Default is inevitable. Discuss.

Permabear · 24-02-2011 03:36PM

This post has been deleted.

goz83 · 24-02-2011 03:44PM

danbohan wrote: »

People have problems with being sold mortgages by lying two-faced bankers at huge profits, who knew what was coming and offered 110% mortgages

people have a problem accepting the reality , ie personal responsibility or in many cases lack of

When you consider that financial institutions (the ECB, ICB and the banks in general), as well as all the advice available to the first time buyer between 2004 and 2008, it would only be fair to say that getting a home for ones family was the responsible thing to do, before prices got so high, that nobody could afford to buy. It looked like society was going to become the poor renting homes from the rich if you didn't buy on time. That's the propaganda we were being fed. With 2 at the time, it would be fair to say I had a "responsibility" to put a roof over their heads. We didn't take out the 110% mortgage either, we took only what was needed to purchase the average 3-bed semi in Dublin. I actually bought the house from my dad and paid separately for the contents he was leaving behind. It's easy to call someone else irresponsible when you have your own unfounded opinions of of someone elses circumstances and reasons for buying an over priced house. I don't care that it cost €400k and would have no issue paying back a loan for the rest of my life it it had been sold honestly. Throw on top the insult that everyones wages are slashed to bits thanks to the banks and many others lost their jobs because of it. Maybe then you might see why I, and countless others are angry and suffering needlessly.

I wonder how happy you would be if for example you bought a nearly new car with only 15 thousand kilometres on the clock from your local dealer, paying 20k in cash and part exchange. Great bargain, because that particular type of car is selling at 30k everywhere else. Then the engine seizes after a week of light driving. It will cost 3k to replace. Then the mechanic you hire tells you that the car has been clocked and finds an old service sticker under the dash with 180 thousand kilometres on the sticker. Then you get a letter from the bank to say that 20k is owed on the car for finance, which is now your responsibility. You phone the dealer, but the sales rep no longer works there and the dealer claims no responsibility, and says that you were told everything at the point of sale and got a bargain. The car was clearly advertised as an ex-company car with outstanding finance. Would you be angry? Would you think perhaps you were lied to? Would you so quickly dismiss someone who was sold a loan 20 times bigger using similar unethical practices?

maninasia · 24-02-2011 04:33PM

It's a tough one, but nobody would have complained if the price went up. At least I never heard any house owner complaining 'oh my house is worth 50, 000 euro more than last year...I feel sorry for the guy I'm going to sell it on to', just telling how much imaginary money they had made that year and the last. Prices go up and prices go down, it's a basic fact. That they went down so quickly and things change quickly, well things changed quickly before that and they went up so quickly too.

PeterIanStaker · 24-02-2011 05:27PM

Permabear wrote: »

This post had been deleted.

Which is exactly what will happen at the next GE.

ei.sdraob · 24-02-2011 06:34PM

SkepticOne wrote: »

then what are the chances of default?

still 50% chance of default in next few years

glass half empty or half full

danbohan · 24-02-2011 06:49PM

goz83 wrote: »

When you consider that financial institutions (the ECB, ICB and the banks in general), as well as all the advice available to the first time buyer between 2004 and 2008, it would only be fair to say that getting a home for ones family was the responsible thing to do, before prices got so high, that nobody could afford to buy. It looked like society was going to become the poor renting homes from the rich if you didn't buy on time. That's the propaganda we were being fed. With 2 at the time, it would be fair to say I had a "responsibility" to put a roof over their heads. We didn't take out the 110% mortgage either, we took only what was needed to purchase the average 3-bed semi in Dublin. I actually bought the house from my dad and paid separately for the contents he was leaving behind. It's easy to call someone else irresponsible when you have your own unfounded opinions of of someone elses circumstances and reasons for buying an over priced house. I don't care that it cost €400k and would have no issue paying back a loan for the rest of my life it it had been sold honestly. Throw on top the insult that everyones wages are slashed to bits thanks to the banks and many others lost their jobs because of it. Maybe then you might see why I, and countless others are angry and suffering needlessly.

