Ireland - Hero to zero!

de1amo

if the euro was so highly valued the İrish problem wouldnt be so magnified-thats the problem the irish havent been able to devalue to make their exports attractive. i should think inward investment has shrunk as well? Our government has used quantitive easing to devalue the pound to make us more attractive-foreign investors are still buying into our economy but the rub of the green is that imported items ie oil and gas are 'hurting' the consumer and constraining people 'exporting themselves and their cash abroad.-QE was a necessary evil to save the banks but the side affects are all in the pipeline--inflation and interest rate rises to cool the inflation-rocky times are ahead and i see us having a tough time but not as bad as if the banks had gone under as ireland has let happen by its lack of wriggle room!

worldtraveller

Ireland's banks were hit with downgrades Friday — one to junk bond status — as speculation mounted that an EU-IMF bailout of Ireland could require senior bondholders to help cover the massive losses.

Prime Minister Brian Cowen saw his own hold on power slip another notch, as his ruling Fianna Fail party lost a special election for a long-empty seat in parliament. The winner vowed to force Cowen from office before he can pass an emergency 2011 budget being demanded as part of the international rescue.

The New York-based Standard & Poor's credit ratings agency said it was lowering Anglo Irish Bank six notches to a junk-bond B grade. It also cut the ratings on Bank of Ireland one notch to BBB+, and downgraded both Allied Irish Banks and Irish Life & Permanent one notch to BBB.

The agency said bonds issued by Anglo are particularly at risk of being discounted as part of an euro85 billion ($113 billion) rescue mission by the European Union and the International Monetary Fund. It says Ireland "may be forced to reconsider its current supportive stance toward Anglo's unguaranteed debt."

Junior bondholders at Anglo already have been forced to accept losses of 80 percent to 95 percent on their loans.

AP

dopester

worldtraveller wrote: »

It could just as easily be in Spain of course! There are a massive number of similar, half-completed projects there as well, which they can't 'give away'.

There is a bit more detail about the story, including protesters who are angry they've not been paid in full for work on that development, in the Guardian.
http://www.guardian.co.uk/business/2010/nov/25/donegal-property-development-auction-bid-5000

But the signs are not propitious: "You just won't get funds to complete buildings from any bank because nothing is selling," said an executive who heads up the recovery unit in an accountancy practice in Dublin.

Mr_Mumble

It's good to see the senior debt holders (mainly huge life assurers, pension funds, hedge funds and other asset managers) of Irish banks are now in the sights of the IMF. Bloomberg has detail on the numbers:

Allied Irish has about 5.9 billion euros of senior unsecured debt and 12.1 billion euros of senior secured notes, all of which are covered bonds, according to data compiled by Bloomberg. Bank of Ireland has 5.4 billion euros of senior unsecured debt and another 5.9 billion euros of government- guaranteed bonds, the data show.

The Irish government have been saying these folk are sacrosanct for some odd reason. Waffling about confidence in the banking system or that it would be unprecedented for senior bond holders to share the pain or take a haircut. Yet, two years ago the US Government via the FDIC wiped out unsecured senior debt holders in Washington Mutual:

in various jurisdictions and circumstances, nominally "senior" debt may not rank pari passu with all other senior obligations. For example, in the 2008 Washington Mutual Bank seizure, all assets and most (including deposits, covered bonds, and other secured debt) of Washington Mutual Bank's liabilities were assumed by JPMorgan Chase. However other debt claims, including unsecured senior debt, were not.[1] By doing this, the FDIC effectively subordinated the unsecured senior debt to depositors, thereby fully protecting depositors while also eliminating any potential deposit insurance liability to the FDIC itself. In this and similar cases, specific regulatory and oversight powers can lead to senior lenders being subordinated in potentially unexpected ways.

Of course the Irish government should not break any contract law when making senior debt holders take a haircut. Guess the lawyers will have plenty of overtime deciding whether the IMF can do a WaMu and wipe out the 11.3bn Euros of unsecured senior debt.

Taxpayers across Europe should be cheering the IMF on imho!

Mr_Mumble

Government Statement on the announcement of joint EU - IMF Programme for Ireland.

