2 potential threats (IMF or rejection from Euroland) and the effects on our savings

G

Godfather

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602
Hi,

I'm getting more and more confused by 2 schools of economists:
1) the ones thinking that Ireland might have to ask for help to EU and IMF like Greece (the financial investors seem to bet on this as the cost of Ireland borrowing money keeps increasing as I type)
2) the ones thinking that Ireland might have to go out of Euro-land for a while until public finances are restored as credible

I still don't understand how the 2nd hypothesis might become real. Do the EU treaty consider any option to "push out" a country from the Euro?

I would prefer this thread to be kept on the deposits section because here we are talking about our savings and how they are impacted pls.

In the 1st case I don't see much risk (or am I over-optimistic? :confused: ) while in the 2nd case I am worried that the newer Irish Pound would be so devaluated for quite a long while compared to the Euro-land. :(

Any thoughts/opinions would be so welcome. :confused:
 
I don't see risk for depositors in scenario 1 either.

On scenario 2 I am of the opinion that it won't happen but thats neither here nor there. If it did happen is it really a bad thing if all your deposits, your earnings and all your liabilities (loans, mortgages) are converted to some new currency. I guess it would hit you if trade outside of Ireland or when travelling and converting to euro?

I really can't see Ireland leaving the euro.
 
Godfather said:
Hi,

I'm getting more and more confused by 2 schools of economists:
1) the ones thinking that Ireland might have to ask for help to EU and IMF like Greece (the financial investors seem to bet on this as the cost of Ireland borrowing money keeps increasing as I type)
2) the ones thinking that Ireland might have to go out of Euro-land for a while until public finances are restored as credible

I still don't understand how the 2nd hypothesis might become real. Do the EU treaty consider any option to "push out" a country from the Euro?

I would prefer this thread to be kept on the deposits section because here we are talking about our savings and how they are impacted pls.

In the 1st case I don't see much risk (or am I over-optimistic? :confused: ) while in the 2nd case I am worried that the newer Irish Pound would be so devaluated for quite a long while compared to the Euro-land. :(

Any thoughts/opinions would be so welcome. :confused:
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Option 1 would secure your deposits to some extent. It would all come down to whether the situation of the banks were to deteriorate and would require further funding, which may or may not be possible. But this would not be due directly to an EU/IMF bail out.
Option 2 would be disastrous for your savings. Ireland has to import an awful lot of products, some which just aren't produced here, and some that cannot be produced here. The second category is the most important which includes oil. The price of oil and petrol and diesel would go through the roof with a knock on effect on the entire economy which is immensely dependent on oil. This would send production costs of pretty much everything up.

Here is a report on what the ECB think of possibilities of leaving or expulsion from Euro: http://www.ecb.int/pub/pdf/scplps/ecblwp10.pdf
 
Chris said:
Here is a report on what the ECB think of possibilities of leaving or expulsion from Euro: http://www.ecb.int/pub/pdf/scplps/ecblwp10.pdf
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Thank you very much Chris, the document seems quite reassuring. :)

I previously googled "Ireland Euro" and got shocked by these alarming old articles: :(
http://www.independent.ie/business/...and-may-exit-euro-region-in-2010-1972016.html

http://www.finfacts.ie/irishfinancenews/article_1019087.shtml

[broken link removed]

But I will work on thinking positive thanks to Aristotle's and Chris' replies. Thank you very much! ;)
 
Godfather said:
Thank you very much Chris, the document seems quite reassuring. :)

I previously googled "Ireland Euro" and got shocked by these alarming old articles: :(
http://www.independent.ie/business/...and-may-exit-euro-region-in-2010-1972016.html

http://www.finfacts.ie/irishfinancenews/article_1019087.shtml

[broken link removed]

But I will work on thinking positive thanks to Aristotle's and Chris' replies. Thank you very much! ;)
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Just to clarify, I am not in the camp that believes everything is fine with the Euro and Ireland's membership of it.
I strongly suggest that you look up more articles that have an opposing view to the ECB report. The report is extremely biased, and the ECB would never come out and say that expulsion from the Euro were an option. I believe that voluntarily leaving is probably more likely than an expulsion. But either way I don't think the government guarantee of deposits is worth the paper it is written on and that desparate politicians are guaranteed to do desperate and extremely stupid things. The important thing is to look at both sides of the argument and take precautionary measures.
 
Chris said:
[...] I don't think the government guarantee of deposits is worth the paper it is written on and that desparate politicians are guaranteed to do desperate and extremely stupid things.
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Oh dear... :eek: I'm getting a panic attack now!

Chris said:
The important thing is to look at both sides of the argument and take precautionary measures.
Click to expand...

Would you be able to pls share here any suggestion on "precautionary measures"? :confused:

I can share with you mine: at the moment my savings are split among non-irish banks (sorry! too panicky!) like rabo, nib, nationwide UK, NR.
 
aristotle said:
What kind of precautionary measures?
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Godfather said:
Would you be able to pls share here any suggestion on "precautionary measures"? :confused:

I can share with you mine: at the moment my savings are split among non-irish banks (sorry! too panicky!) like rabo, nib, nationwide UK, NR.
Click to expand...

