high immigration was an economic fundamental (its not) and consequently ratched up policies to encourage house building.
    FG and Labour raised little opposition.

    For Noonan et al to make war against the EU would be to negate their reason for political existence as they see their career advancement closely associated with the big stage of the EU.

    The problem for them (FF/FG/Labour) now becomes an existential one.They are utterly dependent on the EU and the EU effectively governs Ireland now.The flip/flop over defaulting has exposed their true identity which is that nothing seperates FG,FF and labour from each other apart from the depths each is willing to sink to in corruption.

    The political system has seperated itself from the people.They use the power of the state to pusue their interests
    The policies of FF now taken up by FG/Labour are acts of civil war against the Irish people.

  24. @AMcGrath,

    I am not trying to argue the rights or wrongs of the issue. I have no problem in saying that the bailout in inapproproiate and unfair. I am merely trying to determine what is possible and not possible.

    My point is that the current strategy is workable and we can carry the debt burden. It is for others to decide if we should.

  25. Irish Life should be IPOd at an attractive price. Especially if we get one last blast of permagrowth over the next while until peak oil hits.

  26. Just like Obama – change you can believe in … and it’s going into the banks’ pockets!

    People have to make a difference here. The state is their enemy, and they must figure a way of reducing its power.

    On the fire sale of assets, I wonder if the stuff held in the UK will be first to go. That will help their housing market to achieve price discovery.

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