Independant today (09/12), "senior bondholders cannot be burned"

zig

Just wondering where are they getting this "cannot" from? Why wouldnt it be possible for Enda and friends to go back and demand a renegotiation? Is it possible the EU officials are just saying this to the bondholders to stop them from panicking?


http://www.independent.ie/business/european/bondholders-safe-even-if-opposition-win-election-2454031.html

Bondholders safe even if opposition win election

By Emmet Oliver Deputy Business Editor

Thursday December 09 2010

Senior EU officials have told international investors that even a new Irish government will not be allowed to remove the protection which has been given to senior bondholders in the banks.
In a private phone call this week with hedge funds and other investors from across Europe, the EU team which negotiated Ireland's rescue package, reassured the firms that senior bondholders cannot be burned as part of the €85bn rescue package, even if Fine Gael and Labour seek to reopen the question.
The Irish Independent, which has seen extracts from the call organised by Deutsche Bank, understands the EU team described the protection for senior bondholders as an "integral part" and a "building block" of the entire plan.
Forcing discounts or "haircuts" on senior bondholders is not a part of the programme that will be discussed during quarterly reviews, the EU officials made clear. The EU team said other details could be discussed.
The disclosure is a major blow to the Labour Party which is pushing to force losses on senior bondholders, by introducing a so-called resolution regime for banks.
The party's finance spokeswoman Joan Burton said recently: "What we need is a banking resolution regime in place, where you could have a negotiated settlement with all bondholders, including senior bondholders, if a bank goes bust."
Questions
Hedge funds and asset managers peppered the EU team with questions about senior and junior bondholders, with several questions about the opposition's approach differing from that of Fianna Fail and the Green Party.
The EU team said its approach would make a "obvious distinction" between viable and non-viable banks. The team said the kind of burden sharing to be imposed on junior bondholders would come down to what kind of bank was involved.
It will come down to the "quantum" of taxpayers' money which has gone into the bank, said the EU official.
One questioner wanted to know whether the state's own investment in AIB would be wiped out first, before any senior bondholders were hit. "I don't have answers to those questions now,'' said the EU official.
But he reiterated that the programme did not include any plans to impose burden sharing on senior bondholders.
Overall, the EU team were upbeat about Ireland's prospects, particularly the export sector. The call, which is believed to have involved Istvan P Szekely, mission chief of the European Commission for Ireland, was warned that there were risks to the €85bn plan.
"We have to be humble,'' said one of the EU team, pointing out that Ireland's restructuring was one of the largest tried by a European country. "The extent to which we can predict this is limited," he said.
- Emmet Oliver Deputy Business Editor
Irish Independent

Permabear

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Laminations

donegalfella wrote: »

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And by all means we should be paying interest on (a) but why should we pay any interest on what we borrow for (b). A renegotiation is not a default, it's a redrawing of the interest rates to recognise the role of the European banks lending into an irresponsible Irish system. Why should we be paying interest to protect their banks?

We could sweat them out, it'd be a major blow for Ireland if they refused to deal and we had no money to borrow and instead had to survive on our tax take- but we could survive for a while on €31bn. However could Europe afford to not deal. It would mean certain contagion and the collapse of the euro. Do you disagree with any renegotiation of interest rates or haircuts for bondholders?

Euroland

donegalfella wrote: »

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Iceland (and not only Iceland) managed to do that.

Euroland

donegalfella wrote: »

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Nonsense.

1) Today Fitch already downgraded Ireland down to BBB+, no panic.

2) Many countries went through this route and after a few years they are back on track, much stronger and their credit ratings growing up again.

Permabear

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ilovesleep

God donegalfella, so there is so no hope what so ever for this country. We need a war if you ask me.

Laminations

DF, ifthe bondholders get burnt/take a bath would that affect your investments? i.e. Your speculation and betting against your own country and people

Laminations

donegalfella wrote: »

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But that's my point, we can survive without (a) for longer than they can survive without (b). We should have the upperhand in negotiations/renegotiations.

Before the budget, the state was spending around €55 billion a year. Can you outline what changes you would make to reduce that to €31 billion?

Politically, how can the Irish government afford to jeopardize this deal? What happens if the EU/IMF walk away?

