Erin go Bust

[Lord Tammerlain]

   Erin Go Bust         :      Information Clearing House: ICH

Is an article discussing the problems that Ireland is facing economically. Some rather large ones mind you

There was a bank run in Ireland on Wednesday. LCH Clearnet, a London based clearinghouse, surprised the markets by announcing it would increase margin requirements on Irish debt by 15 percent. That's all it took to send investors fleeing for the exits. Yields on Irish bonds spiked sharply as banks tried to close positions or raise the capital needed to meet the new requirements. The Irish 10-year bond soared to 8.9 percent by day's end, more than 6 percentage points higher than "risk free" German sovereign debt. The ECB will have to intervene. Ireland is on its way to default.

snip

Until September, Ireland had the legal option of terminating the bank guarantee on the grounds that three of the guaranteed banks had withheld material information about their solvency, in direct breach of the 1971 Central Bank Act. The way would then have been open to pass legislation along the lines of the UK’s Bank Resolution Regime, to turn the roughly €75 billion of outstanding bank debt into shares in those banks, and so end the banking crisis at a stroke.

With the €55 billion repaid, the possibility of resolving the bank crisis by sharing costs with the bondholders is now water under the bridge. Instead of the unpleasant showdown with the European Central Bank that a bank resolution would have entailed, everyone is a winner. Or everyone who matters, at least." ("If you thought the bank bailout was bad, wait until the mortgage defaults hit home", Morgan Kelley, Irish Times)

So, the Irish government could have let the bankers and bondholders suffer the losses, but decided to bail them out and pass the debts along to the taxpayers instead. Sound familiar? Only, in this case, the obligations exceed the country's ability to pay. Austerity measures alone will not fix the problem. Eventually, the debt will have to be restructured and the losses written down. Here's another clip from Kelly's article:

"As a taxpayer, what does a bailout bill of €70 billion mean? It means that every cent of income tax that you pay for the next two to three years will go to repay Anglo’s (bank) losses, every cent for the following two years will go on AIB, and every cent for the next year and a half on the others. In other words, the Irish State is insolvent: its liabilities far exceed any realistic means of repaying them

The amount of money Ireland is so far going to have to spend to cover bank loss's is massive. In a different article, I read that Ireland will have a deficit equal to 32% of GDP

2nd UPDATE: Irish 2010 Budget Deficit Will Be 32% Of GDP - WSJ.com

)--The Irish government's budget deficit will rise to 32% of gross domestic product this year due to the soaring cost of supporting the nation's stricken banking system, Minister of Finance Brian Lenihan said Thursday.

In a statement following the Central Bank of Ireland's publication of an estimate of the final cost of supporting Anglo-Irish Bank Corp. and other institutions, Lenihan said the government will announce a new, four-year budget plan in early November.

This is a potential future for the UK mind you, not as extreme I believe, but it will follow the same path

 

[paris]

Sad news.

Erin, why didn't you follow the advice of US-backed organisations warning you against the Lisbon Treaty.

Remember who stands ready to help when the ECB's money comes your way.

 

[Djoop]

Well, we (the dutch) have twice as much debt (60+%) evnthough we're a gas exporting country. We waisted 30 billion on ABN-AMRO we will never see back, two years down the road (another 10 billion in loans) and they're still losing money. Third quarter the dutch economic growth was -0.1%. I could go on and on, its a competition of bad news unfortunately...

 

[Infinite Chaos]

-- This is a potential future for the UK mind you--

If I had £1 for every post in this forum from my first join date that tells me the UK is about to go belly up...

 

[Lord Tammerlain]

If I had £1 for every post in this forum from my first join date that tells me the UK is about to go belly up...

Sometimes what people say are relatively true

The UK had the same sort of economic conditions as Ireland, a large housing bubble, over leveraged banks, a large trade deficit, and had some that were worse like a large government deficit before the crisis.

The problems the UK has faced over the last couple of years have not been fixed, and will get worse before they get better

 

[PeteEU]

Sometimes what people say are relatively true

The UK had the same sort of economic conditions as Ireland, a large housing bubble, over leveraged banks, a large trade deficit, and had some that were worse like a large government deficit before the crisis.

The problems the UK has faced over the last couple of years have not been fixed, and will get worse before they get better

Disagree fully.

There is one big difference between the UK and Ireland..

The UK is a big economy, yes declining, but it is a big economy with a big base to work off. Compared to Ireland, the UK has a big industrial base, and the UK has one thing Ireland does not.. the City of London financial area.

