what are the chances of this actually happening

shadowcomplex

http://www.independent.ie/business/personal-finance/surviving-the-recession/what-would-happen-to-your-money-if-ireland-defaulted-2647568.html

KillerShamrock

Slim to nothing its a scaremongering article that's badly researched badly written and has an unhealthy obsession with Argentina
We are not going to default and certainly not going back to the Irish punt. Simple

daddydick

In fairness it's views expressed by university lecturers who study this kind of thing. Everyone said they were scaremongering when they warned of the property bubble.

Richie6904 you sound like Bertie Ahern, I think I will avoid taking your advice for now.

CiaranC

Richie6904 wrote: »

Slim to nothing its a scaremongering article that's badly researched badly written and has an unhealthy obsession with Argentina
We are not going to default and certainly not going back to the Irish punt. Simple

How is servicing a debt of 200-250 billion euro with a working population of about 1.6 million people possible?

later12

Highly speculative and extremely unreliable, if not even dishonest, portrayal of a default there by Louise McBride.

There are no depths that the Indo cannot sink to these days, it seems.

There are some very, very strong arguments against a default, both the soft variety and the hard variety. There are also some strong arguments against avoiding a restructuring un-necessarily.

When it comes to defaulting on Irish official or non official, private or public debt, what people really need is clarity and honesty, with references to recent historical examples. And neither the likes of Morgan Kelly nor Louise McBride seem willing to provide either honesty or clarity. Morgan Kelly simply takes the argument to one extreme, and now Louise McBride takes it to the other. In both cases, unreasonable commentators only diminish the reasonable case that can be made by their own side.

It's hard to know where to begin with refuting some of her allegations. I am sure many of them should be obvious by now, not least the ambiguity surrounding the very term default, and McBride's unwillingness to actually define what on Earth she is talking about in the first instance - restructuring/ reprofiling (hard or soft) or a partial or total repudiation of debt. Sort of significant, you might say.

RichardAnd

daddydick wrote: »

In fairness it's views expressed by university lecturers who study this kind of thing. Everyone said they were scaremongering when they warned of the property bubble.

University lecturers are often all facts, no pragmatism. I was taught thing in college that I was led to believe were sacrosanct by professors but now, working in industry, I see that alot of this was total academic nonsense.

I'm nto saying ignore what academics say but take it with a pinch of salt.

Coles

RichardAnd wrote: »

University lecturers are often all facts, no pragmatism. I was taught thing in college that I was led to believe were sacrosanct by professors but now, working in industry, I see that alot of this was total academic nonsense.

I'm nto saying ignore what academics say but take it with a pinch of salt.

The article is question is not about Morgan Kelly. It is a scaremongering article trying to outline the negative impacts of a unilateral default on the State's borrowings. It does not discuss any positive impacts and it ignores the inevitable negative impacts of not defaulting, or the very real likelihood that a default is actually inevitable. It is one sided and deserves to be taken with a pinch of salt for that reason.

Off topic, but is there a single prediction that Morgan Kelly has made over the past 4 years that was wrong?

RichardAnd

Coles wrote: »

The article is question is not about Morgan Kelly. It is a scaremongering article trying to outline the negative impacts of a unilateral default on the State's borrowings. It does not discuss any positive impacts and it ignores the inevitable negative impacts of not defaulting, or the very real likelihood that a default is actually inevitable. It is one sided and deserves to be taken with a pinch of salt for that reason.

Off topic, but is there a single prediction that Morgan Kelly has made over the past 4 years that was wrong?

Morgan Kelly is one fish in a sea. He's been right about plenty of things so he's worth listening to. However, on these boards he is treated by some posters as some manner of clairvoyant that is infallible in every sense. He's a smart guy certainly, but he's just one man so I merely take on board what he has to say without assuming he is right.

I do stand by my original opinion that the opinions of academic without real world experience is not something to be taken without a sprinkling of the worlds most ubiquitous spice.

