"NAMA debt may be classified as outside the Government sector by the EU."

eamonnm79

From RTE.IE

"The NTMA says Ireland's national debt is forecast to rise to 73% of economic output by 2013, without taking into account debt issued in connection with the National Asset Management Agency (NAMA).

But the agency says it is possible that NAMA debt may be classified as outside the Government sector by the EU."
So Nama debt will not be government debt. Anyone know how this makes sense?
Its debt that the irish taxpayer will have to repay with interest. How is it not Government debt?

Économiste Monétaire

From my understanding of ESA 95, it will count in the calculation of general government consolidated gross debt (the number ECOFIN uses in connection with 'debt not exceeding 60% of [nominal] GDP' criteria (EDP), as laid down in Maastricht).

eamonnm79

Hi EM
Read page 4 of this.
http://www.ntma.ie/Publications/2009...ease230709.pdf

The NTMA are thinking that nama debts will be "off balance sheet"

blucey

eamonnm79 wrote: »

Hi EM
Read page 4 of this.
http://www.ntma.ie/Publications/2009...ease230709.pdf

The NTMA are thinking that nama debts will be "off balance sheet"

Hardly matter how Eurostat count it. Its still debt that we will have to repay. This is an enron siv solution.

Hasschu

The Irish national debt can rise to well over 100% of GDP before the wheels come off the bus. It is obvious to all concerned that the Irish gov't has a problem to deal with. There is a grace period that will end when the Lisbon amendments are voted in or voted out. At that point the gov't will have to put its cards on the table by taking measures that will address the deficit starting immediately. Outside funding will be necessary and there are only two viable sources namely the ECB and IMF. Either one of whom will demand a concrete five year plan with milestones and penalties built in. All could end well if political stability and social cohesion are sustained.
All succesful countries make it through tough times if the gov't and the people are able to make the sacrifices required in the short term. Should a charismatic leader emerge capable of taking us back to the days when we gloried in our isolationism, poverty and religious piety then it will be game over.

eamonnm79

Hasschu wrote: »

The Irish national debt can rise to well over 100% of GDP before the wheels come off the bus.

Hi Hasschu
The ND will be over 100%
The projections for the ND without Nama are 73% of ND in 2013.
So if the GDP is 170BN the ND without nama will be 124BN.
Then if we add on 80BN for nama we get 204 BN which is 120% of GDP.
Add to this that individuals (not including companies) currently have 170BN in private debt.

blucey

blucey wrote: »

Hardly matter how Eurostat count it. Its still debt that we will have to repay. This is an enron siv solution.

But raptor was such a cooler name then NAMA.

Hasschu

Eamonnm79- The projection is for over 120% by 2013 as you state. Italy has survived similar ND levels and so can Ireland. Canada had a similar dilemma in the 1990s and the Federal Gov't addressed it by downloading costs to the Provinces and Cities/Regional Gov'ts. You can see similar strategies emerging in SNIP NUA with the reorganization of County Councils and Municipalities. Some of the pain will be passed from Dublin to the new entities. The new entities will be given taxing power, property taxes being the most likely with licencing and other fees in a supporting role. The European supportive state model that we have become accustomed to will be off the table for at least a decade. Those now dependent on the state for their income whether as employees or as recipients of services, pensions or support payments will suffer greatly. The sooner the adjustment starts the more likely the country is to survive. We have the advantage of being in the EU and having a sound Euro as our currency. The Europeans will do much hand wringing and political posturing but they will ease our pain because it is in the interest of the EU as a whole that they do so. This does not mean that we will get off scot free.

Flamed Diving

Is this likely to matter to sovereign bond markets how we cook the books?

eamonnm79

Hasschu wrote: »

Eamonnm79- The projection is for over 120% by 2013 as you state. Italy has survived similar ND levels and so can Ireland. Canada had a similar dilemma in the 1990s and the Federal Gov't addressed it by downloading costs to the Provinces and Cities/Regional Gov'ts. You can see similar strategies emerging in SNIP NUA with the reorganization of County Councils and Municipalities. Some of the pain will be passed from Dublin to the new entities. The new entities will be given taxing power, property taxes being the most likely with licencing and other fees in a supporting role. The European supportive state model that we have become accustomed to will be off the table for at least a decade. Those now dependent on the state for their income whether as employees or as recipients of services, pensions or support payments will suffer greatly. The sooner the adjustment starts the more likely the country is to survive. We have the advantage of being in the EU and having a sound Euro as our currency. The Europeans will do much hand wringing and political posturing but they will ease our pain because it is in the interest of the EU as a whole that they do so. This does not mean that we will get off scot free.

Anyone making economic predictions with the degree of certainty you just did needs to think a little harder.