Ireland on the other hand built their massive economic growth of the last 20 years mostly on debt and low taxes and that aint good if you dont have the economy to meet the burden. The US and UK got away with it (so far) because of the size of their economies and favourable rating agencies and economic system. Ireland has lived the shadow of the UK economy during this crisis and has been some what protected until now. With international firms pulling up their tents in Ireland and moving to Eastern Europe instead, Ireland is loosing a big chunk of what the Irish tiger economy was... and what is left? Potato farming?

Now personally I smell speculators yet again. It is odd how after a quite time on the markets, and after earnings season, then suddenly focus is back on the suppose European sovereign debt crisis.... just as among others Ireland is in need to refinance some debt.. funny how that almost always happens lately.. And they are as usual dragging Portugal and Spain into it, but not the UK (a shocker!) or other countries like Holland.

I really hope that the European governments declare open season on speculators and put a million dollar bounty on their heads. Speculators are the scum of the earth and should be banned and imprisoned. They have made this crisis far far worse than it should have been and are driving nations of millions into the ground and often not even giving said nations a chance. I fully expect both Portugal, Spain and other European countries to be suddenly out of the blue be downgraded by the ratings agencies with in a month or two btw..

 

[Lord Tammerlain]

Disagree fully.

There is one big difference between the UK and Ireland..

The UK is a big economy, yes declining, but it is a big economy with a big base to work off. Compared to Ireland, the UK has a big industrial base, and the UK has one thing Ireland does not.. the City of London financial area.

Ireland on the other hand built their massive economic growth of the last 20 years mostly on debt and low taxes and that aint good if you dont have the economy to meet the burden. The US and UK got away with it (so far) because of the size of their economies and favourable rating agencies and economic system. Ireland has lived the shadow of the UK economy during this crisis and has been some what protected until now. With international firms pulling up their tents in Ireland and moving to Eastern Europe instead, Ireland is loosing a big chunk of what the Irish tiger economy was... and what is left? Potato farming?

Now personally I smell speculators yet again. It is odd how after a quite time on the markets, and after earnings season, then suddenly focus is back on the suppose European sovereign debt crisis.... just as among others Ireland is in need to refinance some debt.. funny how that almost always happens lately.. And they are as usual dragging Portugal and Spain into it, but not the UK (a shocker!) or other countries like Holland.

I really hope that the European governments declare open season on speculators and put a million dollar bounty on their heads. Speculators are the scum of the earth and should be banned and imprisoned. They have made this crisis far far worse than it should have been and are driving nations of millions into the ground and often not even giving said nations a chance. I fully expect both Portugal, Spain and other European countries to be suddenly out of the blue be downgraded by the ratings agencies with in a month or two btw..

The UK does have an industrial base but for the size of the UK economy it is rather small. Growth in the UK has been primarily from its financial services business. Given the poor state of most banks and the various bailouts of them, they are not going to provide real economic growth, and will most likely as in Ireland be a drain on taxpayers. Is it speclators that are helping to push Ireland into a crisis, sure, but speculators could not do it if Ireland was not in a bad state anyway

 

[PeteEU]

The UK does have an industrial base but for the size of the UK economy it is rather small.

Yes the UK industrial base is small considering the size of the UK economy (and considering of what it once was), but at least it HAS an industrial base. Ireland basically does not, and what there is, is slowly moving towards Eastern Europe... for now at least. It use to be that Ireland was the technological silicon valley of Europe... now many companies are moving away to cheaper wage areas and better markets.

Growth in the UK has been primarily from its financial services business. Given the poor state of most banks and the various bailouts of them, they are not going to provide real economic growth, and will most likely as in Ireland be a drain on taxpayers.

I also think you underestimate the financial services sector a tad. For example, 80%of world hedge funds are in London.... that is a lot of money. It is also why every British government protects the city tooth and nail and refuse to punish the banks as they should. As for growth.. in the UK yes it has been primarily because of the financial services sector but also like the US due to higher and higher housing prices and a lot of debt. It is not only the UK banks that have a ton of bad debt, but also the average Brit. Credit card debt in the UK is the highest in Europe by far last I looked, and only the US was higher and not by much if at all.

Is it speclators that are helping to push Ireland into a crisis, sure, but speculators could not do it if Ireland was not in a bad state anyway

Oh I agree fully. Ireland lived on the greed fumes coming from over the Atlantic and followed the same model. They were warned by many, but felt protected by their strong neighbour and the "system".

