It's really the German banks that are getting this bailout, why aren't they paying?

gizmo555

If the Irish Times is correct, the principle has been conceded and what's being worked on now is the legalities. What remains to be seen is how much of the burden the bondholders share:

Officials in the EU-IMF mission to Dublin are examining how senior bondholders could be compelled to pay some of the cost of rescuing Ireland’s banks . . .

The negotiators are taking legal advice on the steps required to ensure all classes of bank bond investors assume a burden in the restructuring process. One of their prime concerns is to avert the threat of an immediate court challenge from any senior bondholder or a court objection at a later date . . .

The source said there was a “common understanding” between delegations from the EU Commission, the European Central Bank and the IMF that senior and junior bondholders should each pay a share of the rescue costs.

The first step would be to seek to “persuade” senior bondholders to participate in the bailout, said the source. “If that doesn’t succeed, the question is how can you force them in a legally-sound way.”

The implication, by the way, is that the dogged insistence from the Irish government since the crisis blew up two years ago and continued with by Brian Lenihan as recently as yesterday, that it is legally impossible to draw a distinction between senior bondholders and depositors, is wrong.

Amhran Nua

Inquitus wrote: »

Now if only the alleged Political Party in your sig was actually registered, or likely to put up any candidates in the next election, we might actually have a voice for change, instead all we have is one muppet, with a fancy pic in his sig, trumpeting change, while sitting in front of his laptop, on his couch, actually doing nothing.

If you'd been looking at the site you continue land on out of the blue in the middle of other discussions, you'd notice we have been gearing up for the coming election. By all means, feel free to start your own party, no doubt you'll find it terribly easy.

Scofflaw

gizmo555 wrote: »

If the Irish Times is correct, the principle has been conceded and what's being worked on now is the legalities. What remains to be seen is how much of the burden the bondholders share:

Officials in the EU-IMF mission to Dublin are examining how senior bondholders could be compelled to pay some of the cost of rescuing Ireland’s banks . . .

The negotiators are taking legal advice on the steps required to ensure all classes of bank bond investors assume a burden in the restructuring process. One of their prime concerns is to avert the threat of an immediate court challenge from any senior bondholder or a court objection at a later date . . .

The source said there was a “common understanding” between delegations from the EU Commission, the European Central Bank and the IMF that senior and junior bondholders should each pay a share of the rescue costs.

The first step would be to seek to “persuade” senior bondholders to participate in the bailout, said the source. “If that doesn’t succeed, the question is how can you force them in a legally-sound way.”

The implication, by the way, is that the dogged insistence from the Irish government since the crisis blew up two years ago and continued with by Brian Lenihan as recently as yesterday, that it is legally impossible to draw a distinction between senior bondholders and depositors, is wrong.

Interesting - no wonder the bond markets remain worried. And regrettably unsurprising that a government that's been running a semi tax haven would be concerned for bondholders.

cordially,
Scofflaw

View

Amhran Nua wrote: »

View wrote: »

It should be pointed out that the near collapse of the largest bank in Ireland - DefPa Bank - has already cost the tax-payers in Germany a small fortune.

What does that have to do with us?

As I understand it, DefPa Bank was an Irish company (i.e. set-up in Ireland, doing business in Ireland and filling its returns with the CRO) when it came close to collapse. As such, if it had completed the transfer of its regulator to Ireland, it would have been 100% our mess to clear up.

(As I understand it, they were still using the German regulator from when it had originally been a German company)

View

SkepticOne wrote: »

View wrote: »

It should be pointed out that the near collapse of the largest bank in Ireland - DefPa Bank - has already cost the tax-payers in Germany a small fortune.

Lest the name doesn't ring any bells, it operates out of the IFSC and was massively bigger than all other Irish banks put together. It is a name we should be familiar with though, as it had applied for a change of regulator from Germany to Ireland. If that had gone through, it would have been the tax-payer in Ireland who would have been picking up the tab for its near collapse...

