Thursday, Sep 30, 2010
This bail-out will cost the taxpayers 22,500 euros EACH
BBC: Irish deficit balloons after new bank bail-out
The cost of bailing out the Republic of Ireland's stricken banks has risen to 45bn euro (£39bn), opening a huge hole in the Irish government's finances.
The increased cost will see the government run a budget deficit equivalent to 32% of GDP this year.
The cost includes a bill of up to 34bn euro to rescue the worst-hit lender, Anglo Irish Bank.
The government said it would now have to rewrite its budget to cut borrowing more quickly in the coming years.
But Irish finance minister Brian Lenihan defended the action, saying Anglo Irish Bank was too big to fail.
Posted by devo @ 07:45 PM (2642 views) Add Comment
70 Comments
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1. devo said...
Anglo Irish Bank is too big to fail.
What does Lenihan mean by 'too big to fail'? Is he going to explain, or is just repeating the cliché enough to justify his actions.
2. Crunchy said...
1. devo
..And what after the coming default avalanche? That's the bone breaking question.
3. little professor said...
It's become such a banana republic, Ireland. Can't believe they are only just across the water from us.
1. devo - "too big to fail" in this context means that his fellow politicians and cronies have far too much invested in the Irish property debacle to allow AIB and Anglo to fail - much better to shift the debt onto the taxpayer, that way they still get paid.
4. alan said...
Devo,
It probably means he has lots of mates employed there.....
Who next...Portugal?
5. devo said...
We need someone like Louis Theroux or Roger Cook (remember him?) to investigate the financial system. Start to rattle a few cages.
6. devo said...
Hey, charlie brooker, maybe you could turn your hand to a bit of investigative journalism?
7. str 2007 said...
And the markets were virtually unfased.
Is that because they knew there'd simply be another bailout ?
8. devo said...
@6. str 2007
Yes. The euro bloc is in too deep to change tack now. Even a non-gambler can see that this is a safe bet.
Until it's not - but then everything changes anyway.
9. devo said...
So, last year the Irish people accepted the austerity measures with barely a whimper, for the good of their nation.
Today they are told that the banking system is to be bailed out again - paid for by further austerity measures, that is, job cuts/pay freezes/ tax rises.
You are being taken for a ride, people of Ireland.
WAKE UP!!!
10. general congreve said...
I'm sure there just isn't the will or the way to pay this back, full steam ahead to sovereign default.
@8 - Saw one fella on the news saying they should confiscate all the bankers cars, houses etc. towards the cost. It won't be long before they're swinging from lamp posts!
11. Durham Lad said...
I do hope - but don't expect - that the Directors of these failed banks spend at least 10 years in prison. The only way that decent people will accept the disgraceful tax increases; wage cuts; and social cuts is if justice is seen to be done.
12. devo said...
@9. general congreve: they should confiscate all the bankers cars, houses etc. towards the cost.
Too right - you make mistakes you pay the price. It's called capitalism.
13. bystander said...
LP@2 - just seen a list of the richest congressmen and women in the States and everyone of them, and I mean everyone of the richest politicians in the USA has a large amount of their wealth in equities and most have major real estate investments - they were never going to let their share portfolios crumble to nothing. We, on this site, ask why bondholders in AIG etc. don't take a bath, and yet here is the answer. Politicians should not be allowed by law to hold any stock options, investments etc. until they have left office, as it is human nature to be greedy and manipulative/ manipulated. Every politician, should be asked to give up all worldly goods (be rewarded well by the state, instead), so they are (more likely to be...) incorruptible. Unfortunately this will never happen as the guys who create these 'democratic' systems are the most corrupt/ corrupting.
14. peter said...
Spend, spend, spend!
And when we run out of money let's go and print some more. Don't worry that it will destroy everyone's saings. Let's blow the lot.
Ireland today...the UK tomorrow?
15. flashman said...
