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Europe Prepares for Bloodbath Open After Ireland Lowered By S&P To AA- From AA, Outlook Negative
From S&P:
Overview
- The projected fiscal cost to the Irish government of supporting the Irish financial sector has increased significantly above our prior estimates.
- We are therefore lowering our long-term sovereign credit rating on the Republic of Ireland to 'AA-' from 'AA'.
- The negative outlook reflects our view that a further downgrade is possible if the fiscal cost of supporting the banking sector rises further, or if other adverse economic developments weaken the government's ability to meet its medium-term fiscal objectives.
Rating Action
On Aug. 24, 2010, Standard & Poor's Ratings Services lowered its long-term sovereign credit rating on the Republic of Ireland to 'AA-' from 'AA'. At the same time, the 'A-1+' short-term rating on the Republic was affirmed. The outlook is negative. The transfer and convertibility assessment remains 'AAA', as it is for all members of the European Economic and Monetary Union.
The downgrade to 'AA-' applies to other ratings that are dependent on the sovereign credit rating on Ireland, including the issuer credit rating on the National Asset Management Agency (NAMA), and the senior unsecured debt ratings on government-guaranteed securities of Irish banks (see "Ratings List" below).
Rationale
The downgrade reflects our opinion that the rising budgetary cost of supporting the Irish financial sector will further weaken the government's fiscal flexibility over the medium term. In light of the recent announcement of new capital injections into Anglo Irish Bank Corp. Ltd. (BBB/Watch Neg/A-2), our updated projections suggest that Ireland's net general government debt will rise toward 113% of GDP in 2012. This is more than 1.5x the median for the average of eurozone sovereigns, and well above the debt burdens we project for similarly rated eurozone sovereigns such as Belgium (98%; Kingdom of; AA+/Stable/A-1+) and Spain (65%; Kingdom of; AA/Negative/A-1+).
After a decade of rapid credit growth, which in our view greatly increased the risk profile of Irish banks, the Irish government has adopted what we view as a proactive and transparent approach to dealing with the financial sector's difficulties. We believe this should help foster a gradual recovery of the Irish economy over the medium term. Nonetheless, we believe that the government's support of the banking sector represents a substantial and increasing fiscal burden, which in our view will be slow to unwind.
We have increased our estimate of the cumulative total cost to the government of providing support to the banking sector from about €80 billion (50% of GDP; see "Ireland Rating Lowered To 'AA' On Potential Fiscal Cost Of Weakening Banking Sector Asset Quality; Outlook Negative," published June 8, 2009, on RatingsDirect) to €90 billion (58% of GDP). For details on how our 2010 estimate of Ireland's general government debt compares to official estimates, see Standard & Poor's commentary "Explaining Standard & Poor's Adjustments To Ireland's Public Debt Data," also published today.
Our estimate includes two main components: the upper end of our estimate of the capital we expect to be provided by the Irish government to improve the solvency of financial institutions, and the liabilities we expect the government to incur in exchange for impaired loans acquired from the banks.
We have increased our estimate of the cost to the Irish government of recapitalizing financial institutions to €45 billion-€50 billion (29%-32% of GDP) from €30 billion-€35 billion (19%-22% of GDP). These revised projections take into account the Irish government's recent announcement that it will inject further capital into Anglo Irish bank, bringing the total authorized so far for that institution to €24 billion (15% of GDP). In our view, the total cumulative amount of capital injected into Anglo Irish by the government could reach €35 billion (22% of GDP) over time. The higher capital injections relate to the recognition of worse-than-expected deterioration in Anglo Irish's asset quality. We believe similar developments could take place at some other Irish banks.
The second component of our estimate of the aggregate fiscal cost to the Irish government of providing financial system support relates to obligations to be issued by NAMA and its subsidiary entities. The face value of the total banking assets that we expect NAMA to acquire is about €80 billion. We expect NAMA to acquire these loans at a significant write-down. Our estimate of the haircut likely to be applied to the aggregate portfolio has increased slightly to 46% from 45% since our June 8, 2009 publication. As a result, our estimate of NAMA debt issuance has decreased to €40 billion from €43 billion. NAMA's own business plan applies a discount of 50% on the nominal amount of loans it expects to be transferred from the banks.
Absent the banking sector support described above, our projections indicate that Ireland's gross general government debt would in any case be on an increasing trend reaching 92% of GDP by 2014. Over the same period we expect net general government debt would reach 72% of GDP, which includes our estimate of the Irish government's liquid assets (cash and cash-equivalent) equal to 20% of GDP. Taking into account our estimates of likely future recapitalization costs to the Irish government and NAMA debt issuance we expect gross and net debt to reach 136% and 115% of GDP, respectively, by 2014.
