Reuters say Ireland should abandon the Anglo seniors
(emphasis mine)
"The Irish government will reveal the full horror of the cost of rescuing Anglo Irish on Sept. 30. It has already signaled bad news for the 2.5 billion euros of subordinated debt, but it is desperately trying to draw the line and support the 14.1 billion euros of senior debt.
"It's cosseting the bondholders because it fears further damage to its own creditworthiness if it walks away. But if the Anglo bill is as big as outsiders fear, its support will have the opposite effect. Even as the Irish prime minister talked on Sept. 28 of a "manageable plan," the spread on Irish sovereign debt widened to a record 475 basis points.
"The last official estimate of the rescue bill, 25 billion euros, looks hopelessly optimistic. Ratings agency S&P estimates it at 35 billion euros, while BarCap says 48 billion for the sector, or over a quarter of Ireland's 163 billion euro GDP. [My own estimate of 38.6bn on the upper side is now patently below external consensus, despite being branded 'outrageous' and 'outlandish' by several insiders in the past]
"The Sept. 30 statement is expected to contain a best estimate and a worst case. If the best estimate is near S&P's figure, further downgrades of Ireland's sovereign debt are likely. However, if the government were to abandon the senior bondholders, the saving -- equivalent to a tenth of Ireland's GDP -- would give the state the chance to work its way out of its economic hole."
Here we have: S&P, RBS, Barclays, Reuters, WSJ, FT, Sunday Times (Irish edition - hat tip to F.F.) and all genuinely independent analysts are now saying - shave the seniors, burn the subordinates. Government still resisting. For how long can it afford demolishing our own economy to prolong the inevitable?
Here we have: S&P, RBS, Barclays, Reuters, WSJ, FT, Sunday Times (Irish edition - hat tip to F.F.) and all genuinely independent analysts are now saying - shave the seniors, burn the subordinates. Government still resisting. For how long can it afford demolishing our own economy to prolong the inevitable?
ReplyDeleteIreland's wellbeing is not the focus of our officials who dance to Trichet's whistle, a EU lead tune, pay senior bondholders, regardless what it takes! Ireland is a pawn on the chess board of EU Interests, and we are sacrificed to keep the EURO Lie alive. - Sickening! -
Yes, but Constantin, surely there is a danger of getting too fixated on the subordinated debt-holders. I mean, in the greater scheme of things, how important are they really. I appreciate the principle at stake but there is a persistent myth abroad that our banking crisis is the cause of our economic problems. Surely it's the deficit NOW that's the real challenge. I know that the Bank situation is making it worse but even if the banks were wholly solvent our government would be still in grave trouble - no? I mean if Lenihan torches the subordinated debt holders, it buys him (in purely fiscal terms and ignoring reaction of markets etc..) what, one quarter of breathing space. I have a suspicion that even if the government does the right thing with the subordinated debt that this act of attempting to escape trouble will, in fact, crystallise the problem with the rest of the fiscal problem. What I'm saying is that the argument over Anglo subordinated debt is an argument about principle and not about money. The money is relatively small beer compared to the size of the problem... Do I have that right?
ReplyDeleteTo the outside world the Anglo debt and the our budget deficit are one.
ReplyDeleteAnd in reality, they are one because the taxbase of Ireland is being asked to fund both.
Great work Constantin.
I cannot understand this governments unwillingness to come to some sort of arrangement over the Anglo debts with the creditors.
By rights, the fact that this bank is such a basketcase and if the government really had the welfare of this state at heart, would open the books of Anglo to all of the independent economists like you and others and allow them to see the full picture as to why they're insisting on repaying every single cent owed.
The financial policy of European Union is one huge mistake in this year.This step of Anglo Irish Bank creates the next financial imitation on stock market. Ok, bondholders have a trading chance, but this strategy of A.I.B. doesn´t deal with satisfaction of every interested subject.
ReplyDelete