I have a genuine question: what changed over the weekend?

Xiney

Seemed like, to me, on Friday all these European bigwigs were saying "Ireland can handle their money we have complete confidence blah blah"

Now everyone is talking about a bailout happening imminently (despite Cowen's assurances to the contrary, for what they're worth)


So, serious, genuine query from someone who has only been paying half attention... what changed?

ei.sdraob

Friday we were being lied to

Today we are still being lied to, but no one is buying it anymore

wylo

Nothing afaik, just more pressure from the EU.

flutered

me thinks ollie de finns report to the ecb showed what was really happening, not what lie-nehan and co wanted us to think is happening, also the ecb will protect what they have.

Dirk Gently

So, serious, genuine query from someone who has only been paying half attention... what changed?

significant amounts of money (big deposits) were being taken out of Irish banks over the past week which spooked the ECB.

Scofflaw

Nothing changed in Ireland's position. The markets, though, were so jittery last week that it became increasingly clear to other countries who have debt to service much sooner than us that when they had to go to the bond markets early next year the chances are that their bond rates would be so high as to make it impossible for them to borrow. The pressure from those countries has added to the pressure from the ECB to get Ireland's banks off ECB life support (currently >€100bn) and ring-fence them in some way.

The two together have resulted in Ireland coming under pressure to take a bailout. In a sense, therefore, the markets, by believing that we need a bailout, have made it politically necessary for us to be given one.

cordially,
Scofflaw

Scofflaw

clown bag wrote: »

significant amounts of money (big deposits) were being taken out of Irish banks over the past week which spooked the ECB.

Not quite - the Irish banks had already lost most of their large deposits (which wouldn't be covered by any guarantee) - the figures were released last week.

cordially,
Scofflaw

DiscoStu

boi also sated that it was having trouble securing funds from overnight lending. the implication being that a localized 2008 credit crunch type scenario was unfolding. that put the willies up the ecb and forced the current play for a bailout.

Dirk Gently

Scofflaw wrote: »

Not quite - the Irish banks had already lost most of their large deposits (which wouldn't be covered by any guarantee) - the figures were released last week.

cordially,
Scofflaw

I thought I seen some justification for the deposit trends contributing on various reports with people suggesting some large amounts were removed in the past week. Obviously they must have meant to say figures were released in the past week. Maybe I just mis-heard the reports amongst all the commotion over the last few days. I'm sure the release of the figures done no good for "confidence" in any case.

dan_d

I thought that was AIB that said that.

Anyway OP, if you've got a whole heap of time on your hands, refer to the Bailout Megathread in this forum. Otherwise, the short version is as Scofflaw says. We've been proceeding on the basis that we can afford the bank bailout and budget cuts, but the markets got spooked a couple of weeks ago, raised the percentage rates on borrowing for us. The EU is running scared that they will do the same for the rates on Portugal and Italy's borrowing, and then eventually Spain (4th biggest economy in the EU apparently), and as a result the whole thing will come tumbling down around their ears, as these countries will no longer be able to afford to borrow to service their debt.

Hence the pressure on us to accept a bailout, even though we don't need to go to the markets until the middle of next year. We are, unfortunately, being made a bit of a scapegoat and an example of.

The Brits are weighing in because any demise on our part will hit them badly - we are a huge export market for them, and a number of their banks are exposed to us (RBS). And for some reason they seem to think they'll have to part finance it - they lost me a bit on that one - but you get the picture.

NapoleonInRags

Scofflaw wrote: »

Nothing changed in Ireland's position. The markets, though, were so jittery last week that it became increasingly clear to other countries who have debt to service much sooner than us that when they had to go to the bond markets early next year the chances are that their bond rates would be so high as to make it impossible for them to borrow. The pressure from those countries has added to the pressure from the ECB to get Ireland's banks off ECB life support (currently >€100bn) and ring-fence them in some way.

The two together have resulted in Ireland coming under pressure to take a bailout. In a sense, therefore, the markets, by believing that we need a bailout, have made it politically necessary for us to be given one.

cordially,
Scofflaw

To my mind this is an excellent summary of the current position.

Tora Bora

dan_d wrote: »

I thought that was AIB that said that.

Anyway OP, if you've got a whole heap of time on your hands, refer to the Bailout Megathread in this forum. Otherwise, the short version is as Scofflaw says. We've been proceeding on the basis that we can afford the bank bailout and budget cuts, but the markets got spooked a couple of weeks ago, raised the percentage rates on borrowing for us. The EU is running scared that they will do the same for the rates on Portugal and Italy's borrowing, and then eventually Spain (4th biggest economy in the EU apparently), and as a result the whole thing will come tumbling down around their ears, as these countries will no longer be able to afford to borrow to service their debt.

