Whats going to happen when ireland defaults

ilovesleep · 26-12-2010 01:18PM #1

From what I have read I really dont see this IMF/EU bailout loan helping Ireland. Nobody knows just how big the banking dept is with them not even taking mortgage defaults into consideration. It looks as if with each passing day we are going to be lumped with this imf/eu loan for good. We're just throwing money away into failing banks.

I want to know whats going to happen when Ireland defaults.

Are we going to be completely on our own to run the country having exhausted all the money loaned to us and leaving the countries that has given us a loan as part of this bailout package up in a heap.

melekalikimaka · 26-12-2010 01:21PM

i will eat my hat if we default

its not going to happen at this point. too many people have too much invested at this point

MrMatisse · 26-12-2010 01:23PM

Id go and get some ketchup for that hat.....

melekalikimaka · 26-12-2010 01:36PM

MrMatisse wrote: »

Id go and get some ketchup for that hat.....

what makes people think that we are going to default?

blinding · 26-12-2010 01:41PM

To correctly justify the default we are going to have to bring the Fraudsters that brought us to this situation to justice.

Hopefully this will not be have to be done with the gun but it may have to come to that.

JENNYWREN19 · 26-12-2010 01:46PM

ilovesleep wrote: »

From what I have read I really dont see this IMF/EU bailout loan helping Ireland. Nobody knows just how big the banking dept is with them not even taking mortgage defaults into consideration. It looks as if with each passing day we are going to be lumped with this imf/eu loan for good. We're just throwing money away into failing banks.

I want to know whats going to happen when Ireland defaults.

Are we going to be completely on our own to run the country having exhausted all the money loaned to us and leaving the countries that has given us a loan as part of this bailout package up in a heap.

we'll be repossessed

ei.sdraob · 26-12-2010 02:13PM

melekalikimaka wrote: »

what makes people think that we are going to default?

Mountains of debt at every level: personal, company and state

and being in a currency union with low target inflation

since inflation is ruled out that only leaves default of one form or the other on some or all of the debt, there is no other way out of this situation

johnnyskeleton · 26-12-2010 02:41PM

melekalikimaka wrote: »

what makes people think that we are going to default?

The EU are advising (nay insisting) on us at least partially defaulting on Anglo's debts. As Anglo is now nationalised, that is an act of soverign default:

http://www.bloomberg.com/news/2010-12-21/allied-irish-anglo-irish-secure-european-union-approval-for-state-support.html

dissed doc · 26-12-2010 03:12PM

melekalikimaka wrote: »

i will eat my hat if we default

its not going to happen at this point. too many people have too much invested at this point

LOL!

We have already defaulted. We have already passed the point with which the country can pay it's debts. We are borrowing from the ECB - EuroArea lender of last resort.

previous user · 26-12-2010 03:17PM

I just hope it does not have the indirect effect of ending the euro and devaluing everybodies savings.

melekalikimaka · 26-12-2010 03:19PM

dissed doc wrote: »

LOL!

We have already defaulted. We have already passed the point with which the country can pay it's debts. We are borrowing from the ECB - EuroArea lender of last resort.

we have not defaulted, our loan interest would be markably higher if we had

Anonymous1987 · 26-12-2010 03:31PM

johnnyskeleton wrote: »

The EU are advising (nay insisting) on us at least partially defaulting on Anglo's debts. As Anglo is now nationalised, that is an act of soverign default:

http://www.bloomberg.com/news/2010-12-21/allied-irish-anglo-irish-secure-european-union-approval-for-state-support.html

Restructuring of the banks junior debt does not mean government default.

The government is a shareholder of Anglo and AIB but note that the government and the banks are separate entities legally and as a shareholder the greatest lost the government can make is on the investments it made to recapitalise the banks. The bank restructuring is a default for the banks not the government. Shareholders can only lose their investments.

Unfortunately the government has also guaranteed senior bondholders as well as deposits up to €100,000 so if the banks cannot meet either of these the government must cover the loss to the depositors and senior bondholders. This would put pressure on the government to meet its own obligations. Its important to note junior bondholders are not included in the government guarantee so a bank default on junior bondholders does not impact on the government.

Anonymous1987 · 26-12-2010 03:50PM

ilovesleep wrote: »

I want to know whats going to happen when Ireland defaults.

Its not like a default is a cure, it would involve renegotiating our debt with our creditors through the IMF and reaching an agreement on what we can afford to repay.

The consequences would be that the markets would think twice before lending to us, charging a higher interest rate on future borrowing. Worst case scenario; no-one will lend to us. Of course it is very difficult to say exactly how the markets would react.

