Bailout megathread.

NewHillel wrote: »

Please Olli, just a small little loan to tide us over ...

a genuine lol from me! Brilliant.

caseyann wrote: »

Sorry i misread in haste.:o thanks for the clear up,i felt ill when i saw that expected Ireland to be cut up in chunks and sold off
Whats your estimate around?

The only figure doing the rounds is €80 billion. That's just a rumour though, and I haven't heard any basis for the choice of 80, although I can probably make one up.

Let's see. If we assume, say, that the government's figure of €15 billion in cuts by year 4 was accepted as credible - the figure, not the plan - by the EU, I wouldn't imagine they'd see the need for us to borrow more than that involves, assuming we completely failed to make any cuts. That would be €6bn x 4, €3bn x 3, €3bn x 2 and €3bn x 1, which is €42bn. If we assume a bank exposure of €40bn on top, we get a figure of €82bn, which we can round down to make the figure more memorable.

Or I can just take the government deficit of c.€20bn a year and multiply by four for a four year plan.

Or we can just re-use the Greek figure - oh, good, that was €80bn.

So €80bn is a figure that comes popping out of various almost completely meaningless bits of arithmetic. But why assume we'd be making no cuts? Why assume we'd need, or the EU offer, complete coverage when all that's supposed to be happening is that we're being bought time to get our house in order?

So, no, I really don't have an estimate, because a really credible reason why we need a bailout hasn't actually been put forward - the popular belief that we need one seems to be based on the belief that we need one. I would assume, instead, that any bailout would be based on looking at the maturity of Irish debt, and the capacity of the state to service that debt on maturity.

Governments roll their debts over - they borrow to pay the loans that have come due. With the bond markets at their current levels, we basically can't afford to do that, assuming we need to - so let's look at the state's outstanding bonds, and when they fall due.

From that we can see that the next bond issue falling due is November next year, for €4.4bn. The next one after that is March 2012, for €5.5bn, then April 2013 for €6bn, and a big one, January 2014 for €11.9bn.

In the meantime, the government is spending more than it takes in, so the question is basically whether, when those debts fall due, we can either pay them directly, or can borrow to pay them. If we can't pay them, then we're defaulting - that makes it look like the next actual window for a default, and therefore the need of a bailout, would be towards the end of next year. However, the government could decide, looking at the books right now, that we're just not going to be able to make that payment as well as continue meeting the various costs of the state, and reckon that the markets won't have calmed down by then sufficiently for us to borrow either. In that case they could go for a rescue package now, as they also might if they reckon that the state-guaranteed banks will continue being unable to tap the markets and that ECB-provided liquidity will dry up as well.

Any realistic estimate of a bailout would seem to me to have to factor all these things in - but given the total amount of outstanding state bonds is currently €90bn, and that under normal market conditions we'd expect to be able to service that debt, €80bn seems far too high a figure.

cordially,
Scofflaw

jank wrote: »

Ah come on Scofflaw, most analysts agree that that 750 billion figure is just that a figure put out there to clam the markets. GIVING 750 billion or even a fraction of that to a country is another matter entirely hence the Merkel comments last week and the EU comments today.

Sure - you can say 'commitment' instead, but it is the figure that the member states (and others) have agreed to. I'm sure they don't expect it all to be used, or even an appreciable fraction of it, but I can't really see a rationale for us needing an appreciable fraction of it anyway.

jank wrote: »

The question is someone has to pay for this debt.
The banks couldnt pay it so we are....now we cant pay it so big brother is coming in to bail us out ..but after all the "We cant burn the bond holders" talk the EU are saying well we will bail you out but the bond holders will have to pay some of the costs too...it appears now they are working out the small print of the deal. This will transpire in the next week. The drop today indicates that bond holders will not after all take a cut but it may mean harsher bailout terms from the EU since they are stumping up all the costs.

Merkel et al have been quite specific about the fact that the "haircut" stuff applies only to post-2013 arrangements, and not to the current bonds.

jank wrote: »

Anyway at the end of the day we lose.
Thanks FF and the Greens!:mad::(

We hardly fell unexpectedly into a hole in 2007 after the election - Fianna Fáil and the PDs spent the previous decade digging it, with the enthusiastic encouragement of the electorate.

cordially,
Scofflaw

Why has the Dept of Finance denied this story??

Who would you believe, Reuters - a respectable news agency, or this government?

At the very least Cowen has shown himself to be deceitful and only interested in remaining in power. Him and his government has lost all credibility. Because of that I am deeply skeptical of anything they say