Why has public debt not fallen under the troika programme?

noodler

Heads the ball wrote: »

The ECB should have guaranteed Irelands debt as we would have gotten a lower interest rate on it

The bank debt or our entire national debt?

Our national debt in September 2008 had a fixed interest rate (based on an average of outstanding bonds, retail debt etc the Government had issued) so obviously an ECB guarantee would have made no difference there.

From Sept 2008 - September 2010: Our issuances of debt were also on the private market for a reasonable enough fee of 5% average.

From November 2010 - Present: We ave been borrowing from the EU/IMF for a rate of between 3% to 4% which is better than many of our fellow Europeans can access funds at.

However, as others have pointed out, the ECB can't guarantee a country's debt so it is all immaterial.

Heads the ball

noodler wrote: »

The bank debt or our entire national debt?

Our national debt in September 2008 had a fixed interest rate (based on an average of outstanding bonds, retail debt etc the Government had issued) so obviously an ECB guarantee would have made no difference there.

From Sept 2008 - September 2010: Our issuances of debt were also on the private market for a reasonable enough fee of 5% average.

From November 2010 - Present: We ave been borrowing from the EU/IMF for a rate of between 3% to 4% which is better than many of our fellow Europeans can access funds at.

However, as others have pointed out, the ECB can't guarantee a country's debt so it is all immaterial.

National debt.

Guarantee it at the outset.

I dont see any reason why the cant.

noodler

Heads the ball wrote: »

National debt.

Guarantee it at the outset.

I dont see any reason why the cant.

Well, surely you mean guarantee new debt the Government issues? (No point in guaranteeing debt we have already accumulated - we already have their money - one of the Honohan criticisms of the bank guarantee).

The ECB is forbidden from bailing out member state Governments.

I mean, in a purely theoretical sense, some other issues:

Would lenders lend to us at rates lower than German bonds if that happened? How would other countries who have tighter fiscal discipline than Ireland feel about paying higher rates? Surely such a guarantee, as inappropriate and unrealistic as it is, would be demanded by everyone?

Heads the ball

noodler wrote: »

The ECB is forbidden from bailing out member state Governments.

Well change the rules then. The law should serve the people, not the other way around.

noodler wrote: »

Would lenders lend to us at rates lower than German bonds if that happened?

I dont know. Didnt Germany issue bonds recently at zero per cent (I could be wrong). We probably wouldnt get it any lower than zero, no

noodler wrote: »

How would other countries who have tighter fiscal discipline than Ireland feel about paying higher rates?

I dont know. I dont really care tbh.

noodler wrote: »

Surely such a guarantee, as inappropriate and unrealistic as it is, would be demanded by everyone?

Same could have been said about "bailouts" and the bank guarantee.

noodler

Heads the ball wrote: »

Well change the rules then. The law should serve the people, not the other way around.

That does not really make sense.

If the ECB were to do as you suggest for one, then it would lead to demands to do it for all and then the effect is nullified.

Heads the ball wrote: »

I dont know. Didnt Germany issue bonds recently at zero per cent (I could be wrong). We probably wouldnt get it any lower than zero, no

They issued some short-term debt for that - their 10 years are still over 1%.

The point is that if we would perverse situation where Ireland can borrow more cheaply than everyone everyone in the Euro area despite having the highest deficit.

Heads the ball wrote: »

I dont know. I dont really care tbh.

Unfortunately, it matters so you should care. One thing this crisis had proven is that if one country gets a concession from Europe then another seek the same concession.

Heads the ball wrote: »

Same could have been said about "bailouts" and the bank guarantee.

Not too sure what this means in relation to the oart of my post you directed it too.

everdead.ie

Heads the ball wrote: »

Well change the rules then. The law should serve the people, not the other way around.



I dont know. Didnt Germany issue bonds recently at zero per cent (I could be wrong). We probably wouldnt get it any lower than zero, no



I dont know. I dont really care tbh.


Same could have been said about "bailouts" and the bank guarantee.

Germany recently issued 10yr bonds at around 1.3% who on earth would get 0% they would get no return?

http://www.businessworld.ie/livenews.htm?a=2961592;s=rollingnews.htm

Even Germany pays above the Euribor Rate and for a reason it has to make financial sense for people to loan money to a country.

noodler

everdead.ie wrote: »

Germany recently issued 10yr bonds at around 1.3% who on earth would get 0% they would get no return?

http://www.businessworld.ie/livenews.htm?a=2961592;s=rollingnews.htm

Even Germany pays above the Euribor Rate and for a reason it has to make financial sense for people to loan money to a country.

It has happened a couple of times with the shorter-term bonds in recent months.....

In fact
http://online.wsj.com/article/SB10000872396390444330904577535102520070554.html?mod=googlenews_wsj

everdead.ie

noodler wrote: »

It has happened a couple of times with the shorter-term bonds in recent months.....

In fact
http://online.wsj.com/article/SB10000872396390444330904577535102520070554.html?mod=googlenews_wsj

There is a difference over a long term bnd like a 10 year bond though as it's value is going to be decreased by inflation anyway.

noodler

everdead.ie wrote: »

There is a difference over a long term bnd like a 10 year bond though as it's value is going to be decreased by inflation anyway.

?

Not sure what you are getting at?

Leaving inflation aside, the Germans, in the above example, will be paying back less in nominal (cash) terms then they borrowed.



Obviously you need to pay a higher yield generally to get somebody to take a longer-term security.

It is still amazing that some people (well investment funds more like) feel so worried about other bonds (or even deposit accounts) that they would rather lump money in somewhere and take a nominal loss (nevermind the larger real loss once inflation is taken into consdieration)

everdead.ie

noodler wrote: »

?

Not sure what you are getting at?

Leaving inflation aside, the Germans, in the above example, will be paying back less in nominal (cash) terms then they borrowed.



Obviously you need to pay a higher yield generally to get somebody to take a longer-term security.

It is still amazing that some people (well investment funds more like) feel so worried about other bonds (or even deposit accounts) that they would rather lump money in somewhere and take a nominal loss (nevermind the larger real loss once inflation is taken into consdieration)

What I mean is if I give you a loan now at -0.6% and you pay me back the money in two years I lose money but if I did that over ten years I'd losean awful awful lot of money.

noodler

everdead.ie wrote: »

What I mean is if I give you a loan now at -0.6% and you pay me back the money in two years I lose money but if I did that over ten years I'd losean awful awful lot of money.

Yeah but as we both said the German 10-year yield is still positive at over 1%.

Anyway thought you were just splitting hairs after I pointed out that people are actually giving Germany free money.

No bother.

everdead.ie

noodler wrote: »

Yeah but as we both said the German 10-year yield is still positive at over 1%.

Anyway thought you were just splitting hairs after I pointed out that people are actually giving Germany free money.

No bother.

Ya I know sorry I just meant it would be unrealistic to have a country finance their long term debt at zero or approaching zero.