If the euro were to break up?

cc-offe

If the euro currency were to break up would we be in a worse situation after taking the bailout than if the euro had broken up without us taking it? Any opinions?

If the euro was devalued then no, it'd be easier to pay back.

Cavehill Red

That would largely depend on the circumstances of the breakup, and what our debts would be denominated in.

We'd go to An Punt Nua, which would float low very quickly. But that would make us competitive. It would mean fewer foreign holidays and imports, but that too would invest funds here in Ireland. And we'd be back in control of our own interest rates, the very problem that led to the overheating of the property market (effectively negative interest rates = cheap money.)

But if we still owed billions of 'euro', we'd have a lot more to pay back than before. This is the circumstances of Iceland. But unlike Iceland, we haven't reneged on the bank debts.

So as I say, it depends on circumstances.

cc-offe

If the euro currency broke up would be just be paying back each country seperately?

Cavehill Red

Deleted User wrote: »

If the euro was devalued then no, it'd be easier to pay back.

It would still be worth something, Paddy. So it would still be a greater debt on the nation than if we didn't have to pay it, surely.

cc-offe

Let's say we owe the exact same amount as portugal but we get a bailout and they don't, if the currency broke up, who would be in a better position?

Cavehill Red

cc-offe wrote: »

Let's say we owe the exact same amount as portugal but we get a bailout and they don't, if the currency broke up, who would be in a better position?

Chances are they would, for the reasons I just gave, all things being equal.

We'd still owe the bailout money. Portugal wouldn't owe any bailout money. The euro would only collapse in the context of a continent-wide banking collapse (which is certainly possible currently).

In that context, many banks either go to the wall (Anglo, AIB, for example) while others have to write down horrendous losses (BoI). But if we borrowed the money to cover the likes of Anglo and AIB, we'd still have to repay that money somehow. Whereas Portugal wouldn't have to repay any bailout because they wouldn't have taken one.

cc-offe

They wouldn't have to pay a loan back but would they have any money to function? With no currency to protect would they get help from anywhere?

Cavehill Red

cc-offe wrote: »

They wouldn't have to pay a loan back but would they have any money to function? With no currency to protect would they get help from anywhere?

Same for us in those circumstances, though.

Of course, countries have not only reneged on debts but returned to the markets quickly afterwards. The markets have very short memories.

Spain did it umpteen times in its history. Uruguay and Turkey did it repeatedly in the past century alone.

cc-offe

Cavehill Red wrote: »

Same for us in those circumstances, though.

Of course, countries have not only reneged on debts but returned to the markets quickly afterwards. The markets have very short memories.

Spain did it umpteen times in its history. Uruguay and Turkey did it repeatedly in the past century alone.

Thanks, I understand it would be the same for us if we didn't borrow the money, I was just wondering in the event of the euro breaking up would we have been better off just defaulting now and letting it fail rather than taking the bailout if the currency might not last anyway, thanks for bearing with me, sitting up with a teething baby here and finding it hard to concentrate

Cavehill Red

cc-offe wrote: »

Thanks, I understand it would be the same for us if we didn't borrow the money, I was just wondering in the event of the euro breaking up would we have been better off just defaulting now and letting it fail rather than taking the bailout if the currency might not last anyway, thanks for bearing with me, sitting up with a teething baby here and finding it hard to concentrate

Damn! You have my sympathy. Can't think of anything worse! Thankfully those days are gone for me. I just have teenage angst and whining to deal with. The sound is about as annoying, but it doesn't last as long. And you don't get it much before noon.

Anyhow, if the currency collapsed, all bets are off. That's the bottom line really. We don't actually need to default. But we probably should renege on the bank guarantee. That's difficult to do with an EU gun at our heads ordering Biffo to bail out the banks. But we should do it nonetheless.

cc-offe

Haha well she can't be blamed really, she gets it from me I think, I'm just as bad (if not worse) when my wisdom teeth are coming through
I know, what is up with teenagers these days? They have the weight of the world on their shoulders and we weren't a bit like that of course!!

I thought they no longer had the option to renege on the bank guarantee?
What do you think the chances are of them taking a vote of no confidence tomorrow?

Cavehill Red

cc-offe wrote: »

Haha well she can't be blamed really, she gets it from me I think, I'm just as bad (if not worse) when my wisdom teeth are coming through
I know, what is up with teenagers these days? They have the weight of the world on their shoulders and we weren't a bit like that of course!!

I thought they no longer had the option to renege on the bank guarantee?
What do you think the chances are of them taking a vote of no confidence tomorrow?

