Category: Uncategorized

Promissory note restructuring

This is breaking that Prof. Honohan will seek leave from the ECB to not repay part of the promissory note worth 3.1 billion due at the end of this month. This is good news in the short run (and something Karl, Brian and I spoke at length about recently at the Oireachtas)

From the piece:

The Minister for Finance Michael Noonan confirmed in the Dáil this evening that negotiations were taking place with the ECB about settling the promissory note by delivery of an Irish government bond.

The concession may facilitate a longer-term effort to cut the cost of Ireland’s banking rescue, which helped tip the nation into an international bailout in 2010.

The immediate questions are:

1. What interest rate(s) will be charged on this(these) bond(s) and at what maturity(ies)?

2. What will fund the asset side of the balance sheet of the IBRC?

3. It looks to me like the promissory notes are going to be funded by the EFSF, or some other funding structure, but specifically what funding structure at the EU level will the bond use?

Update: RTE’s David Murphy reported on Twitter that the government are proposing to pay off the note with a bond which matures in 2025. If ECB says yes, the government gets 13 year delay on the €3bn payment.

Update2: Karl has the text of Minister Noonan’s speech on his blog now.

Non-Financial Corporate Debt (updated)

The excess level of debt in Ireland gets a frequent airing.  Frequent reference is made to graphs like the following published by McKinsey.

Ireland has an excessive level of debt but it is the figures attributed to the financial and non-financial corporate sectors that push us into the stratosphere.

Outside of some coverage issues in relation to the general government debt, there is relatively broad agreement about the excessive debt levels in the household and government sectors.

On the issue of Non-Financial Corporate Debt there was a useful session of the Joint Oireachtas Committee on Finance on the 7th of March.  The committee heard from Michael Connolly from the CSO and Joe McNeill led a group from the Central Bank. 

The transcript of the debate is here, and the intended text of the opening presentations as well as the slides used by Joe McNeill are here.  Michael Connolly also used slides but I have not seen them.  I will add a link if someone has it.

The debate meanders at times and a couple of misperceptions are persisted with by some of the Members but there are many useful contributions from the witnesses.  A couple of quotes are provided  below the fold but there was much more discussed.

The conclusion is straightforward.  The non-financial corporate debt burden is not as large as dramatic graphs similar to that above like to indicate.

UPDATE: Michael Connolly has kindly provided the slides he submitted to the Committee.  Slides 7 to 13 are particularly relevant and are very useful contributions on this issue.

Continue reading “Non-Financial Corporate Debt (updated)”

Blanchard on Greece

Olivier Blanchard provides an assessment of the challenges facing Greece in this IMF blog post.

BlackRock and Banks

BlackRock Solutions provided the key granular analysis underlying the landmark 2011 PCAR study of the Irish banks;  the NYT reports on its role in the Greek banking sector here.

Best man for a job in finance is a woman?

Brian Lucey writes on this topic on his blog. Given the serious discussions around gender quotas in politics, and around female labour force participation more generally, the post is timely and worth a read.

By the way, are there any women who read this blog here today?