Size of bailout. "Work it out for yourselves", says Lenihan

Soldie

So, what will the bailout figure be?

During last night's press conference (link) Brian Lenihan refused to be pinned down on size of the bailout. When pressed on the question, he said that "you can work it out for yourselves".

It seems some independent economists have taken Brian Lenihan up on his offer. Constantin Gurdgiev is putting the figure at upwards of €120 billion (source), while the author of NAMA Wine Lake reckons it'll be €200 billion or higher (source).

Indeed, the markets don't seem to be reacting too well to both Brians lowballing the bailout figure: Irish, Portuguese, Spanish and Greek 5-year Credit Default Swaps have surged to 530, 460, 281 and 1000 basis points, respectively. The Euro is also tumbling against the dollar. Another factor that adds to the uncertainty is the vague remark that was made about the banks being restructured. Michael Noonan said today that there may be some disagreement between the IMF and the EU, with the IMF wanting the bank bond holders to shoulder some of the burden.

Are we better off just defaulting before it's too late?!

Scofflaw

It's a little iffy attributing the reaction of the bond markets to any particular question - I've already seen the bond movement being attributed to uncertainty over whether the Irish budget will pass.

It's still worth pointing out, despite that, that the bond markets will inevitably react badly to any suggestion that bond holders might get a haircut - and that since any move to have that happen in the Irish situation will inevitably be followed by stronger moves in that respect in any subsequent restructures - an explanation which does have the advantage of explaining the moves in the other sovereign debt bonds. I don't think any specifically Irish move is likely to have done that.

cordially,
Scofflaw

oppenheimer1

Soldie wrote: »

So, what will the bailout figure be?

During last night's press conference (link) Brian Lenihan refused to be pinned down on size of the bailout. When pressed on the question, he said that "you can work it out for yourselves".

It seems some independent economists have taken Brian Lenihan up on his offer. Constantin Gurdgiev is putting the figure at upwards of €120 billion (source), while the author of NAMA Wine Lake reckons it'll be €200 billion or higher (source).

Indeed, the markets don't seem to be reacting too well to both Brians lowballing the bailout figure: Irish, Portuguese, Spanish and Greek 5-year Credit Default Swaps have surged to 530, 460, 281 and 1000 basis points, respectively. The Euro is also tumbling against the dollar. Another factor that adds to the uncertainty is the vague remark that was made about the banks being restructured. Michael Noonan said today that there may be some disagreement between the IMF and the EU, with the IMF wanting the bank bond holders to shoulder some of the burden.

Are we better off just defaulting before it's too late?!

No he didn't, you're selectively quoting. He was asked for the ratio of sovereign needs vs bank needs. He said that sovereign needs were well known and that if he gave a ratio people would be able to work out the size of the full package themselves. For that reason he didn't give a ratio.

FFS I hate misinformation. Trying to dress up the remarks so they would appear condescending when all he was doing was trying to protect the governments hand.

krd

Scofflaw, the real problem with the bond markets is how schizophrenic they behave. There are beliefs, theories, and the second guessing, and maybe even third, fourth and fifth guessing of the beliefs of others.

For instance the way bond markets behaved towards countries with deficit problems. They wanted cuts - but when they got their cuts they were unhappy that the fiscal tightening may impair these countries ability to pay their debts.

The markets were correct on both counts. Although there seems to be a contradiction, the markets are behaving rationally. It's just a mistake to believe that rational behaviour doesn't lead to negative outcomes, deadlocks, and contradictions.

A default is not an option. If we defaulted, the UK would be well within their rights to invade this country. I believe we need a debt resolution. A default will just beggar everyone.

Leaving the Euro is an option for no one. Anyone who thinks it is, is away with the fairies, clutching their diploma from the Robert Mugabe school of economics.

The only way out I can see, is an abolition of national bonds, and the introduction of a single Euro bond. And while we're at it, we could get rid of our worse than useless National Central Banks. We're in this situation due to irresponsibility and dysfunction both on the part of creditors as well a debtors. So we have a political problem that gives the illusion that it's an economic problem.

The fairest way out of this could be to lob all Euro debt together and devalue out of it. We could clear our debts and stick it to the Chinese for all their funny business with the Renminbi.