They can't afford to walk away. We can survive on current spending levels for 8months. If we had to go it alone, we could slash all welfare and raise all taxes. We were paying 65% rates in the 80s. Anyway if we had to go it alone by that stage the euro would have collapsed and we'd be back to our own currency which we could deflate. It's a total bluff that they'd walk away so all of that is hypothetical scaremongering

And politically, the government should die before letting the country be used as a sphincter. They shouldn't be concerned on how it will affect their chance of seats

Permabear

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handlemaster

donegalfella wrote: »

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This is what would happen !!

ICELAND'S decision two years ago to force bondholders to pay for the banking system's collapse appeared to pay off this week after official figures showed the country exited recession in the third quarter.
The Icelandic economy, which shrank for seven consecutive quarters, grew 1.2 per cent in the three months to the end of September. Iceland famously agreed in a referendum to reject a scheme to repay most of its debts that were once worth 11 times its national income.
In contrast to Ireland, Iceland's taxpayers refused to pay the debts accumulated by the banking sector. Bondholders were told to accept dramatic cuts in the value of repayments on bank debt after the sector borrowed beyond its means to fund ambitious investments abroad.
Advertisement: Story continues below
The return to growth is likely to put pressure on Irish politicians to explain why Dublin rejected a more radical restructuring of its debts and a departure from the euro zone. Iceland's currency has fallen by around a quarter, helping its exports.
Economists on the right and left have recommended a country deep in debt restructure repayments with bondholders - in effect writing off much of the debt.
The Nobel prize winner Paul Krugman has called on Ireland, Greece and Portugal to consider leaving the euro zone and defaulting on its debts.



Its just business. Bond holders took a risk ( or in this case no risk as we are propping them up) with private banks,they got there interest while it lasted. As with Nama etc loans were tranfered under false pretences it appears from the banks, why should I pay for their gambling.

Permabear

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Euroland

donegalfella wrote: »

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+1, agree

Euroland

donegalfella wrote: »

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Already recovering

Euroland

donegalfella wrote: »

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We can get it elsewhere, i.e. China, Russia, Sweden

zig

donegalfella wrote: »

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Just because you devalue your currency doesnt make you Zimbabwe, they had lots of reasons why they ended up the way they did, Mugabe being one big one.

Laminations

donegalfella wrote: »

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So if we refused to pay interest on our borrowings that we are taking simply to pay back foreign banks, you think the Germans would collapse the euro rather than strike a deal?

Since the state doesn't plan to repay its debts, why should Joe Average bother with his mortgage?
.

This is where you're getting mixed up. I'm suggesting we pay our debts - thats part (a) of your scenario. I'm suggesting we renegotiate (b), not refuse to pay it but negotiate haircuts for bondholders and a better interest rate from the ECB

Euroland

donegalfella wrote: »

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Slash public sector salaries on average by 20-25% (those ho make more will get higher cuts), slash social welfare by 30-50%, scrap overseas development fund, reduce expenditure across the state agencies/bodies, etc.

noodler

Most of the bonds are now guaranteed under the ELG.

The only option option to consideration is the non-Guaranteed senior bonds and if the IMF/EU (well EU anyway) say no then what are you going to do?

noodler

Euroland wrote: »

Slash public sector salaries on average by 20-25% (those ho make more will get higher cuts), slash social welfare by 30-50%, scrap overseas development fund, reduce expenditure across the state agencies/bodies, etc.

Public sector pay bill is around €16.5bn I believe.
So slahing it be a quarter gets us a €4bn saving.

Spending on social welfare is around €20bn so a slash in that budget by 35% is about €7bn.

Feel free to correct me on that of course.

Scofflaw

Laminations wrote: »

And by all means we should be paying interest on (a) but why should we pay any interest on what we borrow for (b). A renegotiation is not a default, it's a redrawing of the interest rates to recognise the role of the European banks lending into an irresponsible Irish system. Why should we be paying interest to protect their banks?

We could sweat them out, it'd be a major blow for Ireland if they refused to deal and we had no money to borrow and instead had to survive on our tax take- but we could survive for a while on €31bn. However could Europe afford to not deal. It would mean certain contagion and the collapse of the euro. Do you disagree with any renegotiation of interest rates or haircuts for bondholders?

I suspect that if Ireland chose to burn the senior bondholders - effectively a default at this stage - the extra damage done by cutting the bailout facility would be minor from the point of view of everybody except Ireland.

cordially,
Scofflaw

Laminations

Scofflaw wrote: »

I suspect that if Ireland chose to burn the senior bondholders - effectively a default at this stage - the extra damage done by cutting the bailout facility would be minor from the point of view of everybody except Ireland.

cordially,
Scofflaw

A renegotiation could simply involve the interest rates we're paying. We shouldn't be punitively charged to borrow money to give to European banks

Euroland

donegalfella wrote: »

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We borrow directly from China, Russia, Sweden, etc

Laminations

noodler wrote: »

Public sector pay bill is around €16.5bn I believe.
So slahing it be a quarter gets us a €4bn saving.

