Ireland and Spain: Twins?

It is obvious that the banking crises in Ireland and Spain share many similarities.   However, it is also clear that the Spanish banking crisis is quite a bit smaller relative to its GDP (even if it is bigger relative to euro area GDP).

  • The credit boom was not quite as strong in Spain as in Ireland.  The credit/GDP ratio in Ireland rose from 104 percent in 2002 to 210 percent in 2008; the increase in Spain was from 100 percent in 2002 to 188 percent in 2008
  • A recent DB report calculates that real estate loans peaked at 77 percent of GDP in Ireland but only 29 percent of GDP in Spain, while estimated non-performing loans stand at 52 percent of GDP in Ireland but only 17 percent of GDP in Spain
  • Ireland’s Troika funding of 67.5 billion euro is equivalent to 43 percent of Irish GDP, the Spanish funding of 100 billion is equivalent to about 9 percent of Spanish GDP.

71 thoughts on “Ireland and Spain: Twins?”

  1. ‘credit boom was not quite as strong in Spain as in Ireland.’

    Property-price inflation and drops across a smaller range, too, I think.

  2. Spanish unemployment 24%+, Irish unemployment <15%
    Spanish deficit 6.4% with a nasty upward looking trend, Irish deficit 7.5% looking like it’s downward

    Spanish debt:GDP 81% before bank bailout – 91% today
    Irish debt:GDP 80% plus 40% for the bank bailout

    Irish property peak to today – 50%
    Spanish -25%

  3. “Spanish unemployment 24%+” highlights the point that really strikes me: so much discussion of the banks, so little attention paid to the wretched state of the economy.

    Commentators seem to have succumbed to Jamie Dimon Syndrome, the delusion that whatever is good for the banks must be good for society.

  4. Irish unemployment <15%

    …though I’d be interested in seeing the numbers on Fás training & similar schemes, compulsorary after a few months – could be tens of thousands of additional unemployed not reckoned.

  5. They are Twins. Like the film of the same name with Danny DeVito and Arnie Schwartzeneggar. One is a bit smaller, but fatter, than the other.

  6. Spain did not get much of a deal. The contingent liability for banks is clearly now on the Spanish state balance sheet and they could see trouble in the bond market over the next few weeks. A country could face bond market exit below 100% debt ratio if the markets stay this nervous.

    Oh and the Greek election, next Sunday. Plus we are 3-1 down.Happy days.

  7. @Kevin Donoghue

    “Commentators seem to have succumbed to Jamie Dimon Syndrome, the delusion that whatever is good for the banks must be good for society.”

    Yes, Rajoy was using that old ploy earlier today: “Small businesses and families starving for credit will get eventually relief as the funding props up banks and they increase lending.”

    Now where have I heard that one before?

    @Colm McCarthy

    “Plus we are 3-1 down.Happy days.”

    Being a rugby fan, I’m a bit light on the rules of engagement in soccer – perhaps you can enlighten me. Is there some rule in the game that states Ireland must keep giving the ball back straght back to Croatia every time they lose it?

    Or was your reference to being 3-1 down something to do with areas of the economy we aren’t doing too well in compared to others?

  8. Am I right to believe something in the FT a couple of weekends ago that Spanish banks are sitting on €625bn of mortgages that are all largely ‘marked to their original value’ and only being reported that 2.5% of those loans are impaired in any way?

  9. re PR Guy

    There’s been a few comments around that the spanish banks have understated unperforming loans – I’m not sure if its specific residential mortgages.
    There have been a lot of overseas projects mentioned, as was probably the case with lending here (unemphasised around the guarantee – everything was given to the developers and greedy housholders).

    Somebody here mentioned Morgan Stanly, I think, saying that they’d need another 200 billion; but thought they were mischief-making. Maybe not ?

  10. PR Guy: Soccer is more complicated than macroeconomics, which in turn is more complicated than nuclear physics. Stick to the rugby.

  11. Well unlike Ireland it has a residual rump Nuclear industry that could be the “Nucleus”……….. sorry – for a future Industry.

    http://www.iea.org/stats/pdf_graphs/ESTPESPI.pdf

    Unfortunately it shut down its Nuke construction programme in the early 80s with very profound long term consequences.
    en.wikipedia.org/wiki/Lemoniz_Nuclear_Power_Plant

    http://www.youtube.com/watch?v=gnrfBOm6FhQ

    Spain is also isolated from the Northern European Gas pipeline system as is now the most dependent European country on LPG ship imports…. it is perhaps desperatly seeking to prolong the lifetime of its old Nuclear plants so as to maintain some standard of living.

