Ireland agrees to lend Greece €450m

GSF

http://www.rte.ie/news/2010/0411/greece.html

good to see that after Anglo and Quinn we still have dosh left over for Greece. Crazy stuff!

blinding

I am a bit short as well. Can I have 900 million Euro please ?

silverharp

they've lost their marbles!

2qk4u

Squize every last cent out of the Irish so we can sent it out of the country. Roll on the elections...

Piriz

in fairness guys:

• it hasn't happened yet, just all eurozone countries agreed to it if its necessary
• Ireland could make a profit from it, interest @ 5%
• safeguarding Greece would benefit all EU member states including Ireland

GSF

Piriz wrote: »

in fairness guys:

• it hasn't happened yet, just all eurozone countried agreed to it if its necessary
• ireland could make a profit from it, interest @ 5%

• safeguarding Greece would benefit all EU member states including Ireland

Greece aren't exactly a great credit risk but since we will be borrowing the money to lend to Greece that brings our own IMF/ECB bailout nearer. Isn't Ireland contributing self defeating on that basis alone?

woodseb

GSF wrote: »

Greece aren't exactly a great credit risk but since we will be borrowing the money to lend to Greece that brings our own IMF/ECB bailout nearer. Isn't Ireland contributing self defeating on that basis alone?

an extra 450ml borrowing for us at around 4.5% to lend on at 5% isn't going to tip us over the edge in terms of our own borrowing anyway

the biggest risk to irelands debt situation is a crippling interest rate, greece is facing yields of 7.5% which is unsustainable for any eurozone nation, if they are allowed to default our interest rate would also skyrocket and the cost would be far in excess of the risk in lending 450mln to greece now

...in short, not being part of a solution means that we will be the next problem

Piriz

GSF wrote: »

Greece aren't exactly a great credit risk but since we will be borrowing the money to lend to Greece that brings our own IMF/ECB bailout nearer. Isn't Ireland contributing self defeating on that basis alone?

fair enough, but i'd assume the move is calculated, 450 million is not the most significant when it comes to showing support for a member state and participation within the EU. Remember the move is said to strengthen the Eurozone and benefit 'all' its members. Participation from Ireland will bring its own rewards, non-participation might be detrimental... If Ireland were in Greece's position wouldn't we prefer equal assistance from other members?
Are we certain Ireland would be borrowing the money?
I understand why people would be disgruntled with such an announcement due to our own Economic situation but we shouldn't close our doors and cover our ears. You scrub my back and i'll scrub yours is an attitude which would favor everyone! (IMO)

GSF

Piriz wrote: »

Are we certain Ireland would be borrowing the money?

We are borrowing money already to meet current day to day expenditure, so where else would we find €450m from except by borrowing?

It has set the precedent for future bailouts which are likely - Portugal and Spain. If Greece costs us €450m how much would Spain cost us?

woodseb

GSF wrote: »

We are borrowing money already to meet current day to day expenditure, so where else would we find €450m from except by borrowing?

It has set the precedent for future bailouts which are likely - Portugal and Spain. If Greece costs us €450m how much would Spain cost us?

setting a precedent that EU states will be helped if worst comes to worst is the whole point of the plan to support the Euro as a currency and lower the risk of lending to EU countries

If it comes to Spain or Portugal needing to be bailed out, the problem facing Ireland will be far more worrying than it is now and it'd be likely that we would be in no position to help given the size of the bailout needed. The greek bailout is possible at the moment because the size of the total amount can be spread over the other states and these states can borrow at rates below what would be reasonable to lend to the country in need. If Spain was in danger of going under it's hard to imagine the EU could step in again

Piriz

GSF wrote: »

We are borrowing money already to meet current day to day expenditure, so where else would we find €450m from except by borrowing?

It has set the precedent for future bailouts which are likely - Portugal and Spain. If Greece costs us €450m how much would Spain cost us?

Well we also sent money over to support Haiti, did we borrow money to do that? Maybe we have a contingency fund for these things, i dunno. But if you think we should never help then we should never receive help either.. Quite simply it doesn't work like that and shouldn't either!
The loan will be paid back and also turn a profit, we borrow money to help another nation who needs it, we show we are willing and involved members of the EU, all members will benefit from its outcome and we make a profit from it! Its win win!
And if it happens with the others hopefully it'll be win win again too. If Ireland ever needs similar it'll be a great resource for us too.

