there has been some commentary about the possibility of Ireland defaulting or becoming bankrupt in the papers on recent days. I am not exactly clear on what would happen if that came to pass. Not saying it will,(I hope it doesn’t). I don’t know. But in case it does happen… I just want to figure out the scenarios. Therefore could u someone enlighten me a bit, in particular what would happen in rough terms in the following areas:
Private sector workers. Do they continue on as normal, or does pay get reduced or stop or what?
public sector workers. Same question
Government services. Would hospitals, clinics, schoools etc continue to function?
Banks: will they remain open for normal business. Would ATMs work? Would you have access to your Irish deposit (assuming you had one). Would there be a run on the banks?
Supplies. Would oil and gas and anything else we need to keep the country runnig continue to come in from abroad
Apologies if this sounds fanciful but I’m hearing references to the possibility of default and no-one has spelt out what exactly it would mean, except that it could be chaotic. I don’t want to scare myself (or anyone else) but I’d like to at least know what might lie ahead. Any thoughts on what it would mean?
Thanks in advance
I’m sorry. I re-read my post before sending and though I had caught any typos but I missed the backslash in the title.
I’ve read loads of posts but they are many views and they get quite spread out over the course of the forums.
I am just looking for a brief view of what could happen in those area I mentioned, if Ireland became bankrupt.
I pray it won’t be so. And yet I fear it will. Currently I don’t even subscribe to the notion that it’ll be a complete washout for FF in the election. I think the Irish electorate are turkeys who are keen on Christmas.
Perfectly reasonable question by the original poster. (Though a bit late perhaps.)
The problem is that there are so many different scenarios that could take place that it’s impossible to give any definite predictions.
The best response is to stop worrying about specifics and to try for general strategies that will serve you well in any event. For me, that would mean paying off variable rate debt if possible; moving at least some funds out of Irish banks; renting over buying accommodation if possible; building up a savings buffer (putting it offshore); making sure there’s an alternative source of income open to you if the day job runs into problems; etc. A lot of this is going to be difficult or impossible for most of us and that’s fine - but I do think there’s a real need to think about these issues.
Default is a certainty the only question is do we plan for it or have an Argentina fiasco where they kept going following all the nonsensical advice from the IMF to the very end and then find the rug pulled from under them.
If you take steps even at this late stage we can still avoid a complete meltdown. As it is we are going full steam ahead towards the iceberg with nobody on deck.
Patience please with the OP, - none of us started out as being regular pinsters and there are a LOT of people out there who don’t have a clue as to what’s really going on.
I think it’s a very fair question and so far no-one has answered it.
Please correct me if I’m wrong OP, but I get the feeling that what you really need to know is, does default happen overnight?
ie, will we wake up one morning after Ireland’s financiers haven’t been able to make the country’s mortgage repayment and find all credit stopped and all bank deposits taken in lieu,
or, will we wake up one morning and be told that we can’t make the repayment, given time to move any deposits and have our opinion asked as to what course of action we ought to take collectively?
I hope you can work out which is most likely of the two scenarios
Total default would be highly unlikely as it is the ‘nuclear’ option. Not only would it bring down the irish banks and the irish state but in all likelyhood it would bring down the euro, the european banks and possibly result in a global meltdown of the financial system. This is why Barroso got so shirty with Higgins, he was terrified that this option may gain sway.
There may be a push to seperate the irish state debt component, which everybody would probably agree should be honoured from the bank debt, which the FF/green government took on on behalf of the taxpayers. A default on the bank component is more likely as it is not repayable in the short or medium term.
The annual ‘state’ debt component of the national debt will need to be reduced to below 3% of GDP in any event. This has to result in cuts in public service salaries, public services and more tax hikes. (Remember, there are at least another 3 ‘tough’ budgets to come, so expect more pain).
It is unlikely that the state will default totally on the ‘bank component’ of the debt. Despite all the bruhaha from various commentators (including Trichet), there will probably be a partial writedown of the bank debt and the remainder will be payed off over a long period of time (90-100) years. (cf Brady Bonds)
The major concern for ireland now, is the increasing talk of tax harmonisation as the price to be paid for the ‘bailout’ or for any re-negotiation. This should be resisted at all costs as if it is implemented, the multinationals which are a major source of employment and tax revenue will leave. Anything that has happened so far is negotiable or just about managable (with severe pain). If the multinationals leave, ireland would revert to an agricultural economy on the fringes of europe.
The major campaign should now be for the retention of corporation tax at its present level.
(Disclaimer- I am not employed by or have any personal interest in any multinationals)
Excuse my french but why the fuck do various EU mandarins keep on banging on about tax harmonisation in the news as though it was some kind of natural positive step to make. We’d want to be deaf, dumb, blind and stupid to harmonise at this stage of the game.
I always felt we wasted the boom in that we didn’t do anything close to enough to encourage local industry. But “we are where we are”. And where we are is seemingly totally dependant on foreign investment. And the other thing I don’t get is that if that foreign investment were to go away and we took that big retro-grade step then it would be a big step on the way to soverign default where all those German pensioners (whose funds made bad investments in bad Irish banks) would be told to go swing for the money. Who wins in this scenario? Is it all just talk to keep the punters in other EU states happy that we’ll be made to compete with them (safe in the knowledge that we can’t). Is it sour grapes that they feel that we spent their money and now we must be made to suffer for it? (A notion that isn’t without some truth but is unworkable in practice)
Tax harmonisation would be bugfuck-mental-crazy. Everybody loses if we do that.
Quite aside for anything mental that might happen to the Irish banks you could be smart to be taking your business elsewhere simply because they’re all going to have to continue recent their practice of charging more for their services.
Not sure if you’re referring to my comment or to Enoch Root’s comment. If it is mine then yes - I agree - I don’t get it. It seems nuts to me. Please explain why tax harmonisation would seem to be a good idea to the people who are loaning us money to pay back the money we owe them. I can see why the EU may wish to posture and throw shapes about the idea. But if it actually happens I’d say they have little chance of getting their money repaid.
Am I wrong? Please feel free to explain how I’m wrong because I utterly don’t get why they’d want this.