There have been a couple of threads about this, but here are some things I have done (NB these are not recommendations for you but should give you an idea as to what you could research):
1) most of my cash is physically abroad
2) all of my cash within Ireland is in foreign banks
3) all my equity holdings are abroad
4) not all of my cash is in €, I have diversified into harder currencies and precious metals

Please beware that interest earned on cash held abroad is liable to income tax, not DIRT, but my motivation for keeping cash abroad is wealth creation but preservation. These might seem like quite drastic measures and the scenario I am preparing for may well never happen. But I just don't trust politicians in desperate situations and by that I mean all politicians.
 
1) Your strategy here seems sound Chris, but just how exactly do you get your cash "physically abroad"? I've been trying to find out about opening non-resident euro accounts abroad, maybe in Germany perhaps, but it appears impossible if you don't live there.

2) Your cash is indeed safer with the better rated foreign banks operating within Ireland than with the domestic ones. And even if the 100K deposit guarantee were to be fully honoured in the event of a bank bust (and of course if things deteriorate far enough this can never be 100% guaranteed), it's still preferable not to have to go down this route in the first place, and higher rated foreign banks minimize this risk.
However, with foreign banks operating in Ireland your cash is not secure from Mr Lenihan's clutches in the (however unlikely) event of a euro exit and devaluation? Surely all Rabo, NR, NW(uk) etc accounts would all be converted to new Irish Punts & devalued? ...but hence your strategy of minimizing your Irish cash deposits I suppose!

3) Regarding equities, as Manuel of Fawlty Towers would say " I know nothing" :)

4) Just how does one "diversify into harder currencies and precious metals"? I realize that we all have to spend time doing our own researching , but there's just so much to learn about in such a short time, a real "crash" course if you'll pardon the pun :) and any tips are always welcome.

To conclude, the upcoming budget looms and I would fear further inroads into peoples savings by the government as they become evermore desperate to save their own hides. So, my priority would first be to get my savings physically into foreign banks in euro outside the country, and any advice as to how to do this and which banks/countries etc would be much appreciated.
 
Bcommercial said:
1) Your strategy here seems sound Chris, but just how exactly do you get your cash "physically abroad"? I've been trying to find out about opening non-resident euro accounts abroad, maybe in Germany perhaps, but it appears impossible if you don't live there.
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I agree, for example i'm italian and the banks there seem to be able to open an account to me because I have italian passport (I'm enquirying on this still though). Chris/anyone else could share their experience with accounts abroad with foreign banks?

Bcommercial said:
2) Your cash is indeed safer with the better rated foreign banks operating within Ireland than with the domestic ones. And even if the 100K deposit guarantee were to be fully honoured in the event of a bank bust (and of course if things deteriorate far enough this can never be 100% guaranteed), it's still preferable not to have to go down this route in the first place, and higher rated foreign banks minimize this risk. However, with foreign banks operating in Ireland your cash is not secure from Mr Lenihan's clutches in the (however unlikely) event of a euro exit and devaluation? Surely all Rabo, NR, NW(uk) etc accounts would all be converted to new Irish Punts & devalued? ...but hence your strategy of minimizing your Irish cash deposits I suppose!
Click to expand...

+1

Bcommercial said:
4) Just how does one "diversify into harder currencies and precious metals"? I realize that we all have to spend time doing our own researching , but there's just so much to learn about in such a short time, a real "crash" course if you'll pardon the pun :) and any tips are always welcome.
Click to expand...

Yes pls, I would like some tips as well...
 
1) Your strategy here seems sound Chris, but just how exactly do you get your cash "physically abroad"? I've been trying to find out about opening non-resident euro accounts abroad, maybe in Germany perhaps, but it appears impossible if you don't live there.
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I'm sure there are lots of options. One example is to open an account with Keytrade bank in Belgium (www.keytradebank.com). Keytrade are a subsidiary of Credit Agricole and provide a stockbroking service as well as banking. Search the forums for more details.

I have no connection with Keytrade other than as a customer.
 
Foreign Banks

Chris, How did you open the accounts, do you have addresses abroad?

Maturin, Belgian banking may not be safe either.
 
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Keytrade online

1 - Complete the form online
You will need your identity card to fill in the form.

What is the Id Card?
 
I just completed application online last week and received copy of it yesterday in post to sign and return to them together with photocopy of passport & utility bill.

Belgian banks may not be safer but I certainly have a lot more confidence in the Belgian government deposit guarantee scheme than I do in the Irish one.
 
Happy Girl said:
Belgian banks may not be safer but I certainly have a lot more confidence in the Belgian government deposit guarantee scheme than I do in the Irish one.
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+1

Sorry it looks like italian banks look for italian passports... I'll let you know if can see anything different. :(
 
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