Chaos in Ireland

Dear Reader,

This week I will be updating you on what has been happening in Ireland in the last couple of days. Ireland's momentary situation is extremely complicated since on one hand the country is in serious need of help yet on the other hand not everyone in Ireland wants to accept this help. Discussions about Ireland's future were held on monday between Brian Cowen, which is the current Irish Prime Minister, the European Union and the International Monetary Fund. The three parties agreed to negotiate a bail-out package for the country of €80 - €90 billion. 

http://www.dailymail.co.uk/news/article-1331979/IRELAND-BAILOUT-Cameron-Osborne-face-fury-Britains-7bn-loan.html

The bail-out package has been divided in three parts. Britain will give Ireland a £7 billion loan the rest of the package plan will be divided between the European Union (who will give two thirds) and the International Monetary Fund (who will give one third). This bail-out package has caused much controversy in the country since many people including Michael Lowry (one of two independents who currently prop up the country) and Jackie Healy Rae (independent for Kerry South) who said that he would "no longer support this government" (Brown, J. 2010). Eamon Gilore, who is the "leader of the opposition labour party association Dail, the Irish parliament" (Brown, J. 2010) went as far as saying that there should be an immediate general election. 

http://www.dailymail.co.uk/news/article-1331979/IRELAND-BAILOUT-Cameron-Osborne-face-fury-Britains-7bn-loan.html

Brian Cowen refuses to resign even though there have been protests all over the country and some protestors even broke in to his office on Monday. He said that he will call a general election in the New Year. Cowen's four year economic plan includes €10 billion public spending cuts and €5 billion tax raise.  The people in Ireland are obviously not very happy about this decision and the country is now not only highly indebted but also at war with itself. To add on to the dramatic situation, Moody's credit rating agency has also announced that it would downgrade Ireland saying that “a multi-notch downgrade, leaving the rating of the Republic (of Ireland) still within the investment-grade category, is now the most likely outcome of our review of the sovereign credit” (Brown, J. 2010). 

http://www.dailymail.co.uk/news/article-1331979/IRELAND-BAILOUT-Cameron-Osborne-face-fury-Britains-7bn-loan.html

The FTSE also fell by 0.5% today as well as the Euro with constant fears that Portugal and Spain will follow Greece's and now Ireland's footsteps. As I stated last week, the European Union might not be strong enough to carry such a load on their shoulders and bail-out every country that needs help. I believe that first of all Ireland needs to figure out its governmental problems and the problems that they have within the country because even the billion-euro bail-out plan will not help them resolve their internal issues. Second of all I think that the European Union should over-think what they have been doing for the last couple of years, the fact that they have been working more on "expansion" rather than making sure that the member countries were actually performing well. I feel as though the European Union is like a deck of cards and with one card taken away (Greece could be seen as this card), the whole deck is falling apart. 

Have a good week,

The Financialista 

Financial Times:

Brown, John Murray (2010) "Ireland plunged into political Turmoil" Date Viewed: 22nd November, 2010. Available online at: 

http://www.ft.com/cms/s/0/63dd1d9a-f634-11df-a313-00144feab49a.html?ftcamp=rss#axzz1629tk200

FT Reporters (2010) "Euro rally fades as contagion fears grip investors" Date Viewed: 22nd November, 2010. Available online at:

http://www.ft.com/cms/s/0/cedcc27c-f5f2-11df-99d6-00144feab49a.html#axzz162AW0tyo

Images:

Daily Mail (2010) "Irish PM refuses to stand down over financial crisis - but WILL call an election in the New Year" Date Viewed: 22nd November, 2010. Available online at:

http://www.dailymail.co.uk/news/article-1331979/IRELAND-BAILOUT-Cameron-Osborne-face-fury-Britains-7bn-loan.html

Bailing out Ireland

Dear Reader,

This week I will be writing about one of the most talked about topics of the week: the possible bail-out of the Irish Republic. The main articles I read this week were "Debt crisis team heads for Dublin" from the Financial Times and "EU begins Irish Republic bail-out talks" from the BBC News. As many of you may already know, Ireland is facing a recession at the moment, with unemployment rising and housing prices falling. Ireland has also been doing quite poorly with its governments bonds, which are usually regarded as safe long term investments, but in Ireland's case, with the market prices falling, the yields have been pushed up. The yield on a 10-year Irish bond reached around 9%, which is very high when compared to the UK's government 3% (Greece's yield is around 11%). Ireland now has to decide if they want to ask for help from the Eurozone and be bailed out as happened to Greece. When Greek bonds reached levels which made it impossible to make money from the bond market they turned to the International Monetary Fund and the European Union. 

http://www.reuters.com/resources/r/?m=02&d=20101116&t=2&i=250299040&w=460&fh=&fw=&ll=&pl=&r=2010-11-16T090914Z_01_BTRE6AD1SMB00_RTROPTP_0_IRELAND-POLL

The EU finance commissioner Olli Rehn said that they were already making bail out plans to help Ireland if the country decided to ask for help and that they were now much better prepared since a bail-out had already been done for Greece earlier this year and they know what to expect. The UK is ready to help Ireland for obvious reasons as British Chancellor George Osborne said "Ireland is our closest neighbour and it's in Britain's national interest that the Irish economy is successful and we have a stable banking system"(Niels, B. 2010). Some reports say that the UK is willing to give billions of pounds of direct loans to Ireland, this is because the UK's finance is linked with Ireland's finance since many  of the   UK banks have strong exposure in Ireland. BBC News also said that the Irish banking system needs to be "restructured" and that the Irish government will have to have a consultation with the Commission, the European Central Bank and the International Monetary Fund in order to see where the problems are and what needs to be fixed. 

http://www.guardian.co.uk/business/2010/nov/17/ireland-bailout-debt-crisis

The Financial Times revealed that a team of EU and International Monetary Fund will visit Ireland on Thursday to talk about this debt crisis, many professionals see this as a confirmation that Ireland will ask for the bail-out very soon. 

