EU intervention rather than IMF?

Scofflaw

The IMF have denied rumours that Ireland has already made an arrangement with them - rumours which seem to have been triggered by misinterpretation of Patrick Holohan's remarks about the government's austerity package being already one that the IMF would like to see.

Bond spreads jumped by 65 basis points last night to 8.76% on the speculation caused by the Central Bank governor's remarks - the biggest one-day jump since we joined the euro.

The EU has said that it "stands ready to ride to Ireland's rescue" with a Greece-style bailout:

European commission president José Manuel Barroso said today the EU stood ready to ride to Ireland's rescue if needed, after the country's borrowing costs surged to record levels.

"What is important to know is that we have all the necessary instruments in place now to support Ireland if necessary," Barroso said, when asked whether the EU would bail out Ireland as it did Greece earlier this year.

Barroso made the comments in Seoul, where world leaders have gathered for the G20 summit. Ireland's crisis has triggered fears of a repeat of Greece's near-bankruptcy, casting a shadow over the summit as world leaders try to hammer out a deal for global growth.

As rumours of an imminent bailout swirled, the International Monetary Fund was forced last night to deny that Ireland had requested financial assistance. The IMF said relations with Ireland were "normal", and that Dublin's plans to slash its deficit by €15bn (£12.8bn) by 2014 showed it was committed to fiscal adjustment.

Barroso said "in case of need, the EU is ready to support Ireland".

"We are monitoring the situation closely," he said, adding that "we support the efforts of the Irish authorities" to tackle a deficit that has ballooned after bailouts of cash-strapped Irish banks.

The EU already provides long-running guarantees on certain liabilities held by Ireland's crisis-hit banks.

Source

cordially,
Scofflaw

sarumite

This could be ignorant, but wasn't the Greece bailout funded by the EU, though managed by the IMF? What would the difference be between an EU or IMF bailout?

Justin Collery

Questions:
What did Ollie tell the opposition and union leaders during the week? There has been little substantive talk of what he said. Could he have said that the IMF/EU deal was basically done, and kicking and screaming will only make the inevitable happen more quickly? 2 year bonds when up by 17% yesterday, and are up 7% already today, closing the gap between the cost of 2 year money and 10 year money, indicating the markets believe the deal is done and/or default is likely.

Implications:
The situation is different than with Greece, and importantly so. We have bankrupt banks with a guarantee from a bankrupt government. When the EU/IMF come in the guarantee is seen to be worthless which *might* precipitate another run on the banks, one which the government could do nothing about this time. The EU/IMF will likely be conscious of this and may take measures with the banks at the same time as they do with the government. I can't see the EU letting a bank go bang, but am fascinated to see what they will do to stop it.

dan_d

Scofflaw wrote: »

The IMF have denied rumours that Ireland has already made an arrangement with them - rumours which seem to have been triggered by misinterpretation of Patrick Holohan's remarks about the government's austerity package being already one that the IMF would like to see.
cordially,
Scofflaw

I actually wondered how many people/journalists would misinterpret these remarks when they were made yesterday.:rolleyes:

It's very unfortunate - the man seems to be very good at his job, and pulls no punches (as does the current regulator). However, one should always build in the stupidity of the media when making remarks such as this and the hysteria that they like to feed.

The whole situation is making me tired. We may actually have the means of paying off our debts, we may be able to recover, and we may be able to handle the whole thing. As a country, we should be looking at this as an opportunity to rebuild ourselves for the better. Yes we screwed up, and our banks are a massive millstone around our neck, but if we can pay off our debts then that's what matters. Unfortunately, we have to deal with a level of hysteria that's affecting us very adversely, a lot of it based on Chinese whispers, and there appears to be nothing we can do to calm the situation. I just don't know what the solution is other than to literally keep going, and not default.

ei.sdraob

Whoever our new overlords are (IMF or EU or FF or FG/Lab) they all will have to solve the underlying imbalance in our economy.

