What would be the ultimate implications of a NO result in the fiscal stability treaty

fro9etb8j5qsl2

In laymans terms like? Would it be all fire and brimstone like the Yes campaigners are saying? Will Ireland be forced out of the euro and go bankrupt? And of it does, what are the implications of that?

Crucifix

Harlee Fat Calf wrote: »

In laymans terms like? Would it be all fire and brimstone like the Yes campaigners are saying? Will Ireland be forced out of the euro and go bankrupt? And of it does, what are the implications of that?

From what I've been reading, post no vote if we needed another bailout, we'd have nowhere to get it. In that kind of situation, leaving the euro to allow the use of monetary policy and "quantitative easing" might be the only course. The opinions I've read on how bad that would be seem to range wildly. Some people think the euro was just a bad idea and leaving it is inevitable, that getting out of it will be rough but the only viable option. Other people think leaving the euro would be absolutely devastating for the country, and sticking with the euro is the only viable option. And many opinions inbetween.

PopeBuckfastXVI

Harlee Fat Calf wrote: »

In laymans terms like? Would it be all fire and brimstone like the Yes campaigners are saying? Will Ireland be forced out of the euro and go bankrupt? And of it does, what are the implications of that?

The most immediate tangible implication is that we won't have access to the ESM funding in approx 3 years should we need it. We can speculate all day long on what that means, but it'll boil down to one of the following:

• We cannot borrow from any source, meaning severe austerity.
• We can borrow from the markets at a worse rate than the ESM, meaning increased austerity as interest repayments are higher for the country, there are no guarantees that we can do this.
• We can arrange some form of funding from the IMF/EU or some other benefactor, most likely at worse rates than the ESM and associated increased austerity conditions attached, there are no guarantees that we can do this.
• We don't need ESM funding, so access to it is not an issue, ironically this is *more* likely if we have access to ESM funding because we will be seen as more credit worthy, just by having access.

Apart from that a no vote will mean we have, as a people, rejected the idea of prudent budgeting, and have opted to keep the door open to unsound borrowng practices, in case we want to go down that road. There's no way of quantifying how this decision will be viewed by the various interests that interact with, do business in and lend to Ireland, but at least one ratings agency has said they will downgrade our status if we vote no, so it's safe to assume that it will be taken 'negatively' to some degree.

Most private business interests in the country are calling for a 'yes' vote. I can only presume that they are doing that because they see it as being in there interests, probably to make Ireland a better place to do business. Generally that would imply that Ireland would be a worse place to do business, and a worse place to make investments without the 'yes'.

On the whole though, we would be in an uncertain position having voted 'no', and one thing international markets and investors detest is uncertainty, and we need as much investment as we can get to turn our economy around at the moment.

antoobrien

If we vote no:
1) No ESM access
2)We're currently twice the IMF quota of what we should be allowed borrow - this is only happening because of the partnership with the EU. Without ESM access (EFSF will be closed for applications after we leave the current programme) their lending will be at most half of what we currently get (and probably less)
3) Our bonds will be seen by the market as being a higher risk - meaning they will ask for a higher interest rate/yield to mitigate the risk of not getting their money back. The borrowing will be more expensive, so we will be able to borrow less.

We have an €8billion bond payment to be made in 2014 and the deficit is expected to be €10 billion. So there's an €18 billion gap to plug. The real question should be, if we vote now - how do we plug the €18 billion gap?

I'd wager it'll be tax hikes and spending cuts (but I don't have a crystal ball).

fro9etb8j5qsl2

Crucifix wrote: »

From what I've been reading, post no vote if we needed another bailout, we'd have nowhere to get it. In that kind of situation, leaving the euro to allow the use of monetary policy and "quantitative easing" might be the only course. The opinions I've read on how bad that would be seem to range wildly. Some people think the euro was just a bad idea and leaving it is inevitable, that getting out of it will be rough but the only viable option. Other people think leaving the euro would be absolutely devastating for the country, and sticking with the euro is the only viable option. And many opinions inbetween.

I'm one of those euro naysayers I think it should have never happened in the first place.

So the general consensus would be that either result means more austerity but a no vote will leave us in a less stable position with possibly worse austerity? Ugh

PopeBuckfastXVI

Harlee Fat Calf wrote: »

I'm one of those euro naysayers I think it should have never happened in the first place.

