Question About Fiscal Treaty

carlmango11

Quick question, sorry if prefix is wrong.

I fail to see how this treaty relates to continued bailout of banks. It looks to me more like a control over excessive debt/expenditure yet I see the "No" side consistently state that a "Yes" would lead to further bailout and a "No" won't/might not.

Could someone explain the relationship between the two? Is it that if we vote no they might not have another option but to cut off the banks to lower the deficit?

Thanks

Stabshauptmann

According to the Yes side, if we vote No we will be cut off from further funding.
Well since we cant afford to keep our country ticking over without further funding, we certainly wont be able to bail out banks.

carlmango11

Cheers. This would push me towards the No side I think. :eek:

carveone

Stabshauptmann wrote: »

According to the Yes side, if we vote No we will be cut off from further funding.

Not quite - we won't have access to the ESM. Which we shouldn't need access to anyway (according to the government). Unless we don't have access to it in which case the markets could (will) decide that this lack of available backstopping is a good excuse to raise our risk profile. Making it much more expensive for us to fund our stonking great big deficit from the market. Possibly expensive enough for us to require access to the ESM.

It's pretty irksome really - rock meets hard place.

Well since we cant afford to keep our country ticking over without further funding, we certainly wont be able to bail out banks.

I believe that the process of bailiing out banks, while gruellingly expensive, has essentially run its course and any further state funding is for our deficit.

It's interesting that the Location field under your name is "Watching you". That's essentially what we're signing up for as far as I can tell. All the rest of the limitations (the 60%, the 0.5%, the 3%) have all been covered in past Treaties - mainly Maastricht over 20 years ago - and the Six pack.

ressem

I'm not an accountant, but what would the banks do then to balance the books. And what would / could our government do to stabilize them?

Would it be legally possible for the Government to outlaw tracker mortgages and cause them to be converted into current interest mortgages?

Effectively giving the bank the tool to balance the books out of the pockets of the majority of their mortgage holders? Or at least come close enough that a wealth fund that has access to cheaper money than AIB could buy the bank.

The government is forcing the state-held banks to charge interest at a level lower than the bank is charged for rolling it over, this would end.

carveone

ressem wrote: »

Would it be legally possible for the Government to outlaw tracker mortgages and cause them to be converted into current interest mortgages?

I'm sorely unqualified to answer pretty much any of these (doesn't stop me posting though!). As to the tracker mortgages, it wouldn't be possible for any government to decide that existing legal contracts between parties could be made null and void at a whim. Not without some sort of coup d'etat first! The banks really made their bed on that one and they're pretty uncomfortable lying in it.

The government is forcing the state-held banks to charge interest at a level lower than the bank is charged for rolling it over, this would end.

I believe the banks are doing everything legal they can to push people off the trackers. That includes trying to figure out if the customer involved has breached any terms and conditions that were imposed at the time of sale. For example "the house has to be your primary residence". They've already nobbled a few people who have rental properties under tracker mortgages.

I think the ECB has made buckets of money available for loan to the banks at really low interest rates to offset some of these type of problems. It's kicking the can down the road I guess but what choice do they have really...

Scofflaw

Stabshauptmann wrote: »

According to the Yes side, if we vote No we will be cut off from further funding.
Well since we cant afford to keep our country ticking over without further funding, we certainly wont be able to bail out banks.

There seems to be an ongoing confusion about where the bank money is coming from. Apart from the promissory notes, which cost €3.1bn each year on March 31st, the funding for the banks is from the ECB, and is separate from the troika funding - the ECB doesn't provide any of the troika funding.

Paying the promissory notes is something I suspect the government would try very hard to achieve, even if we didn't have access to ESM funding, because as far as I can see, if the government does not pay the promissory notes as they fall due, then their classification as an asset of IBRC changes, and INRC might well become insolvent on the spot, something that government has already spent billions trying to avoid.

cordially,
Scofflaw

Stabshauptmann

Scofflaw wrote: »

There seems to be an ongoing confusion about where the bank money is coming from. Apart from the promissory notes, which cost €3.1bn each year on March 31st, the funding for the banks is from the ECB, and is separate from the troika funding - the ECB doesn't provide any of the troika funding.

This is confusing alright, can you help me work through this.