    If they spent just a tiny fraction of housing expenditure on Nuclear at least its gas consumption for electricity would be much reduced now.

    http://www.iea.org/stats/pdf_graphs/ESELEC.pdf

    Its high speed rail investment has also been impressive and has the potential to save the country much kerosene outside the Euro but the system is not quite elegantly designed with stations far outside cities and yet not linked in a ergonomic manner such as in France where old lines are used to connect these new stations with the old city stations.

    fr.wikipedia.org/wiki/Ligne_de_Besançon-Viotte_à_Vesoul

    Still its in better shape then Ireland from a physical economy viewpoint….. but perhaps if we can use the island nature of our country to a advantage it might shelter us from much of these frequent banking wars and social experiments….. however we made ourselfs into the perfect market state frankenstein so perhaps that option is not open to us now as our society has been effectivally destroyed since 1987ish and before.

  12. Twins, no. Big brother, little brother maybe, with Ireland obviously having the bigger problems. I have thought this for a while, what with the boom in Spanish property only a fraction of the magnitude of that in Ireland.

    The problem is, we need the Spanish problem to escalate. Currently it looks as if Spain’s debt and contingent liabilities could be sustainable. Ours clearly are not.

  13. Not twins
    2 bastards – different mothers – same father sowing those wild seeds of credit where they should never have been sown
    Anyhow – would some well paid economist please address the following:
    Can our respective readjustments be achieved in the Euro?
    I think not. Equivalent to telling Daddy he’s been bad and to go f**k off

  14. Rumours that the Troika told Trap that Ireland could only be awarded that penalty in the Croatia match if the deficit were eliminated have been denied by the ECB.

  15. @ C McCarthy

    +1 sad …. The core of the Spanish are possibly in a worse state than us. Their mortgage books are not safe and the regional Caja’s were out of control for a long time. Spanish reluctance for a bailout seems like it was a struggle to prevent the bank/sovereign linkage.

  16. @colm mcc

    You might be right there.

    I have it on good authority that Feynman’s diagrams were derived from a failed attempt to explain the off-side rule to Americans and that that was the real reason they caused so much controversy- and ‘spin’ has almost as important a role in nuclear physics as it does in macro – the difference being it is quantified and facilitates rather than confuses calculations.

  17. Nobody willing to do any hard work in this country.

    Task force please to examine:
    Would Ireland be better off outside the Euro (allowing for strategic default)?

  18. Contracts signed Y2011
    Spain 8.999 Billion (Top Cat forY2011 EIB debt / quasi fiscal debt production anyhow)
    Ireland 0.475 billion (with 235 million for ESB dumb stuff)

    At least some of the Spanish stuff seems rational…. I can’t find too many E cars anyhow.
    http://www.eib.org/projects/pipeline/2010/20100124.htm

    gl.wikipedia.org/wiki/Metro_de_Granada

  19. Compare and contrast…

    1. As detailed elsewhere, Spain’s biggest banks remain relatively robust and are diversified internationally. Ireland’s banks have reverted to being domestic firms, which is not a positive for a trading nation.

    2. Spain’s unemployment rate hit a record 24.6% in Q1 1994 when Ireland’s average rate for the year was 14.7%. In Q1 2012, the rate was 24.4%.

    About 21,000 Spanish began work in Germany in 2011 but relative to population, Irish migration tends to be higher.

    According to the Goethe-Institut, record numbers of people took German courses and examinations in 2011 — better than waiting for the tooth fairy?

    Andalucía had a jobless rate of over 30% in the 1990s and it fell to below 13% in 2006 but is now back above 30%.

    In 2006, Ballina, County Mayo, had the highest unemployment rate among large Irish towns, with 15.8% of its labour force out of ‘work.’ Tralee (14.2%) and Dundalk (13.9%) also had high unemployment at the time of the 2006 census while at the other end of the scale Malahide (4.3%) and Leixlip (4.4%) had the lowest rates.

    The unemployment rate was calculated using the responses to the question on Principal Economic Status in the 2006 Census. The national rate was 8.5%, with urban areas (9.5%) having higher unemployment than rural areas (6.9%).

    The official unemployment rate in the second quarter of 2006 as measured by the Quarterly National Household Survey using the ILO criterion was 4.3%.

    Spain’s unemployment rate fell to 8.2% in early 2007.