Thankfully we haven't reached the point where our debt is unsustainable yet only because of the IMF/EU bailout although the bank guarantee increases our risk substantially.

Anonymous1987 · 26-12-2010 04:07PM

melekalikimaka wrote: »

i will eat my hat if we default

its not going to happen at this point. too many people have too much invested at this point

If we cannot pay our debts then it doesn't matter who or how much is invested, the initial contract can not been honoured.

melekalikimaka · 26-12-2010 04:08PM

Anonymous1987 wrote: »

If we cannot pay our debts then it doesn't matter who or how much is invested, the initial contract can not been honoured.

we will end up getting more pumped in i think... but tbh i think theres enough leftover as there is with the bailout as it stands to cover some extra unseen debt

Anonymous1987 · 26-12-2010 04:16PM

melekalikimaka wrote: »

we will end up getting more pumped in i think... but tbh i think theres enough leftover as there is with the bailout as it stands to cover some extra unseen debt

True, the bailout does have a substantial contingency fund set aside for the banks, it really depends on how the economy performs and the ability of people and business to meet repayments of loans. There is also the issue of short term liquidity to banks with the Irish banks being heavily dependent on the ECB, the markets are still not lending to the banks for liquidity.

johnnyskeleton · 26-12-2010 05:00PM

Anonymous1987 wrote: »

Restructuring of the banks junior debt does not mean government default.

The government is a shareholder of Anglo and AIB but note that the government and the banks are separate entities legally and as a shareholder the greatest lost the government can make is on the investments it made to recapitalise the banks. The bank restructuring is a default for the banks not the government. Shareholders can only lose their investments.

Unfortunately the government has also guaranteed senior bondholders as well as deposits up to €100,000 so if the banks cannot meet either of these the government must cover the loss to the depositors and senior bondholders. This would put pressure on the government to meet its own obligations. Its important to note junior bondholders are not included in the government guarantee so a bank default on junior bondholders does not impact on the government.

I don't think such a technical distinction is anything other than a way to call it something other than what it is.

Anglo has been nationalised. It is a separate company, but so are semi state companies. I mean, we could make everything into a private company - tax collecting, social welfare, NAMA, NPRF, the gardai etc. Then, if we default on any or all of these companies we can simply say "whoops, private company, sorry about that lenders, but our soverign credit rating should be kept intact". I think you should give the markets some credit - a limited company in public ownership is a state body in all but name.

If Anglo defaults on its bondholders, it is not in substance any different to if the social welfare fund defaults on paying recipients.

blinding · 26-12-2010 06:10PM

Eventually the "penny" will drop with the Irish people that they have been defrauded (at present a slow realization)

That many people do not end up owing so much money without Fraud on a grand scale being commited.

The people will not pay for this fraud.

melekalikimaka · 26-12-2010 06:35PM

blinding wrote: »

The people will not pay for this fraud.

its no longer the problem of individuals, its national problem

sollar · 26-12-2010 06:38PM

Is it worse to pay a higher interest rate on future borrowings or to pay back fifty to a hundred odd billion of debts built up by reckless private bankers.

We should default on as much as we can and then concentrate on balancing budgets in the future so our borrowings can be lower.

The markets are not exactly impressed with our prospects by carrying all that debt anyway.

blinding · 26-12-2010 06:47PM

melekalikimaka wrote: »

its no longer the problem of individuals, its national problem

The Irish people have been defrauded by politicians and bankers.

If somebody defrauded your local post office/credit union and then went down the bookies and blew the lot would you go down the bookies and settle their account. If you would then you must have "mug" on your forehead !

We were continuously lied to. We are under no moral or in my view legal obligation to honour "deals" made by fraudsters.

later12 · 26-12-2010 06:58PM

We will not default exactly.

We will most likely restructure our debts through progressive write downs on piggy back (banking) debentures from 2013 onwards, once European lending institutions have a chance to build up capital cushions and offload Irish debts to the global market thereby minimising their exposures.

We will probably voluntarily leave the Euro, as things appear in 2010, by that time.

ilovesleep · 26-12-2010 07:15PM

blinding wrote: »

The Irish people have been defrauded by politicians and bankers.

If somebody defrauded your local post office/credit union and then went down the bookies and blew the lot would you go down the bookies and settle their account. If you would then you must have "mug" on your forehead !

We were continuously lied to. We are under no moral or in my view legal obligation to honour "deals" made by fraudsters.

exactly! our government has to get the best deal possible and do the right thing - whatever the hell that is right now - or we will probably be like russia in time. Its very hard to get russians to work. I could see a lot of irish picking a house, moving in, becoming squatters, stealing hens and living happily ever after on eggs and beer.

