Your post is informative and I agree with most of your sentiment except for the above.
Michael Noonan first mentioned this point a few months ago and people arguing for debt forgiveness are quick to seize on it.
The sale of loans from the banks to NAMA at discounted rates, the banks writing down loans in their accounts and the state providing for a certain level of losses (a) does not entitle the people who took out the loan to renege on all or part of it and (b) does not mean the taxpayer isn't taking a hit.
As a country we will either be made bankrupt or crippled with enormous taxes and underfunded public services for a generation if we use the entire debt facility made available to us by the EU/IMF. If we have some discipline and keep the banking losses well below the worst case scenarios envisaged we will recover faster.
The myth that debt forgiveness costs us nothing because it's already been paid for needs to be dispelled before the masses latch onto it as some kind of justification for letting someone else (i.e. the taxpayer) foot the bill where debts are perfectly serviceable.
DerKaiser, you're missing the point. Some level of debt forgiveness
has already been paid for, and if we don't use it, we'll lose it. It has nothing to do with Nama, either.
After the PCAR (the latest bank recaps) in March, the Irish banks received more than €15 billion or so in capital specifically to provide for losses on mortgage and personal debt. That's not an opinion, it is fact. It's there in black and white in the PCAR.
Now, the taxpayer is not getting that money back. It has already been paid over to the banks, borrowed by the state from the troika.
That €15 billion currently is sitting unused on the banks' balance sheets - unused for the purpose for which it was given. There is no way it can be returned to the taxpayer - that cash now belongs to the banks, to be used for a specific purpose. We need to use it.
If the banks get sold off before that capital gets used, then some foreign bank, some private equity company, or whoever buys the Irish banks off the state, will walk off down the road with that €15 billion in capital in their back pocket. It won't just simply add €15 billion to the purchase price received by the state for the banks. It doesn't work like that. Whatever foreign entity buys the banks will get that €15 billion in capital on the cheap.
In the meantime, consumer spending will remain constrained and consequently unemployment will remain high because of the personal debt levels of Irish citizens.
Someone has to grasp this nettle, for recovery and the economy's sake.
The money has already been provided, despite what DerKaiser says. The country should use it, or we'll lose it to whoever buys the banks.