    The IMF has said that centralised and industry level pay bargaining dating from the Franco regime, has been a hindrance to promoting employment in poor regions.

    3. In 2001, 32% of the Spanish workforce comprised temporary workers compared with 5% in Ireland.

    Spain and Japan have the worst dual labour systems in the developed world – – it is an insidious development for a developed country where a large group of workers on low pay and few rights live in a society where others with the connivance or the direct protection of a state, are given disproportionate priviliges and protections .

    Irish officials sometimes brag about the ‘flexible’ labour market but what can better illustrate the dual market than well-meaning staff of the Pensions Board flogging PRSAs to low paid workers attending race meetings during the boom while the Minister for Finance (who later retired at 51) had his rep veto proposals for a mandatory system in the private sector?

    In Spain there was a reform in 1997 where existing permanent workers retained their redundancy benefit of 45 days pay for each year of service and the benefit was cut to 33 days for new workers.

    4. The shadow economy in Spain has been estimated at 20% of GDP; Ireland’s level has been put at 14% — a guess of course.

    Spain is home to 18% of the Eurozone’s €500 bills, which are habitually used for unrecorded cash transactions, although the Spanish economy accounts for 12% of the region’s output, according to data from the Bank of Spain and European Central Bank.

    Visa Europe suggests that the same industries either tend to stay out of the shadow economy or are particularly prone to being part of it.

    5. The Economist reported last year that three friends needed three years to set up a bookshop in Madrid. They had to obtain a full house of separate permits, one to sell books, a second to sell coffee and a third to sell wine. The town hall said not to worry and advised them to open while still waiting for the paperwork. But the budding entrepreneurs wondered what they would do if the police turned up.

    The Economist said: Tormented by unemployment, Spain needs new firms like Tipos Infames. Yet in the World Bank’s ranking of how easy it is to start a business the country comes only 133rd, after Kenya.

    Ireland’s equivalent rank was 13.

  20. This does put things in perspective.
    A lot of people who lost their jobs in Ireland returned to their countries of origin leaving vacant residential units in their wake. To make matters worse the unemployed Irish themselves are quick to emigrate, adding to the vacancy rate. While some Spaniards went to Chile and Argentina the vast majority of unemployed Spaniards stayed home. This accounts for the difference in unemployment rates and distressed property volumes.
    Ireland has been through periods in the past where there were many houses without smoke for many years at a time..

  21. Today’s Ft Editorial

    Eurozone buys itself some time
    ©Getty
    Madrid’s role in the financial crisis has the erratic quality of Dr Jekyll and Mr Hyde. It has veered unpredictably between embodying the euro’s greatest threat and pushing the reforms the monetary union badly needs. It is vital that the deal on eurozone financial assistance for Spain’s banks should be a step to a permanent solution and not a redoubling of past mistakes.
    It is good that the agreement activates a new power granted to Europe’s rescue funds last year. Madrid will borrow money not for its main budget but for the Frob, its bank bailout fund. The assistance will be limited to the banking system, without Spain entering a programme subject to the eurozone-International Monetary Fund troika. This reward for genuine commitment to austerity and structural reform will hopefully prevent relations with Europe from becoming as poisoned as in some other countries.
    More

    ON THIS STORY
    Wolfgang Münchau Saving Spain’s banks – and eurozone
    Lex Spain’s bailout
    Q&A Spain’s bailout lite
    Gavyn Davies The consequences of Spain’s rescue
    Alphaville The paid-in Spain
    ON THIS TOPIC
    Lex Eurozone bank union
    Lombard Eurozone bank oversight / G4S / Sainsbury pay
    City safeguards set Britain at odds with EU
    Banks lead gains on European markets
    EDITORIAL
    Drought of ideas
    Removing Assad
    The political limits of central bankers
    Hollande’s first step is a faux pas
    The key dysfunction of the euro, however, is not addressed. Rather than sever the lethal embrace between stressed sovereign debt and weak banking systems, a cash advance to bail out banks with taxpayer funds adds to the burden of Madrid’s public finances. If the state of Spanish banks is much worse than expected, this action could amount to lending the country rope with which to hang itself – repeating the Irish mistake.
    Until this prospect is banished, markets will not regain confidence in Spain, despite the strengths of its corporate sector, its structural reforms and a speedy macroeconomic adjustment. What is needed are bank resolution rules that cap taxpayer exposure. This means writing down shareholders and converting uninsured and unsecured debt into equity when banks cannot raise the capital they need.