My understanding is that there are the Capital Injections ("bailouts"), and then there are Financing Operations (the ECB funding).

ECB funding is provided on a roll over basis and currently stands at approx €150bn in short term loans and repos to Irish banks.

The ECB isnt one of the Troika members, but the Troika money is used to bail out the banks.
Ireland's bailout from the Troika is as follows:

1. EU partners:€22½ billion from the European Financial Stability Fund (EFSF) and bilateral loans.
2. Eurozone partners: €22½ billion from the European Financial Stability Mechanism (EFSM)
3. IMF: €22½ billion from the International Monetary Fund

The facility includes up to €35 billion to support the banking system; €10 billion of which was for immediate recapitalisations.


I am also unsure that your assessment that the bailout has only been financed through promissory notes is correct. By my count we have spent €18bn in cash via Special Investment Shares and Preference Shares. The breakdown is below, can you check my sums or show me where the ECB gave Ireland this money?

All figures are in € million
Bank Special Investment Shares (Exchequer cash) Preference Share (NPRF cash) Promissory note Estimated future bailout Total
Anglo €4,000 €25,300 €5,000 €34,300
Irish Nationwide €100 €5,300 €5,400
Allied Irish Bank €7,200 €13,300 €20,500
Bank of Ireland €6,500 €5,200 €11,700
EBS €625 €250 €1,500 €2,375
Permanent TSB €4,000 €4,000
Total €4,100 €13,700 €30,600 €29,000 €78,275


1. The cost of the Irish Bank Resolution Corporation (nationalising Anglo and Irish Nationwide): €5.4bn capital injection to INBS, €24bn in Anglo.
Anglo: €4bn in 2009, €10.44bn granted March 2010, €10.054bn August 2010, €4.946 bn in December 2010.
INBS: €2.7 billion each in March 2010 and December 2010
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/11/801

2. The cost of Nationalising AIB (state has a 92% holding and the company has been delisted from the ISE and NYSE) has been €7.2bn in cash from the National Pension Reserve Fund: €3.5bn in 2009, €3.7bn in 2010, and the commission has approved another €6.1bn

3. Capital Injections in Bank of Ireland
€3.5bn in March 2009, €3bn in May 2009

4. Capital injections in EBS €0.875bn (two stages €350m and €525m).


I know that there Estimated Future Bailout column are soft numbers, they are taken from the results of the 31 March 2011 stress tests and subsequent government statements (and in Anglo's case from the Central Bank estimates the final bill could be as high as €34.3 billion). Dont let them distract you from the "hard" numbers.

I would also include in the cost of the bailout the cost of NAMA, but dont want to totally derail the thread. And if I devoted some effort I could put some numbers around the ELG as well

NoAnimalID

The most interested ones in keeping a yes vote are the Germans and the French as their banks will loose a lot, and that will most likely end up in a huge bail out by their own rich governments.

The Irish can actually gain a lot from this situation, they have the power to force Germany to reverse the brutal austerity measures that are shocking the Irish economy right now. The Irish could actually walk away with no debt and still remain in the euro with mush less bank debt. It is clear that the current pro-european politicians in FG have sold their people to the banks!

Stabshauptmann

carlmango11 wrote: »

Cheers. This would push me towards the No side I think. :eek:

Why?

Maybe I didnt make my point clear. This treaty is NOT about the banks. Though by voting no we will not be unable to keep the country afloat, let alone bail out the banks.*


* If we need ESM funding

NoAnimalID

This treaty is about the Banks. In France, this treaty is about Grwoth. In Ireland, this treaty is about the Banks. Regardless what the Yes side babble, the treaty is likely to be changed so having a referendum is madness.

*The Yes camp have underestimated Ireland's veto

The Waltzing Consumer

NoAnimalID wrote: »

This treaty is about the Banks. In France, this treaty is about Grwoth. In Ireland, this treaty is about the Banks. Regardless what the Yes side babble, the treaty is likely to be changed so having a referendum is madness.

*The Yes camp have underestimated Ireland's veto

I see you are posting in a lot of threads with this sort of stuff. I don't think you are going to last long here, thank God.

Oh, and veto? What fricking veto, THERE IS NO VETO!!!!