I wonder how happy you would be if for example you bought a nearly new car with only 15 thousand kilometres on the clock from your local dealer, paying 20k in cash and part exchange. Great bargain, because that particular type of car is selling at 30k everywhere else. Then the engine seizes after a week of light driving. It will cost 3k to replace. Then the mechanic you hire tells you that the car has been clocked and finds an old service sticker under the dash with 180 thousand kilometres on the sticker. Then you get a letter from the bank to say that 20k is owed on the car for finance, which is now your responsibility. You phone the dealer, but the sales rep no longer works there and the dealer claims no responsibility, and says that you were told everything at the point of sale and got a bargain. The car was clearly advertised as an ex-company car with outstanding finance. Would you be angry? Would you think perhaps you were lied to? Would you so quickly dismiss someone who was sold a loan 20 times bigger using similar unethical practices?

you can blame all and sundry , but the reality is you choose to buy , you paid the going price at the time and you were happy to do so , if the house was worth 800k now would you be blaming the bank for "tricking you"

sold honestly , thats just claptrap . in every country their is or has been property booms and crashes and anybody buying property in 2002-2008 that did not realise that were blind or burying their head in the sand

RichardAnd · 24-02-2011 09:36PM

PeterIanStaker wrote: »

Which is exactly what will happen at the next GE.

Agreed. FG will get in this time around but after 3-5 years of trying to get this country to a state of normality, Joe Public will be riving to see spend thrift FF back into power. After that, the whole cycle kicks off again

Sand · 24-02-2011 09:41PM

@Scofflaw

And there's the rub - if default is not "inevitable" because we cannot pay, then default is clearly voluntary because we will not pay. And at this stage, when we've barely even tried to implement the programme, a claim that we cannot pay is hardly credible.

How much of the "oh god we can't pay this!" is just shock?

cordially,
Scofflaw

Well, the cant pay/wont pay argument can be confused - but it can also reflect political realities, which cant be ignored either. Default is always voluntary. We could always close down schools, end health care, ration food, send the army in to loot wealth from homes and factories so unless we had exhausted all efforts to find any fraction of wealth left on the island then a default would be a case of "wont pay", not "cant pay". The rest of the EU quite easily *could* pay for the Irish banking losses by recapitalising their own banks, but they *wont* pay until we give them reason to. Thats a political reality too that we cant ignore.

The problem that makes default inevitable is that the government has guaranteed both the entire banking system and has a fiscal crisis to handle plus a massive property investment fund in the shape of NAMA. Theres a whole host of contradictory objectives across all these areas:

- The guaranteed banks need to return profitability so they can trade their way out of trouble, they must increase variable mortgage rates.

- The government must cut spending, they must cut public sector wages and/or employment

Both in their own right make perfect sense - taken together,the end result is public sector mortgage holders being sacked or taking wage cuts whilst their mortgages are going up and up and up. In the end they default, and the banks must write down the loss, hitting their balance sheet and putting the loss back on the taxpayer. And given Irelands bankruptcy laws, any economic potential of that worker is written off for the next ten years, if they stay in the country at all. The same is true of NAMA's attempts to prevent commercial property being sold at market prices, and thus limiting the potential for economic activity or recovery - "Zombie Hotels" for example are strangling actually viable businesses and employers, at taxpayers expense.

Irish taxpayers cant cover *everyones* losses, and given the way the government has rushed about recklessly guaranteeing everyone default on at least one of those guarantees is inevitable, even if the fiscal situation is brought under control. And thats a mighty big if: spending has increased every year since 2007 despite several "austerity" budget, growth projections being cut and interest rates increasing.

We arent Greece, this isnt a liquidity crisis and this isnt a fiscal crisis - its a solvency crisis and a banking crisis at its core, and Ireland stupidly tied the anchor of the banks around itself before it went swimming in rough seas. Ireland could balance its budget in 2016 and *still* be forced to default. NAMA has already taken an 8-10% writedown of their portfolio in 2010, and Irish (taxapayer's) banks mortgage books are looking uglier and uglier as more and more mortgages go into arrears by at least 90 days, or are defaulted on altogether. And we havent even seen the ECB raise rates yet to try combat inflationary threats which will accompany a wider economic recovery in the EU.

I know people think it impossible that Irish people would default on a mortgage, but you cant beat gravity - cut wages, reduced jobs, higher and higher interest payments...the fantasy of Irish people never defaulting on a mortgage will eventually give way to the reality. I think a lot of moral horror around default (John McHale noted it would be immoral not to repay the debt, and I think the cant pay/wont pay betrays a similar line of thought in that it is based on the view that debt can always be repaid if necessary sacrifices are made, and thus it would be selfish not to repay it at any cost, another line of thought is worry over what foreigners/neighbours would think about us) is based on the traditional Irish view of debts and bankrupts.

We are going to have to default (people can call it what they like - we'll not be paying people what we agreed on the schedule we agreed, if at all) and we arent powerless in the negotiations (and whatever form the default takes it would be better if it was negotiated) if we dont crawl into the negotiating room, bowing and scraping. The logic was laid out very clearly in a piece by Anatole Kaletsky:

This month, the European Central Bank produced such an analysis.. Its main conclusion, presented in a lecture at the London Business School by Lorenzo Bini Smaghi, an ECB executive director, was predictable enough. For every European country, the costs of defaulting — what Mr Bini Smaghi called “Plan B” — would far exceed the costs of imposing severe budgetary cutbacks and faithfully servicing all debts (Plan A)....