The Government today agreed in principle to the provision of €85 billion of financial support to Ireland by Member States of the European Union through the European Financial Stability Fund (EFSF) and the European Financial Stability Mechanism; bilateral loans from the UK, Sweden and Denmark; and the International Monetary Fund's (IMF) Extended Fund Facility (EFF) on the basis of specified conditions.

The State's contribution to the €85 billion facility will be €17.5 billion, which will come from the National Pension Reserve Fund (NPRF) and other domestic cash resources. This means that the extent of the external assistance will be reduced to €67.5 billion.

The purpose of the external financial support is to return our economy to sustainable growth and to ensure that we have a properly functioning healthy banking system.

The external support will be broken down as follows: €22.5 billion from the European Financial Stability Mechanism (EFSM); €22.5 billion from the International Monetary Fund (IMF); and €22.5 billion from the European Financial Stability Fund (EFSF) and bilateral loans. The bilateral loans will be subject to the same conditionality as provided by the programme.

The facility will include up to €35 billion to support the banking system; €10 billion for the immediate recapitalisation and the remaining €25 billion will be provided on a contingency basis. Up to €50 billion to cover the financing of the State. The funds in the facility will be drawn down as necessary, although the amount will depend on the capital requirements of the financial system and NTMA bond issuances during the programme period.

If drawn down in total today, the combined annual average interest rate would be of the order of 5.8% per annum. The rate will vary according to the timing of the drawdown and market conditions.
The assistance of our EU partners and the IMF has been required because of the present high yields on Irish bonds, which have curtailed the State's ability to borrow.

Without this external support, the State would not be able to raise the funds required to pay for key public services for our citizens and to provide a functioning banking system to support economic activity. This support is also needed to safeguard financial stability in the euro area and the EU as a whole.

Programme for Support

The Programme for Support has been agreed with the EU Commission and the International Monetary Fund, in liaison with the European Central Bank. The Programme builds on the bank rescue policies that have been implemented by the Irish Government over the past two and a half years and on the recently announced National Recovery Plan.

The Programme lays out a detailed timetable for the implementation of the measures contained in the National Recovery Plan.

The conditions governing the Programme will be set out in the Memorandum of Understanding and the Government will work closely with the various bodies to ensure that these conditions are met. The funding will be provided in quarterly tranches on the achievement of agreed quarterly targets.

The Programme has two parts - the first part deals with bank restructuring and reorganisation and the second part deals with fiscal policy and structural reform.

The requirement for quarterly progress reports covers both parts of the programme. When the documentation on the Programme is finalised, it will be laid before the Houses of the Oireachtas.

Bank Restructuring and Reorganisation

The Programme for the Recovery of the Banking System will be an intensification of the measures already adopted by the Government. The programme provides for a fundamental downsizing and reorganisation of the banking sector so it is proportionate to the size of the economy. It will be capitalised to the highest international standards, and in a position to return to normal market sources of funding.

Fiscal Policy and Structural Reform

The Ecofin has acknowledged the EU Commission's analysis that a further year may be required to achieve the 3% deficit target. This analysis is based on a more cautious growth outlook in 2011 and 2012 and the need to service the cost of additional bank recapitalisations envisaged under the programme.

The Council has today extended the time frame by 1 year to 2015.

The Programme endorses the Irish Government's budgetary adjustment Plan of €15 billion over the next four years, and the commitment for a substantial €6 billion frontloading of this plan in 2011.

The details of the Programme closely reflects the key objectives set out in the National Recovery Plan published last week.

The adjustment will be made up of €10 billion in expenditure savings and €5 billion in taxes.

The Programme endorses the structural reforms contained in the Plan which will underpin a return to sustainable economic growth over the coming years.

The Government welcomes the support shown to Ireland by our Eurozone partners and in particular by the United Kingdom, Sweden and Denmark who have expressed their willingness to offer bilateral assistance.

The Government also welcomes the assistance of the IMF.
As part of the Programme, Ireland will discontinue its financial assistance to the Loan Facility to Greece. This commitment would have amounted to approximately €1 billion up to the period to mid-2013.

http://www.rte.ie/news/2010/1128/govtstatement.html

Even more of a pigs ear than last week imho! On first reading it looks like senior debt holders are saved at the expense of Irish pensioners. However, the separate Eurogroup press release will make bondholders even more skittish.

