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Thread: Fitch Downgrades Ireland to A+ from AA-

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    Default Fitch Downgrades Ireland to A+ from AA-

    Fitch Downgrades Ireland to 'A+'; Outlook Negative
    >2010-10-06 11:04:30.471 GMT
    >
    >FITCH DOWNGRADES IRELAND TO 'A+'; OUTLOOK NEGATIVE
    >
    >Fitch Ratings-London-06 October 2010: Fitch Ratings has
    >downgraded the Republic of Ireland's (Ireland) Long-term
    >foreign and local currency Issuer Default Ratings (IDRs) to
    >'A+' from 'AA-' respectively. The Outlooks on the Long-term
    >IDRs are Negative. Fitch has simultaneously downgraded
    >Ireland's Short-term foreign currency IDR to 'F1' from 'F1+'.
    >
    >The Euro Area Country Ceiling of 'AAA' remains unchanged. The
    >notes issued by the National Asset Management Agency (NAMA)
    >have also been downgraded to 'A+'
    >from 'AA-' and to 'F1' from 'F1+', in line with the sovereign ratings.
    >
    > >"The downgrade of Ireland reflects the exceptional and
    >greater-than-expected fiscal cost associated with the
    >government's recapitalisation of the Irish banks, especially
    >Anglo Irish Bank," said Chris Pryce, Director in Fitch's
    >Sovereign Group. "The Negative Outlook reflects the
    >uncertainty regarding the timing and strength of economic
    >recovery and medium-term fiscal consolidation effort."
    >
    >Typically a Negative Outlook implies a slightly greater than
    >50% probability of a further downgrade over a 12-24 month
    >horizon. The triggers for a revision of the Outlook to Stable
    >would be evidence of sustained economic recovery and fiscal
    >consolidation. The ratings could be downgraded further if the
    >economy stagnates and broad-based political support for and
    >implementation of budgetary consolidation weakens.
    >
    >Fitch believes that the latest government estimate - announced
    >on 30 September - of the fiscal cost of recapitalising Irish
    >banks and the transfer of assets to NAMA are plausible,
    >particularly if account is taken of the additional EUR5bn
    >estimated for the stressed case. Moreover, the large cash
    >buffer of more than EUR20bn, around EUR14bn of uncommitted
    >funds of the National Pension Reserve Fund (NPRF) as well as
    >ongoing bank funding support from the ECB means that Ireland
    >still retains considerable financial flexibility. Despite the
    >weak performance of the economy, the underlying budgetary
    >position remains in line with the targets set out in the 2010
    >Budget and Fitch expects a further strengthening of the fiscal
    >consolidation effort to be set out by the Minister of Finance
    >in November.
    >
    >On the basis of its central case, the government's total
    >direct bank bailout costs will rise to EUR45bn from the
    >EUR23bn assumed at the time of Fitch's last rating action on 4
    >November 2009. Of this EUR45bn, EUR29.3bn will be on account
    >of Anglo Irish Bank ('BBB-'/RWN), already 100%-owned by the
    >state. The remainder will be spread over the other four Irish
    >banks. In some cases government assistance has been given
    >indirectly by the state-owned NPRF in which case the
    >transactions will show up as a rise in net debt, rather than
    >the more commonly used gross debt measure.
    >
    >General government gross debt (excluding debt issued by NAMA
    >to fund asset transfers from the banks) will rise to 99% of
    >GDP at end-2010 from the 78% previously predicted by the
    >government. This increase is explained by the issuance of
    >promissory notes to re-capitalise Anglo Irish Bank and Irish
    >Nationwide Building Society in 2010 and by a downward revision
    >to the estimated level of nominal GDP for 2010. While the
    >promissory notes have an immediate full impact on the stock of
    >gross debt, their funding cost is spread over a 10-15 year
    >period. Net government debt that takes into account the
    >government's cash buffer and the assets of the NPRF is
    >forecast to be around 76% of GDP by year-end (90% excluding
    >NPRF assets). Moreover, though the cost of bank
    >recapitalisation is much greater than anticipated, the
    >estimated cost of transferring assets to NAMA has consequently
    >fallen to EUR31bn from EUR54bn.
    >NAMA debt is not formally counted as part of government debt
    >(though it is guaranteed by the state). However, it does
    >represent a significant contingent liability. Fitch believes
    >it is reasonable to assume that NAMA will over the long-term
    >break-even given the average 58% discount that has been
    >applied to transferred assets compared with an original
    >forecast of around 30%.
    >
    >The broad general government deficit for 2010 will be
    >equivalent to an unprecedented 32% of GDP. However, in large
    >part this reflects a ruling by the European statistical
    >agency, Eurostat, that the issue of promissory notes by the
    >government to the banks should be treated as 'above the line'
    >budgetary expenditure. Fitch believes stripping out these
    >one-off transactions provides a more appropriate measure of
    >the underlying fiscal position which is now forecast to be a
    >deficit of 11.9% of GDP, close to the initial government
    >forecast for 2010.
    >
    >A key element of strengthening confidence in the
    >sustainability of public finances over the medium-term will be
    >the announcement in early November of a 'four year profile'
    >(2011 to 2014) for the budget including details of the
    >adjustment necessary in terms of tax revenue as well as public
    >expenditure.
    >Broad-based political support would help strengthen the
    >credibility of the medium-term fiscal consolidation effort.
    >
    >The timing and strength of economic recovery is also critical
    >to firmly placing public finances on a sustainable path. A
    >rebalancing of the economy is underway.
    >Ireland is regaining its international competitiveness lost
    >during the 'boom'
    >years and the current account of the balance of payments is
    >expected to move to balance during 2011. Moreover, the drag on
    >growth from the collapse of the construction boom has mostly
    >run its course. Nevertheless, the ongoing distress in the
    >housing and commercial real estate markets, household sector
    >de-leveraging and the uncertainty over the global economic
    >outlook, especially important given Ireland's open and
    >internationally orientated economy, weigh on growth prospects
    >and fiscal outlook.