Why would the Irish tax payer be picking up the tab for it? It would not have been one of the institutions under the guarantee.

The near collapse of DefPa Bank pre-dated the bank guarantee by a couple of months so the issue is a bit moot given that the tax-payers in Germany picked up the tab for it.

However, if it had been a company regulated in Ireland (as well as being registered and operating in Ireland), it is - given what happened subsequently - probable that the Government's reaction would have been to "save the biggest bank in Ireland".

I should also mention that the Government's guarantee covers all EU banks who operate in Ireland (who want to avail of it). The government - once it offered a guarantee - can't decide it will only cover some of the EU banks (i.e. the "Irish banks").

K-9

gizmo555 wrote: »

The implication, by the way, is that the dogged insistence from the Irish government since the crisis blew up two years ago and continued with by Brian Lenihan as recently as yesterday, that it is legally impossible to draw a distinction between senior bondholders and depositors, is wrong.

There was a recent case about bondholders, last week I think, that made it easier for them. Not sure if it directly related to that.

gizmo555

K-9 wrote: »

There was a recent case about bondholders, last week I think, that made it easier for them. Not sure if it directly related to that.

Well, as I say, Brian Lenihan was on TV yesterday claiming that what is apparently being done to senior bondholders today is legally impossible.

Bob_Latchford

Is it true to say in a sovereign state anything is legally possible by passing laws? Also even the laws mean one thing but ultimately its the people that will decide.

I mean it was not legally possible for an Irish Republic to exist under British Crown etc.

Always makes me wonder when I hear "not legally possible" what it actually means

Cannibal Ox

gizmo555 wrote: »

Well, as I say, Brian Lenihan was on TV yesterday claiming that what is apparently being done to senior bondholders today is legally impossible.

Brian Lenihan is trying to defend his own decisions before an election and putting us at risk in the process.

Laminations

gizmo555 wrote: »

Well, as I say, Brian Lenihan was on TV yesterday claiming that what is apparently being done to senior bondholders today is legally impossible.

That's how fast he's flip flopping now. I don't accept that

K-9

gizmo555 wrote: »

Well, as I say, Brian Lenihan was on TV yesterday claiming that what is apparently being done to senior bondholders today is legally impossible.

Today in the press - RTÉ News

There is a difference between subordinated and senior bond holders.

gizmo555

Bob_Latchford wrote: »

Is it true to say in a sovereign state anything is legally possible by passing laws? Also even the laws mean one thing but ultimately its the people that will decide.

I mean it was not legally possible for an Irish Republic to exist under British Crown etc.

Always makes me wonder when I hear "not legally possible" what it actually means

Well that is, of course, true and is exactly what was done in the 80s in response to the AIB/ICI debacle - the Oireachtas passed emergency legislation at record speed to enable that rescue.

gizmo555

K-9 wrote: »

Today in the press - RTÉ News

There is a difference between subordinated and senior bond holders.

There is, but what Lenihan has been saying all along with considerable vehemence is that there is no difference between senior bondholders and ordinary depositors and that they can't be treated differently. It appears he is, once more, completely wrong.

Aseth

I just read an interview with one of German economists in welt.de and he claims that Ireland is strong enough and does not need help.

Here's the link and translation(with the help of Google - I tried my best to improve it when possible, but the meaning is clear):

http://www.welt.de

Top economist Sinn believes that Ireland's position has been exaggerated for political reasons.

Ifo president Hans-Werner Sinn is clear: Ireland is rich enough to help themselves. The land slip, for political reasons under the umbrella.

S:(...)Greece and Portugal have to be helped, but not the banks. I'm pretty sure, moreover, that the Ireland crisis is orchestrated. The situation is certainly not as bad as is being done.(...)