  22. Today’s Ft Editorial

    Eurozone buys itself some time
    ©Getty
    Madrid’s role in the financial crisis has the erratic quality of Dr Jekyll and Mr Hyde. It has veered unpredictably between embodying the euro’s greatest threat and pushing the reforms the monetary union badly needs. It is vital that the deal on eurozone financial assistance for Spain’s banks should be a step to a permanent solution and not a redoubling of past mistakes.
    It is good that the agreement activates a new power granted to Europe’s rescue funds last year. Madrid will borrow money not for its main budget but for the Frob, its bank bailout fund. The assistance will be limited to the banking system, without Spain entering a programme subject to the eurozone-International Monetary Fund troika. This reward for genuine commitment to austerity and structural reform will hopefully prevent relations with Europe from becoming as poisoned as in some other countries.
    The key dysfunction of the euro, however, is not addressed. Rather than sever the lethal embrace between stressed sovereign debt and weak banking systems, a cash advance to bail out banks with taxpayer funds adds to the burden of Madrid’s public finances. If the state of Spanish banks is much worse than expected, this action could amount to lending the country rope with which to hang itself – repeating the Irish mistake.
    Until this prospect is banished, markets will not regain confidence in Spain, despite the strengths of its corporate sector, its structural reforms and a speedy macroeconomic adjustment. What is needed are bank resolution rules that cap taxpayer exposure. This means writing down shareholders and converting uninsured and unsecured debt into equity when banks cannot raise the capital they need.

  23. @Colm

    “Spain did not get much of a deal”

    It didn’t have to take 1/3rd IMF funding like Portugal, Ireland and Greece. And IMF funding comes at 5% cf 3-4% for the EFSF.

    And before we say IMF involvement was not appropriate to a pure bank rescue, could we remember the volume of Spanish sovereign debt owned by their banks.

  24. Spain has succeeded in putting its banks inside an EZ funding tent with a ‘contingent’ liability to pick up losses.
    A contingent liability is a very distinct thing from a sovereign bond paying interest and reaping at the appointed time.
    So if Spanish bank are utterly bust, what does the EFSF / ESM do. Send a 7 day notice? Send some divisions into Spain?

    The EFSF is another ‘bank’, regardless of how funded and it is now giving EZ money which may be leveraged to prop up ‘Spain’s banks.

  25. @ All

    As the FT points out, in its usual helpful manner as far as Ireland is concerned, “the key dysfunction of the euro, however, is not addressed. Rather than sever the lethal embrace between stressed sovereign debt and weak banking systems, a cash advance to bail out banks with taxpayer funds adds to the burden of Madrid’s public finances. If the state of Spanish banks is much worse than expected, this action could amount to lending the country rope with which to hang itself – repeating the Irish mistake”.

    What this assessment overlooks is the difficulty in severing the “lethal embrace” in question, the track record of the UK being not much better than that of the EA.

    As to Ireland getting a better deal, is it not time to move on?

    The following extract from the report by Derek Scally in today’s IT alerts readers to the Der Spiegel report to which Ciarán O’Hagan drew attention on another thread and which gives a strong indication of the direction that that move may take.

    “Ahead of a Spanish bailout, Bundesbank president Jens Weidmann has called for “clarity” about whether EU members want to keep responsibility for budgets at national level – “limiting the level of joint liability” – or dare to go the path of a “fiscal union”.

    His remarks come amid reports that European officials, lead by European Council president Herman Van Rompuy, are planning just such a union, with member states no longer allowed decide alone on new borrowing.

    According to Der Spiegel, the plan being drafted in Brussels would allow national finance ministers sole discretion only over income raised through tax takings.

    “Whoever needs more money than they raise themselves, would have to register its requirement with the euro zone finance ministers,” the magazine said, citing official involved in the talks. These applications would be examined and, if approved, debt could be raised in jointly issued eurobonds or mutualised debt notes.

    This financing would be overseen by a full-time official who, in future, could become European finance minister. This body would only be responsible for new borrowing, not existing structural debt, according to the draft, and its work would be overseen by representatives of the national parliaments”.

    This idea is but a reflection of a proposal made months ago by the Luxembourg representative on the Commission, Reding, and dismissed by Merkel at the time, that the AAA rated countries issue collective bonds. It makes a lot of sense as it is the obvious thing for the original Six of the EU to do. That it smacks of realpolitik and two-speed Europe seems to be an objection that Merkel has succeeded in overcoming.

    And France?

