Michael Noonan in the FT

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.

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?

I came across this via the FT site

Foreclosures, House Prices, and the Real Economy

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1722195

http://ftalphaville.ft.com/blog/2011/02/14/487981/further-further-reading-67/

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.

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:)

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.

@ 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.

@ 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.

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.

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

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

@ 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”.

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?

@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.

@Mr. Bond

Everyone ♥ Unicode. http://en.wikipedia.org/wiki/Heart_%28symbol%29#Computer_code should see you right.