Ireland debt = Junk

According to ratings agency Moody’s.  From the Irish Times report

While Ireland still carries investment-grade ratings with rival agencies Standard Poor’s and Fitch, the downgrade creates big new obstacle for the Government’s plan to exit the EU-IMF bailout programme and start borrowing from debt markets again next year. Only investors with a very large appetite for risk buy junk-rated bonds given the higher implied risk that the issuer may default, or fail to pay back the debt.

A spokesman for the Department of Finance said: “This is a disappointing development and it is completely at odds with the recent views of other rating agencies.”

The spokesman said it was “difficult to see” how the downgrade reflects moves to enhance the fund’s flexibility expressed by euro zone finance ministers on Monday night.

The spokesman for EU economics commissioner Olli Rehn said the commission regrets Moody’s decision. “It contrasts very much with the recent data, which support a return to GDP growth this year, and the determined implementation of the programme by the Irish government, which has taken strong ownership of it.”

The downgrade came at the end of a day on which EU internal markets commissioner, Michel Barnier, said he would propose “stiff measures” in November to curb the power of the agencies. “We were surprised that the agencies would downgrade a country without any warning,” he said, referring to a similar downgrade of Portugal last week.

News leaked yesterday about a summit before EU leaders agreed through diplomatic channels to meet in Brussels, putting them under pressure to calm markets by quickly agreeing a new rescue plan for Greece.

, , , , , , , ,

  • “A spokesman for the Department of Finance said: “This is a disappointing development and it is completely at odds with the recent views of other rating agencies.””

    Three levels above junk says S&P, Fitch. Different? Yes. Completely at odds? Hell no.

  • Carrickmoreman

    How’d Moody’s do with Lehman Brothers? AAA the night before it went bust or was that another ratings agency?

  • Alias

    The domestic economy underwrote several hundred billion of liabilities (and actual losses) to foreign eurosystem lenders, so that is the amount of money that is to be sucked out of the domestic economy during the term of the loans. Given that 120+ billion has been sucked out of it in the (near) year since last September, the good news is that Moody’s think that there is even a faint chance that the domestic economy is capable of generating another few hundred billion to thereby avoid default. I would downgrade all of these agencies for failing to downgrade Ireland’s credit rating to junk status on the 28th of September 2008. As the (much lamented) ‘Dave’ posted back then “The government should be more concerned about where its own credit rating will end up rather than the credit rating of a few private companies.”

  • HeinzGuderian

    Surely now the time is right to join our Southern Brethren in the slow Junk to China ?

  • DC

    I wonder if this will mean that the taoiseach will now stop being the highest paid prime minister in Europe?

  • Greenflag

    ‘@ Alias,

    I would downgrade all of these agencies for failing to downgrade Ireland’s credit rating to junk status .

    Oh you would . I presume you would also downgrade Moody’s for not downgrading Lehman’s , or Bank of America or Citigroup or Goldman Sachs just days before the aforementioned banksters had to be ‘rescued ‘ by the American taxpayer ?

    Moody’s are just ‘feasting’ on the publicity over the past few days given to Italy and Portugal now that Greece has been temporarily reprieved . Any port in a storm will do and the easier the target the better . Meanwhile the USA teeters on the edge of a default which would plunge the entire world into another global recession like the 1930’s .

    And in all of this the neo conservative Hayekites and GOP ideologues are hoping to establish their corporate fascist state on the backs of another 10 million unemployed Americans by destroying whatever vestige of a social safety net the USA still has .

    Meanwhile American male life expectancy in some states is now less than that of the Philippines and almost 2 years less than the UK while females of the American sub species ‘plutocratus feminae ‘ enjoy life expectancy rates similar to those of the average Japanese woman .

    For another view of Moody’s vandalism here’s MAx Keiser calling the ‘rating agencies ‘ what they are i.e financial terrorists or a racket in others words .

    http://rt.com/programs/keiser-report/finance-economy-rating-agency/

    For those who are still following the NOTW fiasco it should come as no surprise that having made 10 billion in profits the same NOTW had a refund of 5 billion dollars from the American taxpayer and thus had a corporate tax rate of minus 50% -Nice money if you can get and NOTW got it NOT illegally but by using offshore tax avoiding havens such as the Cayman Islands where the profit is made whereas the American land based businesses all make huge losses – Thus do the corporate plutocrats benefit from anarchic capitalism.

