Irelnd less riskier than Spain. Thanks to B Lenihan

Rujib1

Not so long since Ireland was seen as the next Iceland. Then Greece moved in between Ireland and Iceland. Now it would seem, Spain could join Greece in the space between Ireland and Iceland.
In summary, the boldness of Lenihan is putting more and more clear water between Ireland and some more weak economies.

Investors urged to buy Irish bonds
http://www.irishtimes.com/newspaper/breaking/2010/0118/breaking31.htm

Investors should buy Irish 10-year government bonds and sell Spanish securities because Ireland has less debt to sell the rest of this year and its exports may help the economy grow faster, Deutsche Bank AG said.

"Ireland offers better risk-reward perspective relative to Spain," Deutsche Bank analysts including Abhishek Singhania in London wrote in a note dated January 15th. "Even if domestic demand does
not recover and fiscal consolidation limits government expenditure, the Irish economy could continue to grow, unlike the Spanish economy."

Ireland has sold about 25 per cent of the bonds it needs to issue this year, compared with 9 per cent
for Spain, the analysts said.

Investors should buy the Irish 10-year security due in October 2020 and sell the Spanish bond maturing in April 2020, betting that the difference in yield narrows to about 50 basis points, the analysts
said. They should end the bet if it widens to 120 basis points.

The Irish bond yielded about 95 basis points more than the Spanish security today.

Bloomberg

murphym7

ECB said last week at their press conference that the steps Lenihan took recently were very impressive.

gleep

murphym7 wrote: »

ECB said last week at their press conference that the steps Lenihan took recently were very impressive.

LMAO! Of course they did, they've been pulling his strings the past year and a half!

You know what they say, self praise and all that!

GET A GRIP LADS

Rujib1

gleep wrote: »

LMAO! Of course they did, they've been pulling his strings the past year and a half!

You know what they say, self praise and all that!

GET A GRIP LADS

Who in hell is self praising here. Original post quotes Deutsche Bank economist.
It's fundamentally that the international perception of Ireland in some quarters at least is improving!

R1

SLUSK

Wow "less risky" than Spain, really impressive guys!

ardmacha

Everyone agrees that the recent direction shows some taking responsibility. However Lenihan's decision to "bankroll" the likes of Anglo Irish and Irish Nationwide was responsible for the question of Ireland's ability to pay being raised in the first place.

gerry28

Lenihan just trampled on the little people, putting the low paid and the poor on the bread line. Cutting the wages of low paid workers while back tracking on the cuts to his well paid collegues in the civils service etc.

He hasn't quite got away with it all just yet. There are a lot of angry public servants looking to have a few things changed.

irish_bob

gerry28 wrote: »

Lenihan just trampled on the little people, putting the low paid and the poor on the bread line. Cutting the wages of low paid workers while back tracking on the cuts to his well paid collegues in the civils service etc.

He hasn't quite got away with it all just yet. There are a lot of angry public servants looking to have a few things changed.

how exactly did he put the poor on the breadline , while wellfare rates were reduced by no more than 5% , the cost of living is down by at least 6% , surely this means they could be no worse now than they were a year ago yet your statement that they were PUT on the breadline by definition means they were prior to the budget not on the breadline

zootroid

There is still a lot to be done over the next few years. The budget deficit is still ridiculously high.

gerry28

irish_bob wrote: »

how exactly did he put the poor on the breadline , while wellfare rates were reduced by no more than 5% , the cost of living is down by at least 6% , surely this means they could be no worse now than they were a year ago yet your statement that they were PUT on the breadline by definition means they were prior to the budget not on the breadline

His policy seems to be to drive down wages, that is going to cause serious hardship for people. More jobs will be lost.

Interest rates are going to rise in the coming months and years aswell as inflation in the eurozone. Land tax, water charges and i suspect next years change to the PRSI system are going to impact heavily on the low paid also.
Alot of ordinary low paid workers are going to be getting it very tight if his program is seen out. For your average person on between 25 and 35K pa live is only going to get tougher over the coming months and years.

murphaph

ardmacha wrote: »

Lenihan's decision to "bankroll" the likes of Anglo Irish and Irish Nationwide was responsible for the question of Ireland's ability to pay being raised in the first place.