I think you are missing the part about this being a loan, hence it will be paid back with interest as a cherry on top!

SkepticOne

It's all part of the policy of pretending things are going reasonably well in Ireland. We've no bank failures and look at how we're able to help the Greeks!

Chris_5339762

Would pay for half the Cork - Limerick motorway easily. Disgraceful.

Piriz

Chris_5339762 wrote: »

Would pay for half the Cork - Limerick motorway easily. Disgraceful.

are you taking the piss?

irishconvert

Piriz wrote: »

[*]Ireland could make a profit from it, interest @ 5%

How can we make a profit when we will have to borrow the money back from another country to replace what we loan to greece? And where did you get this 5% rate from? The report says the money will be loaned at below market rates.

Spudmonkey

I wouldn't say anything yet about denying Greece that kind of money. How fair away are we from needing the same thing?

ParkRunner

Piriz wrote: »

in fairness guys:

• Ireland could make a profit from it, interest @ 5%

They said the same too about NAMA. Roll on the future so we can call on all these bets!

sceptre

This wouldn't have to even be considered if Maastricht, European EMU and the eurozone regulations had made allowance for ECB transfers in the event of an asymmetric economic shock like I said they should back in the late 90s as a mess waiting to happen in its absence. With that unavailable six months or a year ago (or even now), there's no other useful option.

If I'd made an effort, taken the evil pill and submitted the final draft of that thesis I'd be a prophet now...<sigh>

Piriz

irishconvert wrote: »

How can we make a profit when we will have to borrow the money back from another country to replace what we loan to greece? And where did you get this 5% rate from? The report says the money will be loaned at below market rates.

From the RTE link:
The loans would carry an interest rate of about 5% - lower than the rate currently being paid by Greece, but higher than the rate Ireland borrows at, which means in theory Ireland could make money from it.

&

5% is below the current 7.5% market rate Greece are borrowing at.

P. Breathnach

It's in our interest that the Greeks are helped through their difficulties by the collective action of all eurozone members, including us. We don't want an "every man for himself" approach, because we sure as hell would have great difficulty defending our position without help.

irishconvert

Piriz wrote: »

From the RTE link:
The loans would carry an interest rate of about 5% - lower than the rate currently being paid by Greece, but higher than the rate Ireland borrows at, which means in theory Ireland could make money from it.

&

5% is below the current 7.5% market rate Greece are borrowing at.

So what is this 1% ECB interest rate we are currently at? Who can borrow at that rate?

P. Breathnach

sceptre wrote: »

...If I'd made an effort, taken the evil pill and submitted the final draft of that thesis I'd be a prophet now...<sigh>

Then you would be without honour in your own country.

Piriz

EF wrote: »

They said the same too about NAMA. Roll on the future so we can call on all these bets!

It was only a matter of time till someone started talking sh*te about NAMA in this thread...congrats on being that person, take an iota!

ei.sdraob

Piriz wrote: »

From the RTE link:
The loans would carry an interest rate of about 5% - lower than the rate currently being paid by Greece, but higher than the rate Ireland borrows at, which means in theory Ireland could make money from it.

&

5% is below the current 7.5% market rate Greece are borrowing at.

your math is all fishy (and the amount "pledged" grew from 250 million last week to 450 million this week :rolleyes:) you must be seriously joking if you are trying to sell this as a "good investment"
Ireland borrows 450 million at the current 4-5% rate we get and gives it to Greece at 5%

if we get paid back then thats one terrible investment with a real rate of 0.5-1% from Irelands perspective, yes thats right less than 1% rate for a BBB- (and on negative watch) rated "investment" :cool:

please dont try to paint this as "good investment" its not.
its a form of aid, pure and simple so please dont call it an "investment"

i suppose its better than NAMA or pouring money into Anglo and never seeing it again....
anyways by the time the money actually starts to arrive in Greece (if ever since theres some serious time wasting going on) it might be too late
interesting times we live in, interesting times

Piriz

irishconvert wrote: »

So what is this 1% ECB interest rate we are currently at? Who can borrow at that rate?

