GRE Greece ETF Update and Charting the PIIGS Main Equity Indices [UPDATE]

The GRE Greece ETF is now trading at below 1.00€ (low of 0.985€) meaning that from the peak of about 14.00€, the drop has been more than 90%. One could wonder how much lower it can go.

Here's the details about the ETF, as captured from the French prospectus of the fund (click for larger image):

Conclusion: there's still room for further drop, as the banking sector still represents 33% of the index. 

[Update: initiated a small position on the ETF, bought at 0.985€ per share]

My friend SS has been kind enough to provide me on demand many charts and market data, and here's what he sent me on request yesternight: the charts of the main index of each of the PIIGS countries:

Greece: Top at 5346, currently trading at 553. This is a drop of 90%from peak. And it's a stock index of the 20 largest Greek capitalizations. 

Portugal: Top at 13729, currently trading at 4870. This is a drop of 65%. Same comment, this is the an index made of the largest companies in Portugal and my guess is that we're far from the bottom.

Ireland: Top at 10,000 bottom at 2,000 (drop of 80%) currently trading at 3,000. This is still a drop of 70% and my guess is that we're far from the bottom. 

Spain: Top at 16,000 currently trading at 6,500. This is a drop of 65%. My guess is that we're far from the bottom

Italy: Top of 44,000 currently trading at 13,000. This is a drop of 70%. And my guess is that we're far from the bottom

The Rise of the Fascist European Union

Since the markets topped back in 2007-2008, democracy has been losing ground everywhere in the Western world, but in Europe it's been probably worse than anywhere else.

Don't get me wrong, the most fascist country for now is the US, and they have been on the track since the late 1990s. But the US fascists have followed the the rule of law: law makers and government officials have embraced those ideas, and voted them through, and the Supreme Court has been basically shut down. In Europe, it's lawlessness and lies that are bringing the fascist ideas and actions, in complete disregard of the rule of law and democracy.

Here's a short list of the illegal and anti-democratic actions so far:

• Ireland: Irish people forced to bailout the European banks
• Greece: Prime Minister, democratically elected replaced by a non-elected Prime Minister
• Italy: Mario Monti, non-elected technocrat replaced the democratically elected Berlusconi as Prime Minister.
• ECB: buying sovereign bonds in complete illegality

Well, things have made another nasty and dangerous turn with the new "Greek Bailout" plan, which is nothing but a bailout of the French and German banks who are creditors to Greece, and a complete pillage of Greece:

• Greece Needs New Constitutional Provision Imposed by the Troika

Eurogroup Statement of conditions placed on Greece:

The Eurogroup also welcomes Greece's intention to put in place a mechanism that allows better tracing and monitoring of the official borrowing and internally-generated funds destined to service Greece's debt by, under monitoring of the troika, paying an amount corresponding to the coming quarter's debt service directly to a segregated account of Greece's paying agent.

Finally, the Eurogroup in this context welcomes the intention of the Greek authorities to introduce over the next two months in the Greek legal framework a provision ensuring that priority is granted to debt servicing payments. This provision will be introduced in the Greek constitution as soon as possible. ....

• Troika Demands 38 New Changes in Greek Tax, Spending and Wage Policies in Next 6 Days

 And

• Growing Air of Concern in Greece Over New Bailout.

In the fine print of the 400-plus-page document — which Parliament members had a weekend to read and sign — Greece relinquished fundamental parts of its sovereignty to its foreign lenders, the European Commission, the European Central Bank and the International Monetary Fund.

“This is the first time ever that a European and probably an O.E.C.D. state abdicates its rights of immunity over all its assets to its lenders,” said Louka Katseli, an independent member of Parliament who previously represented the Socialist Party, using the abbreviation for the Organization for Economic Cooperation and Development. She was one of several independents who joined 43 lawmakers from the two largest parties in voting against the loan agreement.

Ms. Katseli, an economist who was labor minister in the government of George Papandreou until she left in a cabinet reshuffle last June, was also upset that Greece’s lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal, and that future bonds issued will be governed by English law and in Luxembourg courts, conditions more favorable to creditors.

In the meantime, the UE officials are still asking for more lawlessness:

Feb. 10 (Bloomberg) -- The European Central Bank should participate in efforts to reduce Greece’s debt, said Luxembourg’s Jean-Claude Juncker, who leads the group of euro- area finance ministers.