Eh, no it didn't. Ireland's current budget defecit (the difference between current income and current expenditure) is much greater than that injected into the banks and even if it wasn't, it would be next year if no measures to reduce expenditure had been taken. Next thing you'll be telling us we should cease all capital projects to keep the wages at the level they were at. Anyone whose employer has a serious cashflow problem (like the government) will just have to accept that the money is no longer there to maintain their payscales.

irish_bob

gerry28 wrote: »

His policy seems to be to drive down wages, that is going to cause serious hardship for people. More jobs will be lost.

Interest rates are going to rise in the coming months and years aswell as inflation in the eurozone. Land tax, water charges and i suspect next years change to the PRSI system are going to impact heavily on the low paid also.
Alot of ordinary low paid workers are going to be getting it very tight if his program is seen out. For your average person on between 25 and 35K pa live is only going to get tougher over the coming months and years.

wages are too high which is why the country is not creating jobs or attracting foreign investment like it used to , wage deflation is very nesscessery and on the upside will reduce the cost of living which will cancel out any reduction in pay

ardmacha

Originally Posted by ardmacha
Lenihan's decision to "bankroll" the likes of Anglo Irish and Irish Nationwide was responsible for the question of Ireland's ability to pay being raised in the first place.

Eh, no it didn't. Ireland's current budget defecit (the difference between current income and current expenditure) is much greater than that injected into the banks and even if it wasn't, it would be next year if no measures to reduce expenditure had been taken. Next thing you'll be telling us we should cease all capital projects to keep the wages at the level they were at. Anyone whose employer has a serious cashflow problem (like the government) will just have to accept that the money is no longer there to maintain their payscales.

There is no doubt that the government assuming the risk for bank investors had an influence on the spread between Irish debt and that of other Euro countries. You quote my post which does not mention capital expenditure or pay rates and imply that I am making statements about these things, when I did not.

kuntboy

Great, now all we need is some industry and exports to earn the taxes to pay back these bonds...oh wait...um.. Maybe we can sell more bonds to make money to pay off the bonds....Fukc it, we'll just wait 20 years until we're cheap again and attract some more US FDI...in the meantime we'll keep saying "knowledge economy" and other waffle.

The_Honeybadger

ardmacha wrote: »

Everyone agrees that the recent direction shows some taking responsibility. However Lenihan's decision to "bankroll" the likes of Anglo Irish and Irish Nationwide was responsible for the question of Ireland's ability to pay being raised in the first place.

The budget deficit was over 20bn before we even mention anglo. Income tax receipts, VAT and stamp duty revenue collapsed rapidly and this is as much to do with our prediciment as the banks have. It is convenient to blame them for all our problems but the reality is we would still be in massive trouble regardless. Although i suppose it could be argued that their reckless lending created the bubble in the first place, they were encouraged all the way by Bertie and co. The blame for the mismanagement of the public finances over the past decade through election focused policies can be laid squarely at FFs door, although IMO if they had done anything else they would have been voted out and replaced by FG, who would have then wrecked the economy to buy votes. Non existent regulation, irresponsible politicians and reckless banks all combined to create our problems. We all benefited from the boom and I think we have a collective responsibility to correct what went wrong for future generations, I dont believe FF should still be in charge and but for Lenihan I doubt they would be.

gurramok

Rujib1 wrote: »

Not so long since Ireland was seen as the next Iceland. Then Greece moved in between Ireland and Iceland. Now it would seem, Spain could join Greece in the space between Ireland and Iceland.
In summary, the boldness of Lenihan is putting more and more clear water between Ireland and some more weak economies.

Ireland ain't strong yet, not by a mile.

As well as the 5yr plan to tackle the huge deficit not sorted yet, we have the mother of all public sector strikes/work to rule coming up. That will help hammer that risk rating back down to the Spanish level.

eoinbn

gurramok wrote: »

Ireland ain't strong yet, not by a mile.