We need some other mechanisms for getting rid of all the local basket case behaviour. (my preference would be a wall and a few guns)

krd

Soldie wrote: »

It seems some independent economists have taken Brian Lenihan up on his offer. Constantin Gurdgiev is putting the figure at upwards of €120 billion (source), while the author of NAMA Wine Lake reckons it'll be €200 billion or higher (source).

I hate doing these calculations. Gathering the figures, and totting them up, sends me into a panic. Calculating my portion of the debt gives me palpitations and a woozy sense of unreality - as if I am losing my mind.

How much we need is like a how long is piece of string question.

The good news, is the pit is not absolutely bottomless. At this point - I went looking for the total external debt figure for Ireland - as all private debt is now effectively public debt. And on looking at a few figures and realising the offsets are completely bogus (foreign assets owned by Irish people - these would be things like Seanie Fitz's worthless Nigerian bog he bought from some people claiming it had oil under it and half built bungalows in Latvia and Romania - throw on that a few Florida Mansions, now worth a fraction of what was originally paid for them, but still liable for taxes etc - white elephants from every corner of globe) And as far as I can see - there is absolutely no bottom to the pit we're in.

The Irish times figure for external debt is €1,700,000,000,000
That's €390,804.60 per capita. I have no recollection of either spending or "investing" that amount of money.

We're completely screwed - There's no way we can even pay the interest on that. And all our messing around has just been rolling over the interest.

I have no intention of paying back a penny of it - as I believe it was blown by every 4x4 driving tosser. Why should I pay for a party I wasn't invited to?

EstateCar

EstateCar wrote: »

It will be 3 trillion

This is the politics forum. Please back up any figures (with sources) you post

Liam Byrne

oppenheimer1 wrote: »

No he didn't, you're selectively quoting. He was asked for the ratio of sovereign needs vs bank needs. He said that sovereign needs were well known and that if he gave a ratio people would be able to work out the size of the full package themselves. For that reason he didn't give a ratio.

We need openness and transparency. Lenihan's days of hiding the facts should be consigned to the dustbin.

Soverign needs "well known" - fair enough; those are OUR expenses and outgoings.

The bank outgoings are something that FF & The Greens chose to sign us up to, have nothing to do with us, and are the reason for the disaster and mistrust.

We should be given the figures because we're the mugs who will be footing the bill for all of his disastrous guesswork, lies and decisions.

Soldie

oppenheimer1 wrote: »

No he didn't, you're selectively quoting. He was asked for the ratio of sovereign needs vs bank needs. He said that sovereign needs were well known and that if he gave a ratio people would be able to work out the size of the full package themselves. For that reason he didn't give a ratio.

FFS I hate misinformation. Trying to dress up the remarks so they would appear condescending when all he was doing was trying to protect the governments hand.

Okay, so I exaggerated the title a little bit to generate some discussion on a topic that hasn't really been discussed much here (the size of the bailout that's needed). That isn't misinformation. The point is that the Brians have been lowballing the figure and generally avoided being pinned down on it. Is now really the time to be playing politics?

This is misinformation, by the way.

krd

Soldie wrote: »

Michael Noonan said today that there may be some disagreement between the IMF and the EU, with the IMF wanting the bank bond holders to shoulder some of the burden.

Are you sure you have that the right way around? Wasn't it Merkle suggesting the bond holders shouldering some of the burden. I doubt the IMF would ever suggest anything like that. Both for ideological and career reasons. People who work at the IMF usually move on to very high paying jobs in large banks as a deferred reward for their contribution.

Michael Noonan, talks gibberish.

Are we better off just defaulting before it's too late?!

Too late for what?

At the minute we're attempting to borrow money to pay a loan we can't afford to pay. It doesn't make sense. It's like losing your job and using credit cards and overdrafts to pay your mortgage. Effectively you're already in default.

Soldie

krd wrote: »

Are you sure you have that the right way around? Wasn't it Merkle suggesting the bond holders shouldering some of the burden. I doubt the IMF would ever suggest anything like that. Both for ideological and career reasons. People who work at the IMF usually move on to very high paying jobs in large banks as a deferred reward for their contribution.

Michael Noonan, talks gibberish.

This is my source, although their source makes no reference to Michael Noonan's statement (I'm guessing the Irish Times omitted the statement in an updated version of the article).

