Independant Article ..we were never bailed out we were uropes middleman??

poeticseraphim · 07-10-2012 4:20am #1

http://www.independent.ie/opinion/analysis/heres-why-the-64bn-is-ours-for-the-asking-3251469.html

President Schulz who seems like a nice enough chap was on a visit. You really need to read the whole article.

Is it just the same old guff we have heard before. Is it justified?

What do you think of it??

I know nothing about Stephen Donnelly the author.

I think i will need to re-read it again myself to see what i think..it seems very ..erm ..simplistic....

You do need to read the whole thing...but here is a snippet...

'The ECB forcing the Irish people to provide €62bn of free cash to international investors in order to avoid contagion of the European banking system is just such a circumstance. In other words, if the ECB wants to cover the losses of professional investors, let it do it with its own money (and critically, at zero cost to any European citizen).

'If the ECB wants to cover the losses of professional investors, then let it do so with its own money...'

So this was my message to President Schulz: Ireland was not bailed out, nor is Ireland looking for a bailout. We do not seek charity, or benevolence from our European partners. But we do want our €64bn back.'

shedweller · 07-10-2012 8:48am

Awaits smoke and mirrors posts...

CptMackey · 07-10-2012 10:00pm

I read the article. Not sure what to think really. One thing tho, if we borrowed around 64bn in the bailout and IF (don't have figures) 61bn went to the banks then it is madness that we are picking up the bill

Good loser · 07-10-2012 11:41pm

Read the article. The usual guff from Donnelly - a Wicklow independent TD.

This guy is as slippery as the worst of them - doesn't need any lessons from the ULA in misleading rubbish. He lets on to support fiscal rectitude and correction of the public finances yet always manages to find the proposal under discussion to be e.g. premature, not how he'd do it etc.

Imagine anyone with a modicum of commonsense, let alone a TD, suggesting that there is someone out there in Europe that owes us €64 billion and they don't know it. €64 billion is serious, serious money. And if only the Government did what Stephen suggests they would give it to us. For God's sake any politician/party that came back with that money in the bag would/should be given jobs for life (this one and the next) in the Dail. So why on earth are they not taking Stephens advice?

Because it's a bogus argument. Garbage from beginning to end.

poeticseraphim · 08-10-2012 6:12am

Good loser wrote: »

Read the article. The usual guff from Donnelly - a Wicklow independent TD.

This guy is as slippery as the worst of them - doesn't need any lessons from the ULA in misleading rubbish. He lets on to support fiscal rectitude and correction of the public finances yet always manages to find the proposal under discussion to be e.g. premature, not how he'd do it etc.

Imagine anyone with a modicum of commonsense, let alone a TD, suggesting that there is someone out there in Europe that owes us €64 billion and they don't know it. €64 billion is serious, serious money. And if only the Government did what Stephen suggests they would give it to us. For God's sake any politician/party that came back with that money in the bag would/should be given jobs for life (this one and the next) in the Dail. So why on earth are they not taking Stephens advice?

Because it's a bogus argument. Garbage from beginning to end.

You do not point out how it is a bogus argument?

Welease · 08-10-2012 8:38am

poeticseraphim wrote: »

You do not point out how it is a bogus argument?

Because it's not possible to change the past....

The article is based around, if we hadn't done x, y and z then we wouldn't have to pay this money back, as its not used for hospitals etc.. All irrelevant.

The government at the time decided to protect the banks and socialise the debts.. We were loaned the money to make this happen, a decision that we undertook freely (as we also did in overheating our economy etc. to boom levels). Other countries took different routes, and it continues to be an ongoing discussion if they have fared better or worse..

Godge · 08-10-2012 8:58am

Welease wrote: »

Because it's not possible to change the past....

The article is based around, if we hadn't done x, y and z then we wouldn't have to pay this money back, as its not used for hospitals etc.. All irrelevant.

The government at the time decided to protect the banks and socialise the debts.. We were loaned the money to make this happen, a decision that we undertook freely (as we also did in overheating our economy etc. to boom levels). Other countries took different routes, and it continues to be an ongoing discussion if they have fared better or worse..

Absolutely correct, the FF government in September 2008 made an omelette but there are still some eejits out there who think we can have our egg back and start again.

While never forgetting what FF have done to destroy this country, we should put it behind us and focus on what needs to be done to rebuild.

Good loser · 08-10-2012 8:59am

Welease wrote: »

Because it's not possible to change the past....

The article is based around, if we hadn't done x, y and z then we wouldn't have to pay this money back, as its not used for hospitals etc.. All irrelevant.

The government at the time decided to protect the banks and socialise the debts.. We were loaned the money to make this happen, a decision that we undertook freely (as we also did in overheating our economy etc. to boom levels). Other countries took different routes, and it continues to be an ongoing discussion if they have fared better or worse..

Also, I believe, because each country - under the euro rules - was obliged to police its own banks; any failures by the banks were the responsibility of the national government. This would apply in particular to the senior debt.
If there had been no guarantee that obligation could have been enforced, as de facto it was by the ECB.

Farmer Pudsey · 08-10-2012 9:39am

Good loser wrote: »

Read the article. The usual guff from Donnelly - a Wicklow independent TD.

This guy is as slippery as the worst of them - doesn't need any lessons from the ULA in misleading rubbish. He lets on to support fiscal rectitude and correction of the public finances yet always manages to find the proposal under discussion to be e.g. premature, not how he'd do it etc.