  • Greenflag

    http://rt.com/programs/keiser-report/finance-economy-rating-agency/

    At about 3 minutes in the above link Ireland’s kleptocratic class gets more than a mention while poor Noonan begs Irish consumers to buy new fridges in an attempt to spur consumer spending to benefit the German and Chinese economies .

    Both Max and Stacy refer to the Irish as chumps for putting up with the austerity crap and to be frank they have a point !

  • Greenflag

    sorry Irish reference in above link is 6 minutes in.

  • tuatha

    Irish bonds on the “free” market have gone from 5% just after the bailout was announced to just on 17% today. “The remedy was successful but the patient died.”

  • USA

    Moody’s have as much credibility as Rupert Murdoch.

  • dantheman

    How’s Northern Ireland’s credit ratings doing these days??

  • Zig70

    While the numpties are gloating ‘we beat you 321yrs ago’ the money men are shafting the Irish, which will affect us both sides of the border whether you like it or not. The financial sector seems untouchable by sovereign governments. So we’ll just have to bend over and say thanks. Would they dare downgraded the US bonds to junk?

  • DC

    Zig70

    Have you heard about my SOCA idea?

  • Greenflag

    ‘ the money men are shafting the Irish,’

    And the Brits and the Americans and the Greeks and the Spaniards and the Portuguese and anybody else they can shaft . And some of them i.e the ‘money men ‘ are even Irish , British and American and German and French .

    ‘The financial sector seems untouchable by sovereign governments.’

    Correction – IS untouchable . Politicians in the USA are dependent on the financial sector to get elected in the first place -those who have even a whiff of being anti the money men -never even make it to candidate much less get elected . Just look at where VP Joe Biden gets his financial support

    ‘Would they dare downgrade the US bonds to junk?.’

    They would downgrade their mothers and sell their kids into slavery if they could get a big enough margin . These bastards are predatory rats far beyond the ken of most people in the western world . They make the medieval robber barons and the gilded age plutocrats of the USA in the 1890’s look like Mother Teresa 🙁

    BTW -the numpties always gloat -it’s all that they’ve got left 🙁

  • Zig70

    @DC, I think it might work for the US but maybe be more of a word (or bullet) in ear. The problem for Ireland is that the culprits are either non-Irish or run by the ruling class. I don’t trust politicians and there is probably a few skeletons in Dail closets. Turkeys and Christmas again. Then when no-one is convicted we can have an inquiry and the legal profession will rape us as well. I’ll just stick to seeing my Tesco and oil bill go through the roof.

  • Alias

    Greenie, that’s a myth. A sovereign state can default on its debt. Ireland, however, is not a sovereign state. It transfered sovereignty over its monetary and macroeconomic system to a supranational authority and thereby defaulted on its former national interest in those matters.

    Sovereignty is simply the authority to exercise the affairs of state in your collective interest. Those who whom the appicable sovereignty has been transferred continue to exercise exercise the affairs of the Irish state in their collective interest, and not in the constitutionally redundant Irish national interest. Where there is a conflict between the two – such as the interests of eurosystem bondholders versus the interests of Irish taxpayers – then that conflict is resolved in favour of those who exercise the sovereignty by those who exercise the sovereignty.

    All countries that have defaulted on debts – most recently Russia, Argentina and Equador and Iceland – have been sovereign countries with a sovereign monetary and macroeconomic system. Neither country has suffered any consequence from mythical international courts by defaulting – mainly because there isn’t any appicable international law. Some states such as the UK and the US did pass domestic laws allowing any defaulted party to make a claim on commercial assets of the defaulting state but only where those assets are in the state where the defaulted party issued the contract.

    It’s true, of course, that those parties that you have defaulted against may not be inclined to lend to you again but defaulting states by-pass that situation by borrowing from other lenders. There is no evidence to support the bogus claim that default leads to market exclusion. And besides, in Ireland’s case, the existing arrangement is designed to extract several hundred billion of wealth from the system, not inject such a sum into it.