Spending on social welfare is around €20bn so a slash in that budget by 35% is about €7bn.

Feel free to correct me on that of course.

That's €11bn already and you haven't touched tax. Increase tax rates by an average of 30% and you have another €10bn and you're almost there. Anyway it's all irrelevant cos they wouldnt let us go it alone as thatd mean a default rather than a renegotiation and itd mean the collapse of the euro. We'd have a knock on effect for Spain/Italy/Portugal, all of whom owe german banks big style so they have to deal in a renegotiation. It's a game of chicken and we have swerved too early

Euroland

handlemaster wrote: »

The Nobel prize winner Paul Krugman has called on Ireland, Greece and Portugal to consider leaving the euro zone and defaulting on its debts.

I fully agree with Paul.

Euroland

donegalfella wrote: »

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Zimbabwe is a different story, we are backed up by enormous trade surplus. So, in a long run, I don’t expect Irish punt to slip significantly against other mayor currencies.

danbohan

donegalfella wrote: »

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So, let's see, you would slash all welfare, raise all taxes, slash PS pay and pensions. By that point, I'm pretty sure you'd have Dublin engulfed in riots. I'm glad I don't live there.

I'm glad I don't live there.

in a few weeks after dublin had burned down the hungry hordes would have drifted as far as donegal in search of your gold and silver reserves DF ,

Euroland

noodler wrote: »

Public sector pay bill is around €16.5bn I believe.
So slahing it be a quarter gets us a €4bn saving.

Spending on social welfare is around €20bn so a slash in that budget by 35% is about €7bn.

Feel free to correct me on that of course.

Public sector could be cut down to 10 and social welfare down to 10, and we would get 16.5 BEUR saved. Additional expenditure cuts (army, overseas development fund, capital expenditure, etc) could add another 1-4 BEUR, so we nearly there.

danbohan

Euroland wrote: »

Slash public sector salaries on average by 20-25% (those ho make more will get higher cuts), slash social welfare by 30-50%, scrap overseas development fund, reduce expenditure across the state agencies/bodies, etc.

those cuts should have taken place on tuesday anyway , but look at the screeching over 8 euro cuts to sw ,wonder when the majority of people will realize the bind we are in , sinn fein and the unions are fully aware and just playing politics which is just as big a disservice to Irish population as anything fianna fail did in last few years

who_ru

the Germans will never leave the Euro and revert back to the Mark for obvious reasons.

right now the euro is weak, it is no surprise that German exports are rocketing ahead, the German minister for finance said recently that full employment was possible in the near future in the German economy.

if for some reason the Govt in Berlin decided to leave the Euro, revert to the mark, then that currency would appreciate instantly against a weak and propably mortally wounded Euro, making German exports extremely difficult to sell anywhere. I cannot see Germany leaving the Euro on that basis.

And as an aside, Merkel is deeply unpopular in Germany right now and is simply making populist noises about making lenders take a hit instead of German tax payers footing the bailout bill.

Gordon Browne has ominous words for all eurozone countries.
http://www.bbc.co.uk/news/uk-11951014

windsurfer99ie

who_ru wrote: »

the Germans will never leave the Euro and revert back to the Mark for obvious reasons.

right now the euro is weak, it is no surprise that German exports are rocketing ahead, the German minister for finance said recently that full employment was possible in the near future in the German economy.

if for some reason the Govt in Berlin decided to leave the Euro, revert to the mark, then that currency would appreciate instantly against a weak and propably mortally wounded Euro, making German exports extremely difficult to sell anywhere. I cannot see Germany leaving the Euro on that basis.

And as an aside, Merkel is deeply unpopular in Germany right now and is simply making populist noises about making lenders take a hit instead of German tax payers footing the bailout bill.

Gordon Browne has ominous words for all eurozone countries.
http://www.bbc.co.uk/news/uk-11951014

I think your analysis is correct. German exports benefit from a weak Euro, and we have also provided them with a market for their products. In turn, the German Banks have lent us the "trade surpluses" back at punative rates of interest. For these reasons, the German economy has prospered under the Euro. However, for historical reasons the German people hate inflation and weak currency, and as you say, Merkel is unpopular at the moment. Therefore, I do not think that it is out of the question that for domestic political reasons they may collapse the Euro at some point, even though it would not appear to be in their economic interests to do so at the moment.