  26. @ All

    On the position of France, it looks as if it may come to a showdown between ideology and the hard facts of life. The Socialists will be fully in charge but the country, if not broke, is living way beyond its means. Hollande has reversed some elements of the increase in the retirement age, speaks of increasing the minimum wage and legislation is being proposed which would make it even harder for companies to hire and fire!

    The catalyst in the deal to be struck with Germany may well prove to be the outcome of the row going on in Germany regarding the FTT to which Derek Scally also refers. The ties binding the brothers in arms on the left in the two countries are more window-dressing than content and the governing coalition in Germany knows this.

    http://www.irishtimes.com/newspaper/world/2012/0611/1224317685761.html

  27. Lots of ‘rational’ exuberance around this morning …. (my views on the rational in economicks are well known)

    The spanish hangover will kick in by the weekend … following the trail of Paddy the Builder all banking seniors will be subbies on the folowing monday .. now why didn’t we make ‘not our seniors’ subbies and burn em?

    The Hedgies are salivating with glee …

    DOCM_óg aka JPMcCarthy in the Sindo reckons we should rejoin the commonwealth to solve the debt crisis – one and fourpence and the Pee_h_Dee scroll safely wrapped in one of Biddy’s ol drawers may be reclaimed

    43% of Deutsche GDP is a piddling €1.5 TRILLION … give or take a few schillings … Enda the Silent doesn’t think it worth mentioning … Lucinda doesn’t do trillions … too many of those naughty noughts …

    Hollande will have a parliament to back him

    The SPD/GP coaliton in Germany is in waiting

    The next Irish government will be an official FG/FF coalition – the present FG/FF coalition is merely latently provisional …. If the Labour Party quits now then the next Gov will be a Labour/SF coalition and the present Gov can do the decent and make it official ….

    Spain seeks another €100 billion for its banks ….

    The Financial System wins EURO2012 without having to kick a ball …

    Greece wants another €100 billion write-off by next monday .. or else …

    Terry Mancini hits top of the pops with The Soldiers Song … and a backing track from the Dáil_e_mount Roar ….

    PIGS fly.

  28. @Jagdip

    ‘…. the volume of Spanish sovereign debt owned by their banks.

    70% ???

  29. Isn’t it amazing that we give credence to politicians who say that would seek any improved terms that might be given to Spain.

    Remember July 2011 when Portugal and Ireland received an interest rate reduction on the shirt-tails of Greece?

    Remember Ireland got exactly the same interest rate reduction as Portugal?

    But do you remember the corporate tax concession that Ireland had to give but which Portugal didn’t? We have to “constructively engage in discussions”

    If Ireland couldn’t get equality of treatment last July, what makes us think we might have gotten it with any new Spanish terms?

  30. Well that didn’t last long. Spanish 10yr back at 6.2%. Looks like CMcC
    Called it correctly.
    Btw, I see one of their guys saying they will pay 3% for the money.
    Brian Hayes on radio saying they will pay the same as us.?

  31. Spin…….
    Brian Hayes says Troika will be involved…..is he spinning against the Spanish government? Or is he BSing because we are left holding the baby?

  32. @Eureka

    “Would Ireland be better off outside the Euro”

    Hasn’t George Lee got a programme on RTE tonight covering exactly that subject? It has to be better than watching Ukraine v Uganda or whatever the ‘big match’ is tonight. There’s more excitement in watching Spanish and Italian 10 year rates.

    I see that Irish hopes for Euro 2012 lasted all of 2 minutes and 43 seconds last night. Almost as long as our hopes for getting a better deal on bank debt.

    It’s my birthday!

  33. @ CP

    Spanish loans will be calculated on the exact same basis as the Irish ones. All our new tranches will come at around 3%, but the existing stuff was drawn down when rates were higher, simple as that. If rates jumped back up tomorrow, Spain’s loans will be issued at those higher rates as well.

  34. I really don’t get why people think Germany is a safe haven….. their Industrial policey is a oil centric disaster zone.
    Ok they invested some money into rail during the 90s but nothing compared to their automobile industry.
    Look at the recent EIB German debt production ….. if that is anything to go on then its car research , solar and autobahns…… dead or foolish industries at 50 degree latitude unless they give Moroccans Irish scale credit to buy their Solar thingies and thus enable it to continue its mercantile dreams.