The negotiators for the EU only seem to care about making sure there's a pound of flesh to pay the French and German bond holders with. The IMF, on the other hand, seem somewhat more aware that the prospects of Ireland ever being able to repay this debt aren't great, especially if we're given the same interest rate as the Greeks -- 5%. Perhaps that's why the IMF want the bond holders to share some of the burden.

krd

Soldie wrote: »

This is my source, although their source makes no reference to Michael Noonan's statement (I'm guessing the Irish Times omitted the statement in an updated version of the article).

The negotiators for the EU only seem to care about making sure there's a pound of flesh to pay the French and German bond holders with. The IMF, on the other hand, seem somewhat more aware that the prospects of Ireland ever being able to repay this debt aren't great, especially if we're given the same interest rate as the Greeks -- 5%. Perhaps that's why the IMF want the bond holders to share some of the burden.

At the moment, very little is making sense. Angela Merkle suggested recently the bond holders should take a hit. The markets didn't like this and there was some back tracking.

I'm not aware of the IMF publishing a report suggesting the bondholders should take a hit. It doesn't sound like something they would suggest.

As - if Ireland gets forgiveness for some of the loans every other country will want some too.

I think we're heading in that direction anyway.

There's a whole Micawberishness to everything at the minute - assumptions that something will turn up.

I don't believe the IMF really have a plan or had a plan. They're not dealing with an economically insignificant banana republic with insignificant external debt. And it's not simply French and German bond holders. The €150bn that we owe the UK - that debt is enough to cause the Brits very serious pain if we go delinquent. Regardless - if the Irish economy is not saved we're set to cause the British economy very serious damage.

The usual IMF remedies(or poison) don't apply to our situation. We have a problem with debt and how that debt has been structured - but the problem is as much with the creditors as with us. The idiot bond holders made the mistake of giving our idiots the money in the first place. They should take a very significant hit - if the banking system can't take it then the banking system needs to be fixed. This is really what needs to happen. We're shrinking our economies to keep the banks fat - it doesn't make any sense. It makes no sense that we were able to borrow that much money in the first place.

The current expectations of economies, in how their growth, inflation and debt should function doesn't make sense. The markets demands for growth, inflation, debt are schizophrenic. They can't have it all and we can't give it to them.



Michael Noonan is one of these Irish enigmas - in how did that eejit ever get so far.

Dotsie~tmp

The more I look at these figures the scarier it gets. Heard talk on morning business channel of Irish tax payer assuming over €250bln debt burden with national debt + bank rescue added. Madness. These are private companies for god sake. Cant see it working. I know they are trying to save the system but the price may be too high for Ireland.

lmaopml

Just heard on the news that it's 85billion.

stepbar

Is it any wonder the UK and Denmark are clamering to give us loans? Not sure e why Sweden is offering support....

Kristopherus

On RTE News now. 85 billion.

stepbar

lmaopml wrote: »

Just heard on the news that it's 85billion.

I'd pay more credence to the figure suggested by NAMA wine lake TBH... If the financial regulator insists on increasing minimum solvency rates the rest of the banks in Ireland will be effectively nationalised (PTSB included). PTSB haven't even started to raise the funds they need.

Kristopherus

From RTE Website:


