Irish Bank Borrowings surges by €24 Billion to €119 Billion in September

Cassandra Syndrome

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Remember the €25 Billion Irish banks had to pay in September? Well €24 Billion of that came form the ECB, who how represent 9% of all Irish banks liabilities.


One of the most bullish stories coming out of Europe last month was that Ireland, despite a drunk and disorderly finmin, and banks either increasingly more nationalized or on the verge of full scale restructuring, managed to fund its €25 billion in sovereign debt maturities. Of course, the European media took that as a sign of strength and from that point on it was off to the races for the EUR. Yet it appears the celebration was just a little premature. We learn today that virtually all of the maturities were funded indirectly by the ECB: in other words the monetization shell game so well mastered by the Fed is now being conducted by European banks everywhere. In September Irish bank borrowings surged from €95 billion to €119 billion, a €24 billion increase, and virtually a euro-for-euro match for all the new Treasury issuance. And since no demented monetization ploy goes unpunished, the action raised Irish ECB borrowings to 9% of liabilities, the same as Portuguese banks. As for the balance, as readers will recall we highlighted that last week the ECB purchased €1.4 billion of government bonds directly, therefore confirming that every single Irish bond auction would have been a 100% failure had it not been for Jean Claude Trichet's direct and indirect monetization scheme. But yes, somehow the euro is considered more viable than the dollar.

One day Germany will say "monetize away, Weimar be damned." That day will be very memorable for the dollar which has now become the funding currency of choice. That is the day when Europe will officially retaliate against endless US FX aggression, and the currency war will be really on.
How The ECB Directly And Indirectly Monetized All Irish September Treasury Auctions | zero hedge
 


HarshBuzz

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and people ask dumb questions like 'how are we beholden to the EU?' :rolleyes:

hilarious comment underneath that article:

Ireland isn't even a real country, so their problems don't count.
 

Cassandra Syndrome

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and people ask dumb questions like 'how are we beholden to the EU?' :rolleyes:

hilarious comment underneath that article:
Part of the beauty of that website is some of the hilarious gallows humour comments that the posters leave.

It is true what they say that Laughter is the best medicine.
 
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But but, didnt they promise us Jobs and recovery?, and dont forget we have turned several corners!
 

HarshBuzz

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But but, didnt they promise us Jobs and recovery?, and dont forget we have turned several corners!
what are you on about?
 

Outlander

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The Irish Economy

This is from Karl Whelan:

Now, this weekend, the ECB has issued a statement that would be barely understandable to most people but that the Financial Times have interpreted, probably correctly and based on briefings, as opening up the possibility of taking action against the “addict banks.”

Since the Irish banks are submitting NAMA bonds as collateral to the ECB, as well as securitised loan books formed from turning large amounts of Irish loans into marketable securities, it could be argued that they fit the bill for being counterparties who are offering up collateral whose credit risk is highly correlated with the credit risk of the counterparty itself. As such, they could be forced to reduce their borrowings from ECB if it is decided to exclude some of the collateral that they are offering up to get access to ECB funds.

----------

This may just be tough talk from the ECB. But if it’s not, then it raises the very serious question of what exactly needs to be done to allow the Irish banks to access funds on the international bond markets.
The ECB taking action against our "addict banks" would have consequences for our bond yields, and could trigger a call on the emergency rescue fund.

However removing the credit line from one addict and giving it directly to the governmental credit crack heads wouldn't in itself solve our problems.
 

HarshBuzz

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I pointed this up in other threads last week

There is scope for Credit Crunch II to hit the Irish banks very soon. As they get downgraded to near-junk status, no other banks will fund them (or buy their debt). I'm already aware of banks who have been told by their credit committees to pull their bilateral funding lines with all Irish FIs.
This leaves the Irish banks almost totally reliant on the ECB for funding so when a step like the one above is announced, this will have an immediately retrograde effect on the Irish banks' funding positions.

Translation; the Irish banks just got even more screwed, if that were possible. That line in the sand that St Lendahand thought he drew two weeks ago just got washed away by the tide.

Next step; general retail flight of deposits (you know that thing Lendahand assured us couldn't happen 'because Ireland is an island')
 

Gemlarkin

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The ECB must force more budget cuts or they will be forced to lend

The ECB must force more budget cuts or they will be forced to lend more and more to the Irish Banks
 

MPB

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and people ask dumb questions like 'how are we beholden to the EU?' :rolleyes:

hilarious comment underneath that article:
I presume this 24 billion is guaranteed by the Irish state? So it is not really so much a loan, as a further payment on the purchase of the country.
 