Scofflaw

Laminations wrote: »

A renegotiation could simply involve the interest rates we're paying. We shouldn't be punitively charged to borrow money to give to European banks

First, if the IMF are lending at 5.7%, you're really not going to get anything below those rates, and second, the money we're putting into the banks is nearly all coming from us, and is money that would have been put in by this government anyway. The bulk of the money we're borrowing - €50bn of the €67.5 - is being borrowed for state spending, not the banks.

Did people actually look at the 4 year plan? Nearly everything in the IMF/EU memo of understanding is in the plan.

cordially,
Scofflaw

zig

What about the argument that the investors would be willing to come back fairly quickly, possibly quickly enough that the money we still have could allow us to survive for now if you still went ahead with cuts.
Many Economists around the world believe this would be the case. As unpopular as it is to mention him around here I still feel I must, but this is one of McWilliams' strongest points. He has made sense in the past, I think I'll trust his and many international economists opinions over the nonsense Im hearing from Irish and European politicians.

Which ever direction we take, its going to be a gamble, just one has the potential to leave us in horrible heavy debt for a long time to come.

Atilathehun

Shure this the perfect scenario for Enda and Gilmore. They will be elected to office. They will promise ever louder and louder up the the election that they will renegotiate the details of the agreement and ensure bond holders take a haircut.
After they are in office and in the real world as opposed to hurling in the opposition ditch, they will come to their senses and realise that being in government or in management of any large organisation is more often more about choosing the least damaging options than than taking the preferred and easy options.
They will solemnly declare to the plain people of Ireland that they have found out to their utter dismay that the FF / Green government has contractually singed the country up to a deal which cannot be renegotiated.
For Enda / Gilly this will be a win win situation for abot the first 18 months in office. Then the plain people will get tired of listening to the whinging, whining tones of the lot of them.

later12

donegalfella wrote: »

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Where are you getting this from? Leaving the euro would be disastrous for the German economy, its exports, and even for its banking system. It would be good for crisis havens like precious metals and US Treasury bonds, not Germany.
The German economy, its IFO, and its unemployment are the best they have ever been since reunification. The German contribution into the bailout of Ireland hardly raised a murmur in the Bundestag last week.

People really need to stop exaggerating the issue of Germany leaving the Eurozone. They know what's good for them.

Scofflaw

zig wrote: »

What about the argument that the investors would be willing to come back fairly quickly, possibly quickly enough that the money we still have could allow us to survive for now if you still went ahead with cuts.
Many Economists around the world believe this would be the case. As unpopular as it is to mention him around here I still feel I must, but this is one of McWilliams' strongest points. He has made sense in the past, I think I'll trust his and many international economists opinions over the nonsense Im hearing from Irish and European politicians.

I wouldn't bother listening to either, frankly - there's plenty of information out there to make up one's own mind with. "Many economists" - how many economists? Which economists? What's their previous record? Pundits? Academics? "Market analysts"?

It sounds very like 'soft landing' to me - so we should probably apply the same test: an example of a country that has defaulted, and to whom the markets have returned in short order and with reasonable rates. If it's something that actually happens, an example shouldn't be too far to seek - and if it's not something that actually happens, then it goes into the box marked "soft landings, new paradigms, and other economic fantasies".

zig wrote: »

Which ever direction we take, its going to be a gamble, just one has the potential to leave us in horrible heavy debt for a long time to come.

No, they all do. Even if we avoid the bank debts, we still owe a lot of money.

cordially,
Scofflaw

later12

Scofflaw wrote: »

I wouldn't bother listening to either, frankly - there's plenty of information out there to make up one's own mind with. "Many economists" - how many economists? Which economists? What's their previous record? Pundits? Academics? "Market analysts"?

This.

People often tend to think their argument is valid once same argument has been pursued by Morgan Kelly, Brian Lucey, John FitzGerald or, shudder, david mcWilliams. They come into vogue once they predict anything that remotely comes to pass, like George Lee and his supposed prophecy of the property bubble. Or else they predict something outrageously disastrous like Morgan Kelly's Our Lady Of The Eurozone article, which I'm sure, by now, must be required reading for all new boards users gauging its popularity on this site.