As well as the 5yr plan to tackle the huge deficit not sorted yet, we have the mother of all public sector strikes/work to rule coming up. That will help hammer that risk rating back down to the Spanish level.

This.
The cuts in the budget haven't been agreed. The unions are just waiting for their members to clear some of their Xmas debt before we go back to where we were 5 weeks ago. The cuts might not be reversed but one can be sure that the unions won't backoff until they get some payoff that will most likely be damaging to the economy as a whole.

The_Honeybadger

eoinbn wrote: »

This.
The cuts in the budget haven't been agreed. The unions are just waiting for their members to clear some of their Xmas debt before we go back to where we were 5 weeks ago. The cuts might not be reversed but one can be sure that the unions won't backoff until they get some payoff that will most likely be damaging to the economy as a whole.

I wonder is there an appetite among their members for a long strike action? There isn't among the few I have talked to, but no doubt others will take a harder line. Will have to wait and see I guess, can't see the gov caving after getting this far.

gerry28

mickeyk wrote: »

I wonder is there an appetite among their members for a long strike action? There isn't among the few I have talked to, but no doubt others will take a harder line. Will have to wait and see I guess, can't see the gov caving after getting this far.

From the people i talk to at work there is not much of an appetite for strike action. People are quietly angry. A little aghast at the roll back of the senior public servants paycut backtrack etc.

Peoples attitude may change though if the government start talking tough and threatening further paycuts next year. People i work with were very angry with mary hanifan the day after the cuts were announced threatening more next year unless!!!

I may be speaking too soon because nobody has seen their pay cut yet, that will happen over the next few weeks.... maybe attitudes will harden a little then.

The way things stand i don't see how the government are going to have the support of staff for their reform plans after the levy and the paycuts and thrash talk from mary hanifan.

Alcatel

The international perception is that Ireland is at least working on its problem, unlike countries like Greece, and has a viable plan. The view outside the country is a lot less partisan than inside the melting pot... But in the end, we're living off of these people's money, and their perception does matter.

The international lenders are bankrolling between a third and half of our expendature these days. They have as much of a right to have a say in how this country should be run as the taxpayers, unless the taxpayers want to drastically cut spending and services.

murphaph

gerry28 wrote: »

The way things stand i don't see how the government are going to have the support of staff for their reform plans after the levy and the paycuts and thrash talk from mary hanifan.

If reform (that should have accompanied benchmarking all along but often didn't) doesn't come, then the costs will have to be saved through further pay cuts. It is not in the average public sector worker's interest to obstruct reforms that could save their salary from further reductions.

nuttz

kuntboy wrote: »

Great, now all we need is some industry and exports to earn the taxes to pay back these bonds...oh wait...um.. Maybe we can sell more bonds to make money to pay off the bonds....Fukc it, we'll just wait 20 years until we're cheap again and attract some more US FDI...in the meantime we'll keep saying "knowledge economy" and other waffle.

There is something to be said about the "knowledge economy". I work for a US company that has been in Ireland for a few years. The team I am on is expanding by around 15 people (there are other teams in the building and other offices expanding also), but since the recruitment began I have yet to interview a person with the desired skills for the roles.

ardmacha

I have yet to interview a person with the desired skills for the roles.

What are these skills? One major problem in this country is that business has failed to convey to young people what skills it values and has failed to work with educational institutions to ensure that these skill gaps are met. A related problem is that organisations expect people with skills and experience without any obvious path existing for how people can get a job to get the experience.

ceret

zootroid wrote: »

There is still a lot to be done over the next few years. The budget deficit is still ridiculously high.

A lot done, more to do.

strathspey

ardmacha wrote: »

....One major problem in this country is that business has failed to convey to young people what skills it values and has failed to work with educational institutions to ensure that these skill gaps are met. A related problem is that organisations expect people with skills and experience without any obvious path existing for how people can get a job to get the experience.