Not a bit like that. (Though the goth tattoo may imply otherwise!)

We can renege on the guarantee by a simple act of parliament. They could lash it through tomorrow morning if they wanted to. But they won't because the IMF are running the show now, and they want the bailout.

Tomorrow could be very interesting. There have been rumours that Cowen wanted to go to the Aras tonight and decided at the last minute (ie was told by the IMF/EU) not to.

The vote of no confidence could go down to the wire (Ceann Comhairle vote) but is unlikely to pass. Then Biffo's got to face the Fianna Fail parliamentary party in the afternoon, which will likely not be pleasant. There could even be a move to remove him as FF leader but leave him as lame duck Taoiseach.

In short, it's going to be a busy day.

cc-offe

It's a scary time, whatever happens is going to go down in the history books, It feels like there is no hope at all with the bank guarantee and the IMF.

Just out of Interest, why do you think Brian Cowen is clinging on for dear life, Do you think he genuinely believes he's doing the right thing?

Cavehill Red

cc-offe wrote: »

It's a scary time, whatever happens is going to go down in the history books, It feels like there is no hope at all with the bank guarantee and the IMF.

Just out of Interest, why do you think Brian Cowen is clinging on for dear life, Do you think he genuinely believes he's doing the right thing?

I don't think he has a choice, to be honest. The IMF/EU gun's at his head now. In his defence, I don't think he was lying for the past ten days. I think he was genuinely trying to resist the bailout. He has failed. Now the EU and IMF are insisting that the bailout and budget go through. So he has to stay.

Equally, in the defence of the Greens (never thought I'd be defending them and Cowen in the same post!), I think they're trying to take down the government rather than be blamed as one of the parties who relinquished Irish sovereignty and shackled us to banker debt for decades.

One rumour was that Cowen was en route to the park tonight and got turned around by a phone call from Europe. I've no idea how true that is or not. But it's doing the rounds in well-informed quarters. It wouldn't surprise me at all if it were true. After all, who wants to go down in history as the man who sold Ireland out?

cc-offe

But how can they force him? I get that he's been bullied into it, it's easy to see , but why not just resign and leave the new goverment to try to find a solution, if it was me I would much rather be hated by the EU leaders than by my own country

Cavehill Red

cc-offe wrote: »

But how can they force him? I get that he's been bullied into it, it's easy to see , but why not just resign and leave the new goverment to try to find a solution, if it was me I would much rather be hated by the EU leaders than by my own country

I know what you're saying. But if you're a national leader, your peers are other national leaders not your own people. Sarko and Obama call you on the phone. Brown, Blair and Cameron are your mates. You hang out with Angela Merkel at all sorts of meetings.

There's as much of a personal relationship with those people as there is with Joe Farmer down the Tullamore pub, if not more so.

Cowen's been told by them that if he doesn't take the bailout the euro will collapse and it will all be his fault. That's their line. It's not without merit either. If not Ireland, then Portugal or definitely Spain could collapse the single currency and possibly even the EU.

Now, when your mates are telling you that, do you want to be the man who brought down the EU, or the man who did the 'right thing' by the EU, even though it hurt his own country?

cc-offe

I definitely see what you're saying but I think this decision is going to ruin Ireland and I think it will ruin it very quickly, He won't be involved in politics again, they're his 'friends' now, they won't be soon enough, I guess at the end of the day I would like to think that if it was me, that I would do the right thing by the country, a little hurt for the country maybe but to do something that could completely ruin it....I'd like to think if it was me and I didn't have the backbone to make the right decisions, that i'd let someone else take over. Simplistic I know.

Cavehill Red

cc-offe wrote: »

I definitely see what you're saying but I think this decision is going to ruin Ireland and I think it will ruin it very quickly, He won't be involved in politics again, they're his 'friends' now, they won't be soon enough, I guess at the end of the day I would like to think that if it was me, that I would do the right thing by the country, a little hurt for the country maybe but to do something that could completely ruin it....I'd like to think if it was me and I didn't have the backbone to make the right decisions, that i'd let someone else take over. Simplistic I know.

He's got plenty of money. He's got a big pension coming to him. He could wangle a nice sinecure in Europe or somewhere like the IMF in return for 'doing the right thing' by them.

Where are John Bruton, Pat Cox, or Peter Sutherland now? They all got cushy numbers from their EU/IMF/WMF pals.

Don't worry about Biffo. He'll be grand. He won't hurt whether we take on this loan or not. That's what's terrifying about this. The people who will pay don't get a say.

cc-offe

I suppose that's his motive right there, a nice EU job, make himself feel important because he won't have any sort of life living here in Ireland any more.

