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Ireland Unveils 4 Year Budget Details, Riots Imminent

November 25, 2010 Leave a comment

Assorted international currency notes.

Assorted Currency Notes

http://www.zerohedge.com/article/ireland-unveils-4-year-budget-details-riots-imminents

A bunch of completely irrelevant numbers released by Ireland. At best these will achieve nothing but will kick the can down a few more months. At worst violent rioting will be a daily occurrence in Dublin within a week.

From RTE:

* The Government strategy aims to make savings of €15bn over the next four years, with a €10bn cut in public expenditure and a €5bn increase in taxes. (riots)

* It said that 40% of the measures (€6bn) will be frontloaded in the Budget, which will be delivered on 7 December.

* More than 24,000 jobs will be cut in the public sector over the four-year period.(riots)

* The public sector pay bill will be reduced by €1.2bn and pay for new entrants will be reduced by 10%. While public services retirees face significant cuts in their pensions. (riots)

* Ireland will raise VAT rate to 22% in 2013, and 23% in 2014 (riots)

* Ireland may tap pension reserve fund for infrastructure plan (kiss that retirement money goodbye

* It says the numbers of people paying tax must increase, but that an income tax system where more than 45% of tax units pay no income tax is not sustainable (riots)

* Ireland promises to maintain a 12.5% company tax rate (this will be revised soon courtesy of Olli Rehn and the European overlords)

* And the funnitest thing you will see today: the government expects to grow at just under 3% for the next 4 years.(laughter)

As Portugal is currently gripped in its biggest general strike in history over precisely the same issue (austerity budget), sit back, and enjoy the Dublin riots to cause Waddell and Reed to sell some ES soon to quite soon.

http://vidrebel.wordpress.com/

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Ireland’s young flee abroad as economic meltdown looms

November 14, 2010 Leave a comment

Ireland’s young flee abroad as economic meltdown looms

 

Homeless man, Ireland

Homeless man, Ireland

 

 

Many young people are seeking to emigrate rather than face a life of hardship as the republic lurches towards financial collapse

Homeless man Ireland A homeless Irish teenager begs on Merrion row, just around the corner from government bulidings in Dublin, Ireland. Photograph: Kim Haughton for the guardian

Student Niamh Buffini works hard and plays hard. As Ireland’s No 1 taekwondo martial arts practitioner – she is rated 12th in the world – her ambitions include winning Olympic gold for Ireland.

But by the end of this month her future will have been decided by forces not just beyond her control but seemingly those of her government also. Ireland is on the cusp of insolvency. Some economists argue that it already is.

Buffini will soon learn if her fees at the Institute of Technology in Tallaght, south Dublin, have climbed beyond her means. Her father is a self-employed builder, which has recently become a euphemism for “unemployed”.

“My class size will have dropped by 50% by next year,” Buffini said. “Even lecturers took part in the recent student protests over fees because society here is going to be left with very few educated people. My best friends have already left – they’re doing bar work in Spain and Australia.”

Last week was not a good week for Ireland. Speculation about a European Union-backed bailout pushed its borrowing costs to unprecedented heights.

At Buffini’s college on Friday, the day began with a protest by construction workers who were supposed to have been working on a new wing. Their paymaster Michael McNamara – the country’s premier construction firm – had been put into receivership under the weight of debts of €1.5bn (£1.27bn), leaving them jobless and out of pocket for work they had already completed.

So far the workers’ demonstrations have remained largely peaceful. Indeed, many Tallaght students seemed shocked by the violence they witnessed in TV reports from London involving their British counterparts. But that may change.

Economists are sought-after celebrities in Ireland at the moment and none is more famous than Morgan Kelly. His doom-laden words are lapped up by a nation addicted to Celtic melancholy.

Kelly, of University College Dublin, was laughed at, scorned and even threatened when he correctly predicted, as long ago as 2007, that Ireland’s property bubble was heading for a spectacular explosion.