I dunno, but i guess if they could they would, but they're not!

Piriz

ei.sdraob wrote: »

your math is all fishy (and the amount "pledged" grew from 250 million last week to 450 million this week :rolleyes:) you must be seriously joking if you are trying to sell this as a "good investment"
Ireland borrows 450 million at the current 4-5% rate we get and gives it to Greece at 5%

if we get paid back then thats one terrible investment with a real rate of 0.5-1% from Irelands perspective, yes thats right less than 1% rate for a BBB- (and on negative watch) rated "investment" :cool:

please dont try to paint this as "good investment" its not.
its a form of aid, pure and simple so please dont call it an "investment"

i suppose its better than NAMA or pouring money into Anglo and never seeing it again....
anyways by the time the money actually starts to arrive in Greece (if ever since theres some serious time wasting going on) it might be too late
interesting times we live in, interesting times

hey, you quoted me from where i was answering some other posters question.
I'm not trying to paint this as a "good investment", you say 'my maths is all fishy'? its not my maths, its from the article..
I have highlighted that it would be....ah just read my other posts ffs!

woodseb

ei.sdraob wrote: »

your math is all fishy (and the amount "pledged" grew from 250 million last week to 450 million this week :rolleyes:) you must be seriously joking if you are trying to sell this as a "good investment"
Ireland borrows 450 million at the current 4-5% rate we get and gives it to Greece at 5%

if we get paid back then thats one terrible investment with a real rate of 0.5-1% from Irelands perspective, yes thats right less than 1% rate for a BBB- (and on negative watch) rated "investment" :cool:

nobody is talking about this being a good investment on purely financial terms:rolleyes: this deal is been done because if it was done on the basis of financial investment the rate would be too high for Greece which is the problem - you've introduced this term for making a pithy point...actually i'm not sure what point you're are making

anyway, Ireland would be making a 0.5-1% margin on this loan. The margin is what you look at in lending because the money you use to lend isn't free.....just as a bank must lend at a rate that exceeds what it pays for funds in the wholesale or deposit market.

damnyanks

It's about spreading the burden and showing support for the EU.

Also imagine if we don't pay up and when we are in the exact same situation how would the rest of europe deal with us?

Mister men

Piriz wrote: »

in fairness guys:

• it hasn't happened yet, just all eurozone countries agreed to it if its necessary
• Ireland could make a profit from it, interest @ 5%
• safeguarding Greece would benefit all EU member states including Ireland

So we live in a country where we leave kids without special needs assistants so we can bail out another country....thanks the EU.

Mister men

damnyanks wrote: »

It's about spreading the burden and showing support for the EU.

Also imagine if we don't pay up and when we are in the exact same situation how would the rest of europe deal with us?

Hopefully kick us out.

Elevator

Piriz wrote: »

fair enough, but i'd assume the move is calculated, 450 million is not the most significant when it comes to showing support for a member state and participation within the EU. Remember the move is said to strengthen the Eurozone and benefit 'all' its members. Participation from Ireland will bring its own rewards, non-participation might be detrimental... If Ireland were in Greece's position wouldn't we prefer equal assistance from other members?
Are we certain Ireland would be borrowing the money?
I understand why people would be disgruntled with such an announcement due to our own Economic situation but we shouldn't close our doors and cover our ears. You scrub my back and i'll scrub yours is an attitude which would favor everyone! (IMO)

bollocks to the whole lot of it, have heard it all now

ei.sdraob

Piriz wrote: »

hey, you quoted me from where i was answering some other posters question.
I'm not trying to paint this as a "good investment", you say 'my maths is all fishy'? its not my maths, its from the article..
I have highlighted that it would be....ah just read my other posts ffs!

wasnt aimed at you but anyone why tries to make this out to be as "good investment"

state controlled media outlet paints a state bailout/aid as "good investement" so

woodseb wrote: »

nobody is talking about this being a good investment on purely financial terms:rolleyes: this deal is been done because if it was done on the basis of financial investment the rate would be too high for Greece which is the problem - you've introduced this term for making a pithy point...actually i'm not sure what point you're are making

anyway, Ireland would be making a 0.5-1% margin on this loan. The margin is what you look at in lending because the money you use to lend isn't free.....just as a bank must lend at a rate that exceeds what it pays for funds in the wholesale or deposit market.