....All these arguments make eminent sense, but raise a crucial question that the ECB, for obvious reasons, prefers not to answer. If debtor countries such as Ireland start to view the choice between default under plan B and belt-tightening under plan A as a strictly financial calculation, won’t creditor countries such as Germany carry out a similar analysis? Indeed, won’t the EU as whole work out the costs and benefits of allowing one member to default?

Applying cost-benefit logic at the pan-European level, it becomes clear that the cost for the EU as a whole of subsidising, or bribing, a small country such as Ireland to stick to Plan A, will always be much smaller than the cost of letting it default and disrupt the entire eurozone. The potential defaulter’s calculation becomes even more favourable if, as in Ireland, most of the national debt takes the form of bank guarantees that benefit bondholders in Germany, Britain and France....

....Ireland should realise that, when the chips are down, the EU as a whole and Germany in particular will agree to relieve its entire debt burden, which is small in relation to the EU and German economies, if the only alternative is a sovereign default that would trigger a pan-European crisis and a possible break-up of the euro. Ireland can therefore drive a hard bargain with Germany and Europe.

Now that doesnt mean we can walk in and dictate terms to the Germans and tell them we want gold plated sports cars and swimming pools in every Irish back garden - if theyre aggravated, their "cant pay/ wont pay" thinking would swing very heavily into "wont pay", regardless of the maths. But it does mean that its to our advantage to be open about the unfeasibility of the current path. What we need for them is to take on the Irish banks/NAMA losses which we cant handle and leave the Irish taxpayer to deal with the fiscal crisis, which we can handle. There is a deal that can be worked out there - if we are willing to stand up for ourselves, and stop the very Irish embarrassment and shame with regards to being in trouble with debt.

Afterall, whats the alternative to default thats offered by supporters of the current strategy of hope and pray?

goz83 · 25-02-2011 03:19AM

danbohan wrote: »

you can blame all and sundry , but the reality is you choose to buy , you paid the going price at the time and you were happy to do so , if the house was worth 800k now would you be blaming the bank for "tricking you"

sold honestly , thats just claptrap . in every country their is or has been property booms and crashes and anybody buying property in 2002-2008 that did not realise that were blind or burying their head in the sand

At what point in my post did you find where I said I was "happy to buy". I believe I said I felt it was a responsibility I felt to put a roof over my families head. I wouldn't complain at all if the house doubled in value, but what difference does that make? It is a home to me, not just a house. This would simply be imaginary money and I may have already pointed out that if my home went up in value, then it is an almost certainty that everywhere else has gone up in value too. The difference I see with the house doubling in value, is that I would be able to sell it and pay the mortgage, which is crippling people in negative equity. Because of the equity issue, it is not really a possibility to sell and move on, or out. Do you suggest that people who needed homes between 2002-2008 should have sat and waited until prices went down? I think it's pretty arrogant to say that and is an insult to alot of people. You must be a Banker and if you're not, then replace "B" with "W" and that's what you are. The people in charge of the banks lied, that's been established. Should they get away with this? Sure why not, we live in Ireland....land of crooks in suits. Owe a few thousand, get screwed to the wall. Owe a few million, get a golden hand shake.

Scofflaw · 25-02-2011 03:35AM

Sand wrote:

Afterall, whats the alternative to default thats offered by supporters of the current strategy of hope and pray?

Urging the government to look for an EU-level solution while not pushing them to do anything stupid like unilaterally defaulting.

Those who want default are actually in the same position as those who don't when it comes to "hoping and praying" - just hoping and praying for something different.

cordially,
Scofflaw

SkepticOne · 25-02-2011 03:58AM

From the article quoted by Sand:

....All these arguments make eminent sense, but raise a crucial question that the ECB, for obvious reasons, prefers not to answer. If debtor countries such as Ireland start to view the choice between default under plan B and belt-tightening under plan A as a strictly financial calculation, won’t creditor countries such as Germany carry out a similar analysis? Indeed, won’t the EU as whole work out the costs and benefits of allowing one member to default?

This is one of the points I've been trying to make. Although defaulting is not something Ireland would necessarily want to do, it is also something that the EU as a whole really does not want to happen in any member country. Therefore it becomes a negotiating tool.

When you further factor in the likelihood of Ireland defaulting anyway at some stage, the argument is further strengthened. If you know you are going to default down the line, you gain nothing from putting it off. We don't have that much to lose really and this strengthens Ireland's hand.