So the general consensus would be that either result means more austerity but a no vote will leave us in a less stable position with possibly worse austerity? Ugh

Pretty much yes. We spend more than we earn, we need to correct that either way, for the good of the country, in the euro or out of it, ESM, fiscal treaty or whatever.

kleefarr

If we vote yes, we get more money (€4BN) to give to the banks, is that right?

melekalikimaka

Harlee Fat Calf wrote: »

I'm one of those euro naysayers I think it should have never happened in the first place.

So the general consensus would be that either result means more austerity but a no vote will leave us in a less stable position with possibly worse austerity? Ugh

very much the bottom line, its downhill either way, but with a yes vote germany will throw us a bone

dub_skav

As with all the recent european votes anybody who tells you x, y or z WILL happen is lying.
Nobody is sure what would happen either way, but it does seem logical that people would be unsure why Ireland voted no, POSSIBLY leading to market uncertainty.

PopeBuckfastXVI

kleefarr wrote: »

If we vote yes, we get more money (€4BN) to give to the banks, is that right?

Where are you getting that from, I haven't heard anyone say that?

johngalway

PopeBuckfastXVI wrote: »

Apart from that a no vote will mean we have, as a people, rejected the idea of prudent budgeting, and have opted to keep the door open to unsound borrowng practices, in case we want to go down that road.

That's the biggest reason I voted yes this morning.

kleefarr

PopeBuckfastXVI wrote: »

Where are you getting that from, I haven't heard anyone say that?

I'm sure I heard it on radio news a couple of days ago. Definitely the 4BN figure and banks anyway.

johngalway

kleefarr wrote: »

If we vote yes, we get more money (€4BN) to give to the banks, is that right?

No, I don't believe so. The treaty and the €4bn are different.

Yesterday I heard the banks may need €4bn more, but that it is hoped (as I roared at the radio myself) they can make it themselves.

PopeBuckfastXVI

kleefarr wrote: »

I'm sure I heard it on radio news a couple of days ago. Definitely the 4BN figure and banks anyway.

It's unrelated to the treaty, yes or no.

I think it was that AIB were rolling over a bond or something like that.

Scofflaw

kleefarr wrote: »

I'm sure I heard it on radio news a couple of days ago. Definitely the 4BN figure and banks anyway.

It's entirely unrelated to the Treaty. The Treaty would have an effect on it, I guess, because finding that money - if the banks need it and if it needs to be borrowed - will be more expensive with a No than a Yes.

However, one is entitled to believe, if one is very optimistic, that in the event it would be more expensive the government just wouldn't do it...but I admit I think that's pretty much fantasy.

cordially,
Scofflaw

kleefarr

johngalway wrote: »

No, I don't believe so. The treaty and the €4bn are different.

Yesterday I heard the banks may need €4bn more, but that it is hoped (as I roared at the radio myself) they can make it themselves.

Ah, good.
Obviously was listening properly.

kleefarr

So vote yes to borrow more money cheaply?
Sounds like the way to go. Although it would be better if we didn't have to borrow, obviously. We are digging ourselves in deeper and deeper.

Yes will get my vote anyway then.

Scofflaw

PopeBuckfastXVI wrote: »

It's unrelated to the treaty, yes or no.

I think it was that AIB were rolling over a bond or something like that.

I think that's separate - this one was an estimate of what the banks might need over the coming years:

This is according to an interview with the country's financial regulator, Matthew Elderfield, in German paper Boersen-Zeitung.

However, the Central Bank hopes the banks will be able to raise the money themselves instead of it being provided by the State.

The new capital would not be required for another five or six years.

http://www.rte.ie/news/2012/0530/banks-may-need-an-extra-3-4-billion-elderfield.html

Given the timescale, it's pretty much completely irrelevant.

cordially,
Scofflaw

fro9etb8j5qsl2

So, if there is a NO result, what are the chances of Ireland losing the Euro as a currency?

beeftotheheels

Harlee Fat Calf wrote: »

So, if there is a NO result, what are the chances of Ireland losing the Euro as a currency?

Pretty slim. If we wanted to default on our debts then that risk would go right up. But just voting no, creates a bit more uncertainty, will cause us to have to pay a bit more for our borrowings, its not a good thing (I voted yes earlier) but it won't be the end of the world as we know it. It will be a bit more painful than SF are making out though. We won't get access to the ESM so we'll have to borrow at more expensive rates elsewhere. Declan Ganley and David McWilliams acknowledge this while advocating a No vote.