Our working assumption is that the remainder of the government's capital injections into the banking sector will take place in 2010--although in reality they may be distributed over a longer period of time. We view these capital injections into the banking sector as having an extraordinary impact on the general government deficit in that year. As a result, the headline deficit could increase to 35% of GDP.
However, our view of the Irish government's underlying fiscal consolidation program is broadly unchanged. We expect the underlying deficit, net of these recapitalization costs, to reach 11% of GDP in 2010, compared with 15% of GDP in 2009. We project the deficit to reduce toward 5% of GDP by 2014. The government forecasts the general government deficit to fall below 3% of GDP in 2014. Data on the cumulative exchequer balance over the first seven months of 2010 indicate that a sharp decline in capital spending has reduced the overall exchequer deficit (the largest component of the general government deficit) to 6.5% of GDP in 2010 from 10.3% of GDP in 2009.
Outlook
The negative outlook reflects our view that the rating could be lowered again if--as a result of its support for the financial sector or due to a more sluggish economic recovery--the government's fiscal performance improves more slowly than we currently assume. Conversely, the outlook could be revised to stable if the Irish government looks more likely to achieve its fiscal target for the underlying general government deficit of less than 3% of GDP by 2014, or if the banking sector stabilizes more quickly and at a lower fiscal cost to the government than we now think likely.
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Any minute now, Bitchez!
This about sums it up.
http://www.youtube.com/watch?v=VJioTCSWLA4
Correct.
Except he's not Irish.
He's American.
You owe me 27 seconds of my life, Turd!
Wait a second. This entire thread is about Irish debt so what's the problem?
A little Max Keiser might make you smile.
http://www.youtube.com/watch?v=GFrBpBmkgjM
tic toc Bitchez !
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Yummy Grandma :)
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I wouldn't bet the farm on the fact stocks will keep going down. Don't forget you're fighting the fed who rigs this game. Once below 10000, the dow will rocket back up to 10600.
I'm sure it will because otherwise my name ain't Santa Claus AND I KNOW WHERE YOU LIVE!!
All Ireland has to do is pay Mishkin to write a favorable analysis.
How much is that whore charging these days?
He charged Iceland $124,000 but considering the times, I'd say he's going for around $400,000. What, you think sociopaths come cheap these days?
Time to make the most you can in the shortest period possible, then get gone before you're git good.
With Irish debt at 1000% of GDP, too late for the Fed whore. Where's Ted K when you need him?
Time for the ratings to get outed as the circle jerk they are.
And by outed I mean so that my 65 year old mother reads it in the NYT or sees it on CNN.
That would be nice. It would also be nice if the news media (and this article) mentioned that Ireland was in the process of bending over to the IMF and the Bankers. Apparently they weren't moving fast enough.
IIRC, Ireland was in the process of selling off public assets instead of stiffing the Bankers. Which must be nice if you're the one buying up the assets on the cheap and getting to charge the locals to use them.
It's this kind of nonsense which needs to hit the MSM, because right now, a number of States are either doing the same thing, or looking at it.
Yes, this kind of news does need to be on CNN. But if you own CNN, and want to own more public assets, it's not in your interest to make the public aware of what's going on.
Buy Guinness. We are going to need it.
I only drink real beer.
A pint of Kilkenny it is then!
My ideal day starts with me sipping a pint of Guiness, and ends with me sipping a pint of Guiness. Only when I am in Ireland, of course, as Guiness seems to go bad once it leaves God's Country.
Pabst Blue Ribbon??
Nice.
Chill that shit to 34 degrees and these pussies wouldnt know the difference, the euro trash might notice.
Something other than Heineken? SECURITY!
Any beer recently pulled from an icy cooler, and not paid for by me.
Hey coop,
I think I preferred your previous avatar. This one is grossing me out!
Hey, what's wrong with a little orifice prolapse between friends?
http://www.youtube.com/watch?v=snhiofL2Rh4
Harp only.
Brilliant!
Two Irish guys walk into a bar...thats it.
Irish guy walks into his local and orders 3 Guiness.
Barman; bee jaysus, you are going for it today Paddy, what has you drinking like this?
Paddy; ahhh, my brothers are gone you know. One in New York and one in Austrailia. I promised them i would have a Guiness each for them everyday, untill we get back together again one day.
Barman; What a fine man, drinking a pint each for his brothers everyday, that will do me, sit yourself down and i will bring them over.