Imagine anyone with a modicum of commonsense, let alone a TD, suggesting that there is someone out there in Europe that owes us €64 billion and they don't know it. €64 billion is serious, serious money. And if only the Government did what Stephen suggests they would give it to us. For God's sake any politician/party that came back with that money in the bag would/should be given jobs for life (this one and the next) in the Dail. So why on earth are they not taking Stephens advice?

Because it's a bogus argument. Garbage from beginning to end.

I agree totally with Donnelly our politicians have not been fighting our corner rather as according to McWilliams a German once quoted to him ''why do you Irish want to be liked so much''.

If as is now coming to prominance that Brien Lenihan RIP was corcesed into continuing the Bankbailout they why do we continue paying for it. When the Trioka bailed us out the IMF wanted bank bondholders to take a haircut. The US treasury and the ECB again prevented it. My own opinion is that we need to start standing up to the germans and the ECB or we are facing 15-20 years of no growth, emigration and high unemployment.

Two week ago the letter from the germans/netherlands telling us the deal was off indicate that we need to fight our corner better. Most european think that all the bailout money is for Ireland in reality as Donnelly points out it is going into the banks and from there to bondholders most of which went to German banks. Merkel has no issue fighting her corner for her country we need to do the same. The government reaction last Monday was not to pay AIB bondholders and wait for the reaction but then that takes B#lls somthing Irish government have been shown to lack.

The_Honeybadger · 08-10-2012 9:27pm

Farmer Pudsey wrote: »

Most european think that all the bailout money is for Ireland in reality as Donnelly points out it is going into the banks and from there to bondholders most of which went to German banks.

Somebody (Scofflaw I think) linked a spreadsheet a while back showing where the Troika money was going, and barely a penny of it has gone into the banks, the government have gone out of their way to ensure this is the case. Our pesnion reserve fund has gone into the banks as well as other borrowed money, but nothing from the Troika funds.

Not trying to jump on your post in particular, but it might be worth pointing out. If somebody could link it again that would be great.

Good loser · 08-10-2012 11:14pm

Farmer Pudsey wrote: »

I agree totally with Donnelly our politicians have not been fighting our corner rather as according to McWilliams a German once quoted to him ''why do you Irish want to be liked so much''.

If as is now coming to prominance that Brien Lenihan RIP was corcesed into continuing the Bankbailout they why do we continue paying for it. When the Trioka bailed us out the IMF wanted bank bondholders to take a haircut. The US treasury and the ECB again prevented it. My own opinion is that we need to start standing up to the germans and the ECB or we are facing 15-20 years of no growth, emigration and high unemployment.

Two week ago the letter from the germans/netherlands telling us the deal was off indicate that we need to fight our corner better. Most european think that all the bailout money is for Ireland in reality as Donnelly points out it is going into the banks and from there to bondholders most of which went to German banks. Merkel has no issue fighting her corner for her country we need to do the same. The government reaction last Monday was not to pay AIB bondholders and wait for the reaction but then that takes B#lls somthing Irish government have been shown to lack.

So you think it's possible to undo the omelette and reassemble the eggs.
I don't.

Scofflaw · 09-10-2012 12:24am

mickeyk wrote: »

Somebody (Scofflaw I think) linked a spreadsheet a while back showing where the Troika money was going, and barely a penny of it has gone into the banks, the government have gone out of their way to ensure this is the case. Our pesnion reserve fund has gone into the banks as well as other borrowed money, but nothing from the Troika funds.

Not trying to jump on your post in particular, but it might be worth pointing out. If somebody could link it again that would be great.

I'll try and dig it up again...here we go:

OK, I admit I was surprised by this. In looking for answers to posts in the Alan Ahearne thread, I came across this handy little table of bank recapitalisation costs:

€bn |AIB/EBS |BoI |IL&P |IBRC (Anglo/INBS) |Total
Government preference Shares (2009) — NPRF |3.5 |3.5* |— |— |7.0
Capital contributions (with Promissory Notes as consideration) /Special Investment Shares (2010) — Exchequer ** |0.9 |— |— |30.7 |31.6
Ordinary Share Capital (2009) — Exchequer |— |— |— |4.0 |4.0
Ordinary Share Capital (2010) — NPRF |3.7 |— |— |— |3.7
Total pre-PCAR 2011 (A) |8.1 |3.5 |0 |34.7 |46.3
|||||
PCAR 2011: |||||
Capital from Exchequer*** |3.9 |— |2.7 |— |6.5
NPRF Capital |8.8 |1.2 |— |— |10.0
Total PCAR (B) |12.7 |1.2 |2.7 |— |16.5
Total Cost of Recap for State (A) + (B) |20.7 |4.7 |2.7 |34.7 |62.8

Source: http://debates.oireachtas.ie/dail/2012/03/29/00077.asp

The post-bailout recap costs are in bold there - as you can see, there are two sources, Exchequer cash and the NPRF. Both are Irish, so apparently none of the money put into the banks comes from the bailout funds provided by the troika. That's confirmed by a recent (6th June) comment by Noonan:

However, the cost of bank recapitalisation to date has been met from our existing resources – cash reserves and the NPRF.

