Monday, February 11, 2013

11/2/2013: Bailout 3.0 and precedent research

Ireland Bail-out 3.0 (this time more benign than 1.0 - the original Troika lending arrangement, but less benign than 2.0 - the 2011 alteration to the terms of the Troika lending arrangement in the wake of Greek bailout 2.0... I know, one can wreck one's head on this forest of bailouts) has been heralded as a 'historic' achievement.

Here is the original (unedited) version of my paper from 2010 on

  1. the necessity of such a deal, which makes me deem the deal to be net positive, and 
  2. the volumes of relief that we need (well in excess of EUR4.3-6.9 billion NPV benefit my model estimates the deal will provide over 40 years duration) which makes me deem the deal to be insufficient in terms of relief provided.

Note, the title of the book in which this featured as a chapter is What if Ireland Defaults.


Liam O'Sullivan said...


Really comprehensive article.

I feel however the need to highlight a rather significant issue regarding your projections in your 2010 paper, regarding likely mortgage arrears, that have not come to pass. I know no one can get all predictions right but surely your reference to 30% arrears by volume was extreme.

You say on page 12;

Given the trend to-date, we can expect that by the end of 2011 there will be some 107,000-114,000 mortgages in distress in Ireland. By the end of 2012 this number can rise to over 161,000 or some 21% of the total mortgages pool in the country. When considered in the light of demographic distribution and vintages, mortgages that are likely to be in arrears around the end of 2012-the beginning of 2013 can account for up to 30% of the total value of mortgages outstanding.

TrueEconomics said...

Ok, so how many mortgages were in distress (I consistently and clearly define 'distress' as defaulted, in arrears or restructured and not in arrears) in Q3 2012? 23.665% of the total. What was the outstanding volume? 28.62%.
That is Q3 2012 figures. I'd say pretty darn close.