ffs stop using the word investement

its not

its a form of aid not investment, that is my point

hows this for a "good investement", we take a loan at 4-5% and lend it to them at their current rate of 7%, same risk > higher return, still a bad investment but it surely wont be aid


anyways once again this might be a case of too little > too late, Greece's problems are a bit larger than the 30 billion EU/IMF are scraping together
we be lucky if we see this money back
more than likely there would have to be another bailout down the road as investors are not falling for this trick

and more importantly Greece's finances are still on negative trajectory


this bailout is like extending the overdraft limit to a drunk who does not want to sober out, and is still spending more on drink than he earns


yes its good that states are coming together to help, and this is exactly the sort of carry on i voted for under Lisbon, but once again were only delaying the inevitable here since Greece are not being serious about fixing their economy

ei.sdraob

in case anyone has trouble accessing the above linked FT article (stupid nagscreens)

Finally there is a deal. It came late, and only after the financial markets – and a rating agency – forced the European Union to put up or shut up. It will provide Greece with emergency loans at a rate of about 5 per cent, which is lower than present market rates. There is no agreement yet about the overall amount of money to be disbursed. But I hear that the total figure will be much larger than has been widely reported – somewhere between €50bn and €60bn.

It is not the worst conceivable deal. That would have been the German idea of funding at market rates. It is evident that the economic advisers of Angela Merkel, the German chancellor, have little experience with the resolution of international solvency crises. Otherwise they could not have conceivably insisted on such a ludicrous idea. The 5 per cent interest rate that has been agreed is, in my view, still relatively high given the situation Greece is in, and the likely debt dynamics it will face in the next few years. However, 5 per cent is better than the 7 per cent or so of the recent market rates for Greek two-year bonds. Moreover, the European Central Bank decided last week to prolong the exceptional collateral regime, which allows banks that own Greek bonds to exchange their assets for cheap central bank funds. This was a significant announcement, and will provide Greece and its creditors with breathing space.

So will this stave off insolvency? It is important to distinguish the near-term insolvency as a result of the failure to roll over existing debt, and the country’s long-term solvency position. This deal, I am confident, will solve the first issue. As I predicted last week, Greece will not default this year. But I am still sticking with my second prediction that Greece will eventually default. The numbers simply look too bad. The adjustment effort Greece is asked to make will be one of the largest in history. But unlike other countries that made a similar effort in the past, Greece cannot devalue; it faces a much more challenging global environment; it has a weak fiscal infrastructure; a low consensus in society in favour of deep reforms; and a fragile financial system. The agreed bail-out terms do not exactly offer much relief, except in the very short-term. It will become clear very soon that this loan agreement represents a net transfer of wealth from Athens to Berlin – and not the other way round.

All this points to an eventual but not imminent default. It is important to remember that default does not usually imply a complete wipe-out. Bondholders usually recover some proportion of their holdings. I would expect that some form of restructuring of the Greek debt is inevitable, whereby bondholders will see a percentage subtracted from the par value of the assets. The 5 per cent interest rate, relative to the market rate, may already be a metric of the size of a future restructuring. It is hard enough to imagine how Greece can get out of a simultaneous debt and competitiveness crisis without falling into some vicious circle – debt deflation, for example, or just extreme public hostility that will thwart the government’s reform efforts. But it is impossible, at least for me, to imagine a situation in which Greece can manage to extricate itself from a pending catastrophe without some debt restructuring.

The EU and its institutions do not come out of this with much glory. The European Council made a political statement on February 11 saying that it is willing to support Greece in principle, while subsequently failing to agree on a firm package. In March, they appeared to suggest they had a deal, when, in fact, they did not. There was a lot of deceit in the process. It took a speculative attack on the Greek bond market to bring about concrete action. A lot of harm has been done in the meantime.

It is still not a coherent policy. Many questions remain. For example, what will happen if Greece fails to repay the loan? Will the bond market interpret the deal as a sign that the EU will not let anyone fail who acts in good faith? Or will it start testing the EU’s solidarity for Portugal and possibly even Spain or Italy? There will come a point when the EU will no longer be in a position to help, even if it wants to.