Source: http://debates.oireachtas.ie/dail/2012/06/06/00097.asp

So while the public perception of the bailouts is that it's first and foremost for the banks, the truth is entirely the reverse - none of the bailout money has gone into the banks. Which leads, of course, to several questions - what exactly is Alan Ahearne playing at? Why is this not a better known fact? And why has every effort apparently been made to ensure that only Irish money goes into the banks?

cordially,
but also somewhat surprised and puzzled,
Scofflaw

I'm still not sure exactly why the input of money to the covered banks has been arranged this way, or at whose behest it happened. Since some of the bailout loan facility was specifically earmarked for the banks, it seems unlikely to have been any kind of legal requirement from the lenders.

And, yes, I appreciate the argument that money is fungible - and while that's true, proximate sources of money are legally meaningful in determining ownership.

cordially,
Scofflaw

poeticseraphim · 09-10-2012 3:59am

Scofflaw wrote: »

I'll try and dig it up again...here we go:

I'm still not sure exactly why the input of money to the covered banks has been arranged this way, or at whose behest it happened. Since some of the bailout loan facility was specifically earmarked for the banks, it seems unlikely to have been any kind of legal requirement from the lenders.

And, yes, I appreciate the argument that money is fungible - and while that's true, proximate sources of money are legally meaningful in determining ownership.

cordially,
Scofflaw

It has always been known that th whole idea of the bailout going as it did would mean the Govt bailed out the banks then the Troika bailed out the Irish Govt....the whole issue was the ECB could not directly bailout banks....and of course if they did the balance would be on the ECB balance sheet and kept as sovreign debt.
There was a chance of it being done differently for Spain (which could have been aplied retrospctively) but that's unlikely now .

I think what Stephen Donnelly is implying (i am not saying that i think he is correct or anything) is that these terms were put upon Ireland to try to contain the insolvency and keep it off the ECB books to prevent the collapse of liquidity and prevent the problem spreading to th other other euro economies.

The issue is the ECB could not directly fund the banks at that time as i understand it.

As to what our deficit was prior to this i am unsure.

If this man is talking out of his hat he should stop it is would be damaging to any reputation of competency we might have left.

The point is though after we exit the Bailout programme...without a deal of some kind? Our economy cannot sustain this level of debt. So then what? It is the question no one is asking? Second bailout? All because of the debt??? Which would touch upon Donnelly's point.
We try to sustain it and die slowly ...default and deal with that ..need a second bailout..or there is some kind of deal??? So what is going to happen? It is the uncertainty that is causing such turmoil in Europe along with austerity.

They need to get real about what different naions are willing to accept or not. The Germans will only go so far. And it is becoming obvious that certain nations like Spain are not so willing to accept the bailout terms in return for the cash as everyone expected. Everyone assumed it was in their dest interests so they would come around.

But everyone country has a different cultural and moral ethos...they know what will fly there and what will not. Also the Austerity needed in Spain appears to requir much more severe reforms and it's tougher.

We need to plan things....the economy cannot sustain that debt for the next thirty years...yes things are going along...but we will not be able to sustain the countries balance sheet after time and living standards will fall...

So if we are not going to get a deal...what are we doing after we exit the bailout....??? It will slide the country into a slow grind into poverty ...

Dirk Gently · 09-10-2012 7:00am

Good loser wrote: »

Imagine anyone with a modicum of commonsense,.

In all fairness....

He studied engineering at UCD and MIT before joining international management consultancy, McKinsey & Company. Through his work with McKinsey he has first-hand experience of how to bring transformational change to global private sector companies, major public sector organisations and NGOs on a wide range of briefs.

In 2008, he completed a Masters’ degree in Public Administration and International Development at Harvard’s Kennedy School of Government. Here he examined, in detail, the interaction between the IMF and small states.

Scofflaw · 09-10-2012 8:20am

poeticseraphim wrote: »

It has always been known that th whole idea of the bailout going as it did would mean the Govt bailed out the banks then the Troika bailed out the Irish Govt....the whole issue was the ECB could not directly bailout banks....and of course if they did the balance would be on the ECB balance sheet and kept as sovreign debt.
There was a chance of it being done differently for Spain (which could have been aplied retrospctively) but that's unlikely now .

I think what Stephen Donnelly is implying (i am not saying that i think he is correct or anything) is that these terms were put upon Ireland to try to contain the insolvency and keep it off the ECB books to prevent the collapse of liquidity and prevent the problem spreading to th other other euro economies.

The issue is the ECB could not directly fund the banks at that time as i understand it.

Were it either of those things, the answer would be obvious, but neither of them are at all relevant, because (a) the bailout loans were put onto the sovereign's books anyway, and (b) the ECB provided none of the bailout money.

That's what makes it puzzling - the government borrowed the money from the IMF and EFSF/EFSM, and in theory once it had borrowed it, it was simply government money. Despite that, they were very careful to ensure that only "Irish" money went into the Irish banks. One possible answer is that using the bailout money would have involved more detailed enquiry on the part of the IMF/EU/ECB into the affairs of the Irish banks - I can't think of any other reason.

poeticseraphim wrote: »

As to what our deficit was prior to this i am unsure.

If this man is talking out of his hat he should stop it is would be damaging to any reputation of competency we might have left.

The point is though after we exit the Bailout programme...without a deal of some kind? Our economy cannot sustain this level of debt. So then what? It is the question no one is asking? Second bailout? All because of the debt??? Which would touch upon Donnelly's point.
We try to sustain it and die slowly ...default and deal with that ..need a second bailout..or there is some kind of deal??? So what is going to happen? It is the uncertainty that is causing such turmoil in Europe along with austerity.

