Sunday, April 1, 2012

1/4/2012: Flightless dodo - the Hunt of Chief Noonan

I am not usually prone on updating my past posts, but the Promissory Notes 'deal' announced last week by Minister Noonan just keeps on giving more and more backlash and analysis. So:

  • My original post here.
  • Note the updates in the above
  • FT Alphaville view here which is broadly in agreement with my view and with links I posted in the original post updates.
  • Interesting information coming out of ECB on Minister Noonan's claims that the 'deal' is a part of some 'broader plan' - via the Irish Times, here.
Reiterating my view:
  • Promo Notes have been paid, not deferred
  • Payment of Promo Notes was originally to be based on Government borrowing cash from the Troika. Under the 'deal' it has been replaced by the Government borrowing cash from BofI
  • Payment of Notes under the 'deal' cost us more in new debt and increased deficit in 2012, but will decrease interest payment in 2013 compared to original arrangement. Net effect on interest cost - nearly a wash.
  • The 'deal' is NOT (see ECB official statement) a part of any 'broader deal'.
  • The ECB are now clearly on a defensive - which means they will be unlikely to support any further 'deals'.
Having gone out with a brave claim to spot a bald eagle soaring in the sky and get a feather for his war bonnet, Chief Noonan came back with a smudgy mud-print of a dodo, a bill for €400mln+, and a promise to go hunting again. Next stop, trading gold for glass beads... oh, they sparkle so nice.

(Obviously - an allegorical analogy. For those rare readers lacking in humor department.)

On a serious note - I find it discomforting and sad that an excellent seasoned politician and a very promising Minister for Finance has been forced into this position of defending the failure. Let's hope his luck (and progress) change in the nearest future.
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