Now he is forecasting mass mortgage defaults and an ugly popular uprising. The first stirrings are already visible, he says, with “anxiety giving way to the first upwellings of an inchoate rage and despair that will transform Irish politics along the lines of the Tea Party in America”, giving rise to a new “hard-right, anti-Europe, anti-traveller party”.

The fact that Kelly got it right last time means that his dire warnings are now being given serious consideration this time around, but so far there is no evidence that the Irish are turning into racist extremists.

Polish immigrants, whose arrival in Ireland less than a decade ago increased the workforce by an astonishing 20%, have left in orderly fashion and with no complaints about their treatment. More worrying is the trend for the young Irish to follow them abroad.

Mark Ward, president of Tallaght’s student union, says that 1,250 students are leaving Ireland every month. One in five graduates is seeking work outside the country. The Union of Students in Ireland believes that 150,000 students will emigrate in the next five years.

Ward, a 26-year-old marketing graduate, said: “The government’s to blame for bankrolling the banks who were lending to their property developer friends. They all thought the party would never end.

“Students shouldn’t have to pay for the mistakes of the government and their developer pals. It’s going to take years to sort this mess out and it won’t be just my generation which will be blighted big time.”

Is the social fabric of Ireland beginning to unravel? The Kingdom, one of the country’s much-loved local papers, recently reported that nearly 200 Gaelic footballers and hurlers have left Kerry to play in Britain, Australia and the US in the first seven months of this year. The true figure is probably double that.

The charity Barnardo’s said that children were asking it for food because there was not enough for them to eat at home. “Some of our services are being asked by children if they can take food home for later because there just isn’t enough,” said Carmel O’Donovan, a project co-ordinator with Barnardo’s.

And it’s not just the most vulnerable who are feeling the pinch. Greystones is a wealthy Wicklow seaside town whose most famous resident is Sean FitzPatrick, the former chairman of nationalised Anglo Irish Bank. Emer O’Brien, an interior designer, and her architect husband Killian are struggling to repay their mortgage.

“It is awful, a bit like waiting for a bomb to explode but simply not knowing when,” she said. “I don’t think anybody has any faith in any of the politicians to fix this problem. Over 70% of education and health spending goes on pay and pensions, so all the cuts in those departments are coming from front-line services.

“I hope I don’t get sick in the coming months because there’ll be nobody to tend to you in the hospitals. Of course, a lot of people would be heading across the Irish Sea or the Atlantic if only they could sell their houses, but we can’t do that either. So basically we’re stuck on the Titanic as it goes down.”

Next month the government will deliver its latest austerity budget with the aim of slashing a further €15bn from public spending on top of the €14.5bn it has already been forced to cut. But Kelly has argued that the public sector cuts are “an exercise in futility” when compared with the €70bn bill for Ireland’s bad banks. “What is the point of rearranging the spending deckchairs, when the iceberg of bank losses is going to sink us anyway?” he asked in the Irish Times last week.

Put at its starkest, for the next six to seven years, every cent of income tax paid by Irish citizens will go to cover the banks’ losses.

At the Capuchin Friary in Smithfield sausage breakfasts are being served to Dublin’s growing band of homeless and needy people. “There’s new faces arriving every day. At first they’re embarrassed to be here but we put them at their ease,” one of the volunteers said.

Gerry Larkin, the drop-in centre’s security manager, has noticed that occupants of the many neighbouring apartment blocks which were supposed to regenerate the city’s down-at-heel north side are now taking their places in the queue for food parcels.

He said: “Some of them have got into trouble with their mortgages and they’re asking me at the door: ‘Any chance of coming in, can you give me even a bit of food for the kids?’

“We’ve gone from 150 breakfasts during the boom years to 450 now and another 700 coming in for lunch.”

Five nights a week Niamh Buffini trains in her local martial arts club, nurturing her dream of winning gold for Ireland. “I’m always upbeat, but with my friends the chat about how bad things are is never ending.

“I’m an optimist by nature and I hope we can get out of this. The best I could say is I couldn’t see it getting any worse.”

