Does this mean all money going into Anglo will be included within the GGD?
What is the deficit going to be this year with €12bn going into Anglo and €2.5bn going into INBS?
Citibanks take on Ireland. A bit long and sorry I cant post the full report.
From: NIVETHAN THARMENDIRAN (CITIGROUP GLOBAL MAR)
the more and more I look at it, the more remarkable I find Ireland’s skills in
navigating though these stormy sovereign credit seas. It’s spreads have
remained a low beta despite it’s spread levels being only second widest to
Greece for much of this episode, (now Portugal). I understand why this has bee
the case, but I question whether this is warranted once the market has finishe
Ireland has benefited from:
- smaller on balance sheet issuance 2010 funding requirement (i.e… ahead of
the Nama accounting trick)
- smart 1st out the door funding in January - c.f. Greece holding off.
- an open and honest admission of past misbehaviour and a pre-emptive attempt to strike the budget - c.f. Greece
- a “lets shut our mouths” policy - c.f. Greece
I feel that these are the main reasons why Ireland has been allowed to buy time
where as Greece’s approach has led it to a liquidity issue.
However Ireland’s issues situation is remarkably similar to those of Greece.
Our economists highlighted these in early March before the Greek situation went
Titanic (I.e. as the ship bobbed like a cork ahead of the big plunge). Please
take a read from p4 onwards of the attachment where Juergen and Giada compare
the situations of Greece with Ireland.
Ireland’s fiscal tightening was 6.5% of GDP Greece’s fiscal tightening was
6.5% of GDP
however the Irish budget has failed to fall significantly after tightening
because a falling real and more importantly nominal GDP - debt/deflation spiral
starting to bite? - great chart on p4 with the Irish and Greek budget balance
profiles - very similar. The Irish fiscal tightening has slowed growth “too
much” - worsening the deficit numbers. Greece actually has a better chance
given the size of the black economy (an estimated 13% of GDP is tax receipts
lost/GDP unrealised). Ireland deficit/GDP ratio has just been revised to 14.3%!
Greece on 13.6%
Ireland will be facing much higher deflationary pressures - take a look at
the chart on p 5 (or the excl file attached) - Ireland has seen the highest
growth in price levels in the eurozone since 1995 and remains well above the
average. c.f. Greece which broadly in line. Greek disinflation vs the average
is likely to occur but we have our doubts as to whether we will see deep
negative numbers especially when compared to Ireland.
if you add to this:
the Irish property market mess… Irish average property prices are now back
to 2004 levels. 1st time buyer prices are at 2003 levels. down something like
30% and the yoy price change chart hasn’t shown signs of bottoming as
yet…Charts attached. Personal and Bank balance sheets have been significantly
impaired. Home ownership in Ireland is only second to that of Spain within the
eurozone, but Spanish house prices have only fallen 10% to date. that’s not to
mention the speculative buy to let housing purchases in Ireland.
take a look at Irelands Real effective exchange rate: bang on with that of
Greece - despite a reduction in the trade deficit - Ireland remains
NAMA is expected to be worth 30% of Irish GDP. this does not show up in theIrish national debt due to the off balance sheet nature of NAMA - factor this
in and Ireland Debt/GDP ratio is closer to 90%.
threes more +ves and -ve’s i’m sure.
The market has generally had an issue with Portugal being a small guy with
issues and Spain being a large guy with large issues.
I would argue that the shorts can’t getter shorter in Portugal given the size
of it’s market and it’s insignificance in the benchmarks.
and I’d argue that Spanish is 1) too large and will likely see it’s other
capital markets (equities corporate and covered debt have issues before the
government bonds - it’s a much slower burner.
Ireland however is a plump pigi - it may not have liquidity issues but solvency
is a big un asked question… and defining the line where liquidity issues and
and solvency issues begin is very hard…
That is a very negative note, are the markets starting to see through our marketing BS?
Do you have a link to the full report?