When the next government goes to the EU to renegotiate the deal made by the tired outgoing one of the things it can bring to the table is the threat of early default.

What it should be looking for here for the EU to take over some of the banking debts which originate not with the Irish state but with private corporations that happen to operate within it.

SkepticOne · 25-02-2011 03:59AM

Scofflaw wrote: »

Urging the government to look for an EU-level solution while not pushing them to do anything stupid like unilaterally defaulting.

On what basis would these negotiations take place? What would we bring to the table?

Nothingbetter2d · 25-02-2011 04:20AM

personally i think we should have a referendum on the whole "should we default" issue

it wasn't fair for Fianna fail to sell out our future by guaranteeing the banks without first asking the people

The people didn't cause the problem. The bond holders & banks did.

maninasia · 25-02-2011 04:26AM

goz83 wrote: »

At what point in my post did you find where I said I was "happy to buy". I believe I said I felt it was a responsibility I felt to put a roof over my families head. I wouldn't complain at all if the house doubled in value, but what difference does that make? It is a home to me, not just a house. This would simply be imaginary money and I may have already pointed out that if my home went up in value, then it is an almost certainty that everywhere else has gone up in value too. The difference I see with the house doubling in value, is that I would be able to sell it and pay the mortgage, which is crippling people in negative equity. Because of the equity issue, it is not really a possibility to sell and move on, or out. Do you suggest that people who needed homes between 2002-2008 should have sat and waited until prices went down? I think it's pretty arrogant to say that and is an insult to alot of people. You must be a Banker and if you're not, then replace "B" with "W" and that's what you are. The people in charge of the banks lied, that's been established. Should they get away with this? Sure why not, we live in Ireland....land of crooks in suits. Owe a few thousand, get screwed to the wall. Owe a few million, get a golden hand shake.

Do you suggest that people who needed homes between 2002-2008 should have sat and waited until prices went down?

Well yes actually. I know that would have been difficult and going against peer pressure and spouse pressure but that's what was required. We've all got to try and use our critical faculties and think things through before signing up for for huge debts. Now I know Ireland has an island mentality and renting is not great but all the same..there was a choice there. You took the choice and were a bit unlucky on the outcome, it happens to us all. Many citizens had too much blind trust in the popular media, the government and what their friends/family were saying (all vested interests in one way or other, media-property supplements, government-stamp duty and property owners, friends/family-get in quick and don't go against the tide).
Property booms-busts happen all over the world all the time. The UK had a big one in the 1980s.

As for the other matter about bankers etc., I'm sure most of us agree. I for one am not against some type of write-down of some mortgages, but the problem we now face due to gross government ineptitude is that this will end up being more public debt that the public has to service!
The problem the government/FF has created is that they always put the hard decisions on the long finger, they have NEVER faced making a tough decision now for better times later (although I have to say large parts of society seem to agree with them). This is like cancer, it needs radical surgey to root it out, not 5% here, 10% there, postponing till 2 years later etc. It can't be fixed like that.

As for the point of negotiation, negotiation is an art and a science. When you negotiate you don't take anything off the table, although you don't stick it in people's faces either. No ruling this or that out at the start. Many in government (and I believe in Irish society again, because we are a consensus society at heart) have no skill in negotiation from long years of social partnership and bribe the masses rule. The negotiators job is to go in and get the best possible deal using any means neccessary, period.

Scofflaw · 25-02-2011 04:39AM

SkepticOne wrote: »

On what basis would these negotiations take place? What would we bring to the table?

The fact that we can't handle the necessary measures/debt without serious political unrest and/or general misery. That's basically all we have, and is exactly what we're saying when we threaten default as well, since that's why we'd be threatening default.

I'll say again in respect of default that the other European countries would still have a lot more to worry about by accepting an Irish bank default than by Ireland doing it unilaterally. An Irish sovereign default is obviously somewhat different.

cordially,
Scofflaw

SkepticOne · 25-02-2011 05:49AM

Scofflaw wrote: »

The fact that we can't handle the necessary measures/debt without serious political unrest and/or general misery. That's basically all we have, and is exactly what we're saying when we threaten default as well, since that's why we'd be threatening default.

Unfortunately, this does not make a huge amount of sense as a negotiating strategy.

Ireland: Give us a better deal on on the loan or else...
EU: Or else what?
Ireland: Or else we'll have general misery.
EU: So? How is that our problem?

I'll say again in respect of default that the other European countries would still have a lot more to worry about by accepting an Irish bank default than by Ireland doing it unilaterally. An Irish sovereign default is obviously somewhat different.

