Ireland

Even as the melt up continues with the US economy double dipping, things in Europe are just getting plain worse by the day. First it was the disappointing series of PMI data out of the old continents, with a focus on the periphery, where pretty much every number missed expectations. Now Reuters is reporting that due to refinancing requirements to the tune of €25 billion by its two most insolvent banks Anglo Irish and Allied Irish, the banks, and the government of Ireland itself, has quietly request an extension of the European Commission bank guarantee program which bailed out the country back in 2008, and which is needed to bail it out all over again. "Ireland's guarantee, which is set to run out at the end of the year, saved its financial system from collapse when it was first issued in September 2008 and has continued to be a lifeline for lenders since the Greek crisis shut off their supply of term funding. Both Anglo Irish and Allied Irish Banks, the country's second-largest lender, have called for the guarantee to be extended and the government said it was in discussions with Brussels about its future." In other words, nothing continues to work in the European banking world, except that which is explicitly backed by the ECB, which in turn is implicitly backstopped by the Fed. If there was a reason for the melt up to surge another 3-4%, this is it.

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 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+).

Banks protesters storm Irish parliament

Protesters have stormed parliament during a march against government plans to inject billions of euros into the country's banks.

Dozens of people broke away from the march and ran at the gates of the parliament's main building, Leinster House.

They wrestled with police, who tried to force them back and secure the gate.

At least one man suffered a head injury during the scuffles with organisers appealing for calm.

Add bad banks, high NPA to GDP ratios, dramatically overly optimistic growth assumptions, and unrealistic perspectives on taxation, and you get a capital "I" in the PIIGS acronym!

This is a very meaty piece, written for those who are serious about the true state of affairs in sovereign Europe as NOT reported in the mainstream media. Though not necessarily for freshmen, it is more than worthwhile for those who want to know what is not being said.

Economic contagion begets financial contagion, which will spread across much (if not most) of Europe, causing further economic contagion. This is what is written on the tea leaves in Ireland.

Below is the Central Bank Of Ireland's take on dealing with what it has just uncovered to be a busted banking system and imminent austerity measures. The PIIGS have just been rebranded to PIIIGS. Don't take our word for it: here is what the Irish Finance Minister just said:

IRISH FINMIN: INFORMATION REVEALED BY BANKS 'TRULY SHOCKING'
IRISH FINMIN: WE MUST STABILISE BANKING SYSTEM NOW
IRISH FINMIN: BANKS MUST REPAY DEBT BY FACILITATING RECOVERY
IRISH FINMIN: ECB TRICHET BACKS AUSTERITY MEASURES

As disclosed, Ireland has instituted a "Bad Bank" concept to acquire 1,200 loans, or €81 billion worth, at a 47% discount. Sounds about right. Of course, the US financial system still carries most of its loans at about par: you see we have a printer and they don't, so we can do whatever we want.

Just in case you needed some more validation for a "strong" Euro thesis, the latest bit of news out of Europe shows that all those problems that were initially swept under the rug, just like in a crappy Japanese horror movie, find a way to reach out and haunt Central Bankers worldwide. First the Baltics, then Greece, then Austria, and now, once again, Ireland. 50% state ownership of Ireland's two leading banks is now on deck. To keep this as surreal as possible, may we suggest that Fred "Iceman" Mishkin quit his job in Columbia where all he does is spread completely factual and thoroughly undiscredited economic non-bullshit and run for [president/despot/tyrant/monarch/steam spewing geyser] of Iceland.

Nothing to see here... Keep buying stocks.