And that is why multinationals will move to places in the world where they can find these skills. Remember one thing folks, for all of communisms flaws, the one thing the Eastern block didn't neglect was an emphasis on mathematical and technical education. The exact opposite of what has been emphasised here in the West for the last few decades.
As an aside I heard an Irish colleague giving out that some multinationals had a staff contingent of foreigners approaching 40%. I replied, 'fancy that, a multinational employing multi nationals? Who would have thought?

Flamed Diving

Rujib1 wrote: »

Not so long since Ireland was seen as the next Iceland.

Among the educated, we never were.

kippy

irish_bob wrote: »

wages are too high which is why the country is not creating jobs or attracting foreign investment like it used to , wage deflation is very nesscessery and on the upside will reduce the cost of living which will cancel out any reduction in pay

I agree with the sentiment but when you look into it a bit deeper you've got to appreciate that two very important cost of living factors are not directly controllable by Ireland.
1. Oil costs - which knock on to everything in society.
2. Interest rates. Currently at an all time low, this will not be the case for much longer and those that are paying a mortgage and have just been given a pay cut/let go, will find this an ever increasing issue. (While some have no sympathy for these people I do, and can appreciate any anger they feel)

Also, while I do agree that our wages are too high, we've got to realise that we simply CANNOT compete with Eastern Europe and Asia on the traditional manufacturing front, they've caught up and overtaken us a few years ago. We need to carefully target specific job sectors and types. For example the healthcare products side of things appears to be a big area to get into. Were it not for the fact that Galway has some many of these companies located there the city would be in far worse shape, however being reliant on one sector is not good enough.
We also need to spend and invest more into renewable energy research and development-this is an area we should be world leaders in with the resources we have one our doorstep.

While what Lenihan has done appears to be working, we cant let ourselve take our eyes of the big picture. We wouldnt be so up to our ears in crap if Lenihan and those that went before him had a better handle on what was happening. We're back to tax take levels of 2002/2003. 10-15 years of "prosperity" wiped out in 2. A health service thats not much better than before the "boom" and an education service that we are told does not produce graduates who are fit for the jobs out there. Never mind everything else that hasn't inproved in the good times.

The whole country has at least two to three years of further wage cuts/tax increases/social welfare cuts ahead of it and this will cause no end of issues.
Whatever about us being less riskier than Spain, at least they have a relatively good climate to keep them cheerful.

ART6

The greatest danger as I see it is that the unions will sooner or later bring the country to a standstill, and I see little evidence that Cowen will do a Maggie Thatcher unless he is forced to by Lenihan, who might not be able to do so given his condition. This may be exacerbated by further taxes draining the incomes of those who have already taken a hit in pay reductions and levies in both the private and public sectors. Already we have the tree hugger's Greens crazy carbon tax, and we have the threat of domestic rates and water charges, all of which are happening because the government simply will not grasp the nettle of reducing public expenditure by getting rid of the endless quangos, agencies, commissions etc that provide the jobs for the FF boys. As I have posted before in this forum, in 2006 the Independant reported that we had then over 1,000 quangoes costing €13 billions a year.

The taxpayer, private and public sector, are paying not just to bail out incompetent bankers but also to keep FF buddies in the standards to which they have become accustomed.

Growth is of course the answer, as we are repeatedly told by our expert ministers, but our wages costs are too high and must be reduced if we are to compete with the developing economies. In your dreams! How much would we have to reduce our wage bill to compete with India, China, Vietnam etc etc? To do that we would have to at least slash our cost of living by half, and since the government itself is responsible for a large proportion of that cost with the EU cutting out a nice slice for itself with excessive regulation there is no chance of that happening.

Ah but we will compete by becoming a knowledge economy. Doing what? The Far East already builds most of the highly advanced ships the world needs. It's car makers are world leaders in technology. Just about every computer and electonic device is produced in the Far east. The Indians, Chinese, Vietnamese, are not discernably suffering from knowledge lack. Meanwhile, our education system is suffering (we're told) from severe lack of resources (or should that be lack of planning) so who is going to provide this magical "knowledge" that will bring us all the wealth of kings next week?

I am personally pessimistic. I don't think the current government or any of the other political parties has any real idea of what to do long term, or given our membership of and dependance on the EU the freedom to do it even if they did.