No, the thing that would be offered is prevention of an Irish sovereign default (which would hurt Ireland - and may happen anyway - but would hurt the EU more) in return for sharing in the cost of the Irish banks (which if they want to prevent banking failures they should be doing anyway).

So assisting with the banking problem in Ireland would be presented to them as the lesser of two evils from the EU point of view.

I think the hardest thing for certain people to get their heads around here is the idea of Ireland negotiating against the EU as this requires giving up cherished notions. It necessitates deciding which side you are on at least temporarily. You cannot in this situation be on both the EU's side and Ireland's side at the tame time even though, like me, you are pro-EU generally.

Duke Leonal Felmet · 25-02-2011 06:35AM

goz83 wrote: »

When you consider that financial institutions (the ECB, ICB and the banks in general), as well as all the advice available to the first time buyer between 2004 and 2008, it would only be fair to say that getting a home for ones family was the responsible thing to do, before prices got so high, that nobody could afford to buy. It looked like society was going to become the poor renting homes from the rich if you didn't buy on time. That's the propaganda we were being fed.

There were precedents of housing market collapses before 2008, take the UK in the late 80s, for example. Further to that, you had the likes of McWilliams shouting from the sidelines and even selling his house, in his case. Furthermore, a well known statistic is that most of Germany, Austria and Switzerland is comprised of renters. Just 22% of Swiss own a house, for example.

It isn't like this was hidden knowledge in 2005. Stop blaming everyone else.

kenrr · 25-02-2011 02:11PM

SkepticOne wrote: »

Unfortunately, this does not make a huge amount of sense as a negotiating strategy.

Ireland: Give us a better deal on on the loan or else...
EU: Or else what?
Ireland: Or else we'll have general misery.
EU: So? How is that our problem?

No, the thing that would be offered is prevention of an Irish sovereign default (which would hurt Ireland - and may happen anyway - but would hurt the EU more) in return for sharing in the cost of the Irish banks (which if they want to prevent banking failures they should be doing anyway).

So assisting with the banking problem in Ireland would be presented to them as the lesser of two evils from the EU point of view.

I think the hardest thing for certain people to get their heads around here is the idea of Ireland negotiating against the EU as this requires giving up cherished notions. It necessitates deciding which side you are on at least temporarily. You cannot in this situation be on both the EU's side and Ireland's side at the tame time even though, like me, you are pro-EU generally.

With respect, I have an alternative view that the hardest thing for certain people to get their heads around here is that patience pays in dealing with this sort of situation. I don't have a hope and pray attitude based on the current EU/IMF package being cast in stone for the next 10 years - I think it's certain that the package will evolve and be amended as the situation unfolds, not only in Ireland but in other EMU countries. However I think it's a very poor strategy, both politically and pragmatically, to be impatient and rush into negotiations when we've hardly started to implement the package. Obviously the Govt/EU/IMF were all of the opinion only a few months ago that there is a possible scenario where the package will be successful and will not lead to default. However much you might think they're wrong, going back and telling the EU/IMF that, in effect, they're stupid and of course it's inevitable Ireland will default, is not likely to lead to much of a concession in the terms when we have hardly started implementation. Usually you get one good shot at negotiations... wait a while, say, perhaps 2 or 3 years to see if a pessimistic scenario actually develops; show that we've fully complied with deficit reduction criteria; show that bank debt problem is far worse than assumed in the original package; show that economy is far worse than assumed in the original package; consequently present a convincing argument that default is inevitable within a couple of years unless the package is substantially amended/supplemented.

I don't think it's a question of being for/against the EU and it's not a moral question of evil bankers or of being ashamed of debt ... from my point of view it's entirely a pragmatic appraisal of what might be the cheapest and least painful way out of the mess. Going with the current package for a while, perhaps for a couple of years or so would allow time to see whether things are at the optimistic or pessimistic end of the range of possible scenarios. Also it gives time to consider the measured re-structuring of banks etc ... something which FF should have done in the two years following the 2008 guarantee.

P. Breathnach · 25-02-2011 02:38PM

kenrr wrote: »

With respect, I have an alternative view that the hardest thing for certain people to get their heads around here is that patience pays in dealing with this sort of situation. I don't have a hope and pray attitude based on the current EU/IMF package being cast in stone for the next 10 years - I think it's certain that the package will evolve and be amended as the situation unfolds, not only in Ireland but in other EMU countries. However I think it's a very poor strategy, both politically and pragmatically, to be impatient and rush into negotiations when we've hardly started to implement the package. Obviously the Govt/EU/IMF were all of the opinion only a few months ago that there is a possible scenario where the package will be successful and will not lead to default. However much you might think they're wrong, going back and telling the EU/IMF that, in effect, they're stupid and of course it's inevitable Ireland will default, is not likely to lead to much of a concession in the terms when we have hardly started implementation. Usually you get one good shot at negotiations... wait a while, say, perhaps 2 or 3 years to see if a pessimistic scenario actually develops; show that we've fully complied with deficit reduction criteria; show that bank debt problem is far worse than assumed in the original package; show that economy is far worse than assumed in the original package; consequently present a convincing argument that default is inevitable within a couple of years unless the package is substantially amended/supplemented.