Irish banks are to use around £13bn of this money (depending on whether any can be raised privately) to increase capital.

de1amo

the slide is on in Asian overnight-the contagion will spread as everyone has been forcasting-i dont see how the ECB think they can defy what all the market makers are forcasting--the vultures are circulating and they smell blood-senior bond holders and governments are going to take severe haircuts as the banks need rescuing again!

worldtraveller

Lloyds Banking Group and Royal Bank of Scotland shares tumbled on Friday after Lloyds said it had effectively written-off more than half of its outstanding loans to Irish borrowers.

In a statement, Lloyds said it had seen a "further significant deterioration in market conditions" in Ireland and that a further 10pc of its £26.7bn portfolio of Irish loans would be impaired by the end of the year.

"We are concerned that any economic recovery in the Republic of Ireland may take longer to achieve, and that asset prices will remain depressed for longer than previously anticipated," said Lloyds.

The Telegraph

European leaders received a nasty shock as the credit agency Moody's downgraded Ireland's debt, even as the politicians closed a summit intended to prop up confidence in the eurozone.

The dramatic downgrading of Irish debt by five levels sent the cost of the country's borrowing up, as yields - the returns demanded by wary investors - on 10-year government bonds rose more than 24 basis points to pass 8.6pc.

If Ireland cannot stabilise its debt then further revisions may follow, warned Moody's, which has also told Greece and Spain their ratings could fall.

"I don't understand what they do," Nicolas Sarkozy, the French president, said of the agency's latest move. "This decision – I simply call it stunning."

However, the International Monetary Fund (IMF) warned that Ireland is not on track to hit its target of achieving a budget deficit of 3pc of GDP by 2015. The beleaguered nation faces significant risks that could affect its ability to repay the IMF's share of the €85bn (£72bn) international bail-out it received, the fund said.

The Telegraph

worldtraveller

The Irish government is preparing to take majority control of a fourth bank, Allied Irish Banks, as it struggles to fix the nation's ravaged financial sector, according to news reports Thursday.

The Irish Times and broadcaster RTE said Finance Minister Brian Lenihan will go to court to seek permission to pump another euro3.7 billion ($4.85 billion) from the National Pension Reserve Fund into Allied Irish Banks.

That may make the government the majority shareholder immediately, although state control is seen to be inevitable. AIB became 19 percent state-owned last year after receiving euro3.5 billion in state funds.

The Department of Finance declined to comment on the reports, but noted that Finance Minister Brian Lenihan had previously said he would act to insure that AIB met new, higher requirements for capitalization.

The cash injection is the latest chapter in Ireland's massive banking and financial crises.

The government plans spending cuts of euro4 billion and additional taxes of euro2 billion next year as part of a Nov. 28 bailout deal to borrow up to euro67.5 billion ($90 billion) from European Union partners and the International Monetary Fund.

The government already controls Anglo Irish Bank, and the Irish Nationwide and EBS building societies.

The European Commission approved the capital injection for AIB on Tuesday, along with recapitalization of up to euro4.95 billion for Anglo Irish Bank and euro2.7 billion for Irish Nationwide Building Society.

AP

worldtraveller

worldtraveller wrote: »

DUBLIN: -43.3% PEAK (END 2006) TO DATE
OUTSIDE DUBLIN: -31.8% PEAK (END 2006) TO DATE
NATIONAL: -35.2% PEAK (END 2006) TO DATE

permanent tsb/ESRI House Price Index - Quarter 2 2010

Latest figures including Q4 2010:

DUBLIN: -44.4% PEAK (END 2006) TO DATE
OUTSIDE DUBLIN: -34.5% PEAK (END 2006) TO DATE
NATIONAL: -38.3% PEAK (END 2006) TO DATE

permanent tsb/ESRI House Price Index

JWF

worldtraveller wrote: »

Latest figures including Q4 2010:

DUBLIN: -44.4% PEAK (END 2006) TO DATE
OUTSIDE DUBLIN: -34.5% PEAK (END 2006) TO DATE
NATIONAL: -38.3% PEAK (END 2006) TO DATE

permanent tsb/ESRI House Price Index

OUCH!

NE anyone?