It has been a very slow news weekend. There were no major events, and, if you can believe it, the EU and IMF have agreed to a support package for the Irish banks and other institutions that are under stress. Nobody can really be shocked by this as the readers of NOTES have been prepped as to this outcome. The Irish polity at this point did not have to surrender its sovereignty as it doesn’t have to raise its corporate tax, at least not yet. Markets are responding positively as the S&Ps, EURO and COMMODITIES are all higher as the all-clear signal is given.
In the original “TIME MACHINE,” when the siren sounded it meant it was all clear. We just didn’t know what was clear. There is much being written about the possible fallout from the Irish bailout and what it may mean for the other peripherals under financial stress. It seems that the U.K. and Sweden have offered up immediate funds to backstop the BANKS and the markets are waiting to hear from the IMF.
In the Financial Times, Tony Barber had an interesting piece, in which he wrote that according to the BIS, the three largest creditors to the Irish economy at the end of June , “… including the Irish governments, banks and non-financial corporations–were Germany to the tune of €109 billion, the U.K. at €100 billion and France at €40 billion.”
While the Irish people are asked to sacrifice with a restructured, austere budget, who is in fact being bailed out? Rumors are rife that Irish public sectors are gearing up for action and taking to the streets to oppose further austerity. The onus is on the sitting government to impose fiscal austerity and the markets will be attentive to the political fallout. If the Irish government were to fall, I don’t think that will be a major event as it has been widely anticipated. Some Machiavellians have opined that the present government hopes they fall so that a new regime would have to deal with the fallout from further austerity and then they would be there to pick up the pieces.
Oh well, we are left to ponder who will be next. Unless there is a tremendous bout of growth in the PIIGS, there will be more threats of sovereign “restructuring.” Watch the EUROPEAN sovereign spreads tomorrow to see what the market truly believes. Saint Patrick may have rid Ireland of snakes but they evidently were able to swim to the continents dry land.
Tags: banks, BIS, Commodities, EU, Euro, Financial Times, IMF, Ireland, PIIGS, S&P
November 22, 2010 at 7:11 am |
Ireland thus joins Iceland, Greece, Latvia and Ukraine as “lands of indentured servitude” to banking interests. Portugal will climb aboard this slave ship within a fortnight. One day soon enough, a nation will have had
enough of this and simply flip off their IMF masters and put their current politicos in chains.
November 22, 2010 at 8:37 am |
Mr.Kowalski—some nations are always depending on the kindness of strangers.—-as you point out the list is growing.The fascinating thing is that when the developing countries were in credit stress the workouts and restructuring were fairly rapid while in Europe the crisis drags like a Wagnerian opera
November 22, 2010 at 10:48 am |
Ira: Ireland simply means that the trend of socializing losses while privatizing gains has made a new high. That trend is the current operative reality, it’s powerful and there is no end in sight. So if the “trend is supposed to be our friend” what does this mean to us as investors and traders?
November 23, 2010 at 8:01 am |
Jess —in markets trend is your friend —political trends on the other hand can be debilitating as decision makers attempt to defend the undefensible—the present state of the u.S. debt markets is a fine example