Philip Lane Irish Times 12/05/11

Scofflaw

Another in the series of economic debate articles the IT is running, this one by Philip Lane, another heavyweight economist. Not a very quotable article, and rather more detailed and dry than the Kelly article that preceded it, but the conclusions are quotable:

It is certainly arguable that the projected pace of fiscal consolidation is too slow. However, an immediate closing of the fiscal deficit would send Ireland into a new and deeper recession, while also having a dramatic impact on the banking system, in view of the high debt levels among households and small businesses. It is for these macroeconomic reasons (and not the protection of highly paid upper-level public sector workers) that the troika has agreed to a drawn-out fiscal adjustment process, in which steady expansion in the export sector offsets the negative fiscal drag on the domestic sector and private sector debt sustainability is supported by a gradual pace of adjustment.

In summary, Ireland is on a financial tightrope. The Government’s strategy is to lobby for a more robust European safety net, in case negative shocks make it infeasible to deliver on projected targets. This approach is predicated on the commitment among our European partners to ensure that Ireland will successfully emerge from the current dire situation. This commitment is reinforced by the fact that the euro zone crisis is fundamentally different to previous sovereign and banking crises by virtue of the enhanced joint interest between creditors and debtors in preserving area-wide financial stability and in the capacity of the ECB to provide additional resolution mechanisms.

Morgan Kelly advocates a different approach, by which Ireland adopts a more unilateral approach to addressing the crisis. As currently presented, it seems to me that he understates the ultimate potential gains to the current official strategy, while also underestimating the potential costs of his alternative approach.

Still, the chronic nature of this crisis means this debate is sure to continue for several years.

Source: http://www.irishtimes.com/newspaper/opinion/2011/0512/1224296752403.html

Having seen various responses to MK's article - in particular this one by Seamus Coffey - I'd agree that MK has overstated both the probable debt and the likely savings from the default he proposes.

I also agree that our best bet is to wait and see what emerges from Europe in terms of relief - currently, the very unevenly distributed pain we're undergoing is the result of budget deficit cutting, which I think we all agree has to happen, while default on the debts whose payment will eventually become a major feature of our state budget is something that can be done at more or less any time. For the moment, I think we are better advised keeping the default card in our hand, and waiting to see what else is played.

cordially,
Scofflaw

Laminations

Scofflaw wrote: »

I also agree that our best bet is to wait and see

Why does that not surprise me.

Although I somewhat agree with you here.

lmimmfn

Scofflaw wrote: »

Having seen various responses to MK's article - in particular this one by Seamus Coffey - I'd agree that MK has overstated both the probable debt and the likely savings from the default he proposes.

but didnt MK's article also include the money that the banks had already borrowed from the ECB before the bank guarantee?

Sand

I think an Irish Times commentator best summarised the article when he noted:

"In summary the writer states that the issue is hard and the choices difficult. Thanks thats really helpful."

Phillip Lane is exceptionally cautious, which is understandable as there are no happy answers, but I think he overstates things when he claims

This approach is predicated on the commitment among our European partners to ensure that Ireland will successfully emerge from the current dire situation. This commitment is reinforced by the fact that the euro zone crisis is fundamentally different to previous sovereign and banking crises by virtue of the enhanced joint interest between creditors and debtors in preserving area-wide financial stability and in the capacity of the ECB to provide additional resolution mechanisms.

Our European partners are for the most part playing domestic politics, which has always trumped European interests when push comes to shove. They have no commitment whatsoever to Ireland, their definition of Ireland emerging "successfully" from this crisis is for Ireland to be quarantined so as not to affect them, and to continue on struggling to hike taxes and cut spending to pay reparations to the ECB for being inconvenient. If Lane makes the mistake of assuming German or French voters have any interest in Ireland beyond that, its no wonder he is mispricing the various risks and payoffs involved in rocking the boat as Morgan Kelly indicates we ought to.

I'd agree that MK has overstated both the probable debt and the likely savings from the default he proposes.