There is always talk of 130 billion €, so high, the claims of German banks, which are supposedly at risk. Of this, but 100 billion euro bank claims to their own purpose entities that are located in Ireland. They have invested their money in the wide world and have nothing to do with the Irish problem.
(...)
S:Anyway, they have a higher base to twenty percent for taxes and social contributions. The only problem is that it did not take as a tax haven to complete. If they had our tax rate, which is higher by at least eleven percentage points, they would swim in money. You would have every year 17 billion euros more in the coffers.
Welt online: Higher taxes do not hamper the economic recovery of Ireland?
Of course. But why should we complicate the German recovery instead? We have enough to do with our own problems. Germany has been falling since 1995 from the third to tenth place in the EU, in terms of economic output per head.
Welt online:Why the Irishman take the funds at all?
S: Because interest rates are lower than market interest rates. And the EU wants that anyone uses this fund because it seeks a permanent facility that will help the EU countries can borrow from each other.
WO: Who benefits from it?
S: First, the countries that could then finance rates and, second, of course, the banks that are out of the risk. But we make it easier for banks again to collect the German savings and distribute in the wide world in recent years.

Scofflaw

There is always talk of 130 billion €, so high, the claims of German banks, which are supposedly at risk. Of this, but 100 billion euro bank claims to their own purpose entities that are located in Ireland. They have invested their money in the wide world and have nothing to do with the Irish problem.

That's interesting, because I've come across another source that says the figure for German exposure to Irish banks is only €30bn, not €130bn, which would tally with that figure.

dispute between Germany's largest bank and the government as well as confusion among the German public.

Chancellor Angela Merkel's spokesman Steffen Seibert said in Berlin earlier this week that Deutsche Bank was especially exposed to Ireland as he tried to explain to German voters why they will be paying for Ireland's bailout.

The comment provoked Deutsche Bank spokesman Christian Streckert to describe the statement as "defamatory" and insist that the bank was owed less than €400m by Irish banks.

Other big banks, including Commerzbank, BayernLB and WestLB, have also called their exposure to Ireland relatively minor.

The government later issued a statement admitting it does not have have any "reliable figures" about the scale of Germany's exposure to Ireland.

Figures from the Bank for International Settlements in Basel, often quoted in the Irish media, suggest Irish banks and companies owed $139bn (€104bn) to German banks in June and a further $132bn to British banks at the end of June.

While these figures come from one of the world's most respected financial regulators, they differ starkly from the figures issued by individual banks.

One reason is that it is often difficult to calculate these risks. The €400m figure quoted by Deutsche Bank included derivatives to hedge risk, according to bank spokesman Ronald Weichert.

The bank has not disclosed the gross figure. The lender said in a July presentation that it had €309m in gross exposure to central and local governments in Ireland at the end of March.

Bundesbank president Axel Weber said on Monday that estimates for bank exposure to Ireland were "exaggerated".

Mr Weber, who is tipped to become the next head of the European Central Bank, said much of the German banks' exposure to Ireland involved companies in the International Financial Services Centre that were Irish subsidiaries of German banks.

Mr Weber believes the real exposure of German banks is closer to €30bn.

Now, if Merkel is beating the drum of 'massive exposure' by the German banks to Irish debt, when the exposure is not that much, why? The only obvious explanation I can immediately see is that she's trying to persuade the German taxpayer to swallow the Irish bailout by telling them they're at risk and blaming it on the bankers.

I appreciate that doesn't tally with the narrative that the Germans are trying to stiff us on behalf of their banks - but it's the German banks themselves saying the risk isn't there. Admittedly, they have good reason to say their debt is safe, and being made to look like villains by German politicians can't be something they're happy about either. However, what they're saying is pretty specific - that the €100bn isn't loans to Ireland, but loans to other countries held in Ireland by German subsidiaries - and what the BIS is saying wouldn't contradict that, because that is how those loans would show up in Germany.

cordially,
Scofflaw

ardmacha

Anyway, they have a higher base to twenty percent for taxes and social contributions. The only problem is that it did not take as a tax haven to complete. If they had our tax rate, which is higher by at least eleven percentage points, they would swim in money. You would have every year 17 billion euros more in the coffers.