The fact is, most of these guys spend their days teaching spotty faced, hungover, emaciated 19 year olds about taxation - and that's if they're any good. Others, of the ginger haired variety make their living doing stand up shows (no really).

Look I'm not saying these guys are wrong or inaccurate. But they often do have an interest in predicting something outrageous or sensational. My advice would be to do your own research, read the FT or The Economist, educate yourself and make your own decisions - don't let an economist do it for you.

zig

later10 wrote: »

This.

People often tend to think their argument is valid once same argument has been pursued by Morgan Kelly, Brian Lucey, John FitzGerald or, shudder, david mcWilliams. They come into vogue once they predict anything that remotely comes to pass, like George Lee and his supposed prophecy of the property bubble. Or else they predict something outrageously disastrous like Morgan Kelly's Our Lady Of The Eurozone article, which I'm sure, by now, must be required reading for all new boards users gauging its popularity on this site.

The fact is, most of these guys spend their days teaching spotty faced, hungover, emaciated 19 year olds about taxation - and that's if they're any good. Others, of the ginger haired variety make their living doing stand up shows (no really).

Look I'm not saying these guys are wrong or inaccurate. But they often do have an interest in predicting something outrageous or sensational. My advice would be to do your own research, read the FT or The Economist, educate yourself and make your own decisions - don't let an economist do it for you.

FT is the place that has put some of these ideas in my head(even though that is much more balanced journalism)! Admittedly McWilliams and the likes probably help confirm these ideas.

But just to point out the bold bit in your post, im at a loss, are they wrong and inaccurate or not? I know by saying that in you post you're just showing them a bit of respect or whatever, fair enough, but you can't mouth off and 'shudder' over Mcwilliams, and spend a post bashing these guys credibility unless you think they may be wrong.
(ps I hate picking out small bits of posts, but I just really think its worth addressing)

Scofflaw

zig wrote: »

FT is the place that has put some of these ideas in my head(even though that is much more balanced journalism)! Admittedly McWilliams and the likes probably help confirm these ideas.

But just to point out the bold bit in your post, im at a loss, are they wrong and inaccurate or not? I know by saying that in you post you're just showing them a bit of respect or whatever, fair enough, but you can't mouth off and 'shudder' over Mcwilliams, and spend a post bashing these guys credibility unless you think they may be wrong.
(ps I hate picking out small bits of posts, but I just really think its worth addressing)

I would think he's making the point that just because someone is an economic pundit, he's not saying they're automatically wrong. It disposes of a particular straw man counter-argument, which is to point to a given piece by a given pundit and say "see, he was right here! I thought you said they were always wrong?".

cordially,
Scofflaw

SkepticOne

I notice that some of the people on this thread were on other threads earlier trying to deny that the bailout was about the banks and protecting bondholders in Europe. Since they can no longer hold that position with any credibility, they will shift to defending the deal and they will try to make out that that was their position all along.

later12

zig wrote: »

But just to point out the bold bit in your post, im at a loss, are they wrong and inaccurate or not?

Well Scofflaw already answered the question, they aren't necessarily wrong; they are often right, in fact. But these economists and pundits are not always correct either - anything that an economist says should be backed up with facts and clear logic that makes sense to you. Don't just take an economists opinion as gospel - Question it. As a former lecturer of mine would say, Economics is a science where two people can get a Nobel prize for saying precisely the opposite thing.

Sometimes, as in Mc Williams case, I think the delivery of the message is sometimes overly simplistic or sensational - tabloid economics, perhaps.

Scofflaw

SkepticOne wrote: »

I notice that some of the people on this thread were on other threads earlier trying to deny that the bailout was about the banks and protecting bondholders in Europe. Since they can no longer hold that position with any credibility, they will shift to defending the deal and they will try to make out that that was their position all along.

And some want it to be all about the banks, whatever the figures actually say. I'm not sure, by the way, what you feel has changed? We knew the senior bondholders weren't going to be burned, no matter whether the matter was left up to the Irish government or not. The original government blanket guarantee, as well as the subsequent guarantees issued to Anglo, are proof enough of the government's views on the matter.