Has he? The NTMA admit to 203 billion debt in a short few years, and thats discounting the 37 billion of debt sitting behind NAMA, and the additional 10-20 billion that the ECB and the IMF are projecting. Or the 60 billion that the Irish Central Bank has poured into the banks under its "Other Operations" figure on its balance sheet. The NTMAs considers this manageable, but only in the face of GDP growth (as opposed to GNP growth) which seems amazingly optimistic given rising interest rates to fight inflation, increasing energy prices, a real threat to Irelands corporate tax rate, a lack of potential for Ireland to catch up with the EU average having already done so, worsening demographics and the impact of several years of tax hikes and spending cuts.

And of course, it presumes the government can actually deliver the cuts and "efficiencies" required to cut the deficit which seems very optimistic given the preference to always push the hard decisions to some point in the future rather than now. Already, its interesting that the "job inititiative" is running into some issues in that the spending has been defined, but theyre running into some issues figuring out how theyre actually going to apply the pensions grab legally. So spending is definitly up, revenue...less certain.

johnnyskeleton

It seems to me that he is just putting a shine on that particular turd.

Deficit spending is an economic stimulous. So running a €20bn deficit quite literally means that there is €20bn extra coming into the country via borrowing.

If you cut that stimulous, all things being equal with a mulitplier of 1 then GDP will decrease in line with the cut e.g. each 1.6bn cut would result in a ~1% drop in GDP. So reducing the deficit will definately reduce GDP, the amount which it does so depends on the multiplier and the depts of the cuts.

On the other hand, it means that a large part of our GDP is based on this stimulous package.

So while in theory a government shouldn't cut spending during a recession, there is no point trying to maintain such an artificially high level of stimulous.

It's kinda like saying that a junkie can't go cold turkey. They can, they just won't like it. But it is better than trying to live out the lie.

Scofflaw

On this occasion, I'm just going to recommend reading Seamus Coffey's post on the subject, since otherwise I'd more or less just be going through his arithmetic. One point, though, because I find it kind of typical:

The NTMA admit to 203 billion debt in a short few years, and thats discounting the 37 billion of debt sitting behind NAMA

Mm. This is bogus arithmetic. NAMA have paid out €30bn to buy €70bn of loans. What you're doing here is simply discounting 100% of every asset NAMA acquired. NAMA's current expected losses (not according to NAMA) are about €3.5bn - that may turn out to be the case, it may not, since it's based on projections (obviously) - but just writing down 100% of NAMA's assets to nothing is a pretty farcical way of coming to a real debt figure.

cordially,
Scofflaw

View

johnnyskeleton wrote: »

It seems to me that he is just putting a shine on that particular turd.

Deficit spending is an economic stimulous. So running a €20bn deficit quite literally means that there is €20bn extra coming into the country via borrowing.

If you cut that stimulous, all things being equal with a mulitplier of 1 then GDP will decrease in line with the cut e.g. each 1.6bn cut would result in a ~1% drop in GDP. So reducing the deficit will definately reduce GDP, the amount which it does so depends on the multiplier and the depts of the cuts.

On the other hand, it means that a large part of our GDP is based on this stimulous package.

So while in theory a government shouldn't cut spending during a recession, there is no point trying to maintain such an artificially high level of stimulous.

It's kinda like saying that a junkie can't go cold turkey. They can, they just won't like it. But it is better than trying to live out the lie.

The junkie certainly can go through the shock of cold turkey. Equally well, the junkie could check-in (or be check-in by concerned onlookers) to a drug rehab centre and attempt to beat the addiction through using methadone and gradually tapering it off over a period of time.

We, however, are a bit like a junkie who prefers to rage at the drug rehab centre while ignoring the drug problem and believing that, if we only leave the centre, the local drug pushers (aka the international bond markets) will be happy to supply us with unlimited quantities of free drugs out of a spirit of benevolence.