The EU and the IMF will offer the Government an €85bn facility, which can be used to recapitalise the banks and fund the public finances.
The package would see the level of capital in the Irish banks being increased from eight to 12% in a move to bolster confidence of depositors in the financial system.
The International Monetary Fund earlier said talks between it and Ireland were moving forward quickly, but it was up to the Irish Government to make the necessary political decisions.
The IMF's First Deputy Managing Director, John Lipsky, made the comment in New York in response to questions by reporters about the impact on the negotiations of growing political instability in Ireland.
Mr Lipsky said the IMF's work in Ireland was technical, not political.
EU Economic and Monetary Affairs Commissioner Olli Rehn said it is essential that Ireland passes the Budget in the timeline foreseen, adding this would be best done sooner than later.
The Commissioner was speaking following a confidential briefing with Irish MEPs at the European Parliament in Strasbourg, which lasted for just over an hour.
Mr Rehn said every day that is lost increases uncertainty and increases the economic and social cost.
He added that Ireland needs to adopt the Budget, get it out of the way and move on.
Mr Rehn also said that while he did not have a position on domestic politics, political stability is important.
However Socialist Party MEP Joe Higgins walked out of the meeting after just two minutes.
Mr Higgins said that the information was only being shared on the basis it was confidential and would not be divulged. He said not sharing the information would be a betrayal.
For many of the MEPs at the meeting the key issue was keeping Ireland's 12.5% corporate tax rate off the table.
Minister for Minister for Enterprise, Trade and Innovation Batt O'Keeffe told the Dáil that Ireland's corporation tax of 12.5% is critical, and is but one of a number of factors that makes Ireland attractive to multinational companies.
He was speaking this evening on a Fine Gael Private Members' Motion on the need to defend Ireland's corporation tax rate.
Mr O'Keeffe also said a move away from the existing corporation tax rate would have a significant negative effect on existing and potential investments.
Meanwhile, Managing Director of the International Monetary Fund Dominique Strauss-Kahn was commenting on Ireland and Greece.
Speaking during a Swiss Television interview Mr Strauss-Kahn's message was: 'We must tighten our belts.'
Referring to the crisis in Ireland and Greece he said: 'The idea that you may live long beyond his means is a crazy idea, even if the causes are different in these two countries.'
The director of the IMF estimates that these countries 'in one way or another we have to tighten their belts to get back to something that is bearable ... Those who are in a weak position are those who get in trouble first.
'That is why we need to preserve as much as possible social spending. We cannot continue like this.
'The solidarity of European countries should avoid the collapse of some states, but it requires rather drastic economic measures, and once again it will be the weakest countries that will suffer most', he said.
December Budget
Earlier, it emerged that Taoiseach Brian Cowen telephoned the leaders of Fine Gael and Labour last night to stress the importance of the Budget being passed on 7 December.
It is understood that Mr Cowen did not directly ask for support for the Budget, but did offer access to officials in the Department of Finance and other Government departments to underline the necessity of passing it.
The Government's view is that support from the IMF and the European Union depends on the measures included in the Budget being passed.
Minister for Transport Noel Dempsey said this morning it was imperative that the Budget is passed and that the Opposition gives as much support as possible.
The Cabinet met this morning to sign off on its four-year economic plan, which is due to be published tomorrow.
Last night, Mr Cowen said he would seek dissolution of the Dáil after the current budgetary process is complete in the New Year.
He made the announcement after the Green Party called for a General Election to be held in January.
Euro 'at stake' in bailout
Elsewhere, Germany's finance minister has said the fate of the shared European currency was at stake in the proposed bailout of Ireland.
Speaking in the German parliament, Wolfgang Schaeuble said: 'It's our common currency that's at stake.'
Mr Schaeuble said Germany must take responsibility 'otherwise there will be untold economic and social consequences for our country'.
Luxembourg's foreign minister has said Ireland should not have to raise its corporate tax as a condition for receiving the bailout.
Jean Asselborn said: 'The situation that Ireland finds itself in is already difficult enough. We should be careful not to strangle Ireland. Ireland has already lost so much economically.
'And if we take away every attraction Ireland has for inward investment then things will only get worse. And the worse it gets, the more expensive will it get for Europe in the end.'
Elsewhere, Greece has won approval for a new tranche of rescue funding but the IMF and EU prescribed even tougher action on tax evasion, and waste in health care and state companies to earn another payout.
They also warned that Greek wages were too high and said the country, saved from imminent insolvency in May, faced potential problems in repaying on time although solutions were available in that case.
The expert auditor from the IMF Poul Thomsen said: 'The programme is at a crossroad.'

Dotsie~tmp

€85bln. So every working man and woman in Ireland has juts taken out an expensive €40,000 loan.

krd

Dotsie~tmp wrote: »

€85bln. So every working man and woman in Ireland has juts taken out an expensive €40,000 loan.

On top of what we've already been signed up for.

The figures are horrifying. 5% interest alone on €40,000 is €2,500. The average working person doesn't have €2,500. And why should they even pay.

The average working person is being forced to pay the bill for every conman and gob****e in the country.

It's some kind of reverse communism.

