All The Latest On The Irish Bailout – Up To €17.5 Billion Of Rescue To Be Funded By Irish Pension Fund Contribution Redirection – Follow along as we track the news avalanche: Official release from ECOFIN as paraphrased by the CEU: Euroarea financial support will be provided to Ireland.Three pillars: 1) an immediate strengthening of the banking system, 2) an ambitious fiscal adjustment to restore to fiscal sustainability, 3) growth enhancing reforms in the labor market, to allow return to sustainable growth. Financial package will cover needs up to €85 billion: €10 billion for immediate recap measures, €25 billion on a contingency basis for banking system support, and €50 billion for budget needs. €17.5 billion will be financed by an Irish contribution from banking system and its pension fund (the NPRF). The remainder €17.5 will ceme from EFSF, UK, Scandinavian countries, and the IMF. Interest rate at about 5.8% Precise interest rate to be in line with standard IMF pricing practices, and will be come next week. Olli Rehn: "Senior debt of bank bondholders will not be involved"
Note 1: BLS tracks four costs of shelter: rent of primary residence (for renters), owners’ equivalent rent of residences (for homeowners), lodging away from home, and tenants and household insurance. Lodging and insurance account for only 3.5% of shelter, so it didn’t seem worth the trouble to strip them out to get a housing-only measure. You will sometimes see analysts do this comparison using the BLS measure of housing costs. Housing is about one-third larger than shelter because it includes household energy and utilities purchases, furnishings, and other household operations. For that reason, I think shelter is a better measure for exploring the relationship between the housing market and measured inflation.
Note 2: According to BLS, food comprises about 14% of consumer expenditures, energy about 9%, and shelter about 32%. So the core CPI less shelter covers about 45% of consumer expenditures. So use it with care.
The plank in Schäuble’s eye – From the look of it, the Irish bailout is taking another chunk of another one of FT Alphaville stalwart Neil Hume’s weekends. From Peston European finance ministers are struggling to reach agreement on the interest rate to be paid by Ireland for the €85bn of rescue finance it is set to receive from the EU and IMF – although they appear to have reached a settled position there should not be losses imposed on providers of senior debt to Irish banks. The rate Ireland pays for its bailout is to be announced very soon, apparently after some wrangling between the UK government, which wanted 5%, fearing 7%+ was unaffordable, and can see a total bank exposure UK to Ireland of around EUR200Bn, plus trade, and the German government, which, according to their finance minister Wolfgang Schäuble feels that any rescue loans should not look like cheap money, but should be charged at an interest rate that contains an element of punishment for the reckless borrowing spree of Ireland’s banks, which took the Irish economy to the brink of bankruptcy. Umm, who gets punished, exactly? And who gets off?? And whose banks??? Is Schäuble perhaps confused about the nationality of the well-known not-particularly-Irish bank, DEPFA,
Why is Greenland so rich these days? It said goodbye to the EU – If you think that leaving the EU would be catastrophic, take a look at Greenland. By rights its people ought to be poor. Their island is isolated, suffers from freezing weather, has a workforce of only 28,000 and relies on fish for 82 per cent of its exports. But it turns out that since leaving the EU, Greenland has been so freed of EU red tape and of the destruction of the Common Fisheries Policy, that the average income of the islanders today is higher than those living in Britain, Germany and France. Greenland’s politicians realised that the fisheries policy was ruining their fishing industry. They had the guts to stand up against the all the prophets of doom and let their people vote in a referendum on leaving the European Community, as the EU was then called. On January 1, 1985, it became independent of Brussels – the only country ever to do so.
EU Outlines Bond Restructuring Plan – Creditors of euro-zone countries that face insolvency after 2013 will see their bond holdings restructured—and may be forced to take losses—under a proposal agreed by the leaders of France and Germany, and top European Union officials, according to people familiar with the matter. Finance ministers, meeting Sunday in Brussels to approve an international rescue package for Ireland valued at about €85 billion ($110 billion), will also discuss the proposal. The proposal to make private-sector creditors bear part of the burden of future troubles was agreed earlier Sunday by German Chancellor Angela Merkel, French President Nicolas Sarkozy, EU President Herman Van Rompuy and European Central Bank chief Jean-Claude Trichet, people familiar with the matter said.
EU Ministers Race to Complete Aid Package for Ireland – Ireland’s negotiations over an 85 billion-euro ($113 billion) aid package came down to setting the interest rate it will pay on emergency loans as European finance ministers battled to contain the fiscal crisis. A “staff-level” accord on Ireland’s aid will be endorsed today, European Union Economic and Monetary Commissioner Olli Rehn said today in Brussels. French Finance Minister Christine Lagarde said Ireland’s interest rate is the only “little detail” to be nailed down. With 10-year bond yields averaging over 7.5 percent in Greece, Ireland, Portugal, Spain and Italy on Nov. 26, European leaders are fighting to prevent the spread of Ireland’s fiscal woes from threatening the survival of the 12-year-old euro.
In The Name Of Oil, Ghana Is Already Swimming In A Flood Of Debt – Ghana shall soon be owned by the Asians: Since ExxonMobil’s $4 billion offer for Kosmos Energy’s 23.5% stake in the Jubilee field was rejected last month, Asian national oil companies have been rounding about in Accra, aiming to become GNPC’s financier and operating partner. Kosmos, however, is contemplating a listing of its shares as an alternate way to go ahead with the project. ExxonMobil abandoned its offer on 17 August, opening the way for a GNPC bid backed by the China National Offshore Oil Corporation. Sources at GNPC told Africa-Asia Confidential that the deal would include a $5 billion loan to the GNPC. CNOOC would take a 10% stake, another major oil company 10% and GNPC 3% of Jubilee, which is estimated to hold more than 1.2 billion barrels of oil. CNOOC is in good terms with Accra due to previous promises by the China Development Bank to bankroll Ghana’s oil infrastructure with billions of dollars in preferential loans.
EU finance ministers agree deal on Irish rescue package – The European Union has approved an €85 billion rescue package for Ireland which, if drawn down in its entirety today, would attract an average interest rate of 5.83 per cent. Of this €10 billion will be used to immediately to recapitalise the banks to bring them up to a core tier 1 capital ratio of 12 per cent, with a €25 billion contingency. Further injections of capital for the banks will take place in the first half of 2011, as needed. The remaining €50 billion will be used to meet the budgetary requirements of the State. Ireland has also secured an extra year – until 2015 – to meet its target of reducing its budgetary deficit to 3 per cent.
Irish Cutbacks Pile It on for ‘New Poor’ —A church-run soup kitchen here symbolizes the human cost of Ireland’s crisis: Middle-class homeowners, squeezed by rising debt and falling incomes, line up for food parcels alongside foreign asylum-seekers and the long-term unemployed. As Ireland plans its economic bailout with austerity measures, the number of people living on the streets in Dublin rises. Video courtesy of Reuters. These are Ireland’s "new poor"—ordinary people with houses and jobs laid low by years of austerity, and now facing even tougher times as the government slashes public-sector jobs, raises taxes and cuts social welfare. This week, the Irish government unveiled a new four-year belt-tightening plan to repair public finances broken by recession and the cost of propping up the country’s beleaguered banks. It is a key precondition of the estimated €85 billion bailout Ireland is currently negotiating with the European Union and the International Monetary Fund.