The cost of the Greek bail-out is not high, compared with the hypothetical alternative of uncontrolled Greek default inside the eurozone. Portugal is a smaller country than Greece, in terms of gross domestic product, but Spain is the eurozone’s fourth-largest economy, with an annual GDP of more than €1,000bn ($1,350bn, £875bn) at current market prices. Is this going to be a sovereign-level re-run of the bail-out decision taken by the US government in respect of Bear Stearns and Lehman Brothers? Will Greece be lucky because it was the first ones to receive help, while Portugal and Spain, like Lehman beforehand, will enjoy no such support?

It is impossible to answer these questions. But it is evident that whatever will be agreed will only apply to Greece. The EU has still not provided a generalised crisis resolution regime. I suspect that smart investors know that.

Piriz

Mister men wrote: »

So we live in a country where we leave kids without special needs assistants so we can bail out another country....thanks the EU.

Oh yea thanks for quoting me and then making that point! thats brilliant, you should consider a career in law, barristers with your skills, imagine! f*ck sake!

You have no idea what you are talking about!
We are part of a European Union, Greece also has special needs kids, and poor people, and sick people and if they have no money yes we will bail them out!! Its a collective effort to strengthen the Eurozone! It was a EU directive not a hands up who wants to help, where Mary Harney raised her hand and said "we'll help the Greeks, sure we've saved that money by removing the SNA's". Cop on!

Mister men, they are talkin about this topic in after hours too, perhaps you'd take your f*cking dense rants there and stop quoting me!

Piriz

Elevator wrote: »

bollocks to the whole lot of it, have heard it all now

yea, again, thanks for quoting me and coming in with that rebuttal, thanks for stopping by!

now run along to after hours with your lack of any substance!

ei.sdraob

Piriz wrote: »

You have no idea what you are talking about!
We are part of a European Union, Greece also has special needs kids, and poor people, and sick people and if they have no money yes we will bail them out!! Its a collective effort to strengthen the Eurozone! It was a EU directive not a hands up who wants to help, where Mary Harney raised her hand and said "we'll help the Greeks, sure we've saved that money by removing the SNA's". Cop on!

Your argument might hold some water if Greece where actually bothering to address their problems, they are not

All this bailout would accomplish (if the money materialises as promisd and on time) is prevent a default in the short term, it does nothing to address the big issues

While we here in Ireland (and most rest of EU) have to work untill 68 now (and will go up more) they can retire at 65 (men) and 60 (women), is that fair (yes that word!)?

What was the point of pushing cuts on our welfare and PS if a good chunk of them savings will be transferred to another country, which has not undertaken same level of cuts

we are not far behind Greece anyways

Now, of course the Greeks are a basket case. Latest Eurostat revisions of its budgetary data show that actual deficit reached 13% of GDP in 2009. But Ireland is a close second here – with our deficit as a fraction of our real economy (GNP) being bang on with the Greek latest revisions. Worse than that, Greek economy has shrunk only by about 1/5 of the decline experienced by Ireland.

link

DidierMc

Is this what being at "the heart of europe" feels like?

GSF

DidierMc wrote: »

Is this what being at "the heart of europe" feels like?

We borrow from the Germans to lend to the Greeks. I supposes it keeps it from appearing as if Germany is the only one bailing out the Greeks as that might not play well in Germany.

But since this is just a stop gap measure for Greece they will be back for more there will be plenty more of this fiction to come.

wicorthered

GSF wrote: »

We borrow from the Germans to lend to the Greeks.

Its like something you'd get in a sitcom

Flamed Diving

As an exercise, I skipped all the posts in this thread. Could someone confirm to me if the majority of them are:

a) Failing to see the greater picture
b) Are being short-sighted
c) Are being sensationalist
d) All of the above


Answers please!

ei.sdraob

Flamed Diving wrote: »

As an exercise, I skipped all the posts in this thread. Could someone confirm to me if the majority of them are:

a) Failing to see the greater picture
b) Are being short-sighted
c) Are being sensationalist
d) All of the above


Answers please!

you should read the thread

i pointed out the "greater picture" and it aint pretty

Flamed Diving

ei.sdraob wrote: »

you should read the thread

i pointed out the "greater picture" and it aint pretty

I was mostly right. Anyway, I reckon we have to play ball in the EU, since it is probable that we will have to dip into such a fund, if things turn downwards for us. I still reckon Greece should just default.

