Why are left-wing parties opposed to the EU/IMF deal?

Permabear

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OhNoYouDidn't

Permabear wrote: »

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There is a myth out there that if we were to have let Anglo fail, or drop the bank debt from the soverign debt, that the 'market' would hammer us.

They won't. The FI lending desk and the soverign desk are seperate and can't consipire to punish people. The market looks to the next opportunity. If trader a in a bank gets burnt on Anglo, trader b won't care less when he factors into whether to lend to Ireland or at what rate. Thats not how it works.

So there is nothing economically illiterate about dumping the bank gurantee.

OhNoYouDidn't

Permabear wrote: »

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But ditching Anglo and INBS debt from the soverign bucket will dramatically reduce the level of debt and P&I that needs to be repayed. If we can trim the debt we actually hold, the picture changes.

AndywK

Permabear wrote: »

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I'm pretty sure they would still be objective to it.

So if it was China that offered FF the money are you saying FF would of rejected it?

It might not have been their first choice by any means but I say they still would have taken it.

In short, I find that statement just to be a sly stab at the left side.

Scofflaw

OhNoYouDidn't wrote: »

There is a myth out there that if we were to have let Anglo fail, or drop the bank debt from the soverign debt, that the 'market' would hammer us.

They won't. The FI lending desk and the soverign desk are seperate and can't consipire to punish people. The market looks to the next opportunity. If trader a in a bank gets burnt on Anglo, trader b won't care less when he factors into whether to lend to Ireland or at what rate. Thats not how it works.

So there is nothing economically illiterate about dumping the bank gurantee.

Ah, yes - neither of them ever hear anything about the other. They don't read the papers, or the financial media in any way. The sovereign desk will be totally unaware that bank debt has been defaulted on - all they will ever see is that the number representing Ireland's debt burden is now smaller. It will be a complete mystery to them how this happened, but nevertheless they will immediately leap on the chance to lend to Ireland at low, low rates.

I'm sorry - I prefer not to point and laugh at a post, but sometimes it really is the only option. Seriously, that's an utterly, totally, bizarrely unrealistic claim.

apologies,
Scofflaw

alan85

Left-wing parties such as Sinn Féin and the United Left Alliance reject the EU/IMF bail out, and are also against any renegotiation of the terms of said bail out.

I don't think the EU/IMF deal is a classic case of left vs. right. Paul Sommervile and Declan Ganley have effectively come out against it too in that they want the banks let go and bond holders take haircuts. If the banks were let go and bond holders had received haircuts I believe we could have found money on markets at cheaper rates and recapitalised our banks ourselves while dealing with budget deficit. Of course banks would not have gotten money from markets for a while but I think in the long run investors would come back when they saw a smaller and better regulated banking system for a strong small economy.

I fear this is turning into an economic case study that university students will study.

It might be better to question pro EU/IMF politicans on how they see us 10 years from now. The NPRF was set up to pay for pensions and welfare from 2025 onwards with a forecasted ageing population. How will that be funded now? Higher taxes and lower incomes and hence lower quality of life?
[I'm not an economist btw to be clear]

Permabear

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hatrickpatrick

Why are left-wing parties opposed to the EU/IMF deal?

Not the bailout itself but its terms - specifically, the moral abhorrence of bailing out investors who took a risk and are now whining about losing their money.

You are a bondholder. You chose to invest in something. Investments don't always work out. Tough f*cking luck - I'm not paying to bail out gamblers who gambled badly.

Permabear

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OhNoYouDidn't

Scofflaw wrote: »

Ah, yes - neither of them ever hear anything about the other. They don't read the papers, or the financial media in any way. The sovereign desk will be totally unaware that bank debt has been defaulted on - all they will ever see is that the number representing Ireland's debt burden is now smaller. It will be a complete mystery to them how this happened, but nevertheless they will immediately leap on the chance to lend to Ireland at low, low rates.

