State Bankrupcy / State Default / Insolvent

The Valley · 08-09-2010 10:26PM #1

I really dont understand what the consequences will be if as a country we become insolvent. I feel that we are not being told the truth and the scale of the problem is alot deeper than the goverment are leading us to believe.

Can somebody paint me a picture of how bad things can get in this country if we run out of money and default? I note another trad has a 25% chance of default within the next 5 yrs - what will happen if this occurs

someday2010 · 08-09-2010 10:30PM

There will be pay increases for striking Public sector workers while the rest of us starve

johnnyjb · 08-09-2010 10:34PM

someday2010 wrote: »

There will be pay increases for striking Public sector workers while the rest of us starve

Touche

oppenheimer1 · 09-09-2010 12:29AM

The Valley wrote: »

I really dont understand what the consequences will be if as a country we become insolvent. I feel that we are not being told the truth and the scale of the problem is alot deeper than the goverment are leading us to believe.

Can somebody paint me a picture of how bad things can get in this country if we run out of money and default? I note another trad has a 25% chance of default within the next 5 yrs - what will happen if this occurs

Western countries don't default per se, they go cap in hand to the IMF when the markets make their debt too expensive to roll over. The IMF will finance the countries deficit, but wilt the condition that major cuts are made to expenditure. An IMF bailout would mean a major reduction in Public sector pay and numbers. Social welfare would be cut dramatically. The semi-states and utilities like water ESB would be sold off and privatised. Health would undergo drastic changes. In the end we would have a very small government who was only tasked with legislating, security and paying back the debt.

An out and out default would mean that we would be frozen out of the markets permanently and taxes raised would have to match or exceed expenditure at all times, all through out the year.

lmimmfn · 09-09-2010 12:41AM

oppenheimer1 wrote: »

Western countries don't default per se, they go cap in hand to the IMF when the markets make their debt too expensive to roll over. The IMF will finance the countries deficit, but wilt the condition that major cuts are made to expenditure. An IMF bailout would mean a major reduction in Public sector pay and numbers. Social welfare would be cut dramatically. The semi-states and utilities like water ESB would be sold off and privatised. Health would undergo drastic changes. In the end we would have a very small government who was only tasked with legislating, security and paying back the debt.

tbh with you, that doesnt read like armageddon to me, it reads as something sustainable, yes would be crap but not as crap as its looking like

oppenheimer1 wrote: »

An out and out default would mean that we would be frozen out of the markets permanently and taxes raised would have to match or exceed expenditure at all times, all through out the year.

now that would be armageddon because theres no way tax take can fund the repayments and the interest on Nama and the banks

The Valley · 09-09-2010 03:50AM

oppenheimer1 wrote: »

In the end we would have a very small government who was only tasked with legislating, security and paying back the debt.

This may not be a bad thing........

Is there any chance we could be forced out of the euro currency?

If the state went bankrupt what would happen the bank garuntee scheme for deposits

femur61 · 09-09-2010 06:12AM

oppenheimer1 wrote: »

Western countries don't default per se, they go cap in hand to the IMF when the markets make their debt too expensive to roll over. The IMF will finance the countries deficit, but wilt the condition that major cuts are made to expenditure. An IMF bailout would mean a major reduction in Public sector pay and numbers. Social welfare would be cut dramatically. The semi-states and utilities like water ESB would be sold off and privatised. Health would undergo drastic changes. In the end we would have a very small government who was only tasked with legislating, security and paying back the debt.

Isn't this what the country needs to get us out of this hell hole, that we created in that we allowed it to happen. We need educated specialists outsiders to make our decisions, not some uneducated hurling star who never got their leaving cert.

ei.sdraob · 09-09-2010 06:16AM

oppenheimer1 wrote: »

Western countries don't default per se, they go cap in hand to the IMF when the markets make their debt too expensive to roll over. The IMF will finance the countries deficit, but wilt the condition that major cuts are made to expenditure. An IMF bailout would mean a major reduction in Public sector pay and numbers. Social welfare would be cut dramatically. The semi-states and utilities like water ESB would be sold off and privatised. Health would undergo drastic changes. In the end we would have a very small government who was only tasked with legislating, security and paying back the debt.

excellent! where do we sign

jank · 09-09-2010 07:28AM

Listening to Newstalk lately the consensus is that we will need to go cap and hand to the ECB to access those bailout funds. I wonder will their conditions be as harsh as the IMF.
Watch out 2011!

Nijmegen · 09-09-2010 08:15AM

As long as we don't end up with firing squads in the streets and a Latin American style dictator, my view at this point is that no matter how bad it gets with the economy, at least we're not living in central Pakistan / sub-Saharan Africa / etc.