Sand

Mm. This is bogus arithmetic. NAMA have paid out €30bn to buy €70bn of loans. What you're doing here is simply discounting 100% of every asset NAMA acquired. NAMA's current expected losses (not according to NAMA) are about €3.5bn - that may turn out to be the case, it may not, since it's based on projections (obviously) - but just writing down 100% of NAMA's assets to nothing is a pretty farcical way of coming to a real debt figure.

Debt is debt Scofflaw. The value of the NAMA portfolio is unknown - though write downs have already occured, and outlook remains negative. The debt the government has issued is known and certain.

You'll note I didnt actually provide a real debt figure, just noted that the NTMA have entirely ignored this debt, assuming NAMA debt=NAMA asset. Which is ludicrous. If critics are asked to allow some value for the NAMA portfolio, then fine - but let the "manageable" guys allow some liability for the NAMA debt.

The NTMA may ignore debt they prefer to wish never happened, but investors wont.

paddy0090

Found this in the economist here

The Economist wrote:

IF THE stakes were not so high, Europeans’ incompetence in the euro-zone debt crisis would be comic. One year after the Greek rescue was launched, it is manifestly failing (see article). Yields on ten-year Greek bonds are higher than they were a year ago. Both the Greek government and its European and IMF rescuers admit that the country has no hope of tapping private capital markets in 2012, a central assumption of the original plan. It is plainly time for Plan B. But rather than get on with it, Europeans are bickering like children in a playground. The biggest fight is between Germany and the European Central Bank (ECB). Germany’s politicians do not want to lend Greece more money without a “game-change” in the rescue plan. That could include bold new concessions from the Greeks, such as pledging privatisation proceeds as collateral for new rescue funds. Or it could imply a debt restructuring. Although the Germans are reluctant to impose losses on holders of Greek bonds, they have become convinced that a “reprofiling” of the country’s debt is advisable.
The ECB is adamantly opposed. It wants to continue with today’s failed plan, with more Greek austerity in return for more loans. The bank’s officials have argued, in increasingly hysterical tones, that any tampering with Greek debt, even a modest extension of maturities, would be a catastrophe. One has predicted it would cause a crisis far worse than the collapse of Lehman Brothers in 2008. Privately, ECB officials are even more extreme, threatening that if Greece restructures its debt, they might refuse to allow Greek bonds as collateral for funding by the ECB. Such a withdrawal of liquidity would doom the country’s banking system and might even lead to Greece’s departure from the euro zone.


It is certainly reasonable for the bank to worry about the impact of a Greek default on the European banking system and its own balance-sheet, and about the risk of further defaults in Ireland, Portugal and even beyond. But rather than digging in its heels, the ECB should insist that Europe’s politicians reduce those risks by coming up with funds to recapitalise hard-hit banks. Perhaps, in a calculated piece of brinkmanship, the ECB hopes that by raising the stakes around a restructuring it can persuade Europe’s governments to blink first and provide more cash for Greece. That would be risky. The still more alarming possibility is that, blinded by pride, the bank and its hitherto sensible president, Jean-Claude Trichet, are unable to accept that a euro-zone country is bust.
Whatever the ECB’s motives, the Germans are right. When Plan A is clearly not working, there is no point in pigheadedly pursuing it. That means looking for a plausible Plan B.

The bold part kinda puts the kibosh on MKs idea of simply handing over the banks to the ECB. Whether or not they would doom our banking system is another matter as said above. Waiting for Spain could take longer than Lenihan thought as well it seems to have drifted out of view.

All that said this is F.U.B.A.R.

I think this quote from Brendan Kennan in the Indo says it best

THEY used to have a saying in the North to the effect that there were two kinds of politicians -- the mad and the sane. The difference being that the mad ones believed what they said.
It turned out not to be easy to tell who was which. Dissident republicans are, by definition, mad. But some of the nastiest loyalist paramilitary bosses emerge as coldly sane, and pretty clever at turning a few bob. Ian Paisley was sane all along, despite appearances.