Worztron

James Connolly and Michael Collins are turning in their graves!
The Fianna Fáil (FAIL) cronies should be jailed for treason. Not a single person has been jailed for this mess. The golden circle are being protected despite their fraudulent activities. If someone cannot (note cant rather than wont) pay their TV license, they get jailed. If someone costs the state billions, they go on a nice holiday to Spain or a golfing trip with the other crooks. Now file encryption passwords are being withheld, those who know the codes should be jailed for obstructing the course of justice.
FF are like an unofficial royal family. Parasites, the lot of them. They insist on brand new Mercs each year.

Its very simple; if someone is not punished for their blatant mistakes then they are certain to repeat them!

Bottle_of_Smoke

How about as soon as we get this bail out we switch to sterling? Bailing Ireland out is the precedent being set in stone. Heard Portugal have been lying about the extent of their problems and I'd imagine theres plenty of El-Gobminaz in spain and Gombionis in Italy. God knows where next

Botttom line. The euro be f*cked

James Connolly and Michael Collins are turning in their graves!

In fairness Connollý's most likely been spinning for almost 90 years

Worztron

Capitalism is an utter failure. It keeps collapsing and breaking. The internetaional bond holders are blackmailing countries. What a crap system. With every capitalist country, the vast majority of the wealth is in the hand of the minority elite. :mad:

cavedave

Dotsie~tmp

€85bln. So every working man and woman in Ireland has juts taken out an expensive €40,000 loan.

Did Lenihan say on RTE last week that the figure would be "nothing like 70 or 80 billion"? I cannot find the intervirew on rte.ie

When asked about the scale of the loan likely to be sought, Mr Lenihan confirmed that the figures would be tens of billions but would be “nowhere near” €70 billion or €80 billion as suggested by the presenter Richard Crowley.

from http://www.irishtimes.com/newspaper/breaking/2010/1121/breaking1.html?via=rel three days ago

krd

cavedave wrote: »

Did Lenihan say on RTE last week that the figure would be "nothing like 70 or 80 billion"? I cannot find the intervirew on rte.ie

Do you believe a word that comes out of that gob****es mouth?


The insane thing is how they keep lying. If no one believes you what's the point?

cavedave

I was ok with the lying about needing a bailout here becuase when you need a bailout you need to act like you don't.

But why would you lie about the size of a bailout when you say one will happen? If you are going to be found out in 3 days you do not lie. Which means he did not know. So after three years of a crisis Brian Lenihan has no idea how much he needs to borrow three days in advance.

This says he is in no position to make a four year plan or agree any loan with the IMF. Someone who cannot get their figures right three days in advance after three years of trying has no job making four year plans.

Here http://www.rte.ie/news/av/2010/1121/media-2858342.html is the interview 21 November 2010
at 4:45 he says nowhere near 70 billion will be borrowed

krd

From today's Irish Times
Money will be provided to the banks from the €85 billion fund being negotiated, which will include a “contingency fund” the banks can draw on should they continue to lose money on loans.

The reason the precise figure is not known is because of the contingency fund attached. I had kind of guessed as much before. So much is contingent on so many other events happening. We're being kept artificially solvent to avoid banking problems across the world.

I'm not ok with the lying. The lying just drags things out. The lying is in a fantasy world. It's lying and dishonesty that got us here. Someone should be giving Lenihan a smack in the jaw every time he tells a fib. He's a useless bullsh1ter. The thing with bullsh1ters, when faced with a problem instead of attempting to solve it, they pretend it isn't there.


We really have a global problem. We have a real economy and we have banking. The banking has gone haywire and is killing the real economy - there needs to be an international banking resolution to clear these debts so world can function again.

If we had a government with the intelligence and the balls we could force the international community to deal with the central problem and not keep putting bits of chewing gum and cellotape on it.

dilallio

From the discussions in the Dáil today

http://www.rte.ie/news/2010/1124/economy_tracker.html

10.44: Labour leader Eamon Gilmore described the EU/IMF facility as 'one hell of an overdraft'. He asked the Taoiseach how much it was going to cost and what the interest rate would be.
10:39: The Taoiseach said negotiations were continuing on a facility and he said the €85bn figure was being discussed. He said the final figure had not been decided, but would not be a 'three figure' sum.

Someone should tell the Taoiseach that he's correct that €85bn is not a three figure sum.

85,000,000,000 euros is most definately not a three figure sum