It's not nice, but it beats some alternatives.

professore · 09-09-2010 08:23AM

Nijmegen wrote: »

As long as we don't end up with firing squads in the streets and a Latin American style dictator, my view at this point is that no matter how bad it gets with the economy, at least we're not living in central Pakistan / sub-Saharan Africa / etc.

Not yet. Vote No.1 for Declan Ganley and see what happens !!!!

SkepticOne · 09-09-2010 08:39AM

Here's what an IMF bailout will mean for Ireland: More of the same.

It is simply a continuation of the same process that has brought us this far. There will be more cuts in public expenditure. More tax increases. More whinging from public sector employees that they are being unfairly targeted. More griping from the private sector that the tax increases are unfair and that not enough is being done to cut expenditure.

Meanwhile those at the top (politicians, bankers, top developers etc) will continue to be bailed out to the greatest extent possible given the reduced resources of the state.

It will be a pyrrhic victory for those who advocate a small state because although there will be cutbacks, these will be forced upon us.

The reason a small state is attractive is because it frees up the private sector to create wealth. But we will not get that benefit. The state is going to shrink, not to free up the private sector, but to service debt as best we can. The private sector will still be lumbered with high taxes and these will likely increase.

So in two years time, I would expect the same people to be making the same arguments on both sides of the divide.

ei.sdraob · 09-09-2010 08:49AM

SkepticOne wrote: »

It will be a pyrrhic victory ... The state is going to shrink, not to free up the private sector, but to service debt as best we can.

Yes

sucks to be us

I think what really pisses a lot of people off is that we've two years into this crisis and things are looking worse while other countries have some glimmers of hope, every option that the FF/Greens government took was the worst possible choice

kevteljeur · 09-09-2010 09:02AM

jank wrote: »

Listening to Newstalk lately the consensus is that we will need to go cap and hand to the ECB to access those bailout funds. I wonder will their conditions be as harsh as the IMF.
Watch out 2011!

I believe, following recent events, that the ECB (and effectively the German and French governments) will step in, and the IMF wouldn't, because we're in the Euro zone. The difference in reality wouldn't be great, other than that they would have much more specific ideas about how the Irish economy should be structured to achieve the stability to repay debt.

As other people have mentioned here before, and I also believe that would be the case, you would see large changes in the tax structures, and in the pay of the civil service. They would be recommendations, but the sort of recommendations that the Irish government wouldn't really have any say in. So although I'm no expert, for most people here it would be pretty traumatic in economic terms.

k

Tora Bora · 09-09-2010 09:04AM

You are looking at something like this I guess.

Family_evicted_by_their_landlord_during_the_Irish_potato_famine.JPG

MrDarcy · 09-09-2010 09:28AM

https://www.youtube.com/watch?v=iHsx1cvACkY

SkepticOne · 09-09-2010 09:31AM

kevteljeur wrote: »

I believe, following recent events, that the ECB (and effectively the German and French governments) will step in, and the IMF wouldn't, because we're in the Euro zone. The difference in reality wouldn't be great, other than that they would have much more specific ideas about how the Irish economy should be structured to achieve the stability to repay debt.

As other people have mentioned here before, and I also believe that would be the case, you would see large changes in the tax structures, and in the pay of the civil service. They would be recommendations, but the sort of recommendations that the Irish government wouldn't really have any say in. So although I'm no expert, for most people here it would be pretty traumatic in economic terms.

What we're looking at is a shrinkage of both the public and private sectors and, paradoxically, a reduced ability to service debt.

SkepticOne · 09-09-2010 09:34AM

Unrealistic. The captain goes down with the ship in that film.

MrDarcy wrote: »

https://www.youtube.com/watch?v=iHsx1cvACkY

MrDarcy · 09-09-2010 10:03AM

What I find utterly amazing right now is how the government of the country are spinning like giant spiders... "It's just some ebbs and flows, hold the line, stop complaining, get with our script, our plan is working, we've just turned the corner, going forward, stop being negative", and so on and so forth...

Our REFUSAL to accept these instructions, and this is what they are at this stage, instructions, and our REFUSAL to accept any of this medicine in our name while not at the same time protesting against any of it yet, and I think that is going to change between now and Christmas, is the biggest example of democratic action that I've ever seen in this country.

There is a silent refusal going on here, it isn't backed up by civil unrest or violence as you would see in Greece, but there is a protest going on, people are refusing to spend money, they are refusing to run with this in an almost, "spend to rule" kind of a way.

My analysis of all of this is that Cowen is the problem, he cannot lead, he tries to dictate and people are not having a f*cking bar of it, at least nobody that I'm talking to is having a verse of it, so until we have a credible leader who people respect and will get behind and start working and spending again, then further we will fall....