I'm sorry - I prefer not to point and laugh at a post, but sometimes it really is the only option. Seriously, that's an utterly, totally, bizarrely unrealistic claim.

apologies,
Scofflaw

A trader on the FI desk gets stung by investing in a B rated property bank. He shrugs his shoulders, calls in the CDS he hedged with and moves on

The trader on the soverign desk looks at that, might add a small premium onto the rate because of 'instability' and moves on.

The idea that the 'market' is an homogenous entity that punishes countries who have a company that fails is wrong. Plain wrong.

20Cent

OhNoYouDidn't wrote: »

A trader on the FI desk gets stung by investing in a B rated property bank. He shrugs his shoulders, calls in the CDS he hedged with and moves on

The trader on the soverign desk looks at that, might add a small premium onto the rate because of 'instability' and moves on.

The idea that the 'market' is an homogenous entity that punishes countries who have a company that fails is wrong. Plain wrong.

True seen plenty of economists/commentators say the same thing.

Permabear

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OhNoYouDidn't

Permabear wrote: »

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Don't be so smug and patronising.

I never suggested that anyone operates in a vaccum, just that its disingenious to suggest that if Ango went pop that the Irish soverign debt would have been impacted to any significant degree, like some of the FF post decision cheerleaders are suggesting. The risk premiums might have existed, but they wouldn't have amounted a fraction of a percent of the tens of billions the bailout has tacked to the national debt.

Letting Anglo fail would have been easy and cost free to the state beyond the administritive nature of shifting assets to other banks, like loans and deposits. It would have cost some German investment houses some pain, and somehow that has made it our pain.

What a number of policitcal parties, but for some reason only the left are picked on, are saying is reverse the treasonous and wrong decision of 2008 and let those who invested in Anglo whistle for it. They are professional investors, should be hedged and knew the risks they were taking.

Your ideological blinkers blind you to the fact that it is a valid option to explore, which surprises me. The idea that a bad decision will be revisted by a new government is hardly news to you.

Denerick

OhNoYouDidn't wrote: »

Don't be so smug and patronising.

I never suggested that anyone operates in a vaccum, just that its disingenious to suggest that if Ango went pop that the Irish soverign debt would have been impacted to any significant degree, like some of the FF post decision cheerleaders are suggesting. The risk premiums might have existed, but they wouldn't have amounted a fraction of a percent of the tens of billions the bailout has tacked to the national debt.

Letting Anglo fail would have been easy and cost free to the state beyond the administritive nature of shifting assets to other banks, like loans and deposits. It would have cost some German investment houses some pain, and somehow that has made it our pain.

What a number of policitcal parties, but for some reason only the left are picked on, are saying is reverse the treasonous and wrong decision of 2008 and let those who invested in Anglo whistle for it. They are professional investors, should be hedged and knew the risks they were taking.

Your ideological blinkers blind you to the fact that it is a valid option to explore, which surprises me. The idea that a bad decision will be revisted by a new government is hardly news to you.

What I think DF is getting at is that you are obsessed with the past. Anglo is done with... what is done is done. Why are you now opposed to the EU IMF deal and why can't you give a straight answer about it? (Other than 'Its a bad deal' or 'private profit public losses' or some other silly catchphrase)

OhNoYouDidn't

Denerick wrote: »

What I think DF is getting at is that you are obsessed with the past. Anglo is done with... what is done is done. Why are you now opposed to the EU IMF deal and why can't you give a straight answer about it? (Other than 'Its a bad deal' or 'private profit public losses' or some other silly catchphrase)

Private losses, public losses is NOT a silly catchphrase...

I am opposed to bailing out private industry to the direct detriment of civic society. I object to having to borrow to do this. I object to being the scapegoat for the euro project being questioned and forced into a bad deal. I appreaciate that the public purse is out of control and needs to be reigned in, but the fundamental reason it was brought to a head was to appease 'the markets' or the german banks. Fcuk 'em.

FF sold us out. I hope the next government deal with the mess they have been left. Its not exactly sedition.

Permabear

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Rabble Rabble

Permabear wrote: »

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Your transition from libertarian to banker welfarist is complete.