“The ECB must look, within the framework of its independence, what sort of contribution it can make to the debt reduction of Greece,” Juncker told reporters in Brussels today. “I hope it will find something.”

And the ECB is obliging — see also Japan and the Myth of Independent Central Banks:

Draghi’s $158 Billion Free Lunch to Boost EU Bank Profits 

Feb. 13 (Bloomberg) -- Banks are benefiting from a European Central Bank subsidy that could reach 120 billion euros ($158 billion), enough to pay every bonus at financial firms in London for the next 24 years at today’s levels. 

Royal Bank of Scotland Group Plc, BNP Paribas SA and Societe Generale SA are among more than 500 banks that took 489 billion euros of three-year loans from the Frankfurt-based ECB at a December auction. The loans currently carry a 1 percent annual interest rate, less than a quarter of the 4.3 percent average yield on euro-denominated senior unsecured bank debt of all maturities in the past year, according to Commerzbank AG. 

With borrowing estimated to hit a record 1.2 trillion euros after a second auction later this month, banks may save 120 billion euros over three years. That could boost 2012 profit by about 10 percent for lenders in Italy and Spain, according to estimates by Morgan Stanley.  

“This is very much a free lunch,” said Arnd Schaefer, an economist at WestLB AG in Dusseldorf, Germany. “Banks can get money for just 1 percent and then lend it on for much more. That’s pretty good.”          

There's much more in the report, so you can read it in it's entirety if you're interested in what the ECB is doing.

And also, this other report about the ECB changing the rules of bond, creating subordinate versus senior level bonds on the very same instrument, depending on who is holding it:

Feb. 17 (Bloomberg) -- The European Central Bank’s plan to shield its Greek bond holdings from a restructuring may hurt private investors while paving the way for debt insurance contracts to be triggered.

The ECB will exchange its Greek debt for new bonds with an identical structure and nominal value, though they’ll be exempt from so-called collective action clauses the government is reportedly planning. That implies senior status for the ECB over other investors, according to UBS AG, and the use of CACs may lead to credit-default swaps protecting $3.2 billion of Greek bonds being tripped.

“It may appear that the ECB is receiving preferential treatment, raising questions about whether the ECB is senior to private-sector bondholders,” according to Chris Walker, a foreign exchange strategist at UBS, the world’s third-biggest currency trader. “If a coercive default does indeed eventually take place then a CDS event seems very likely with all the negative consequences for risk appetite that may bring.” 

Portugal To Receive 600 million euros Bailout in December

This seems to have been planed for some time, but I don't remember hearing about it anywhere:

The European Union (EU) placed on 29 September a € 1.1 billion bond with 7 years maturity, completing a successful series of EU bond issuances done over the last weeks. The operation, under the European Financial Stabilisation Mechanism (EFSM), was carried out by the European Commission on behalf of the EU. From the proceeds Ireland will receive € 500 million and Portugal € 600 million of loans as part of their financial assistance packages.

Irish property prices to fall by as much as 90 percent

"homes built in commuter towns in Ireland’s midlands may fall as much as 90 percent". Finally, someone who is realistic about where prices will go.

As you can see from the report below, prices are already close to 50% below where they were 4 years ago, and yet, Irish people are still obsessed with owning property. This means we are far from hitting the bottom.

I have stated many times that prices should reach drop by above 90% to have finally, durably, bottomed. And I'm now finally finding echoes of that on major publications — I admit, I would find an 85% decline to be acceptable as well :-)

Nov. 30 (Bloomberg) -- Irish homes may sell for as little as 21,000 euros ($28,000) today as owners dispose of foreclosed properties in the country’s biggest residential auction.

“The Allsop auctions are really the only mechanism we have now for the revelation of prices, because transactions outside of them are so thin on the ground,” said Constantin Gurdgiev, a lecturer in finance at Trinity College Dublin.  [...]

“Contrary to what people want to think, Irish people are still obsessed with owning property.” 

The average asking price for a home in Ireland was 195,000 euros in the third quarter, compared with 366,000 euros during the height of the property boom in mid-2007, according to Daft.ie, Ireland’s largest property website. 

The central bank estimated in March that prices may fall as much as 60 percent from their peak. While properties in the city of Dublin may regain close to half their highest values, homes built in commuter towns in Ireland’s midlands may fall as much as 90 percent, Gurdgiev said.[...]

