We have turned the corner!

Tora Bora

Interesting article in the FT today, pointing to a "changing psychological state of mind", in Ireland as a result of the interest rate reduction on the bail out loan, etc.
I think there is real merit in this argument .... we may indeed have turned the corner;)

http://www.ft.com/intl/cms/s/0/60589b6e-b799-11e0-8523-00144feabdc0.html#axzz1TI04ADNb

Please respect FT.com's ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email ftsales.support@ft.com to buy additional rights or use this link to reference the article - http://www.ft.com/cms/s/0/60589b6e-b799-11e0-8523-00144feabdc0.html#ixzz1TIrplq00


Irish eyes smiling after shot of EU optimism



The latest eurozone rescue deal will save Ireland almost a billion euros a year in interest payments, but analysts and politicians say the greatest impact may in fact be psychological – providing a battered economy with a much-needed shot of optimism.
Eurozone leaders, who met last week to discuss the Greek crisis, cut the interest rate on European bail-out funds, thereby easing the fiscal plight of Ireland which – before its bank and housing market crises forced it last year to accept a €85bn international bail-out – was among the eurozone’s top economic performers.
Dublin is now set to save about €800m a year in interest payments, after the interest rate was cut from about 6 per cent to between 3.5 per cent and 4 per cent.
The loan period has also been extended from seven years to at least 15 years.
“The financial impact is significant, without being a game changer. Of greater importance is the psychological impact,” said Kevin Daly, economist at Goldman Sachs.
“It is being seen in Ireland as a victory and good news after a prolonged period of things continuing to be bad.”
Others in Dublin go further. “Really for the first time in three years, for me, I’m starting to see the light at the end of the tunnel,” said Leo Varadkar, transport minister.
With financial markets still not convinced that Ireland will be able to avoid further bail-out help, Enda Kenny, prime minister, has adopted a far more cautious stance.
He has ruled out the possibility that draconian budget cuts planned to take effect this winter could now be scaled back.
“The unfortunate circumstances in which we find ourselves are that we’re spending between €18bn and €20bn more than we’re taking in and we’ve got to deal with this,” Mr Kenny said.
But the tweaking of the interest rate comes against a backdrop of improved economic news.

Last week’s deal in Brussels followed an upbeat assessment this month from European Union authorities and the International Monetary Fund of Ireland’s progress in shoring-up its banking system, bringing its public sector deficit under control and restoring international competitiveness. Dublin was praised for “steadfastly” implementing its programme.
The interest rate levied on bail-out funds had been a source of irritation to the government.
“Three months ago it felt as if it was Ireland against the rest of Europe and the mood was angry. Anything that shows reconciliation and that the European Union is rewarding progress is a positive,” said Gilles Moec, at Deutsche Bank.
Now Ireland’s economy has chalked up a number of “positive developments,” according to Michael Noonan, finance minister.
These include a 1.3 per cent expansion in gross domestic product in the first three months of this year, and this week’s announcement that private sector investors were investing €1.1bn in Bank of Ireland, the troubled lender.
Attention is now focused on whether the economy can grow sufficiently to allow a significant improvement in government finances.
The IMF-EU report said progress in restoring lost competitiveness was helping to boost exports, which were expected “to continue driving the recovery although domestic demand will continue to contract”.
European Commission forecasts suggest real GDP will expand by 0.6 per cent this year and 1.9 per cent in 2012.
Purchasing managers’ indices, which are regarded as a good guide to future economic trends, have pointed to a noticeable slowdown in recent weeks – reflecting global trends.
But Ireland’s manufacturing strength has given it an advantage over other crisis-hit eurozone “periphery” countries.
The Irish economy would in the near future be able to grow at a pace faster than the new rate of interest on the bail-out loans, said Neil Gibson, director of Oxford Economics in Belfast.
“This restructuring will mean people in Ireland won’t pay as heavy a price,” he said.

ei.sdraob

“Really for the first time in three years, for me, I’m starting to see the light at the end of the tunnel,” said Leo Varadkar, transport minister.

Would that be the Metro North tunnel minister?

Cookie_Monster

ei.sdraob wrote: »

Would that be the Metro North tunnel minister?

:pac:

why would saving 1bn a year in interest while still borrowing 20bn a year improve anyone's state of mind?

hinault

My mortgage provider sent me a letter this morning telling me that my monthly repayment is now €1,162 per month.

Six months ago my repayments were €1,113 per month.

I think our economy is dead regardless of national loan interest repayment reductions:o

careca11

they can throw all the technical terms at all us they like about light at the end of the tunnel sh1te all they want ,
fact is, for the people on the ground are facing
:
Mortgage rate increases
Health insurance, Life insurance, car insurance increase, Home insurance
increases in Electricity , Gas , public transport ,petrol/diesel prices
property taxes , water charges
pending pay cut's
inevitable increase in income tax, USC etc ,


Light at the end of the tunnel me hole

Manach

There is light. It is a flamethrower.

View

Don't knock it - having international investors reading positive articles about Ireland is better than having them reading the "Oh woe is me" articles we have been generating lately.