All this ‘bankster’ bashing stuff strikes me as a little desperate and it most certainly misses the point. The Irish economy (by some measures) doubled in size in 10 years. The Irish government were warned ad nauseum by every economic body is existence to cool their growth or face the consequences. The Irish government ignored every warning and every bit of economic wisdom and cheered on their crazy growth rates. They did this because the Irish voting public were coining it in and they absolutely insisted that their government do everything in its power to keep the party going. It goes without saying that part of this laissez faire on steroids attitude was to encourage the banks to lend with gay abandon. The Irish people effectively voted for unrestrained lending and that’s what they got. Irish people travelled the globe investing in anything that moved whilst boasting to anyone who’d listen about their wealth. It got to the stage where you couldn’t go skiing or sunbathing without hearing an Irish voice droning on about a property deal or a business they’d bought. They drove up property and asset prices from Surrey to Bogota by taking pride in always paying the top price. The people of Ireland are responsible for their current woes because their election night votes effectively meant that no Irish government could get elected or stay in power if they even hinted at curbing the economy party. It’s fair to say that the Irish are getting what they deserve but the truth is that the cost of their folly is nowhere near as much as the average Irish family made in the extended Celtic Tiger years. Even with the falls in Irish property prices they are way ahead of the game and given the chance they’d almost certainly do it again.
16. The Slog said...
An absolute disgrace, and a lesson to all those Brits who still can't be bothered to think about the EU.
The ECB is swimming in stability funds and a few breezy vapidities from O'Rehn do not any parsnips butter.
The Irish have been silly - but we all were...and now they're being hung out to dry. Beware: Trichet is a snake, and next time
it'll be us.
Defend that wealth any way you can...
17. uncle tom said...
The Irish have a long history of packing their bags and heading abroad when things get tough at home.
The real danger for Ireland is that if they have to raise too much in the way of new taxes to pay for all this; the biggest earners and most economically active will vote with their feet; causing further economic contraction and reduced tax revenues..
18. mark said...
people in the pub are starting to talk to about worry and the state of the UK and how ireland will effect us, so it looks to me if panic is starting to set in, especially considering the pending cuts
19. flashman said...
I was in my local last night. No one mentioned Ireland and the only panic was about Dustin Johnson leading off for Europe in the Ryder cup. It's being played at the Celtic Manor so at least 'Celtic' came into it somewhere. I've never come across any British person who's remotely panicked about the state of Ireland. I've come across quite a few who are chuffed about it
20. bystander said...
Flashman@13_It goes without saying that part of this laissez faire on steroids attitude was to encourage the banks to lend with gay abandon"....like they needed much encouragement. You have always stood your ground on this antiBankster bashing platform, for that you are to be applauded, but you paint the financial sector as the victim of a witch hunt, but this victim became extremely wealthy and enjoyed the party just as much as the 'ignorant' electorate. You say the driving force of the economy was the government and it's policies and I say the real driver were those who had control of the flow of capital to fund the Celtic Tiger revolution. The banks could have called a halt anytime they wished, but the bonuses and short-termism were just too tempting. They were doing their 'job' and did it so well that they forgot about sensible leverage and prudent lending criteria. They had the money (leveraged beyond belief), the government simply encouraged them to use it and they got very, very, very wealthy thanks to the lenient/ lax regulatory bodies set up to monitor them. If the banks had said no to 'relaxed' lending standards then the Celtic Tiger wouldn't have roared so loud and caught such a big cold.
21. hpwatcher said...
I'm sure there just isn't the will or the way to pay this back, full steam ahead to sovereign default.
Yes, the increasing goverment debt will probably drive the country into the ground in 2-3 years.
22. flashman said...
bystander: I wouldn't dream of absolving the banks of anything. They are wan*ers, almost to a man. Collective responsibility is my point. The people were greedy and ill disciplined, so they voted for a succession of greedy ill disciplined governments. Everyone knows that bankers will rip everyone off, if they are given half a chance. That's what they do. The Irish government (with the gleeful backing of the people) didn't just give them half a chance, they cheered them on and the people got rich on it. The public effectively forced their government to turn a blind eye because they wanted even more lending...not less. I often suspect that the obsessive focus on 'banksters' is done for self-serving purposes. The lefties amongst us, often reach for the bankster card whenever they get uncomfortable about a public sector spending debate and the kitchen table revolutionaries amongst us like to think that it might whip up the crowd a bit. We are all to blame for the financial crisis and no progress will be made until that simple fact is recognised
23. bystander said...
Agreed Flashman. Point well made.
24. estrader said...