But as always in these supposed "free markets", the very fact that you can make a TON of money off a negative, is disgusting as hell. The speculators are investing tons of money in betting that Ireland goes down and are doing everything they can to insure this. They did it with Greece and made billions. It is that kind of speculation that disgusts me and it should be stopped.

 

[Lord Tammerlain]

Yes the UK industrial base is small considering the size of the UK economy (and considering of what it once was), but at least it HAS an industrial base. Ireland basically does not, and what there is, is slowly moving towards Eastern Europe... for now at least. It use to be that Ireland was the technological silicon valley of Europe... now many companies are moving away to cheaper wage areas and better markets.



I also think you underestimate the financial services sector a tad. For example, 80%of world hedge funds are in London.... that is a lot of money. It is also why every British government protects the city tooth and nail and refuse to punish the banks as they should. As for growth.. in the UK yes it has been primarily because of the financial services sector but also like the US due to higher and higher housing prices and a lot of debt. It is not only the UK banks that have a ton of bad debt, but also the average Brit. Credit card debt in the UK is the highest in Europe by far last I looked, and only the US was higher and not by much if at all.



Oh I agree fully. Ireland lived on the greed fumes coming from over the Atlantic and followed the same model. They were warned by many, but felt protected by their strong neighbour and the "system".

But as always in these supposed "free markets", the very fact that you can make a TON of money off a negative, is disgusting as hell. The speculators are investing tons of money in betting that Ireland goes down and are doing everything they can to insure this. They did it with Greece and made billions. It is that kind of speculation that disgusts me and it should be stopped.

My main expectation is that when this crisis is finally over the financial services business will be alot smaller on a global basis, and will return more towards its historical economic level. The industry world wide has become far too big and costly for the good of overall economy. Financial services are more of a cost center then a productive one. It is an essential cost admitedly, but it has become far too large a one. This shrinkage will hurt the UK

 

[Infinite Chaos]

-- The UK had the same sort of economic conditions as Ireland--

Essentially you are wrong, Ireland has tried to transform itself from a largely agrarian economy whereas the industrial base in the UK still exists. Granted the UK is not the world's manafacturer but it hasn't been for over a hundred years. Up till 2005, we were the 4th largest economy in the world (vying with France) and we've now been overtaken (as expected) by China. We still tie with France but we have a larger manufacturing base than France.

Where on the world economy list is Ireland? Where on the world economy list is Ireland's manufacturing base? Essentially, you're comparing 5/6th largest economy with the 38th?

The UK does have an industrial base but for the size of the UK economy it is rather small. --

It's still larger than that of France. Our manufacturing industry largely stopped trying to compete on cheap goods and became highly specialised.

Anyhow, moving back to the essential point of this thread - the Irish economy, it seems the Irish are in talks with the EU for possible financial support.

 

[Lord Tammerlain]

Essentially you are wrong, Ireland has tried to transform itself from a largely agrarian economy whereas the industrial base in the UK still exists. Granted the UK is not the world's manafacturer but it hasn't been for over a hundred years. Up till 2005, we were the 4th largest economy in the world (vying with France) and we've now been overtaken (as expected) by China. We still tie with France but we have a larger manufacturing base than France.

Where on the world economy list is Ireland? Where on the world economy list is Ireland's manufacturing base? Essentially, you're comparing 5/6th largest economy with the 38th?



It's still larger than that of France. Our manufacturing industry largely stopped trying to compete on cheap goods and became highly specialised.

Anyhow, moving back to the essential point of this thread - the Irish economy, it seems the Irish are in talks with the EU for possible financial support.

It is not the size of the economy that I am looking at, it is the overall conditions of the respective economies. High debt loads, a housing/property bubble, large trade and government deficits. All conditions that tend to lead to an economic crisis. As the reasons behind the economic crisis have not been worked through, the various countries that have the main issues will have another go round when the current upswing ends


If I were Ireland I would just let the banks go belly up, the costs of the bailout are going to be to huge for it to cover

 

[PeteEU]

Essentially you are wrong, Ireland has tried to transform itself from a largely agrarian economy whereas the industrial base in the UK still exists. Granted the UK is not the world's manafacturer but it hasn't been for over a hundred years. Up till 2005, we were the 4th largest economy in the world (vying with France) and we've now been overtaken (as expected) by China. We still tie with France but we have a larger manufacturing base than France.

