The structure of government debt, in particular the promissory notes, is a further challenge. During 2010 some €30.7 billion (20 percent of GDP) in promissory notes were injected into two failed banks—since merged into the Irish Bank Resolution Company (IBRC)—following exceptional loan losses. This capital was needed to ensure the banks were eligible for Eurosystem funding used to cover deposit outflows, and also to repay holders of unguaranteed senior bank bonds as considered appropriate by the ECB due to
concerns about pan-European financial stability. This lack of burden-sharing on senior bank debt as part of the resolution process added to government debt, exacerbating the political difficulties with the annual payments of €3.1 billion due on the notes until 2023. In these circumstances, the authorities settled the payment due at end March 2012 by placing a long-term government bond with a face value of €3.5 billion with IBRC. The underlying set of transactions was complex and it is not expected that future promissory note payments can be financed in this manner. A more durable extension of the debt service schedule on promissory notes, matched by corresponding stability in the Eurosystem funding of IBRC, is needed to ensure the political sustainability of the substantial medium-term fiscal consolidation planned, and to significantly reduce market financing requirements in the medium term and thereby facilitate regaining market access
Did they comment on TD’s using half their pay from the public purse (i.e. money directly from our taxes) to refund the VAT they never declared? I can’t believe they missed that one. Maybe they think it’s ok to do that? I suppose if politicians can buy duckhouses with drawbridges then funding missing VAT repayments is no great leap beyond that.
Much as we like to think that our debt is unsustainable, outsiders do not quite agree with us. The markets are pricing Irish sovereign debt at a level that makes it very difficult for us to return to market financing. But they are not pricing Irish debt for default. (A high probability of default woudl surely attract yields well in excess of 10%).
So what are the markets thinking? Probably exactly what they are saying: “We’re not sure yet if you are going to be forced to default so in the meantime get your money from somewhere else”
“the consultants on mickey mouse money can conveniently split the week between private and pubic work.”
In Thursday’s Irish Times (14 June) a list of tax defaulters was published which included not only M. J. Wallace Ltd. but also a consultant gynaecologist who made a settlement of €1,895,668 with the Revenue Commissioners for “Underclaration of Income Tax”.
MR. BEAUMONT: On the first point, it’s certainly the case that Ireland’s ability to regain market access depends very much on broader financial conditions in the Euro Area, especially in 2013, and so that remains a risk.
In terms of the point about political support and the promissory notes, in fact, everything we write is directed to our Board, so we’re helping our Executive Board understand the domestic situation in Ireland.
These promissory notes used to recapitalize failed banks entail repayments of 3.1 billion euros annually, which is quite similar to the amount of fiscal consolidation that is done annually. These notes are very difficult politically to keep servicing in the current manner, and that’s what we saw at the end of March where instead of making the repayment in cash, the repayment was made in the form of a long-term government security.
MR. BEAUMONT: Yes, this is specifically in relation to a potential shortfall in growth in 2012. Currently we have no signs that, but if it were to happen, we would support accommodating a revenue shortfall rather than trying to offset it within the current year.
Just tried to phone IMF - on hold - they have switched from Fields of Athenty in Gdansk to There Is An Isle in Christchurch ….. fairly tuned in alroight these days!
It seems most people have missed the real headline here:
“The IMF bows to demands of public sector unions and of the semi-state managements, staffs and unions”.
With an initial focus on the Croke Park Agreement, this is what the IMF says:
“This approach has delivered the budgeted savings while maintaining industrial peace which is critical to the implementation of other fiscal and structural reforms.” (p24)
And if further evidence is required, the excessively limited scope and nature of the proposed privatisation programme is a real clincher:
“The government announced in February asset sales of up to €3 billion, comprising energy companies (part of Bord Gais Eireann’s Energy business and some of Electricity Supply Board’s non-strategic power generation capacity), a forestry company (Coillte, excluding land) and the remaining state shares in the national airline (Aer Lingus).” (p27)
The IMF with the other Troika members sets the broad parameters of economic governance, but the Government has considerable discretion in implementing policy within these parameters. This, for me, demonstrates convincingly, that the Government is employing this discretion to pander to sectional economic interests to the detriment of the interests of the vast majority of citizens.
Those who prevent government from governing in the public interest - and who compel government to govern in their who narrow interests - are the government.
These narrow interests retain their power and influence irrespective of whom citizens elect. Is it little wonder that disaffection and discontent with the political process is increasing?
The new Memorandum of Understanding shows that Minister Noonan has now included for the first time a debt repayment target for 2013 for NAMA. There was no obvious quo pro for this concession. As we saw with the Anglo promissory note arrangement, NAMA’s cash mountain gave us flexibility and we have signed this away for the first time.
Inde_kon, on a comprehensive review of 14 influential blog posts, reports that over 90% of the Irish population are ‘very happy’ with the IMF component of the ‘troika’ governance.
Keep up the good work. Hi to Ajai.
Minor point: The Fans would appreciate a re-structuring of the national anthem in The 7th Review, the soldier’s song is clearly unsustainable on recent empirical evidence, and is best replaced with ‘The Fields of Athenry’. This may be included under ‘confidence building measures’ as it is both cost and revenue neutral.