They need to get real about what different naions are willing to accept or not. The Germans will only go so far. And it is becoming obvious that certain nations like Spain are not so willing to accept the bailout terms in return for the cash as everyone expected. Everyone assumed it was in their dest interests so they would come around.

But everyone country has a different cultural and moral ethos...they know what will fly there and what will not. Also the Austerity needed in Spain appears to requir much more severe reforms and it's tougher.

We need to plan things....the economy cannot sustain that debt for the next thirty years...yes things are going along...but we will not be able to sustain the countries balance sheet after time and living standards will fall...

So if we are not going to get a deal...what are we doing after we exit the bailout....??? It will slide the country into a slow grind into poverty ...

I rather suspect, and have said for a couple of years, that our problem is that we can indeed sustain the level of debt - I expected our debt to be almost exactly at the limits of sustainability. And indeed our 'debt trajectory' is expected to pass within a whisker of the generally agreed 'unsustainable' level of 120% of GDP before declining again.

If we have a reasonably balanced budget, then the combined magic of inflation and even small amounts of economic growth will reduce the debt in a surprisingly short time. It's easy to get doom and gloomy about it, but the arithmetic is in our favour (or not, if one is hoping for a Fight Club style reset of the financial system).

cordially,
Scofflaw

poeticseraphim · 09-10-2012 1:07pm

That's what makes it puzzling - the government borrowed the money from the IMF and EFSF/EFSM, and in theory once it had borrowed it, it was simply government money. Despite that, they were very careful to ensure that only "Irish" money went into the Irish banks. One possible answer is that using the bailout money would have involved more detailed enquiry on the part of the IMF/EU/ECB into the affairs of the Irish banks - I can't think of any other reason.

The reason was EU law regarding the direct funding of privat banks by th ECB as i understand it. I could be wrong.

I had thought of this , I would have assumed it is better financial sense for the EU to have a better insight into Irish dealings from thir prospective. From the then Govts prospective it might have been disastrous.

I rather suspect, and have said for a couple of years, that our problem is that we can indeed sustain the level of debt - I expected our debt to be almost exactly at the limits of sustainability. And indeed our 'debt trajectory' is expected to pass within a whisker of the generally agreed 'unsustainable' level of 120% of GDP before declining again.

If we have a reasonably balanced budget, then the combined magic of inflation and even small amounts of economic growth will reduce the debt in a surprisingly short time. It's easy to get doom and gloomy about it, but the arithmetic is in our favour (or not, if one is hoping for a Fight Club style reset of the financial system).

Debt at the limits of sustainabilty is not how many see it. A debt-to-GDP ratio of 60% is quite often noted as a prudential limit for a dveloped country that crossing that thresholds poses threats to debt sustainability. And it certainly changes the first world status and potential of a country in economic terms and in terms of living standards.

Also don't we have to meet Fiscal Compact debt level standards?

That magic wand of inflation is tougher to wield without your own currency and it is not us that prints money. The ECB also has to take other economies into account.

And the social toll on living standards and jobs is going to get worse. A lot worse.

Most commentators do not share your view. And I don't think the IMF or the EU predicted how much austerity would affect the economy ..not just here.

I don't see the potential for much economic growth.

Even balancing th budget now with these level of debt payments is hurting the economy i don't see how we can balance it and keep up payments without the economy slowing not growing.

Scofflaw · 09-10-2012 3:26pm

poeticseraphim wrote: »

The reason was EU law regarding the direct funding of privat banks by th ECB as i understand it. I could be wrong.

And in fact you are wrong, for the two reasons already stated, and which I'll repeat:

1. the money in the bailout fund is loaned to the sovereign, so putting bailout money into the banks would not trigger any direct funding issues.

2. the ECB is not lending any of the troika money.

I hope I don't have to repeat those again, because you cannot in any sense be right, even arguably, because of point 2. The ECB is involved in the troika purely from a management perspective - it has not loaned any money to the Irish government. It is not financially involved in the bailout facility, and the prohibition on the ECB recapitalising banks cannot therefore be any part of an explanation for this curious division of bailout money.

poeticseraphim wrote: »

I had thought of this , I would have assumed it is better financial sense for the EU to have a better insight into Irish dealings from thir prospective. From the then Govts prospective it might have been disastrous.

It's the only obvious alternative explanation I can see at this point.

poeticseraphim wrote: »

Debt at the limits of sustainabilty is not how many see it. A debt-to-GDP ratio of 60% is quite often noted as a prudential limit for a dveloped country that crossing that thresholds poses threats to debt sustainability. And it certainly changes the first world status and potential of a country in economic terms and in terms of living standards.

Prudential and sustainable aren't the same thing. Come to that, 120% is an arbitrary figure - Japan has gone for years with higher debt levels than that.

poeticseraphim wrote: »

Also don't we have to meet Fiscal Compact debt level standards?

They aren't an issue here as long as we have a deficit within the limits and are reducing the overall debt by a pretty minimal amount.

poeticseraphim wrote: »

That magic wand of inflation is tougher to wield without your own currency and it is not us that prints money. The ECB also has to take other economies into account.

The maths I've done requires nothing more than the ECB inflation target of a bit under 2%, though. Sure, greater inflation would get the job done faster, but it's not necessary.

poeticseraphim wrote: »

And the social toll on living standards and jobs is going to get worse. A lot worse.