You're right, it is terrifying. We just have to hope for the best, My eyes will be glued to the news tomorrow.

robbyvibes

Biffo is what some would call "a useful idiot"

Cavehill Red

cc-offe wrote: »

I suppose that's his motive right there, a nice EU job, make himself feel important because he won't have any sort of life living here in Ireland any more.

You're right, it is terrifying. We just have to hope for the best, My eyes will be glued to the news tomorrow.

Ideally, the government will lose the vote of confidence and collapse. Cowen cannot sign off on a bailout if he has no mandate. Then it's all on pause until after we have an election.

Knowing that we have enough money to do us till next year, the markets will target Portugal instead. The EU remains in crisis. So does the euro. But we then have time to debate among ourselves as a people whether we should cover Anglo and AIB's debts or not. We can ask politicians do they support that or not and vote accordingly.

But I fear we could have a very bad scenario coming down the line. A close call vote in the Dail. Biffo turned over by Fianna Fail. And then he, a lame duck Taoiseach with nothing else to lose, signing us up for lifetimes' worth of debt.

cc-offe

Cavehill Red wrote: »

Ideally, the government will lose the vote of confidence and collapse. Cowen cannot sign off on a bailout if he has no mandate.

At least if the people of Ireland had a few months to think/talk/debate and begin to trust a new government then it wouldn't seem so scary,
I don't think that anybody is looking at Cowen right now thinking there goes a man who I have faith in, to go from "we don't need a bailout" to "we're getting a bailout" in a week is crazy, how are we supposed to feel?

It feels like the EU did it on purpose, hit us with it when we weren't expecting it, I knew it was becoming more and more expensive to borrow but naively I thought we were coming out of the worst.

I hope to God the scenario that you mentioned earlier is what we see happening in the coming days.

Cavehill Red

cc-offe wrote: »

At least if the people of Ireland had a few months to think/talk/debate and begin to trust a new government then it wouldn't seem so scary,
I don't think that anybody is looking at Cowen right now thinking there goes a man who I have faith in, to go from "we don't need a bailout" to "we're getting a bailout" in a week is crazy, how are we supposed to feel?

It feels like the EU did it on purpose, hit us with it when we weren't expecting it, I knew it was becoming more and more expensive to borrow but naively I thought we were coming out of the worst.

I hope to God the scenario that you mentioned earlier is what we see happening in the coming days.

Right now, for a very brief period of time, we have the power. The EU and IMF and all sorts of European bankers and billionaires are waiting for us to be morons and agree to pay off debts that aren't ours.

I think we should use that time to our benefit. Let's have a vote to renege on the bank guarantee. The worst that can happen is the bailout. Then we owe all of that unknowable amount of money. If we renege, all bets are off. One thing you can be sure of is that we won't owe all that money. That's a win in my book.

Even the threat of it might make the EU and IMF see reason. If we had a collapse of government for example, I bet they'd be back in the morning with Merkel saying again that bondholders should take a haircut. She'd be trying to persuade Kenny and Gilmore to pay something towards the Anglo and AIB debt. Because something's better than nothing and she wants her banks paid something.

cc-offe

I completely agree, a vote has to happen but how are the people supposed to make that happen? I'd happily protest tomorrow but noone seems to want to do anything, I feel like we all have a chance to make a change and it's just going to pass us by.

Cavehill Red

cc-offe wrote: »

I completely agree, a vote has to happen but how are the people supposed to make that happen? I'd happily protest tomorrow but noone seems to want to do anything, I feel like we all have a chance to make a change and it's just going to pass us by.

I feel very confident in saying this - if we're put on the hook for Anglo's debt, we will shortly cease to be in any real sense a nation. We will become an EU colony working for the benefit of European banks.

So yes, time is short. Biffo deserves praise for stringing this out with talks, and the Greens deserve praise for threatening to collapse the government. But time is indeed of the essence.

I'm looking to see if it's possible to prevent a bailout by challenging it under the constitution. I'm prepared to punt some of my own money on a case, because even the time of litigation would mean that the Sauron's eye of the markets would be forced to move along to Portugal or Spain and we would have breathing space to decide our own destiny, be it by way of general election, referendum or whatever.

There are protests planned for Saturday. But that could be too late. I think, for our children's sake, the country needs to speak up now. Right now.

cc-offe

Cavehill Red wrote: »

I feel very confident in saying this - if we're put on the hook for Anglo's debt, we will shortly cease to be in any real sense a nation. We will become an EU colony working for the benefit of European banks.

