- 2011-2014 deficit financing: €17bn in 2011 (accounting for expected increase in interest payments), €16bn in 2012-2014 annually (allowing for €15bn adjustment in 2011-2014 framework to be published by the Government) = €65bn
- Banks capital demand: €37bn in residual capital losses including Nama and incorporating expected mortgages defaults of €12bn
- Bonds redemptions forthcoming (hat tip to Brian Lucey): commercial paper =€ 6.4bn in 2011, redeemable out of IMF loan and thus non-replicative over 2012-2014, bond issues €4.4bn in 2011, €5.6bn in 2012 and €6bn in 2013, to the grand total of €22.4bn
- Banks liquidity supply - immediate draw on IMF funds - €28-35bn
Government has available ca €20bn (nominal) reserves from NTMA and ca €12bn in liquid funds from NPRF that can be accessed, implying net demand on IMF/ECB funding is €120-127bn.
Assuming the expected haircut on all bondholders in Irish 6 covered institutions implies additional savings of ca €10bn not factored in the above. However over the years 2012-onward I expect Nama to start showing losses. In addition, I suspect that the Exchequer will have to cover losses in the Central Bank of Ireland relating to their lending to the Anglo, which can be in excess of €10bn.
Interest charge on the IMF/ECB loan is likely to be around 5%, providing for a demand for €6bn in annual interest repayments.
6 comments:
Do you expect there is likely to be any collateralised lending? How would that affect the rates?
Hi Constantin,
I only wish our gombeen government would give us these figures and tell us the truth - but even in this dark period in our nation's young history they still treat us with contempt.
So, thank you for your concise analysis of the mountain of debt facing us - keep up the good work!
Your figures suggest that once again Lenihan(and the Government) is misleading at best, lying at worst, in relation to their "60-70bn estimate and definitely not more that 90bn". More deceit.
Hi Constantin,
The figure is certainly in the 150 - 200 region; as there are still high costs related to this government's strategy and also in the banking system. Their estimates of less then 90 are based on false economic principles and a "hope-for-the-best" strategy: thus take their figure of 60-70 and multiply it by Pi and that will be the real figure (just look at all their historical projections in the past)...
There needs to be a 50% reduction in government costs along with 60% reduction in the banking sector for the country as a business to survive over the coming 5-7 years.
Part of the IMF/ECB funding terms should be salary caps for the government and banking sectors and any sector that benefits from these funds... Paying government and banking executives above 150K and bonus is comical and IMF/ECB should insist on full visibility on all spending on a quarterly basis for the next 5-7 years...
Regards,
Bruce
Would we not be better off defaulting??
You certainly wouldn't.
I cannot say precisely, but that would have a huge negative impact on country's future economic stability, if it gets out of this mess.
Anyways, about "60-70bn estimate and definitely not more that 90bn" - we all knew that was not true.
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