Crucifix

beeftotheheels wrote: »

Pretty slim. If we wanted to default on our debts then that risk would go right up. But just voting no, creates a bit more uncertainty, will cause us to have to pay a bit more for our borrowings, its not a good thing (I voted yes earlier) but it won't be the end of the world as we know it. It will be a bit more painful than SF are making out though. We won't get access to the ESM so we'll have to borrow at more expensive rates elsewhere. Declan Ganley and David McWilliams acknowledge this while advocating a No vote.

I got the impression David McWilliams thought we'd get a second chance to vote on something more favourable, that he was a "No...for now" voter

beeftotheheels

Crucifix wrote: »

I got the impression David McWilliams thought we'd get a second chance to vote on something more favourable, that he was a "No...for now" voter

http://www.independent.ie/opinion/columnists/david-mcwilliams/david-mcwilliams-the-fiscal-treaty-will-only-make-things-worse-3123628.html

Armed with this, we could go to the ECB and say, with a No vote, we know that we will default because the ESM isn't open to us.

So he acknowledges no ESM access, but tries to pretend that that will then give us bargaining power sufficient to cause the ECB to break the law.

Scofflaw

Crucifix wrote: »

I got the impression David McWilliams thought we'd get a second chance to vote on something more favourable, that he was a "No...for now" voter

I admit to very large doubts that those on the No side saying "No...for now" would either change their vote in a second referendum, or fail to spend the campaign on that vote denouncing the repeat vote as "the end of democracy".

It seems to me to be more of a straightforward tactical ploy, at least in most cases - just another way of soothing the concern that voting No will have negative consequences by claiming the vote will actually be consequence-free.

cordially,
Scofflaw

meglome

Scofflaw wrote: »

I admit to very large doubts that those on the No side saying "No...for now" would either change their vote in a second referendum, or fail to spend the campaign on that vote denouncing the repeat vote as "the end of democracy".

It seems to me to be more of a straightforward tactical ploy, at least in most cases - just another way of soothing the concern that voting No will have negative consequences by claiming the vote will actually be consequence-free.

cordially,
Scofflaw

I've said it before but I've actually gotten a few people online to admit they'd still vote no even after getting the things they were asking for. What do you say to that.

beeftotheheels

Scofflaw wrote: »

I admit to very large doubts that those on the No side saying "No...for now" would either change their vote in a second referendum, or fail to spend the campaign on that vote denouncing the repeat vote as "the end of democracy".

It seems to me to be more of a straightforward tactical ploy, at least in most cases - just another way of soothing the concern that voting No will have negative consequences by claiming the vote will actually be consequence-free.

cordially,
Scofflaw

+1 But I'm a No for the second referendum if we have one, a Yes for now as it were because I find the notion of certain parties being able to lobby for a vote based on impunity (and lies) as being far more damaging to our country than any margin we might have to pay on our financing.

christmas2012

a no result may result in the electorate putting the vote to us again just like lisbon which everyone resented and rightfully so.
but a no result would mean we dont get access to low interest money and we are still in debt thanks to the banks and idiot politicians..

Scofflaw

beeftotheheels wrote: »

http://www.independent.ie/opinion/columnists/david-mcwilliams/david-mcwilliams-the-fiscal-treaty-will-only-make-things-worse-3123628.html

So he acknowledges no ESM access, but tries to pretend that that will then give us bargaining power sufficient to cause the ECB to break the law.

If you think about it, the idea that we vote No, threaten default, and thereby get a write-down on our bank debt leaves a very large hurdle still to cross.

What's coming up in 2014 isn't bank debt, and even a complete write down of down the bank debt would make very little difference to the funding gap in 2014. We don't get the money back unless someone gives it to us.

So writing bank debt down doesn't change in our likelihood of default in 2014...unless the markets are persuaded that without the bank debt we won't default...which can't be the case if writing down the bank debt doesn't significantly change the funding gap we face.

Is the whole argument based on the misconception that what we're paying out annually is primarily bank debt?

cordially,
Scofflaw

Dave!

Scofflaw wrote: »

Crucifix wrote: »

I got the impression David McWilliams thought we'd get a second chance to vote on something more favourable, that he was a "No...for now" voter

I admit to very large doubts that those on the No side saying "No...for now" would either change their vote in a second referendum, or fail to spend the campaign on that vote denouncing the repeat vote as "the end of democracy".