    Ireland’s problem is that it won’t be able to default since it requires the cooperation from the supranational authority to whom it has transferred its monetary and macroeconomic sovereignty, having no constitutional authority other than to do as instructed by those who do have constitutional authority (the treaties are ratified in the Irish constitution and now form part of it) and having no choice to exercise the limited sovereignty residing with it in full accordance with the policies and dictats of those who hold the sovereignty.

    By the way, what is wrong with you? A few posts in and no mention of Mr Madoff?

  • wee buns

    Withdrawal from the euro and of course there would be huge costs involved, the sexy junk truth of it is – that it would be advantageous for a nation to do a triple whammy — withdraw, default on selected debts, and re-issue a devalued currency to pay off the remainder with a take-it-or-leave-it offer.
    Phoenix like, a populist, nationalist movement to rise from the total failure of legitimacy and discrediting of existing parties who have attached their star so closely to the EU bottle-rocket.
    A humbler economy would be restarted based on more viable exports and tourism.

  • lamhdearg

    wee buns
    its probably better that Eire sit tight, let some other countrys (greece spain italy) do the fighting(breaking up the euro zone), that is what neutral countrys do best, sit tight let them do it.

  • SK

    “its probably better that Eire sit tight, let some other countrys (greece spain italy) do the fighting(breaking up the euro zone), that is what neutral countrys do best, sit tight let them do it.”

    It just doesn’t feel right to hit that post button without saying something snide, does it lamhdearg?

  • wee buns

    The Phoenix like thing: I can’t see this happening.
    But the current situation is exactly what the EU’s architects didn’t want — local chaos being wrought by a highly visible, and centrally administered European institution, i.e. the euro.

  • wee buns

    lamhdearg
    what happens is— profits stay private, losses are socialised. Now particularly begins the most absurd stage — blaming the welfare state (such as it exists) for the crisis, and turning structural collapse into personal moral failing.
    You might be familiar with this story.

  • lamhdearg

    sk,
    i agree with your snide comment, i am tired, and all the hate directed at my “side” (for want of a better word) over the last few weeks has put my back up against the wall metaphoricly speaking, therefore all things irish are a little bit more alien and a bit more of a threat than usual. but i still think Eire would do better to wait on one of the other eurozone countrys to blink first.
    wee buns
    dito, Eire should hold fire.

  • lamhdearg

    goodnight.
    i will end on a good Ulster news story.
    Linfield 1- (billionaire owned)BATE 1, only joking
    From U.T.V.

    A volunteer lifeboat crewmember from Newcastle, Co Down, who was holidaying with his brother in Co Donegal has rescued a six people – including two children – from freezing water.
    Richard and Samuel Burgess were fishing at around 4.30pm on Tuesday when they heard a call from the coastguard at Malin Head radio to say another boat was taking on water, close to Port na Blath in Sheephaven Bay.
    The brothers made their way to the scene and found four adults and two children in the water, close to the bow of the 18ft cruiser which was jutting out of the sea.
    The pair took all six on board and wrapped their jackets around the kids to keep them warm, before they were taken to hospital on dry land to be checked out.
    RNLI lifeboat volunteer Richard Burgess said: “I am delighted we were close by and were able to help these people.
    “I have been on the lifeboat crew for 20 months and the minute we arrived on scene my lifeboat training kicked in.
    “Conditions on the day were good and the group were about half a mile out from the shore but the area is very rocky and they would have been unable to make it to shore on their own.

    “It could have been a very different ending to the day and we are just delighted that everyone is safe.”

    © UTV News

  • Alias

    Wee Buns, it isn’t legally possible for a Member State to unilaterally withdraw from the EMU.

    But a legal right of ‘negotiated’ withdrawl does exist, i.e. the other members have a right to expel you out if you agree to be expelled. However, you must do so on terms agreeable to those members. Since those members are unlikely to agree to process that leads to a default to their lenders, the idea that you will gain their consent to reclaim your sovereignty on your terms is highly fanciful.

    Even if they did agree to allow you to withdraw from the EMU, it is unlikely that the ECB would agree to return the foreign reserve assets that were transferred to it from the Irish Central Bank if the state did not intend to repay to the ECB the 150 or so billion that the ECB has used its sovereignty over the Irish Central Bank to convert into sovereign debt. Since you wouldn’t have any foreign reserve assets, you wouldn’t be able to create a sovereign currency thathad any value. At any rate, the assets of the banks have been transferred to the ECB as collateral, so a newly sovereign Irish Central Bank would then have to fund banks that have no assets (and no reserves).