P. Breathnach

Flamed Diving wrote: »

... I still reckon Greece should just default.

I think if Greece defaulted, then one of the greatest advantages of the euro, collective strength, would be at risk. That would make me very worried about our situation.

Flamed Diving

P. Breathnach wrote: »

I think if Greece defaulted, then one of the greatest advantages of the euro, collective strength, would be at risk. That would make me very worried about our situation.

I understand that, but what if the EU continues to pour tens of billions into Greece, only for it to slide further into chaos? What good is that? I mean, they are one step away from being unable to raise capital on bond markets. We are bad, but we ain't that bad.

SkepticOne

Good article from economist Paul Krugman in yesterdays' Irish Times:

Unfortunately, Greece cannot expect a similar performance. Why? Because of the euro.

Until recently, being a member of the euro zone seemed like a good thing for Greece, bringing with it cheap loans and large inflows of capital. But those capital inflows also led to inflation – and when the music stopped, Greece found itself with costs and prices way out of line with Europe’s big economies.

Over time, Greek prices will have to come back down. This means that, unlike postwar America, which inflated away part of its debt, Greece will see its debt burden worsened by deflation.

That’s not all. Deflation is a painful process, which invariably takes a toll on growth and employment. So Greece won’t grow its way out of debt.

On the contrary, it will have to deal with its debt in the face of an economy that’s stagnant at best.

So the only way Greece could tame its debt problem would be with savage spending cuts and tax increases, measures that would themselves worsen the unemployment rate.

Some people on this thread seem to be suggesting that it is right to lend Greece the 1/2 billion on the basis that we might be looking for a similar bailout in the not too distant future.

While I would be inclined to agree that it might well be the case that we'll be looking for a loan shortly, I'm not sure I agree with the logic that the best way to do this is to borrow more in order to lend to another high risk country.

What we seem to be doing by lending money to Greece is pretending to ourselves that things are not so bad here. We're trying to align ourselves with the prudent countries rather than the basket case ones but are we really fooling anyone other than ourselves?

I think when it comes time to look for a bailout what we have tried to do with Greece will make things harder not easier. Who wants to lend on favourable terms to a country that did not have the insight to understand the situation it was in and therefore exposed itself to unnecessary risk?

woodseb

I don't think the aim for us is to support the fund in the hope that we can dip into a similar pot if we hit dire straits. I don't think the money would be there from the other members to do another bailout if Greece is indeed given help, given the fact that Germany are already baulking at this package

Where we (and every other EU member) will benefit is by keeping our interest rate at a reasonable level - a Greece default would blow spreads out and make any borrowing by a PIIGS state unsustainable. By supporting Greece it lowers the risk of lending to a Eurozone member and 'keeps the wolf from the door'.

Of course there is the risk that Greece is the EU's Bear Stearns and the real problem of Portugal or Spain could be a Lehman down the road that can't be saved - but it's a risk that must be taken because letting Greece collapse will invevitably cause a credit contagion that we don't want to repeat

Here's a good table showing what we will contribute....

strathspey

GSF wrote: »

We borrow from the Germans to lend to the Greeks. I supposes it keeps it from appearing as if Germany is the only one bailing out the Greeks as that might not play well in Germany.

But since this is just a stop gap measure for Greece they will be back for more there will be plenty more of this fiction to come.

If I was German, I would be infuriated having to bail-out what can only be described as the

---

of Europe, ie. the PIIGS and that includes Ireland.

Scofflaw

strathspey wrote: »

If I was German, I would be infuriated having to bail-out what can only be described as the

---

of Europe, ie. the PIIGS and that includes Ireland.

On the whole, I'd rather we left it to the imagination, rather than using a term universally regarded as offensive, thanks.

moderately,
Scofflaw

Count Dooku

Slovakia Rejects the Loan for Greece

The Slovak Parliament voted against a proposal to provide a loan to Greece on Wednesday. Slovakia should have participated in the €110 billion bailout for Greece with roughly €800 million. Sixty-nine lawmakers voted to not provide a loan to Greece while thirteen