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Old January 29th, 2013, 06:44 AM   #1
odlum833
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Ireland on collision course with ECB

Quote:
Cabinet to get watered down debt deal

Tuesday, January 29, 2013

The Government is in line for a watered down deal on the €30bn Anglo promissory note after ECB sources suggested any agreement will be limited and not yield any savings to the State.





The Coalition had effectively staked its reputation on striking a deal ahead of the €3.1bn repayment due at the end of March.

However, it has suffered a major setback after the governing council of the ECB rejected the proposal by the Department of Finance to wrap these payments up into a 30 to 40-year bond.

The ECB source said this type of deal was never possible because it contravenes the bank’s strict policy against monetary financing for member states.

While a deal may be reached before the next payment is due, the source said it is “unlikely to satisfy the Irish Government”, adding that “the next few weeks will be messy”.

The ECB is legally limited in what it can offer. One possibility is that the Government will still have to pay back the full promissory note within the current timeframe, by 2023.

However, it could be rearranged so that much smaller repayments are scheduled for the next few years, with the bulk of the total liability moved closer to the end of the next decade.

The ECB and the Department of Finance both declined to comment.

Lorcan Roche Kelly, chief European strategist with US hedge fund Trend Macro, said it may be in the Government’s interest to get a second EU/IMF bailout to deal exclusively with the bank debt.

“There is a possibility that the Government may be able to get the [European Stability Mechanism] to give €30bn to the ECB to pay off the promissory note,” said Mr Kelly. “This money would then be rolled into a long-dated bond that the Government would eventually have to pay back.”


The Government is scheduled to exit the bailout at the end of this year. Securing a deal on the bank debt could determine whether the State can access market funding at sustainable interest rates over the medium term.

Taoiseach Enda Kenny previously claimed a deal on the promissory note was needed if Ireland was to exit the bailout.

The outcome of the talks will have major consequences for the Government after Mr Kenny and a number of ministers signalled confidence in a deal being struck.

Mr Kenny said yesterday: “The Government will continue to negotiate now on the technicalities and complexities of what’s involved here and we are confident and hopeful that we can have a conclusion by the next repayment date.”

Fianna Fil finance spokesman Michael McGrath said the Government has suffered a “setback”, as the ECB “has not accepted or possibly rejected a Government proposal that has been put on the table”.

He said a good deal on the promissory note could “take the edge” off future budget adjustments.

“This is the single most significant issue as we seek to exit the current programme of assistance with the troika and as we seek to put our public finances on a sustainable footing,” he said.

Sinn Fin finance spokesman Pearse Doherty said it now appears a deal is “as far away as ever”.
http://www.irishexaminer.com/ireland...al-221005.html

Aye 31st of March is deadline day. Anything less than a long dated bond is politically impossible for the government at this stage and an extension of the program is even more unpalatable. However the possibility of the ESM paying off the entire promissory note is attractive.

I think if a significant agreement is not reached here the ECB faces default. Expect fireworks from both sides in the next couple of weeks!
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Old January 29th, 2013, 08:34 AM   #2
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Up till now we have not had the level of protest seen in other euro countries probably due to the carrot of a bank deal being held in front of us.

If we don't get something by the deadline this could very well change.
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Old January 29th, 2013, 08:47 AM   #3
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Just back to the political thread. This is Labour's moment. Their salvation but will they take it? I don't see how paying is politically possible at this stage. So will Labour draw the knife first or leave it to the big boys in FG as usual? They could literally redeem themselves on this.

This loon is making more sense by the day.


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Old January 29th, 2013, 09:12 AM   #4
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I can't listen to him. I watched one of his videos about the crisis here and he got so many basic facts wrong that I couldn't believe anything else he said.
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Old January 29th, 2013, 10:07 PM   #5
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Quote:
Originally Posted by oon27 View Post
I can't listen to him. I watched one of his videos about the crisis here and he got so many basic facts wrong that I couldn't believe anything else he said.
Especially when it's on Russia Today which is the international mouth-piece of the Russian government. Their editorial line comes from the offices of the Kremlin in Moscow.
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Old January 30th, 2013, 12:43 AM   #6
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Enda Kenny says negotiations are ongoing - confident of a deal by March 31st. What deal is the question.

http://www.irishtimes.com/newspaper/...reaking47.html
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Old January 30th, 2013, 12:55 AM   #7
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Quote:
Originally Posted by Dvblvnia View Post

Especially when it's on Russia Today which is the international mouth-piece of the Russian government. Their editorial line comes from the offices of the Kremlin in Moscow.
Not true. Max Keiser was at Kilkenomics in November. Spoke the most sense out of anyone there including David McWilliams and Fintan O'Toole. The very reason he is on RT or Al Jazeera is because he is allowed to say what he wants. The likes of BBC and some of the American networks hold a tight editorial line telling him to mention certain things or countries such as Israel in his commentary. He may be a bit dramatic in the way he goes on but he knows his stuff and knows what is happening in the real world including his own country, the USA.
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Old January 30th, 2013, 08:21 PM   #8
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High court challenge to the legality of the PN is up for decision tomorrow morning apparently. Unlikely but could you imagine if the high court struck down the notes!?
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Old January 30th, 2013, 09:38 PM   #9
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Originally Posted by odlum833 View Post
High court challenge to the legality of the PN is up for decision tomorrow morning apparently. Unlikely but could you imagine if the high court struck down the notes!?
It would be very interesting to see what would happen if they did.
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Old January 30th, 2013, 09:40 PM   #10
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ECB default, market rally, Draghi furious
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Old January 31st, 2013, 03:07 AM   #11
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Yes, this will be crucial both for the Government and the Country. I think this could be a make or break issue for this administration. Funnily enough, I get that impression that even if they play hardball and lose, they will still salvage some grudging respect. What would be worst for them is that they are seen to accept any awful deal thrust upon them by the ECB...like the last crowd.