Most commentators do not share your view. And I don't think the IMF or the EU predicted how much austerity would affect the economy ..not just here.

I don't see the potential for much economic growth.

Even balancing th budget now with these level of debt payments is hurting the economy i don't see how we can balance it and keep up payments without the economy slowing not growing.

Yet somehow we managed GDP growth in 2011...no, it's true that there are a lot of risks, but "I just can't believe there will be growth" isn't a valid argument.

cordially,
Scofflaw

Good loser · 09-10-2012 10:52pm

Dirk Gently wrote: »

In all fairness....

A fluent spoofer - like many other management consultants.

poeticseraphim · 10-10-2012 12:32am

1. the money in the bailout fund is loaned to the sovereign, so putting bailout money into the banks would not trigger any direct funding issues.

That is precisely what i said it was loaned to the sovereign not banks directly as in Spains case now. Sovereign debt should have been considered separately to bank debt. Our sovereign deficit was nowhere near what we were bailed out at.

Spain has received direct funding into it's banks as of now. As far as i know it's sovereign debt is still separate to bank debt.

I don't agree the deficit alone caused the sovereign debt crisis.

The national budget went from a surplus in 2007 to a deficit of 32% GDP in 2010.

The economy collapsed in 2008 because of a property bubble and that i accept.

The government appears to have taken seriously the assurances of the Irish Central Bank that the banks were fundamentally sound and were merely suffering from a short-term liquidity problem. Thus, the government appears to have believed that the guarantee would not have consequences for the state finances. However, there is also evidence that senior civil servants, as well as Merrill Lynch (who had been recruited as advisors in the weeks prior to the decision) warned against the dangers of a blanket garantee. I am now begining to think the Govt simply believed it would not be an issue because they actually thought the banks were solvent.

With the collapse of the property sector international banks became concerned about Irish banks exposure to bad loans and the Irish banks could no longer borrow and raise funds. Irish banks had stopped in the early 2000s lending on the basis of deposits but international bonds.

The only thing stopping the restructuring losses on privat holders seems to be the garantee to me.

Scofflaw,

Do you think our sovereign debt will be uncoupled from bank debt? Not arguements as to why it was coupled or why not.

But do you think it will b uncoupled?

Scofflaw · 10-10-2012 1:14am

poeticseraphim wrote: »

That is precisely what i said it was loaned to the sovereign not banks directly as in Spains case now. Sovereign debt should have been considered separately to bank debt. Our sovereign deficit was nowhere near what we were bailed out at.

Spain has received direct funding into it's banks as of now. As far as i know it's sovereign debt is still separate to bank debt.

Spain hasn't received any such thing. The €100bn on offer to its banks is on offer as a loan to the sovereign.

Spain, like us, is hoping for direct ESM money for its banks, but, as for us, that's currently been cast back into uncertainty by the Helsinki statement.

But at the moment, the money that is on offer to Spain goes to the sovereign. Do please try to get your facts straight!

poeticseraphim wrote: »

I don't agree the deficit alone caused the sovereign debt crisis.

The national budget went from a surplus in 2007 to a deficit of 32% GDP in 2010.

The economy collapsed in 2008 because of a property bubble and that i accept.

The government appears to have taken seriously the assurances of the Irish Central Bank that the banks were fundamentally sound and were merely suffering from a short-term liquidity problem. Thus, the government appears to have believed that the guarantee would not have consequences for the state finances. However, there is also evidence that senior civil servants, as well as Merrill Lynch (who had been recruited as advisors in the weeks prior to the decision) warned against the dangers of a blanket garantee. I am now begining to think the Govt simply believed it would not be an issue because they actually thought the banks were solvent.

It's the simplest explanation, but highlights one of the deepest criticisms of the previous governments and in particular their regulation of the financial sector - that they didn't know any better because for the previous decade they had effectively been letting the banks regulate themselves. Come the day, the banks thought they were OK, and the government didn't have a clue.

poeticseraphim wrote: »

With the collapse of the property sector international banks became concerned about Irish banks exposure to bad loans and the Irish banks could no longer borrow and raise funds. Irish banks had stopped in the early 2000s lending on the basis of deposits but international bonds.

To some extent - bonds reached a high point of about 28% of the combined bonds+deposits total in the covered banks in 2007, but the majority of the banks' ending base was always deposits. Similarly, the money that ran out of the banks after the crunch was deposits - the bonds really became an issue first and foremost because bondholders couldn't get their money back as quickly or quietly as depositors.

If you'll excuse the very long table - this is from the aggregated balance sheets of the Irish banks - all figures are in billions of euro:

Year|Month|Deposits from Irish Residents|Deposits from Irish Residents|Deposits from Irish Residents|Deposits from Irish Residents|Deposits from non-residents|Deposits from non-residents|Total Deposits|Debt Securities Issued|Debt Securities Issued|Debt Securities Issued|Debt Securities Issued
|||Monetary financial institutions|General government|Private Sector|Euro area deposits|Rest of world deposits|All Deposits|Irish Resident Held|Euro Area Held|Rest of the world Held|Total Debt Securities Issued
2003|Jan|77|10|1|67|8|43|129|2|0|13|15
|Feb|79|10|1|69|9|43|131|2|1|13|16
|Mar|79|10|1|69|7|43|130|2|1|13|16
|Apr|81|9|1|70|7|44|132|2|1|15|17
|May|80|9|1|70|8|43|131|2|1|15|18
|Jun|82|9|1|71|9|44|134|2|1|16|19
|Jul|83|11|1|71|9|44|136|2|1|16|19
|Aug|84|11|1|72|9|44|136|2|1|17|20
|Sep|85|11|1|73|9|46|140|4|1|18|22
|Oct|87|12|2|74|7|47|142|4|1|18|22
|Nov|85|11|1|73|10|48|144|3|1|18|22
2003|Dec|89|12|1|76|7|50|146|3|1|18|22
2004|Jan|88|12|2|75|9|52|148|4|1|20|25
|Feb|89|11|1|76|8|51|149|5|1|21|27
|Mar|89|12|1|76|9|58|156|5|1|22|28
|Apr|91|13|1|78|11|55|157|5|1|25|31
|May|94|13|1|79|12|65|171|4|1|25|31
|Jun|95|14|1|80|9|66|170|4|2|27|32
|Jul|111|28|1|82|13|57|181|4|1|27|33
|Aug|111|28|1|81|13|57|180|6|2|28|36
|Sep|110|26|2|82|12|56|177|8|2|30|39
|Oct|112|27|2|84|12|55|179|9|2|30|40
|Nov|112|27|2|83|14|53|179|8|2|31|42
2004|Dec|116|27|2|87|10|57|183|7|3|32|42
2005|Jan|116|28|2|86|14|59|189|8|3|35|46
|Feb|118|30|1|87|17|61|196|8|4|35|46
|Mar|118|30|1|87|14|63|196|8|5|36|49
|Apr|120|31|2|88|15|63|199|8|5|38|51
|May|123|31|2|90|14|65|202|10|5|39|54
|Jun|126|33|1|91|15|62|203|10|6|40|56
|Jul|128|34|2|93|14|66|208|10|6|40|57
|Aug|130|34|1|94|14|70|214|11|6|40|57
|Sep|130|34|2|95|15|74|219|11|6|45|62
|Oct|134|36|2|97|20|75|229|9|8|47|64
|Nov|136|38|2|96|19|74|228|11|8|51|71
2005|Dec|143|40|2|102|21|73|238|12|9|53|74
2006|Jan|140|38|2|100|22|75|237|12|10|53|74
|Feb|158|56|2|100|23|75|256|13|9|55|77
|Mar|162|58|2|102|22|75|259|14|11|55|79
|Apr|163|58|2|103|19|74|256|17|12|54|84
|May|165|60|2|104|22|73|261|17|12|54|83
|Jun|169|60|2|107|27|76|271|16|12|54|82
|Jul|176|65|2|109|22|76|273|16|12|59|87
|Aug|177|64|2|111|23|76|277|16|12|62|91
|Sep|180|65|2|112|21|77|278|17|13|68|98
|Oct|183|67|2|115|21|79|283|18|12|70|100
|Nov|183|68|2|112|19|85|288|18|13|71|103
2006|Dec|190|72|2|116|21|86|297|21|12|74|107
2007|Jan|181|63|3|116|18|87|287|23|13|78|114
|Feb|178|60|2|115|19|89|286|24|17|79|120
|Mar|180|61|2|117|18|93|291|25|16|77|118
|Apr|182|62|2|118|18|97|297|28|16|76|120
|May|182|62|2|119|17|97|296|29|15|76|121
|Jun|188|67|2|119|21|98|308|31|15|76|122
|Jul|188|65|2|121|18|99|306|31|16|79|126
|Aug|187|64|2|121|18|107|312|30|15|79|124
|Sep|192|67|2|122|18|112|322|29|14|79|122
|Oct|192|67|2|123|20|113|326|29|14|83|126
|Nov|195|72|2|121|24|117|337|28|14|81|123
2007|Dec|195|69|2|124|20|134|349|28|13|75|116
2008|Jan|195|69|2|123|23|137|355|28|13|79|120
|Feb|196|71|2|123|21|138|355|27|13|77|118
|Mar|201|74|2|125|23|143|367|27|14|75|116
|Apr|200|74|3|124|24|142|367|27|14|73|114
|May|211|84|2|124|22|143|376|27|15|75|117
|Jun|214|86|2|126|24|149|387|27|14|73|114
|Jul|213|85|2|126|25|150|387|27|14|70|110
|Aug|215|86|3|126|27|158|400|26|14|68|108
Guarantee|Sep|232|99|3|130|25|160|417|24|14|59|97
|Oct|227|92|3|131|23|193|442|23|14|58|95
|Nov|227|94|3|130|23|189|440|25|14|55|94
2008|Dec|230|97|3|130|25|171|426|26|14|54|95
2009|Jan|239|109|3|126|22|169|429|30|14|57|101
|Feb|241|112|3|127|21|160|422|31|14|53|97
|Mar|237|109|3|126|19|147|404|30|15|47|91
|Apr|244|115|3|126|19|154|417|29|14|44|87
|May|248|118|3|127|18|159|425|31|14|42|88
|Jun|249|120|3|127|18|153|421|33|14|38|85
|Jul|249|118|3|128|19|160|427|34|14|39|87
|Aug|249|117|3|129|20|159|428|35|14|42|91
ELG|Sep|249|115|3|130|20|154|424|38|11|45|94
|Oct|253|117|3|133|20|155|428|37|11|46|94
|Nov|251|115|3|132|21|154|426|39|12|47|97
|Dec|252|116|3|132|17|154|423|38|11|46|96
2010|Jan|254|119|3|132|21|149|423|38|14|46|98
|Feb|249|115|3|131|20|145|415|39|14|47|99
|Mar|250|118|3|130|18|141|410|44|14|48|106
|Apr|249|117|3|129|17|138|404|45|14|49|108
|May|252|120|3|129|17|146|415|44|14|47|105
|Jun|251|120|3|129|16|148|415|43|13|45|102
|Jul|250|119|3|128|17|147|414|42|13|41|96
|Aug|246|116|3|127|18|144|408|42|13|40|95
Wall of Debt|Sep|249|122|3|125|14|131|394|36|10|23|68
|Oct|247|120|3|125|12|123|383|35|10|22|66
Bailout|Nov|239|119|3|117|8|109|356|34|10|21|65
2010|Dec|234|117|3|114|5|98|338|33|10|20|63
2011|Jan|225|111|3|112|6|88|319|33|10|19|62
2011|Feb|230|119|3|109|5|79|314|34|10|18|62
2011|Mar|224|109|9|106|4|74|302|32|10|17|59
2011|Apr|235|106|21|108|3|73|311|32|10|17|58
2011|May|211|82|21|107|3|72|285|32|9|17|58
2011|Jun|210|85|21|104|3|67|280|31|9|17|57
2011|Jul|191|86|2|103|3|68|261|32|8|16|56
2011|Aug|192|88|2|102|3|68|263|31|8|16|55
2011|Sep|194|89|2|102|3|68|265|31|8|15|54
2011|Oct|196|92|2|102|3|68|266|31|8|15|54
2011|Nov|195|92|2|101|3|64|263|33|8|14|55
2011|Dec|192|87|2|102|2|65|259|30|8|13|51
2012|Jan|189|84|2|103|2|64|255|29|8|11|49
2012|Feb|188|83|2|103|3|64|254|29|8|11|47
2012|Mar|187|81|2|104|3|64|254|27|7|10|44
2012|Apr|184|75|2|108|3|60|247|26|7|9|42
2012|May|185|75|2|108|3|62|250|26|7|9|42
2012|Jun|182|76|2|105|3|61|246|25|7|8|40
2012|Jul|157|50|2|105|3|62|222|25|7|8|40
2012|Aug|157|49|2|105|3|60|219|25|7|8|39