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    No doubt FF and ministry of finance will blame RTE and Miriam for daring to ask difficult questions. How dare these unpatriotic economic illiterates speak against the dictatorship, can they not see they are upsetting our new masters the bondholders.
    Personally I say burn the bondholders.

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    Default Ireland will have to bleed for a decade.

    Daniel Gros, Brussels Centre for Policy Studies, 28.09.10 Prime Time

    Clearly the guarantee was a mistake.

    Any govt official with a modicum of sense must have known there was a property bubble, and when it burst there would be massive effect on the banks.

    Ireland will have to bleed for a decade.


    Life's a fitch.
    "It is difficult to get a man to understand something when his salary depends upon his not understanding it." - Upton Sinclair.

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    If Ursula hadn't asked that Question in the Ardilaun hotel in Galway?

    ......................It's all TV3's fault.

    .............Eoghan roar at them again.
    Beware of imposter Miss Piggy's on P.ie. There is only one Miss Piggy on P.ie. The others can FROG OFF.

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    Quote Originally Posted by athlonedub View Post
    >NAMA debt is not formally counted as part of government debt
    >(though it is guaranteed by the state). However, it does
    >represent a significant contingent liability. Fitch believes
    >it is reasonable to assume that NAMA will over the long-term
    >break-even given the average 58% discount that has been
    >applied to transferred assets compared with an original
    >forecast of around 30%.
    I find this a worrying assumption, given the Daft report analysis yesterday which suggested land values have already fallen 75%

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    Loks like Fitch were right, even Mr Elderfield isn't sure that loss on banks will stop at 34,000,000,000.
    Blast I forgot that Big Brother Bond Holder is listening. Hope we don't hit A--

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    Quote Originally Posted by jimbo99 View Post
    Loks like Fitch were right, even Mr Elderfield isn't sure that loss on banks will stop at 34,000,000,000.
    Blast I forgot that Big Brother Bond Holder is listening. Hope we don't hit A--
    And credit unions are a "worry".

    DUBLIN, Oct 6 (Reuters) - Ireland's credit unions are systemically underprovisioning against loan losses, the financial regulator warned on Wednesday.

    "We are finding systemically ... underprovisioning in the credit union sector," Matthew Elderfield told a parliamentary committee. "That's a worry to me."

    Elderfield said that the regulator had discovered credit unions were underprovisioning by 40 percent and he intended on dealing with this problem.
    Irish credit unions "a worry" - regulator 00:28 Hours ago
    We have turned the corner.I commend this Budget to the House. Brian Lenihan, 9 December 2009

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    10 year bond price going up again on back of this

  9. #9

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    Junk Status here we come Fitchez......

    No doubt the NAMAtrons will be along to say that this is broadly in line with the adjustment and 4 year plan for recovery.
    “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” - Friedrich A. Hayek

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    Quote Originally Posted by jimbo99 View Post
    Loks like Fitch were right, even Mr Elderfield isn't sure that loss on banks will stop at 34,000,000,000.
    Blast I forgot that Big Brother Bond Holder is listening. Hope we don't hit A--
    But but but

    The Central Bank has, therefore, determined and advised the Bank that in the
    central - or expected loss case - an additional €6.4bn in total capital will be
    needed for the Recovery Bank and Funding Bank structure to continue to meet
    the minimum capital requirements in the coming years consistent with Basel
    rules.
    A total of €22.9bn has already been provided by the State since the bank was
    nationalised early in 2009. This additional capital requirement brings the
    projected total gross cost of the restructuring of Anglo Irish Bank to €29.3bn.

    This additional capital will be provided by increasing the Promissory Note issued
    by the State and by appropriate burden-sharing exclusively by holders of Anglo
    subordinated debt instruments as outlined below.
    http://www.nama.ie/Publications/2010...30Sept2010.pdf
    We have turned the corner.I commend this Budget to the House. Brian Lenihan, 9 December 2009

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