Where on the world economy list is Ireland? Where on the world economy list is Ireland's manufacturing base? Essentially, you're comparing 5/6th largest economy with the 38th?



It's still larger than that of France. Our manufacturing industry largely stopped trying to compete on cheap goods and became highly specialised.

Anyhow, moving back to the essential point of this thread - the Irish economy, it seems the Irish are in talks with the EU for possible financial support.

You got any numbers on the size of French vs British manufacturing industry?

 

[Infinite Chaos]

You got any numbers on the size of French vs British manufacturing industry?

Somewhere yes - there's a thread from a while back where I discussed this with kaya08. I'll use the search function and get the sources I used earlier this year / last year.

Last year's figures are on various websites - UNIDO is a good source but I think their last data is from 2008 / 2009. Italy apparently has a larger manufacturing sector than either France or the UK but generally on the total GDP scale, France is above the UK and then it's Italy.

 

[PeteEU]

Somewhere yes - there's a thread from a while back where I discussed this with kaya08. I'll use the search function and get the sources I used earlier this year / last year.

Last year's figures are on various websites - UNIDO is a good source but I think their last data is from 2008 / 2009. Italy apparently has a larger manufacturing sector than either France or the UK but generally on the total GDP scale, France is above the UK and then it's Italy.

if you could find it would be much appreciated, because I cant hehe. Been looking for manufacturing statistics for a while but the places I find are behind pay walls..

 

[Infinite Chaos]

Just searched back and can't find it. I had also linked to a Guardian Article from last year that discussed the statistics.

Strange.. but I know the forum software was changed. I must be using the wrong search terms - however the links specifically discussed France and UK manufacturing sectors. At the very least now though - you can use the ONS for UK figures. My french isn't that good so I wouldn't know what the French equivalent for the Office of National Statistics would be.

Sorry.

 

[PeteEU]

Just searched back and can't find it. I had also linked to a Guardian Article from last year that discussed the statistics.

Strange.. but I know the forum software was changed. I must be using the wrong search terms - however the links specifically discussed France and UK manufacturing sectors. At the very least now though - you can use the ONS for UK figures. My french isn't that good so I wouldn't know what the French equivalent for the Office of National Statistics would be.

Sorry.

been looking at eurostat and they have some benchmarks like number of employed in manufacturing and so on. But as for the "size" aspect, I guess it really depends on which statistic you use. Money wise, employment wise, GDP wise, and so on.

 

[paris]

My french isn't that good so I wouldn't know what the French equivalent for the Office of National Statistics would be.

List of national and international statistical services - Wikipedia, the free encyclopedia

INSEE - Wikipedia, the free encyclopedia

http://www.insee.fr/en/default.asp

As a side note, last I heard Sarkozy's gouvernment wanted to increase France's manufacturing industry because it was lagging behind that of (I believe it was) the UK.

...

My mistake, he was comparing France to Italy and Germany:

"La France doit demeurer une grande nation industrielle", a souligné Nicolas Sarkozy, rappelant que l'industrie ne produisait que 16 % de la valeur ajoutée en France, contre 23 % en Italie ou 30 % en Allemagne. "Nous sommes le grand pays européen le plus désindustrialisé (…)", a-t-il insisté.

http://www.gouvernement.fr/gouverne...-doit-demeurer-une-grande-nation-industrielle

 

[Infinite Chaos]

-- As a side note, last I heard Sarkozy's gouvernment wanted to increase France's manufacturing industry because it was lagging behind that of (I believe it was) the UK.

...

My mistake, he was comparing France to Italy and Germany --

Some people think of GDP as being only the physical goods and services that an economy can produce so it's easy to mistake having a larger manufacturing output than another country means that your economy is bigger.

I remember the Europe chart showing Germany at the top (biggest economy AND biggest manufacturing sector); France second (second biggest economy but fourth biggest manufacturing sector) UK third (third biggest economy and third biggest manufacturing sector) then Italy in fourth (fourth biggest economy and second biggest manufacturing sector).

The UK managed to beat France and Italy in the 1990s (up till 2004 I think) but that was largely fueled by debt driven advances and the housing sector. Lots of people, even in the UK think the UK only has a financial sector and that there's no manufacturing left. While it's true we don't have many universal company names left we have many small highly specialist manufacturers here punching way above their weight and size in chemicals, engineering and all sorts of other sectors.