# RTE News today: Debt restructuring was mentioned



## Godfather (7 Apr 2011)

Hi,

just a few mins ago during the RTE 6:01pm News the word "Debt restructuring" was mentioned for Ireland... During the interview to Trichet... In your opinion how would debt restructuring impact our own savings at the irish Banks? 

Thanks for any clue...


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## Lightning (7 Apr 2011)

Debt restructuring, aka default, is now looking more and more inevitable by the day. 

If our default is a planned debt restructure then there may be no impact on savings with the possible exception of State Savings that are invested directly in the Irish national debt. 

If our default is an unplanned mess where our heavily indebted bank sector defaults then savings may be effected.


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## Godfather (7 Apr 2011)

My God, then all the PIIGS countries would fall into that stage as domino effect in my opinion...  Like in the song from SASH these are really misterious times!!!


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## Chris (8 Apr 2011)

I agree with Ciaran in that it all depends on the way default is introduced. If it is proactive, then I think the effect on deposits may be that there is a withdrawal limit set, but no deposits are lost. Alternatively, if the EU and ECB keep their head in the sand, and Ireland doesn't stand up to the task on its own then a default may be forced on the state by the market. This would be chaotic having a big impact on banks and their operations, which could result in default on deposits.
Godfather, I think the domino effect is misused in this context. The way it is used in the media and by politicians is that a default in Ireland would be the cause of a default in another country. But this is simply begging the question. The only reason Ireland would default is because of bad fiscal management, and the only reason a subsequent country would default is because of bad fiscal management. One default does not cause another one.


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## Godfather (8 Apr 2011)

Chris said:


> The only reason Ireland would default is because of bad fiscal management, and the only reason a subsequent country would default is because of bad fiscal management. One default does not cause another one.



I'm not so sure... Let's say that the EU and IMF pumps money at better rate than IMF alone to keep Ireland go on for a while, as it happened with Greece, as it will happen with Portugal, as it might happen with Spain and Italy as well...  

That seems to be only a temporary solution... Would you agree? Greece seems to be even more likely to go bankrupt earlier than here... 

I believe the Euro is not a project that is going to last long... There are 2 forces in Euroland in my opinion moving opposite way... Maybe I'm too pessimistic but I don't see the Euro-currency life expectancy to be very long... Because countries would lose the instrument of the currency devaluation which was so useful to Italy (for example) in the past...


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## Chris (8 Apr 2011)

Godfather said:


> I'm not so sure... Let's say that the EU and IMF pumps money at better rate than IMF alone to keep Ireland go on for a while, as it happened with Greece, as it will happen with Portugal, as it might happen with Spain and Italy as well...
> 
> That seems to be only a temporary solution... Would you agree? Greece seems to be even more likely to go bankrupt earlier than here...
> 
> I believe the Euro is not a project that is going to last long... There are 2 forces in Euroland in my opinion moving opposite way... Maybe I'm too pessimistic but I don't see the Euro-currency life expectancy to be very long...



I agree, I think that the interventions have kicked the can down the road and made things worse than they are now. If Ireland or Greece had defaulted rather than get a bailout, then the amount of money to default on would have been lower. Your prediction about Greece being more likely than Ireland to default first is very valid in my opinion. But if that were the order, then a Greek default would not be the cause of an Irish default. An Irish default would happen because of its own problems.

I used to be quite supportive of the Euro, but my belief in the currency has been pretty much shattered in the last 3 years. First with the nullifying of the growth and stability pact, then the massive increase in money supply and funding to banks, and finally through the direct intervention in the bond markets. I just got a book that was recommended to me called "The Tragedy of The Euro" by Philipp Bagus. It only came out last year so it is very up to date. Looking forward to digging into it.


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## Godfather (8 Apr 2011)

Chris said:


> But if that were the order, then a Greek default would not be the cause of an Irish default. An Irish default would happen because of its own problems.



Exactly... Sorry I expressed my thought incorrectly: I didn't mean that the PIIGS are so interconnected to impact on each other's default... What I meant is that we don't have anymore the currency devaluation option in our power and that's such a good weapon...


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## elcato (8 Apr 2011)

> If it is proactive, then I think the effect on deposits may be that  there is a withdrawal limit set, but no deposits are lost.  Alternatively, if the EU and ECB keep their head in the sand, and  Ireland doesn't stand up to the task on its own then a default may be  forced on the state by the market. This would be chaotic having a big  impact on banks and their operations, which could result in default on  deposits.


By deposits you mean > 100k ? If defaults happens do EU rules regarding deposit guarantees go out the window i.e. < 100k ? My first thoughts are yes but I think that rules would still have to be enacted albeit slowly.


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## ggalrossy (8 Apr 2011)

CiaranT said:


> If our default is a planned debt restructure then there may be no impact on savings with the possible exception of State Savings that are invested directly in the Irish national debt.



Is the An Post 3 and 5 year savings part of this ?


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## Lightning (8 Apr 2011)

ggalrossy said:


> Is the An Post 3 and 5 year savings part of this ?



Yes. All NTMA State Savings products (more commonly called "An Post Savings") are invested directly in the Irish national debt.


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## Spear (9 Apr 2011)

Default or "restructuring" is increasingly looking like the most probable option. One or two more than McWilliams saying it now!! See the Irish Times today, for example: 

irishtimes.com/newspaper/opinion/2011/0409/1224294304548.html [apologies, but I can't post direct link yet as I have < 15 posts]


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## Godfather (9 Apr 2011)

Yes, I agree... I'm starting to believe David McWilliams more and more...


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