In my opinion there are two major problems with the crisis in Ireland. First of all, I believe Ireland is an extremely proud country and they will not be very happy if they have to accept help from the European Union. There have been many talks about Ireland in 2008 when they said no to the Lisbon treaty and then finally accepted it in 2009 (which seemed slightly forced because many people voted yes so that Ireland would not be blamed for the end of the Lisbon Treaty). The second problem I believe is that we cannot keep bailing out every country that has problems, yes, we should all be a big European community but I think that by bailing out first Greece, now possibly Ireland and who knows how many countries will follow, the European Union is simply hiding the mistakes the countries have made and is not really tackling the core problems. Will these countries ever be able to pay off these debts? I doubt it.

Have a good week,

The Financialista 

BBC:
Blythe, Niels (2010) "Q&A Irish Bond Crisis" Date Viewed: 16th November, 2010. Available online at:
http://www.bbc.co.uk/news/business-11743952


News Business (2010) "EU plays down Irish Republic bail-out talks" Date Viewed: 16th November, 2010. Available online at:
http://www.bbc.co.uk/news/business-11771574


Financial Times:
Spiegel, Peter (2010) "Debt crisis team heads for Dublin" Date Viewed: 16th November, 2010. Available online at:
http://www.ft.com/cms/s/0/54c2f752-f171-11df-8609-00144feab49a.html#axzz163JTRtg0

The Guardian:
Wearden, Graeme (2010) "Ireland's Debt crisis -today as it happened" Date Viewed: 16th November, 2010. Available online at:
http://www.guardian.co.uk/business/2010/nov/17/ireland-bailout-debt-crisis

Images:
Reuters (2010) Date Viewed: 16th November, 2010. Available online at:
http://www.reuters.com/resources/r/?m=02&d=20101116&t=2&i=250299040&w=460&fh=&fw=&ll=&pl=&r=2010-11-16T090914Z_01_BTRE6AD1SMB00_RTROPTP_0_IRELAND-POLL

Wearden, Graeme (2010) "Ireland's Debt crisis -today as it happened" Date Viewed: 16th November, 2010. Available online at:

http://www.guardian.co.uk/business/2010/nov/17/ireland-bailout-debt-crisis

Real Estate Decline

Dear Reader,

This week while reading the Financial Times I noticed an article that caught my attention. The article is entitled "Decline in house prices gathers pace". This article really interested me since I enjoy reading and keeping updated with real estate. It is quite interesting to see how the real estate market has been doing since the 2007 financial crisis. 

As we all know, many countries in the world including the United Kingdom, the United States and many countries in Asia and the Middle East saw falling real estate prices after 2007 which caused many people to lose a lot of money and many insecurities around the world. The real estate prices in the United Kingdom saw a rise over the past two years yet according to the article they are again starting to fall. many real estate professionals reported falling prices in the month of October. A survey conducted by the Royal Institute for Chartered Surveyors shows that 55% of the people surveyed believe that they have seen a downturn and falling prices while only 4% reported about rising prices.

http://www.foreclosuredeals.com/images/house-for-sale.jpg

Not only did the real estate prices fall in October, it was also the first time in eight months that fewer homeowners put their home on the market, people do not think that it is the right time to sell now. According to the article people are getting scared, and they do not feel safe about buying or selling a house anymore. On a more positive note though, the article also mentions that the prices will most probably not drop any further since fewer houses are being built and there is less supply. 

After the financial crisis people have become extremely skeptical about buying a home and the weakness of mortgage finance availability is making it much harder to buy homes, particularly for first time buyers. Renting has become much more popular and "safe" since the risks are much lower and people have to think of less issues and problems to deal with. 

I also found it quite interesting that at the end of the article, the author also mentions that according to the British Retail Consortium there has been a 2.4% rise in total sales this month, which is quite low when compared to the 5.9% rise seen in the same month last year. The total food sales on the other hand rose by 4% in the past 3 months compared with last year.

All this data shows that people have become a lot more conservative with the way they spend their money. The financial crisis affected almost everyone, and 3 years after the start of it, people are still suffering the consequences. In the United Kingdom much less money is going into clothing and luxury items while more money is being spent on food. People need an incentive to start buying again and keep the economy running. I believe that it will take quite a long time for people to gain that trust again since they have realized that it is better to save in case hard times come again, as Benjamin Franklin said "a penny saved is a dollar earned". 

Have a good week,

The Financialista 

Financial Times:
Pimlott, Daniel (2010) "Decline in house prices gathers pace" Date Viewed: 10th November, 2010. Available online at:

http://www.ft.com/cms/s/0/abba118c-eb70-11df-b482-00144feab49a.html

Images:
Foreclosure Deals (2010) Date Viewed: 10th November, 2010. Available online at:

http://www.foreclosuredeals.com/images/house-for-sale.jpg