"We are all to blame for the financial crisis and no progress will be made until that simple fact is recognised"
Rubbish. Don't include me in the 'we', speak for yourself. I saved, I borrowed and spent well within my means. I was calling for higher interest rates and stricter lending standards long before the bubble inflated let alone burst. I have been doing everything I can to propetc myself from the fallout.
25. estrader said...
*protect* myself from the fallout
26. Crunchy said...
19. flashman said..."We are all to blame for the financial crisis and no progress will be made until that simple fact is recognised."
I think you will find that not all are to blame for this and that number is growing on a daily basis.
Stupidity, greed/insecurity is a poor legacy and one that I fear will breed more of the same in the passing of time.
Some stand with a very clear conscience.
27. flashman said...
estrader: Come on now. Surely you're smarter than that? It should be obvious that 'we' refers to society as a whole. I didn't borrow anything and nor did most on this site …otherwise they wouldn't be here. Btw, you are borrowing every time you indulge in one of the leveraged trades you are so fond of (inappropriately) talking about on a house price website … so cut out the holier than though attitude.
28. str 2007 said...
Interesting views on the Irish Flashman and I'm sure they're true, but best start checking under your car in the mornings, unlike us English, some of them do more than hold a protest banner ! LOL
estrader
Yes, I also would like to be excluded from the royal we.
29. cat and canary said...
The people blame the banks
The banks blame the politicians
The politicians blame rival parties
and commodities are the next big thing!...
30. estrader said...
Flashman, No, I am not adopting a holier than thou attitude because I am speaking on behalf of the many who followed the same prudent path and become enraged when we read/hear the ‘we’ are all responsible and made to feel that it’s now our duty to pay for the consequences. I suppose I am responsible for the Gulf Oil spill because I drive a car, or the Gulf wars too.
I’ve never been over leveraged, I always maintain a margin and only talk about leveraged trades when it is (appropriate) on a house price website.
31. hpwatcher said...
All this ‘bankster’ bashing stuff strikes me as a little desperate and it most certainly misses the point.
If anyone is to blame, it's BOE & the politicians who kept interest rates too low for far too long. This provided the fuel for the party.
Banks just capitalised on the situation - I actually don't agree with bank bashing.
32. uncle tom said...
Yes, most of us here can be excluded from the 'we'
Most of the long standing posters on this site found their way here because they saw the naked insanity of the credit markets and property speculators, compounded by the willingness of govt. to turn a blind eye; and wanted to find kindred spirits to discuss the issue with.
Although it has taken far longer than many of us guessed - or perhaps hoped - we are at last being proven correct.
Unfortunatley, being right doesn't protect us from the collective we when it comes to remedying the resultant mess...
33. mark wadsworth said...
FUN WITH NUMBERS
That €50 billion total bail out cost divided by Irish population 4 million = $12,500 each, call it £10,000.
Total UK bank bailouts so far (shares, soft loans, guarantees, interest subsidies etc) is over £400 million, divided by UK population = £7,000 each.
So isn't this a case of pots, kettles? And our HPC hasn't started yet, but it's merrily underway in Ireland. From here, as at September 2010:
A survey of the property market carried out for the Irish Independent shows that house prices have fallen sharply since April. The survey polled 150 estate agents and show that prices of new homes dipped by 9% since April, while second-hand prices were down 8%. These declines put the drop from the peak at about 45%.
34. str 2007 said...
''Unfortunatley, being right doesn't protect us from the collective we when it comes to remedying the resultant mess...''
Which I guess has led us on to seek greater protection for our capital/savings and hence the other financial discussions which take place here, which personally I do find appropriate as part of the whole subject.
Afterall, it is 'we' in actual fact, to date, that have paid a far higher price than the over leveraged 'man' in the street who has been hugely bailed out.
As Flashman says, the Irish people who's houses have doubled or tripled in value now have £13k per tax payer (or some such figure) to repay.
They're still way ahead of the game.
The penalty is being paid by those not caught up in the party and I feel very sorry for those that were still being encouraged to join the party as FTBers in 2007/8. Or indeed those priced out altogether because of the greed.