Portugal Lenders Bailout Approved — 78 billion €

Arrogance, incompetence and greed from the Portuguese government, people — who have been on a borrowing binge since WWII mortgaged the future of their children and grand children — and the international banks — which lent all that money to insolvent entities — have now led to a third bailout in the EU. But don't get it wrong, as it was the case for Ireland and Greece, this is not the bailout of the Portuguese government or people, it's the bailout of the lenders, and it's a scheme to transform the people into debt slaves.

Hopefully, these spending will just accelerate the fall of the dominos that are most of the sovereign economies. The few countries which have a decent balance sheet — such as Germany — are diluting their credit quality to bailout out the profligate economies which have no reason and no political will to reduce spending and borrowing.

There is no way that debt is going to be paid, so sooner or later, default will arrive. It would be a catastrophe for the stupid and incompetent lenders, but it would be a tremendous liberating force for the people, the economy as a whole, and would help set up a sounder safer system, since lenders will understand that lending is a risky business. Hopefully, the IMF will go insolvent as well in the process, and we'll get rid of this dangerous and useless post-Bretton Woods system.

That's how the economy works. The basic laws of economics are part of the laws of nature. If you don't like it, if you think it's unfair, get used to it. It's as if you complain about gravity being unfair. You cannot do anything about it, can you? So why do you think greedy and ignorant politicians can save you from the natural laws of economics?

May 16 (Bloomberg) -- European finance ministers endorsed a 78 billion-euro ($110.8 billion) bailout for Portugal as they stepped up pressure on Greece to do more to win improved aid terms.

Portugal followed Greece and Ireland in seeking emergency loans from the European Union and International Monetary Fund, bringing to 256 billion euros the aid provided to stamp out the sovereign debt crisis.
[...]
The European finance chiefs were also set to approve the nomination of Bank of Italy Governor Mario Draghi to be the next president of the European Central Bank.

Greek bonds fell after the euro area’s economic powerhouses put up hurdles to an expanded aid package, with public discontent simmering in northern Europe over the costs of propping up high-deficit countries on the continent’s periphery.

Finance ministers said the IMF’s role as the contributor of a third of the bailout money for Greece, Ireland and Portugal won’t be hampered by Strauss-Kahn’s May 14 arrest on sexual- assault charges in New York.
[...]
Greece, which received a 110 billion-euro loan package last year, is preparing a new economic-recovery program, including 76 billion euros of asset sales and spending cuts, to persuade European governments and the IMF to release the next 12 billion- euro portion in June.
[...]
Default is “just a nightmare,” ECB council member Christian Noyer said in Tokyo today. “It’s the absolutely wrong solution. It would be a catastrophe.”

Greece’s chances of escaping a restructuring hinge on the public mood in Germany, which crafted the euro’s low-deficit rules and, as Europe’s largest economy, is the biggest guarantor of the unprecedented loan packages.

Forty-one percent of Germans oppose further financial aid for Greece, with 48 percent in favor, according to an Emnid survey published in Bild am Sonntag yesterday. Some 58 percent voiced “very low” or “quite low” trust in the 12-year-old euro, up from 54 percent in December.

Reports on Ireland

Max Kaiser did a very good job summarizing the current state of matters in Ireland in a video report available on YouTube in two parts: part 1, part 2.

A few things you knew already:

• The bailout was really a bailout of the foreign banks which held the debt of the Irish banks.
• European banks who have been bailed out are actually lending the money for this bail out, so they are making a double whammy for being stupid enough to lend money to these insolvent institutions.
• That debt is not going to be paid out, default/massive haircut is the only solution given the massive amounts of debt involved.

A few things that might be new to you (they were new to me):

• There are currently more than 300,000 excess properties in a country of 4.5 million people
• There are many ghost towns spread around Dublin
• If you default on your debt and your home is repossessed, you can be jailed, as the debt is not erased.
• As a consequence of the previous point, there have been, and are still, waves of emigrations. People who cannot afford their homes anymore — or who do not want to be a debt slave for the next 20-25 years — are now emigrating in mass to the US and Australia

Michael Lewis also wrote a great report on Ireland, available on VanityFair:

When Irish Eyes Are Crying
First Iceland. Then Greece. Now Ireland, which headed for bankruptcy with its own mysterious logic. In 2000, suddenly among the richest people in Europe, the Irish decided to buy their country—from one another. After which their banks and government really screwed them. So where’s the rage?