I don't think it's a question of being for/against the EU and it's not a moral question of evil bankers or of being ashamed of debt ... from my point of view it's entirely a pragmatic appraisal of what might be the cheapest and least painful way out of the mess. Going with the current package for a while, perhaps for a couple of years or so would allow time to see whether things are at the optimistic or pessimistic end of the range of possible scenarios. Also it gives time to consider the measured re-structuring of banks etc ... something which FF should have done in the two years following the 2008 guarantee.

Good post.

But it won't appeal to headless chickens.

SkepticOne · 25-02-2011 03:09PM

kenrr wrote: »

Usually you get one good shot at negotiations... wait a while, say, perhaps 2 or 3 years to see if a pessimistic scenario actually develops; show that we've fully complied with deficit reduction criteria; show that bank debt problem is far worse than assumed in the original package; show that economy is far worse than assumed in the original package; consequently present a convincing argument that default is inevitable within a couple of years unless the package is substantially amended/supplemented.

However if we know that the we've got a bad deal now, what are we doing drawing down the loan in the first place? Remember a new government is taking over shortly. It will expected that it will seek to rectify the mistakes of the old one. Furthermore, if the new government draws down the loan it will be interpreted as agreeing with it. A window opens in the next few weeks that will be closed afterwards for the rest of the term. I agree with you that you get one shot but that shot is now.

The other point you made that we'd essentially be calling the EU/IMF idiots I don't think applies. The deal was a result of negotiations between two parties, one of which was our government on its last legs on the way out. This is not the sort of government you want negotiating the future of the country, yet this is what we had. I new government reopening negotiations is merely acknowledging that fact and I believe it will be expected.

SkepticOne · 25-02-2011 03:13PM

P. Breathnach wrote: »

Good post.

But it won't appeal to headless chickens.

I can understand your fear but all change for the better involves a certain element of risk. What would be worse would be pretending everything is OK (the hope and pray approach). Look where that has got us.

P. Breathnach · 25-02-2011 04:09PM

SkepticOne wrote: »

I can understand your fear

I'm not at all afraid. Concerned, yes; regretful, yes; sympathetic to those in a worse position than mine, yes. But not afraid.

The present government was boxed into a corner and took the only deal on offer rather than default. That was, in my view, the right decision at that time (leave aside the question of the many wrong decisions that preceded it).

The incoming government have made some presumptuous claims about renegotiating the deal, but when push comes to shove they will have to deal with things as they really are rather than as they would like them to be. That might result in some people thinking that they were sold a pup and feeling let down.

but all change for the better involves a certain element of risk.

Change for the worse also involves risk.

What would be worse would be pretending everything is OK (the hope and pray approach). Look where that has got us.

Sometimes it is good to do nothing for the present, to wait things out until a problem becomes clearer, or a new solution is found, or until circumstances change. That's what I meant by my headless chickens remark: I'm not a believer in "do something -- anything!".

Scofflaw · 25-02-2011 04:12PM

SkepticOne wrote: »

However if we know that the we've got a bad deal now, what are we doing drawing down the loan in the first place? Remember a new government is taking over shortly. It will expected that it will seek to rectify the mistakes of the old one. Furthermore, if the new government draws down the loan it will be interpreted as agreeing with it. A window opens in the next few weeks that will be closed afterwards for the rest of the term. I agree with you that you get one shot but that shot is now.

The other point you made that we'd essentially be calling the EU/IMF idiots I don't think applies. The deal was a result of negotiations between two parties, one of which was our government on its last legs on the way out. This is not the sort of government you want negotiating the future of the country, yet this is what we had. I new government reopening negotiations is merely acknowledging that fact and I believe it will be expected.

The thing about the agreement with the IMF and Europe is that it's an agreement. Whether the new government draws down any part of the available money is irrelevant to whether it is "interpreted as agreeing with it", because the new government is already bound by the agreement, whether it agrees with it or not.

I'd agree that a new government has something of a mandate for renegotiation, but that's also irrelevant, since the old government, were it still in place, would also have such a mandate. All that's necessary for an Irish government to have such a mandate is that it be the properly elected government of Ireland.

