What do AAMers think WILL happen in the coming months

Firefly

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Forgetting the merits of different taxes & cut...What do poeple think will actually happen in the coming months? Do people think that we will default, be bailed out by the ECB Stabilisation fund, or the gentlement in the white coats, aka the IMF, will come in?

I think we'll have a tough budget to try and satisfy Europe, but sometime in Q1 we will run out of cash. I don't see the IMF coming in, but rather the EU Stabilisation fund being used. I think the conditions attached for this will mean savage government spending cuts - particularly in the PS numbers and pay rates, as well as reducing social welfare. Income taxes will also rise, but I think the EU knows that without a corp tax of 12.5% they will never get their money back so this will be left alone for now.

Thoughts?
 
Tempted as I am to be optimistic, at every point my worst fears have come true so I'm feel I have to judge things by those. One problem is the fact that the governments and certain interests seem to be determined to keep us uncompetitive by artificially propping up the property and rental markets. Going on about the few pence involved in the minimum wage, when businesses are closing down due to insane rents, is missing the wood for the trees. The same with wages; the country would be far more competitive if house prices dropped but it looks like after the initial fall, we're now in for a Japanese-style prolonged agony of a long slow fall. It's funny how we hear a lot about the need for tough medicine, slashing pensions, etc, but property seems exempt from this tough medicine.
 
Strong rumours this morning of a 3-4 year €80 billion EU/UK bailout to be decided over the weekend. Statement expected later in the G20. Bond prices and CDS spreads are tigthening. There are legs to this story. There is will be a EU/IMF programme introduced similar to what wa seen in Greece.
 
Here is what I think. I believe the comments made on Bloomberg about Ireland running out of money in 2 months is overly pessimistic, and that the governments' estimate of June next year is overly optimistic. I would imagine that by mid January the markets will have worked out how workable the budget cuts are and how realistic any assumptions about growth and interest payments will be. I don't think that the markets will gain any confidence, or at least not enough confidence to reduce the bond yield. Double digit yields are extremely likely, but even if they stay the same they are not at levels that can realisticly be borrowed at. I would say that by March or April the public accounts will be running dry, but this will be denied right up to the day that the announcement will be made that Ireland has to tap into the ECB stability fund.
I agree with you on the corporation tax, increasing this would be cuting off the hand that feeds the mouth. The ECB and IMF are clever enough to realise how many jobs here are reliant of foreign companies that will quickly leave if the tax were increased.
ECB and IMF will take over the finance department and make sweeping pay cuts and income tax increases, as well as reducitons in social welfare payments (the area of wages and SW ameks up 2/3 of the budget so this is the first place they will start). I don't think they will bother looking at scrapping departments or services, even though this would be a better aproach to reducing the public pay budget.

In summary:
- March/April Ireland will start looking for money from the ECB/IMF
- huge public paycuts
- pension cuts
- social welfare cuts (I think they will have a similar reaction to these as they had to Greece's account shenanigans)
- capital projects will all be scrapped or frozen
- corporation tax will be left alone
 
A bail-out of some description seems to be certain..it will be interesting to see how the powers that be present it to the public...I think a necessary illusion of some sort will be required to prevent the masses from panic! The situation is quiet serious and technically complex (you get the feeling that the taoiseach, finance minister and to a lesser extent the governor of the central bank do not really understand the markets and are in fear of them), therefore the ordinary joe is in a much more ignorant position, so expect emotionally potent over simplification to sell our rescue fund to the public in the coming month...ah hell just call it propaganda
 
Tempted as I am to be optimistic, at every point my worst fears have come true so I'm feel I have to judge things by those. One problem is the fact that the governments and certain interests seem to be determined to keep us uncompetitive by artificially propping up the property and rental markets. Going on about the few pence involved in the minimum wage, when businesses are closing down due to insane rents, is missing the wood for the trees. The same with wages; the country would be far more competitive if house prices dropped but it looks like after the initial fall, we're now in for a Japanese-style prolonged agony of a long slow fall. It's funny how we hear a lot about the need for tough medicine, slashing pensions, etc, but property seems exempt from this tough medicine.