Hence the pressure on us to accept a bailout, even though we don't need to go to the markets until the middle of next year. We are, unfortunately, being made a bit of a scapegoat and an example of.

The Brits are weighing in because any demise on our part will hit them badly - we are a huge export market for them, and a number of their banks are exposed to us (RBS). And for some reason they seem to think they'll have to part finance it - they lost me a bit on that one - but you get the picture.

Ok, so let's say we don't really need a bailout, but we take one for euro political correctness. Helping get bond markets back to a level where Portugal / Spain etc, can borrow again.
What's to stop Ireland going to the bond markets again in the new "normal" market, raising money and using it to pay off the bailout money which would carry a higher interest rate.

Bailing out of the bailout:) Once again tell the electorate "we have turned the corner".

Permabear

This post has been deleted.

Bob_Latchford

Tora Bora wrote: »

Ok, so let's say we don't really need a bailout, but we take one for euro political correctness. Helping get bond markets back to a level where Portugal / Spain etc, can borrow again.
What's to stop Ireland going to the bond markets again in the new "normal" market, raising money and using it to pay off the bailout money which would carry a higher interest rate.

Bailing out of the bailout:) Once again tell the electorate "we have turned the corner".

Depends on the interest rates involved. If Ireland taking a bail out decreases the future rate then its great idea.

If the speculation just moves over to Greece & Spain etc and interest rates on debt go up your left with paying whatever rate is negotiated now. which we may or may not have needed.

Really need some sharp economists with irish interests at heart in the negotiating team.

ei.sdraob

Bob_Latchford wrote: »

Depends on the interest rates involved. If Ireland taking a bail out decreases the future rate then its great idea.

I dont think it will, just look at Greece

An IMF/EU bailout will buy time (2-3 years in case of Greece)

If the underlying structural issues are not fixed in that timeframe then we are back to square one, but in a worse state. Greece now has few years to get house in order.

Ireland on the other hand might just get a bailout of the banks, we still will need to borrow 21 billion sometime next year, that doesnt give much time to get house in order, considering we had 2 years to do this and only made a half-arsed attempt, i am not holding my breath:(

SkepticOne

Here's what happened over the weekend I think. Despite the blanket guarantee in place, there has been a drain of funds from the banks from bond holders, corporate depositors and retail depositors over the last few months. Consequently, the banks - again despite the state guarantee and support from the ECB - were finding it difficult to raise money and were thus becoming insolvent.

The government since it had already extended every bit of support to the banks, realised the problem was beyond its control and approached the EU for direct help for the banks. Their position was probably that they could not afford to take on further debt so the EU should fund the banks directly. The EU however would rather lend to Ireland rather than the banks directly. That way Irish tax payers could continue to be responsible for the problems of the banks albeit at a slightly better interest rate than would other wise be the case.

This is where the dispute is and why the papers seem to be saying that Ireland is "under pressure" to accept a bailout. This makes it seem as if everything is grand with Ireland and somehow the EU forcing Ireland when in fact it is Ireland that is approaching the EU. A bailout of Ireland was always inevitable at some stage but it is the banking situation that has brought it forward to last weekend.

Leiva

SkepticOne wrote: »

Here's what happened over the weekend I think. Despite the blanket guarantee in place, there has been a drain of funds from the banks from bond holders, corporate depositors and retail depositors over the last few months. Consequently, the banks - again despite the state guarantee and support from the ECB - were finding it difficult to raise money and were thus becoming insolvent.

The government since it had already extended every bit of support to the banks, realised the problem was beyond its control and approached the EU for direct help for the banks. Their position was probably that they could not afford to take on further debt so the EU should fund the banks directly. The EU however would rather lend to Ireland rather than the banks directly. That way Irish tax payers could continue to be responsible for the problems of the banks albeit at a slightly better interest rate than would other wise be the case.

This is where the dispute is and why the papers seem to be saying that Ireland is "under pressure" to accept a bailout. This makes it seem as if everything is grand with Ireland and somehow the EU forcing Ireland when in fact it is Ireland that is approaching the EU. A bailout of Ireland was always inevitable at some stage but it is the banking situation that has brought it forward to last weekend.

So by nailing the Economy to the Banking Crisis crucifix we are all going down together .