So, paddy does this everyday for about 3 weeks untill its a common sight in the bar. But, one day he orders the same 3 Guiness and sits down as usual and starts drinking away. When he leaves that day at his usual time, the barman looks over and sees that one Guiness has been left on the table. Oh dear, the barman and prepares to console paddy the nest day on the loss of his brother. Paddy comes in the next day...
Paddy; The usual please barman.
Barman; But i thought...i thought you might have lost a brother paddy because you left a pint there yesterday, is that right.
Paddy; Ach no, dont be daft...i didnt drink it because i've stopped drinking.
I'd be tellin that one again, so I would:>Z
EUR/CHF Uh-oh spaghettios...
Whatsamatta? S&P has reaffirmed that Ireland's bonds are "investment grade". Wake me up when they hit BB+
Does this mean Captain Jack McCarthy isn't going to return from the grave to host Popeye and the Thanksgiving Day parade?
Yep,... DOW 8,000 here we come.
http://in.reuters.com/article/idINIndia-51021820100824
A number of interlocking stories show that, while European central bankers are talking a firm game about upgrading growth forecasts on the back of German exports, their actions show continued very strong concern.
First comes news on Monday that Anglo Irish Bank has transferred a new batch of impaired loans to the state-run bad bank National Asset Management Agency at just 38.1 percent of their face value, a price lower than the last transfer and one that, while it may prove optimistic, even at this level implies a weakening asset market and a growing and perhaps ultimately un-meetable bill for the government. Remember, the more money Ireland needs from the center, the less there is available to meet the growing needs of Greece and Spain.
Shortly after came news that the European Central Bank last week bought 338 billion euros of bonds, the most since early July. This follows closely on talk, unsubstantiated, last week among bond market participants that the ECB had bought up 60 billion euros of Irish bonds as investors lost confidence in Ireland and sold.
Bank of Ireland's new head estimates the
cost of Anglo-English at 15 to 16% of GDP,
better logic than Moody's suckers. Your list of European sovereigns
on tne brink should include France and Italy, the
UK backstopped at GBP 4.8 trillion..
So should I be bull 'ish on the doelarr????
Na.
Forex traders can't even take a piss break anymore without all hell breaking lose.
Let alone a deuce - I come back and the pikies have their caravans on the lawn. Bloody hell!
What a bunch of S&P crooks. The debt rating US of A is not even considered being downgraded, yet Ireland is because of financial sector cost. Professional fraudsters.
It is a race to the bottom. Since the US has the rating agencies the gubbimint is using them against even more insolvent nations.
Ireland's prime minister responded, " Ahh, tis the back of my hand the S&P wbe havin, and a good latherin after that."
S&P needs to lower CA, FL, IL, and NY to CCC.
Maybe you want to express your view directly to the ANALyst downgrading Ireland ?His email : trevor_cullinan@standardandpoors.com
Good luck !
NY should just be "Fail"
Default on all private external debt bitches.
That would certainly speed up the process, and be a nice payback for the gangster banksters. Tit for Tat bailout.
Well the ECB runs this place so the decision rests with them - but as I said before on this forum - we can pay our national debt only if the banks default on their external paper.
The state is having trouble taxing money when huge but strangely unquantifiable money is being sucked out of this bog hole while almost zero credit creation prevents us from refilling the bucket.
Somethings gotta give.
They should default rather than spend the next 10 years constrained by debt.
The same thing is happenning here. There is no way the tax revenues can pay for all the goverment and municapalities expenditures.
The only difference is here they print money more wrecklessly than the ECB.
How do you like your pain ladies and germs, now hard and quick or slow water torture
Over here in Ole' Blighty, the government considers taxing employees' free parking at work. An extra £250/year, on the productive part of the population. Do you yet have any proposals as ridiculous across the Irish Sea?
In an Irish brogue, what ye pronounce that "the Dark of Cark" by any chance?
Ya something like that or maybe like this.....
www.youtube.com/watch?v=XRm9Q2KfzBA
You can always immigrate to America.
http://www.youtube.com/watch?v=sRMrA8MTXpA
Old news (to ZHers) that should have happened a long time ago. I wonder if S&P is now going to report the Apple is coming out with an I-Phone?
Fuckin'-A, I just heard that from Moody's!
+AA
Greek Banks Pressured to Merge as Economy Hurts Profits
did they just say the banks are bankrupting the country of ireland...in plain english that is? nice to see someone say so .....lol.
What? What? I thought Ireland was the fair-haired golden boy poster child of 'successful austerity' in Europe.