D1stant

There are no instant solutions to this. 1 Billion is a lot of money and brings us closer (a small step sure, but closer) to a viable place but negativity has overtaken the herd, and the herd bleats No' at every stimulus.

ardmacha

Mortgage rate increases
Health insurance, Life insurance, car insurance increase, Home insurance
increases in Electricity , Gas , public transport ,petrol/diesel prices
property taxes , water charges
pending pay cut's
inevitable increase in income tax, USC etc

The vast majority of mortgages are with banks owned by the taxpayer. The more the person who actually borrowed the money pays for them the less the rest of us have to pay. It is largely zero sum.

There are no general pay cuts in the economy. Some few people may have pay cuts, but more will have pay rise in 2011.

Things have bottomed out, progress from here is up, although significant adjustments still need to be made.

Scofflaw

View wrote: »

Don't knock it - having international investors reading positive articles about Ireland is better than having them reading the "Oh woe is me" articles we have been generating lately.

Even the Indo has managed a little ray of sunshine: http://www.independent.ie/business/european/europes-deal-the-verdict-2829848.html

cordially,
Scofflaw

Cookie_Monster

"Our debt is now more manageable in the medium term. There's a greater likelihood of us returning to the bond markets, and that's a positive development, but our fiscal deficit must still be addressed.

^Bord Gais CEO^

So exactly is paying slightly less interest making our debt more manageable in the medium term? Overall we're still borrowing huge amounts each year, adding more and more to the pile, so we pay a little bit less interest on this, I don't see it being in any way significant in comparison to the debt itself.

Atilathehun

I took a taxi yesterday, for the first time in over a year. The driver told me he was seeing a good pick up in business in the last five or six weeks.

Anecdotal I know, but positive nonetheless.

Driving through my local village on the way home from work, there is certainly a noticable pick up in activity.
I do believe there is a positive change of direction.

Scofflaw

Cookie_Monster wrote: »

^Bord Gais CEO^

So exactly is paying slightly less interest making our debt more manageable in the medium term? Overall we're still borrowing huge amounts each year, adding more and more to the pile, so we pay a little bit less interest on this, I don't see it being in any way significant in comparison to the debt itself.

The size of the debt itself is basically meaningless, though, because paying it back most likely isn't on the agenda. The only question is how much it costs to keep servicing the interest.

I know that's counter-intuitive for most of us, but that's the way public debt works. We didn't pay down any public debt during the boom years from 1990-2005 - no, really we didn't. All that happened was that the economy grew and inflation eroded the value of the debt.

The same will likely happen with this debt, so the main variable is the cost of interest payments - as long as we meet those, the debt doesn't compound (and not meeting them would be a sovereign default).

Obviously, we're still racking up debt, but most calculations have already factored in the maximum use of the bailout funds - there's no new debt on top of that if we can return to fiscal balance before they run out. If not, then we'll be acquiring new debt.

cordially,
Scofflaw

hinault

Scofflaw wrote: »

The size of the debt itself is basically meaningless, though, because paying it back most likely isn't on the agenda. The only question is how much it costs to keep servicing the interest.

I know that's counter-intuitive for most of us, but that's the way public debt works. We didn't pay down any public debt during the boom years from 1990-2005 - no, really we didn't. All that happened was that the economy grew and inflation eroded the value of the debt.

The same will likely happen with this debt, so the main variable is the cost of interest payments - as long as we meet those, the debt doesn't compound (and not meeting them would be a sovereign default).

Obviously, we're still racking up debt, but most calculations have already factored in the maximum use of the bailout funds - there's no new debt on top of that if we can return to fiscal balance before they run out. If not, then we'll be acquiring new debt.

cordially,
Scofflaw

Correct me if I am wrong but didn't we actually pay down our debt 1985-1995 though?

tweedledee

All this garbage reminds me of the "green shoots of recovery" spin we got a few years ago,remember??????Good ole FF crap.
Then the EU/IMF arrived.:eek:

tweedledee

On the grand scheme of things,1 BILLION is peanuts.Just a newspaper sidenote.

Scofflaw

hinault wrote: »

Correct me if I am wrong but didn't we actually pay down our debt 1985-1995 though?

Nope - more kind of doubled it:



cordially,
Scofflaw

FlashD

Just my opinoin but I believe we haven't turned a corner and won't for another 2-3 years.

Housing prices are still falling and will continue to do so, when they bottom out then we will turn the corner.

How long we will stay bottomed out before we start an upward trend is another story.

Regards

bamboozle

unfortunately there is no overnight quick fix for the mess we're in. €800m a year in reduced interest payments is obviously great for us but must be seen as just another step in the right direction, there are many more small steps which need to be taken and will take time, paramount among these are the reduction in costs in the public service, be it through reduction in numbers through natural wastage and voluntary redundancy and also through improved cost efficiencies.

1huge1

Scofflaw wrote: »

Nope - more kind of doubled it:


cordially,
Scofflaw

Your not taking inflation into account, overall our debt came down a lot.