    French and to a lesser extent Spanish Investments seems more rational.

    http://www.eib.org/projects/loans/regions/european-union/index.htm

    People just don’t seem to understand whats happening in France – from a energy perspective Lyon is becoming a walled city.

    http://www.sytral.fr (go to the Projects window)

    With villages 40 Km from the citadel wishing to enter the defensive curtain.(not covered in the above projects)

    Google :
    Nord Isère | Tignieu-Jameyzieu Tram Lyon-Cremieu : le collectif …

    fr.wikipedia.org/wiki/Crémieu

    Also a very long tram train line in the works using a old line (not covered above)
    Google :Nord Isere Tram train Lyon-Trévoux : feu vert en vue d’un lancement en 2017

    fr.wikipedia.org/wiki/Ligne_de_Lyon-Croix-Rousse_à_Trévoux

    Its hard to get your head around the scale of Lyons public transport investments …. but it is also very smart – using the existing infrastructure to the max.

    fr.wikipedia.org/wiki/Trolleybuses_in_Lyon
    fr.wikipedia.org/wiki/Tram-train_de_l’Ouest_lyonnais

  35. The money is being routed through Spains “Fund for Orderly Bank Restructuring (Frob)”.

    Is there any chance that this Fund will require banks to go through a resolution process wiping out shareholders and forcing debt for equity swaps on creditors above a certain size?

    Doesn’t the fact thatt here is a feedback loop between the banks and sovereigns allow you to break the cycle by curing the resolving banks?

    I would re-iterate my previous view that the currentl legal structure provides that National authorities are responsible for bank resolution and resuce for the moment at least. Accordingly, the ECB and its call to protect all creditors must be sidelined in the absence of an EU level solution. Individual states must be encouraged to resolve their banks and enforce losses on bondholders. The rest of the EU must provide individual nations with the financial and political support to embark on such difficult and risky tasks.

    The Spanish bail-out may fit within this prescription if the funds can be used to enforce losses on bondholders rather than making all bondholders whole. As of yet, I am not aware of any guarantee of bank debt. Rather the sovereign is only guaranteeing the moneys out into the restructuring fund. It is how Spain is allowed to use that fund which counts.

  36. The relief rally in Spanish and Italian bonds lasted precisely three hours. Spanish 10-yr is now yielding 6.45, Italian back up over 6.00. Spanish and Italian banks are stuffed with domestic government bonds and would be showing big mark-to-market losses were it not for magic accounting. The Spanish ‘deal’ over the weekend binds the sovereign to the banks, yet again.

    This is just a currency union, with a multilateral currency board masquerading as a central bank. If there is no move to a proper monetary union, quickly, this arrangement is just not sustainable.

    Another missed opportunity.

  37. To expand on my point, there is close to consensus that the irish bank guarantee was a mistake. This begs the what an optimal solution might have looked like.

    My suggestion is that an optimal solution would have involved the state taking control of Anglo, advising people that the bank was in an insolvency/resolutuion process, confirming the state was providing funds to cover deposits up to a certain level (€100,000) but that other creditors would could take debt for equity or such amount as would be available for distribution if the bank were to be wound up immediately (such amounts to be caculated according to a specifiec model/mechanism).

    To deliver this we would have bneeded a credible resolution system and the funds to back up the guarantees to depositors.

  38. @Colm McCarthy

    Yes, we seem to be witnessing a dead bank bounce. I thought it might last until at least later on this afternoon after the US had been open for a while and the cold dawn of realisation seeped in through the cracks in the currency union.

    I have to agree with Zhou above, it will be interesting to see what Spain is allowed to do with the money. My guess is most of it will end up in the hands of bondholders as they form a queue for an orderly exit asap.

  39. I should have said “equity for debt”.

    (Otherwise, I make no apology for my myriad typos in continuance of my doomed crusade for an edit function)

  40. The European Championships are a microcosm of why joined the EU.

    We may have enjoyed a golden age of Civil Servants with Whitaker and others much as we enjoyed a golden age in soccer with Lawrenson, Stapleton, Whelan and Brady.

    Ultimately, however, we know that periodically our best civil servants will be in the nature of Whelan & Andrews who despite their heart and ambition are no match for the Xavis, Iniestas, Alonsos, Modrics, Pirlos and Schweinsteigers of this world.

  41. @ PR Guy
    My birthday yesterday. Definitely felt like dying this morning. Only 11 hours to go!
    Will be good to look at the George Lee programme.
    Why is nobody else tackling this?

  42. the difference zhou is our players in Euro 2012 are doing their best, and their pay and transfer fees are reflective of their abilities ..