This kind of thing seems incredibly naive. Yes, Ireland can raise its taxes, despite some of the commentary and whining here on this forum. But that tax raise is needed for the regular budget deficit and to replace lost revenue from stamp duty etc. It doesn't leave much for the bank situation.

Aseth

ardmacha wrote: »

This kind of thing seems incredibly naive. Yes, Ireland can raise its taxes, despite some of the commentary and whining here on this forum. But that tax raise is needed for the regular budget deficit and to replace lost revenue from stamp duty etc. It doesn't leave much for the bank situation.

I'm not saying it's a solution, it's not even my opinion. But sometimes it's interesting to see what others in Europe think about situation in Ireland. Especially Germans.

Hayte

pwd wrote: »

How is Ireland more at fault than Germany, for bad loans from German banks to Irish ones?

Because guess what? If someone makes you a bad offer, you don't have to accept it. Germany is looking out for its own taxpayers and does what it needs to do to protect itself. Ireland should do the same but our options are vastly more limited because we have no leverage. We've been gaming the Euro for years and poaching foreign investment with low corporate tax for a long time. In the end, what we are experiencing now is all of the excesses that we ever indulged in over the past decade come to smack us in the nuts all in one go.

As disappointed as I am to find that we cannot seem to manage our own financial affairs, I am more disappointed that Irish citizens are so quick now to turn on Germany. 5 years ago you didn't care but now we can't pay them the money we owe them and so we are trying to find creative ways of not doing so to avoid getting what we deserve. There are different levels of complicity and responsibility in all this mess but we voted FF in. We were happy to make commission on the property market when the going was good. We were happy to buy houses, renovate and flip them for profit. As long as we get a buck who cares about the people who are buying houses to live in them? Who cares if they have skyhigh mortgage repayments? Now the consequences of the way we live are confronting us and its frankly pathetic to see so many people try to wriggle out.

If there is going to be any real reform in all this it has to start with we the electorate. We have to understand what went wrong and not vote in people who will let this happen again. We cant demand services and a standard of living that we can't afford. We cant go borrowing half again as much as we sell as a nation. We can't screw our eurozone neighbors and expect them to forgive what we owe them when our deals go bad but take them for a ride when the going is good.

gizmo555

Hayte wrote: »

How is Ireland more at fault than Germany, for bad loans from German banks to Irish ones?

Because guess what? If someone makes you a bad offer, you don't have to accept it.

Just because Irish banks offered to borrow money from the German ones, didn't mean they had to lend it - it takes two to tango!

Scofflaw

gizmo555 wrote: »

Just because Irish banks offered to borrow money from the German ones, didn't mean they had to lend it - it takes two to tango!

And we borrowed the money from the Irish banks that the German banks lent to them.

Again, worth pointing out that the figure of €130bn owed to German banks is disputed, with the German banks saying that €100bn of that is actually in the hands of German bank subsidiaries in Ireland and on loan outside Ireland.

cordially,
Scofflaw

Hayte

That was exactly my point. Germany will look out for its own interests. We should look out for ours. I guess we just aren't very good at doing that. Or tango'ing for that matter. And if we look at it below the national level? Like Scofflaw pointed out, we were fine with borrowing the money if it meant we could profit. Its only now that citzens at large are actually looking for where their credit came from!

Scofflaw wrote: »

Again, worth pointing out that the figure of €130bn owed to German banks is disputed, with the German banks saying that €100bn of that is actually in the hands of German bank subsidiaries in Ireland and on loan outside Ireland.

I take it they were in Ireland in the first place dodging German tax right?

Scofflaw

Hayte wrote: »

That was exactly my point. Germany will look out for its own interests. We should look out for ours. I guess we just aren't very good at doing that. Or tango'ing for that matter. And if we look at it below the national level? Like Scofflaw pointed out, we were fine with borrowing the money if it meant we could profit. Its only now that citzens at large are actually looking for where their credit came from!