By Michael Lewis, March 2011

Finally, as a sign of how mad the markets participants have become, here's a nice story published by Bloomberg a few weeks ago. One must be seriously mad to believe that this is the beginning of the sovereign debt crisis in Europe. Just a quick look at the sovereign yields would confirm that. And of course, the fact that RBC bought BlueBay is yet another sign that the banking sector is still very much entrenched in its willing to speculate...

April 8 (Bloomberg) -- BlueBay Asset Management, which oversees $39 billion in assets, is buying Irish government bonds because pessimism surrounding the country’s finances has reached “unrealistic” proportions.
[...]
Dowding began buying Irish bonds last week after the government said it wouldn’t penalize investors in Irish bank debt. BlueBay now holds more Irish debt than the level recommended by the index it uses to measure performance, a so- called overweight position.

“Ireland’s economy has more competitive advantage compared with Portugal’s,” Dowding said in an interview. “We like the fact that the interests of European Central Bank and European Union policy makers are very much being observed by the new government. A near-term restructuring of Irish government debt is extremely unlikely.”
[...]
“There is a sense in the market that the European authorities may have managed to engineer the beginning of the end of this stage of the euro-sovereign debt crisis,” he said. “The outlook for peripheral countries is turning somewhat more positive. However, our long-term assessment on Portugal remains one where we are very concerned about its growth prospects.”

BlueBay was bought by Royal Bank of Canada in December.

Irish Gov Stabs their People in the Back while the Icelandic Thrive...

It is ironic how the Irish government decided to stab their people in the back, and take their money to bailout not their own banks, but all the banks in the Eurozone who lent money to these insolvent banks.

Iceland is doing so much better now that they have defaulted and, even more ironic, what ignorant analysts and economists believe is an inconvenient for the government is actually a blessing for the people: the fact that the government from Iceland cannot borrow on the markets is a very very positive side effect of this default, and I do hope that once the western civilisation as we know it has defaulted on their debt — no country is solvent except maybe Germany — they will introduce constitutional laws to prevent governments from running deficits and borrowing money — as Germany did a couple years ago.

Irish Bow to Trichet on Bondholders as Rescue Hits $142 Billion

April 1 (Bloomberg) -- Ireland yielded to the European Central Bank to protect bondholders even as its bailout bill for the region’s worst banking crisis moved to as much as 100 billion euros ($142 billion) after stress tests.

The ECB in Frankfurt was “solidly opposed” to imposing losses on investors in senior bank debt, Finance Minister Michael Noonan told broadcaster RTE today. The ECB agreed to provide “ongoing” funding for the banks, he said.

Ireland agreed yesterday to inject as much as 24 billion euros into four banks, while leaving bondholders untouched. The government already funneled 46.3 billion euros into the financial system and set up an agency that paid more than 30 billion euros to assume risky property loans. The total equates to about two-thirds the size of the Irish economy.

“The government’s position is very clear: It doesn’t want to take action on senior bondholders for the four banks that are going forward,” said Matthew Elderfield, head of regulation at the central bank, said in an interview with Bloomberg Television. “It recognizes that, on balance, that if you want to have these viable banks able to return to the market that would hurt their capacity to do that.”

Standard & Poor’s Ratings Services today cut Ireland one notch to BBB+ from A-, though revised its outlook to stable.
[...]
As recently as March 28, Agriculture Minister Simon Coveney said the government planned to impose losses on senior bondholders in the banks to cut the costs of its bailout.

“Taking all of the losses of the banking system and putting them on the balance sheet of the government doesn’t make sense,” Nouriel Roubini, co-founder of Roubini Global Economics LLC, said today in an interview from Cernobbio, Italy, with Maryam Nemazee on Bloomberg Television’s “The Pulse.” “Eventually, the back of the government will be broken.”
[...]
“Rather than go after over 20 billion euros in unguaranteed bonds, the government is making ordinary citizens bear the burden of this debt,” Gerry Adams, leader of nationalist party Sinn Fein, said in statement today. “Rather than act in the interests of the Irish people they are acting in the interest of the banks.”
[...]
The decision not to seek burden-sharing with senior bondholders “is a recognition of reality that Ireland is depending on continued funding for its banks from the ECB, which is setting the rules,” said Dermot O’Leary, chief economist at Goodbody Stockbrokers.