It seems to me to be more of a straightforward tactical ploy, at least in most cases - just another way of soothing the concern that voting No will have negative consequences by claiming the vote will actually be consequence-free.

cordially,
Scofflaw

Then what's D McWilliams' angle? Why's he urging a No vote?

Scofflaw

Dave! wrote: »

Then what's D McWilliams' angle? Why's he urging a No vote?

I would say - cynically, perhaps - that he knows what his fan base expects. It's how he makes his living, after all.

cordially,
Scofflaw

ectoraige

Harlee Fat Calf wrote: »

So, if there is a NO result, what are the chances of Ireland losing the Euro as a currency?

Slightly less than if there is a YES result.

Since the beginning of the financial crisis the EU response has been to ignore the scale and interconnectedness of the debt. Any measures that have been taken have been little more than an exercise in economic fire-fighting, and have done nothing to address the root of the problem.

If this approach continues, we will see the break-up of the Euro, and damage the European project for years. This treaty is a part of this failed response.

If Ireland votes YES it will be seen as an endorsement of the EUs crisis management to date. If however it votes NO, another solution will have to be put in place, and it should be a more meaningful solution, because quite frankly the treaty is quite meaningless.

I love Europe, and the Euro and for those very reasons I cannot endorse the treaty. It is bad for Europe, and it is very bad for the Euro.

Scofflaw

ectoraige wrote: »

Slightly less than if there is a YES result.

Since the beginning of the financial crisis the EU response has been to ignore the scale and interconnectedness of the debt. Any measures that have been taken have been little more than an exercise in economic fire-fighting, and have done nothing to address the root of the problem.

If this approach continues, we will see the break-up of the Euro, and damage the European project for years. This treaty is a part of this failed response.

If Ireland votes YES it will be seen as an endorsement of the EUs crisis management to date. If however it votes NO, another solution will have to be put in place, and it should be a more meaningful solution, because quite frankly the treaty is quite meaningless.

I love Europe, and the Euro and for those very reasons I cannot endorse the treaty. It is bad for Europe, and it is very bad for the Euro.

Are you aware of the full range of measures that are being, or have been, put into place?

I'd agree that watching Europe's governments scrambling to negotiate into place crisis measures that should have been negotiated at the start has been unedifying - the total lack of a plan B is, as ever, the characteristic feature of Europe-wide plans. To be fair, though, just negotiating a plan A is hard enough.

cordially,
Scofflaw

ixtlan

McWilliams... We say we will never default on sovereign debt as normally understood -- debt incurred for schools, hospitals etc -- but when it comes to all this bank debt we don't have any choice.

And good luck convincing bond markets of our new definition of sovereign debt... as an economist he surely knows this is a ridiculous statement.

The problem with McWilliams, is that while he has a point, like some of the other no economists, he views the problem strictly as an economic one. It isn't. It's a political/economic one. Doing what you may think is just and right from a economic point of view to the exclusion of politics would end in disaster. Should Ireland accept any responsibility for the bank debts? If you say none, you are surely indicating that we as a nation are unable to govern ourselves. If you say well... maybe we could take some hit, if our finances were left in a sustainable state, then it does become a political issue to negotiate. The no-side believes that the best negotiating stance is one with a no-vote in one hand and a threat of default in the other, while personally I believe a yes-vote in one hand and a reasonable balanced approach in the other is better.

Ix.

ectoraige

Scofflaw wrote: »

Are you aware of the full range of measures that are being, or have been, put into place?

I'm aware of what has been put into place, and that's why I'm so pessimistic. I can't point to a single one that hasn't just kicked the ball down the line, when it'll cost more to eventually deal with.

The only plans that I do hear being bandied about at the moment are contingencies for dealing with a Greek exit, even though there's little to indicate a Greek desire for such an outcome.

Scofflaw

ectoraige wrote: »

I'm aware of what has been put into place, and that's why I'm so pessimistic. I can't point to a single one that hasn't just kicked the ball down the line, when it'll cost more to eventually deal with.

The only plans that I do hear being bandied about at the moment are contingencies for dealing with a Greek exit, even though there's little to indicate a Greek desire for such an outcome.

So, the 'six-pack', the 'two-pack', the European Banking Authority, the upgraded coordination, the 'European Semester' are all can-kicking?

cordially,
Scofflaw