What happens if Ireland became bankrupt?

Clytus

What happens....are we declined loans?...do the IMF step in and bail us out?
Do the CS/PS pay cheques bounce like a ping pong ball?

What exactly happens does anyone know

Économiste Monétaire

If, hypothetically, the country defaulted on its external debt then we would be ostracised from financial markets. Capital flows to Ireland would stop. Also, the IMF would step in to restructure the debt to ensure that private debt holders lose as little as possible. We would become, effectively, left out of the world economy/political system until we agreed to pay the debt back.

We would probably renegotiate the defaulted bonds to a percentage of the debt, say, for example, 80 per cent. You have to recognise that a country is not like a person, i.e. we guarantee our mortgages with the physical house, so the main incentive to pay back external debt is access to funding for future projects.

Run_to_da_hills

As Proverbs 22:7 puts it well "The rich ruleth over the poor, and the borrower is servant to the lender".

If Ireland defaulted on national loans the country would find it very difficult or impossible to secure future finance. The country would in effect become a “slave” to its creditors.

The Government would be then forced to take whatever drastic action is deemed necessary to be able to secure and repay its creditors.

seahorse

Jesus, this is scary stuff! :eek:

Time Magazine

seahorse wrote: »

Jesus, this is scary stuff! :eek:

Our public debt is far smaller (as a % of our income) than it was back in the day. Fell in the region of 80% between 1995-2005.

seahorse

The Economist wrote: »

Our public debt is far smaller (as a % of our income) than it was back in the day. Fell in the region of 80% between 1995-2005.

Well I'll sleep a bit better after reading that! Thanks!

The Economist

The Economist wrote: »

Our public debt is far smaller (as a % of our income) than it was back in the day. Fell in the region of 80% between 1995-2005.

what about private debt and the bank guarantee:eek:

Time Magazine

Private debt has soared, but that wouldn't be the State becoming bankrupt.

Of course that changes when the State guarantees the banks, but even if all the banks were to go bankrupt we wouldn't lose all of that money of that guarantee. Banks still have many assets etc etc. The cost to the State is guesstimated to be in the region of 4% of GDP. That's still nothing 80's debt levels.

fumpidge

Run_to_da_hills wrote: »

The Government would be then forced to take whatever drastic action is deemed necessary to be able to secure and repay its creditors.

What drastic actions would you be talking of?

asdasd

What drastic actions would you be talking of?

In general it just means rescheduling loans. Not a biggie. The problem is that the cost of public debt servicing would then increases as creditors would not be willing to pay low interest on government debt, as it would not be a sure bet ( in the case where we fully defaulted Irish bond interest rates would go through the roof). I am not sure how this would affect general interest rates in the Irish economy, as we are part of the Eurozone, but it would affect subsequent government borrowing. Had we our own currency long term interest rates would increase, and thus mortgage rates.

mumhaabu

Ireland's current lot of problems are directly related to the bad governance the Country endured under Charles Haughey of Fianna Fail during the 1980's. We still have our debt except Bertie Ahern's government privatised it completely onto the Shoulders of the private individual.

Our financial markets were deregulated and four state owned banks were privatised namely, Irish Life, TSB, ACC Bank and IIC Bank.

Ireland's emerged out of the recession of the 1980's under leadership of Garrett Fitzgerald, who initiated a policy of frugalness which included the lower corporation tax and investments in education. Ireland's manufacturing economy related to the Dot-com bubble happened this was also helped by National events like the World Cup of 1994 which boosted confidence enormously.

Also the children of the 1970's and 1980's who left for America, England and Australia began flocking home with well over 100,000 returnees. These people brought massive new skills and entrepreneurial spirit to Ireland as never seen before. Then with the flow of US dollars from the returnees; houses and businesses were built as never before. Ireland had confidence and Fianna Fail could do no wrong, then in August 2000 the Dotcom bubble burst and we entered a slight contraction made worse by 9/11 (which ironically drove more Irish home along with new anti-immigration stances from America).

Fianna Fail with control of nearly every council in Ireland then began the biggest private building spree ever seen in Ireland, planning permission was give out left right and centre and thus the great pyramid scheme of the Irish Housing Bubble began, headlines read "average house price to be €3million in 2010" buy now so like scmucks we all bought into it and the banks were begging people to take loans and with deregulation and the new Euro money was worth nothing in the bank anyway. We voted No to Nice and were then forced to vote again as we were holding up the show and then in 2004 the floodgates opened and half of Eastern Europe relocated to the British Isles, people on €300 a week were owning €250,000 homes and Polish tenants were paying the mortgage and those tenants were busy building the Pyramid further higher, things were so intense the ESB & Eircom were giving 9 months for some homes to be connected to utilities.