35. flashman said...
estrader: "I suppose I am responsible for the Gulf Oil spill because I drive a car". Indirectly, yes you are. Have you ever moaned about the price of petrol? It plays a small part in encouraging the oil majors to skip a few expensive safety procedures. Have you ever driven when you could have walked or cycled? Have you ever bought less food than you could have, causing another trip to the supermarket? We are all part of society and none of us are blameless.
You readily admit that leveraged trades are a form of borrowing but you temper this by saying "I've never been over leveraged". The fact is that you are leveraged which probably makes you one of the biggest borrowers on this site.
On another subject, I think that 'direct' trading talk should be banned from HPC. Sometimes it is useful to bring markets into the discussion but surely this is no place for personal trade information or gratuitous discussions about trading techniques?
36. alan said...
I noticed Moodys cut Spain's sovereign debt from top AAA by a notch. It follows on from other rating agencies (assuming readers of this site trust them anyway).
As property bubbles deflate so the capital support for the big loans reduces...
37. estrader said...
flashman,
This getting way off topic -
1) A large proportion of UK petrol price is TAX.
2) Oil is often used like gold as a hedge against inflation and $US dollar debasement. If this wasn't "necessary" oil would be much, much cheaper. You can't be serious with what you say. My demand for cheaper petrol is encouraging negligence?? That would be like saying my demand for cheaper software is encouraging more 'bugs' and piracy, or this sites demand for cheaper housing is encouraging dodgy and unsafe buildings.
3) Yes, I am economical with food and driving.
4) What is your point about leverage? If I lose a trade I am not bailed out and I am forced to maintain margins, strictly. I don't get where you are coming from on that point.
5) I have only engaged in trading discussions when asked, or if one has begun. I'm sorry you don't agree. If they are banned I will comply, but my impression is that people are interested. I apologise if people aren't.
38. Flashman said...
estrader: "You can't be serious with what you say. My demand for cheaper petrol is encouraging negligence??"
You have to understand and think about the words "indirectly" and "small part".
What is your point about leverage?
My point about leverage is that you asked not be included in the "we" when in fact you should be. Leverage means that you can lose far more than your original stake so you are by the standards of this website quite a big borrower and risk taker
39. flashman said...
estrader: “You can't be serious with what you say. My demand for cheaper petrol is encouraging negligence??”
You have to understand the words “indirectly” and “play a small part”. It’s important to pay attention to the subtleties of language.
“What is your point about leverage”
My point about leverage is that you imperiously asked to not be included in the “we”, when in fact you should be. When you indulge in a leveraged bet (borrowing), you can lose far more than your original stake. You are therefore one of the biggest borrowers and risk takers on this site.
“my impression is that people are interested”.
I think you’ll find that only a minority are interested and quite a few people are repelled by it. People on trading forums are all interested in it. When you first started posting here, you used to refer people to your trading blog. I might be wrong but it struck me that you might be using this site to promote yourself. To be fair, you are not alone in that.
40. str 2007 said...
Well I think the overall economic picture is relevant and the trading talk is merely an extension of that.
If I wasn't interested I wouldn't read it.
Personally I think it would be a little dull here if we only discussed house prices, particulary with the speed they move.
41. mark wadsworth said...
STR 2007 comment 30: "... the Irish people who's houses have doubled or tripled in value now have £13k per tax payer (or some such figure) to repay. They're still way ahead of the game."
According to this chart, Irish house prices are up from €150,000 to $200,000 between 2000 and 2010 (via a peak price of €325,000), so if we go with the average cost of bail out of €12,500 per man, woman and child and there are about four people in a household (query?) then the average Irish household has gained absolutely nothing from all this, not even in nominal terms, has it? Unless they sell the house, bank the modest post-inflation profits (query?) and move abroad, thus escaping the future tax liability - which is going to do wonders for the Irish economy.
Estrader - as long as you maintain your margins (and I know of no broker in the world who doesn't insist on this) then you are not really leveraged at all - your bet is leveraged, but not you personally :-)
42. estrader said...
flashman,
Let me clear one point up - I am a private investor and my only aim was to encourage others to explore and expand their horizons. I have nothing to gain, sell, promote etc. From this point on I will cease and desist.
----------------
"My point about leverage is that you imperiously asked to not be included in the “we”, when in fact you should be. When you indulge in a leveraged bet (borrowing), you can lose far more than your original stake. You are therefore one of the biggest borrowers and risk takers on this site."