Coles

RichardAnd wrote: »

Morgan Kelly is one fish in a sea. He's been right about plenty of things so he's worth listening to. However, on these boards he is treated by some posters as some manner of clairvoyant that is infallible in every sense. He's a smart guy certainly, but he's just one man so I merely take on board what he has to say without assuming he is right.

And I assume you dismiss those that have a track record of being repeatedly wrong?

So who's left?

Duffy the Vampire Slayer

With Argentina always being the country we are compared to, how did the other countries mentioned fare?

Coles

Duffy the Vampire Slayer wrote: »

With Argentina always being the country we are compared to, how did the other countries mentioned fare?

Here's a Tribune article from 2009 about the countries that have gone before us, and the scale of their default.

It's difficult to know what the real impact would be, but it's certainly worth considering it.

beeftotheheels

One of the significant problems we seem to have is this irrational need to find a country to compare ourselves to. Are we Iceland? Argentina? Ecuador? Uruguay? Greece? Russia? Peru?

We are none of the above, we are Ireland in 2011, an EU Member State, a Eurozone member.

Of course we should look at the previous defaults, of course we should learn from them. But we have to appreciate that there is no precedent for where we are right now. Our problems are unique in their own way being as they are at least partially caused/ exasperated by our membership of a voluntary collection of sovereign States in a something less than federal whole and by our membership of the common currency which has no precedent.

The ECB, so often painted as the baddy of the piece, has an obligation to look out for the whole of the eurozone and not just us, but when we voted to join the eurozone we handed over monetary policy while retaining fiscal policy. We split the role of the traditional central bank in two and handed part of it away, and then wholeheartedly refused to acknowledge we had done so by failing to use fiscal policy to counter balance our lack of control over the monetary policy.

The flip side of eurozone membership is, despite what many commentators would like us to believe, that we are part of a club with much deeper pockets than our own. So the chances of us actually running out of cash, which is what necessitated a number of other defaults, is unlikely to happen to us.

I think at some stage we will see a restructuring of our debt, but I think it will be orderly not least because of the input of the ECB/ EU. The problem for us is that the ECB will tell us to hold off on doing this until the last possible minute, but I think they will create a scenario whereby we can restructure our debt load in an orderly fashion when they adjudge the worst threat to the eurozone economy as having passed.

matthew8

I wouldn't call it nonsense, if we default we would have money but it would be worthless.

Peanut

Only if the punt is re-introduced, which seems like a non-runner on many levels.

I think we are heading towards more fiscal policy integration across the Eurozone countries in a bid to clean up the mess, in combination with a managed debt restructuring where needed. The idea being that tighter fiscal union may help reduce the negative confidence effects of any partial defaults.

dan_d

Who on earth is Louise McBride when she's at home?

Why do papers print this crap? Let's be realistic here - Argentina and Ireland are NOT comparable. Different land masses, different industries, different time period, different population sizes, different currency, different governance....the list goes on and on and on. About the only thing we have in common is that Argentina defaulted and for some reason, there's people out there that think we will too and it will somehow be exactly the same as what happened to Argentina. And a liking for beef.

We are not Argentina. I could print it in big black capitals if it would help to get it into people's heads.We are one of a number of countries under a single monetary union.If we go, we bring a whole pile of people with us. There is no precedent for this. Why is that so hard to understand? We can certainly speculate - and in the case of that article, take the speculations, extrapolate from them, embroider them and state them as hard facts - but the real fact of the matter is that nobody out there really has the first clue about what will happen to us, the Euro, Ireland and Europe, and Europe as a whole, should we "default" (a word which is now being used to cover a multitude of situations, not all of which are actually defaulting).

Can people please use their brains and look past these articles to see them for what they really are. A journalist's opinion, backed up by some random statements from someone with a financial background, and printed as facts. Nobody knows what will actually happen.That's it, really.

Finnbar01

Multinationals could pull out of lreland, leading to major job losses. Foreign companies eyeing up Ireland as a possible base could pull back from their plans. "If Ireland suddenly defaulted, it would damage future investment in the country and dissuade people from doing business with us," said Mr Twomey

This doesn't make any sense. If we were to default and reintroduce the punt, it would certainly be cheaper for multinationals to do business in Ireland. Wage costs for example would be reduced.

later12

Duffy the Vampire Slayer wrote: »

With Argentina always being the country we are compared to, how did the other countries mentioned fare?

