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FT - UK weighs billions in loans to Ireland

Worrying lead story in the FT tomorrow, well, at least its not about that engagement*. You can probably translate "weighs" as "ha ha suckers you're paying".

FT - UK weighs billions in loans to Ireland
George Osborne, the UK chancellor, is considering billions of pounds in British loans to help bail out Ireland, as part of an international effort to shore up the country and its debt-laden banking system.

The preparations come as European Union authorities agreed to dispatch a team of European and International Monetary Fund officials to Dublin for what EU leaders called “short and focused discussions” about a possible bailout of Ireland, focused on its troubled banking sector.

Although officials refused to term it an official assessment team to prepare for a rescue, it will include personnel from the same agencies – the IMF, the European Central Bank, and the European Commission, the EU’s executive branch – that were sent to Greece earlier in the year as part of Athens’ bailout.

“This can be regarded as an intensification of preparations of a potential program in case it is requested and deemed necessary,” said Olli Rehn, the EU’s senior economic official, speaking after a Brussels summit of finance ministers from eurozone countries.

Although Ireland has not made a request for aid, Mr Osborne arrived in Brussels on Tuesday night for a full Ecofin meeting amid growing expectation that Britain will play its part in a rescue alongside other EU countries and the IMF.

UK Treasury officials stressed no request had so far been received from other eurozone countries for the UK to make bilateral loans to Dublin, but they refused to rule them out.

A request for British participation in an Irish rescue effort would prove highly controversial with eurosceptic Conservative MPs. Senior Conservatives believe that loans to Ireland – a country with which Britain has a land border and strong financial and trade ties – would be easier to sell to Tory MPs if they were not part of an EU rescue.

“Tory backbenchers would not be opposed to UK assistance to Ireland but they are worried about a European mechanism,” said one leading Tory.

Britain is already committed to about £6bn in contingent liabilities if Ireland approached the €60bn European financial stability mechanism but the UK is not part of a wider €440bn European financial stability facility.

Tory eurosceptics are already voicing deep concern over UK taxpayers underwriting a eurozone bail-out, but their anger might be diluted if British assistance was made directly or through the IMF.

Douglas Carswell, a Tory MP, said on his blog: “I wonder what excuses they’ll be using for spending our money on bailing out the euro? ... What blah blah sound bites will the politicians be rehearsing to justify another EU bill?”
The Wall Street Journal story that broke the story that Brits are gonna have to BOHICA:
U.K. Support Sought for Ireland Bailout


*I'm happy for them, their friends and family but gawd, the wall to wall saccharine coverage has me banging my head already, heck its given the Express an excuse to put Diana on their front page, arrrrggggh.
"The state is the great fiction by which everybody seeks to live at the expense of everybody else." -- Frederic Bastiat, 1848.
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Comments

  • Georgie is a mug if he lends a penny given our own current financial crisis that is being rammed down our throughts & exaggerated every minute of the day.

    Anyways. Its a job for The Fourth Reich
    Not Again
  • michaels
    michaels Posts: 28,776 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    I guess two questions:
    Can we afford not to given how much of their bonds our banks hold?
    Can we afford to given our own 'little' debt problem?

    A lot of me says the EUR should be allowed to die its natural death, the problem is the same logic was applied to Lehmans and that nearly brought down the global financial system. Loosing the EUR would mean default by all the PIGS and I don't think the world could cope with that either. So we are left with the Irish submitting to European economic governance no doubt to the strains of 'Deuchland Uber Allis'
    I think....
  • michaels wrote: »
    I guess two questions:
    Can we afford not to given how much of their bonds our banks hold?
    For the big UK banks:

    1. RBS own Ulster Bank (despite the name 80% of business is in Eire) and have already taken a £5.6bn hit over the past 30 months on Irish investments. RBS are undoubtedly the UK bank with the most to lose according to equity markets. I took a look at the Asset Protection Agency annual report last week (virtually nothing on geographic exposure) and, after charges/fines, there is a £10-12bn buffer before the UK government has to pay out on extra writedowns for RBS. Whether this is relevant given that the UK government owns 84% of RBS is another matter. IIRC analysts think a worst case scenario for Ireland would see RBS lose another £8-10bn.

    2. Lloyds have £27bn in outstanding loans, have set aside £5bn in provisions and have no sovereign exposure. It's a healthier bank than RBS with more private ownership so I don't think this is a reason to bail out Ireland.

    More detailed analyst comment on RBS and Lloyds exposure to Ireland in this FTAlphaville markets live.

    3. Barclays, made very clear in their recent results they have little exposure (£503m) to Irish government debt, unless their investment banking arm are playing games Ireland is of little significance.

    The other two big British banks (HSBC & Standard Chartered) shouldn't have serious problems with Ireland or frankly the whole EU periphery falling.

    RBS, RBS and RBS are the reason for the British government to bail out Ireland. IMHO its a bad idea because it may set a precedent for if/when Greece needs a further bail out or Portugal gets into trouble. If we get that far we'd be looking at Spain and Italy too.
    "The state is the great fiction by which everybody seeks to live at the expense of everybody else." -- Frederic Bastiat, 1848.
  • i hear our share of the bailout would be 7 billion, i also hear our exports to ireland are over 20 billion a year.

    that being true, i expect its in our own interest to help with the bail out. whether it pays us to do so in future export trade i guess will depend on how well the bailout works overall.
  • sabretoothtigger
    sabretoothtigger Posts: 10,035 Forumite
    Part of the Furniture 10,000 Posts Photogenic Combo Breaker
    edited 17 November 2010 am30 12:33AM
    RBS wouldnt go under so theres no reason for greater concern or action then already taken.