Here's an example of the psychological consequences of Cowen's lack of leadership... This week I was talking to a lad I know who is on the dole, his attitude is that he should remain on the dole because if he were to work, he would just be taxed and his tax would be used to bail out banks.

This "f*ck you Cowen", mindset is now embedded all around the country, there is a serious moral hazard in place here, in all seriousness, why would people take on another person's debt???

It is for this reason and several other's that the Anglo black hole must be sorted out, it is pitching people against the state, it is giving people a reason to use their position of unemployment to be a protest against the current government.

Tora Bora · 09-09-2010 10:10AM

MrDarcy wrote: »

What I find utterly amazing right now is how the government of the country are spinning like giant spiders... "It's just some ebbs and flows, hold the line, stop complaining, get with our script, our plan is working, we've just turned the corner, going forward, stop being negative", and so on and so forth...

Our REFUSAL to accept these instructions, and this is what they are at this stage, instructions, and our REFUSAL to accept any of this medicine in our name while not at the same time protesting against any of it yet, and I think that is going to change between now and Christmas, is the biggest example of democratic action that I've ever seen in this country.

There is a silent refusal going on here, it isn't backed up by civil unrest or violence as you would see in Greece, but there is a protest going on, people are refusing to spend money, they are refusing to run with this in an almost, "spend to rule" kind of a way.

My analysis of all of this is that Cowen is the problem, he cannot lead, he tries to dictate and people are not having a f*cking bar of it, at least nobody that I'm talking to is having a verse of it, so until we have a credible leader who people respect and will get behind and start working and spending again, then further we will fall....

Here's an example of the psychological consequences of Cowen's lack of leadership... This week I was talking to a lad I know who is on the dole, his attitude is that he should remain on the dole because if he were to work, he would just be taxed and his tax would be used to bail out banks.

This "f*ck you Cowen", mindset is now embedded all around the country, there is a serious moral hazard in place here, in all seriousness, why would people take on another person's debt???

It is for this reason and several other's that the Anglo black hole must be sorted out, it is pitching people against the state, it is giving people a reason to use their position of unemployment to be a protest against the current government.

Look, just because you cannot see him, dosen't mean he is not leading the band, now does it:rolleyes: http://www.youtube.com/watch?v=6ZAZ8lFwbUU

MrDarcy · 09-09-2010 10:19AM

Tora Bora wrote: »

Look, just because you cannot see him, dosen't mean he is not leading the band, now does it:rolleyes: http://www.youtube.com/watch?v=6ZAZ8lFwbUU

I've nothing personal against the man but nothing p*sses me off more than people who put themselves up for leadership positions when they know nothing about leadership or management.

Management is about the delivery of results, not excuses or soundbytes, the brief here is actually very simple, lead the country back to employment, I can't remember one single occasion when I heard Cowen and his government telling us of their plan for a return to employment and if there is such a plan, well I'm not at all sure where I might fit into it.

Fail to prepare, prepare to fail, now where did we hear that before???

ei.sdraob · 09-09-2010 10:54AM

and here is a study of our rate of "sinkage"

We need to cut costs and increase productivity to pay the mounting debt. It is disconcerting that Ireland dropped from being the 22nd most competitive economy in 2009 to the 29th in 2010, according to the World Economic Forum.

People pay attention to the overall indicator and rank, but the subindicators tell the real story. There are no surprises, really, but it is a sobering read.

Here are some the negative trends:

*Public trust of politicians: 37 to 65

– higher numbers are worse, as countries are ranked from 1 to 139

*Wastefulness of government spending: 45 to 93

*Burden of government regulation: 61 to 87

*Efficiency of legal framework: 22 to 27

*Government deficit: 55 to 130

*Savings rate: 75 to 119

*Government debt: 51 to 112

*Intensity of local competition: 39 to 51

*Time required to start a business: 24 to 45

*Brain drain: 10 to 19

*Financing through local equity market: 51 to 105

*Ease of access to loans: 19 to 117

*Soundness of banks: 9 to 139 (bottom of the pile)

*Regulation of security exchanges: 16 to 90

*Capacity for innovation: 26 to 31

*Government procurement of advanced tech: 43 to 75

There are positive trends too:

*Quality of infrastructure (6 indices, all up)

*Inflation: 48 to 3

*Interest rate: 63 to 11 (I guess the data are older than a few weeks)

*Pay and productivity: 76 to 56

Ireland is still the best place in the world if you worry about malaria. The judiciary is still strong. And foreign investors are still treated well.

http://www.irisheconomy.ie/index.php/2010/09/09/what-a-difference-a-year-makes/

Tora Bora · 09-09-2010 11:08AM

http://www.ft.com/cms/s/0/b11d2732-b915-11df-99be-00144feabdc0.html?ftcamp=Late_cta1a/NL/CESeptember2010/Cluster_2_europe/0/

