Friday, September 24, 2010

Economics 24/9/10: Still deep in denial?


In the real of bizarre, we have two fresh statements from Irish officials.

First, NTMA issued a statement claiming that Irish authorities - aka Irish taxpayers - will make up any shortfall on the banks capital side. One wonders if the NTMA has acquired new powers from the State - this time around, to determine our budgetary policy. You see, per European authorities, capital support for the banks is a matter of national deficits. National deficits are a matter of fiscal policy. Fiscal policy is firmly a matter for the Exchequer (i.e the Government). NTMA is neither the Exchequer, nor the Government. What business does it have in making promisory statements to the markets concerning the matters of fiscal policy?

Second, per Reuters report: "An Irish official told The Daily Telegraph that Dublin will "explore the appropriate burden-sharing arrangements" over coming weeks as it fleshes out its plan to break up the nationalised bank. Anglo Irish may ultimately cost Irish taxpayers as much as €25bn". So let's quickly summarize the statement:
  1. After the economy posted a double dip (GDP side), having lost some €13,000 per every working person in income since the beginning of this Great Recession,
  2. After all independent analysis has pointed, for some 21 months now to the need to cut loose the subordinated (and senior) debt holders in Anglo, plus subordinated debt holders in other state-supported banks,
  3. After the above calls by independents was echoed in recent weeks in the international analysts opinions (e.g. RBS),
  4. After independent analysts have correctly estimated Ireland's exposure to Anglo to be in the region of €33-39 billion, the estimate once again echoed in international analysts estimates (S&P),
  5. After international bond markets have shown total disapproval for the Government handling of the recession, bidding both bond yields and CDS spreads to historic highs
our officials remain in a deep denial about both the extent of the problems and the required course of action.
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