    Ireland is only 6m people, 20 times what iceland was but half of Greece and obviously a tenth of what we are. It seems the little guys are the canary in the mine

    I wonder if they suffer most because they are so few or if its just a first reaction to precede the same problems to occur elsewhere in far larger nations that nobody can bail out 100%
    Thats the real thing to worry about, Ireland to go under or not is an indication, not the main event or risk


    I propose ireland leave eu and abandon the euro and join the uk, they already get to vote here anyway. Sterling beats euro and they can freeze current debt interest .

    Otherwise they should form a budget which is flat, no further deficit expenditure or need for issuing of bonds. [I presume/hope they arent like the americans, rolling over 10 trillion every 3 years]
    Who cares if the open market prices Ireland bonds at 10 or 20% if Ireland doesnt need to go to the open market and raise money the 'crisis' is over right away.
    Some real austerity is the natural solution and I suggest they take this bitter pill and get it over with already and dont forget the lesson next time some political pleb suggests overspending is the answer
  • Mr_Mumble
    Mr_Mumble Posts: 1,758 Forumite
    i hear our share of the bailout would be 7 billion, i also hear our exports to ireland are over 20 billion a year.
    Probably far more than £7bn when you include Britain's contribution via the IMF.

    The FT says we're committed to £6bn under the financial stability mechanism (a construct only possible thanks to article 122.2 of the Lisbon Treaty, yeah, who believed the Europhiles when they called that "simply a tidying up exercise"?!). However, afaik, the Irish don't want to use the mechanism as it is specifically for sovereign debt. Ireland wants a capital injection straight into the banks. Ergo the British government don't have to commit any money. Presumably Dave & George will fold and a bilateral loan to Ireland would be provided instead of the commitment via the financial stability mechanism.

    The impact on exports is a whole other kettle of fish. Which is the better outcome for British trade; Ireland to become the next Iceland (defaults on debt) or Greece (more austerity and possible default in a couple of years)? This is pretty unfathomable.

    All the above chatter is trying to look at the matter from a pragmatic viewpoint. Morally it's outrageous that the Irish government are still planning to pay out 20% to subordinated debt holders of private banks and 100% for senior debt holders of private banks. It's fracking ridiculous that taxpayers of other, supposedly sovereign, countries are being made to pay for a bailout of other foreign banks. It was only two years ago that the US government, via the FDIC, allowed unsecured senior debt holders of Washington Mutual to lose all of their money.

    The EU hasn't just embraced moral hazard its about to engage in coitus with the femme fetale. Who knows what'll pop out in nine months time, perhaps Rosemary's Baby.
    "The state is the great fiction by which everybody seeks to live at the expense of everybody else." -- Frederic Bastiat, 1848.
  • All this talk of bailouts and this is what make me sick -
    According to The Economist, the Irish taoiseach (prime minister) is paid a generous €310,000 ($446,000) per year, more than the US president. This makes of him the highest paid head of state in the developed world (probably). In comparison, the German chancellor or the Italian PM receives a bit more than half.

    They must think we are stupid:(
  • Ahhhh Poor Bertie he needs that pay rise don’t you know, hair stylists and makeup artists don’t come cheap especially in rip off Ireland where you don’t get so much bang for your buck.

    Bertie recently said you can’t compare his salary with other Premiers like Sarkozy who have people who pay for everything he doesn’t even have to put his hand in his pocket to buy a cup of tea. Well with the last pay rise equal to the average industrial wage I can’t see Bertie going thirsty.

    Now the less cynical view might take the line that if he were a manager in charge of a company and had had the same spectacular success as Ireland Incorporated over the last 10 years then perhaps he would be entitled to good pay rise.

    If you were heaven forbid a bit cynical you might think it a bit hypocritical that in the same week as he approved his pay rise he informed Public servants that they would have to tighten their belts and have more realistic pay expectations considering softening economic forecasts.

    If you were even a little more cynical you might say the timing of the announcement might have been arranged to coincide with the Transport minister’s initiative to remove all provisional licence holding drivers off the road if unaccompanied by drivers with full licences with a lead in time of barely a weekend. This is another scandal where waiting lists to do a test were let stretch to over 6-12 months and with poor public transport especially out side the cities up to 20% of all adults were forced to drive with L plates on there own. The back lash to this certainly took some of the heat off Bettie.

    And if you were the most cynical of all you might think that as this is Berties last stint in office he doesn’t care what people say he just wants the money before he retires.

    But as they say in the L’Oreal add “He’s worth it”.
  • If there is one thing that Ireland's predicament shows is that HPI that outstrips wage inflation is bad - FACT. As tempting as it might be for governments to let people make large amounts of money by painting the walls magnolia and putting a 'vase with twigs in it' in the window, HPI that outstrips wage inflation should be legislated out of existence.

    Enough damage has been done, and it would be easy to manage with verified salary caps and ruthless regulation of BTL, so that it didn't turn into the ponzi scheme we've seen over the last decade where people have been allowed to borrow literally millions to buy houses when they themselves are on about 20k.
    Have owned outright since Sept 2009, however I'm of the firm belief that high prices are a cancer on society, they have sucked money out of the economy, handing it to banks who've squandered it.
  • Generali
    Generali Posts: 36,411 Forumite
    10,000 Posts Combo Breaker
    edited 17 November 2010 am30 8:21AM
    There is some talk of a UK only partial bailout for Ireland.

    IIRC, Ireland is the 3rd biggest export market for the UK after somewhere (Germany?) and Holland.
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