Wow, what a shock. For months we’ve been told that “there is no alternative” because the Gods (aka the sovereign bond market) demanded austerity budgets and otherwise wouldn’t buy our debt. So we sacrificed those on social welfare and many on modest incomes in the public sector while demanding virtually nothing of the wealthy. In fact, we cut the VAT on their Mercs and the duty on their champagne. And what do you know: unlike the rich, public sector wage slaves and those on social welfare actually tend to spend every penny they earn. So it was no doubt a huge surprise to all except those on the likes of Progressive Economy to find that–open economy my ass–the fiscal tightening cannot close the deficit because it doesn’t just affect the numerator (gov’t spending) but also the denominator (GDP/GNP).
But the entire policy is typical colonial kowtowing to the masters while attempting to put one over on them: “shh! maybe they won’t notice that we took a few extra spuds!” As if the sacrosanct “bond market” is made up of idiots who don’t recognise a deflationary spiral when they see one. The fact is, contrary to the “there is no alternative” line, there were other alternatives to draconian fiscal tightening and we’d be no worse off in the bond markets if we had pursued them and probably better off. Certainly retail wouldn’t be haemorrhaging to quite the same degree.
Anglo being wound down, hoocudanode…
Agree Dreaded, the clue was froma afew weeks ago the divergence between the tigthening of the Banks CDS while the Irelands CDS rose…
Is that simply because the ‘treatment’ of the recapitalisation has not been finalised and we must include the €7bn in GGD for now but with an opportunity to RESTATE that in future.
Ireland…Just reading the chart, wasnt lookign at it all morning
CDS on 5 yr Mid up 15% today so far…
173 Bps up 23 bps
Greece is at 567 BPS up 82 Bps
that banco portugese comercial is at near 300 bps
all 5 yr mids
News articles will follow later in the day I reckon…
prepare to repel boarders !!!
Oh PS fuck sake Ernie
do you want fries with that single issue ? talk about “out-of-context” - if the markets hadn’t thought we were trying to deal with it properly ( by cutting PS pay etc ) , as mentioned above, it might have been Ireland hit first and not Greece.
Now, NAMA isn’t factored into our National Accounts Debt/GDP ratio (here), but are its costs included in the budget deficit?
I’m guessing it’s off balance sheet.
We appear to have caused a spot of sovereign contagion
The way to SORT this is for the EU Commission to issue a statement saying that sovereign Bad Bank costs will be deducted from those figures ‘going forward’ and that a restatement of the GGD will be made for the record once the Bad Banks are sorted.
Lucky they evidently have no idea on the markets that we borrowed over 17% of GNP innnnit
Apparently it matters a lot to you–so much so that you’re willing to sacrifice many people’s livelihoods–that Ireland be second or third rather than first and that the markets be fooled for a short time before “they” work out the obvious. I don’t quite see why.
As for the “single issue” charge: sorry but this single issue–i.e., what is to be done?–is exceedingly important. I’m sorry if you’re bored by it.
yes, I think Ernie has a point. We should have imposed higher cuts in the non-productive expenditure - civil service pay bill (numbers) , likewise social welfare, and simultaneously reduced taxes to boost the productive sector. That way lower taxes would have acted as a stimulus to the economy. Instead we increased taxes and barely touched the non-productive sector, and lo and behold our growth is stunted. Who would have thought it?
FT Alpha. Everybody is still fascinated with Greece
That’s exactly what I thought on reading it. If the cuts were based on the initial deficit - then doesn’t that change what the Government have to look for in the next budget?
A bit crafty there Ernie; it’s a little disingenuous to insinuate that retail’s current woes can be blamed disproportionately on the public sector pay levies rather than the more general cross-sector pay cuts, rise in unemployment and general disappearance of credit in the wider economy!
What a load of crap.
The old “colonial” nonsense thrown into the cement mixer. If we quit borrowing money on a ridiculous scale then we wouldn’t have any “masters” to kowtow to.
The answer is not good.