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Anglo will push up our deficit

  • 16-08-2010 5:24pm
    #1
    Laminations
    Registered Users, Registered Users 2 Posts: 4,693 ✭✭✭


    So all those saying the bank bailout was just IOUs and the deficit is the real issue, it seems all these IOUs aren't going to be kept off the books forever

    http://www.rte.ie/business/2010/0816/anglo.html

    Anglo will now seriously cost us in terms of borrowing rates to service this debt. The markets are already viewing this badly. Anglo private debt should never have been gauranteed and hoisted on the tax payers shoulders


Comments

  • #2
    ardmacha
    Registered Users, Registered Users 2 Posts: 7,476 ✭✭✭ardmacha


    I am not sure we need a new thread for this obvious statement.


  • #3
    ei.sdraob
    Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    we can only post threads here based on news based on positive (and wishful) spin :pac:


  • #4
    oppenheimer1
    Closed Accounts Posts: 6,084 ✭✭✭oppenheimer1


    Laminations wrote: »
    So all those saying the bank bailout was just IOUs and the deficit is the real issue, it seems all these IOUs aren't going to be kept off the books forever

    http://www.rte.ie/business/2010/0816/anglo.html

    Anglo will now seriously cost us in terms of borrowing rates to service this debt. The markets are already viewing this badly. Anglo private debt should never have been gauranteed and hoisted on the tax payers shoulders

    Not quite. Those IOU's haven't actually been drawn down so money hasn't actually been borrowed to make the payments. Its only when you read that "cash" has been put into the banks is when actual borrowing has taken place. This requires an actual interest payment. What Honohan is saying is that these IOU's have to be added to the liabilities on the Irish balance sheet driving up the deficit, but this deficit is mostly paper. This paper will never be cashed but will always have to remain on books until it is.

    The only way this will make Irish borrowing payments higher is that the added risk increases the price of Irish bonds. One could argue that this added risk is already priced in, and has been since the nationalisation of Anglo, or the introduction of the guarantee, take your pick.


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