David Sharrock, www.guadian.co.uk

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Ireland Goes Bust, Irish Bank Run

November 13, 2010 1 comment

Economics / Credit Crisis 2010 Nov 12, 2010 – 02:35 AM

By: Mike_Whitney

Economics

Best Financial Markets Analysis ArticleThere was a bank run in Ireland on Wednesday. LCH Clearnet, a London based clearinghouse, surprised the markets by announcing it would increase margin requirements on Irish debt by 15 percent. That’s all it took to send investors fleeing for the exits. Yields on Irish bonds spiked sharply as banks tried to close positions or raise the capital needed to meet the new requirements. The Irish 10-year bond soared to 8.9 percent by day’s end, more than 6 percentage points higher than “risk free” German sovereign debt. The ECB will have to intervene. Ireland is on its way to default.

This is what a 21st century bank run looks like. Terms suddenly change in the repo market, where banks get their funding, and the whole system begins to teeter. It’s a structural problem in the so-called shadow banking system for which there’s no remedy. Conventional banks exchange bonds with shadow banks for short-term loans agreeing to repurchase (repo) them at a later date. But when investors get nervous about the solvency of the bank, the collateral gets a haircut which makes it more expensive to fund operations. That sends bond yields skyrocketing increasing the liklihood of default. In this case, the debt-overhang from a burst development bubble is bearing down on the Irish government threatening to bankrupt the country. Ireland is in dire straights. Here’s an excerpt from an article in this week’s Irish Times which sums it up:

“Until September, Ireland had the legal option of terminating the bank guarantee on the grounds that three of the guaranteed banks had withheld material information about their solvency, in direct breach of the 1971 Central Bank Act. The way would then have been open to pass legislation along the lines of the UK’s Bank Resolution Regime, to turn the roughly €75 billion of outstanding bank debt into shares in those banks, and so end the banking crisis at a stroke.

With the €55 billion repaid, the possibility of resolving the bank crisis by sharing costs with the bondholders is now water under the bridge. Instead of the unpleasant showdown with the European Central Bank that a bank resolution would have entailed, everyone is a winner. Or everyone who matters, at least.” (“If you thought the bank bailout was bad, wait until the mortgage defaults hit home”, Morgan Kelley, Irish Times)

So, the Irish government could have let the bankers and bondholders suffer the losses, but decided to bail them out and pass the debts along to the taxpayers instead. Sound familiar? Only, in this case, the obligations exceed the country’s ability to pay. Austerity measures alone will not fix the problem. Eventually, the debt will have to be restructured and the losses written down. Here’s another clip from Kelly’s article:

“As a taxpayer, what does a bailout bill of €70 billion mean? It means that every cent of income tax that you pay for the next two to three years will go to repay Anglo’s (bank) losses, every cent for the following two years will go on AIB, and every cent for the next year and a half on the others. In other words, the Irish State is insolvent: its liabilities far exceed any realistic means of repaying them….

Two things have delayed Ireland’s funeral. First, in anticipation of being booted out of bond markets, the Government built up a large pile of cash a few months ago, so that it can keep going until the New Year before it runs out of money. Although insolvent, Ireland is still liquid, for now.

Secondly, not wanting another Greek-style mess, the ECB has intervened to fund the Irish banks. Not only have Irish banks had to repay their maturing bonds, but they have been hemorrhaging funds in the inter-bank market, and the ECB has quietly stepped in with emergency funding to keep them going until it can make up its mind what to do.”

Ireland has enough cash to get through the middle of next year, but then what? The bad news has rekindled fears of contagion among the PIIGS. Greece is a basketcase and Portugal’s bond yields have spiked in recent weeks. Portugal’s 10-year bond hit 7.33% by Wednesday’s close. The euro plunged to $1.37 even though the Fed is trying to weaken the dollar by pumping another $600 billion into the financial system. Troubles on the periphery are escalating quickly dragging the 16-nation union into another crisis. This is from the Wall Street Journal:

“For a decade, Ireland was the EU’s superstar. A skilled work force, high productivity and low corporate taxes drew foreign investment. The Irish, once the poor of Europe, became richer than everyone but the Luxemburgers. Fatefully, they put their newfound wealth in property.