poeticseraphim wrote: »

The only thing stopping the restructuring losses on privat holders seems to be the garantee to me.

Scofflaw,

Do you think our sovereign debt will be uncoupled from bank debt? Not arguements as to why it was coupled or why not.

But do you think it will b uncoupled?

Which is, of course, the great white hope. I don't really like making those kind of predictions, I admit, because the answer depends on a very large number of political events as well as exactly what 'decoupling' means.

If we mean a deal where the bank recapitalisation costs are simply taken off the State's books by some other party, be that the ESM or whoever, in exchange for nothing at all on our part - no, I can't see that as likely, at least for the short to medium term. I don't see it as likely either for all the cost (€64bn) or even for any part of the costs.

If, on the other hand, we mean a deal where the ESM takes over the State's holdings in the covered banks - in effect, a sale of those assets by the State to the ESM - then, yes, I can see that as possible in the short to medium term. Such a deal would involve valuing the State's holdings at a fair price, and might only involve somewhere around €9bn or so.

cordially,
Scofflaw

Dannyboy83 · 10-10-2012 10:47am

Scofflaw wrote: »

That's what makes it puzzling - the government borrowed the money from the IMF and EFSF/EFSM, and in theory once it had borrowed it, it was simply government money. Despite that, they were very careful to ensure that only "Irish" money went into the Irish banks. One possible answer is that using the bailout money would have involved more detailed enquiry on the part of the IMF/EU/ECB into the affairs of the Irish banks - I can't think of any other reason.

None of the bailout money was used for banks - that came from Irish sources.
All of the bailout money was drawn down - "the bailout loans were put onto the sovereign's books"

Where is this money that was earmarked for the banks but never used?

ArmaniJeanss · 10-10-2012 10:50am

Re Scofflaws table, any idea what happened between June and July 2012 in the 'Deposits from Irish Residents Monetary financial institutions' column (Column D) to cause such a big fall?

Solair · 10-10-2012 11:05am

I wonder how much of those deposits are disappearing back into paying off debts?

Looking at the figures, most of the huge deposits seem to be associated with the property bubble. I'd suspect that they were made up of windfalls on sales of houses, etc but if a large % of savers also had major borrowings or were exposed to property speculation, there could be a lot of money going back into paying down loans on failed developer projects etc as banks get tougher

there are lots of mini development empires out there

Cavehill Red · 10-10-2012 11:10am

Scofflaw wrote: »

If we have a reasonably balanced budget, then the combined magic of inflation and even small amounts of economic growth will reduce the debt in a surprisingly short time. It's easy to get doom and gloomy about it, but the arithmetic is in our favour (or not, if one is hoping for a Fight Club style reset of the financial system).

Soft landing, is it? I think your spectacles are way too rosy, and I don't need to be some militia in the hills canning my own food and waiting for the apocalypse just because I believe the European financial status quo is about to head off a cliff.

K-9 · 10-10-2012 11:27am

Dannyboy83 wrote: »

None of the bailout money was used for banks - that came from Irish sources.
All of the bailout money was drawn down - "the bailout loans were put onto the sovereign's books"

Where is this money that was earmarked for the banks but never used?

