Iirimaa nõustub abipaketiga

Euroopa Liidu rahandusministrid otsustasid möödunud nädalavahetusel nõuda Iirimaalt pakutud finantsabiga nõustumist. Pühapäeva õhtul Iirimaa valitus seda ka tegi. Paketi detailid loodetakse välja töötada selle kuu lõpuks. Ligikaudu nädal tagasi Iirimaale suundunud Euroopa Komisjoni, Euroopa Keskpanga ja Rahvusvahelise Valuutafondi missioonid töötavad hetkel peamiselt kahel suunal: 1) hindavad Iirimaa pangandussüsteemi riske ja võimalikku finantseerimisvajadust ja 2) töötavad välja eelarvepoliitilisi meetmeid riigi fiskaaltasakaalu saavutamiseks. Meedia hinnangul võib abipekti suurus jääda vahemikku 80-90 miljardit eurot, millele lisanduvad Rootsi ja Suur-Britannia poolt pakutavad bilateraalsed laenud. Abipaketti finantseeritakse läbi vastloodud Euroopa finantsstabiilsuse mehhanismi (European Financial Stabilization Mechanism) ja Euroopa finantsstabiilsusagentuuri (European Financial Stability Facility). Järgneb investeerimispanga Barclays Capital analüütikute arvamus värskest Iiri abipaketist ja selle võimalikust mõjust riigi ja pangandussektori finantsstabiilsusele.

EU ministers agree to request from Ireland            

EU finance ministers have agreed to a request from Ireland for financial aid. The announcement on the size of the package and the conditionality is expected before the end of the month. The EC, ECB and IMF mission is working with the Irish authorities on two main issues: (1) assessing the condition of the banking system and the size the required financial help, and (2) on the types of fiscal measures and size of fiscal adjustment. The international and local press (FT, Bloomberg, the Irish Times, to name a few) reports that the size of the assistance could be EUR80-90bn (in line with our views, see below) and that the UK and Sweden are likely to participate with bilateral loans.

On our estimates (see Euro Themes: An EU/IMF programme could end the Irish crisis, 19 November 2010), a programme could provide a buffer against both expected and unexpected losses in banks (c.EUR22-37bn, on our calculations) and provide funding to the sovereign through 2013 (c.EUR63bn, which the government may not have to tap fully if sovereign spreads compress sufficiently).

We think the programme would work because Ireland is solvent. Under the 2010-14 fiscal consolidation plan (EUR15bn), we estimate that the public debt-to-GDP ratio would be on a downward trajectory, even after adding in EUR22bn from future recapitalisation expenditures in non-NAMA portfolios. In the event of additional losses in NAMA portfolios (beyond the 55% haircut already imposed upfront), which we believe are unlikely, public debt dynamics would also stabilise, unless the stress scenario is accompanied by very low medium-term economic growth numbers.

In our view, to a large extent, the Irish government has deployed the right economic and financial policies. We would expect any EU-IMF programme for Ireland not to include a heavy structural reform agenda as in Greece. While the programme would likely include some fiscal revenue and expenditure targets, in our view corporate income tax should not be raised at this juncture to avoid a negative impact on economic growth (although this is likely to be thorny issue, which may be decided on political grounds).

We believe that a programme with fiscal measures worth of (at least) EUR15bn can only be achieved if it is broad-based (details on the specific fiscal measures are expected before end of the month). To make the fiscal programme broad-based (which would probably make it more appealing to parliament on 7 December 2010), we think the key expenditure measures should include the following items: 1) further cuts in the public wage bill: 2) current and capital expenditures, including infrastructure expenditures; and 3) social benefits. On the revenue side, we believe: 1) personal income tax should include a widening of bands consistent with a drop in wages and the general price level; 2) the favourable fiscal treatment of pension contributions should be reduced; and 3) property taxes should also be introduced over the medium term. In our view, corporate income tax should not be raised at this juncture to avoid a negative impact on economic growth.

In addition to fiscal targets, the programme would likely include conditionality on the banking sector side, which we think would be at the core of the EU-IMF programme. Some of the key elements would likely focus on bank supervisory and regulatory issues. We believe the key factors outlined below would help to strengthen financial stability:

1) The establishment of a new bank resolution regime.

2) Extension of the government guarantee programme, so long as financial stability remains a concern, possibly by a few more years rather than a few months (currently, it is in place only until mid 2011).

3) The establishment of an adequately-funded safety net for bank deposits.

4) Injection of sufficient capital into viable but undercapitalized banks, with the objective to reassure depositors and financial markets of the sufficiency of buffers to absorb additional unexpected losses, which would likely enable banks to tap international capital markets at reasonable funding rates in the medium/long term.

5) Prompt resolution of banks that are deemed nonviable, potentially, through mergers and acquisition, purchase and assumption, or liquidation.

6) In nationalized banks, a pre-condition for a further government capital injection may be a reneging of obligations due to both subordinated debt and common equity holders. Unsecured debt holders in nonviable banks may be restructured, although such a scenario would likely require additional regulatory changes.


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