"Those now dependent on the state for their income whether as employees or as recipients of services, pensions or support payments will suffer greatly."
Why would a state employee suffer more than a private company employee?
To be more accurite any PAYE worker will suffer greatly(if they are lucky enough to keep thier jobs)

eamonnm79

Flamed Diving wrote: »

Is this likely to matter to sovereign bond markets how we cook the books?

Since the markets seem to be reacting much more in tune with perception rather than reality I would say that initially they would not care/ realise but if we get cought with our pants down and there would be lots of ways we could get cought out they will come down on us like a ton of bricks.
I said bricks!

Flamed Diving

eamonnm79 wrote: »

Since the markets seem to be reacting much more in tune with perception rather than reality I would say that initially they would not care/ realise but if we get cought with our pants down and there would be lots of ways we could get cought out they will come down on us like a ton of bricks.
I said bricks!

Well, my point is that debt is debt, no matter if the EU are happy with how it is dressed. I doubt very much that lenders will be wowed by such manovuers.

eamonnm79

Flamed Diving wrote: »

Well, my point is that debt is debt, no matter if the EU are happy with how it is dressed. I doubt very much that lenders will be wowed by such manovuers.

Nothing has made me think that Irish bonds are less risky now than 3 months ago.
However over the same period the irish bonds are selling 2% above German rates as opposed to 3%.
Luckily enough for the tax payer this is working in our favour with regard to interest on our increasing debts.

So I guess I disagree.
"Such manouvers" would seem to me to be important to investors.

Flamed Diving

eamonnm79 wrote: »

Nothing has made me think that Irish bonds are less risky now than 3 months ago.
However over the same period the irish bonds are selling 2% above German rates as opposed to 3%.
Luckily enough for the tax payer this is working in our favour with regard to interest on our increasing debts.

So I guess I disagree.
"Such manouvers" would seem to me to be important to investors.

The drop in the borrowing rate occured before this announcement. It occured because of the governments moves to get the exchequer finances under control, back in April and subsequent moves/bord snip. I am interested to see how they react to this, I doubt they will be budge for a smoke & mirrors trick.

Anonymous1987

The markets even the bond markets are dominated by expectations. I would imagine the increasingly positive figures coming from the US and Europe have had a major role to play in reducing the Irish debt expense given that Ireland is so open to these markets. I can't see why the Bord Snip announcement to cut major costs in government expenditure shouldn't bring the interest cost down further as initial plans to do so where regarded favorably by the IMF. Surely this relatively solid plan to manage the tax shortfall can't hurt. If the plans for NAMA where as transparent comprehensive and as specific as An Bord Snip Nua we would really be making headway in tackling the economy.

Flamed Diving

Anonymous1987 wrote: »

The markets even the bond markets are dominated by expectations. I would imagine the increasingly positive figures coming from the US and Europe have had a major role to play in reducing the Irish debt expense given that Ireland is so open to these markets. I can't see why the Bord Snip announcement to cut major costs in government expenditure shouldn't bring the interest cost down further as initial plans to do so where regarded favorably by the IMF. Surely a relatively solid plan to manage the tax shortfall can't hurt?

Based on the recent NTMA announcements:

Ireland Leaves Door Open to More 2009 Bond Sales

By Anchalee Worrachate

July 22 (Bloomberg) -- Ireland may consider selling more bonds than initially planned this year to help finance the 2010 budget deficit as investor sentiment toward the country improves, according to the nation’s debt agency.

While the government has no “specific” plan, it may tap the markets if there is enough demand, said Oliver Whelan, the head of funding and debt management at the Dublin-based agency. Ireland has raised 22.7 billion euros ($32.2 billion), or 90 percent, of the 25 billion euros earmarked this year, he said.

“If the opportunity in terms of market demand is there, I wouldn’t rule out at some stage doing some elements of pre- funding,” Whelan said in an interview yesterday. “There is no particular plan to pre-fund at this stage.”

Ireland’s economy shrank 2.3 percent in 2008 and may contract as much 12 percent in the three years through 2010, the most for an industrialized economy since the Great Depression, the Dublin-based Economic and Social Research Institute said in April. Standard & Poor’s lowered Ireland’s credit rating twice this year, to AA, citing the nation’s deteriorating finances.

The yield difference, or spread, between 10-year Irish bonds and the benchmark German bund narrowed 1 basis point to 200 basis points today. It peaked at 284 basis points in March, the widest since the introduction of the euro in 1999.

Bond Returns

Irish bonds are the best-performing securities in the euro region this month, returning 2.1 percent, according to Bloomberg/EFFAS indexes. That compares with a 0.4 percent gain for benchmark German debt.

“Sentiment has improved,” said Whelan. “Ireland is serious about addressing the budgetary issues and the market is beginning to appreciate that.”

The country’s budget deficit will rise to 10.8 percent of gross domestic product this year, more than three times the European Union limit, according to the government.

