Research by an economist at UCC -- University College Cork - - shows that more than half the value of outstanding Irish bank bonds is held by investors in the Republic of Ireland.
Seamus Coffey says on his economics blog that by April 2010 there was €111bn worth of bank bonds (€6bn more than in September 2008 when the State banking guarantee was issued) in issue, but by the end of 2010 this had fallen to €64bn - - a drop of over €47bn. Most of this money was fully repaid.
The economist says the biggest drop has occurred for bondholders from the
rest of the world which has dropped (or been repaid) by €26bn since the
guarantee was introduced and is now down to €20bn. As late as last August there
were €41bn of bonds held by rest of the world residents but there was a
reduction of €17bn in September.
In a reference to the campaign to get bondholders to take big 'haircuts' or discounts, Coffey asks: Are we going to burn ourselves?
The economist says since the guarantee holdings of Irish bank bonds by other
Eurozone residents has fallen from €17bn to €10bn. This would hardly leave a
ripple on the European banking system. This would similarly apply to the €20.5bn
held by residents of the rest of the world. Non-payment of the €33bn owed to
Irish residents would be far more significant.
Journalists such as Fintan O'Toole and David McWilliams have called for a referendum on the issue.
I said in response to the Lucey article, that before discussing our problems with Angela Merkel post March 9th, or even with David Cameron, we should surely start with the facts.
I wrote in December that university academics can advocate massive debt restructuring across Europe, while retaining the "legitimate expectation" of added pension years which has resulted in a State bailout of their pension funds, while the sought after bondholder 'haircuts' would hit private sector pensions.
In Denmark, which is not in the Eurozone, the collapse of Amagerbanken, a small Danish lender, showed that Copenhagen “is now far less willing to continue to support bank creditors at the expense of taxpayers” than just a few months ago, according to Moody's, the ratings agency.
Danske Bank, the owners of National Irish Bank, and four other Danish lenders have had their credit ratings cut.
Senior creditors and some depositors face losing about 41% of assets.
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