Despite the apocalyptic predictions of McWilliams et al that we'll be drowning in debt by the end of next year, we won't actually be - all such predictions seem to be based on the idea that by the end of next year we'll not only have drawn out the full amount of the bailout facility at the highest possible interest rate, but we'll have added another few tens of billions from a variety of other sources that vary by author (private sector debt! external debt! promissory note interest!) and which appear to be included on the very slimmest of justifications.

So there is no "window of opportunity" - at least, not in the sense of one closing soon, and probably not in the case of one being open right now. Like all countries that enter an IMF programme, we will almost certainly have to demonstrate that we can and will follow the programme before the programme can be renegotiated.

Have most people not ever come to an arrangement with creditors? Sticking to what's initially agreed for at least a decent period after the agreement is one of the first things you need to do - believe it or not, you're in a stronger bargaining position once you do that, not a weaker one. The weak bargaining position is the one where you make it clear that anything you agree to in negotiations is meaningless, because you won't stick to it if it doesn't suit you.

cordially,
Scofflaw

kenrr · 25-02-2011 04:58PM

SkepticOne wrote: »

However if we know that the we've got a bad deal now, what are we doing drawing down the loan in the first place? Remember a new government is taking over shortly. It will expected that it will seek to rectify the mistakes of the old one. Furthermore, if the new government draws down the loan it will be interpreted as agreeing with it. A window opens in the next few weeks that will be closed afterwards for the rest of the term. I agree with you that you get one shot but that shot is now.
.....

You can have as many shots as you like but you usually only get one good shot ... in this case, if threatening default, that's when you've demonstrated good faith by having gone a long way to implement deficit reduction and a pessimistic scenario has unfolded which has a very high probability of leading to default. I agree a new government will have a mandate to go and negotiate to try to improve terms but I suggest it would be most unwise in those negotiations to use the threat of the 'nuclear winter' option at this stage because any threat of 'cannot pay = default' is not yet a credible threat.

goz83 · 25-02-2011 06:52PM

Duke Leonal Felmet wrote: »

There were precedents of housing market collapses before 2008, take the UK in the late 80s, for example. Further to that, you had the likes of McWilliams shouting from the sidelines and even selling his house, in his case. Furthermore, a well known statistic is that most of Germany, Austria and Switzerland is comprised of renters. Just 22% of Swiss own a house, for example.

It isn't like this was hidden knowledge in 2005. Stop blaming everyone else.

You're saying that it wasn't hidden in 2005? Are you having a laugh? If the banks were still lying to everyone (including the government) up to and beyond 2008, I don't see the relevance of 2005. At 21 years old in 2005, I had little interest in politics. I was simply thinking about a home for my then 2 year old son to live in. And prices just kept rising.

Also we're not Swiss, or German. It's ridiculous to compare us to them, because:

1: They are not an island community.
2: They are not nearly as family oriented as Ireland.
3: We drink more.

Renting is therefore a preferred method. Rental prices also do not rise as they have here, creating more stability in the rental market. Fact is most Germans don't have children until their late thirties. This is a real problem for them with an ageing population and a workforce now largely made up of other nationalities.

Duke Leonal Felmet · 25-02-2011 07:11PM

goz83 wrote: »

You're saying that it wasn't hidden in 2005? Are you having a laugh? If the banks were still lying to everyone (including the government) up to and beyond 2008, I don't see the relevance of 2005. At 21 years old in 2005, I had little interest in politics. I was simply thinking about a home for my then 2 year old son to live in. And prices just kept rising.

Also we're not Swiss, or German. It's ridiculous to compare us to them, because:

1: They are not an island community.
2: They are not nearly as family oriented as Ireland.
3: We drink more.

Renting is therefore a preferred method. Rental prices also do not rise as they have here, creating more stability in the rental market. Fact is most Germans don't have children until their late thirties. This is a real problem for them with an ageing population and a workforce now largely made up of other nationalities.

1. Babble.
2. Babble.
3. And more babble.

PeterIanStaker · 14-03-2011 08:39PM

http://breakingnews.ie/ireland/creighton-ireland-has-bargaining-card-in-euimf-negotiations-497248.html

:rolleyes:

rocksteady36 · 14-03-2011 09:24PM

Many outsiders can't understand why the Irish ppl are taking it up the ass like we are.

http://www.youtube.com/watch?v=HwSrX6NPafk

This is a great article from an outside perspective about Ireland.

http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103

I think we need to really play hard ball with Euro MPs, they really dont care about us, I dont blame them but wee need to get thru this. We need to threaten to leave EU, heard some commentators say we could sync up with Sterling..We do so much trade with them... This Euro aint working especially if France and German dont mind screwing us completely....