They range from the upsetting but manageable (brief market exclusion, credit ratings back to normal after a few years of the cold shoulder) to the garish and the bizarre (Argentina, Argentina, Argentina). I would also stick Ecuador in the latter camp: long exclusion period, large haircuts, general disaster.

There is evidence (Richmond & Dias, 2009) to show that smaller countries - or countries with smaller economies - take longer to regain access to capital than do the larger countries. That paper also had some interesting findings, such as that higher credit ratings and smaller haircuts imply shorter exclusion periods - none of this is good news for Ireland.

http://dge.uma.pt/portal/docs_para_download/pej_papers/15.pdf

However, as beeftotheheels pointed out, Ireland is in unchartered waters: we simply do not know how single restructurings/reprofilings/ write-downs pan out in monetary unions... hopefully we will never find out.

Icepick

Finnbar01 wrote: »

This doesn't make any sense. If we were to default and reintroduce the punt, it would certainly be cheaper for multinationals to do business in Ireland. Wage costs for example would be reduced.

But experts would want be paid in euro anyway.

Tora Bora

Roubini, in todays FT, believes break up of euro is inevitable, and leaving the euro for peropheral countries, might be the less bad option in a five year time frame.

http://blogs.ft.com/the-a-list/2011/06/13/the-eurozone-heads-for-break-up/


The eurozone heads for break up
The muddle-through approach to the eurozone crisis has failed to resolve the fundamental problems of economic and competitiveness divergence within the union. If this continues the euro will move towards disorderly debt workouts, and eventually a break-up of the monetary union itself, as some of the weaker members crash out.
The Economic and Monetary Union never fully satisfied the conditions for an optimal currency area. Instead its leaders hoped that their lack of monetary, fiscal and exchange rate policies would in turn see an acceleration of structural reforms. These, it was hoped, would see productivity and growth rates converge.
The reality turned out to be different. Paradoxically the halo effect of early interest rate convergence allowed a greater divergence in fiscal policies. A reckless lack of discipline in countries such as Greece and Portugal was matched only by the build-up of asset bubbles in others like Spain and Ireland. Structural reforms were delayed, while wage growth relative to productivity growth diverged. The result was a loss of competitiveness on the periphery.
All successful monetary unions have eventually been associated with a political and fiscal union. But European moves toward political union have stalled, while moves towards fiscal union would require significant federal central revenues, and also the widespread issuance of euro bonds — where the taxes of German (and other core) taxpayers are not backstopping only their country’s debt but also the debt of the members of the periphery. Core taxpayers are unlikely to accept this.
Eurozone debt reduction or “reprofiling” will help to resolve the issue of excessive debt in some insolvent economies. But it will do nothing to restore economic convergence, which requires the restoration of competitiveness convergence. Without this the periphery will simply stagnate.
Here the options are limited. The euro could fall sharply in value towards – say – parity with the US dollar, to restore competitiveness to the periphery; but a sharp fall of the euro is unlikely given the trade strength of Germany and the hawkish policies of the European Central Bank.
The German route — reforms to increase productivity growth and keep a lid on wage growth — will not work either. In the short run such reforms actually tend to reduce growth and it took more than a decade for Germany to restore its competitiveness, a horizon that is way too long for periphery economies that need growth soon.
Deflation is a third option, but this is also associated with persistent recession. Argentina tried this route, but after three years of an ever deepening slump it gave up, and decided to default and exit its currency board peg. Even if deflation was achieved, the balance sheet effect would increase the real burden of private and public debts. All the talk by the ECB and the European Union of an internal depreciation is thus faulty, while the necessary fiscal austerity still has – in the short run – a negative effect on growth.
So given these three options are unlikely, there is really only one other way to restore competitiveness and growth on the periphery: leave the euro, go back to national currencies and achieve a massive nominal and real depreciation. After all, in all those emerging market financial crises that restored growth a move to flexible exchange rates was necessary and unavoidable on top of official liquidity, austerity and reform and, in some cases, debt restructuring and reduction.
Of course today the idea of leaving the euro is treated as inconceivable, even in Athens and Lisbon. Exit would impose big trade losses on the rest of the eurozone, via major real depreciation and capital losses on the creditor core, in much the same way as Argentina’s “pesification” of its dollar debt did during its last crisis.
Yet scenarios that are treated as inconceivable today may not be so far-fetched five years from now, especially if some of the periphery economies stagnate. The eurozone was glued together by the convergence of low real interest rates sustaining growth, the hope that reforms could maintain convergence; and the prospect of eventual fiscal and political union. But now convergence is gone, reform is stalled, while fiscal and political union is a distant dream.
Debt restructuring will happen. The question is when (sooner or later) and how (orderly or disorderly). But even debt reduction will not be sufficient to restore competitiveness and growth. Yet if this cannot be achieved, the option of exiting the monetary union will become dominant: the benefits of staying in will be lower than the benefits of exiting, however bumpy or disorderly that exit may end up being.
Nouriel Roubini is chairman of Roubini Global Economics, professor of economics at the Stern School of Business NYU and co-author of ‘Crisis Economics’ that has been recently published in its paperback edition.