  43. @colm mccarthy

    The relief rally in Spanish and Italian bonds lasted precisely three hours. Spanish 10-yr is now yielding 6.45, Italian back up over 6.00. Spanish and Italian banks are stuffed with domestic government bonds and would be showing big mark-to-market losses were it not for magic accounting. The Spanish ‘deal’ over the weekend binds the sovereign to the banks, yet again.

    Sprinting Steve Kinsella already has the topic opened up for business on just how well the policy of kicking the can up the hill has been and the Krugmanator is on it too.

    I have said it for a very long time but the peripheries interests were always best served by the crisis escalating more quickly before Germany could make itself safe.

    I know people here think that that ship has sailed but if we can not swim out to it I think torpedoing it still has to be an option. Even with the No vote did hindering us Ireland can add to the rising tone of public panic and should do so.

    Remember the German establishment is flat out crazy and the ECB are desperate to find a solution for the Euro and not us – the current European policy crusade against the well known left wing basis of reality can not continue.

  44. @Bond Eoin Bond

    Yes – I was way out on Gov% at 70 and way way out on the lenght of the hangover … 3hours! Think I need a tutorial

    @ceterisparibus

    Wee minister of state Hayes is as out of his debth as Lucinda – his piece on Eironewz in praise of the Irish Banking System is a classic worthy of Saddam’s PR Guy ….

    @Shay
    Blind Biddy still has those two submarines that she picked up on a firesale in Greece – german technology and the german banks loaded the dosh to greece to pay for them …. one is presently lurking in the Kiel canal …. not a bother – a few handy ones picked up from Sarkozy’s folly off the back of a camel in the sahel for a song ….

    @colm mccarthy

    I hear you have teamed up with Terry Mancini to take on Jedward …. and to fill the gap in the unfit Irish back 4!

  45. SPAIN 6.5% ITALY 6.1%

    Finland doesn’t want the dosh to go to ‘UNHEALTHY’ BANKS!

    WHAT ABOUT DEAD IRISH BANKS?

  46. @John
    Too much blood loss.
    8.6% decline in oil consumption YoY (March)

    Italy can take more Leeches as it is much less Leveraged then Spain but a decline of 12.2% YoY is quite something.

    But Nobody is asking where this blood / oil / credit is going ?

  47. FITCH DOWNGRADES A RAKE OF SPANISH BANKS JUST NOW

    ibrc board spotted reading cre na cille … Two_of_7 now as confused as Schroddinger’s cat …. pleading for someone to open the box so that he can figure out if he is dead or alive …

  48. It is noteworthy that although the IMF is not providing funds it will be supervising the application of the funds to the banking sector. Hopefully this will be to the exclusion of the ECB. The IMF isn’t such a shrinking violet when it comes to bondholders.

    A downgrade of Spanish Banks on foot of the €100b fund could further suggest that the Spanish banks are in for a rougher ride than our banks got. Of course, it could also just mean that Spanish Sov Bonds and those holding them are being thrashed by the markets. Let’s hope the fomer applies.

  49. @Dork
    Unfortunately it overdosed on propertyitis, 700,000 units per year–distinguished members of the Society of Charteed Surveyors are standing by it’s bedside. The consultants have diagonised the very same disease as the Irish disease. Below is the link to how the overdose happened;

    http://www.independent.ie/opinion/letters/bubble-values-3034584.html
    Professor Neil Crosby’s online response to this Irish Independent letter
    “Bubble values” 29th February 2012

    “The analysis may be simplistic but unfortunately it is not flawed.
    Banks ask valuers to tell them what the market value/exchange price is
    at a point in time and then lend vast amounts over time based on that
    simple number. The surveyor gives them that simple number and do not
    think it is their job to tell the banks that the question they have been
    asked is stupid on its own and what they should have asked for is the
    underlying value. It was obvious in 2005 and 2006 that prices in the
    property market were higher than could be sustained by any rational cash
    flow analysis. But in a culture that rewards individuals for short term
    performance rather than longer term perspective, it was in neither the
    bankers’ nor the valuers’ interests to stop it. I cannot see anything in
    what the UK regulatory authorities have proposed that makes me think
    they understand the role of property valuation in driving asset bubbles
    and will prevent it all happening again sometime in the 2020s.”

    Neil Crosby
    Professor of Real Estate and Planning
    University of Reading

    John Corcoran – Neil Crosby is quite right to point out the critical and corrupting role of valuers and banks in the property bubble. RICS and other property related professionals should hang their heads in shame for not raising the alarm bells and not challenging landowners, banks and homeowners about the outrageous rise in property valuations which had no relationship with reality or ‘underlying value’. Their role is similar to that of ratings agencies which were paid to sign off triple A ratings by their clients for junk.financial instruments most of which related to property assets..Sadly it does not require a university professor to point this out.