With all the new houses built on borrowed money Government spending sky-rocketed like an Arab Sheik drunk on Oil money. Ireland was spending like there was no tomorrow all on cheap imported credit, these bonanza years saw the Government pay off 80% of the Debt accrued in Haughey years, the rest was squandered on white elephants like Abbotstown, PPAR's and wages increases every other day to the Public service, the Unions were unhappy as they had nothing to complain about, the Public service ballooned and the HSE just kept getting money thrown at it in the hope it would go away and sort itself out. The SSIA's were thought up to buy the 2007 election and to cool inflation as there was so much money around too.

Our Economy was based on unsustainable cheap credit and this was used to plug the national debt and our Economy now is in a far worse situation than it was facing into the 1980's, there will be no EU grants and we will be expected to fund it now!. Ireland's finest hour is over and Europe's darling is now her basket case and we are headed the same way as several civilisations before us,

Nauru collapsed when her phosphates ran out
Iceland is now on the brink, its one trick pony is bleeding slowly to death.
Spain similar to Ireland with a property booms and mass tourism on borrowed Credit card debt.
Manuas, Brazil experienced a massive Rubber boom around the turn of the 20th century.
Peru experienced a fishing bonanza until stocks collapsed
The gold rushes of the Wild West, several ghost towns exist in America a testament to unsustainable method of basing your economy on one industry.
Easter Island, Chile an ancient civilisation collapsed under similar circumstances to Modern Ireland

We have what is called Dutch Disease and I believe Ireland will not recover properly until around 2015 - 2020. Fianna Fail and Ireland will go down as the country that had it all and threw it all away to the Unions and Fat Cat bankers. Now to the Qantas office ASAP! One way please?

asdasd

Not a great analysis.

A) The increase in public debt in the eighties had no effect, or cause, on the private debt in the noughties. The two are not related.
Garret Fitzgerald should not be in charge of a chipshop, or more plausibly, a small academic department. It iwas Ray McSharry who turned it around.

Fianna Fail is a broad church. It is the home of McCreevy and Aherne, economic conservatives and populists. McCreevy wanted to curtail public spending in 2001 ( good article on this in the Sunday Times this w/e). He was turfed out and up to Europe.

There was no way to stop public spending increases anyway. We are still hearing about "underfunding" in the health service compared to other Europeans, without anyone explaining that our GDP growth caused by property, and increases in population ( a young one) could not be compared to aging European populations. We actually increased the spending on health three-fold, since this was based on the unsustainable propety boom which had to end sometime, it was a deferred taxation increase. There was no way to keep spending in check which would have reduced the percentage we spent on health relative to ( the fake) increases in GDP.


what did we get for that? Better paid consultants definitely. What else?

leninbenjamin

asdasd wrote: »

what did we get for that? Better paid consultants definitely. What else?

you're forgetting the bunch of half built toll roads.

Run_to_da_hills

Is this thread now becoming more appropriate since it started last October. :eek:

amacachi

Who knows? :eek:

gurramok

More appropiate yes, hence the debate on public sector pay

If we can't borrow anymore on markets due to perception(real or not) that we will default, there will be blank pay cheques for the public sector and the IMF will have to be called in.

All fun?

Duckle

What happens to your savings in the bank if the country goes bankrupt?

Run_to_da_hills

Duckle wrote: »

What happens to your savings in the bank if the country goes bankrupt?

If the country goes bankrupt along with weimar inflation your savings will be worthless. :eek:

Time Magazine

Run_to_da_hills wrote: »

<nonsense>

Let's put an end to this. Now. Run_to_da_hills infracted. We currently have negative inflation, inflation in the Weimar reached thousands of percent. Stop scare-mongering with references to inter-war Germany.

Duckle, in the first place the chances of us going bankrupt are small. Our debt levels remain lower as a % of GDP than in the 80s. Second, if it were to happen, the IMF have a history of being "concerned" with inflation, so don't listen to Rtdh. Third, your savings would almost certainly be perfectly safe.

I'm not a fan of this government, or particularly of the IMF, but they're not that stupid.