The ECB/IMF loan is just punitive!

[sheehan]

Simple math. You don't need a group of lawyers and teachers to tell you this (perhaps they won't tell you anyway or they cannot figure it out):

Irish GDP in 2009 was 227 billion. The debt is about 60% of GDP (i.e. 136 billion). Now we are taking another 85 billion from ECB/IMF. The total debt will be around 221 billion, roughly the same size of the economy.

How can the Irish people repay the debt? The GDP growth rate is estimated at around 2.5/3% in the next few years (optimistic according to some people) The interest rate of ECB/IMF loans is 5% upwards. So, bascially the Irish nation is borrowing billions at a cost of 5/6% every year and can only produce 2.5/3% growth from the loans it borrows. Is it a death trap?

 

[Mossy Heneberry]

We can't repay it, that's why we must default.

 

[sheehan]

The ECB/IMF must lower the interest rate to a level comparable to the Irish economic growth rate. Othewise, they are not helping but killing and enslaving the Irish people.

 

[Gimpanzee]

We don't know what the full amount of debt will be and we don't know what the interest rate will be.

Its in the lenders interest for it to be configured for maximum return. Could be that even with the best deal possible from the EU/IMF that we still can't pay up.

 

[Trophonius]

From what I know there is major disagreement between the euorpeans and the IMF. The europeans are worried about the whole european project, while the IMF are only concerned about Ireland. As far as I know from the past, while the IMF can be quite austere, their interest rate is low somewhere between 1.5-2.5%.

 

[PoliticsDad]

Simple math. You don't need a group of lawyers and teachers to tell you this (perhaps they won't tell you anyway or they cannot figure it out):

Irish GDP in 2009 was 227 billion. The debt is about 60% of GDP (i.e. 136 billion). Now we are taking another 85 billion from ECB/IMF. The total debt will be around 221 billion, roughly the same size of the economy.

It's not as simple as that. Not that I am down playing the seriousness of the situation but the net debt will only increase by the amount that we drawdown from the 85 bn (if that IS the figure). That will be determined by our annual budgetary borrowing requirements and - the real unknown - the money required to bailout the banks. The latter is the figure that really needs to be watched.

Unfortunately recent developments have seriously undermined the credibility of previous pronouncements by Honohan & Elderfield. It appears that no-one really knows the likely cost of Lenihan's leniency otherwise known as that wretched blanket bank guarantee.

 

[sheehan]

It's not as simple as that. Not that I am down playing the seriousness of the situation but the net debt will only increase by the amount that we drawdown from the 85 bn (if that IS the figure). That will be determined by our annual budgetary borrowing requirements and - the real unknown - the money required to bailout the banks. The latter is the figure that really needs to be watched.

Unfortunately recent developments have seriously undermined the credibility of previous pronouncements by Honohan & Elderfield. It appears that no-one really knows the likely cost of Lenihan's leniency otherwise known as that wretched blanket bank guarantee.

I understand that. However, there is already talk about the need up to 120 billion to bail out the bank eventually. You just cannot repay a loan at an interest rate of 5% with an economic growth of 2.5%.

If the IMF loan is indeed at 1.5-2.5%, I would consider that a more friendly help.

 

[sheehan]

In terms of the banks in particular, let's take Anglo, it is effectively a dead bank which has absolutely no hope of generating positive return in the coming years. We borrow billions at 5% to pump into a bank which gives at best zero return (very likely negative return in fact).

 

[Trophonius]

Asked this on another thread but got no answer yet:

Is PermanentTSB, the only solvent Irish bank at the moment? ie no money from government in bailout and no dealings with NAMA?

 

[jane5]

Trophonius, you're 100% right.

Permanent TSB is not involved with NAMA, has predominantly residential mortgages on their books, most of which are performing, and is solvent.

They always had very strict mortgage criteria-and are quite conservative to deal with, but very fair. Once, when I first started working, I asked for a loan to pay the bills for the first month before I got paid. They gave it to me, but when I started getting paid, called me and said they had converted it to an overdraft facility on my account instead of a loan, and hence there would be no interest charged on it. I was very impressed with this.

They also don't charge for lots of things other banks do charge for.

I have been with TSB for years. Irish Life and Permanent shares are actually going UP in value, unlike every other Irish bank.

I have actually left my money in TSB, for the most part. I feel bad that I won't be participating in the Dec 7th bank run, but I don't see the point trying to collapse TSB, who operate fairly and responsibly, and have always been a pleasure to deal with.

Maybe if you are concerned, and have your money somewhere else, you should move it to TSB?

(Btw, I don't work for TSB! )

 

[PoliticsDad]

I understand that. However, there is already talk about the need up to 120 billion to bail out the bank eventually. You just cannot repay a loan at an interest rate of 5% with an economic growth of 2.5%.