I take it they were in Ireland in the first place dodging German tax right?

As I've said before, we've been operating as a semi tax haven. So we've been stiffing the German taxpayer of taxes from their banks to our profit, and now we want them to bail out ours. Cheeky doesn't really cover it...

cordially,
Scofflaw

gizmo555

Scofflaw wrote: »

And we borrowed the money from the Irish banks that the German banks lent to them.

"We", i.e., the ordinary citizens who borrowed the money are already paying the price. The European banks who provided the torrent of cheap money are equally at fault and should be made equally liable.

Bob_Latchford

Hayte wrote: »

I take it they were in Ireland in the first place dodging German tax right?

Being tax efficient would be their take I imagine. How much was doing the double Irish thing. Money funneled through Ireland back to Germany so German shareholders/pension funds profit from the tax advantages and then spend and invest in Germany.

The interconnectness of all this makes nation lines pretty academic. What if it was USA firm located in London with large shareholding in German banks pushing Germans to go for Irish tax breaks on their loan deals with Japan. you could go around for ever

Who benefits, who took the risk, who is responsable? doesnt seem like many know

K-9

Good piece on why we are here:

Euro Debt Crisis: Similarities and differences in the woes of Ireland, Greece and Portugal

We are very different to Greece and Portugal, who didn't have lending bubbles.

Amhran Nua

Scofflaw wrote: »

So we've been stiffing the German taxpayer of taxes from their banks to our profit

Surely you mean, to the profit of their banks.

Scofflaw

Amhran Nua wrote: »

Surely you mean, to the profit of their banks.

Sure - but also to our profit, that is, the Irish state and taxpayer. We set up a cosy tax regime here so that MNCs and other people's banks would come here, along with their employment and tax. That was why CJH set up the IFSC, and it worked like a charm - providing Ireland with highly paid jobs and corporate taxes as a "financial hub". That, in turn, helped Fianna Fáil buy elections by taking lots of voters out of the tax net.

One rule of being a tax haven, though, is that you don't burn the bondholders...and what's our government fighting not to do?

cordially,
Scofflaw

Amhran Nua

Hayte wrote: »

As disappointed as I am to find that we cannot seem to manage our own financial affairs, I am more disappointed that Irish citizens are so quick now to turn on Germany. 5 years ago you didn't care but now we can't pay them the money we owe them and so we are trying to find creative ways of not doing so to avoid getting what we deserve. There are different levels of complicity and responsibility in all this mess but we voted FF in. We were happy to make commission on the property market when the going was good. We were happy to buy houses, renovate and flip them for profit. As long as we get a buck who cares about the people who are buying houses to live in them? Who cares if they have skyhigh mortgage repayments? Now the consequences of the way we live are confronting us and its frankly pathetic to see so many people try to wriggle out.

You keep using that word. I think it does not mean what you think it means. Can you provide more details on this mysterious "we", because it's not representative of the majority of the Irish population, unless you think "we" all have a massive double mortgage topped up with a loan for the SUV, and every single one of us voted for a FF candidate (it is impossible to vote for FF since the STV system does not allow voting for parties). I'd also be interested to know how "we" should be liable for the debts of Anglo or those debts accepted by the sovereign since Lenihan's blanket guarantee?

Playing some sort of self flagellating collective punishment card doesn't stand up to the harsh light of reality.

Bob_Latchford

Amhran Nua wrote: »

Surely you mean, to the profit of their banks.

What if Irish pension funds had large stakes in German banks. It goes around & around.

swampgas

David Malone has posted what is alleged to be the list of Anglo's bond-holders.

http://golemxiv-credo.blogspot.com/2010/10/who-are-bond-holders-we-are-bailing-out.html

Interesting reading. Don't know enough myself to know how much to trust it though.