The new Euro rescue deal - is it a good one for Ireland?

Sounds like Enda is coming home with the goods from Brussels. But is it enough to get us out of the hole we're in and restore confidence?

Specifically could someone explain how, if Greece is allowed to buy back debt discounted on secondary market, saving perhaps 20%, why wouldn't the secondary market just end this discount? And, assuming debt-buyback is a good move and can be done, can Ireland/Portuga/Italy/Spain do the same and thereby reduce the debt-burden?

horusd said:

Sounds like Enda is coming home with the goods from Brussels.

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Hahahahahahahahahahahaha.
If he manages to spin it like that I'll have to admit he's smarter than I ever thought.


But seriously, of course it is, longer cheapr loans mroe akin to a proper bailout than the punitive conditions orginally imposed. Its what they should've done in the first place for Greece and may have stopped quite a bit of the rot.

horusd said:

Sounds like Enda is coming home with the goods from Brussels. But is it enough to get us out of the hole we're in and restore confidence?

Specifically could someone explain how, if Greece is allowed to buy back debt discounted on secondary market, saving perhaps 20%, why wouldn't the secondary market just end this discount? And, assuming debt-buyback is a good move and can be done, can Ireland/Portuga/Italy/Spain do the same and thereby reduce the debt-burden?

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I think that some of the discounts available on Greek bonds are a lot higher than 20%, probably more in the region of 50%. As soon as Greece/EU start buying up those bonds their price will rise. If they were to buy them all the price would head back to parity. This is basic supply and demand stuff; currently the price is so low because there are a lot more sellers than buyers. It is unclear how much will be able to be bought up at a low price.
While I think overall the move is in the right direction, i.e. impose losses on bond holders, I think the devil is in the detail and I haven't looked at the details. Heard someone on the radio this morning saying that this would save Ireland €800m per year in interest. While this is a lot of money it is pittance compared to the deficit and an estimated interest bill in 2014 of €8bn to €12bn per year. It's nice, but it's not going to solve Ireland's financial problems by far.

Thanks Chris, sounds like it would be well worth some EU agency buying up the discounted debt and canceling it. I know 800 million isn't loads in the scheme of things (who'd have thought we would be saying that) but it's a fair amount of money all the same.

horusd said:

Thanks Chris, sounds like it would be well worth some EU agency buying up the discounted debt and canceling it. I know 800 million isn't loads in the scheme of things (who'd have thought we would be saying that) but it's a fair amount of money all the same.

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That €800bn p.a. could go a long long way, but pushing out the repayment dates will be more beneficial.

I'm optimistic that the greater certainty from this is the first piece of real good news we can cling to.

The markets have spoken, for now at least, and we have pulled back from the brink to an extent.

On the banking side our next step is for the domestic banks to demonstrate that their solvency is rock solid and recapture a deposit base to slowly get off ECB life support. As long as they are on this type of short term funding they will not generate economic activity.

On the budgetary side, the story now should be that we have breathing space but will continue to implement the current program of reducing the deficit at the current pace. The difference now is that these measures will be sufficient and unlikely to be made more severe.

To add a bit of perspective, apparently we are borrowing 18billion a year to keep going and we cant afford to repay it so eventually .... we go bust. Notice no more pay reductions, ie the public service who have a lot of people on salaries that bear no relation to the job set but hey who cares this is Ireland. We are heading for bust full stop. Our best hope is to strike oil or gas.

noah

We need the detail of the plan. It sounds good. Irish bond yields have fallen dramtically on the back of it albeit still at high levels. Interesting thing is that Italian and Spanish yields have edged higher. Think it will take the weekend for the market to digest it and get a clearer picture. Monday will be an interesting day.

Both Italian and Spanish 10 year yields went up again yesterday, which could be an indication of still a lot of distrust in the market. Personally I would say that the market has realised that this deal doesn't address the Italian and Spanish debt problems in the least, and that even the increase in EFSF is barely enough to deal with Greece and Ireland, and that there is no fund big enough to deal with Spain and Italy.