What if...

[tetsujin1979]

ok, first off since doing Accounting for the Leaving, I have had zero economic/business education, and I'm pretty apathetic towards all things political, so if I'm asking something stupid, it's because I don't know any better.

What if, in the morning, someone with the power to make a decision decided, "you know what, sod Anglo, we're not going to bail them out. They've dug their own hole and now they can rot in it".

What if the government decide to let Anglo, or whatever bank, fail and go bust, and would that situation be better or worse than the current one?

[Charlie Darwin]

Anglo isn't really a "them" anymore - it's us, we own it.

If we did, we'd lose all of the 20bn+ we've sunk into it already, but that was always going to happen. What would happen after that isn't entirely clear but it would almost certainly spark a run on all of the other Irish banks and require them to be nationalised and, in the short term, shored up with billions more borrowed cash. But, at the same time, that's probably going to happen over the next year anyway.

Some people (Brian Lucey of TCD for instance) thinks we should do exactly that and default on Anglo's debt because it's inevitable in the long-run and we should get out before we sink any more money in. Others think that pulling out now will cost us more in the long-term as banks will be much less likely to lend us money and will charge higher interest rates while we'll still have cover all of the billions we've already thrown at the banks.

since doing Accounting for the Leaving, I have had zero economic/business education

Funny, replace "Leaving" with "PhD" and you're in the same boat as Joan Burton.

[Billsthoughts]

I think it is because we borrow so much money for the day to day running of the country. If nobody would lend to us then the country wouldnt be able to function. If we were to default on the anglo debts then it would send out the message that we dont pay our debts.

[Spudulika]

There's two sides to the story, and if we just pulled he plug on Anglo then it would have short term negative and medium term positive effects, from what I can read and have been told. Short term we'd experience a restriction of credit facilities, especially as the crooks in FF and their Dail cronies mane Ireland and Anglo interchangeable. We'd find it tough(er) in some circumstances to get loans. However, investors are investors, not donors and not charitable organisations. If we paid out like a liquadator then they's get something back and we'd be a little bit of an outcast, for a while. Then we would have the latest estimate to cover the debts for domestic spend, to create business and confidence, so medium term investors would be looking at a more vibrant economy and would be willing to take a chance again.

As it was stated, I think it was Brian Lucey, we don't know who the bondholders are. Are they pension funds or are they the chechen mafia? Yet it all comes down to us, the people. As the owners of this "bank" we can actually demand the government close it. All the scare stories in our media won't dissuade the public from closing it - despite us being scared into voting for Lisbon and Nice at the 2nd time of asking.

The government won't close it for many reasons, the most important being the people who put and keep them in power have too much to lose, and I don't mean the Irish voting public.

[OneRedArmy]

We're past the tipping point. I can't see how we can avoid defaulting on either our sovereign debt or our sovereign guaranteed debt, and in any case as of last week nobody other than the ECB will lend money to Ireland so we'll effectively be forced to default early in the New Year even if we don't want to.

All that's left to decide is whether it's a messy default, or whether the EU steps in and coordinates the whole thing in a vain attempt to try to limit the potential contagion to Portugal, Spain and the other basket cases. We won't avoid the IMF coming in either.

It's a disaster that it's ended up like this, but trying to repay a debt we can't afford over the next few generations will compound the situation and will force Ireland back 50 years. Defaulting will be very tough on those who will bear the brunt of the IMF-enforced cuts, but will allow a recovery in the medium term. Despite arguments that "one bitten, twice shy", lenders actually have very poor memory in the long-term. There are examples of countries that have regained international credibility reasonably quickly (5-10 years) after a default and markets started lending again to them at a reasonable rate.

Don't expect FF to take this decision though, they will effectively be signing their death warrant. The only unknown for me is how quickly the above situation happens and how much the EU can take control and spin the beejaysus out of it in a desperate attempt to stop the Spanish being next (in which case it would be almost curtains for the Euro and the EU in it's current shape).

[Macy]

Surely it will be the ECB/ IMF fund that we'll be relying on rather than the just the IMF? So after two plus years of how we couldn't let Anglo default because of the effect on state debt, Anglo debt is going to lead to a default anyway? Shows how fooked up the "Save Anglo" brigades arguments were from the get go imo - still we are where we are...

Still don't see why we can't negotiate with the bondholders to take a lower cut. If it's that or outright default as ora outlines, why wouldn't they take a deal. Even a 10-15% write down would significantly help.

[OneRedArmy]

Surely it will be the ECB/ IMF fund that we'll be relying on rather than the just the IMF? So after two plus years of how we couldn't let Anglo default because of the effect on state debt, Anglo debt is going to lead to a default anyway? Shows how fooked up the "Save Anglo" brigades arguments were from the get go imo - still we are where we are...

