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Thread: Interest on the Bank Debt Accoutns for 1.6bn Annual Deficit

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    Default Interest on the Bank Debt Accoutns for 1.6bn Annual Deficit

    Enumerated cost of rescuing the banks and the on going costs of servicing this debt in terms of the fiscal deficit has been revealed.

    (Bare in mind the fiscal adjustment for this year is circa 2bn).

    The annual cost of servicing the debt associated with the financial sector bailout in Ireland in 2008 is estimated at about €1.6 billion, according to figures provided by Minister for Finance Michael Noonan.

    This is from an expected cost of €8 billion to service Ireland’s sizeable national debt this year.
    Bank bailout debt costing State

    Outstanding questions are:


    1. What happens to the rebated interest once the CB ships on the Government bonds used to replace the Anglo promissory notes?
    2. What now of Ireland's 'special case' and what are the chances of having some/all of this debt being repudiated/renegotiated?
    The love of equality in a democracy, limits ambition to the sole desire, to the sole happiness, of doing greater services to our country than the rest of our fellow citizens - Montesquieu

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    The State budget is in trouble on two fronts. As you say, it is stretched beyond breaking by excess debt taken on for private benefit rather than public. But it is also still too close to bubble era spending otherwise afaics.

    Most people (including me) tend to focus only on one of the two fronts. That would be a mistake.
    "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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    STFU, you left-wing, money-tree loving kn0b. You have been repeatedly told by certain posters around here, that the cost of bailing out the banks has been negligible and that having banking debt written off would have no impact on our budgetary difficulties.

    Get with the programme.
    I have no money, but I love my life.

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    Quote Originally Posted by Sucker Punch View Post
    Enumerated cost of rescuing the banks and the on going costs of servicing this debt in terms of the fiscal deficit has been revealed.

    (Bare in mind the fiscal adjustment for this year is circa 2bn).



    Bank bailout debt costing State

    Outstanding questions are:


    1. What happens to the rebated interest once the CB ships on the Government bonds used to replace the Anglo promissory notes?
    2. What now of Ireland's 'special case' and what are the chances of having some/all of this debt being repudiated/renegotiated?

    That's the cost they are admitting to and plays with the whole "the bank debt is not the problem" spin that various sections have been spouting the last few years.

    This is based on 41 billion of debt being attributable to bank debt but the cost of the bail out was 64.1 billion so it is like the other 23.1 billion was free money that has not no cost or loss of income to the state.

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    Quote Originally Posted by Sucker Punch View Post
    Enumerated cost of rescuing the banks and the on going costs of servicing this debt in terms of the fiscal deficit has been revealed.

    (Bare in mind the fiscal adjustment for this year is circa 2bn).

    Bank bailout debt costing State

    Outstanding questions are:


    1. What happens to the rebated interest once the CB ships on the Government bonds used to replace the Anglo promissory notes?
    2. What now of Ireland's 'special case' and what are the chances of having some/all of this debt being repudiated/renegotiated?
    1. Once the bonds are sold the interest will be paid to whoever holds the bonds. At the moment the interest is paid to the Central Bank so while the total outgoing might be €1.6bn a big chunk of that is paid to the Central Bank which just cycles it back to the government. The net cost is less than €1.6bn.

    2. No idea.

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    Quote Originally Posted by Taxi Driver View Post
    1. Once the bonds are sold the interest will be paid to whoever holds the bonds. At the moment the interest is paid to the Central Bank so while the total outgoing might be €1.6bn a big chunk of that is paid to the Central Bank which just cycles it back to the government. The net cost is less than €1.6bn.

    2. No idea.

    TD, at the moment, does the CB 'destroy' that money?
    I have no money, but I love my life.

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    Quote Originally Posted by He3 View Post
    The State budget is in trouble on two fronts. As you say, it is stretched beyond breaking by excess debt taken on for private benefit rather than public. But it is also still too close to bubble era spending otherwise afaics.

    Most people (including me) tend to focus only on one of the two fronts. That would be a mistake.
    True enough,

    This is the first instance in the media that I am aware of that puts a figure on the banking crisis in terms of the fiscal deficit. To date the narrative has solely rested on the fact that the State is in deficit due to a shortfall in revenues. Most people assume that this is due to taxation not equaling expenditure, however this is wrong. The entirety of the fiscal deficit is made up of interest (of which there are several components) on the nation debt.
    The love of equality in a democracy, limits ambition to the sole desire, to the sole happiness, of doing greater services to our country than the rest of our fellow citizens - Montesquieu

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    Quote Originally Posted by Cdebru View Post
    That's the cost they are admitting to and plays with the whole "the bank debt is not the problem" spin that various sections have been spouting the last few years.

    This is based on 41 billion of debt being attributable to bank debt but the cost of the bail out was 64.1 billion so it is like the other 23.1 billion was free money that has not no cost or loss of income to the state.
    There have also been revenues from the banks - fees, interest, dividends etc. - and asset sales - Irish Life, contingent capital notes, equity in BOI etc.

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    Quote Originally Posted by ShoutingIsLeadership View Post
    TD, at the moment, does the CB 'destroy' that money?
    When the Central Bank sells the bonds it will obviously receive money. The Central Bank will use that to repay money that in essence it borrowed from itself. Central Banks can borrow from themselves as they can create money. The Central Bank will take the money from these sales and cancel the money that was created in the first place. So yes the Central Bank is going to 'destroy' that money.

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    Quote Originally Posted by Taxi Driver View Post
    1. Once the bonds are sold the interest will be paid to whoever holds the bonds. At the moment the interest is paid to the Central Bank so while the total outgoing might be €1.6bn a big chunk of that is paid to the Central Bank which just cycles it back to the government. The net cost is less than €1.6bn.

    2. No idea.
    So when the CB moves the bonds on, it's safe to say that the interest no longer accrues to the state, ergo the 1.6bn figure stands?
    The love of equality in a democracy, limits ambition to the sole desire, to the sole happiness, of doing greater services to our country than the rest of our fellow citizens - Montesquieu

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