You are determined to include me just because I am a "borrower" when I clearly stated that I am and have been PRUDENT. I have a credit card, so that makes me part of the royal 'we' does it?
----------------
"You have to understand the words “indirectly” and “play a small part”. It’s important to pay attention to the subtleties of language."
Yes, subtleties of language that can make me partly responsible for crime, warfare, drug use, rape, murder and all other ills of society.
43. flashman said...
str: The trading talk is sometimes an extension of the economic picture but more often, it is just gratuitous trading talk. I do however agree that the overall economic picture is always relevant. It might sometimes get boring talking about the glacial pace of house price moves and the economy but I often wonder how many new people check in because they are interested in house prices and then check straight out again, when all they read is stuff about trading, gold and public sector versus the private sector debates?
44. str 2007 said...
I think if people checked in and only HPC discussions were allowed they'd also find about 3 new articles and 2 or 3 posts on each per day and check back out again through sheer boredom.
Talking of Boring, remeber the Young Ones. (Episode titled Boring)
This catch phrase from Rick sprung to mind :-
"Guys! Guys! Look at us! Squabbling! Bickering! Like children! What's happening to us? We never used to be like this!"
45. flashman said...
mark w: "as long as you maintain margins etc". Not strictly true. During a dramatic move, many people fail to get filled for quite some time and end up owing much more than the contents of their accounts. It happens more than might think. They end up praying that the exchange cancels everything. Now look what you've done...I've just indulged in a trading discussion :)
46. flashman said...
str@39. It’s a tricky one. Dammed if you ban off-topic and dammed if you allow it. Allowing off-topic results in more posts but often they are just ground hog day discussions with the same posters regurgitating the same posts, several times a day. Quantity isn’t always less boring. I suppose we all have our biases. I know from off-site discussions that you are interested in private trading, whereas you know my opinion of it.
47. mark wadsworth said...
Flash, aha, what I said was "as long as you maintain your margins". Big 'if'.
We do not know whether Estrader opens and closes lots of smallish trades within a few minutes or whether every now and then he gets a margin call at four in the morning and asked to wire tens of thousands of pounds to his broker in the next quarter of an hour.
48. flashman said...
mark w@36: If you take a more appropriate ten year period of say 1996 to 2006, Irish house prices went up 270%. In 1998 alone they went up 30%. Irish people didn't only make money from housing. Their governments' lax taxtion of foreign corporations created a jamboree for Irish businessmen and workers.
49. str 2007 said...
Yes back to the subject
This link is a graph of Irish House Prices (perhaps someone can post it on for me.
http://www.statusireland.com/statistics/property-house-price-statistics-for-ireland/3/Irish-House-Prices-Since-1996.html%22
Basically it shows prices in Ireland now back to early 2002 levels.
Is there a good reason why we aren't back at these levels ?
50. flashman said...
"Is there a good reason why we aren't back at these levels ?"
The Irish unemployment rate is almost double the UK rate and their economy (related to unemployment, of course ) contracted more than ours.
51. str 2007 said...
Back to your enemployment level tipping point again I guess (2.85 million wasn't it ?)
52. alan_540 said...
Hi flashman, nice to see your posts again.
I agree that all in society played their part in the madness, bankers, the public and government. All were driven by greed, the bankers to make bigger profits, the public to consume more - whether goods, services or property, and finally the government to retain power for as long as possible.
The saddest thing is that household debt has tripled under a Labour government, I for one don't understand how that is compatible with a socialist party. It cannot be good for society or the economy.
53. flashman said...
2.75 to 2.85.
I was thinking about that number the other day and wondered if we could compartmentalise parts of the UK i.e. if an area suffered particularly large drops in employment, would it be valid to extrapolate upwards and say that they had reached their own rate that was equivalent to the national 2.75 to 2.85 million? I don't have any data or numbers for this and I can think of a few reasons why it wouldn't work exactly the same...but it's worth thinking about. TC often says that prices in Wales have plummeted and they have definitely suffered some bigger than average falls in employment.