Still don't see why we can't negotiate with the bondholders to take a lower cut. If it's that or outright default as ora outlines, why wouldn't they take a deal. Even a 10-15% write down would significantly help.

Paying a cent less than 100% on senior debt is a default, whether its mutually negotiated or unilaterally actioned.

In terms of the ECB providing funds, I haven't had the time to do research on this, but my understanding (I'll have a look at the details later) is that we'd pay the ECB 8%. At that rate I'd tell them to stuff their money and take our chances directly with the IMF. Bluntly, I'm not content for my money to be paid in excess interest to the ECB to protect civil servants salaries. Selfish I know, but at least I'm honest!

Anyway, the implications of a default are open to debate, I was really only covering the likelihood of a default.

[Macy]

I thought the ECB/IMF (where the ECB are the main players) are charging Greece 5%. That was the commentary when we were selling the last bonds, as we were borrowing at a higher rate than we are lending Greece. I think it's a bit delusional to think the ECB bailout would protect civil servants salaries, or that civil servants salaries would be the extent of the issues/ problems for the state of bringing in the IMF to be honest.

[OneRedArmy]

I thought the ECB/IMF (where the ECB are the main players) are charging Greece 5%. That was the commentary when we were selling the last bonds, as we were borrowing at a higher rate than we are lending Greece. I think it's a bit delusional to think the ECB bailout would protect civil servants salaries, or that civil servants salaries would be the extent of the issues/ problems for the state of bringing in the IMF to be honest.

http://www.eurointelligence.com/inde...ash=0283b65ef0

[Macy]

That's still only an opinion not fact, but in that case we'd be as well keep going to the markets up to 8% anyway - it makes both the ECB and IMF options even less attractive. If the failure to go to run the last two bond auctions means the markets will have us at even 8%, and personally I think it will be harder without an election (which would give us political stability).

[dahamsta]

I have my doubts about IMF intervention too. Whatever about all their complaints about our corporation tax, Ireland was the EU's poster child and their continued "investment" in Irish bonds just shows how keen they are not be embarrassed - because that would be their primary concern - by a default.

My guess is that they'll stick their elbows out to keep the IMF at bay, and they'll try to bully us in a similar manner. Perhaps that's just wishful thinking though, because of my perception of the EU when it comes to attempts to push us around. Course now they have Lisbon. Another master stroke by Fianna Fail there. Idiots.

[OneRedArmy]

I have my doubts about IMF intervention too. Whatever about all their complaints about our corporation tax, Ireland was the EU's poster child and their continued "investment" in Irish bonds just shows how keen they are not be embarrassed - because that would be their primary concern - by a default.

My guess is that they'll stick their elbows out to keep the IMF at bay, and they'll try to bully us in a similar manner. Perhaps that's just wishful thinking though, because of my perception of the EU when it comes to attempts to push us around. Course now they have Lisbon. Another master stroke by Fianna Fail there. Idiots.

I agree that its definitely in the EU's interest to keep tight control of the stage management and keep it well away from the IMF ("nothing to see here, move along"), I just don't care much for the ECB Stability Fund and particularly the rate at which it lends money.

[dahamsta]

I don't care for anything Europe since Lisbon tbh. I think they're equally as likely to as the IMF to screw us, just with incompetence rather than the IMF's beloved "austerity". Of course they're equally self-serving, greedy, power-obsessed groups of muppets.

[Noelys Guitar]

I agree that its definitely in the EU's interest to keep tight control of the stage management and keep it well away from the IMF ("nothing to see here, move along"), I just don't care much for the ECB Stability Fund and particularly the rate at which it lends money.

What happens if Spain or Portugal get into even more serious difficulty before the end of this year/early next year ie default or Greece type scenario. S&P get to the "trough" before us. Where would that leave Ireland in relation to accessing funds/IMF intervention? Is there a doomsday possibility down the line whereby we cannot borrow enough money to keep the state afloat (as almost happened in the 80's).

[OneRedArmy]

What happens if Spain or Portugal get into even more serious difficulty before the end of this year/early next year ie default or Greece type scenario. S&P get to the "trough" before us. Where would that leave Ireland in relation to accessing funds/IMF intervention? Is there a doomsday possibility down the line whereby we cannot borrow enough money to keep the state afloat (as almost happened in the 80's).

If Spain goes to the wall nobody will care about Ireland. The future of the Euro would be in question.

As for not being able to borrow, we're there today. That's the reason we cancelled the monthly bond auctions. If we went to raise money today, I'm not sure we'd get it at any price.

[Macy]

S&P get to the "trough" before us. Where would that leave Ireland in relation to accessing funds/IMF intervention? Is there a doomsday possibility down the line whereby we cannot borrow enough money to keep the state afloat (as almost happened in the 80's).

As far as reports go, the fund was set up to cover all the PIGS, and then some. Although if Spain and Portugals Governments are telling the same yarns about the figures as we did/ are, who knows.