If the IMF loan is indeed at 1.5-2.5%, I would consider that a more friendly help.

I totally agree. I presume that the IMF will realise that there is no point in charging a rate that will kill the client that they are trying to rescue - but then again I don't think anything could surprise me at this stage.

 

[Trophonius]

Most of my money is with the TSB. I to have found them hard at times but very fair. I am currently unemployed (well trying to set up a self-employment business) and my works wife part-time, but because of a good credit history was able to get an overdraft of $5000 on our current account.

My reason for asking is, that if there will be a run on AIB and BoI, then if there still is a an Irish owned bank that is solvent, why not withdraw the money form the other two and put it in there. The money is still staying ii the state, and in an Irish bank and it would cause the collapse of AIB and BoI, with both the shareholders and bondholders being burned. Bang goes a lot of the monies we have to repay.

Am I dreaming, or would that work?

 

[Squire Allworthy]

Asked this on another thread but got no answer yet:

Is PermanentTSB, the only solvent Irish bank at the moment? ie no money from government in bailout and no dealings with NAMA?

And it should therefore probably be the one that the government puts money into so that businesses can get loans and 1st time house buyers mortgages and economy starts moving, tax take increases...... But no better to throw the money into the vortex of Anglo, AIB etc

There is no point in causing a run on sound banks, ones that are not part of the bailout.

 

[Trophonius]

Then should people start depositing money in TSB. Might start sending a message.

 

[GDPR]

The Irish Life portion of Permanent TSB used to be much larger than the old building society/bank part and probably still is at least half the business. Merging with Irish Life was the best thing they ever did but Im still not so sure any of our banks are not in deep sh1t.

 

[Kalan]

terms

If Ireland receives the same terms and conditions on the loans as Greece then a default for Ireland, and Greece, is inevitable.
Fianna Fail and the Greens have no legitimacy to sign the Memorandum of Understanding on any agreement reached with the IMF/EMU.
Gilmore and Rabitte have said a number of times that an IMF/Eu agreement will put the next govt. in a strait-jacket. Gilmore says Labour will vote against the budget but if in govt. he will implement it. The legitimacy of the next govt. is already damaged. Gilmore's approach is a recipe for chaos. Where will leadership be found?

 

[Squire Allworthy]

Then should people start depositing money in TSB. Might start sending a message.

Don't know enough about them to make that recommendation, but I can think of a number of banks I would not, on principle, want to have an account in.

That said I am all for conservative, sound banking and believe the whiz bang lads should be in institutions that do not masquerade as High Street banks. The asylum perhaps.

When people put their wages into a bank they have a right to expect that that institution uses it to gain sound assets not a pile of junk derivatives and other dubious financial products.

 

[Malbekh]

The IMF/ECB loan will be at 3.75%. About .75% above what I would have wanted, but it gives us a fighting chance.

 

[drummed]

Trophonius, you're 100% right.

Permanent TSB is not involved with NAMA, has predominantly residential mortgages on their books, most of which are performing, and is solvent.

They always had very strict mortgage criteria-and are quite conservative to deal with, but very fair. Once, when I first started working, I asked for a loan to pay the bills for the first month before I got paid. They gave it to me, but when I started getting paid, called me and said they had converted it to an overdraft facility on my account instead of a loan, and hence there would be no interest charged on it. I was very impressed with this.

They also don't charge for lots of things other banks do charge for.

I have been with TSB for years. Irish Life and Permanent shares are actually going UP in value, unlike every other Irish bank.

I have actually left my money in TSB, for the most part. I feel bad that I won't be participating in the Dec 7th bank run, but I don't see the point trying to collapse TSB, who operate fairly and responsibly, and have always been a pleasure to deal with.

Maybe if you are concerned, and have your money somewhere else, you should move it to TSB?

(Btw, I don't work for TSB! )

from 2000 to 2007 tsb loan book increased 500%. They went on a mad binge with 100% mortages and handed them out to all and sundry. I know, was self-employed and got finance for investment property (1) with virtually no icome details, thankfully they made it a tracker by recorded it as a residential mortage!!!!!! Total mortages at tsb now 40b mostly trackers losing a fortune.
5b of this is in arrears to some degree and figure is getting worse. Tsb have provided for 1b bad debts in their own accounts. Figure is 5b+. Banks total capital available to cushion losses is 2b. Tsb is insolvent to the tune of 2b+, shares down 90% since january(excluding this weeks fall). Bank requires 1 to 1.5 b capital from eu/imf fund and will be sold to highest bidder later. my mortage is still up to date but those who get into difficulty will be sorry if they ever meet tsb collection dept. this bank is doomed.

 

[sport02]

The IMF/ECB loan will be at 3.75%. About .75% above what I would have wanted, but it gives us a fighting chance.

Where are you getting that figure from?