If we had not guaranteed the banks would we be any better off ? or is that the 6million dollar question ?

Scofflaw

mixednuts wrote: »

So by nailing the Economy to the Banking Crisis crucifix we are all going down together .

If we had not guaranteed the banks would we be any better off ? or is that the 6million dollar question ?

That's the 6 billion euro question indeed. Would the banks have collapsed, taking large chunks of our economy with them, or not?

As far as I can see, the only arguments that have been advanced against the bank guarantee are that we don't really know they'd have collapsed without it, or that other countries have suffered bank failure and so surely we should too.

The problem with the first argument is that it's a little easier in hindsight - or was, since it turns out that our banks are still in trouble. At the time, it was seen as an a necessary step by most commentators.

Something that strikes me about the second argument is that at the time of the guarantee we had quite a large camp of opinion arguing that the guarantee was unnecessary, because even if the banks collapsed it still wouldn't be so bad - however, those voices seem much quieter now that people are genuinely worried about their savings (and some of the same voices are urging them to move to gold, or foreign banks, as they have already done). Speaking as a business, the last thing I'd like to see is a bank collapse.

On the other hand, the guarantee has clearly not been sufficient to resolve the problems of Irish banks.

cordially,
Scofflaw

Laminations

Scofflaw wrote: »

That's the 6 billion euro question indeed. Would the banks have collapsed, taking large chunks of our economy with them, or not?

Why are 'the banks' constantly lumped together as some type of homogenous entity? People have problems with the guaranteeing of Anglo, a non-retail, non-atm bank. It has yet to be shown that Anglo was systemic, we were told that Irish pensioners and credit unions had their money on deposit with Anglo (this has been shown to be untrue), but even if it was, a modest depositor guarantee in Anglo would have been cheaper than strapping all of the bond holders risk to the balance sheet of the nation. The secrecy around Anglo bailout is astounding, I'm amazed Cowen and Co. aren't under investigation after the allegations last week that the government saved Anglo to protect Sean Quinn. If Anglo was cut loose you need to show some evidence that it would have led to the collapse of the other banks. We need to see the figures and hear the rational for including Anglo, we can't just be expected to 'believe' that Anglo was important.

Bob_Latchford

didnt a merchant bank involved in the talks about bank guarantee advise government against the Anglo guarantee?

later12

Scofflaw wrote: »

however, those voices seem much quieter now that people are genuinely worried about their savings (and some of the same voices are urging them to move to gold, or foreign banks, as they have already done).

but why would most people be concerned about their savings?

Most people are protected anyway, without the bank guarantee.

That is, savers with up to 100, 000 euros, which would be an enormous majority of citizens with Irish bank accounts.

gurramok

later10 wrote: »

but why would most people be concerned about their savings?

Most people are protected anyway, without the bank guarantee.

That is, savers with up to 100, 000 euros, which would be an enormous majority of citizens with Irish bank accounts.

Have you not heard anything at all?

There is a serious perception(real or not) among the populace that Irish banks are bust hence the ECB/IMF bailout talks underway to shore them up. Hopefully the bailout will calm nerves and restore a bit of confidence to prevent any bank runs.

later12

gurramok wrote: »

Have you not heard anything at all?

There is a serious perception(real or not) among the populace that Irish banks are bust hence the ECB/IMF bailout talks underway to shore them up. Hopefully the bailout will calm nerves and restore a bit of confidence to prevent any bank runs.

Read the question.

The Irish Government has already covered all savings up to 100,000 euro in the event of a bank collapse. This existed prior to the bank guarantee of the 30th of september.

My question was, in the event of such a collapse, what would regular savers even have to worry about. Their savings would ultimately be protected at european level.

gurramok

later10 wrote: »

Read the question.

The Irish Government has already covered all savings up to 100,000 euro in the event of a bank collapse. This existed prior to the bank guarantee of the 30th of september.

My question was, in the event of such a collapse, what would regular savers even have to worry about. Their savings would ultimately be protected at european level.

Read the answer.

People are worried that Irish banks will go bust and that the Irish state cannot meet any payout of that guarantee should an Irish bank go bust.

Its been said they are guaranteed at an european level and links provided, the average person does not know that nor has been reliably informed. We had a thread on it here where many posters with economic knowledge never knew the 100k guarantee at an european level even existed so how do we expect the average non-boards person to know?

ei.sdraob

gurramok wrote: »

Read the answer.