. full article here

Maybe we don't have to wait for Spain at all. The Greeks could do it for us.

Scofflaw

Sand wrote: »

Debt is debt Scofflaw. The value of the NAMA portfolio is unknown - though write downs have already occured, and outlook remains negative. The debt the government has issued is known and certain.

You'll note I didnt actually provide a real debt figure, just noted that the NTMA have entirely ignored this debt, assuming NAMA debt=NAMA asset. Which is ludicrous. If critics are asked to allow some value for the NAMA portfolio, then fine - but let the "manageable" guys allow some liability for the NAMA debt.

The NTMA may ignore debt they prefer to wish never happened, but investors wont.

Sure - but none of that justifies adding 100% of NAMA to our total debt figure.

cordially,
Scofflaw

lmimmfn

Scofflaw wrote: »

Mm. This is bogus arithmetic. NAMA have paid out €30bn to buy €70bn of loans.

has this changed of late? the total figure was 54billion:
http://www.rte.ie/news/2009/1020/banks.html
http://en.wikipedia.org/wiki/National_Asset_Management_Agency

Or do you mean that not all loans are transferred yet? you'll have to excuse my ignorance on this if that is the case as ive been avoiding the media as much as i can over the past month( getting a bit too depressing ) and last i heard on the transfers was AIB's huge loss for last years results due to NAMA transfers.

Scofflaw

lmimmfn wrote: »

has this changed of late? the total figure was 54billion:
http://www.rte.ie/news/2009/1020/banks.html
http://en.wikipedia.org/wiki/National_Asset_Management_Agency

Or do you mean that not all loans are transferred yet? you'll have to excuse my ignorance on this if that is the case as ive been avoiding the media as much as i can over the past month( getting a bit too depressing ) and last i heard on the transfers was AIB's huge loss for last years results due to NAMA transfers.

Not all loans have transferred yet, but the vast majority of them have:

The agency said that, by the end of March, it it had paid €30.5 billion for loans with an original value of €72.3 billion, a discount of 58%. It said another €3.5 billion of loans could transfer to NAMA over the coming months.

Exact figure for bonds issued by NAMA is €30,280,000,000 (9th May 2011).

The original expectation was for NAMA to pay €54bn for €77bn in loans, on assets originally valued at €88bn:

Assets value at origination |€88bn
Approximate average LTV |77%
Net Original Balance excluding Interest roll up |€68bn
Potential decline in property prices approximate estimate |47%
Estimated current market value of underlying asset |€47bn
Interest Roll up Estimate |€9bn
Potential total book value for transfer to NAMA |€77bn
Haircut on loans |30%
Price NAMA could pay for loans |€54bn

The important bit there is the expected haircut, which was 30%, but has been virtually double that. So the €54bn was based on 70% of €77bn. In fact, NAMA has paid €30.3bn for €72.3bn of the loans, and if it applies the same haircut on the remaining loans from the original business plan, then the total NAMA cost of acquisition is going to be €32.3bn.

cordially,
Scofflaw

ei.sdraob

@Scofflaw @Sand

Do not forget the 150-160 or so billion loan from the ECB (which they made clear they want back) and ICB (based on even dodgier collateral that ECB wont accept),
loans which @Scofflaw admitted is given in exchange for dodgy assets/collateral that might not be worth close to that!


* This facility is provided to the Irish banks,
* Last I checked the state and its people now own these banks and all their liabilities (and dodgy assets) The state == the banks
* Therefore that is indirectly more debt piled onto the state, called "exposure" by the FT


How will the banks repay this at a time when deposits continue to flee them and the country? And after this weeks pensions **** up things might get worse as more people get worried.
Since the banks are now "ours" this debt is now "ours" and the ECB made it quite clear that they expect the taxpayers to be "responsible" for this

/


edit: does anyone have an up to date figure of how much is owed to ECB and ICB, both figures keep moving rapidly over various sources

Scofflaw

ei.sdraob wrote: »

@Scofflaw @Sand

Do not forget the 150-160 or so billion loan from the ECB (which they made clear they want back) and ICB (based on even dodgier collateral that ECB wont accept),
loans which @Scofflaw admitted is given in exchange for dodgy assets/collateral that might not be worth close to that!


