Ireland

The Irish government is doing its citizens a disservice by accepting a bail-out. The “National Recovery Plan 2011-2014? intends to save EUR 15bn (“front-loaded” 6-5-4bn for the years 2011-13) by cutting expenses (10bn) and raising taxes (5bn) in order to reduce the budget deficit to less than 3% by 2014. The budget plan sees GDP increasing by 1.75%, 3.25%, 3% and 2.75% in the years 2011-14. Can anybody explain to me how an economy, which was shrinking by 11% (GNP) last year, that will be saddled with austerity (demand-reducing) measures of another 10% of GNP is supposed to grow? Not only have government tax revenues declined by 33% since 2007 but also will increased interest burden (because of the bail-out loans) eat up 20% of revenues by 2014 (up from 8% in 2009).

The sanity of the authors of this “recovery plan” has to be questioned.

If you thought Olli Rehn's "intervention" in Ireland's "democratic" process would end with his yesterday involvement in the voting process, you may be surprised to learn that diktat #2 is coming up. As we speculated last week, the first casualty of the Irish loss of sovereignty will be the country's lowest among the DM countries corporate tax rate. Today we read in the RTE that we are one step closer to being proven right: "A row has broken out in the European Parliament over Ireland's 12.5% corporate tax rate. It has emerged that eight, mostly French and German, MEPs have issued a declaration attacking Ireland's corporate tax rate and calling for a minimum EU wide corporate tax rate of 25%." Furthermore, these are not just any MEPs: "What has heightened the dispute is the fact that the eight MEPs are all co-ordinators for the different political groupings in the parliament and are, as such, representatives for those groupings on an influential parliamentary committee." While it is not a done deal yet, the days of the Irish tax haven may be numbered: "The declaration invites signatures from other MEPs and if it can gather the support of 350 MEPs it then becomes the position of the European Parliament." And here is how the new diktatura will spin its control over the Irish state...

I go where the mainstream media fears to tread, presenting analytical proof that Ireland will have to default with debt to GDP passing the 160% level. Yes, that's post IMF/EU/Bilateral state banks leveraged too much into Ireland loan/Pension fund raiding bailout! In essence, Germany has admitted what the numbers scream - Ireland is already in default, and it has been staggered out into the future via this bailout. 2013 is the magic number, right Ms. Merkel?

Hells yeah, Money McBags is back from his Thanksgiving break where he basted some turkeys, watched consumers run up more debt during Black Friday sales that they won't be able to pay off until the dollar hyperinflates to whatever is just below infinity (perhaps Bernankity), and furiously read...

The alternative title for today entry is: Ireland, please drive a stake through the heart of the vampire banks which have the world by the throat. The entire controlled demolition of the Eurozone's finances can be summed up in one phrase: privatize leverage and profits, socialize losses and risk. The basic deal is this: protect the bank's managers, shareholders and bondholders from any losses, while heaping the socialized losses and risks on the taxpayers and citizens. While there are murmurings of "forcing bondholders to share the pain," any future haircut will undoubtedly be just for show, while the Irish pension funds are gutted to bail out the banks.

If the recent Hungarian "appropriation" of pension funds, and today's laughable Irish bailout courtesy of domestic pension funds sourcing 20% of the "new" money was not enough to convince the world just how bankrupt the entire European experiment has become, enter France. Financial News explains how France has "seized" €36 billion worth of pension assets: "Asset managers will have the chance to get billions of euros in mandates in the next few months for the €36bn Fonds de Réserve pour les Retraites (FRR), the French reserve pension fund, after the French parliament last week passed a law to use its assets to pay off the debts of France’s welfare system. The assets have been transferred into the state’s social debt sinking fund Cades. The FRR will continue to control the assets, but as a third-party manager on behalf of Cades." FN condemns the action as follows: "The move reflects a willingness by governments to use long-term assets to fill short-term deficits, including Ireland’s announcement last week that it would use the country’s €24bn National Pensions  Reserve Fund “to support the exchequer’s funding programme” and Hungary’s bid to claw $15bn of private pension funds back to the state system." In other words, with the ECB still unwilling to go into full fiat printing overdrive mode, insolvent governments, France most certainly included, are resorting to whatever piggybanks they can find. Hopefully this is not a harbinger of what Tim Geithner plans to do with the trillions in various 401(k) funds on this side of the Atlantic.

The State’s contribution to the €85 billion facility will be €17½ billion, which will come from the National Pension Reserve Fund (NPRF) and other domestic cash resources. This means that the extent of the external assistance will be reduced to €67½ billion.
...The facility will include up to €35 billion to support the banking system; €10 billion for the immediate recapitalisation and the remaining €25 billion will be provided on a contingency basis. Up to €50 billion to cover the financing of the State. The funds in the facility will be drawn down as necessary, although the amount will depend on the capital requirements of the financial system and NTMA bond issuances during the programme period. If drawn down in total today, the combined annual average interest rate would be of the order of 5.8% per annum. The rate will vary according to the timing of the drawdown and market conditions.

The dominoes are starting to fall ...

As soon as the ink dries on the IMF loans, the second occupation of Ireland will begin, only this time there won't be armored cars and Paramilitaries in fatigues, but nerdy-looking bureaucrats trained in the art of spreading misery.

The BoomBustBlog contagion model easily predicted the actions of the UK and Sweden in aiding Ireland 9 months ago. To date, the model has been quite accurate and has some dire predictions for the near future. Here's how we predicted the chain of events of Ireland, the UK and Sweden to date, and sneak peek of what we see is in store for the near future.

A few weeks ago, Hitler realized he was in deep doodoo when the fraudclosure scandal was refusing to go away. Well it still hasn't, although for the time being it has been brushed under the carpet, courtesy of Europe which once again dominates the airwaves with its sad existence. Today, a far more industrious Hitler presents his plan to save Ireland. Oddly enough, it just may work.

Rosie enters the "future of the euro" speculation race, and sees a "devastating deflationary shock" when Europe finally accepts the inevitable: "U.S. companies would likely confront a huge appreciation in the dollar, which would cut into their foreign-derived earnings base. Commodity prices would undoubtedly correct and safe-haven flows would certainly redress the loonie’s overvaluation gap. Treasuries would rally big-time." Stocks, of course, would plummet, and "Gold would remain bid — yesterday’s rally in the face of the USD rally is a case in point." On the other hand, the fact that we are starting to see traces of Krugman in Rosie's thinking is very. very worrisome.

Take one look at Bank of Ireland stock this morning. Then read the following October 4 report on BOI from Goldman Sachs, and please join us in extended our congratulations to Goldman analyst Pawel Dziedzic who has joined the prestigious ranks of Cramer and Dick Bove of telling those who care to buy a bank days or weeks ahead of its bankruptcy.

A bunch of completely irrelevant numbers released by Ireland. At best these will achieve nothing but will kick the can down a few more months. At worst violent rioting will be a daily occurrence in Dublin within a week.

From RTE "The EU and the IMF will offer the Government an €85bn facility, which can be used to recapitalise the banks and fund the public finances. The EU and the IMF will offer the Government an €85bn facility, which can be used to recapitalise the banks and fund the public finances. The package would see the level of capital in the Irish banks being increased from eight to 12% in a move to bolster confidence of depositors in the financial system." This could well be too little, too late. The bank run has already started. And just to confirm that the schism between the ECB and Germany is now likely insourmountable, Nowotny said that he is 'irritated' with Merkel's remarks on the serious situation for EUR. Why, of course Ewald- nobody wants to hear the sad truth that you will be unemployed within a year.