People are worried that Irish banks will go bust and that the Irish state cannot meet any payout of that guarantee should an Irish bank go bust.

Its been said they are guaranteed at an european level and links provided, the average person does not know that nor has been reliably informed. We had a thread on it here where many posters with economic knowledge never knew the 100k guarantee at an european level even existed so how do we expect the average non-boards person to know?

There isn't a guarantee of 100K at the european level YET. We were lied to.

Neither do any of the European documents state exactly "who" pays in event of bank run, it sure aint the people in charge of the printing presses. If its the state governments ultimately responsible we are back to square one.

krd

dan_d wrote: »

The Brits are weighing in because any demise on our part will hit them badly - we are a huge export market for them, and a number of their banks are exposed to us (RBS). And for some reason they seem to think they'll have to part finance it - they lost me a bit on that one - but you get the picture.

Funds from the European Financial Stability Fund are drawn down from member states. If Ireland gets 80 to 100bn, the Brits will loan (remember it's a loan) about 7 to 8 bn.

It's a low interest loan, with strings attached. All the member states are doing is going guarantor on a loan for us.

Ireland is about 6 to 7% of England's export market. If the Irish economy collapsed it would really hurt them. So, it's well worth their while to take a gamble on us. If we can pay the bailout loan, they've nothing to lose. If they don't and the Irish economy collapses they will lose big time.

And we have a similar relationship to the rest of Europe.

h2pogo

The whole banking system is based on debt and can not work..

Money is created out of debt...Its called fiat currency and is created in a fractional reserve banking system..

Its a clever system where fraud/counterfitting has been legalized..from the city of london the whole global economy is now using this system of banking thus giving the world a debt based economy..

Its breaking the natural laws of economics and unless adresed will leave the world endebted to an unelected elite of bankers with a large printer..

Whats happend over the weekend is the enevitable has come closer..

gurramok

ei.sdraob wrote: »

There isn't a guarantee of 100K at the european level YET. We were lied to.

Neither do any of the European documents state exactly "who" pays in event of bank run, it sure aint the people in charge of the printing presses. If its the state governments ultimately responsible we are back to square one.

Ah. i see your post on it now http://www.boards.ie/vbulletin/showpost.php?p=69056162&postcount=69

Not implemented until 2012. No wonder people would be worried.

Duiske

Is there a fixed interest rate on the EU emergency bailout cash ? I have heard 5%, but someone suggested 2% last night ? Is 5% still too high for us ?

ei.sdraob

Duiske wrote: »

Is there a fixed interest rate on the EU emergency bailout cash ? I have heard 5%, but someone suggested 2% last night ? Is 5% still too high for us ?

It be around 5% (Was also mentioned on frontline few days ago), we be lucky if we get that

no way it be 2% since member states have to borrow at higher percentage than that (~3-4%) to lend to ireland

this summer we took debt at 5% and proceeded to give this 1.3 billion to Greece at 5%, we had threads here about this

K-9

ei.sdraob wrote: »

this summer we took debt at 5% and proceeded to give this 1.3 billion to Greece at 5%, we had threads here about this

Indeed, talk about that has gone very quiet lately!

I'd heard rates of 5-6% being mentioned.

krd

SkepticOne wrote: »

Here's what happened over the weekend I think. Despite the blanket guarantee in place, there has been a drain of funds from the banks from bond holders, corporate depositors and retail depositors over the last few months. Consequently, the banks - again despite the state guarantee and support from the ECB - were finding it difficult to raise money and were thus becoming insolvent.

The guarantee is worthless if Ireland is properly bankrupt, the government would not have the funds to pay out. And they never did. And neither would anyone lend to Ireland to honour the guarantee, if the banks were to collapse, which would mean our economy would completely collapse.

In a doomsday scenario, the Irish government wouldn't have the cash. It's called writing cheques your ass can't cash.

The bank guarantee was always a bluff. At the time, in 2008, there was major panic and confusion. And it wasn't from Cassandras being "negative". There was genuine confusion as it was emerging how dishonest and reckless bankers had been everywhere. After the Irish bank guarantee there were many English people putting deposits in Irish banks because they believed there own banks weren't safe.

Had the various governments approach been "let the morkets decide" it would have triggered a massive collapse through the entire global banking system. This has happened before - in the early 30s for example. It was possibly the major factor that led to the second world war.

Most money in the world does not exist as hard cash. It's credit. Even the cash in your pocket only exists because someone has borrowed money from a bank. A full banking collapse causes vast amounts of money to vanish into thin air.