Irish Bailout Announced

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machinehead's picture
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Irish Bailout Announced

Ireland joins Greece in the euro-bailout club:

The European Union has approved an €85 billion rescue package for Ireland which, if drawn down in its entirety today, would attract an average interest rate of 5.83 per cent.

Of this, €10 billion will be used to recapitalise the banks, with a €25 billion contingency, and the remaining €50 billion will be used for the budgetary requirements of the State.

As part of the deal Ireland has been given an extra year – until 2015 – to meet its target of reducing its budgetary deficit to 3 per cent.

Under the terms of the deal the State will contribute 17.5 billion, of which €12.5 billion will come from the National Pension Reserve Fund and €5 billion from “other domestic cash resources”.

The European Financial Stability Mechanism will contribute €22.5 billion, the IMF €22.5 billion and the €22.5 billion from the European Financial Stability Fund.

http://www.irishtimes.com/newspaper/breaking/2010/1128/breaking1.html

Watch the reaction of European bond markets on Monday, especially Ireland, Portugal, Belgium and Spain.

My view is that this package solves nothing. It puts Ireland deeper into debt, even as its economy shrinks more thanks to harsh austerity measures which are front-loaded into 2011.

From a populist point of view, bondholders still suffer no haircut, while ordinary Irish pensioners see the country's pension reserves looted. The plutocratic wolves lick their chops: 'Mutton -- it's what's for dinner!'

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Re: Irish Bailout Announced
machinehead wrote:

From a populist point of view, bondholders still suffer no haircut, while ordinary Irish pensioners see the country's pension reserves looted. The plutocratic wolves lick their chops: 'Mutton -- it's what's for dinner!'

I share your assessment.  The wealthy are protected at the expense of the citizens' pensions.  What will those people do when this bailout inevitably falls apart and their pensions are gone? I think we are likely to head down the same path eventually.

Thanks for the update Machinehead.  You're doing a great job of keeping us informed on this important issue.

Travlin

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Re: Irish Bailout Announced

MH, or someone, please help me understand the rationale here (assuming there is one).

Ireland was lent money by various banks/countries with an interest rate. That rate reflects the risk involved to the bank should ireland not pay the loan back. Now that Ireland can't pay the loan back they are now being offered another loan, with worse terms that they are even less likely to be able to pay back. Why don't they default? The banks/countries who lent them the money knew there was a risk. Other countries have defaulted and the world keeps turning. The banks should take it on the chin because they took a risk and it didn't pay off. True, Ireland shouldn't have taken the debt if they couldn't afford it, but the banks also shouldn't have lent them money in the first place. The banks are complicit. Enablers.

As to the spread of the contagion, isn't this a problem allowed by the banks in question? After all, this should have been part of their risk analysis. Seems to me the contagion is the spread of the banks' disease, not that of the debtors. If Ireland (and others) are to be bailed out, then how about subtracting all previous interest payments from any loans already made? This at least includes the bank's liability.

 

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Re: Irish Bailout Announced
Travlin wrote:

Thanks for the update Machinehead.  You're doing a great job of keeping us informed on this important issue.

Second that!

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Re: Irish Bailout Announced

The national pension reserve fund!  Starving the elderly, that's what it comes down to? They would rather mess with a cornerstone of a modern humane state than let the banks fail and the bondholders take the hit?  I loathe the tax sucking parasites.  Banks are the ultimate welfare queens. Make the CEO's get rid of their yachts and big houses and put them on food stamps as part of the bail out.  Seeing as they're the world's biggest losers and insist on govt support, let them live out the "dream", either in jail for fraud, or in some crummy tenement with no central heat and a baby screaming in the next flat.

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Re: Irish Bailout Announced

I saw a survey today that said that 57 percent of the people in Ireland were against the bailout and preferred default.  EU big shots decided that EUR denominated government securities simply can not be defaulted so they basically forced the government to take the bailout.  You can imagine what the next election will be like there.  Probably a lot like the last election in the US.  When the elected people in a government go against the majority of the people on a major issue there is going to be repercussions.

 

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Re: Irish Bailout Announced

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Re: Irish Bailout Announced

Interesting video.  Thanks for posting it.  At one point he says the same thing the survey I read said - the majority of the people of Ireland did not want to take the bail out.  He goes on to discuss the end of the EUR.  That is a really big deal.  I work at a wall street place where a lot of FX activity happens.  I can't even imagine what would happen if the EUR just up and collapsed.  There would be chaos in the currency markets world wide.  Some people would make a boat load of money and some people would loose their shirts.

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Re: Irish Bailout Announced

If Ireland Doesn’t Take The Bailout . . .

http://gonzalolira.blogspot.com/2010/11/if-ireland-doesnt-take-bailout.html

So a week ago as I write this, the Irish formally asked for a bailout from the European Union, acting in concert with the International Monetary Fund and the British government.