Icelanders Reject British, Dutch Depositor Bill a 2nd Time

April 10 (Bloomberg) -- Icelanders rejected a depositor claims accord with the U.K. and Netherlands for a second time in as many years as voters signaled they don’t want their tax funds to cover foreign losses caused by a private bank.
[...]
The bill, which set the terms for covering the depositor losses, was rejected by President Olafur R. Grimsson in February after being passed by a two-thirds majority in parliament.

“Nowhere does it say that Iceland is legally obliged to pay for this ridiculous Landsbanki adventure,” said Stefan Gunnarsson, a shop assistant in downtown Reykjavik. “If a court finds that we are legally responsible, so be it. Until then: No thanks.”

Grimsson said in a Feb. 23 interview he rejected the accord because Iceland’s legal obligation to pay is “unclear,” adding the matter shows that European banking laws haven’t been “thoroughly thought out.” The referendum let the people decide “whether private citizens, taxpayers, should be obliged to repay the losses created by a private bank,” he said then.

The latest Icesave accord would cost the state about 47 billion kronur ($419 million), while the remaining debt will be covered using the proceeds of Landsbanki assets, the negotiating committee representing Iceland said in December. Britain is lending Iceland 2.35 billion pounds ($3.85 billion) to cover the depositor losses, while the Netherlands is lending 1.3 billion euros ($1.9 billion).
[...]
Gunnarsson said the referendum is “a wakeup call for the citizens in other countries.”

“They’ll realize that there’s no fairness in pushing bank losses onto taxpayers when things go sour, but pocketing the gains when everything is going well,” Gunnarsson said. “A big fat ‘no’ from Iceland will drive that point home.”

Failure to resolve Icesave through a referendum “could easily muddy the waters,” central bank Governor Mar Gudmundsson said in a speech on April 7. A no vote “would impede foreign borrowing and delay capital account liberalization, although it is not clear how strong or persistent these effects would be.”
[...]
Iceland has relied on a $4.6 billion bailout led by the International Monetary Fund and on capital controls to prevent a sell-off of the krona. The caps, which the central bank estimates are stopping investors from selling about $3.6 billion in krona assets, have allowed the trade surplus to support the exchange rate and limit import price gains. The central bank has cut rates 15 times in two years as inflation eased to within the bank’s 2.5 percent target.
[...]

Icelanders Reject Depositor Bill, Forcing Year-Long Court Fight

April 11 (Bloomberg) -- “What is clear is that there will be a downgrade from Moody’s and perhaps Standard & Poor’s,” said Asgeir Jonsson, an economist at Reykjavik-based asset manager Gamma. “This will force the government to postpone its plans to enter the international bond markets.”

The European Free Trade Association’s Surveillance Authority in May last year started infringement proceedings against Iceland under its obligation to cover all depositor claims. Those proceedings, which had been shelved during Iceland’s parliamentary handling of Icesave, will now be resumed, said Sigurdur Lindal, a law professor at the University of Iceland.

“A ruling from the EFTA Court isn’t formally binding on Icelandic authorities, although it does set a precedent,” Lindal said in a phone interview. “The U.K. and the Netherlands will likely claim that Iceland discriminated against depositors depending on nationality. However, that matter is not in any way clear cut.”

Grimsson said the referendum “enabled the nation to regain its democratic self-confidence and to express sovereign authority in its own affairs,” in a speech yesterday. Three days after his veto, he said he rejected the accord because Iceland’s legal obligation to pay is “unclear,” adding the matter shows that European banking laws haven’t been “thoroughly thought out.”

The result of the Icesave referendum shows most voters agree. [...]

Portuguese Two-Year Notes Yield the Highest Since 1999 — Ireland to Release Stress Tests Results Today — Euro Close Multi-Year High Against the Dollar

While the Euro is trading at above 1.42$ and is up 0.02 in 48 hours, the European are still crumble and trying to find some ways to avoid default...

March 31 (Bloomberg) -- Portuguese two-year notes dropped for a ninth day, pushing the yield to the highest since before the introduction of the euro.

The yield rose four basis points to 8.07 percent, the most since 1996, as of 8:37 a.m. in London. The 10-year yield was unchanged at 8.10 percent.

