Thursday, June 16, 2011

IMF agrees that Ireland can give senior bondholders a Mohican

Sensational news in the Irish Times, this morning, linked here! The article begins:

MINISTER FOR Finance Michael Noonan says the Government has a plan to impose “substantial” losses on senior bondholders in Anglo Irish Bank and Irish Nationwide Building Society in a significant policy reversal.
He says he has won support for the move from top officials at the International Monetary Fund in Washington, but the difficulty was “what attitude the European Central Bank may take”. He will ask EU authorities to let the Government impose losses on the senior bondholders.

Furthermore, in a meeting with US Treasury Secretary, Timothy Geitner, Noonan also obtained a suggestion of US support for a reduction in interest rates on the first bail out package, being used by France as a lever to get Ireland's Corporation Tax rate raised.

Events in Greece, may make all of this somewhat academic, the burning question might soon quickly become, which former EU nation states might join Greece in returning to their former currencies. Ireland and Portugal seem the most likely candidates, but could Spain, Belgium, Italy and even France not also quickly follow, especially given the affects of the horrendous Mohican Haircuts their own banks are now likely to take.

The following chart of Banks exposures to Greece is from "an article?" in this morning's Daily Telegraph, which lacks any editorial comment, see here!

Country Total lending exposure to Greece (millions) Total Government debt exposure to Greece (millions)
Total of 24 countries 145,783 54,196
European banks 136,317 52,258
Non-European banks 9,466 1,938
France 56,740 14,960
Germany 33,974 22,651
Italy 4,085 2,345
Japan 1,631 432
Spain 974 540
UK 14,060 3,408
US 7,318 1,505
Source: BIS Quarterly Review

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