HarshBuzz

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of course as with all 'Irish bank' gross numbers, you need to disaggregate between actual Irish banks and IFSC operations

According to Glas, it breaks down thusly:

4 'operating banks' :rolleyes:; 42bn
Anglo\INBS: 26bn
IFSC ops: the rest i.e. 51bn
 

Squire Allworthy

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One day Germany will say "monetize away, Weimar be damned." That day will be very memorable for the dollar which has now become the funding currency of choice. That is the day when Europe will officially retaliate against endless US FX aggression, and the currency war will be really on.
We all know that the ECB is intervening directly or indirectly. The traditional German strong currency position is a nonsense in the current context where virtually every country seems hell bent on weakening their currency. The Euro is grossly over valued.

I can't see the current national debts of many countries ever being paid in the traditional sense. Interest will be paid and the sum borrowed will be inflated into oblivion. I can't see any other resolution.

So for how long do the sound bites for the German public have to continue?

I think I will invest in wheel barrow production.

 

HarshBuzz

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The Euro is grossly over valued.
depends what you are valuing it against ;)

the yanks have done an even more spectacular job of destroying their currency than we have and the brits are not far behind
 

Squire Allworthy

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depends what you are valuing it against ;)

the yanks have done an even more spectacular job of destroying their currency than we have and the brits are not far behind
It is over valued against the Yuan, the dollar, Sterling ...........................

I am not quite sure where the current race to the bottom leads. High inflation seem likely eventually.

We will certainly import some inflation, in India the rate is about 12% YOY Argentina also high. food and many commodity costs are rising. In much of Europe the internal pressures will be deflationary rather than inflationary. So I would assume that this would lead to reduced imports in Europe and improved competitiveness assuming labour and energy cost can be contained.

Energy costs will be a bit of a joker in any future recovery. It is unquestionably an area that needs greater investment.
 

HarshBuzz

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absconded

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"therefore confirming that every single Irish bond auction would have been a 100% failure had it not been for Jean Claude Trichet's direct and indirect monetization"


This makes a mockery of everything that posters in denial about our bankruptcy are claiming. Okay, technically we´re not actually bankrupt as long as we can raise credit. But if only the ECB has faith in our ability to repay our bonds, then Ireland is on life support in a critical condition.
The sky actually is falling in.

Remember, it was denial that got our country to where it is today. We need to break the cycle of denial sometime.
 

Squire Allworthy

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"therefore confirming that every single Irish bond auction would have been a 100% failure had it not been for Jean Claude Trichet's direct and indirect monetization"


This makes a mockery of everything that posters in denial about our bankruptcy are claiming. Okay, technically we´re not actually bankrupt as long as we can raise credit. But if only the ECB has faith in our ability to repay our bonds, then Ireland is on life support in a critical condition.
The sky actually is falling in.

Remember, it was denial that got our country to where it is today. We need to break the cycle of denial sometime.

Why do you think the ECB is acting because they have faith in Ireland rather than because they fear the possible consequences of not intervening?
 

Cassandra Syndrome

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Why do you think the ECB is acting because they have faith in Ireland rather than because they fear the possible consequences of not intervening?
We are the ECB's appendix. We appear minute and unnecessary, but if we burst....




We should be blackmailing Brussels all the time. Brian Lenihan should walk into the lobby way of the ECB, with all the IOU notes strapped to him and a red button. "Clear the country's debt, or we're going to implode on you."
 

absconded

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Why do you think the ECB is acting because they have faith in Ireland rather than because they fear the possible consequences of not intervening?
:D TBH, I don´t believe it´s either out of charity or for solid investment reasons that the ECB is bailing us out.

But in all seriousness, why should wealthy Germans and other continental types pump money into an economy which refuses to reform.

Furthermore, being the only buyer of Irish Bonds, can they not command whatever interest rate they wish on our debts?

What´s to stop Bond yields going to 10% if Ireland doesn´t take dramatic austerity measures?
 

ibis

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:D TBH, I don´t believe it´s either out of charity or for solid investment reasons that the ECB is bailing us out.

But in all seriousness, why should wealthy Germans and other continental types pump money into an economy which refuses to reform.

Furthermore, being the only buyer of Irish Bonds, can they not command whatever interest rate they wish on our debts?

What´s to stop Bond yields going to 10% if Ireland doesn´t take dramatic austerity measures?
Ireland is taking what are regarded as dramatic austerity measures.
 


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