:rolleyes:

NoAnimalID

I also suggest-
Ireland must do as Icelanders
- To hold a referendum and stop paying its debt to private banks
- To nationalize the banks
- To liquidate the oligarchs and punish their politicians who caused the catastrophe
- Out of the euro area and relies on the Irish Pound
- Take a course to create a highly productive economy, with state support to open 200,000 small enterprises of year and so will create millions of new jobs
- To eliminate corruption with strong workings of rule of law
- To liquidate its offshore economy and plug all the holes for placing money and proceedings out of country
- With a good government policy of the nation state can return the money back to Ireland

Godge

NoAnimalID wrote: »

I also suggest-
Ireland must do as Icelanders
- To hold a referendum and stop paying its debt to private banks
- To nationalize the banks
- To liquidate the oligarchs and punish their politicians who caused the catastrophe
- Out of the euro area and relies on the Irish Pound
- Take a course to create a highly productive economy, with state support to open 200,000 small enterprises of year and so will create millions of new jobs
- To eliminate corruption with strong workings of rule of law
- To liquidate its offshore economy and plug all the holes for placing money and proceedings out of country
- With a good government policy of the nation state can return the money back to Ireland

I have seen this kind of rubbish posted a few times already by several different posters about how Ireland can go it alone and save itself.

The one thing that keeps coming back in my mind is that given we are so dependent on exports (300% of GDP?) how does "plug all the holes for placing money and proceedings out of country" do anything to ensure that multinationals stay here?

fries

NoAnimalID wrote: »

I also suggest-
Ireland must do as Icelanders
- To hold a referendum and stop paying its debt to private banks
- To nationalize the banks
- To liquidate the oligarchs and punish their politicians who caused the catastrophe
- Out of the euro area and relies on the Irish Pound
- Take a course to create a highly productive economy, with state support to open 200,000 small enterprises of year and so will create millions of new jobs
- To eliminate corruption with strong workings of rule of law
- To liquidate its offshore economy and plug all the holes for placing money and proceedings out of country
- With a good government policy of the nation state can return the money back to Ireland

It's a "posterchild" alright. Austerity has ruined the Irish economy so that it isn't growing at all. If you want to see the damages of austerity you can see them in Greece and in Ireland and in Portugal and in Spain. The idea that austerity helps an economy is stupid rubbish. It's like saying having no customers "helps" a business. How stupid can people be?

Godge

fries wrote: »

Austerity has ruined the Irish economy so that it isn't growing at all.

This is a lie. Yes a lie, not a misleading interpretation, it is a lie.


http://www.irishtimes.com/newspaper/breaking/2012/0511/breaking21.html

Even the EU admit the economy is growing,.

Scofflaw

Stabshauptmann wrote: »

This is confusing alright, can you help me work through this.

My understanding is that there are the Capital Injections ("bailouts"), and then there are Financing Operations (the ECB funding).

Makes sense, we'll take those as working categories.

Stabshauptmann wrote: »

ECB funding is provided on a roll over basis and currently stands at approx €150bn in short term loans and repos to Irish banks.

And those are financing operations.

Stabshauptmann wrote: »

The ECB isnt one of the Troika members, but the Troika money is used to bail out the banks.

Actually, the ECB is the third troika member, but is not providing bailout money.

Stabshauptmann wrote: »

Ireland's bailout from the Troika is as follows:

1. EU partners:€22½ billion from the European Financial Stability Fund (EFSF) and bilateral loans.
2. Eurozone partners: €22½ billion from the European Financial Stability Mechanism (EFSM)
3. IMF: €22½ billion from the International Monetary Fund

Yup.

Stabshauptmann wrote: »

The facility includes up to €35 billion to support the banking system; €10 billion of which was for immediate recapitalisations.

And €25bn for 'contingencies'. That's correct.

Stabshauptmann wrote: »

I am also unsure that your assessment that the bailout has only been financed through promissory notes is correct. By my count we have spent €18bn in cash via Special Investment Shares and Preference Shares.

Ah - no, sorry, what I was saying is that currently the only money still going into banks are the promissory notes, not that no money but the promissory notes and ECB loans has gone in at all - which would certainly be a startling claim!

Stabshauptmann wrote: »

The breakdown is below, can you check my sums or show me where the ECB gave Ireland this money?