Rabble Rabble

Scofflaw wrote: »

Ah, yes - neither of them ever hear anything about the other. They don't read the papers, or the financial media in any way. The sovereign desk will be totally unaware that bank debt has been defaulted on - all they will ever see is that the number representing Ireland's debt burden is now smaller. It will be a complete mystery to them how this happened, but nevertheless they will immediately leap on the chance to lend to Ireland at low, low rates.

I'm sorry - I prefer not to point and laugh at a post, but sometimes it really is the only option. Seriously, that's an utterly, totally, bizarrely unrealistic claim.

apologies,
Scofflaw

It doesn't matter what papers the guys on the Sovereign desk reads, he is either going to get a good deal or not in his particular investment in Ireland and get a bonus if he does. If her gets in at 4.5% and Irish debt costs fall, he is quids in can buy the yacht.

In fact if he isn't German but Chinese, and he knows that Ireland has defaulted on loans not with his bank he wont give a flying flip. The German guy shouldn't care either, he should lap up the bonds, but the bank might care.

What we do know is that the secondary market for sovereign bonds is spooked because of the cost of the banking bailout.

With all of this debt we can, and should restructure. The political options are

1) Destroy the Irish economy with vast cuts in Public Sector, welfare, enormous increases in taxation, and huge transfers of wealth to Roman Abrovovich et al.
2) Default, reschedule, or burn the bondholders.

I'd say some of 2) is certain.

By the way I love the way that a collapse in the Irish economy because of lose regulation, has the right wingers jumping for joy and blaming statism.

Permabear

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Rabble Rabble

Permabear wrote: »

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Nonsense. Most ordinary people in Ireland are rescheduling and paying back their loans. Defaults are not that high. Now Roman Abronovich has to do the same. And Fat Herr ScheisselOdor.

Irish people have taken the hit, and will take some more. Now the lads on the yachts, whoss lending to us Irish was not as blameless as you might think have to take a small bit of the pain.

The little people are responsible for their loans, but the guys with the CDOs and the Exotic Financial Instruments are not, you say.

I say, nonsense.

Permabear

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Sand

Isnt the major flaw of the IMF/ECB liquidity bailout that it doesnt actually do anything to solve the Irish insolvency problem?

The seriousness of our position - and the reality of inevitable default, regardless of its merits (no one I hope considers it an ideal solution...) - have been underlined by the comments of Colm McCarthy over at irisheconomy.ie when he was challenged by John McHale to clarify if he agreed with those who say "Ireland should be willing (unilaterally) to impose losses on the unguaranteed senior bank debt and possibly also the guaranteed senior debt"

(I underlined willing to highlight the almost religious refusal to even countenance imposing losses on bondholders by those who wait and pray and hope for a German solution and what a poor negotiating position it puts them in. McHale didnt ask McCarthy if he thought we should do it tommorrow, he asked if we should be willing to do it at all.)

# colm mccarthy Says:
February 23rd, 2011 at 8:52 am

John McHale,

Hope is not a policy. My position is straightforward. Both tactics and strategy need to be grounded in an appreciation of what is feasible. We are three years into this European banking crisis. The parameters of the (next) set of stress tests are being negotiated at political level, including public disagreements about whether negotiable, listed, securities on the balance sheets of troubled banks should be marked to market!

Ireland, and other ‘peripherals’, are headed for def… oops! Re-construction of unmanageable liabilities!

Do you think this is a minor matter? Those who are fond of the European project should be most concerned about the Kick-and-Hope policy being pursued. I am stunned by the (apparent) insouciance of the EU Commission and ECB. You are persistently encouraging policy positions three months behind the pace of the game. What’s the point?

# colm mccarthy Says:
February 23rd, 2011 at 10:00 am

John McHale,

I appreciate that the attribution to people, in the form of a question, of policy positions that they may never have advocated, is a standard operating procedure for interviewers on Irish radio and TV. If you feel that I may have advocated unilateral default somewhere, there is a Google button on your PC. If it is broken, get it fixed.