So much history to consider. So much hot Irish blood. Such a shame what awaits.
ex VRWC
Musical? Add your voice to the chorus at http://economicprotestproject.blogspot.com/
I'm so bored of these "OMG austerity totally doesn't work and it's almost been implemented for 3 weeks now" articles - the ridiculous spendthrift pseudo-Keynesian (although it isn't, it's just deficit spending) experiment was in place for TWO YEARS, and NOTHING happened - the economy just kept sliding. I suppose something happened - debts spiralled.
The pain will be real, it will happen regardless, but it'll be over with a lot quicker if we go through austerity measures.
I am not arguing there shouldn't be austerity. I am pointing out the fact that pundits can say one thing today and something else tomorrow and nobody holds them to account. Fact of the matter is, most financial pundits should be summarily fired - they have been so wrong and continue to be so every time they open their mouth.
Look at the Gold chart today. To me, it seems as if there was some sort of order to defend 1234 at all costs.
http://www.marketwatch.com/investing/future/future-us-gold
There is still time, but not damn much
The good news is that good people will survive
And mankind will carry on, but the looters are all gonna get wiped out
Anybody that does not know how to completely & independently survive from money is going to die.
The trouble with gold & silver is that Americans are armed to the teeth, and not terribly bright: someone will attempt to take your wealth from you so defend your families.
It would appear that it takes the ratings agencies quite a while to catch up with events.As ever they are behind the times. I was reading on the notayesmanseconomics web blog this morning that credit quality on the recent tranche of loans that went into NAMA had average haircuts of 55%. The effect of this and the weakening of Ireland's banks on Irish government bond yields was that "the spread over the German bund is now back to the levels last seen just before the euro zone announced its “shock and awe” package on the tenth of May".
So maybe s&p is falling further behind just as it tries to catch up.http://notayesmanseconomics.wordpress.com
Apologies as I pressed the save button twice...
It sure will be a bloodbath in the european market this morning, it sure will. the downgrading of one of the PIIGS just shows us all that the problems of these countries haven't been solved.
At least Ireland is not issuing IOU's as California is doing or defaulting on 5 billion Dollars worth of bills as Illinois. Just 2 examples.
Give me a fucking break.
America is in the crapper. Quick, must turn on the anti-Euro propaganda to scare all buyers of Euro denominated debt out there.
Will be interesting to see if China buys it.
China, you know folks is the #2 economy in the world quickly moving into #1 position.
The Dollar is done. Wake up folks. The States can't pay their bills, can't service their debts and the Feds are at the end of their rope also.
This is the 2nd time in 70 years.
Alas, Iran will start to provoke in the Middle East and again, America and the stinking Dollar gets magically saved by the bell at the expense of the rest of the world.
Hope it won't be that and the story plays out as it should this time.
Ratings Agencies. The same geniuses that gave triple AAAs to CDO junk. --- Remember this quote? "Let's hope we are all wealthy and retired by the time this house of cards falters."
How is Incontinentia Buttocks doing?
Bloodbath morning in Europe :
DAX + 0.2 %
FTSE + 0.13 %
CAC 40 + 0.13 %
OMX Stockholm + 0.46 %
Very strange "bloodbath"...LOL !!!!
We are buying stocks for a joke. It's the famous British wit, Monty Python and all that.
Mr Trader with respect the Europeans are on (their last) Holiday.
reality comes slowly but comes surely
"feeding pearls to pigs is expensive and does not fatten pigs"
(Fuck I like it, it has a subtle ring to it)
Actually equities are now falling in Europe and the spread between German and Irish government bond yields is widening again...
Economist Morgan Kelly in May:
And it assumes that Irish do not do a mexican and learn to swim ----- some place? ah where is close that is not completely rooted ? ------- Thinking ------ Thinking --------- drink a pint of the dark -------- thinking ------ drink another pint of the dark ---------- thinking --------- Drink another pint of the dark -------- thinking sort of ! --- are fuckit I'll have another pint of the dark ------Thinking of a root, fuck the swimming its to cold.
Bartender give me a bucket of the dark I aynt doing shite to night.
This is Ireland we're talking about; high emigration (largely to the UK) whenever the economy is weak is taken for granted. But not even the Irish can pile out of the gaff as swiftly and thoroughly as unhappy FDI employers.
negative outlook reflects our view that a further downgrade is possible if the fiscal cost of supporting the banking sector rises further, or if other adverse economic developments weaken the government’s ability to meet its medium-term fiscal objectives.
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