All figures are in € million
Bank Special Investment Shares (Exchequer cash) Preference Share (NPRF cash) Promissory note Estimated future bailout Total
Anglo €4,000 €25,300 €5,000 €34,300
Irish Nationwide €100 €5,300 €5,400
Allied Irish Bank €7,200 €13,300 €20,500
Bank of Ireland €6,500 €5,200 €11,700
EBS €625 €250 €1,500 €2,375
Permanent TSB €4,000 €4,000
Total €4,100 €13,700 €30,600 €29,000 €78,275


1. The cost of the Irish Bank Resolution Corporation (nationalising Anglo and Irish Nationwide): €5.4bn capital injection to INBS, €24bn in Anglo.
Anglo: €4bn in 2009, €10.44bn granted March 2010, €10.054bn August 2010, €4.946 bn in December 2010.
INBS: €2.7 billion each in March 2010 and December 2010
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/11/801

2. The cost of Nationalising AIB (state has a 92% holding and the company has been delisted from the ISE and NYSE) has been €7.2bn in cash from the National Pension Reserve Fund: €3.5bn in 2009, €3.7bn in 2010, and the commission has approved another €6.1bn

3. Capital Injections in Bank of Ireland
€3.5bn in March 2009, €3bn in May 2009

4. Capital injections in EBS €0.875bn (two stages €350m and €525m).


I know that there Estimated Future Bailout column are soft numbers, they are taken from the results of the 31 March 2011 stress tests and subsequent government statements (and in Anglo's case from the Central Bank estimates the final bill could be as high as €34.3 billion). Dont let them distract you from the "hard" numbers.

I would also include in the cost of the bailout the cost of NAMA, but dont want to totally derail the thread. And if I devoted some effort I could put some numbers around the ELG as well

Since I'm not in any way claiming what you're quite correctly (but unnecessarily!) contradicting here, what remains in fact is the 'soft numbers' there for "estimated future bailout".

Those numbers are in fact obsolete - that is, they're part of what was the future in March 2011, and is now the past. The numbers in the end came out as €24bn, and the cost was reduced to €16.5bn through burning some bondholders (or "private sector participation", as they say) - that cost was the bank recapitalisation costs that were just added to last year's deficit. From the IMF's fourth report:

Recapitalization. As reported at the Third Review, the €24 billion recapitalization of the domestic banks was completed at the end of July, with the exception of operations for €0.5 billion which are expected to be completed by end-2011. The total budgetary cost was limited to €16.5 billion through participation by private investors and liability management exercises on subordinated debt.

And this is essentially my point. You referred to bank bailouts as if they were something ongoing, and they're not. What's ongoing is (a) repayment of the promissory notes and (b) ECB financing.

So, to me, the claim that a No vote would mean we would "stop bailing out the banks" rings rather hollow, because with the exception of the €3.1bn annually for the promissory notes (which are, of their nature, something already committed), we have already stopped.

cordially,
Scofflaw

Right 2B a liar

There is a difference between bailing out a bank and what happened in Ireland's case.
case 1 a bail out, a systemically important bank in an economy is illiquid and is given money to recapitalised so that it continue its business and realised those good assets when they come due.

case 2 Ireland, a small bank completely insolvent was given money only so it could pay its private unsecured (bondholders) creditors.

The point I am trying to make is those bondholders have been paid and made off like bandits it as a decision taking by previous Gov that we will have to live with now! This treaty has nothing to do with that, it is merely restating rules and principles already contained in treaties which Ireland willingly signed. What a yes vote will mean is international confidence in Ireland and not make us look like a 'lose cannon' similar to Greeks. Why the likes of Sinn Fein or Libertas think every time EU calls on us to do our civic duty that it is a bargaining chip is beyond me. A yes is for more progress, accountability and for moving on

Stabshauptmann

Scofflaw wrote: »

...

Since I'm not in any way claiming what you're quite correctly (but unnecessarily!) contradicting here, what remains in fact is the 'soft numbers' there for "estimated future bailout".

Those numbers are in fact obsolete - that is, they're part of what was the future in March 2011, and is now the past. The numbers in the end came out as €24bn, and the cost was reduced to €16.5bn through burning some bondholders (or "private sector participation", as they say) - that cost was the bank recapitalisation costs that were just added to last year's deficit.

