THE latest figures from the Bank for International Settlements (BIS) show that Ireland owes banks in other EU countries a massive €310bn, with €196bn of this money due to banks elsewhere in the eurozone. These huge exposures almost certainly explain why the ECB has refused to countenance “haircuts” for the senior bondholders of the Irish banks. One of the salient features of the Irish banking crisis since it first erupted two-and-a-half years ago has been the dogged refusal of the ECB to allow us to impose haircuts or discounts on the holders of the senior bonds of the Irish banks. This was despite the fact that these senior bonds were trading at a significant discount to their face value. Instead, for reasons best known to itself, the ECB — in clear contravention of both previous market precedent and financial logic — has insisted that the senior bondholders be repaid in full and has lent the Irish banks, institutions which it must have known were hopelessly insolvent, €70bn to do so. So why has the ECB been so solicitous of the interests of the senior bondholders. The most recent figures from the Bank for International Settlements, the umbrella body for the world’s central banks, provide us with some clues. At the end of September 2010 Ireland owed the banks of other EU member countries €310bn, of which €196bn was owed to banks in other euro zone countries. In fact the underlying situation may be even worse than even these figures indicate as they exclude €123bn of “other exposures”, mainly derivatives and government guarantees that could become payable. As we in Ireland know only too well, government guarantees have a nasty habit of coming back to bite the guarantor. Of these other exposures, €78bn are potentially payable to banks in other eurozone countries. While the fact that Ireland owes UK banks €113bn with other exposures of €45bn hardly comes as any surprise given the large presence of British banks in the Irish banking market, the extent of our debts to banks from other eurozone countries isn’t so widely known. So to whom in the eurozone do we owe all of this money? Top of the list are German banks, to whom we owe €92bn with a further €38bn of other exposures. Does the fact that Irish banks potentially owe their counterparts up to €146bn explain the German government’s implacable opposition to any write-down of the Irish banks’ debts? After the British and the Germans, it is the French banks — with total Irish bank loans of almost €32bn and a further €23bn of other exposures — who have the biggest exposure to Ireland. Does this provide at least a partial explanation for French president Nicolas Sarkozy’s truculence when faced with Irish requests that senior bondholders be forced to accept a haircut? The Spanish and Italian banks have relatively small exposures to Ireland with direct loans to this country of €9.2bn and €10.6bn respectively as well as other exposures of €3.2bn and €6.4bn. However, there is one other large European creditor listed in the BIS statistics. This is the unspecified “other euro area“. The banks from these countries are directly owed almost €42bn by their Irish counterparts with a further €6.1bn potentially due under the other exposures heading. Who are these other euro area banks? Up to now the general assumption had been that this heading mainly covered Dutch, Belgian and Luxembourg banks. But given the sudden emergence of Finland as one of the most vehement opponents of cutting Ireland any slack I can’t help wondering if one or more of the Finnish banks have large piles of Irish debt sitting on their balance sheets. What is clear from the BIS figures is that a complete collapse of the Irish banking system would have had very serious consequences not just for British banks but also for banks elsewhere in the eurozone. This almost certainly explains the ECB’s phobia of any “contagion” caused by imposing a haircut on holders of senior bonds in the Irish bank bonds. It also gave the Irish government serious leverage, if it had chosen to exercise it. On the basis that if you owe the bank a million euro it is the bank which has a serious problem, the Irish banks owing other EU banks up to €433bn should have meant that it was the other EU banks who had a problem. Why wasn’t this leverage employed in the run-up to this week’s publication of the results of the stress tests on the Irish banks? Was there a failure of nerve on the part of the new Irish government?
“Not one cent more” was the cry and now these same people are now looking to pump 24,000,000,000:00 Euros more into these self same toxic banks. In the entire announcement there is no mention of the derivates losses that are still been hidden be the two banks Allied Irish Bank and Bank of Ireland in their IFSC off-shore branches. Well firstly these losses are been hidden in their offshore branches in the IFSC and they would appear that they are not subjected to any regulation, as the Irish central Bank says it is the ECB’s job to regulate these banks (because of their perceived offshore status) but the ECB says it’s the Irish Central Bank ‘s job, so in the meantime nobody is regulating and so the Boys in Allied Irish Bank and Bank of Ireland have the best place to hide such losses and possibly also hold on deposit vast sums of hot money from around the world .
There is no mention as to the status of current derivative trades belonging to Allied Irish Bank and Bank of Ireland why?
There is no mention as to the further requirements of Anglo Irish Bank, who has just announced 17.500, 000,000:00 losses .The largest corporate losses announced by any company in the Irish republic’s history. These losses are swallowing 72% of the new funds we are now about to put into Allied Irish Bank and Bank of Ireland .This is just madness. So the Bank Debts are now 150 Billion owed to the ECB and approximately 55 Billion owed to the Central Bank this is so called short-term debt then we have our own national debt of 94,000,000,000:00 and we are now putting 70 billion into the banks and not to forget the borrowings of 75 billion extra to run NAMA for the Next 10 years .We then need another 19 billion to fill the gap in our national yearly budget, this year and perhaps the next four years as well. So let’s see our totals then!
150 Billion ECB
55 Billion Irish Central Bank
94 Billion Current National debt
70 Billion Bank bailout so far.
75 billion to run NAMA next 10 years
19 billion current projected year budget deficit.
Total so far 463 Billions and counting!
My figures seem to be conservative as I have not taken into consideration the debts Irish banks have to other European banks as highlighted above . I have only the ECB figures so things are in fact worse ,the overall figure could be well over the 500 billion mark god help us !
We are spending 54 Billion running the country, and we will end up paying 9 -10 billion just on interest payments every year and that is on current interest levels which are heading up by the way. The government have committed to cutting 3 billion in spending cuts in the next budget .But with these new borrowings I expect this figure to rise or they will have to cut a lot more civil service jobs either way spending 19 billion more than we are taking in will have to stop and the new masters in Europe will soon demand results
The number of mortgages outstanding in the Irish state is 786,164 and the total amount due on these mortgages is €99.08bn by the end February 2011. Surely it would be cheaper for the government to pay off all outstanding mortgages in the state and let the banks go down as would be the norm in any other capitalist system. In the Unites States last year 240 banks went out of business while here in Ireland we cannot close down even one bank however toxic it is! To keep NAMA going we are going to have to pay another 75,000,000,000:00 Billion over the next 10 years and that money is just going to waist, as this is the cost of running this new financial Quango. All we are doing is keeping X Bankers, solicitors, and estate agents in well paid jobs and these “insiders” are consistently telling the rest of us to tighten our belts and take our collective austerity medicine and shut up! By paying off the mortgages of all citizens we effectively are giving the largest stimulus the state has ever see and this would overnight put money into people’s pockets and would remove the massive mortgage millstone around every Irish families neck .Suddenly people would have money to spend and the economy will take off .it is certainly better that just pouring these billions into black holes and get nothing in return!
The economy is not likely to generate any serious jobs growth in the next three years as we are now more than likely going to have to endure even harsher budgets to come up with the funds to pay off the interest on these lost billions. More and more people will be losing their jobs and emigration is just getting started and home prices are heading down at least another 30 % from here. The new government are fast abandoning promises to the voters of Ireland and we are left with the question what it all was for the good ship Ireland is still maintaining the course set by the previous despots and traitors who promised us that this bailout would be the cheapest in history! Nama is now turning out to be the mother of all Quangos and its jobs and Jobs for the well connected.