* This facility is provided to the Irish banks,
* Last I checked the state and its people now own these banks and all their liabilities (and dodgy assets) The state == the banks
* Therefore that is indirectly more debt piled onto the state, called "exposure" by the FT


How will the banks repay this at a time when deposits continue to flee them and the country? And after this weeks pensions **** up things might get worse as more people get worried.
Since the banks are now "ours" this debt is now "ours" and the ECB made it quite clear that they expect the taxpayers to be "responsible" for this

The idea is that they don't repay this - or, rather, not all at once, because that's float money that allows the banks to meet their other debts. The idea is that the amount gradually falls as the banks shrink and deleverage, and you keep that going until the banks are in a position to repay it. What you don't do is collapse everything, because that crystallises all the debt, and then we get to find out just how much, or how little, the banks' assets are really worth. On that occasion we would also get to find out how much of that liquidity money translated into actual debt that isn't on the books somewhere else.

The important point to remember is that liquidity borrowings are operating money to allow the banks to meet obligations that fall due as they fall due, because their obligations are short-term and their assets are long-term. It isn't in any sense a consolidated debt position.

ei.sdraob wrote: »

edit: does anyone have an up to date figure of how much is owed to ECB and ICB, both figures keep moving rapidly over various sources

Latest available figures for the ECB borrowings of the covered banks is end-March: €90.6bn, up €2.5bn from end-Feb (up €41bn from just before the end of the Guarantee).

Latest available figures for CB 'other assets' is end-April: €54bn, down €15.9bn from end-Feb (up €33bn from just before the end of the Guarantee).

cordially,
Scofflaw

ei.sdraob

Scofflaw wrote: »

The idea is that they don't repay this - or, rather, not all at once, because that's float money that allows the banks to meet their other debts. The idea is that the amount gradually falls as the banks shrink and deleverage, and you keep that going until the banks are in a position to repay it. What you don't do is collapse everything, because that crystallises all the debt, and then we get to find out just how much, or how little, the banks' assets are really worth. On that occasion we would also get to find out how much of that liquidity money translated into actual debt that isn't on the books somewhere else.

The important point to remember is that liquidity borrowings are operating money to allow the banks to meet obligations that fall due as they fall due, because their obligations are short-term and their assets are long-term. It isn't in any sense a consolidated debt position.

That is a problem right there,
this "support" is not indefinite and is not short term,
the interest rate might go up too,
and in order to repay the banks have to become healthy again
when will this happen if ever.


Barclays Capital has this to say on 30th of March about the ICBs ELA thingie

ELA has been used by a number of central banks inside and outside the euro area overthe past few years, but it is currently only being used in Ireland. At the end of February(Friday, 25 February), the Central Bank of Ireland ‘Other assets’ category, in which theIrish ELA is reported, amounted to €70bn. However, we believe the number wasboosted temporarily at the time by the deposit transfers between Anglo/AIB andINBS/Irish Life and Permanent (total amounts involved were around 16bn): hence thechanges at the time between the Marginal Lending Facility usage, the ELA, and regularOMOs. This was also partly confirmed when in the following week the Eurosystem’sweekly balance sheet ‘Other assets’ dropped by about €7bn, suggesting a reduction inthe use of ELA. Currently, we believe the total amount of ELA outstanding is lower thanthe €70bn at the end of February, probably closer to €50bn in fact.

As importantly, we believe that the bulk, if not the entirety, of this ELA is actuallyreceived by Anglo Irish Bank (probably more than €40bn) and INBS (probably €5-10bn).A few things point in that direction. First, looking at the balance sheets of these entities,it is likely that after the recent transfers, they actually no longer own any ECB eligible collateral (their NAMA bonds having been transferred). Hence, they must rely on ELA .Second, it is clear that Ireland is trying to segregate these two (arguably non-viable)banks from other Irish banks: there have been no new government guaranteed bonds for these two (a €4bn note for INBS expired in early March and was likely replaced by ELA)

So how in gods name with Anglo and INBS ever repay this?