And now, a week after that request, the EU finance ministers just approved the bailout of the Republic of Ireland—however . . . However, in those seven days in between, a serious shitstorm broke out in Ireland—it has been one hell of a week, over there in the Emerald Isle.

And though the bailout has been approved by the EU finance drones, we still do not have an approval from the most important player of them all:

The Irish people.

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Re: Irish Bailout Announced

Ireland is so deep in debt they cannot pay.

So, the solution is force them to borrow an additional 85B EUR, in exchange for austerity measures that can save some ~15B EUR the next four years.

That just must have a happy ending.

 

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Re: Irish Bailout Announced

Monday morning -- the verdict is in -- Ms. Market ain't impressed. Europe's Stoxx 50 index is down 1 percent, but bonds and credit default swaps are sending an even grimmer message:

At last check the Iberian Peninsula was the target of a tactical CDS nuke, with Spanish and Portuguese CDS widening by 23 and 36 bps respecitvely, to 354 and 538 bps. The second tier of bailoutees is also as expected: Belgium and Italy, both of which are wider by just over 16 bps, hitting 178 and 232 bps. And lastly, even the core is no longer safe, as Austria and Germany were both about 5% wider to 87 and 50 bps each.

Bases are widening as cash bonds are lagging today. The reason for the move ... is, as Market News reports, that "a growing school of thought believes that - without major debt restructuring for Ireland - the current solution is just buying time. Many traders also fear that the interest rate applied to the new cash of 5.83% is unmanageable for the Irish economy." In other words start your Portugal, Spain, Belgium, Austria bailout countdown timer.

http://www.zerohedge.com/article/european-cds-bloodbath-increasingly-threatens-core

Europe's finance ministers are rearranging the deck chairs on the Titanic instead of loading the lifeboats. Like the architects of the Versailles treaty, they will go down in history as purblind cretins.

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Re: Irish Bailout Announced

Mmmm ... nothing like the smell of fresh napalm at breakfast! Check out these burning brush fires:

Nov. 29 (Bloomberg) -- The cost of insuring against default on Portuguese and Spanish government debt soared to record high levels as an aid package for Ireland failed to reassure investors the region’s debt crisis will be contained.

Credit-default swaps on Portugal jumped 36.5 basis points to 538.5, and contracts on Spain climbed 24.25 to 347, according to CMA. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments increased 6 basis points to a record 194, based on closing prices.

Swaps on Italy rose 17 basis points to 233, the highest level in almost six months, as the nation’s borrowing costs increased at a sale of 6.8 billion euros of bonds.

The Markit iTraxx Financial Index of swaps on the junior debt of 25 banks and insurers soared 28 basis points to 306, the highest level since April 2009, according to JPMorgan Chase & Co. The senior index was up 3 at 167, after earlier falling as much as 9 basis points.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=aVO_oSbHQCg0&pos=7

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Re: Irish Bailout Announced

9:58 a.m. -- Dow eleven thou ... BUSTED TO HELL!

Any questions? LaughingSurprised

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Re: Irish Bailout Announced
machinehead wrote:

Any questions? LaughingSurprised

Yes, when will these so called economists and politicans recognize the reality of peak debt and discard the 300 year experiment?

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Re: Irish Bailout Announced
machinehead wrote:

In other words start your Portugal, Spain, Belgium, Austria bailout countdown timer.

Hm.  Throw Belgium and Austria into the mix and you're pretty close to a BAy of PIIGS scenario.

Sorry.  Couldn't resist.

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Re: Irish Bailout Announced

Hm.  Throw Belgium and Austria into the mix and you're pretty close to a BAy of PIIGS scenario.

Sorry.  Couldn't resist.

OMG

Glad you didn't resist

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Re: Irish Bailout Announced

If there were a "doomsday clock" on the EU, I would say that we have moved from about 11:30 a year ago to 5 minutes to midnight today. Whether it takes months or a few years to cover that last 5 minutes is a matter for history to decide - but IMO it is inevitable for the clock to strike midnight.  With Ireland and Greece under the bus, we are left with a PISsing match.  I'll give Spain the nod due to their higher consumption of sangria with Portugal a close second.

Now if we can get rid of NATO which has no valid role in today's world, I see no reason not to move the UN to Europe and utilize the facilities of NATO and the former EU.  We can then give the Native Americans the former UN facilities (thereby settling the long running dispute over paying them some blue beads for Manhattan) and they can open a casino (not to be confused with the NYSE or Nasdaq) which may provide both NYC and NY with some much needed revenue and jobs.