Given that the government was already committed to bailing out the banks, that it had already spent large sums doing so, that it negotiated the EU/IMF deal, that the money going into the banks is largely coming from the NPRF, that raiding the NPRF for bank bailout funds was already in the 4-year plan, and that the vast majority of the money in the bailout facility is for the state's expected non-bank deficit, I'm not sure, to the contrary, why you still think you have a credible position, attractive though your "it's all about the banks" narrative undoubtedly is. Admittedly, one could certainly say that in the absence of the government's decision to spend a load of money on the banks, we would probably not have needed the bailout at all, but that's not actually your narrative, I think.

cordially,
Scofflaw

oppenheimer1

http://www.economist.com/node/17629757

Interesting article on why Germany leaving the euro would be very bad for it in the short to medium term. Its hard to argue with their analysis.

handlemaster

Interesting artical



http://www.businessweek.com/magazine/content/10_51/b4208016648372.htm

SkepticOne

later10 wrote: »

Well Scofflaw already answered the question, they aren't necessarily wrong; they are often right, in fact. But these economists and pundits are not always correct either - anything that an economist says should be backed up with facts and clear logic that makes sense to you. Don't just take an economists opinion as gospel - Question it. As a former lecturer of mine would say, Economics is a science where two people can get a Nobel prize for saying precisely the opposite thing.

Sometimes, as in Mc Williams case, I think the delivery of the message is sometimes overly simplistic or sensational - tabloid economics, perhaps.

But what you usually find among academic economists or those with ambitions in the academic world is that they don't question the likes of McWilliams, George Lee, or for that matter the likes of Morgan Kelly and other academics that stray into the popular media.

Morgan Kelly, for example, has said that if we were to be loaned money at anything like the 5% that Greece has been lent then, given the amount that we are in debt, it is unlikely that we will pay it back since that requires a level of growth that we are unlikely to attain. McWilliams has made this point some time ago too. Now I don't claim to have anything other than a layman's interest in the subject but a) their arguments make a certain amount of sense and b) they have a reasonable track record in this area.

However what we find with those who consider themselves to have economic expertise is that they don't so much question or argue against the positions put forward by McWilliams or others but rather that they dismiss them as being simplistic or populist and just leave it at that. They try to rise above the topic rather than engage with it.

Personally I don't give a damn wither someone has a doctorate or a pass degree in economics. What I want to know is whether or not they have an intuition for the economic system. The fact that two economists with opposite and contradictory views can get a Nobel (although I believe it is not a proper Nobel prize), for me suggests that economics is a rather impractical subject akin to philosophy and those who can demonstrate an insight into real world economic systems most likely have something that goes beyond whatever it is they have been taught at university.

For me the way to demonstrate that insight is through prediction. If you can't make predictions, then you don't understand it, as far as I'm concerned.

A case in point would be the housing bubble. There's nothing particularly difficult about the bubble. You don't need any economics training to understand what is going on, yet people with doctorates appeared in the media telling us there would be a soft landing. The ESRI, whose economic division is headed by Dr John Fitzgerald, was of this view.

Consequently, I'm far more likely to listen to George Lee or David McWiliams on these issues than Dr John Fitzgerald even though he, no doubt, has far more papers to his name.

At the same time I don't want this to be seen as an attack on economists. I am no more against economists than I am against theologians or philosophers. I'm just someone who likes to have an idea of what's around the corner when it comes to the economy and I have only adopted these views out of necessity. Certain people have a feel for the economy and other's don't and it seems to be only marginally associated with academic attainment.

later12

SkepticOne wrote: »

But what you usually find among academic economists or those with ambitions in the academic world is that they don't question the likes of McWilliams, George Lee, or for that matter the likes of Morgan Kelly and other academics that stray into the popular media.

They don't, you're right, but that isn't necessarily their fault. Today's FT has an editorial on what a good idea NAMA is in principle, even if the Government have messed up on it by being too measured in their application. Imagine the Indo or a red top running an editorial like that? Praising government initiative at this stage of the crisis?
I have no doubt that there are a great many economists who largely agree with the Government's economic policy and who understand their difficulties in managing the current situation.
But to publish such notions would appear overly sympathetic to the administration and this is something that would be almost professional suicide for a political or economic editor.

Morgan Kelly, for example, has said that if we were to be loaned money at anything like the 5% that Greece has been lent then, given the amount that we are in debt, it is unlikely that we will pay it back since that requires a level of growth that we are unlikely to attain. McWilliams has made this point some time ago too. Now I don't claim to have anything other than a layman's interest in the subject but a) their arguments make a certain amount of sense and b) they have a reasonable track record in this area.