Do not fall for talk of European solvency

By Wolfgang Münchau
Published: September 5 2010 19:10 | Last updated: September 5 2010 19:10

While the Europeans are celebrating the end of the financial crisis, something strange is happening in the bond markets. The gap in the yields – the spread – between the 10-year bonds of peripheral eurozone countries and Germany has been growing at an alarming rate. It is now close to the level that prevailed in the days before the European Union decided to set up its bail-out fund in May.
Last Friday, the spreads were 3.4 per cent for Ireland, 9.4 per cent for Greece, 3.4 per cent for Portugal, and 1.7 per cent for Spain. The yield on 10-year German bonds is currently ridiculously low, about 2.3 per cent. The financial markets somehow regard Germany as a paragon of virtue, stability and sound financial management, and are happy to demand virtually no return on 10-year investments. If the bond markets were ever returned to normal, and if the spreads were to persist, peripheral Europe would find itself subject to an intolerable market interest rate burden.

This observation gives rise to the immediate question of whether some countries would be able to remain solvent under such a scenario. Solvency is defined as the ability to finance debt in a sustainable way, and is affected both by the amount of debt, and future income through which the debt is repaid.
Spain is probably fine for the time being. Portugal’s combined private and public sector debt adds to well over 200 per cent of gross domestic product. In Ireland, the main problem is the banking sector. The economists Peter Boone and Simon Johnson have done some of the maths and found that the total amount of debt likely to end up with the Irish government amounts to about one-third of GDP. They concluded that with 10-year market rates at current levels – close to 6 per cent – Ireland is effectively insolvent. To correct this Ireland would need to generate spectacular rates of future growth. But do we really believe that the Celtic Tiger trick can be replicated? Was the presence of a global financial bubble not inherent in that model?

danbohan · 09-09-2010 02:32PM

ei.sdraob wrote: »

Yes sucks to be us

I think what really pisses a lot of people off is that we've two years into this crisis and things are looking worse while other countries have some glimmers of hope, every option that the FF/Greens government took was the worst possible choice

very true , looking at the alternative bunch of genuises at their ''think in'' in waterford yesterday does not reassure me much either !!!

The Valley · 09-09-2010 02:48PM

McWilliams has been spouting on about devaluation this long time.

Should we consider this now?

If we did this what would happen?

dan_d · 09-09-2010 02:49PM

MrDarcy wrote: »

I've nothing personal against the man but nothing p*sses me off more than people who put themselves up for leadership positions when they know nothing about leadership or management.

Why are you only referring to Brian Cowen?
Have you not noticed that there's an epidemic of that in Leinster House, and in Irish policitical circles in general?

Vanhalla · 09-09-2010 05:43PM

Are we going to get to the stage where we go to the ATM and cant take out any money is what i want to know?
am moving my savings to rabo. **** this country

R P McMurphy · 09-09-2010 05:51PM

If we are to be rescued by the ECB, you can see that the corporate tax rate will probably be up for grabs. This process already started today.

RichardAnd · 09-09-2010 06:52PM

R P McMurphy wrote: »

If we are to be rescued by the ECB, you can see that the corporate tax rate will probably be up for grabs. This process already started today.

And once that goes up, our MNCs will be gone faster faster than you can say Microsoft. That is, unless our "highly skilled workforce" can convince them to remain

.

lmimmfn · 10-09-2010 01:56AM

kevteljeur wrote: »

I believe, following recent events, that the ECB (and effectively the German and French governments) will step in, and the IMF wouldn't, because we're in the Euro zone. The difference in reality wouldn't be great, other than that they would have much more specific ideas about how the Irish economy should be structured to achieve the stability to repay debt.

As other people have mentioned here before, and I also believe that would be the case, you would see large changes in the tax structures, and in the pay of the civil service. They would be recommendations, but the sort of recommendations that the Irish government wouldn't really have any say in. So although I'm no expert, for most people here it would be pretty traumatic in economic terms.

k

well i think its about time the ECB actually copped on to what the Euro stands for and stopped deciding it stands for the german economy and interest rates should be increased or decreased due to the inflation rate of the German economy and actually start policing its states in the euro and harmonizing the damn economies.

While most of this is our own fault, i cant seriously understand how the ECB would let such things happen when at the end of the day( for them ) its the currency thats being seriously affected.

WalterMitty · 10-09-2010 02:06AM

How long do Irish public sector think Wolfgang, Jean and Co will allow them to remain amongst best paid in EU while ECB(Germany and France) are keeping us on life support?

State Bankrupcy / State Default / Insolvent

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