Finnbar01

Icepick wrote: »

But experts would want be paid in euro anyway.

What they want and what they get are two different things.

amacca

Finnbar01 wrote: »

What they want and what they get are two different things.

all very well if one is bargaining from a position of power?

dan_d

Interesting that we are not included in the countries where there was a "reckless lack of discipline"...

Equally interesting that Germany is considered to be the driving force in the Eurozone, never mind that there are other big economies in there and it's supposedly a "joint" initiative. Or that Germany is really only just emerging from a recession itself in recent years.

Odd, that.

Finnbar01

amacca wrote: »

all very well if one is bargaining from a position of power?

If we were to default and adopt the punt nua, people would have to be paid in punts in order for the new currency to have some chance of survival. If a lot of experts demanded euros, than so would shop keepers, civil servants etc. Everyone would want to be paid in euros and not punts. So what would be the point in re-introducing the punt if there were no clause insisting that the main currency is to be the punt.

What would you want to be paid in?

later12

If you truly opt out of the euro at a time like this, you have to bankrupt somebody - the choice is (a) people or (b) the banks.

That is to say, you have to leave (say) mortgages in euros (those earning an punt nua go bust), or convert mortgages to an punt nua, (the banks cannot pay their debts, and the banks go bust.

Remember, this is an Ireland outside the Eurozone, so there is not Emergency Liquidity Assistance.

And if you do burn the banks, it is hard to see how you avoid burning the people.
And if you do burn the people, it is hard to see how you avoid burning the banks.

The only other alternative is to leave all salaries and all assets and all liabilities euro denominated - in which case any export boom is quickly demolished, and what was the point in leaving the bloody thing to begin with?

Sorry, but this thing about leaving the euro just makes no sense. Even threatening to leave, given the above scenario, seems a little incredible.

Icepick

Finnbar01 wrote: »

What they want and what they get are two different things.

exactly
Would the introduction of the new currency also include Communist-like borders closure?

amacca

Finnbar01 wrote: »

What would you want to be paid in?

eh, euros please....and I'd like my hard earned savings to stay in euros please.

and call me crazy but I'd say that there's quite a high chance if they introduced the punt nua overnight and started paying me in it or exchanging my euros for it id get upset in a rioty looty sort of way or just leave as I cant imagine that scenario being good for me or a whole hell of a lot of other people either.

Finnbar01

amacca wrote: »

eh, euros please....and I'd like my hard earned savings to stay in euros please.

and call me crazy but I'd say that there's quite a high chance if they introduced the punt nua overnight and started paying me in it or exchanging my euros for it id get upset in a rioty looty sort of way or just leave as I cant imagine that scenario being good for me or a whole hell of a lot of other people either.

I wouldn't call you crazy at all. I say that would be the straw that breaks the camel's back and would have people out unto the streets.