Ah, cheers. I thought we were still planning on putting some thirty odd billion into the banks.

bogfire

Here's my musing.
Vote yes and we write into the constitution that we will have a balance budget, so we stop ourselves from borrowing -
Vote no, we exclude our selves from additional available funding.

So same result for yes or no. not that I want to borrow more (to keep bailing out banks) , but I don't see the point of voting yes.

meglome

bogfire wrote: »

Here's my musing.
Vote yes and we write into the constitution that we will have a balance budget, so we stop ourselves from borrowing -
Vote no, we exclude our selves from additional available funding.

So same result for yes or no. not that I want to borrow more (to keep bailing out banks) , but I don't see the point of voting yes.

I replied to this same post you made in the other thread.

http://www.boards.ie/vbulletin/showpost.php?p=78802349&postcount=587

Timetotalk

Looking at it very broadly it seems Germany is holding its own on this one. If passed, it seems to me that the fiscal treaty will end up furthering recession in Ireland and many other countries in the EU.

At times when your neighbours are bringing you down you have to go it alone. It would mean great sacrifice and courage but bringing back the punt, becoming independent, and withdrawing ourselves from this mess that we've created would broaden perspectives and set us apart from the euro who's value for the long term is so unpredictable it breeds widespread fear. What we need is certainty.

I've researched a lot over the past few weeks on this thing and weighing up all objective information combined with opinions on both sides all I can say is the STABILITY treaty
feels UNSTABLE.

swampgas

Timetotalk wrote: »

Looking at it very broadly it seems Germany is holding its own on this one. If passed, it seems to me that the fiscal treaty will end up furthering recession in Ireland and many other countries in the EU.

At times when your neighbours are bringing you down you have to go it alone. It would mean great sacrifice and courage but bringing back the punt, becoming independent, and withdrawing ourselves from this mess that we've created would broaden perspectives and set us apart from the euro who's value for the long term is so unpredictable it breeds widespread fear. What we need is certainty.

I've researched a lot over the past few weeks on this thing and weighing up all objective information combined with opinions on both sides all I can say is the STABILITY treaty
feels UNSTABLE.

I think you are completely misguided on just about all points there.

Just to pick one - do you think an independent Púnt Nua would be more stable than the Euro? Please explain how this would possibly happen ...

meglome

Timetotalk wrote: »

Looking at it very broadly it seems Germany is holding its own on this one. If passed, it seems to me that the fiscal treaty will end up furthering recession in Ireland and many other countries in the EU.

Given the same fiscal rules already exist in other agreements and we borrow one third of all government spending how do you think the treaty can do this?

Timetotalk wrote: »

At times when your neighbours are bringing you down you have to go it alone. It would mean great sacrifice and courage but bringing back the punt, becoming independent, and withdrawing ourselves from this mess that we've created would broaden perspectives and set us apart from the euro who's value for the long term is so unpredictable it breeds widespread fear. What we need is certainty.

Our neighbours are 'bringing us down' by rightly pointing out we spend way more than we have?
You want us to get away from the euro because it's 'unpredictable' but go back to having the punt which would be backed by our bankrupted state. hahaha

Timetotalk wrote: »

I've researched a lot over the past few weeks on this thing and weighing up all objective information combined with opinions on both sides all I can say is the STABILITY treaty
feels UNSTABLE.

No offence but by researched it sounds like you've been reading the ULA's website. Might want to broaden your horizons.

later12

Yet again discussion switches to something the Treaty is not concerned with. This is not a treaty on Ireland's membership of the Euro. If it were that easy to leave the Euro, Greece would be a distant memory.

meglome

later12 wrote: »

Yet again discussion switches to something the Treaty is not concerned with. This is not a treaty on Ireland's membership of the Euro. If it were that easy to leave the Euro, Greece would be a distant memory.

I may be a Yes voter but I certainly respect your considered decision to vote no but the constant goalpost moving (almost entirely by the no camp) is driving me crazy.

Timetotalk

meglome wrote: »

Given the same fiscal rules already exist in other agreements and we borrow one third of all government spending how do you think the treaty can do this?



Our neighbours are 'bringing us down' by rightly pointing out we spend way more than we have?
You want us to get away from the euro because it's 'unpredictable' but go back to having the punt which would be backed by our bankrupted state. hahaha



No offence but by researched it sounds like you've been reading the ULA's website. Might want to broaden your horizons.

