'Ireland Default 2010'

Thucydides

I was just reading an interesting interview with the new Cheif Economist of Deutsche Bank. In it he calls for the establishment of an EU style IMF to complement the workings of the Growth & Stability Pact.

Though in it this graph really caught my eye...



It's entitled 'Four Ways to get rid of the National Debt' and it gives past countries who have chosen the specified option, as well as current countries and what their most probable course of action will be.

The options (from left to right and then down) are 'Inflation', 'Innovation & Growth', 'Default' and finally 'Reform'.

As I'm sure you've all noticed Ireland got chucked in with Greece and Eastern Europe. They even made a guess at the default date.

(PS I can't seem to get the graph bigger. Go here to see it normal size http://www.welt.de/wirtschaft/article5935397/Oekonom-der-Deutschen-Bank-warnt-vor-Euro-Crash.html)

leninbenjamin

Is there an English translation of that? The graphs looks like total pop economics bull**** to be honest but I guess I need to read the article before writing it off...

Thucydides

leninbenjamin wrote: »

Is there an English translation of that? The graphs looks like total pop economics bull**** to be honest but I guess I need to read the article before writing it off...

The figures are from Societe Generale and the German braodsheet newspaper Die Welt in an interview with the top economist from Deutsche Bank. I wouldn't dismiss it that sharply.

Unfortunately, there's no English translation. Though I'd imagine google translator might help.

On a similar note, I recently attended a seminar were the lecturer actually calculted the cumulative probability of an Irish soverign default over the next 10 years - on that particular day's bond spreads - and it worked out at 4.67% a year or 47% over 10 years.

I don't like those odds

Hasschu

Die Welt is the Financial Times of Germany. The Deutschebank economist is making the case for a Euro Fund to compete with the IMF within the Euro Zone. If the IMF with its US and Chinese affiliations comes to the rescue of a failed Euro Zone country it is indicative of a failure of the EU and the EMU. The main concern is Greece who has lied and obfuscated for years. The Germans expect Ireland to swallow its medicine and recover in the fullness of time. There is no forecast of a drop dead date for any country. Presumably ECB will prop up Greece until the EMF is in place. The more exposure you get to Germans the more you realize what a responsible and proud people they are. We will not shame the EU and ourselves (Germans) by bringing the IMF into the Euro Zone.

nesf

Thucydides wrote: »

On a similar note, I recently attended a seminar were the lecturer actually calculted the cumulative probability of an Irish soverign default over the next 10 years - on that particular day's bond spreads - and it worked out at 4.67% a year or 47% over 10 years.

I don't like those odds

You're assuming our bond spread is solely based on the chance of default and not a mix of fear, market negativity and a lot of uncertainty about what the rest of the EU would do if a country was in serious economic trouble.

nesf

Thucydides wrote: »

I was just reading an interesting interview with the new Cheif Economist of Deutsche Bank. In it he calls for the establishment of an EU style IMF to complement the workings of the Growth & Stability Pact.

Though in it this graph really caught my eye...



It's entitled 'Four Ways to get rid of the National Debt' and it gives past countries who have chosen the specified option, as well as current countries and what their most probable course of action will be.

The options (from left to right and then down) are 'Inflation', 'Innovation & Growth', 'Default' and finally 'Reform'.

As I'm sure you've all noticed Ireland got chucked in with Greece and Eastern Europe. They even made a guess at the default date.

(PS I can't seem to get the graph bigger. Go here to see it normal size http://www.welt.de/wirtschaft/article5935397/Oekonom-der-Deutschen-Bank-warnt-vor-Euro-Crash.html)

The link seems dead to me.

SkepticOne

Thucydides wrote: »

Though in it this graph really caught my eye...



It's entitled 'Four Ways to get rid of the National Debt' and it gives past countries who have chosen the specified option, as well as current countries and what their most probable course of action will be.

The options (from left to right and then down) are 'Inflation', 'Innovation & Growth', 'Default' and finally 'Reform'.

Here's a larger version of that picture:

Nemi

I'd guess it cannot be definitively predicted. But a lot of things have to come to a head in 2010. NAMA will have to crystalise developer loan losses, and reports of problems with the valuations and legal certainty of collateral have to cause concern there.

And that bank guarantee ties us in to that intimately. So default can hardly be dismissed as beyond reason, particularly if a Greek default makes it hard for us to raise additional finance.

That said, Germans surely have very clear reasons to be rubbishing Ireland. I'd say the validity of the comment does not rest on its source.

Hasschu

The Germans are looking at things in their usual rational manner. Under bankruptcy they are asking a question, will Ireland, Eastern Europe and Greece go into bankruptcy in 2010. Under reform they have Canada who cut sacred cow entitlement programs such as Health, Education, Unemployment benefits in 1996. Great Britain got Thatcherism 1980s. They then ask the question, will California default in 2010, without US Fed Gov't intervention it is highly likely. Greece will recover or default on its own merits as will Ireland, as things stand the perception is that the Irish are less in denial than the Greeks and we should be gateful that they believe that we are basically honest decent people saddled for the time being with a gov't engaged in self serving cronyism. That disease is curable whereas being rotten to the core over a number of years is far more serious.

rightwingdub

Welfare benefits will need to be cut even further, Ireland's generous welfare state is bankrupting the Irish economy, I think an IMF style welfare cut of at least 15% in Budget 2011 is required if there is to be a long term incentive for people to return to the worplace when the economy recovers....lets be positive here.

Hasschu, a lot of Irish people are still in denial about the depth of the financial crisis facing the Irish economy especially public sector workers who continue to live in their own bubble immune from the carnage that is afflicting the private sector at the moment, skepticone I wonder if Ireland will be in the reform column in 2010 especially where "sacred cows" like the public sector, welfare state, health and education are concerned.

carrickbally

Ireland went bankrupt in 2010 because a small number of its most powerful citizens in charge of government, financial institutions etc made reckless decisions in the pre 2009 decade.

Those decisions resulted in both government expenditure and bank lending tripling.

In 2010 government was spending 109 bn euro and taking in about 55 bn euro.

That relative to the size of the Irish economy was something like a world record.

The irony is that many of the powerful people who made those decisions and the people in the media who supported them are now complaining about the consequences and blaming all the rest of us.

carrickbally

Both government expenditure and bank lending tripled in the period before the collapse in 2010.

The EU and the IMF bailed us out.

We are blaming everyone else for what happened despite it being the fault of a small number of our own most powerful citizens.

carrickbally

Budget tomorrow still paying for the bankruptcy caused by the reckless decisions of the celtic tiger morons and their media supporters.