As the European Central Bank held interest rates low, Ireland saw easy credit for construction loans and mortgages. Developers turned docklands into office towers and sheep pastures into subdivisions. In 2006, builders put up 93,419 homes, three times the rate a decade earlier….

The party ended in 2008, when the property bubble popped and the global economy tipped into recession…by September, Irish banks were struggling to borrow quick cash for daily expenses. The government thought they faced a classic liquidity squeeze. Ireland—whose hands-off regulator had assigned just three examiners to two major banks—didn’t recognize the deeper problem: Banks had made too many bad loans, whose defaults would leave the lenders insolvent.” (“Ireland’s Fate Tied to Doomed Banks”, Charles Forelle and David Enrich, Wall Street Journal)

The Irish government hurriedly put together a new agency, the National Asset Management Agency (NAMA), to buy to toxic bank loans at steep discounts., but the banks books were in much worse condition than anyone realized, more than €70 billion in bad loans altogether. By absorbing the debts, the government is condemning its people to a decade of grinding poverty and a deficit that’s 32% of GDP, a record for any country in the EU.

On Thursday, at the G-20 conference in Seoul, European Commission President José Manuel Barroso, said that he was following developments in Ireland closely and that he would be ready to act if necessary. The EU has set up a €440bn bail-out fund (The European Financial Stability Fund) that can be activated in the event of an emergency, although critics say that the fund is more aspirational than a reality. The crisis in Ireland will test whether the countries that made commitments to the fund will keep-up their end of the bargain or not. If they refuse, the EU project will begin to splinter and break apart.

Ireland will surely need a bailout, although not just yet. For a while the ECB can maintain the illusion of solvency by funneling liquidity to banks via its emergency facilities. That way, bondholders in Germany and France get their pound of flesh before the ship begins to take on water. All the risk-takers and speculators will be “made whole” again before the full-force before the debts are shifted onto Irish workers. Here’s how Kelly sums it up:

“Ireland faced a painful choice between imposing a resolution on banks that were too big to save or becoming insolvent, and, for whatever reason, chose the latter. Sovereign nations get to make policy choices, and we are no longer a sovereign nation in any meaningful sense of that term.”

By Mike Whitney

Email: fergiewhitney@msn.com

Mike is a well respected freelance writer living in Washington state, interested in politics and economics from a libertarian perspective.

© 2010 Copyright Mike Whitney – All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Mike Whitney Archive

© 2005-2010 http://www.MarketOracle.co.uk – The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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Today In Athens: Firefighters Brawl With Riot Police And There Are Bombs Everywhere

November 4, 2010 Leave a comment

Greek riot police standing next to protesters.

Article Source

Today’s chaos in Greece involves firefighters brawling with riot police to protest impending layoffs.

Meanwhile the radical left has planted bombs around the country, which police are defusing in Hurt Locker-style bomb suits.

Ironically or intentionally, all of this is bound to eviscerate Greek GDP.

Violent riots are also occurring today in Ireland and France due to similar austerity measures.

Click here to see the photos >

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IMF admits that the West is stuck in near-depression

October 4, 2010 Leave a comment

If you strip away the political correctness, Chapter Three of the IMF’s World Economic Outlook more or less condemns Southern Europe to death by slow suffocation and leaves little doubt that fiscal tightening will trap North Europe, Britain and America in slump for a long time.

By Ambrose Evans-Pritchard
Published: 8:00PM BST 03 Oct 2010

206 Comments

Spain, trapped in EMU at overvalued exchange rates, had a general strike last week

Spain, trapped in EMU at overvalued exchange rates, had a general strike last week

The IMF report – “Will It Hurt? Macroeconomic Effects of Fiscal Consolidation” – implicitly argues that austerity will do more damage than so far admitted.

Normally, tightening of 1pc of GDP in one country leads to a 0.5pc loss of growth after two years. It is another story when half the globe is in trouble and tightening in lockstep. Lost growth would be double if interest rates are already zero, and if everybody cuts spending at once.