By "bringing us down" I really meant bringing us with them... I know this treaty is not about the Euro. It's about reassuring the German electorate that they will be protected from the consequences of a monetary union that they became a part of back in the early 90's. It's about achieving financial dominance for them. I think a Yes vote gives us away cheaply. Much would have to be negotiated before any return to the punt. I see the idea seems preposterous to you, so be it.

I'll not lower myself to your level with any smart ass replies.

oscarBravo

Timetotalk wrote: »

...this treaty is not about the Euro. It's about reassuring the German electorate that they will be protected from the consequences of a monetary union that they became a part of back in the early 90's. It's about achieving financial dominance for them.

I just don't get this sort of reasoning.

OK, I can see how you could make a tentative case for Germany trying to pull a fast one on Ireland if we had a bilateral treaty to which only Germany and Ireland were parties. It requires that you assume some pretty bad faith on their part and a great deal of naiveté and stupidity on ours, but the case could be made.

But we're talking about a treaty to which seventeen countries have signed up. Which has me wondering, in your German financial dominance scenario: are the other fifteen countries conspiring with Germany against us, or are there sixteen unwitting victims of a massive German scheme which is obvious to you, but which sixteen sovereign governments were incapable of spotting?

I just don't get it.

Timetotalk

oscarBravo wrote: »

I just don't get this sort of reasoning.

OK, I can see how you could make a tentative case for Germany trying to pull a fast one on Ireland if we had a bilateral treaty to which only Germany and Ireland were parties. It requires that you assume some pretty bad faith on their part and a great deal of naiveté and stupidity on ours, but the case could be made.

But we're talking about a treaty to which seventeen countries have signed up. Which has me wondering, in your German financial dominance scenario: are the other fifteen countries conspiring with Germany against us, or are there sixteen unwitting victims of a massive German scheme which is obvious to you, but which sixteen sovereign governments were incapable of spotting?

I just don't get it.

No the other fifteen countries are not conspiring with Germany against us... I'm no economist, it's quite complex but I figure it's no bad thing for us to be denied access to the ESM. In simple terms more borrowing = more debt no?

If it were up to me, I'd eradicate the entire monetary system altogether, radical and unrealistic as it sounds. In my 28 years on this planet I have never found the abundance of it or lack there of to be of real help to anyone...

Scofflaw

Timetotalk wrote: »

No the other fifteen countries are not conspiring with Germany against us... I'm no economist, it's quite complex but I figure it's no bad thing for us to be denied access to the ESM. In simple terms more borrowing = more debt no?

And also the inability to service our current debt, which means either default, or really severe austerity as government revenue is diverted to pay back capital.

Public debt is in the form of term bonds.When they mature, the capital has to be paid back, and there are two ways of doing that - either the capital is really paid back, in cash, from the government's revenue, or it's paid back by creating fresh debt. The latter is the normal method for governments, because it's cheaper - unless the bond rates are very large. At no point does it really become impossible for a government to borrow - it just becomes unsustainably expensive.

Cutting off access to ESM will not mean that we don't need to borrow money, or even that we won't be able to borrow money. It just means we probably won't be able to do it cheaply.

Timetotalk wrote: »

If it were up to me, I'd eradicate the entire monetary system altogether, radical and unrealistic as it sounds. In my 28 years on this planet I have never found the abundance of it or lack there of to be of real help to anyone...

Eh, money is a resource rationing and apportioning system. If you "abolished" it tomorrow, it would be reinvented within 5 minutes. The only situation in which you can abolish money is one of totally unlimited and totally accessible resources.

cordially,
Scofflaw

Timetotalk

Scofflaw wrote: »

Eh, money is a resource rationing and apportioning system. If you "abolished" it tomorrow, it would be reinvented within 5 minutes. The only situation in which you can abolish money is one of totally unlimited and totally accessible resources.

This is getting way off topic but check out this:

http://www.thezeitgeistmovement.com/mission-statement

Working towards a resource based economy...

And, getting back to the topic this is on tomorrow in St. Stephen's Green at 1pm if you're around Dublin

https://www.facebook.com/events/131404546995591/