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.
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.
Irish residents have seen their holdings of Irish bank bonds rise from €38bn at
the time of the guarantee to €45bn in April 2010. Since then, these too have
fallen and were down to €33bn by December. The proportion of bond held by Irish
residents has been rising since the guarantee was introduced and now stands at
just over 50%.
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.
Private sector workers whose pension funds are already under water would be hit
but last Monday, Trinity College economist, Brain Lucey, who has a pay-as-you-go
public pension, advocated a unilateral default if necessary
in an article in The Irish Times.
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.
Irish debt haircuts would be welcome; Stupid to start immediate war now with
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
Senior creditors and some depositors face losing about 41% of assets.