Finance Minister Brian Lenihan said on July 16 that the government faces “difficult policy options” as it tries to reduce the deficit. He was responding to the publication of a government-commissioned report that recommends cutting 17,300 public jobs, reducing welfare spending and closing some state agencies and police stations to help save 5.3 billion euros.

To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net

Last Updated: July 22, 2009 06:47 EDT




Terms of Service | Privacy Policy | Trademarks

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a0XahTpqFHOw

eamonnm79

Flamed Diving wrote: »

The drop in the borrowing rate occured before this announcement. It occured because of the governments moves to get the exchequer finances under control, back in April and subsequent moves/bord snip. I am interested to see how they react to this, I doubt they will be budge for a smoke & mirrors trick.

I wasnt trying to ascribe the drop to the smoke and mirrors trick.
You say that the move is due to "the governments moves to get finance under control"
My point would be that at this point they have really only talked about getting the finances under control without yet having done anything so, i would still argue that the moves from 3 to 2 % is due to perception rather than reality and if perception (not reality) changes quickly in a negative way
(Lets say if people took to the streets demanding that the mortgage rates which are going up be reversed) the rates could go back to 3%. In Short the financial markets are extreemly sensitive to sentiment, preception is reality.
So as long as that is the case smoke and mirrors tricks can have an effect and are worth persuing.

Thats all I was trying to say.

I heard a BBC Financial expert say yesterday that they are a bit worried the the markets are rebounding to quickly.
For me this suggests that quantitive easing measures are being too effective and may well lead to a deeper double dip than nessesary.
It also shows the degree of manipulation that can occour in the markets on a massive scale that has nothing to do with how the companies are performing.

Flamed Diving

eamonnm79 wrote: »

I wasnt trying to ascribe the drop to the smoke and mirrors trick.
You say that the move is due to "the governments moves to get finance under control"
My point would be that at this point they have really only talked about getting the finances under control without yet having done anything so, i would still argue that the moves from 3 to 2 % is due to perception rather than reality and if perception (not reality) changes quickly in a negative way
(Lets say if people took to the streets demanding that the mortgage rates which are going up be reversed) the rates could go back to 3%. In Short the financial markets are extreemly sensitive to sentiment, preception is reality.
Thats all I was trying to say.

Perception is all there is. A bond market is a bunch of people trying to predict the future, essentially. They will see through this announcement between Ireland and the EU, although it may lead to more capital coming from the ECB itself, rather than the markets.

Hasschu

"Why should public service employees suffer more than a private company employee ?" Because most of the suffering has already occurred in the private sector. Construction, tourism, auto sales (big ticket in general) have taken a very serious hit. The casualties are for the most part now receiving assistance from the public purse. The private sector problem is well on the way to stabilizing as high unemployment will make wages competitive and at least stop the erosion of jobs to lower cost countries. The 50% drop in the value of commercial properties and the high vacancy rates will add to our cost competitiveness. I am quite convinced the private sector will pull out of this and grow slowly but steadily in the coming months.

Public service employees have for the most part been immune to the repercussions of our economic downfall and this will continue until the day the Lisbon vote is held.

After Lisbon the gov't will have to face reality and do what has to be done for the country to survive. As a country we will not be in a position to decide whether those dependent on gov't support no matter how deserving they are will continue to receive it. Our gov't will be sitting down with beady eyed ex bankers now employed by the ECB and IMF and will have no choice but to come up with a five year plan that those ex bankers consider viable. At that point our gov't will cut its suit according to its cloth, the suit will not cover all those deserving of cover. Some will be naked but the vast majority will be at least partially covered. Ireland has a governance problem not a private sector problem. The extension of guarantees to the banks and their bondholders cooked Ireland's goose. NAMA pushes the problem down the road a few years so instead of dragging the economy down for 3 to 5 years it will now be 5 to 10 years.

Anonymous1987

Thursday should shed some light on NAMA. Given the flaws inherent in the initial proposals specifically the discount rate may fail to reduce certainty and instill confidence in the financial system as much as hoped.

http://www.irishtimes.com/newspaper/breaking/2009/0728/breaking21.htm

eamonnm79

Anonymous1987 wrote: »

Thursday should shed some light on NAMA. Given the flaws inherent in the initial proposals specifically the discount rate may fail to reduce certainty and instill confidence in the financial system as much as hoped.

http://www.irishtimes.com/newspaper/breaking/2009/0728/breaking21.htm

Yep the more favourable the governments proposals are for the banks (and therefore unfavourable to the taxpayer) the more favourably the markets will react.

Small haircuts ( I doubt the size will be released on thurdsy) should be met with Large increases in bank shares.
If it doesnt it means the market already has assumed the haircut will be very small.
Its a pity the government didnt get proper value for money when investing the 7 Billion in the banks.