For the avoidance of doubt, your honour, sovereign (d-word) is a serious risk at this stage, and it is time to make this clear to our European ‘partners’. Friends of the European project, including FT columnists, appear to understand this straightforward point. Unilateral policy adventures are for the birds, but a failure to draw attention to the feasibility of current policy serves neither (Euro) Philes nor Phobes.

Colm McCarthy isnt noted for being alarmist and he has been trusted by policymakers. And he is highlighting the reality, that like it or not, regardless of the attractiveness of unilateral default/restructuring, that is the path Ireland is being driven down. The EU and ECB have absolutely no interest at all, whatsoever, in addressing the true Irish problem. If we want to make them interested, then we need to be willing to unilaterally impose losses on the bondholders. They do not care about anything else. Ireland will not be able to return to borrow in the markets until the insolvency problem is resolved, and the 2013 reform Merkel is planning will only ensure that Ireland will not be able to roll over its debt and will be forced to default messily then.

The main flaw of the left wings parties view is that they think they can default/restructure and yet somehow maintain a deficit of 20 billion per year. Thats clearly impossible. Austerity is inescapable. "Burn the bondholders" wont generate free money.

Permabear

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SkepticOne

Permabear wrote: »

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What do you advocate?

Permabear

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SkepticOne

Soldie wrote: »

The €85 billion is to be drawn down in tranches, and it may be the case that not all of it is needed (it may also be the case that more is needed). €50 billion of it has been earmarked to finance the budget, as that is what the four-year plan has been based on, and another €10 billion was to go into the banks. The remaining €25 billion is on hold as a contingency for the banks. No matter what way you look at it, the majority of the proposed bail out is to finance the budget (€50 billion out of €85 billion is 58%, and €50 billion out of €67.5 billion is 74%). The controversy surrounding the overall figure is that much more may be needed for the banks.

This is just a repeat of the official line. Look, the bailout isn't 85 billion; it is 67.5 billion.

Now the next step is very simple: what percentage of 67.5 billion is 35 billion?

Note here I'm dealing only with actual money transfers. The 85 billion is not a transfer of money since it includes money Ireland has already raised.

If you deal only with real amounts you can see that the majority of money from the lenders point of view is for the banks. We would not get the 67.5 billion otherwise.

Yes, they have phrased it in such a way that it appears that the 35 billion is coming from 17.5 billion pension fund plus some from the loan amount, but you can only do this by inventing the dodgy 85 billion figure.

If I lend you 100 euros on condition that you put 70 euros into some charity of my choosing, you have really only received 30 euros to spend on food although you still owe 100 euros. As well as this most people would agree that the bulk of the loan amount is tied up with the condition that 70 euros must go into the charity.

Now let us say that I stipulate that the 70 euros has to come out of your savings and not the loan amount. Does this make any difference? I think you will agree that the answer is no. The aggregate amounts are the same in both cases.

Does it further make any difference if I add the 70 euros on to the 100 euros to create a 170 euro "package". Again, no. This is all just fiddling about with numbers on bits of papers. In this hypothetical example there are only two real figures a) the 100 euros lent and b) the 70 euros that needs to be put into the charity as a condition of the loan.

But by adding the 70 euros on to the loan amount, it appears that the conditions of the loan are much less onerous. 70 as a proportion of 170 is much less than 70 as a proportion of 100 yet exactly the same transfers of money are involved.

SkepticOne

Permabear wrote: »

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But if we decouple the banks from the state they will fail and bondholders will be burned. Aren't you against this?

K-9

20Cent wrote: »

Question is why is anyone for the IMF/ECB deal. It is clearly a recipe for disaster causing spiraling depression of the economy and inevitable default.

Whereas we could just default first and then have the spiralling depression afterwards.

Rabble Rabble

K-9 wrote: »

Whereas we could just default first and then have the spiralling depression afterwards.

Yeah, nobody every recovers from defaults.


Not that we are even talking about Sovereign defaults. Just, you know, bank debt holders who bought risky paper.

Permabear

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