So yes, time is short. Biffo deserves praise for stringing this out with talks, and the Greens deserve praise for threatening to collapse the government. But time is indeed of the essence.

I'm looking to see if it's possible to prevent a bailout by challenging it under the constitution. I'm prepared to punt some of my own money on a case, because even the time of litigation would mean that the Sauron's eye of the markets would be forced to move along to Portugal or Spain and we would have breathing space to decide our own destiny, be it by way of general election, referendum or whatever.

There are protests planned for Saturday. But that could be too late. I think, for our children's sake, the country needs to speak up now. Right now.

If you did challenge under the constitution and managed to get the ball rolling, hopefully the people of Ireland would dig deep to fund the cost of whatever it takes because even as you say the delay that it could cause would be precious to the Irish people. As far as i'm concerned what they are doing is completely unconstitutional , their main aim is supposed to be for the welfare of it's people. I for one would definitely help with fundraising.

I'm surprised that day to day life is going on as it is at the moment to be honest.

Cavehill Red

cc-offe wrote: »

If you did challenge under the constitution and managed to get the ball rolling, hopefully the people of Ireland would dig deep to fund the cost of whatever it takes because even as you say the delay that it could cause would be precious to the Irish people. As far as i'm concerned what they are doing is completely unconstitutional , their main aim is supposed to be for the welfare of it's people. I for one would definitely help with fundraising.

I'm surprised that day to day life is going on as it is at the moment to be honest.

People always focus on what's in front of them. Their hopes, their dreams, their dinner, their daily grind.

Very few people even think about this sort of thing. Sure, while Cowen was selling us out, TV3 were showing some talent show! And you can bet that it was spoken about around more water coolers on Monday than the bailout was.

But that's people and that's life. No, I don't expect people to contribute to a fund to overturn any bailout legally. I expect I'll have to rely on a few brave people to assist. Thankfully there are a few who will assist, if it's possible.

I still feel that our best chance is a fall of government before the bailout goes through, though.

hinault

I think it will come to pass that there will be some sort of breakup of the Euro.

I think there is serious consideration being given to the idea of a two tier Euro.
Holland/Germany/France and the like would be in tier one Euro and the second tier Euro would contain other Eurozone members who are economically weaker than the countries in tier one Euro.

cc-offe

hinault wrote: »

I think it will come to pass that there will be some sort of breakup of the Euro.

I think there is serious consideration being given to the idea of a two tier Euro.
Holland/Germany/France and the like would be in tier one Euro and the second tier Euro would contain other Eurozone members who are economically weaker than the countries in tier one Euro.

I don't see how this could happen, we would be paying off the IMF/EU bailout no doubt at the same euro rate while our own euro has been devalued.

George Orwell 1982

If Spain have to be bailed out the euro will break up. The german tax payer can only take so much. With 20% unemployment in Spain and zero growth its not all that unlikely.

cc-offe

Yes I know it seems likely that it will break up, I just can't imagine a two tier euro being implemented.

Ray Burkes Pension

hinault wrote: »

I think it will come to pass that there will be some sort of breakup of the Euro.

I think there is serious consideration being given to the idea of a two tier Euro.
Holland/Germany/France and the like would be in tier one Euro and the second tier Euro would contain other Eurozone members who are economically weaker than the countries in tier one Euro.

Irwin Stelzer was taking about this last night on Newsnight.

"I think you're going to get a euro north and a euro south, so that the troubled periphery countries can essentially devalue and then come back in ... "

Bob_Latchford

Its all a leap of faith. The euro right or wrong is an experiment never seen before.

No mechanism for leaving, seems like suicide pact at the moment. Couldnt they have said in theory this is how and why countries leave before the original agreement?

cc-offe

Ray Burkes Pension wrote: »

"I think you're going to get a euro north and a euro south, so that the troubled periphery countries can essentially devalue and then come back in ... "

If it was going to be devalued then where is the incentive to stay with the currency?

Bob_Latchford

Ray Burkes Pension wrote: »

Irwin Stelzer was taking about this last night on Newsnight.

"I think you're going to get a euro north and a euro south, so that the troubled periphery countries can essentially devalue and then come back in ... "

Yes, agree it seems a viable option at the moment but how? and what will Ireland use instead and what happens to the euros here between now and the time we get a new currency up and running?

LordSutch

A new local currency called the 'Punt Nua' linked to Sterling (due to the Punts deminutive size) so that it could trade on the world markets?

cc-offe

Bob_Latchford wrote: »

Yes, agree it seems a viable option at the moment but how? and what will Ireland use instead and what happens to the euros here between now and the time we get a new currency up and running?