Balance the deficit and problem is solved, i wrote about this first last year in the income vs expenditure thread.

ednwireland

what you have to remember is this statement from mcwilliams
the most important reason we are bailing out banks and the eu is giving us the money to do so, and why no gov will restructure the debt and tell bondholders their gamble failed.
theres a much bigger game going on here and we are the pawns

The fact is that Rehn will not save Ireland. On the contrary, he will use the Irish people to save the German banks.

Let's cut to the chase to see what is really going on here. Ireland's banks owe German banks alone €127bn. Looked at from another perspective, the German banks are in the hole to Irish banks and developers to the tune of close to 90pc of Irish GNP. By rubberstamping the Irish elite's bank bailout, the European Commission has saved the reckless German banks -- who don't deserve to be saved -- and punished the ordinary Irish citizen, who doesn't -- in the main -- deserve to be punished.

http://www.independent.ie/opinion/columnists/david-mcwilliams/david-mcwilliams-government-must-cut-deal-that-gives-the-people-hope-2413679.html

Sleepy

Is there a chance that this is all a giant stroke?

Virtually all debt in this country (both that of the banks and the government) seems to be moving into the hands of the ECB. Could it be that the "master plan" is to centralise all debt before defaulting on it / finally admitting we're broke and arranging a payment plan involving some debt forgiveness?

ei.sdraob

Sleepy wrote: »

Is there a chance that this is all a giant stroke?

Virtually all debt in this country (both that of the banks and the government) seems to be moving into the hands of the ECB. Could it be that the "master plan" is to centralise all debt before defaulting on it / finally admitting we're broke and arranging a payment plan involving some debt forgiveness?

I already mention something like this few days ago, Scofflaw was trying discuss it too but it got sidelined

basically I think Greece and Ireland are being used to devalue the euro without actually resorting to much money printing, there is already a full scale currency war out there with US,China,Japan,UK and Brazil all locked in a currency mud slinging

even the BBC are covering the subject now

Nijmegen

Can I make a GIANT CLARIFICATION regarding the IMF?

Contrary to what our politicians would like to tell us, the IMF does not stipulate policy changes. It agrees with a country how much they need to cut and by when, and perhaps what % of that will be new tax versus cuts.

They then leave it to the local politicians to figure out how to make that happen.

Our politicians, who've run the country into the ground, would rather we believe that the IMF and the EU is imposing each cut by design, so they can go back to their constituents and say "Ah sure, I would never have done that to you...."

Drivetime had an interview with the former UK finance minister when they called in the IMF, and as he said directly "No no, we decided which cuts to make after they agreed a figure with us. They were quite businesslike and easy to work with."

Make no mistake, our politicians dug us into this mess, and the EU or IMF is only going to hand them a new shovel to dig us out. They pick the direction.

Nody

Sleepy wrote: »

... arranging a payment plan involving some debt forgiveness?

More likely it would be to extend the duration of the loan length from 5 to 8 years etc.

Sleepy

Ah now, Nody, with a single institution to negotiate with, that we're doing a favour for by devaluing the euro and who's largest member's banks we're helping to save, I think some level of debt forgiveness can be worked out.

That said, if the extension of the loan was at a rate that was low enough compared to our current rate (e.g. 3% rather than 6%) that could in real terms be a form of debt forgiveness...

BeeDI

EU bailout means the Frogs and Krauts get to tell us exactly what to do with corporation tax:mad:

IMF bailout would hopefully mean, less of an agenda to force us to give up the last piece of independent fiscal policy we have left:)

beagle001

Whats likely to happen to AIB,BOI and Irish Life when the IMF/EU eventually do come in is the whole banking system going to be restructured.

gollem_1975

BeeDI wrote: »

EU bailout means the Frogs and Krauts get to tell us exactly what to do with corporation tax:mad:

IMF bailout would hopefully mean, less of an agenda to force us to give up the last piece of independent fiscal policy we have left:)

eh , just because they "tell" us what to do.. does that necessarily mean that we have to do it?

My understanding is that there is no provision in any of the treaty's we have voted on that allows the EU to explicitly dictate our tax policy. they can make recommendations but ultimately it is up to the Irish government to agree on these changes before they are implemented.

