Posted on 01/16/2011 10:54:40 PM PST by bruinbirdman
Irish banks are running out of collateral they can use to borrow from the European Central Bank, turning instead for emergency support from their own central bank on an unprecedented scale.
The latest data shows that Anglo Irish Bank and other lenders had borrowed €51bn (£43bn) from the Irish central bank by the end of December, under an obscure progamme listed in the balance sheet as "other assets".
This comes on top of €132bn in loans from the ECB itself, the figure normally tracked by analysts and itself 24pc of all ECB lending.
"This is a horror story: it shows the cataclysmic condition of the Irish banking system," said Tim Congdon from International Monetary Research. "The banks have borrowed €183bn in total, or 110pc of Irish GDP. They have burned through all their capital and a lot of their deposits as well. This is going to end up on the national debt".
The actions of the Irish central bank are authorised by Frankfurt, but fall into a grey area of monetary policy since they appear to involve creation of money outside the normal control of the ECB's governing council.
The use of Ireland's emergency liquidity assistance programme (ELA) raises further questions since the quality of collateral is unacceptable for normal ECB operations. The volume of borrowing has begun to level off after a surge in November.
Separately, the Spanish media reported that a mission from the International Monetary Fund was arriving in Spain this week to analyse the country's debt sustainability and may discuss a `flexible credit line', akin to precautionary overdraft facilities offered to Mexico and Poland.
The IMF's
(Excerpt) Read more at telegraph.co.uk ...
Kinda like the US buying it’s own assets
Ping.
the Euro is doomed
(Thanks DuncanWaring for the ping!)
If they can’t borrow it they’ll print it following in the Bernanke’s foot steps.
Central Bank steps up its cash support to Irish banks financed by institution printing own money
Those poor people all this is due to having to bail out the banks.
Ireland’s Fate Tied to Doomed Banks
Up to €50 billion—nearly $50,000 for every household in the Emerald Isle.
But unlike Greece, Ireland is a relatively wealthy country, with per capita GDP of nearly $38,000. That’s 21 percent higher than per capita GDP in Greece, and in the top third for European countries. Low corporate tax rates and a skilled workforce have made Ireland a haven for some of the world’s biggest companies. And its public debt, about 65 percent of GDP, is far below Greece’s crushing load, which is 126 percent of GDP. Ireland’s debt levels are even lower than those in France, Germany and the United Kingdom.
A failed banking sector that Ireland’s government can no longer rescue on its own. Ireland is in the midst of a real estate bust that could trump even the ruinous downturns that turned parts of southern California and Nevada into suburban ghost towns, with home-grown banks stoking it all. Now, those banks are trying to manage catastrophic losses. The Irish government has effectively nationalized the nation’s biggest banks by guaranteeing their debt, which would be akin to the U.S. government taking over Citigroup, Bank of America, J.P. Morgan Chase and Wells Fargo.
That means the Irish government is also on the hook for the losses those banks endure—which have risen far beyond initial estimates, and may have a lot farther to go. So far, the Irish government is obligated to cover losses amounting to 175 percent of Irish GDP
http://finance.yahoo.com/news/Why-the-Irish-Crisis-is-Going-usnews-4028366968.html?x=0
I wonder how you say “Quantitative Easing” in Gaelic?
"More whisky"
-—The actions of the Irish central bank are authorised by Frankfurt, but fall into a *grey area* of monetary policy since they appear to involve creation of money outside the normal control of the ECB’s governing council.-—
Ah yes, the old “grey area” trick. Works every time the liberals need cover when doing what they know they’re not supposed to do.
How does one ease quantitatively when one does not own a Euro printing press? Zay arh at da mercy of da Chermans...
Passively profiting from other's productive work has a very slim margin, me thinks.
The problem starts with governments trying to provide services without proper revenue.
By far, the largest borrowers are governments. The lenders demand market returns on their capital (there are alternatives). That demand is at odds with a government that can print its own money.
yitbos
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