I agree with you on the wages and here is a comparison with the Great Depression (GD). During the GD there was monetary deflation (at first) as the US was on a gold standard. Ireland is also experiencing monetary deflation as it cannot create more money for itself (this is a very good thing). During the GD Hoover and FDR introduced and increased minimum wages (this was a very bad thing), while at the same time prices were plummeting due to the monetary deflation. The same is happening here in that the minimum wage seems to be a no-go area. As prices plummeted and wages stayed the same or went up during the GD, this resulted in more and more companies not being able profitably operate resulting in bankruptcies and huge unemployment. The same is happening here in Ireland now. FDR made many more desastruous decisions that made the depression "Great", but these were the very first mistakes.
I also agree that house prices are not falling as much as they should because there has not been a firesale of facant properties, including NAMA ones, and because reposessions have not really happened in any significant amount. But I think the minimum wage is more of a problem than the housing market.
 
I think a bailout from the EU fund but it will not be done in one year. Probably something similar to what the government is actually proposing but the EU will say where the cuts will happen.
Further cuts in PS pay a certainty. Cuts in unemployment benefit, child benefit and the state penion also unavoidable.
Increased taxes and property tax.
I think they would increase corp tax even to 15 or 17.5%. I don't think big multi-nationals will suddenly pull out if a modest increase is applied.
Big cut to overseas aid also.
 
I believe the EU hates our low corporation tax rate.
Ireland is effectively 'poaching' foreign company profits with it.

I don't see why the EU would want to protect this. In fact, I would suggest one of the conditions of the bailout would be to increase the corp tax rate, and let other countries have a slice of the action.
 
Just a question about the German Chancellors remarks - it was reported that Brian Cowan said the remarks were "unhelpful" & Brian Lenihan today said he welcomes the EU clarification. Is it just a case of clarifying her remarks or what? As Alice said thru the looking glass - Curiouser and curiouser!
Regarding what I think will happen is that we will all endure savage cuts - unemployment/childcare/pensions etc. & have a property tax/increased personal taxation/PS pay cuts. People will probably accept them IF there is seen to be cuts from the top down - cut the number of TD's & perks that they have & abolish the Senate would be a start - but they probably won't do that as the government seems to be completely out of touch with the day to day reality of "ordinary" people trying to make ends meet. So I suppose we'll all just have to eat cheese!!!
 
I expect:
- a tough budget in Dec. Some back benchers may defect, but it will pass (FG will abstain if necessary).
- Bond auction in Jan-March time frame. It will "succeed" but only because the ECB buy it all as they don't want us to enter the structural fund.
- Govt to fall some time in the first half of next year.
Over a longer term:
- although a GE will return a strong FG/Lab govt, they will be forced to have tough budgets. As a result in 4-5 years time, FF will possibly be looking at a return to power.
- Bond holders won't get burned, but there will be some 'restructuring' of bond debt.
- No banker, developer or senior govt official will see the inside of a jail cell.
 
I expect:
- a tough budget in Dec. Some back benchers may defect, but it will pass (FG will abstain if necessary).
- Bond auction in Jan-March time frame. It will "succeed" but only because the ECB buy it all as they don't want us to enter the structural fund.
- Govt to fall some time in the first half of next year.
Over a longer term:
- although a GE will return a strong FG/Lab govt, they will be forced to have tough budgets. As a result in 4-5 years time, FF will possibly be looking at a return to power.
- Bond holders won't get burned, but there will be some 'restructuring' of bond debt.
- No banker, developer or senior govt official will see the inside of a jail cell.

Good predictions. I agree.
 
I believe the EU hates our low corporation tax rate.
Ireland is effectively 'poaching' foreign company profits with it.

I don't see why the EU would want to protect this. In fact, I would suggest one of the conditions of the bailout would be to increase the corp tax rate, and let other countries have a slice of the action.

I agree. It's EU policy to harmonize these rates, and our very very low rate is the first target... no brainer! It will not be announced or presented as such, and will not immediately take effect either, but a secret deal will be done behind our backs to have it increased in the near future, and the gov will of course "strenuously deny" that any such conditions applied to the EU bailout...(ie business as usual lads, this is the same bunch of cretinous Irish politicians we're talking about here, nothing has changed!) Anyway, these Foreign Multi Nationals are NOT here only because of our low Corp Tax (ie they could always set up in some other lower tax island in the middle of an ocean somewhere), but mainly because of the gateway to the EU we provide, and hence any other EU country will do the job just as well for them. The EU area wouldn't lose the FDI if our rates increase, but it would rather be another EU country's gain and as such it's immaterial to EU policy if we lose out on the deal....serve us right would be the view of many other EU countries I'd guess!
 