They're correct - and that's the point, I'm not criticising these economist for being factually incorrect. I'm just questioning how balanced some of their predicitons are. For example I haven't read McWilliams contribution to that issue, but I wonder if they balanced that argument with the fact that IMF debt is often subject to write downs and aspects have often been written off in previous bailouts. I know that Morgan Kelly, who is no stranger to wild predictions by the way, did not balance his article with that.

At the same time I don't want this to be seen as an attack on economists. I am no more against economists than I am against theologians or philosophers. I'm just someone who likes to have an idea of what's around the corner when it comes to the economy and I have only adopted these views out of necessity. Certain people have a feel for the economy and other's don't and it seems to be only marginally associated with academic attainment.

Or indeed, not at all. You will see for example, when public economic appointments are made at European level, that it is the economists who work in private industry that are given far more credit than academic economists. Although it sounds rather ridiculous, given the state of our financial services industry, but in my opinion some of Ireland's best economists are working for private companies there in international financial firms. I'm not sure how much direct input if any some of these guys have on government, but due to professional constraints, they have next to no input whatsoever on your average taxpayer who just wants to know what went wrong, who did it, and what can be done. Cue David McWilliams and his stand up show.

Again the most important thing is that people don't take everything that these economists and pundits say at face value any more than you would believe everything else you read in the newspapers.

ei.sdraob

No they can not be burned ...
...because most of them have made their escape before September


Now the government and ECB are left holding most of the debt, the ECB pushed Ireland into a "bailout" since they could no longer tolerate taking on so much of our bank ****. Then again i have no sympathy for the ECB they were the ones who said the banks were ok after the so called stress tests

K-9

Euroland wrote: »

Public sector could be cut down to 10 and social welfare down to 10, and we would get 16.5 BEUR saved. Additional expenditure cuts (army, overseas development fund, capital expenditure, etc) could add another 1-4 BEUR, so we nearly there.

Do you not think taking €20 Billion out just like that, is going to have a terrible effect on VAT, Income tax, PRSI, Pension levy and Excise duty receipts?

What people forget and our Govt. did it with the pension levy, is that the PAYE/PRSI/Social/2 Pension levy receipts element of that €8 Billion in Public Sector wages is going to be lost, never mind the VAT and excise duties that result from the Net pay.

So if you slash all Public Service pay on everybody's wages by 40%, most of that is going to have taxes and other levies on it.

Even welfare, while you don't lose Direct taxes on it, it is money spent in the economy with VAT and excise duties on it. Businesses also depend on it so will see a decrease in sales, thus less VAT, profit and taxes that way.

I'd wager tax revenues would be so bad, Corporation Tax would have to be raised substantially!:eek:

noodler

K-9 wrote: »

Do you not think taking €20 Billion out just like that, is going to have a terrible effect on VAT, Income tax, PRSI, Pension levy and Excise duty receipts?

What people forget and our Govt. did it with the pension levy, is that the PAYE/PRSI/Social/2 Pension levy receipts element of that €8 Billion in Public Sector wages is going to be lost, never mind the VAT and excise duties that result from the Net pay.

So if you slash all Public Service pay on everybody's wages by 40%, most of that is going to have taxes and other levies on it.

Even welfare, while you don't lose Direct taxes on it, it is money spent in the economy with VAT and excise duties on it. Businesses also depend on it so will see a decrease in sales, thus less VAT, profit and taxes that way.

I'd wager tax revenues would be so bad, Corporation Tax would have to be raised substantially!:eek:

Now everybody pays tax, lets not go down that road.

Also, the Pension Levy: It is not as if PS workers don't get something in return for this. They get pensions substantially better (in most cases) than the basic state pension private secotr workers get.

K-9

noodler wrote: »

Now everybody pays tax, lets not go down that road.

Also, the Pension Levy: It is not as if PS workers don't get something in return for this. They get pensions substantially better (in most cases) than the basic state pension private secotr workers get.

I acknowledged that.

The pension levy pays current expenditure as in pensions. Everybody pays VAT to some degree, buy a pack of chocolate biscuits and you pay 21% VAT.

Just forget the minutiae of the post and explain where it is wrong, generally.

K-9

To put it simply, if you cut €8 Billion of Public Sector pay, you lose, say €3 Billion in tax revenue.

So, a €8 Billion saving in pay only means a €5 Billion cut in the deficit.

We need a €15 Billion cut in Public Service pay to get a €10 Billion cut.

Considering Public Sector pay costs €18 Billion...................................