Also, anything short of a write-off of some sort will be viewed as a defeat by the opposition and portions of the public. In this respect a continual bluring of the ESM and the EFSF by media and politicians is very unhelpful!

As for Max Kaiser, he does make some valid points, but they tend to get lost amid amateur dramatics and mistakes I don't know weather comparing him favourably with McWilliams/O'Toole is damning him to faint praise. Both of those are making money by selling misery, just as McWilliams made money preaching the opposite during the boom. Worst of all the celeb economists has to be Shane Ross. Currently he is Mr Angry, but nobody reminds him that he lauded McCreevy and actually called for Sean Fitzpatrick to be made Financial Regulator!

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Old February 1st, 2013, 06:56 PM   #12
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Kenny, Noonan confident.


Quote:
FINANCE Minister Michael Noonan said it was now "very likely" that a deal will be in place to allow Ireland restructure the promissory note repayment schedule.
http://www.independent.ie/business/i...l-3373490.html

http://www.irishtimes.com/newspaper/...reaking31.html
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Old February 2nd, 2013, 03:50 AM   #13
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Quote:
Originally Posted by Dvblvnia View Post
Especially when it's on Russia Today which is the international mouth-piece of the Russian government. Their editorial line comes from the offices of the Kremlin in Moscow.
And that discredits the arguments of those who appear on it?
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Old February 18th, 2013, 05:03 AM   #14
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Quote:
Bundesbank concern at Irish deal




Bundesbank president Jens Weidmann, a member of the ECB governing council, said the promissory notes deal blurred the ECB's "clear line between monetary and fiscal issues".



Bundesbank president Jens Weidmann has voiced concern that Ireland’s promissory notes deal came perilously close to illegal monetary financing.

Last week the ECB “unanimously took note” of a plan to swap Anglo Irish promissory notes for sovereign bonds, easing Irish borrowing requirements by €20 billion.

Mr Weidmann, a prominent member of the ECB governing council, has now hinted the deal set a dangerous precedent by blurring the ECB’s “clear line between monetary and fiscal issues”.

“The transaction in Ireland demonstrates how difficult it is for monetary policy to free itself from the embrace of fiscal policy once you’re engaged,” he said to Bloomberg.

The Bundesbank is unhappy with what it sees as indiscreet statements by Irish politicians on the role played by various officials in reaching the agreement.

Annoyance

There is annoyance, too, that remarks in Ireland on the resulting cost savings only highlighted the legal questions surrounding the arrangement.

For his part, Mr Weidmann said that Irish remarks had “underscored the fiscal elements in this transaction”.

Article 123 of the EU treaty forbids the ECB from engaging in monetary financing. However many officials close to the deal have conceded that both the original promissory note deal and its successor arrangement did just that – or at least came very close.

Yesterday, Mr Weidmann reiterated his “strict” definition of monetary financing and urged EU leaders to “accept the limitations of article 123 for our actions”. “It’s not difficult from that to guess what my position is,” he said.

Last Wednesday evening, the German banker is understood to have held out against allowing a promissory notes deal. The Bundesbank head expressed concern about the legality of the liquidation of assets of IBRC. He is concerned at the monetary financing implications of the Central Bank of Ireland selling promissory notes that have been transformed into bonds.

Mr Weidmann said he was not “passing a legal judgment on a particular transaction”, but said the liquidation of IBRC had “repercussions” which the ECB would have to ensure conformed to its rules.

Monitoring

Echoing Mr Draghi last week, Mr Weidmann said the Irish arrangement would be re-examined.

Yesterday official sources said this would happen as part of normal ECB monitoring and the Bundesbank was not pushing for any special tests, nor did it want the deal reopened.

Mr Weidmann reiterated yesterday his concerns that the ECB was in danger of compromising its independence and credibility by becoming enmeshed in euro zone crisis politics.

His Bundesbank predecessor Axel Weber, as well as German ECB executive board member Jrgen Stark, resigned in protest at an ECB policy to buy bonds of crisis-hit euro members.

Irish officials have insisted that the Anglo promissory notes arrangement was a one-off, thus any concessions do not set a precedent for other crisis-hit euro members.

The Bundesbank takes another view, suggesting that special deals can awaken expectations, even if the situations are not identical.

Mr Weidmann said that a prospective bailout for Cyprus, expected to cost as much as €17.5 billion, should involve a “substantial bail-in component” from private creditors.

He ruled out further debt relief for Greece, saying that debate was reflected in the “last adjustment of the programme and its financing conditions”.

Meanwhile, ECB executive board member Jrg Asmussen has said it is “very important” that France reduce its budget deficit this year within the allowed 3 per cent ceiling.
http://www.irishtimes.com/newspaper/...330114777.html

The concern here IMO is that Ireland has saved so much from the promissory note deal ahead of another arrangement that is expected to save about 43bn extra coming in March by extending loan maturities that Ireland by then could well have had 70bn of it's debt effectively restructured sling shooting us back in to the market in a reasonably healthy condition at very low interest rates. The Germans seem to think we have pulled a stroke and are getting off very lightly compared to other countries. They think both Ireland and the ECB may have acted illegally by breaking the ECB statute on direct monetary financing of a member state.

And also the minor matter that Noonan got on the radio last week naming names and in a roundabout way said Weidmann was acting up in negotiations on the promissory note which probably went down like a lead balloon...usually there is a gentlemens agreement to keep these things behind closed doors.
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