I will give two weird indicators:
FT yesterday and the day before had Greece, Portugal, Spain in the firing line. No mention of Ireland.
CNBC from their English studio had Greece, Portugal, Spain and Italy on their graphics. Again no mention of Ireland.
In one way this is comforting. Maybe, despite our local doubts, we really are doing enough and the other countries are in worse shape (but we can’t see it from where we are).
I am concerned, though, that there will be a case of “shocked, shocked I tell you” to hear that Ireland is still in the shitter. To bowdlerise Bill&Ted “we’ve been totally lied to by our MSM covers”.
What? We’re trying to get away 20 billion in new bonds this year and we have an auction on the first Tuesday of every month! And I believe there is some big rollover stuff planned for July…
The biggest change from 09 to 10 is in capital expenditure. AFAIIC the pain of all the cuts is eaten up by increases in Current Expenditure. Add to this the bank bail-out costs and the increasing debt servicing costs. It won’t be too long before we’re back on the bold step.
The whole point of the last 2 years of government dithering was not to face the problems or even to start to solve them but to shuffle back a few places in the queue for the Bond Vigilante firing squad on the very simple premise that after the first few countries were taken out and shot by the Vigilantes it would be a whole new ballgame. And as long as Ireland was still standing by that stage then the whole plan would have been a success.
By the time this is all over expect almost all of the insiders debt to be pushed on the national debt so it can be part of the inevitable sovereign debt “restructuring” when the crisis reaches its final stage in the next year or two. After write downs of 30%/50% on sovereign debt (mostly NAMA, Bank Recap, all the dig outs by that stage) the establishment will claim a great success, even though the county will still be left paying off at least a doubling of its national debt over the next decade or two.
As the euro is a political animal (a mutant camel with 7 legs and a hump each side) I would expect the debt restructuring as part of a “multi-stream” euro fix. A split of the euro into a soft euro and a hard euro with all the basket cases been dumped in the soft euro. As the soft euro needs to be depreciated at least 30% for the basket case countries to have any real chance of economic recovery that depreciation would the the main mechanism for the debt default. All euro debt for the soft euro countries converted at par to the new currency. And voila, its magically 30% less in real euros.
Its not like this has not been done before. There is a long history of colonial currencies pegged at a lower rate to the home country currency and par conversion of debt during currency conversions caused by sovereign debt crises.
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Well there was a caveat in that particular prediction and there is still Laki lurking out there in a typically sullen Icelandic manner…
Early days yet.
I also predict that it will be sunny some day soon, it will rain another, we are all going to die, and Ireland will never win the World Cup. The only prediction I am absolutely 100% sure of is the last one.
