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Thread: Irish Bank Borrowings surges by €24 Billion to €119 Billion in September

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    Default Irish Bank Borrowings surges by €24 Billion to €119 Billion in September

    Remember the €25 Billion Irish banks had to pay in September? Well €24 Billion of that came form the ECB, who how represent 9% of all Irish banks liabilities.


    One of the most bullish stories coming out of Europe last month was that Ireland, despite a drunk and disorderly finmin, and banks either increasingly more nationalized or on the verge of full scale restructuring, managed to fund its €25 billion in sovereign debt maturities. Of course, the European media took that as a sign of strength and from that point on it was off to the races for the EUR. Yet it appears the celebration was just a little premature. We learn today that virtually all of the maturities were funded indirectly by the ECB: in other words the monetization shell game so well mastered by the Fed is now being conducted by European banks everywhere. In September Irish bank borrowings surged from €95 billion to €119 billion, a €24 billion increase, and virtually a euro-for-euro match for all the new Treasury issuance. And since no demented monetization ploy goes unpunished, the action raised Irish ECB borrowings to 9% of liabilities, the same as Portuguese banks. As for the balance, as readers will recall we highlighted that last week the ECB purchased €1.4 billion of government bonds directly, therefore confirming that every single Irish bond auction would have been a 100% failure had it not been for Jean Claude Trichet's direct and indirect monetization scheme. But yes, somehow the euro is considered more viable than the dollar.

    One day Germany will say "monetize away, Weimar be damned." That day will be very memorable for the dollar which has now become the funding currency of choice. That is the day when Europe will officially retaliate against endless US FX aggression, and the currency war will be really on.
    How The ECB Directly And Indirectly Monetized All Irish September Treasury Auctions | zero hedge
    “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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    Politics.ie Member HarshBuzz's Avatar
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    and people ask dumb questions like 'how are we beholden to the EU?'

    hilarious comment underneath that article:

    Ireland isn't even a real country, so their problems don't count.
    “'retail deposit flight, I don't see that as a great danger. Ireland is an island” - Brian Lenihan - to hundreds of international investors

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    Quote Originally Posted by HarshBuzz View Post
    and people ask dumb questions like 'how are we beholden to the EU?'

    hilarious comment underneath that article:
    Part of the beauty of that website is some of the hilarious gallows humour comments that the posters leave.

    It is true what they say that Laughter is the best medicine.
    “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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    But but, didnt they promise us Jobs and recovery?, and dont forget we have turned several corners!

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    Politics.ie Member HarshBuzz's Avatar
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    Quote Originally Posted by Bi ciuin View Post
    But but, didnt they promise us Jobs and recovery?, and dont forget we have turned several corners!
    what are you on about?
    “'retail deposit flight, I don't see that as a great danger. Ireland is an island” - Brian Lenihan - to hundreds of international investors

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    The Irish Economy

    This is from Karl Whelan:

    Now, this weekend, the ECB has issued a statement that would be barely understandable to most people but that the Financial Times have interpreted, probably correctly and based on briefings, as opening up the possibility of taking action against the “addict banks.”

    Since the Irish banks are submitting NAMA bonds as collateral to the ECB, as well as securitised loan books formed from turning large amounts of Irish loans into marketable securities, it could be argued that they fit the bill for being counterparties who are offering up collateral whose credit risk is highly correlated with the credit risk of the counterparty itself. As such, they could be forced to reduce their borrowings from ECB if it is decided to exclude some of the collateral that they are offering up to get access to ECB funds.

    ----------

    This may just be tough talk from the ECB. But if it’s not, then it raises the very serious question of what exactly needs to be done to allow the Irish banks to access funds on the international bond markets.
    The ECB taking action against our "addict banks" would have consequences for our bond yields, and could trigger a call on the emergency rescue fund.

    However removing the credit line from one addict and giving it directly to the governmental credit crack heads wouldn't in itself solve our problems.

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    Politics.ie Member HarshBuzz's Avatar
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    I pointed this up in other threads last week

    There is scope for Credit Crunch II to hit the Irish banks very soon. As they get downgraded to near-junk status, no other banks will fund them (or buy their debt). I'm already aware of banks who have been told by their credit committees to pull their bilateral funding lines with all Irish FIs.
    This leaves the Irish banks almost totally reliant on the ECB for funding so when a step like the one above is announced, this will have an immediately retrograde effect on the Irish banks' funding positions.

    Translation; the Irish banks just got even more screwed, if that were possible. That line in the sand that St Lendahand thought he drew two weeks ago just got washed away by the tide.

    Next step; general retail flight of deposits (you know that thing Lendahand assured us couldn't happen 'because Ireland is an island')
    “'retail deposit flight, I don't see that as a great danger. Ireland is an island” - Brian Lenihan - to hundreds of international investors

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    Default The ECB must force more budget cuts or they will be forced to lend

    The ECB must force more budget cuts or they will be forced to lend more and more to the Irish Banks

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    Quote Originally Posted by HarshBuzz View Post
    and people ask dumb questions like 'how are we beholden to the EU?'

    hilarious comment underneath that article:
    I presume this 24 billion is guaranteed by the Irish state? So it is not really so much a loan, as a further payment on the purchase of the country.

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    Politics.ie Member HarshBuzz's Avatar
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    of course as with all 'Irish bank' gross numbers, you need to disaggregate between actual Irish banks and IFSC operations

    According to Glas, it breaks down thusly:

    4 'operating banks' ; 42bn
    Anglo\INBS: 26bn
    IFSC ops: the rest i.e. 51bn
    “'retail deposit flight, I don't see that as a great danger. Ireland is an island” - Brian Lenihan - to hundreds of international investors

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