THE EU’s funding facility put off raising €3 billion for Ireland because the cost had escalated following Greece’s referendum announcement. Greece last night faced the threat of bankruptcy within weeks after the EU said it would not provide any more funding to the beleaguered country unless it agreed to support the euro bail-out. By Mary Regan, Political Correspondent Bond guru Bill Gross, co-chief investment officer of PIMCO, said in a keynote address Tuesday that he thinks Greece probably will remain in the union, but the odds are almost even.
While the fund’s triple-A rating was confirmed yesterday on conference call with investors by the Luxembourg-based vehicle, some expressed fears on what this meant for the facility.
http://www.irishexaminer.com/business/eu-delays-raising-3bn-loan-for-ireland-172638.html
http://www.telegraph.co.uk/news/worldnews/europe/eu/8866296/Greece-will-be-cut-adrift-if-bail-out-is-refused-says-EU.html
Thursday, November 03, 2011
TAOISEACH Enda Kenny has announced that he intends to make a state of the nation-style address on TV before the budget to inform people of the position of the country’s finances.
The Government has come under fire in recent days over the repayment of $1 billion to Anglo bondholders and in light of Greece’s intention to hold a referendum on its latest bailout deal.
Failure to repay what amounts to €715 million would open a "second front" on the euro which "could bring the whole thing down", Minister for Finance Michael Noonan said yesterday.
Mr Noonan said Irish people would have to "grit their teeth" and put up with it because "to default takes us over the edge of the cliff".
He said Greece’s shock referendum announcement put "a spanner in the works" of efforts to resolve the eurozone crisis.
As Greek premier George Papandreou prepared to meet German and French leaders, Mr Noonan said: "The sooner clarity is restored, the better for us all."
He said the decision to repay the Anglo bondholders was "the lesser of two evils", and not doing so would place the euro in further difficulty.
"I am not prepared to put the Irish people or this House in that position and I take that responsibility," he said.
Earlier, Taoiseach Enda Kenny dismissed calls in the Dáil to prevent Anglo paying senior unsecured bonds.
Fianna Fáil leader Micheál Martin said Mr Kenny had made a "solemn promise" not to give any more money to the banks, adding: "Your words mean nothing here."
The Taoiseach responded: "It has not been possible for this government to unravel the agreement that was made by your government."
http://www.irishexaminer.com/ireland/kenny-plans-to-address-nation-ahead-of-budget-172711.html
Gross said it might be better for Greece to drop out of the eurozone for a while and then come back. "Iceland is the only country that did it right," he said. "They basically told the banks to stuff it, to basically take their money and go home. Perhaps Greece should do that, or otherwise they're in for a five-, 10-, 15-year period of time of very difficult circumstances."
I asked Gross to elaborate, given that Greece is not facing exactly the same problems as Iceland. "They are not the same, but Iceland effectively let its banks default instead of assuming their debt like Ireland did. If Greece follows Iceland's example, it would be similar in respect to putting the burden on Euroland banks, even more than the 50 percent haircut (envisioned in the latest bailout plan), and reducing the burden on their citizens," Gross said in an e-mail.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/11/02/BUJ41LPN8E.DTL&type=business
The Icelandic Model of Handling Debt Crises
The panic over Greece, of course, is panic over the euro. Another European country, Iceland, took a far more radical path than did Greece, yet it went largely unnoticed. Iceland, in 2009, did what Greece would like to do now: it let its banks fail, and told their creditors to take a hike.
Two years on, Iceland’s economy is recovering, while Greece and Ireland and other euro-zone members struggle with huge taxpayer-funded bank bailouts and austerity measures that will probably fail to create jobs. “Iceland did the right thing by making sure its payment systems continued to function while creditors, not the taxpayers, shouldered the losses of banks,” Joseph Stiglitz, the Nobel Prize-winning economist, told Bloomberg. “Ireland’s done all the wrong things, on the other hand. That’s probably the worst model.”
http://www.miller-mccune.com/politics/the-icelandic-model-of-handling-debt-crises-37516/
Should Greece pay its debts? 'Not every creditor deserves a break'
The OMFIF has started re-circulating a paper Baron Desai wrote last July, 'What Greece could learn from Iceland -- concentrate creditors' minds: hold a referendum.'
Here is the gist of what Desai wrote earlier this year (that's him pictured below):
'As the euro drama slides into melodrama and then possibly into farce, Greece should learn from the example of Iceland, which went bankrupt two years ago. Like Ireland, Iceland ran into problems with its private banks which built up excessive liabilities by offering an above-market interest rate on deposits and then crashed when Lehman Brothers went down. The debt - which were the deposits taken by the banks operating abroad - was left with the Icelandic Treasury.'
'But in a referendum the Icelanders voted to renege on the debt and forced the creditor countries - mainly the UK and the Netherlands - to renegotiate.'
'Not being in the euro, Iceland could let its currency depreciate –a painful exercise, but one that lets individual citizens make their own adjustments to inflation. Now two years on, Iceland is on track for annual growth above 2% this year and next after a cumulative 10% fall in output in 2009 and 2010.'
'Iceland has returned to the international capital markets and can borrow at 5% - a rate the Greeks can only dream of.'
'There is a lesson for the euro area here. Not every creditor deserves a break. They should have known it was risky to lend to Greece. Let them bear the cost.'
'I believe Greece should hold a referendum on whether its citizens are willing to pay back the debt. That should concentrate minds - both in Greece and among the creditor countries – and might make a contribution to resolving the issue. A referendum would certainly be better than the other options that are feared – a revolution or even a military coup...'
That was clearly such a good idea from Desai that I'd be willing to claim him as family, too, except he's a Marx-ish left-winger, so clearly his DNA and mine have never crossed in the gene pool.
http://synonblog.dailymail.co.uk/2011/11/should-greece-pay-its-debts-not-every-creditor-deserves-a-break.html
Thursday, 3 November 2011
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