Our autonomy won't allow us to completely avoid pain but we still have the autonomy to determine how said pain is distributed (i.e. what taxes are increased what expenses are reduced).

the way I'd see it is that the IMF wouldn't have same vested interest in keeping the EU project afloat as the EU itself so therefore I think the EU has to be careful not to impose too harsh a regime on us..the IMF would not have any such concerns.

oppenheimer1

ednwireland wrote: »

what you have to remember is this statement from mcwilliams
the most important reason we are bailing out banks and the eu is giving us the money to do so, and why no gov will restructure the debt and tell bondholders their gamble failed.
theres a much bigger game going on here and we are the pawns



http://www.independent.ie/opinion/columnists/david-mcwilliams/david-mcwilliams-government-must-cut-deal-that-gives-the-people-hope-2413679.html

Would McWilliams be pandering to his audience again?

Scofflaw

ednwireland wrote: »

what you have to remember is this statement from mcwilliams
the most important reason we are bailing out banks and the eu is giving us the money to do so, and why no gov will restructure the debt and tell bondholders their gamble failed.
theres a much bigger game going on here and we are the pawns

http://www.independent.ie/opinion/columnists/david-mcwilliams/david-mcwilliams-government-must-cut-deal-that-gives-the-people-hope-2413679.html

McWilliams is, as usual, talking very loosely and thumping the populist drum of "it's not our fault" because that's what sells his output to his avid fans. Of course we owe the money to someone - everyone's foreign debt is owned by somebody - and of course that gives them an interest in not letting us go under, because we're systemic (to coin a phrase). But we're not propping up our banks because they'd do damage to German banks if they fell over, but because they'd have ripped a huge hole in our economy if they went. If it comes to it, we actually owe the British more than we owe the Germans - €186bn compared to Germany's €140bn.

As for 'reckless German banks' - that's hilarious. Remind me whose banks were discovered to have been conservative with the truth? German banks, or Irish banks? Whose regulator was saying everything was rosy? Foreign banks loaned Irish banks money because our regulators and government were vouching for them, were supposed to be regulating them - but it turns out they had no idea what was going on. And who actually spent the money they lent us? We did.

McWilliams is simply offering what people want to hear - that we could refuse to pay the Germans, and thereby not have to pay anything ourselves, and do it with a clear conscience because "they" were recklessly subsidising our boom. That's not an economic analysis - it's populist drivel. The Indo is trying very hard to shift the blame from our political/economic class to any group of "durned foreigners" it can find, and McWilliams is singing lustily from his employer's song-sheet.

"It's all the fault of the lenders for recklessly lending us money" - for Heaven's sake, dress that up as you will, and it's still the cry of a child who ate all the cookies blaming the fact that they were there. That's why Nanny Europe is taking us in hand right now. Hopefully, one day, we'll grow up - but not if we believe the tripe McWilliams and his acolytes churn out.

regards,
Scofflaw

_Kaiser_

How much longer will this farce continue until FF throws in the towel and resigns in shame... bond levels are at 8.91% now according to Bloomberg.

It's obvious to ANYONE with even a passing interest in this that the "markets" (that we've been told are so vital to our recovery.. hell, survival at this stage!) aren't buying Lenihan or Cowen's soundbites.

Will this country really have to fall over that cliff completely before FF give up power?

Sleepy

Kaiser2000, you seem to be under some form of misconception that Fianna Fail members actually recognise the word shame, nevermind the emotion.

ashleey

Scofflaw wrote: »

McWilliams is, as usual, talking very loosely and thumping the populist drum of "it's not our fault" because that's what sells his output to his avid fans. Of course we owe the money to someone - everyone's foreign debt is owned by somebody - and of course that gives them an interest in not letting us go under, because we're systemic (to coin a phrase). But we're not propping up our banks because they'd do damage to German banks if they fell over, but because they'd have ripped a huge hole in our economy if they went. If it comes to it, we actually owe the British more than we owe the Germans - €186bn compared to Germany's €140bn.