“Not all countries can reduce the value of their currency and increase net exports at the same time,” it said. Nobel economist Joe Stiglitz goes further, warning that damn may break altogether in parts of Europe, setting off a “death spiral”.

The Fund said damage also doubles for states that cannot cut rates or devalue – think Spain, Portugal, Ireland, Greece, and Italy, all trapped in EMU at overvalued exchange rates.

“A fall in the value of the currency plays a key role in softening the impact. The result is consistent with standard Mundell-Fleming theory that fiscal multipliers are larger in economies with fixed exchange rate regimes.” Exactly.

Let us avoid the crude claim that spending cuts in a slump are wicked or self-defeating. Britain did exactly that after leaving the Gold Standard in 1931, and the ERM in 1992, both times with success. A liberated Bank of England was able to cut interest rates. Sterling fell. The key point is whether you can offset the budget cuts.

But by the same token, it is fallacious to cite the austerity cures of Canada, and Scandinavia in the 1990s – as the European Central Bank does – as evidence that budget cuts pave the way for recovery. These countries were able export to a booming world. They could lower interest rates, and were small enough to carry out `beggar-thy-neighbour’ devaluations without attracting much notice. We were not then in our New World Order of “currency wars”.

Be that as it may, it is clear that Southern Europe will not recover for a long time. Portuguese premier Jose Socrates has just unveiled his latest austerity package. He has capitulated on wage cuts. There will be a rise in VAT from 21pc to 23pc, and a freeze in pensions and projects. The trade unions have called a general strike for next month.

Mr Socrates has already lost his socialist majority, leaking part of his base to the hard-Left Bloco. He must rely on conservative acquiescence – not yet forthcoming. Citigroup said the fiscal squeeze will be 3pc of GDP next year. So under the IMF’s schema, this implies a 3pc loss in growth. Since there wasn’t any growth to speak off, this means contraction.

Spain had a general strike last week. Elena Salgado, the defiant finance minister, refused to blink. “Economic policy will be maintained,” she said. There will be another bitter budget in 2011, cutting ministry spending by 16pc.

Mrs Salgado has ruled out any risk of a double-dip. But the Bank of Spain fears the economy may contract in the third quarter.

The lesson of the 1930s is that politics can turn ugly as slumps drag into a third year, and voters lose faith in the promised recovery. Unemployment is already 20pc in Spain. If Mrs Salgado is wrong, Spanish society will face a stress test.

We are seeing a pattern – first in Ireland, now in Greece and Portugal – where cuts are failing to close the deficit as fast as hoped. Austerity itself is eroding tax revenues. Countries are chasing their own tail.

The rest of EMU is not going to help. France and Italy are cutting 1.6pc GDP next year. The German squeeze starts in earnest in 2011.

Given the risks, you would expect the ECB to stand by with monetary stimulus. But no, while the central banks of the US, the UK, and Japan are worried enough to mull a fresh blast of money, Frankfurt is talking up its exit strategy. It risks repeating the error of July 2008 when it raised rates in the teeth of the crisis.

The ECB is winding down its lending facilities for eurozone banks, regardless of the danger for Spanish, Portuguese, Irish, and Greek banks that have borrowed €362bn, or the danger for their governments. These banks have used the money to buy state bonds, playing the internal “carry trade” for extra yield. In other words, the ECB is chipping at the prop that holds up Southern Europe.

One has to conclude that the ECB is washing its hands of the PIGS, dumping the problem onto the fiscal authorities through the EU’s €440bn rescue fund. That is courting fate.

Who believes that the EMU Alpinistas roped together on the North Face of the Eiger are strong enough to hold the rope if one after another loses its freezing grip on the ice?

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Ireland turns on gypsies, homeless

September 21, 2010 Leave a comment

No matter where you go in Dublin’s city center, and many large cities, you’ll almost always find people sitting on the street begging for their keep. You’ll see young runaways, sullen addicts, and Roma people, often referred to as gypsies.