If you think back Angela Merkel in fairness to her told us not to guarantee the bond holders, she went nuts when we did, mainly cos deposits wud leave other euro countries for Irish banks, So Lenihan was sly about giving guarantee in her eyes.. but she never guaranteed anything for German Banks, we did....or Lenihan did.... Then the Irish clowns voted for him to keep his seat in the Dail.

dan_d · 14-03-2011 09:44PM

rocksteady36 wrote: »

Many outsiders can't understand why the Irish ppl are taking it up the ass like we are.

http://www.youtube.com/watch?v=HwSrX6NPafk

This is a great article from an outside perspective about Ireland.

http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103

I think we need to really play hard ball with Euro MPs, they really dont care about us, I dont blame them but wee need to get thru this. We need to threaten to leave EU, heard some commentators say we could sync up with Sterling..We do so much trade with them... This Euro aint working especially if France and German dont mind screwing us completely....

If you think back Angela Merkel in fairness to her told us not to guarantee the bond holders, she went nuts when we did, mainly cos deposits wud leave other euro countries for Irish banks, So Lenihan was sly about giving guarantee in her eyes.. but she never guaranteed anything for German Banks, we did....or Lenihan did.... Then the Irish clowns voted for him to keep his seat in the Dail.

What??

Well, if that's what Angela Merkel did when she heard we were guaranteeing the banks, I think her fears have proved to be groundless. If anything, it's the other way around - deposits are/were leaving Irish banks.

We do not need to threaten to leave the EU. How on earth do you perceive any benefit in that? Have all the hundreds of endless threads around here not got it through to people that sure, we could default, but we'd be the biggest losers at the end of it all? We have not got any money. Our banks are on their knees. We have put ourselves in a position whereby we are getting money from the EU, yes, but it's not a deal that's cast in stone for the next X number of years, that can't be budged. It can be.Maybe not straight away, but we will be able to negotiate it to some extent.

Just because the whole thing hasn't been knocked on the head and magically made to vanish the instant the new Gov started does not mean that it's not possible. As I pointed out elsewhere, the new Gov are now one full week in the job.One, lousy week.The deal has been in place for 3 months or less. What do people expect to happen in that short a time period?

We all seriously need to calm down and have some patience here.

Slydice · 14-03-2011 10:00PM

McWilliams putting out a stronger message about us Defaulting:
http://www.davidmcwilliams.ie/2011/03/14/default-is-only-game-in-town
Default is only game in town
March 14, 2011

At the moment, Taoiseach Enda Kenny is trying to change the interest rate we face but while, a reduction of interest will help, it will only stop Ireland defaulting if we do not add any more to that debt.

Unfortunately, it now seems that the Irish banks are going to need an awful lot more cash.

Let’s imagine for a minute that the government is crazy enough to commit another €50 billion (which is not an unlikely figure) to the banks, which would increase our government debt to €195 billion.

Then add the deficits that we will need to fund for the next five years. That’s about another €45 billion.

This gives leaves our national debt at €240 billion.

Even if we manage to finance all of that at 4 per cent (which is the lowest possible figure under current arrangements), it would cost nearly €10 billion a year in interest payments alone.

That is equal to 80 per cent of the government’s income tax take in 2010. It is unsustainable. There is no way around it.

Paying interest on debt is a draw on an economy – it means money that could be invested in an economy is leaving the country. If we are paying €10 billion in interest every year and our GDP is in the region of €150 billion, we need to expand the economy by more than €10 billion each year, just to stand still.

It works like this: GDP on January 1 is €150 billion. During the year, extra economic activity in the economy adds €10 billion value to the economy, giving a GDP at end of year of €160 billion. But the economy has to pay €10 billion in interest. So we have to take that €10 billion from the €160 billion to get end-of year GDP.

That leaves the GDP at the same level as it was at the start of the year: €150 billion.

The economy will have to run to stand still. Something has to give.

and finishes with:

A structured default now is the game-changer we need. The view from Wall Street this afternoon is that this is the answer.

Don’t bet against it.

I also see Gurdgiev has some probabilities of different types of default up on his site since the 12th:
http://trueeconomics.blogspot.com/2011/03/12032011-updated-probabilities-of.html
12/03/2011: Updated probabilities of default
Posted by Dr. Constantin Gurdgiev

http://2.bp.blogspot.com/-sMq9Zi3GD84/TXtDzL5QQkI/AAAAAAAAD58/TLEPaIK8ffA/s400/Screen%2Bshot%2B2011-03-12%2Bat%2B09.56.43.png

Interesting times ahead from the looks of things.:(

Default is inevitable. Discuss.

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