As for 'reckless German banks' - that's hilarious. Remind me whose banks were discovered to have been conservative with the truth? German banks, or Irish banks? Whose regulator was saying everything was rosy? Foreign banks loaned Irish banks money because our regulators and government were vouching for them, were supposed to be regulating them - but it turns out they had no idea what was going on. And who actually spent the money they lent us? We did.

McWilliams is simply offering what people want to hear - that we could refuse to pay the Germans, and thereby not have to pay anything ourselves, and do it with a clear conscience because "they" were recklessly subsidising our boom. That's not an economic analysis - it's populist drivel. The Indo is trying very hard to shift the blame from our political/economic class to any group of "durned foreigners" it can find, and McWilliams is singing lustily from his employer's song-sheet.

"It's all the fault of the lenders for recklessly lending us money" - for Heaven's sake, dress that up as you will, and it's still the cry of a child who ate all the cookies blaming the fact that they were there. That's why Nanny Europe is taking us in hand right now. Hopefully, one day, we'll grow up - but not if we believe the tripe McWilliams and his acolytes churn out.

regards,
Scofflaw

And could someone remind who proffered the idea of a bank guarantee? Wasn't it the same DM?

Scofflaw

ashleey wrote: »

And could someone remind who proffered the idea of a bank guarantee? Wasn't it the same DM?

It was - because that was what looked popular at the time. He wrote a positively adulatory piece about it, but now that public sentiment is against it, so is McWilliams. If we go back to The Pope's Children, McWilliams was also an out and out celebrant of our bubble.

It amazes me that people look for direction from a pundit who just points whichever way the wind is blowing.

cordially,
Scofflaw

Amhran Nua

Nijmegen wrote: »

Contrary to what our politicians would like to tell us, the IMF does not stipulate policy changes. It agrees with a country how much they need to cut and by when, and perhaps what % of that will be new tax versus cuts.

The IMF does, in fact, make specific recommendations. In South Korea in 1998 for example they were the following:

• Stabilization and reform program to rebuild usable reserves, strengthen and stabilize the won, and ensure Korea’s re-entry into international capital markets.
• Implement the reform program, especially as the contraction in output will be sharper than originally anticipated, with unemployment expected to continue rising.
• Maintain social consensus and stability. In this context, they emphasized the need for an adequate social safety net to protect vulnerable groups in the economy that are adversely affected by the restructuring process.
• Continue to pursue policies to safeguard the gains in confidence, preserve social stability, and decisively address weaknesses in the financial and corporate sectors.
• Continue to focus monetary policy on maintaining exchange market stability . Reduction in interest rates provided the exchange market remained stable.
• Fiscal policy; widen the deficit
• Additional social expenditures were desirable to help preserve social consensus, and supported a modest further widening of the fiscal deficit to allow additional social safety net expenditures.
• Strengthen the financial system to be imperative in the period ahead.
• Rationalize the merchant banks, create a sound and more efficient commercial banking sector.
• Use public resources to support financial sector restructuring. Don’t provide public funds for nonviable banks.
• Bring Korea’s prudential regulations and supervision closer to international best practices.
• Regulate short-term external borrowing and foreign exchange
• Develop the capital market
• Create debt workout units in commercial banks with the help of external audits, form voluntary creditor committees, and improve disclosure to creditors by the large conglomerates.
• Open up of the economy to foreign investment, and strengthen prudential regulations and supervision of banks.

ashleey

No doubt most people are here to slag the IMF but South Korea is an interesting example. They worked their ... off and now we buy their cars, flat screens etc with a straight face. Maybe the IMF have some good ideas?

Amhran Nua

ashleey wrote: »

No doubt most people are here to slag the IMF but South Korea is an interesting example. They worked their ... off and now we buy their cars, flat screens etc with a straight face. Maybe the IMF have some good ideas?

More like the South Koreans have some good ideas. I've a thread somewhere in the depths of the forum about following their example, step by step.

caseyann

Isnt this what was foretold about the selling of Ireland soul to the devil