I was listening to an economics reporter from the English Independent on Drive time.
Paraphrasing
He said that in the current climate governments have a choice about wheater to bolster the banks or the economy and that Mr Lenihan has decided on helping the former to the deriment of the latter.

Anonymous1987

eamonnm79 wrote: »

Yep the more favourable the governments proposals are for the banks (and therefore unfavourable to the taxpayer) the more favourably the markets will react.

Small haircuts ( I doubt the size will be released on thurdsy) should be met with Large increases in bank shares.
If it doesnt it means the market already has assumed the haircut will be very small.
Its a pity the government didnt get proper value for money when investing the 7 Billion in the banks.

I was listening to an economics reporter from the English Independent on Drive time.
Paraphrasing
He said that in the current climate governments have a choice about wheater to bolster the banks or the economy and that Mr Lenihan has decided on helping the former to the deriment of the latter.

To be fair if the government doesn't support the banks, the economy can't function without the financial system. Catch 22, and then of course moral hazard kicks in.

eamonnm79

Anonymous1987 wrote: »

To be fair if the government doesn't support the banks, the economy can't function without the financial system. Catch 22, and then of course moral hazard kicks in.

Well they could nationalise BOI and AIB and let the rest go to the wall so that share and bond holders loose rather than the tax payer.

Or a more moderite approach still involving temp nationalisation from Karl Whelan
http://www.irisheconomy.ie/index.php/2009/07/28/not-too-late-for-a-different-approach-to-the-banking-crisis/

Flamed Diving

eamonnm79 wrote: »

Well they could nationalise BOI and AIB and let the rest go to the wall so that share and bond holders loose rather than the tax payer.

Right, so we have just executed this swift and brutal nationalisation. We still need around €150bn over three years, perhaps more.

What next? Where do we get the money from?

DJDC

Whats so pathetic is that this while NAMA/Irish economic collapse/Irish bank shares dive is all because of one thing..property. Not complex derivatives, not even leveraged loans just simple loans for property development.

Were the risk teams in AIB and BOI on valium or do these banks even have a risk management dept. The complete lack of competency in the Irish banks is the real reasons why they have been hammered by the markets. Did they not see that having all their business in an increasingly oversupplied and overpriced area was idiotic beyond mention.

Anonymous1987

I know this is kinda moving away from the economics of the situation but I get the feeling that the government will not nationalise the banks mainly because of the relatively large voter base of shareholders in the banks. Anyone have figures on the number of shareholders in AIB and BOI? I imagine they are pretty high. Angry shareholders losing their investments because of nationalisation would be politically explosive even if NAMA might be easier on the tax payer. I guess you could argue the flip side that the government must now raise taxes and cut costs to help fund NAMA but it seems this move is not as politically sensitive. Any thoughts on this?

eamonnm79

Flamed Diving wrote: »

Right, so we have just executed this swift and brutal nationalisation. We still need around €150bn over three years, perhaps more.

What next? Where do we get the money from?

The exact same place we are getting it now.
The ECB. They have no problem lending to nationalised banks.
Why would you think they would?

eamonnm79

Anonymous1987 wrote: »

I know this is kinda moving away from the economics of the situation but I get the feeling that the government will not nationalise the banks mainly because of the relatively large voter base of shareholders in the banks. Anyone have figures on the number of shareholders in AIB and BOI? I imagine they are pretty high. Angry shareholders losing their investments because of nationalisation would be politically explosive even if NAMA might be easier on the tax payer. I guess you could argue the flip side that the government must now raise taxes and cut costs to help fund NAMA but it seems this move is not as politically sensitive. Any thoughts on this?

The type of people that have Shares in BOI and AIB are the type of people that the government worry more about that the Population at large. That much is true.
But the shares in the banks have gone from €20 to less than one back to €3-4
These people have already experienced most of the pain they can.

Flamed Diving

eamonnm79 wrote: »

The exact same place we are getting it now.
The ECB. They have no problem lending to nationalised banks.

Well, I was discussing the state, at this stage. They are one and the same now, essentially. Given that we have burnt our bridges with every investor in Europe, and beyond, why would the ECB suddenly think it to be such a great idea to funnell 100s of billions into us?

eamonnm79

DJDC wrote: »

Whats so pathetic is that this while NAMA/Irish economic collapse/Irish bank shares dive is all because of one thing..property. Not complex derivatives, not even leveraged loans just simple loans for property development.

Were the risk teams in AIB and BOI on valium or do these banks even have a risk management dept. The complete lack of competency in the Irish banks is the real reasons why they have been hammered by the markets. Did they not see that having all their business in an increasingly oversupplied and overpriced area was idiotic beyond mention.

True but when prices are going up and people and banks are making paper fortunes the risk departments are told to be quiet.
Some risk managers were effectivly dismissed by the larger financial institutions in the UK.
The UK and US also lost lots of money in simple property loans (not nearly as much as us though per capita)