54. Flashman said...
Incidentally, US house prices have properly crashed despite their official unemployment rate not being that bad. All governments significantly fudge the unemployment stats but the Americans are far worse than any other first world country. Their real unemployment rate is way more than an equivalent to 2.75 to 2.85. Our figures have been fudged for several decades but they are no worse now than before, so the 2.75 to 2.85 relates to the official numbers. If our government fudges the numbers more than they do now, then the 2.75 to 2.8 number will have to be altered
55. flashman said...
Incidentally, US house prices have properly crashed despite their official unemployment rate not being that bad. All governments significantly fudge the unemployment stats but the Americans are far worse than almost any other first world country. Their real unemployment rate is more than an equivalent to 2.75 to 2.85. Our figures have been fudged for several decades but they are not particularly worse now than before, so the 2.75 to 2.85 relates to the official numbers. If our government fudges the numbers more than they do now, then the 2.75 to 2.8 number will have to be altered
56. ontheotherhand said...
MW. I love the number comparisons per head with UK and the calculation per Irish household of gain less bailout cost. Keep it up.
Flashman I understand your points about collective responsibility and that the banks couldn't do what they did without our tacit approval. So long as we failed to stop them being 30X leveraged, handing out 125% mortgages, and borrowing in bulk overnight money, they HAD to compete with Northern Rock or get fired. Imagine you are the CEO of Lloyds and you make half the profit per share of all the others in 2001, 2002, 2003, 2004, 2005 etc. You tell the shareholders every year that you are making half the profit because you are being prudent in case there is a house price crash or a credit disruption. How long do you think you last before they fire you? House prices never go down by much they would say, and global derivatives mean risk has been spread around the world and there will be no disruption. If you don't start lending we'll easily find someone who will...
57. mark said...
wonder what the record is for number of posts on an article on this website
58. jack c said...
Well over 100 when greenbay was in full swing
59. mark said...
lol
60. str 2007 said...
Flashman
Very good point 're localised ployment rates.
I always find myself living in high employment area - hooray!
But the knock on effect is 2007 + asking prices - boo !
Still there's quite a few sticking now with a few reductions.
61. mark wadsworth said...
OTOH, comment 55, I'm a numbers kind of person :-)
62. jack c said...
@str 2007 - wondered if you picked up on this the other day.....
"Hampshire saw an increase in house prices. The average home in the county jumped from £210,154 in July to £211,303 in August. There were no figures available for individual towns in Hampshire"
SOURCE - www.portsmouth.co.uk/biz/House-prices-fall-in-the.6558543.jp
63. str 2007 said...
No Jack
I hadn't seen that, it wouldn't surprise me & without wishing to brag, my home town will be on the upside to that 'average' increase. In fact there's very little for sale sub £200k near me and that includes flats.
Houses that were sticking through the holidays have remained unsold in September which would suggest price reductions would be necessary if they're serious sellers.
There's one nice little house that had been on for 400k that was reduced to 389k has just been dropped to 369k.
The wrong school parchment for me unfortunately, but good to see the reduction.
I'm watching that particular one as upper threes is a favourite price band for smallish 4 beds & quite a few have been building up lately.
To see them all drop 20-30k asking prices would be a big move down for round here.
64. str 2007 said...
Jack
If you July/ Aug increase was based on land reg figures then that could effectively be for sales on Apr/May.
I think it would be a different story now.
65. jack c said...
str 2007 - it basically confirms what you were reporting over the spring/summer months (in stark contrast to the NE of England). I think you will ultimately see a slide in prices but some regions will slide much more than others, I guess is that hampshire will hold up better than other areas.
Look out for a report which I thought might be of interest to you - sending via e-mail today.
66. jack c said...
str 2007 - looks like our last post(s) crossed in the ether!
Have sent you recent report (commodities) which you might find useful.
67. braindeed said...
Flash - ever heard of the phrase 'p^ssing in the wind'?
If it's any consolation, I understood the notion (and agree wholeheartedly with the premise) of 'we' straight off - I've used the same analogy before and got a similar reaction from the beautification candidates too.
Everyone else deserves a haircut, it seems. No one wants to hand back a shilling of the benefits acrued in HPI, etc. WE,/b> are indeed, all to blame.
68. str 2007 said...
cheers jack, got that, I'll have a read when I get a minute (or 10). !
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