Issue more government debt to repay central bank debt as was done before? well that will endup straight back on NTMAs list

Scofflaw wrote: »

Latest available figures for the ECB borrowings of the covered banks is end-March: €90.6bn, up €2.5bn from end-Feb (up €41bn from just before the end of the Guarantee).

Latest available figures for CB 'other assets' is end-April: €54bn, down €15.9bn from end-Feb (up €33bn from just before the end of the Guarantee).

cordially,
Scofflaw

Thanks

Taxi Drivers

ei.sdraob wrote: »

That is a problem right there,
this "support" is not indefinite and is not short term,
the interest rate might go up too,
and in order to repay the banks have to become healthy again
when will this happen if ever.

So how in gods name with Anglo and INBS ever repay this?

Issue more government debt to repay central bank debt as was done before? well that will endup straight back on NTMAs list
Thanks

We're going to pay it for them! But we've already allowed for it. Anglo and INBS have €28 billion of Promissory Notes. This is the collateral they have used to get the money.

So you can add the Promissory Notes to the debt or you can add the money Anglo owe to the ICB to the debt but you cannot add both. They are the same thing!

If the €28 billion of Promissory Notes were paid off in full immediately, Anglo would have to give this money to the Central Bank and the level of ELA would fall by €28 billion. One payment of €28 billion by the State would cause the Promissory Notes to fall by €28 billion AND the level of ELA to fall by €28 billion. It does not have to pay both separately.

This is why you cannot add both and is also why you shouldn't be really worried out the ELA. It's the €28 billion of Promissory Notes that are the problem and we will be paying those for about another 14 years!

The remainder of the repayment for the ELA will come from Anglo's remaining and performing loans which are largely outside Ireland (mainly the UK) and we can expect these to be repaid in full.

Scofflaw

Taxi Drivers wrote: »

We're going to pay it for them! But we've already allowed for it. Anglo and INBS have €28 billion of Promissory Notes. This is the collateral they have used to get the money.

So you can add the Promissory Notes to the debt or you can add the money Anglo owe to the ICB to the debt but you cannot add both. They are the same thing!

If the €28 billion of Promissory Notes were paid off in full immediately, Anglo would have to give this money to the Central Bank and the level of ELA would fall by €28 billion. One payment of €28 billion by the State would cause the Promissory Notes to fall by €28 billion AND the level of ELA to fall by €28 billion. It does not have to pay both separately.

This is why you cannot add both and is also why you shouldn't be really worried out the ELA. It's the €28 billion of Promissory Notes that are the problem and we will be paying those for about another 14 years!

The remainder of the repayment for the ELA will come from Anglo's remaining and performing loans which are largely outside Ireland (mainly the UK) and we can expect these to be repaid in full.

Thanks, Taxi Drivers - good shorthand explanation. The issue of floating debt baffles many - I think you need practical experience of actually using it before you get a grasp on it. Conversely, I've been in business with people who never really got a handle on the difference between 'operating profit' and actual profit.

cordially,
Scofflaw

ei.sdraob

Taxi Drivers wrote: »

We're going to pay it for them! But we've already allowed for it. Anglo and INBS have €28 billion of Promissory Notes. This is the collateral they have used to get the money.

So you can add the Promissory Notes to the debt or you can add the money Anglo owe to the ICB to the debt but you cannot add both. They are the same thing!

If the €28 billion of Promissory Notes were paid off in full immediately, Anglo would have to give this money to the Central Bank and the level of ELA would fall by €28 billion. One payment of €28 billion by the State would cause the Promissory Notes to fall by €28 billion AND the level of ELA to fall by €28 billion. It does not have to pay both separately.