1chippy

maybe i,m being naive but is this not just the start of a load of little steps ireland needs to take. even if it only brings up confidence in a thousand people,will they not spend a little more thus even if not helping the economy grow, keep it from going a step further back.

Nijmegen

1huge1 wrote: »

Your not taking inflation into account, overall our debt came down a lot.

That's not the argument he's making: Inflation has 'paid off' our old debt, as it does most countries, but if we remain at the same 'real' level year on year, well, €38bn in 1995 money and €38bn in 2007 money is more debt in 2007.

But the key thing for the exchequer is - 'What's the annual interest repayment?'

Debtocracy

Every strategy so far has failed to deal with underlying problem in the economic system – there’s too much debt. Any small victories we achieve are relatively meaningless given that we are facing into the greatest global financial crisis of all time. The reduction in interest payments was like a good song coming on the radio as your car motors towards a cliff. We may be able to borrow from Europe in the future to keep the Ponzi scheme going, but will anyone be willing to lend cheap money to Europe once Spain and Italy get out the begging bowl? Printing euros may also be out of the question as the quantity needed may cause a run on the currency. I say enjoy the good times while they are still here.

km79

http://www.rte.ie/news/2011/0729/budget.html

dvpower

Two positive bits of news from this morning's Indo.

http://www.independent.ie/business/irish/ireland-bucks-trend-as-yields-fall-under-10pc-2840544.html

Ireland bucks trend as yields fall under 10pc
IRELAND continued to buck the bond market trend last night when borrowing costs fell to levels not seen for months.
Over the past week Ireland's debt has outperformed the rest of the bond market, sparking rumours of a big investor, or investors, placing bets that this country will not default on the loans.
Ireland's yield, or theoretical cost of borrowing over 10 years, fell to 9.96pc yesterday, down a quarter of a per cent in a single day and more importantly continuing a two-week-long trend.
It was the first time Irish bond yields ended a day below 10pc since the start of May and reached the lowest level since April

http://www.independent.ie/business/irish/rating-agency-says-irish-economy-is-quotprosperousquot-2841184.html

Rating agency says Irish economy is "prosperous"

Credit rating agency Standard & Poor's has given the Irish economy a boost by not lowering it to junk status.
It said the economy is “prosperous and open” unlike its peer Moody’s which recently downgraded our status.

S&P left its rating at BBB+ which means it is unlikely to change anytime soon.

later12

Ireland's 10yr yield is back over 10% at the moment, but that's not hugely important; the S&P rating is very good news

http://www.google.com/hostednews/afp/article/ALeqM5iwbVJiZO_q1LmccHIlKEpj60smDQ?docId=CNG.2207ced5165d5a35075a0f69e5640965.8f1

Meanwhile, there is some speculation this evening that S&P are considering an imminent US downgrade - S&P are refusing to comment to the media on this. It is a Friday, and not unthinkable that they could downgrade after close of trading today.

Voltex

dvpower wrote: »

Two positive bits of news from this morning's Indo.

http://www.independent.ie/business/irish/ireland-bucks-trend-as-yields-fall-under-10pc-2840544.html




http://www.independent.ie/business/irish/rating-agency-says-irish-economy-is-quotprosperousquot-2841184.html

TBH, I after reading those articles, it is quite clear that the program of severe austerity and front loading of fiscal correction was the correct path.
I keep thinking of how wrong the bearded comrads O Connor and Begg were in their view of how we get sort ourselves out.

Voltex

later10 wrote: »

Ireland's 10yr yield is back over 10% at the moment, but that's not hugely important; the S&P rating is very good news

http://www.google.com/hostednews/afp/article/ALeqM5iwbVJiZO_q1LmccHIlKEpj60smDQ?docId=CNG.2207ced5165d5a35075a0f69e5640965.8f1

Meanwhile, there is some speculation this evening that S&P are considering an imminent US downgrade - S&P are refusing to comment to the media on this. It is a Friday, and not unthinkable that they could downgrade after close of trading today.

Ive been thinking about a possible US downgrade and its implications...and tbh there is no other economy in the World that is as deep and liquid as the US to absorb the level of capital thats out there. Look at the rates on US T bills and bonds. They have fallen during the flight from equities and another sign that the US is a safe haven.

SecurityGuy

It's sad that we take into account rating agencies opinions at all.
They've been so much discredited last years and we still stick to it...

whoopdedoo

bamboozle wrote: »

unfortunately there is no overnight quick fix for the mess we're in. €800m a year in reduced interest payments is obviously great for us but must be seen as just another step in the right direction, there are many more small steps which need to be taken and will take time, paramount among these are the reduction in costs in the public service, be it through reduction in numbers through natural wastage and voluntary redundancy and also through improved cost efficiencies.

yes there is, pull up all debt on the relative computer screens and on Dec 31st 2011 @ 11.59 we all embrace as the powers that be press ctrl & del at the same time!

for the first time in the history of man, by the end of the month there will be 7,000,000,000 on this rock hurtling through space! Correct me if I'm wrong but was money and debt created in the big bang?!?