Economy Rigging 1

BSK log, 28/09/10 September 28, 2010

Filed under: Uncategorized — bashstreetkidjailbreak @ 12:07 pm

MAIN ITEM:

The price for borrowing for Ireland hitting 6.99 % and its subsequent undermining of confidence and, also, the happenings on the ground level within Ireland. Particularly the money markets and realities contradicting the magical thinking bubble get rich quick school of economics holding onto *more of the same*, holding on for more quick riches for the future.

ITEM 1:

Here is an example of these economic incompatibilities underway, over to Peston:

‘..Of course, the great fear for the Irish government is that its putative virtue in making deep public spending cuts – and Mr Lenihan conceded that there are some big and painful decisions ahead – will further undermine confidence in the value of Irish assets, triggering further losses at banks, and thus eliminating the fiscal benefits of the deficit reduction programme.’

So to conclude from this possible eventuality the Irish taxpayer will see the price of borrowing going up even higher again potentially. A self perpetuating spiral upwards in the price of borrowing for the Irish state driven on by an entrenched over reliance on international credit and money lenders.

ITEM 2:

More on this from the WSJ:

{‘…Mr. Cowen and his Minister for Finance Brian Lenihan insist they are on track to deliver a budget deficit of 3% of GDP by 2014, as previously agreed with the European Commission.

Not so Mr. May. He worries that the rising cost of the bank bailout will finally take its toll:

“The recent run of disappointing news from Ireland means that public debt is looking increasingly likely to reach Greek proportions, suggesting that the Irish government may eventually be left with little choice but to restructure its debts.”

Mr. May has more comment that will make juicy newspaper headlines:

“Even if the government can persuade markets that it has already committed enough to put the banks back on an even keel, its troubles are far from over. At the very least, fiscal austerity will lead to a long period of very weak growth. At worst, Ireland may be forced to default.” ‘}

ITEM 3:

True Economics blog breaks it down : True Economics: Economics 18/9/10: IMF data on bond yields

and also,

BBC Robert Peston blog report on Ireland: BBC – Peston’s Picks: Why Ireland can’t afford to punish reckless lenders to its banks

and,

ITEM 4:

FT on Ireland:

Ireland will on Thursday unveil a fresh taxpayer-funded recapitalisation of Anglo Irish Bank, the institution at the centre of the country’s property meltdown, amid rising alarm in the markets over the country’s financial health.

Ireland’s cost of borrowing on Tuesday hit record levels with yields on 10-year government bonds jumping 25 basis points to 6.72 per cent.

Irish bond yields for 10-year debt are at similar levels to Greece at the start of April – only a month before Athens was forced to turn to the international community for loans.

The rise in yields came despite buying from the European Central Bank to help stabilise the markets, according to traders, as investors worried that the cost to bail out Anglo Irish and other financial institutions is much higher than first thought.

The Irish Central Bank’s additional capital injection is expected to be about €5bn. That would bring the bail-out costs for Anglo Irish to €30bn, shy of the €35bn forecast by credit rating agency Standard & Poor’s.

Brian Cowen, Ireland’s prime minister, said: “We are determined to do what’s necessary to achieve international confidence and build domestic confidence.”

As part of a choreographed series of announcements, Brian Lenihan, Irish finance minister and the legal shareholder of the nationalised bank, will announce plans to meet tougher capital targets, including a restructuring of part of Anglo Irish’s €16bn bond debt.

The announcement coincides with the expiry of Ireland’s two- year blanket guarantee for bank liabilities at its six domestic lenders, introduced in September 2008 to prevent a run on Anglo Irish.

ITEM 5:

BY IRISH INDEPENDENT – FINAL TAXPAYER BILL ON ANGLO

By Fionnan Sheahan Political Editor

Tuesday September 28 2010

THE Government will announce the cost and timescale of the plan to wind down Anglo Irish Bank by the end of this week.

The coalition’s approach to negotiating a deal with Anglo’s lenders will be closely scrutinised by international markets, amid warnings it will affect the cost of borrowing for the country.

The delay in providing a figure, estimated to be in the region of €30bn, on the Anglo strategy is being partly blamed for the rise in the interest rate being charged on borrowing by the State.

But the coalition hopes to provide some certainty to the markets when the details of the plan are announced by the Central Bank.

Finance Minister Brian Lenihan will brief his cabinet colleagues on the broad outline of the plan at their weekly meeting tomorrow.

The crucial elements of the Government’s plan to split Anglo and then gradually wind it down will be announced by the Central Bank later in the week.

Mr Lenihan and his officials in the Department of Finance have been in constant contact with the Central Bank and Financial Regulator regarding the fleshing out of the Anglo plan announced earlier this month.

The minister is understood to have discussed the latest developments in the drafting of the Anglo plan with Taoiseach Brian Cowen yesterday.

Mr Lenihan is also in touch with Communications Minister Eamon Ryan, who represents the Green Party on banking issues.

Central Bank Governor Professor Patrick Honohan and Financial Regulator Matthew Elderfield are responsible for estimating the cost and timeline for the plan.

But Mr Lenihan is being warned that a default on government-guaranteed debt at state-owned Anglo Irish Bank would lead to a funding crisis for the State and the banking system at large.

Goldman Sachs International chairman Peter Sutherland said the maximum saving the Government could make on sharing Anglo’s rising losses with debt holders was €5.1bn.

Crisis

However, the former European Commissioner and Attorney General warned that such a move would “precipitate a funding crisis” for the State and the banks and that the damage would be serious.

Mr Lenihan believes the Government’s decision to split Anglo will provide certainty about the bank’s future.

When asked about a timeframe for the wind-down earlier this month, Mr Lenihan said it would be “difficult to see it going beyond 15 years”.

Mr Lenihan also admits the proposal is not a “silver bullet” to restore international confidence in the Irish economy.

Lenihan to reveal full plan for Anglo wrap-up – National News, Frontpage – Independent.ie

Advertisements
 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s