    Anyone with a modicum of experience in property and development knew we were headed for trouble and I am sure I was not the only person to flag it up. If these so called professionals had been held to account by their so called professional bodies ( as the General Medical Council regulates doctors) half of them would have been struck off. Their primary responsibilty should have been to the reputation of the valuation profession and not their commission. In many countries property is taxed and valuers are independent or are part of the state.

    Radical reform is required or we will surely revisit this crisis again in the near future.

  50. Zhou,

    Seniors are sacrosanct, so sayeth the ECB. Subbies might be toasted a bit. Bank equity will be written down but since Spanish domestic banks are trading below book value this should be no surprise.

    I wish it were different and if it was, I would be clutching my PN in my right hand and a Ronson in my left.

  51. @John
    Oil is capital really – when the oil supply was growing they could waste it on stuff with no productive capacity….. (the only thing with real long term productive capacity is if it has oil / Nat Gas replacement value) – – the economy appeared to grow and indeed it did grow ,although the debt grew faster then the GDP which is a bit of a warning sign really.

    Now there is a shortage of oil / capital the financial centres must crush their hinterland and drive them into surplus so …….

    The European financial centres are now engaging in massive rail based projects – its no coincidence.
    Every time they build another tram , subway , Tram train etc it subtracts from the hinterlands capacity …. less consumption , less house construction etc etc.
    Although in the long term it pushes down the price of oil. ( in theory)

    en.wikipedia.org/wiki/Public_transport_in_Frankfurt_am_Main

    Despite these efforts cities must always be in trade defecit to their hinterland.
    In the past the energy was chiefly in Agricultural goods (food is energy)…….they have bypassed this relationship dramatically now as oil resides outside cities tradional hinterlands.
    When oil was plentiful we were conduits for this oil – Fois Gras dishes …. now they mean to eat us.

  52. “Neil Crosby is quite right to point out the critical and corrupting role of valuers and banks in the property bubble. ”

    The ‘valuation’ process was a farce. A bloke would come out and checked if the house wasn’t about to fall down (sometimes even that didn’t matter much). Then he checked the (aptly named) daft.ie to see what was on the offer in the neighborhood and that was it.

    But this was not the root of the problem. The root of the problem was that the money lost value because there was so much credit around pumped into the Irish banks by all sorts of overseas and domestic investors. This process fed on low interest rates set by ECB and FED. Once there was too much credit sloshing around, the process was always going to be a farce.

  53. “I wish it were different and if it was, I would be clutching my PN in my right hand and a Ronson in my left.”

    There were men like that in the drawing rooms of big houses in 1920. And it is a high risk strategy when the political context is lost.

  54. re- Mickey Hickey:
    ‘A lot of people who lost their jobs in Ireland returned to their countries of origin leaving vacant residential units in their wake. To make matters worse the unemployed Irish themselves are quick to emigrate, adding to the vacancy rate.’

    Only a tiny number of vacant units were as a result of people moving out – most, nearly all, in fact, were new-builds. Many were unfinished.
    Most of the unfinished in Dublin have since been finished – NAMA & local authorities stepped in.
    Ireland was building exponentially to house the new migrants; the construction created enough of a knock-on to ensure there were jobs for most that wanted them, but like a goldrush-town with an exhausted seam, when the building stopped everything else fell apart.
    We don’t need to be xenophobes to admit that the whole thing was predicated on unsustainable immigration – emphasising that the blame lies with the govt. & banks (and the developers).
    The number of homes in the country doubled in a decade.
    There was an overall drop in population for a bit – I imagine it’s levelled off now (ratio of immigration to emigration – though a large number of emigrants will return; Australia are fairly thorough in implementing their rules)

    What’s of more concern is that, had things continued a few years more before the sht. hit the fan, the banks would have put a lot more money out there to lose – there was several hundred thousand acres of land zoned for housing in the last three or four years before the bust – enough for at least a million homes (all worth half a mill, of course).
    Its this type of madness that makes we worry about that fool onDragon’s Den calling for an extra seventy thousand visas ayear (in addition to the current number) for as yet non-existent ‘IT’ jobs . He’s got the Tribune in on it, a website for the lobbying preogramme, etc.

  55. Just to emphasise the only part of that that was actually a proper reply – the vacancy rate had & has virtually nothing to do with emigration.

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