Anonymous1987 · 26-12-2010 07:18PM

johnnyskeleton wrote: »

I don't think such a technical distinction is anything other than a way to call it something other than what it is.

Anglo has been nationalised. It is a separate company, but so are semi state companies. I mean, we could make everything into a private company - tax collecting, social welfare, NAMA, NPRF, the gardai etc. Then, if we default on any or all of these companies we can simply say "whoops, private company, sorry about that lenders, but our soverign credit rating should be kept intact". I think you should give the markets some credit - a limited company in public ownership is a state body in all but name.

If Anglo defaults on its bondholders, it is not in substance any different to if the social welfare fund defaults on paying recipients.

Explain to me how the government as a shareholder is any different from an individual as a shareholder, the government has an obligation to meet social welfare payments because it has a legal obligation to do so.

A limited liability company is a specific legal structure which by definition limits the liability of the shareholder. In the case of Anglo the government has limited liability for the junior bondholders. The senior bondholders on the other hand are covered by the government guarantee and hence the government is obliged to cover the losses of the senior bondholders.

The legal structure of firms cannot be dismissed as technicalities, they define who faces the losses in the event of a failure to pay.

blinding · 26-12-2010 07:21PM

ilovesleep wrote: »

exactly! our government has to get the best deal possible and do the right thing - whatever the hell that is right now - or we will probably be like russia in time. Its very hard to get russians to work. I could see a lot of irish picking a house, moving in, becoming squatters, stealing hens and living happily ever after on eggs and beer.

The present goverment have no moral authority to make "a deal"

They must step down and engage legal representatives to defend themselves against the Fraud charges that will surely be brought against them.

later12 · 26-12-2010 07:23PM

blinding wrote: »

They must step down and engage legal representatives to defend themselves against the Fraud charges that will surely be brought against them.

They are guilty of severe mismanagement and negligence, but fraud? How do you make that one out?

blinding · 26-12-2010 07:29PM

later10 wrote: »

They are guilty of severe mismanagement and negligence, but fraud? How do you make that one out?

They knowingly underplayed the debts of the banks. They sold this pig in a poke to the Irish people. The pig was dead and but a skeleton of a pig.

They knowingly mislead the Irish people to the debts of the banks. They commited fraud and should be brought to justice for their mis-selling.

later12 · 26-12-2010 07:33PM

blinding wrote: »

They knowingly underplayed the debts of the banks. They sold this pig in a poke to the Irish people. The pig was dead and but a skeleton of a pig.

Well that would seem to go against every other understanding of the situation that I have ever come across. It seems widely accepted that it was the banking industry which misrepresented their liabilities, but you are saying it was the Government? Hmmm.

I think people are very angry, justifiably so, but lets at least be reasonable in our criticisms. Exaggerating Government culpability and talk of an active fraud actually only serves to bring the justified criticism into disrepute and portrays the critics as being irrational.

Anonymous1987 · 26-12-2010 07:47PM

Just a note on the banks auditors. The New York Attorney General is taking Lehman Brothers auditors Ernst and Young to court for giving the bank a clean bill of health before its collapse. Ernst and Young were also the auditors of Anglo Irish. I think the Irish Attorney General should take similar proceedings against E&Y.

ilovesleep · 26-12-2010 07:52PM

later10 wrote: »

Well that would seem to go against every other understanding of the situation that I have ever come across. It seems widely accepted that it was the banking industry which misrepresented their liabilities, but you are saying it was the Government? Hmmm.

the banking guarantee should have been annulled but our government is still continueing with that

Anonymous1987 · 26-12-2010 08:15PM

ilovesleep wrote: »

the banking guarantee should have been annulled but our government is still continueing with that

Note that the bank guarantee consists of two guarantees.

Firstly there is the guarantee on deposits in banks. Guaranteed deposits consist of money held in savings and current accounts up to the value of €100,000. Note that this includes everyone who has an account with a domestic Irish bank.

The second guarantee is a guarantee to cover the senior bondholders in the event they face losses. You have to consider whether the banks can survive without guaranteeing senior bondholders when they are already struggling to obtain funding at present.

If the banks fail then and we still have deposits guaranteed then the government faces enormous debts to cover the deposits.

If we remove the deposit guarantee then the banks will inevitably face a bank run as depositors grow nervous and shift their money to banks located in Ireland but guaranteed by another country. In this case those depositors who cannot get their money in time will lose.

Its also important to note that a collapse of domestic Irish banks will result in a hole in the financial system whereby lending will fall dramatically. This would have dramatic negative consequences for firms and individuals operating in Ireland and the economy in general.

Whats going to happen when ireland defaults

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