How would it be viable? Would we not be expected to pay back all of this bailout money at the same rate even though our currency is worth less? I don't see how it could happen at all.

Bob_Latchford

As understand it the tried and tested method out of these holes in the past is devalueing the currency.
Would be no point to paying back euros with a new punt, so would guess there would be laws passed converting debt 1 euro:1 with the new punt.

but agree with what your saying, its would be very difficult if not impossible to have a transistion to a new currency under this stress.
The bank bond holders would seem to be the most likely option if we dont what to take the full bill onto the Irish tax payer.

Ray Burkes Pension

Bob_Latchford wrote: »

As understand it the tried and tested method out of these holes in the past is devalueing the currency.
Would be no point to paying back euros with a new punt, so would guess there would be laws passed converting debt 1 euro:1 with the new punt.

but agree with what your saying, its would be very difficult if not impossible to have a transistion to a new currency under this stress.
The bank bond holders would seem to be the most likely option if we dont what to take the full bill onto the Irish tax payer.

The main problem with doing it is preventing a run on the banks. Everyone will want to buy something stable with their old euros before its devalued.

George Orwell 1982

Bob_Latchford wrote: »

As understand it the tried and tested method out of these holes in the past is devalueing the currency.
Would be no point to paying back euros with a new punt, so would guess there would be laws passed converting debt 1 euro:1 with the new punt.

but agree with what your saying, its would be very difficult if not impossible to have a transistion to a new currency under this stress.
The bank bond holders would seem to be the most likely option if we dont what to take the full bill onto the Irish tax payer.

This is true. As soon as the govt. announced it would issue a new currency everyone would immediately go to the bank to take out euros as the new currency would devalue. Very difficult to see how it would be introduced.

Ray Burkes Pension

George Orwell 1982 wrote: »

This is true. As soon as the govt. announced it would issue a new currency everyone would immediately go to the bank to take out euros as the new currency would devalue. Very difficult to see how it would be introduced.

As long as FF let their mates in the golden circle know a few hours in advance why would they care really?

Joe 90

Ray Burkes Pension wrote: »

The main problem with doing it is preventing a run on the banks. Everyone will want to buy something stable with their old euros before its devalued.

I suspect that it would be pretty simple to do. Announcement on Sunday night that all balances in Euros in banks in Ireland are now in punt nuas and all Irish Euro banknotes are now of the same denomination in punt nuas. Monday morning punt nua sinks to maybe 50c Euro or whatever. Within Ireland no change. From outside the country Ireland looks reasonably priced again. (Don't forget that a major result of the last decades financial shenanigans is that Ireland has had lost of inflation but the currency has not been able to reduce in value to reflect this.) Big problem with this is that those who owe money outside Ireland, be it in Euros, Dollars or whatever are now properly screwed, the banks are definitely bankrupt.

George Orwell 1982

Joe 90 wrote: »

I suspect that it would be pretty simple to do. Announcement on Sunday night that all balances in Euros in banks in Ireland are now in punt nuas and all Irish Euro banknotes are now of the same denomination in punt nuas. Monday morning punt nua sinks to maybe 50c Euro or whatever. Within Ireland no change. From outside the country Ireland looks reasonably priced again. (Don't forget that a major result of the last decades financial shenanigans is that Ireland has had lost of inflation but the currency has not been able to reduce in value to reflect this.) Big problem with this is that those who owe money outside Ireland, be it in Euros, Dollars or whatever are now properly screwed, the banks are definitely bankrupt.

It would take at least a couple of weeks planning during which time news of the forthcoming new currency issue would be leaked.

Panrich

Joe 90 wrote: »

Monday morning punt nua sinks to maybe 50c Euro or whatever. Within Ireland no change.

Except our debt to the EU/IMF has doubled

maninasia

Have to negotiate, play hardball with the debtors, something this govt. was incapable of doing it seems. They tried hoover up loan upon loan in a ponzi scheme to keep the ship afloat instead of facing the facts two years ago.
Now much of the private bank debt (bondholders) has been paid off and the debt transferred to our books and owed to the EBC. So if we default it will be ECB which will take the hit, not so much the original bondholders. It's a game of pass the parcel.

Cavehill Red

Panrich wrote: »

Except our debt to the EU/IMF has doubled

Not if we don't take the bailout!
A pullout of the euro would have to come simultaneously with a reneging of the bank guarantee.

Anglo is not our debt and we shouldn't pay it. Let the billionaire bondholders go hang.