Despite the fact that the Roma usually don’t exhibit addictions, have children with them, and maintain distinctly tidy appearances despite their meager means, it’s always the Roma people I hear my Irish friends and neighbors complaining about.
As France officially began deporting hundreds of Roma families this week, I took part in more than a few interesting conversations about this blatantly discriminatory new policy. Several of my friends were, like me, horrified, but I was surprised to see how many people fiercely supported the measure.
One friend launched into a tirade about the horrors of “the gypos.” When I pressed him to explain where his decidedly pejorative frame of mind about the Roma came from(perhaps personal experience?), he merely offered the usual, “they’re just rude, and so ignorant.”
In order to justify his bigotry, he offered, “They hurt their children to help their chances of getting more money from begging.” Did he have any proof to support such a horrid accusation? None.
It seems to me, from a purely logistical standpoint, that it would require a much more parenting to raise a disabled child on the street, rather than a perfectly healthy one. And for that matter, wouldn’t it cost more in medical bills throughout a child’s life than his parent could ever hope to earn from begging for change?
Even if that one didn’t make the most sense, he had another reason for his prejudice against them. “When you give them money, they pool it all together from all of their posts around the city and then when they get back to their camp, they divide it up.”
Well to me, that just sounds like an example of business savvy and good sharing, and certainly does not constitute evidence of crookery and inherent dishonesty, as he would have me believe.
As it so happens, I spent time with Roma people a few months ago while working on a documentary. My co-producer and I traveled around Hungary, to some of the most destitute and hopelessly impoverished slums I have ever seen. And yet I’ve never meet people as eager to open up their homes and hearts, as the Roma people in those neighborhoods.
All of the families we visited gave us three kisses on the cheeks – a Hungarian custom – and offered us coffee and literally every single scrap of food that they had.
One older woman spoke about having barely enough money to buy loaves of bread for her family members. She then laughed at the absurdity of being able to afford meat to put on those loaves. It was an awkward silence, full of shame and sorrow, that followed.
The Roma are not just poor people. They live in homes without proper heating, electricity, or sanitation.
They live in conditions that no human should have to endure, and if they were anything but Europe’s scapegoat for all of its financial problems, they wouldn’t be allowed to.
I spoke with Prof. Jack Greenberg, a civil rights attorney who spent time in South Africa during apartheid, and traveled through several Roma camps and neighborhoods. He said that the Roma living conditions were worse, by far, than any of what he saw in the South African shanty towns.
The lucky ones get out of the places where they’ve historically suffered from slavery, genocide, discrimination, and marginalization, to start anew in places like France, or Ireland.
And when they get here, they fight for every dime they get. Yes, I have had a few unpleasant experiences with Roma people aggressively begging on the street, but at the end of the day, if I had to rely on the charity of other people to feed my children, I’d fight tooth and nail to get any money I could out of our ungenerous citizenry.
A few days ago, I met had a chance meeting with a Hungarian living in Ireland. So I excitedly told him that I had traveled all around his country, documenting the plight of the Roma people. His facial expression turned from one of delight to disgust. “The Roma people?” he offered with a condescending snort.
“Have you been to any of the jails?” Well, no. “They’re full of Roma people.”
Interesting. I spoke about how a legacy of poverty and endless discrimination and marginalization leads to hopelessness, and often, in turn, crime. He cut me off, “The police over there, they are afraid to arrest anybody because they’ll say, hey you’re just doing it because I’m Roma.” He finished this last bit with a satisfied imitation of someone playing the “poor me” card.
I thought about it for a moment, and then I realized that didn’t make any sense.
“Well,” I asked, “are the jails full of Roma people, or are the cops afraid to arrest them? It can’t be both.”
He had no answer for this. He, like millions of others all around the world, had been fed a bunch of tripe about people that are different, and being inclined to dislike what is unfamiliar, he agreed to allow every reason he was given, to support his theory. Even if they were literally contradictory and illogical.
Discrimination is never logical. Nor is it permissible.
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