    You would also not have the regulatory powers that would enable you to take the emergency measures nessesary to re-establish your currency since these powers were transferred to the EU seperately from EMU membership and will not be returned to the state if it is expelled from the EMU.

    Without secession from the EU, you can do only as your masters determine. And as the poor Paddies would not contenance withdrawl from the EU, you can talk all you like about re-asserting your national self-interest but it is never going to happen.

    It’s debatable as to weather or not a state can even withdraw from the EU. While the Lisbon Treaty gives that option in principle, it is by no means clear what that involves.

    The European Court of Justice is very clear, however, that a state has no right to reclaim any sovereignty that it has given away:

    “The transfer by the States from their domestic legal system to the Community legal system of the rights and obligations arising under the Treaty carries with it a permanent limitation of their sovereign rights.” – Case 6/64 Costa v ENEL [1964] ECR 585.

    If that is the case, then how would government even call a referedum on seccession from EU membership? Since it is ratified, the Supreme Court could prohibit it if any europhile took a case to it seeking to prevent withdrawal.

  • Alias

    Just to clarify: the foreign reserve assets of the Irish Central Bank were transferred to the ECB when Ireland joined the EuroZone. The assets of the Irish banks were transferred to the ECB as collateral when the ECB used its sovereignty over the Irish Central Bank to convert circa 150 billion worth of eurosystem debt into sovereign debt. The Irish Central Bank remains with the Minister for Fiance as its sole shareholder, so the Irish state is responsible for all monies loaned to the Irish Central Bank and passed to domestic insolvent eurosystem banks to repay foreign eurosystem banks. So while the ECB has exclusive executive control of the Irish Central Bank, the Irish taxpayer remains 100% liable for how the ECB uses that executive control. In both cases, the ECB would have to agree to return both the assets of the Irish Central Bank and the asssets of the domestic insolvent eurosystem banks if the Irish state was to re-establish a sovereign currency. There is zero probability that the ECB would do either, and ergo, zero probablity that Ireland could ever reclaim the sovereignty that it has given away.

  • Alias

    One last point: the Irish Supreme Court must use the precedents of the ECJ in making its judgements since it is now subservient to the ECJ after Lisbon. The above precedent from the ECJ makes it clear that no state or its citizens have any right to reclaim national rights that they have duly forfeited. Hence, there would be no constitutional right by citizens to seek to reclaim what the Supreme Court must now hold to be a “permanent limitation of their sovereign rights” and so no l=constitutional right to hold a referendum on the issue.

  • Greenflag

    @ Alias ,

    ‘Greenie, that’s a myth. ‘

    What’s a myth ?

    ‘Where there is a conflict between the two – such as the interests of eurosystem bondholders versus the interests of Irish taxpayers – then that conflict is resolved in favour of those who exercise the sovereignty by those who exercise the sovereignty.’

    In the cases of Greece , Ireland , Portugal and Spain and possibly other EU states the eurosystem bondholders will be taking haircuts perhaps even crew cuts by the time this crisis is resolved . It will be either that or there will be no eurozone or two speed or no eurozone . None of those options are in the longer term interest of either the French or German financial sectors or their respective taxpayers .In the short term the world awaits the prospect of seeing how the ‘sovereign ‘ USA uses it’s ‘sovereignty’ to send the world economy into another worldwide depression . No doubt other ‘sovereign ‘ countries like the UK ,Russia , Argentina , Ecuador and Iceland will be ‘immune ‘ from the consequences of USA ‘insolvency ‘ And I now read Standard and Poors have now joined Moody’s in ramping up the threat and pushing the US dollar into further decline as an acceptable world reserve currency .

  • Greenflag

    @ ALIAS

    correction,

    above should read

    It will be either that or there will be a REDUCED eurozone or two speed or no eurozone .

    BTW -sorry for late reply -travelling

  • Greenflag

    @ lamhdearg,

    A nice story and well done the Burgess brothers 🙂 Just as well the Burgess brothers were human beings and IMF or ECB banksters -otherwise the folks awaiting rescue would have been thrown anchors instead of jackets.