Here is what I think. I believe the comments made on Bloomberg about Ireland running out of money in 2 months is overly pessimistic, and that the governments' estimate of June next year is overly optimistic.

The Bloomberg view maybe closer to the truth than we think.

http://www.breakingnews.ie/ireland/cowen-denies-bid-for-european-rescue-package-481599.html

if you notice what was said

“We have funding up to mid-year... we don’t have to borrow any money in respect of the sovereign debt, the sovereign issues that affect the Government and running of the country,” he said.

My question is How are our banks being funded ? Since they are locked out of the bond markets too.
 
personally I think the 80 billion will be given to us on the bases of covering the bank bail out.. not a country bail out, I think we will cut hard here anyway and dont think the IMF will be able to do that much more if they did come in.

Our exports are on the increase, as long as the rest of the world keeps improving we will be on our feet again sooner than you think because of the exports and multinationals... this doesnt mean that building or house prices will recover though.

I have decided its all too much gloom and doom so what if the ECB lend us 80 billion to cover the banks we need it and need to sort that out some how. yes we will be paying it off for years but we will anyway so better to get it from the ecb than the markets.. but if you forget about the banks for 1 second... things are not that bad compared to other countries.

The main thing we need is an election this will stabilize the markets.
and a state run business investment bank to sell off a few years down the line.
I know several companies who are export led that are doing very well and need to expand but no money from the banks to do it.
 
The main thing we need is an election this will stabilize the markets.
and a state run business investment bank to sell off a few years down the line.
I know several companies who are export led that are doing very well and need to expand but no money from the banks to do it.

If the state wasn't borrowing so much money, then there would be a lot more available for private enterprises. I agree that there are viable businesses that could make very good use of credit, certainly better use than the state. But I do not think that the state should get in any way involved in investment banking. The political elite have messed up enough without trying to dive into investmnet banking.
 
What i think will happen is as i said in a different post, balied out by Feb or March. Which will result in massive cuts in PS & SW. Corp tax rises to 15%. Other EU countries will be bailed out, and as other countries do, the EU will start printing money devaluing the euro. With a devalued euro and costs gone way down it wont matter about or corp tax and we'll see some major FDI in the country and it all begins again.
 
My gut would be that we will be cohabiting with our IMF / EU masters pretty soon and to be up front I would be one of those who would welcome the IMF in. This country is broken, not only financially but in terms of ethics / leadership and morailty. Politicians / trade unions / the clergy / bankers / developers etc etc have brought this country to a stage of paralysis where only the likes of the IMF can come in waving a big cheque and say "if you want the money then there are no sacred cows" and do what has to be done.

That said, our government is so inept that we will probably blow a huge opportunity that exists right now to extract a bailout at a fantastic rate as the big boys are frantically seeking to resolve the "Irish problem" to stop the contagion effect. Looks to me that if we had any real balls we could probably get a bailout for free right now http://www.reuters.com/article/idUSTRE6AD28U20101114?pageNumber=2 but with the 2 Brian's negotiating for us well...

Roy
 
What i think will happen is as i said in a different post, balied out by Feb or March. Which will result in massive cuts in PS & SW. Corp tax rises to 15%. Other EU countries will be bailed out, and as other countries do, the EU will start printing money devaluing the euro. With a devalued euro and costs gone way down it wont matter about or corp tax and we'll see some major FDI in the country and it all begins again.

You're forgetting one important part, that is that if the ECB devalue, then the BoE and US Fed will also devalue some more. All major central banks are in downward spiral race to devalue their currencies. Problem for Ireland would be the huge burden of costs of goods that have to be imported, oil being the main one.
 
My gut would be that we will be cohabiting with our IMF / EU masters pretty soon and to be up front I would be one of those who would welcome the IMF in. This country is broken, not only financially but in terms of ethics / leadership and morailty. Politicians / trade unions / the clergy / bankers / developers etc etc have brought this country to a stage of paralysis where only the likes of the IMF can come in waving a big cheque and say "if you want the money then there are no sacred cows" and do what has to be done.
The IMF have their own sacred cows. They will eliminate public services. They will privatise everything that moves. You can expect to be paying directly for everything - health services, education, roads, water etc etc. They will eliminate local industry and encourage imports of everything. Have a look at their track record in South America.
 
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