IIRC there was a contingency fund for the banks if needed, this would be EU money.

Geuze · 10-10-2012 11:43am

My general thoughts

Every penny /cent borrowed to cover the normal budget deficit should be repaid in full, even if it causes years of pain.

The banking crisis has cost 60-70bn, although ownership of some banks is an offsetting asset.

The taxpayer should not cover all this cost.

30-35bn approx, has or will go into IBRC. We should not have repaid the senior bonds in these two banks, at least not in full.

I would hope for a 50% reduction in this cost.

Or maybe a 40yr bond at 1%, so an annual interest cost of 350m.

As AIB + BoI + pTSB are still alive (?!), there is some argument for repaying their debts / bonds, but maybe not in full.

Scofflaw · 10-10-2012 12:35pm

Dannyboy83 wrote: »

None of the bailout money was used for banks - that came from Irish sources.
All of the bailout money was drawn down - "the bailout loans were put onto the sovereign's books"

Where is this money that was earmarked for the banks but never used?

The Exchequer currently has a cash pile of €23.7bn, €18.7bn of which comes from EU/IMF loans.

For a bit of analysis, see here: http://economic-incentives.blogspot.ie/2012/10/funding-exchequer-balance.html

cordially,
Scofflaw

Scofflaw · 10-10-2012 12:37pm

Cavehill Red wrote: »

Soft landing, is it? I think your spectacles are way too rosy, and I don't need to be some militia in the hills canning my own food and waiting for the apocalypse just because I believe the European financial status quo is about to head off a cliff.

You're right that that remains a risk, and obviously in that case my rather rosy scenario disappears, but since it's not really possible to make predictions in the event of a financial apocalypse, mine are based on 'business as usual'.

cordially,
Scofflaw

Cavehill Red · 10-10-2012 12:45pm

Scofflaw wrote: »

You're right that that remains a risk, and obviously in that case my rather rosy scenario disappears, but since it's not really possible to make predictions in the event of a financial apocalypse, mine are based on 'business as usual'.

cordially,
Scofflaw

Define business as usual. We haven't seen business as usual in many's a long year, possibly not since the creation of the euro in the first place, to be honest.

Scofflaw · 10-10-2012 1:00pm

ArmaniJeanss wrote: »

Re Scofflaws table, any idea what happened between June and July 2012 in the 'Deposits from Irish Residents Monetary financial institutions' column (Column D) to cause such a big fall?

The answer is to be found in a corresponding fall in the covered banks' assets, which record an equivalent fall in lending to Irish MFIs, so it looks like the fall represents money on deposit by the covered banks with the covered banks which is now no longer deposited out.

cordially,
Scofflaw

Scofflaw · 10-10-2012 1:01pm

Cavehill Red wrote: »

Define business as usual. We haven't seen business as usual in many's a long year, possibly not since the creation of the euro in the first place, to be honest.

In this particular instance, it's rather obviously defined as "still on top of the cliff rather than falling over it".

cordially,
Scofflaw

Cavehill Red · 10-10-2012 9:11pm

Scofflaw wrote: »

In this particular instance, it's rather obviously defined as "still on top of the cliff rather than falling over it".

cordially,
Scofflaw

'Business as usual' is perhaps a sardonic way to describe lurching from crisis to crisis on the clifftop, no?

Scofflaw · 10-10-2012 9:36pm

Cavehill Red wrote: »

'Business as usual' is perhaps a sardonic way to describe lurching from crisis to crisis on the clifftop, no?

Given that the period before that, which was apparently unmarked by crises, actually consisted of lurching drunkenly towards the clifftop at ever increasing speed, it seems apt.

cordially,
Scofflaw

Cavehill Red · 10-10-2012 10:13pm

Scofflaw wrote: »

Given that the period before that, which was apparently unmarked by crises, actually consisted of lurching drunkenly towards the clifftop at ever increasing speed, it seems apt.

cordially,
Scofflaw

This is the point I'm making - was there any such thing as 'business as usual'? In the Irish context, prior to joining the euro, perhaps?

Scofflaw · 10-10-2012 10:28pm

Cavehill Red wrote: »

This is the point I'm making - was there any such thing as 'business as usual'? In the Irish context, prior to joining the euro, perhaps?

In the sense I'm using it, sure. In the sense you're using it, no, hardly - we went from the mild boom of the Seventies to the incredibly rocky ground of the Eighties through the austerity and trimming of the early Nineties to the boom of the late Nineties to the bubble of the early Naughties to the crisis.

In terms of the legal and regulatory environment surrounding business, though, and the rational expectations underpinning it, "business as usual" has been changing only incrementally over that time, and remains pretty much the same now as 20 years ago.

If I have a decent business idea, and am prepared to put the work in to develop it, I can have a rational expectation of reasonable return. That's the case for the vast majority of the economy, even in the financial sphere, and constitutes "business as usual". The business "temperature" may change, and business have different tolerances, but the things that determine those tolerances remain broadly the same.

If Ireland regains competitiveness, continues attracting FDI, continues being an export powerhouse, continues being seen as a good bet by the markets, then we'll make our way incrementally and slowly out of the mess. That's not a "soft landing", but the opposite. It's a "soft climb" up from a hard landing - soft in the sense of climbing up something like a sand dune, which is both harder and a lot less determinate than climbing something like rock.

cordially,
Scofflaw

Independant Article ..we were never bailed out we were uropes middleman??

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