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Re: Irish Bailout Announced

From frying pan to fire -- eurocrats stare into the looming abyss:

The single currency dropped for a third day to a 10-week low of $1.3034. The premium on Spanish10-year bonds over German bunds rose 28 basis points to a euro-era high of 295. The yield on Italy’s 10-year government bond rose 18 basis points to 4.83 percent, about 80 basis points more than Brazil. Portuguese credit-default swaps jumped 11.5 basis points to a record 551, after surging 40 basis points yesterday, according to CMA, a data provider.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=a9y.F6qta.LQ&pos=3

What part of 'failed bailout' do Europe's finance ministers not understand? After two spectacular debacles (Greece and Ireland), the only conclusion is 'let's have a third go in Portugal'? Go ahead, keep banging your thickly armored stegosaurian skulls against a brick wall. Maybe the g-loads will ignite a tiny spark of wit in those pea-sized brains, eurobozos!

It seems shocking that Italian government bonds yield more than Brazil's ... until one contemplates that Brazil has nearly four times the population of Italy, low debt, and energy self-sufficiency. The so-called 'developed countries' have fouled their own nests with their 'infinitely elastic' debt-backed fiat currencies, and are now getting their well-deserved comeuppance.

Euros to zeros: debtberg, debtberg, toil and trouble; fiat burn, and sovereign bubble! Laughing

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Re: Irish Bailout Announced

The gap between the Spanish and German borrowing rates widened to 3.0 percentage points,and the Italian gap to 2.09 percentage points.

http://www.google.com/hostednews/afp/article/ALeqM5g4Qq6E-sCR-0juoTEYSzK...

I beleive the Zero cracked the 1.3 barrier this morning.

Did not know you were a fan of the debtberg theory MH. Smile

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Re: Irish Bailout Announced

The growing concerns about rising European sovereign bond yields and their impact of corporate borrowers were highlighted by a warning from the Bank of Portugal that its country’s commercial banks face an “unbearable” level of risk to refinance their debt if Portugal fails to implement credible measures to consolidate its public finances.

In a report published on Tuesday, the central bank said the country’s sovereign debt difficulties had forced banks into “permanent and large-scale” dependence on European Central Bank funding that was “not sustainable”.

According to the central bank report, Portuguese banks face “no intrinsic profitability or solvency problems” and have shown “a notable capacity to resist and adapt”.

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Re: Irish Bailout Announced

Meanwhile Russia is ready to join/backstop? the EU and possibly create a new currency. Both Germany and Russia have major holdings of gold.

http://www.telegraph.co.uk/finance/currency/8163347/Putin-Russia-will-join-the-euro-one-day.html

Quote:

Vladimir Putin said it is "quite possible" that Russia will one day join the eurozone and create a currency that would eclipse the US dollar as the global reserve standard.

Looks like the Eurasians aren't foregoing this crisis/opportunity to act, after already establishing an agreement to use Russian/Chinese currency for bilateral trade. Already a major realignment of global finance is taking place. A new Russo-Euro would allow for devaluation and fiscal union. Don't underestimate the blowback in Europe from 60 years of US Imperialism.

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Nigel Farage: 'Who the Hell do You Think You Are: The Euro Game

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Re: Irish Bailout Announced

Nigel Farage: 'Who the Hell do You Think You Are: The Euro Game

+1 video, Thanks gregroberts

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Re: Irish Bailout Announced
SagerXX wrote:
machinehead wrote:

In other words start your Portugal, Spain, Belgium, Austria bailout countdown timer.

Hm.  Throw Belgium and Austria into the mix and you're pretty close to a BAy of PIIGS scenario.

Sorry.  Couldn't resist.

Mwhahaha. You bet! Hard to keep lipstick on those Piigs!

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Re: Irish Bailout Announced

Wow!  I just listened to a King World Broadcast interview with Nigel Farage, done on December 1st (after the speech Greg posted above), and he is amazing!  Talk about calling it the way you see it!  I don't know how he is viewed in Britain and Europe, but he seems to be giving the clarion call to folks there to open their eyes, and recognize the threat to their democracies that are being packages into the international balilouts being offered. He's a very powerful speaker.

Here's the link: http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/12/1_MEP_Nigel_Farage.html .  Below is the short bio provided with the broadcast.

Nigel Farage: Founding Member of the UK Independence Party (UKIP) & Member of the European Parliament (MEP) for the South East region and is the leader of the parliamentary party in the EU parliament.

The central aim of the party is the UK's withdrawal from the European Union and to regain control of this nation's governance through our own Parliament at Westminster.

Nigel was a Conservative activist from his schooldays until the overthrow of Margaret Thatcher; John Major's signing of the Maastricht Treaty brought his membership to an end.

He has worked for British, French and American companies operating in the commodity markets, especially the London Metal Exchange (since 1982).

During the interview, Nigel states that he is not a politician, that he wa a commodities trader, and that it was through that work that he got to see how international actors were buying his/others' countries, and how their politicians had no backbone to try to stop it,,  He said his goal was to at least alert his countrymen (and those of other freedom loving countries) of the fact that their domocracies were at risk, so they could choose to take action to stop it if they wanted to.  (paraphrased)

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