This is why you cannot add both and is also why you shouldn't be really worried out the ELA. It's the €28 billion of Promissory Notes that are the problem and we will be paying those for about another 14 years!

The remainder of the repayment for the ELA will come from Anglo's remaining and performing loans which are largely outside Ireland (mainly the UK) and we can expect these to be repaid in full.

Read the Barclays Capital document, The ELA from ICB to Anglo and INBS is about 50 billion, the emergency loan is backed by 28 billion of government promissory notes (or just call a spade a spade and call them bonds)

There is a gap right there, how will that be paid for?

Taxi Drivers

ei.sdraob wrote: »

Read the Barclays Capital document, The ELA from ICB to Anglo and INBS is about 50 billion, the emergency loan is backed by 28 billion of government promissory notes (or just call a spade a spade and call them bonds)

There is a gap right there, how will that be paid for?

I suggest you read my previous post right to the end. Anglo and INBS have about €30 billion of loans remaining. The money to fund these is coming from the ELA. They have transferred their deposits to other banks so the ELA liability is providing the money for these assets. It is these assets that will pay the gap between €28 billion and €50 billion.

Chill.

monkeybutter

Can anyone actually explain how the banks are realistically going to pay back this 160 billion? Considering AIB made a profit of around 2 1/2 Billion in 2006 and lets be honest that was a good year.

Considering they are snowed under with Tracker Mortages and possible residential defaults.

Taxi Drivers

monkeybutter wrote: »

Can anyone actually explain how the banks are realistically going to pay back this 160 billion? Considering AIB made a profit of around 2 1/2 Billion in 2006 and lets be honest that was a good year.

Considering they are snowed under with Tracker Mortages and possible residential defaults.

The banks aren't going to pay it back!!!

The banks have taken the ECB and ICB money and given it to us in the form of mortgages, consumer loans and commercial loans. When these loans are paid back (and lots of them will be) the banks will be able to pay back these funds. The banks don't actually need to make a profit to pay them back, they just channel through the repayments we are making.

Any losses are being covered by the recapitialistion money we are paying to the banks. We don't need to pay them twice.

Sand

@Scofflaw

Sure - but none of that justifies adding 100% of NAMA to our total debt figure.

cordially,
Scofflaw

Sure - but none of that justifies adding 0% of NAMA to our total debt figure.

Which is what the NTMA have done. Perhaps because theyre still burning with rage that they went to all that bother of creating a SPV to try and hide the debt off the governments balance sheet and are enraged that the markets refuse to follow their script and still count the NAMA debt as government debt.

Which is exactly what it is.

When you consider the blinkered idealogical positions taken on the "official" debt positions, perhaps you'll understand that simply because a nice man in a suit from the Irish government says debt is manageable that its not necessarily so.

ei.sdraob

Sand wrote: »

Which is what the NTMA have done.

Speaking of NTMA, they are after depositing 19 billion into banks

Recoverah! is around the corner now

Sand

I think its a subject lesson in the sheer chicanery which is being employed by the various tentacles of the Irish state and the ECB to try and spin and hide debt and losses with accountancy tricks. I was actually encouraged by the drop in ECB/ICB support for the banks, but the unanswered question was always "How did they pay the ECB/ICB back?"

Its intriguing though that the NTMAs independance has been entirely gutted - where the NTMA could previously refuse to place assets on deposit with Anglo-Irish due to well founded fears around the bank, now its routinely used as a mere vehicle to try and hide government debt...

As its clearly no longer built to prepare for Ireland onrushing grey generation, it might as well be folded back into the DoF so to save duplication of effort and staffing.

Scofflaw

Taxi Drivers wrote: »

The banks aren't going to back it back!!!

The banks have taken the ECB and ICB money and given it to us in the form of mortgages, consumer loans and commercial loans. When these loans are paid back (and lots of them will be) the banks will be able to pay back these funds. The banks don't actually need to make a profit to pay them back, they just channel through the repayments we are making.

Any losses are being covered by the recapitialistion money we are paying to the banks. We don't need to pay them twice.

I'm afraid that all the evidence suggests this one simply doesn't get through the filters.

Sand wrote:

I think its a subject lesson in the sheer chicanery which is being employed by the various tentacles of the Irish state and the ECB to try and spin and hide debt and losses with accountancy tricks. I was actually encouraged by the drop in ECB/ICB support for the banks, but the unanswered question was always "How did they pay the ECB/ICB back?"

Its intriguing though that the NTMAs independance has been entirely gutted - where the NTMA could previously refuse to place assets on deposit with Anglo-Irish due to well founded fears around the bank, now its routinely used as a mere vehicle to try and hide government debt...

As its clearly no longer built to prepare for Ireland onrushing grey generation, it might as well be folded back into the DoF so to save duplication of effort and staffing.

I think you're thinking of the NPRF rather than the NTMA.

Sand wrote:

When you consider the blinkered idealogical positions taken on the "official" debt positions, perhaps you'll understand that simply because a nice man in a suit from the Irish government says debt is manageable that its not necessarily so.

Funny thing is that I don't take official positions on the crisis seriously, except as indicators of what they would like the markets to think. The difference is that I don't see the case for default as particularly credible - and that's at least partly the result of the dodgy arithmetic used to "justify" it. Adding the €3.5bn estimated loss from NAMA (not estimated by a nice man in a suit from the Irish government, you'll note) to the debt figures is fine (see Seamus Coffey's post, in which it is added, and with which I'm in agreement) - adding the €54bn from the original NAMA business plan or the full €30bn spent acquiring assets, on the other hand, as people often do, isn't even vaguely credible.

cordially,
Scofflaw

ei.sdraob

Scofflaw wrote: »

I think you're thinking of the NPRF rather than the NTMA.

http://uk.finance.yahoo.com/news/NTMA-deposits-push-Irish-reuters_molt-837571032.html?x=0

See below, NTMA was the one who deposited the money.

Under the EU-IMF bailout, Dublin has until the end of July to recapitalise its banks to the tune of 24 billion euros.

"The deposits in the aggregate amount of 19 billion euros are being lodged with the banks that were subject to the 31 March 2011 stress tests," the NTMA said in a statement.

"On or before 31 July 2011 the deposits will be returned to the state to provide the funds necessary for the 31 July recapitalisations."

The government is hoping that pumping 24 billion euros of fresh capital into its four remaining lenders and demanding they shrink their balance sheets by 73 billion euros by the end of 2013 will cut their dependence on the ECB. Dublin hopes some five billion euros of the 24 billion bill can be raised by asset sales and imposing losses on junior bondholders in the lenders.

Allied Irish Banks (Irish: AIB.IR - news) , which has been effectively nationalised, formally launched an offer on Friday to buy back some 2.6 billion euros of subordinated debt at a discount of up to 90 percent.

In response to this "distressed exchange," ratings agency Standard & Poor's downgraded AIB's lower Tier 2 debt to D, its lowest rating, on Friday.

Jebus! so beside 19 billion being dumped into the banks, now AIB has been reduced to absolute rubbish rating.

beeftotheheels

ei.sdraob wrote: »

Jebus! so beside 19 billion being dumped into the banks, now AIB has been reduced to absolute rubbish rating.

Lower tier 2 debt is the point. They're offering between 10c and 25c in the €1 on the sub buy-back so of course that merits a junk rating.

http://www.irishtimes.com/newspaper/finance/2011/0421/1224295159786.html

Scofflaw

ei.sdraob wrote: »

http://uk.finance.yahoo.com/news/NTMA-deposits-push-Irish-reuters_molt-837571032.html?x=0

See below, NTMA was the one who deposited the money.

Er, yes, I know - but Sand's comments (such as "built to prepare for Ireland onrushing grey generation" and "refuse to place assets on deposit with Anglo-Irish ") are appropriate for the NPRF not the NTMA.

regards,
Scofflaw