Irish two-year notes were little changed, with the yield at 9.53 percent, while the 10-year yield dropped two basis points to 10.08 percent.

March 31 (Bloomberg) -- Three of Ireland’s biggest banks may have to raise a combined 9 billion euros ($12.7 billion) in capital after stress tests are published today, said five people with knowledge of the matter.

Bank of Ireland Plc, the country’s biggest lender by market value, will seek as much as 5 billion euros, said two of the people. Irish Life & Permanent Plc will require more than 3 billion euros, while EBS Building Society will need about 1 billion euros, three people said. The people declined to be identified because the figures haven’t been made public yet. All three companies are based in Dublin.
[...]

Ireland Update: Stress Tests May Leave Government in Control of All Irish Banks — Irish Banks May Need 27 Billion Euros More Aid — Irish Life Seeks Share Trading Suspension Before Stress Tests — Ireland Seeks to Force Losses on Banks’ Senior Bondholders —

While Mr Market is still high on Bernanke's drugs, thinking everything is great, that we have a super-recovery, stocks are cheap, etc. it might give a hard and difficult back to reality tomorrow, if the Irish government decides they have the balls to save their people from debt slavery.

I'm eagerly waiting tomorrow's Irish stress test results, which might be a major turning point for risk takers, banks, speculators who might discover that there are inherent risks when you lend money, or buy shares. It might also be a turning point for the Euro, which is trading close to multi-year high against the USD for no reason except exuberances and irrationality of the markets.

In my opinion, tomorrow the Irish government will have to seize control of all the remaining banks which are still not nationalized, it will also — hopefully — force lenders to take losses on their bonds, and why not tell the IMF and EU that they won't their poisonous help, and will default on their own debt. That would be the best course of action for the Irish people. Not only for the current generation, but also for the next to come.

Basically, tomorrow could provide the catalyst that the 3 remaining bears on the planet have been waiting for.

Of course, the market could also rally 2% to celebrate the fact that banks are being nationalised or because the rescue package will be lower than estimated, say 26 billion instead of 27. That wouldn't surprise me at all!

Here are a few headlines from Bloomberg and the associates quotes follow:

• Irish Stress Tests May Leave Government in Control of All Country's Banks
• Irish Life Seeks Share Trading Suspension Before Stress Tests
• Irish Life Said to Weigh Sale of Life, Asset Management Units
• Ireland Seeks to Force Losses on Banks’ Senior Bondholders
• Ireland Wants Bondholders to Share Bank Burden, Minister Says
• Irish Banks May Need 27.5 Billion Euros More Aid, Analysts Say

Irish Stress Tests May Leave Government in Control of All Country's Banks

March 30 (Bloomberg) The Irish government may be forced to take controlling stakes in Bank of Ireland Plc and Irish Life & Permanent Plc, the last of the country’s biggest lenders to escape state control, following tomorrow’s stress tests.

“They’ve clearly got most to lose,” said Oliver Gilvarry, head of research at Dublin-based Dolmen Securities, who has “sell” rating on both banks. “It’s difficult to see how either will end up less than 50 percent owned by taxpayers.”

The Irish Central Bank will at 4:30 p.m. tomorrow publish its third round of stress tests. The results will determine if the two can avoid joining four of the country’s biggest banks in majority state ownership after they all logged record losses as the country’s decade-long real estate bubble burst.

Ireland may require banks to raise an additional 27.5 billion euros ($39 billion) of capital, according to the median estimate of 10 analysts surveyed by Bloomberg News. The government has pledged to provide that money if banks fail to raise it themselves from a 35 billion-euro fund set up under the country’s international bailout in November. Shares of the two lenders have declined by more than 50 percent since that rescue.

Irish Life, whose shares fell 45 percent in Dublin trading yesterday to 40 euro cents, has sought a temporary suspension in trading in its stock until April 1, after the results of stress tests are revealed, it said in a statement today. The assessment is “not completed and the quantum of capital that may be required by the group, and the source of that capital, is not yet finalized,” it said.

Bank of Ireland’s shares fell as much as 2.4 euro cents, or 9.7 percent, in Dublin trading to 22.3 cents, marking its lowest level since March 17, 2009. They were down 8.9 percent at 22.5 cents at 8:39 a.m.
[...]
The government has already taken control of Anglo Irish Bank Corp., Allied Irish Banks Plc (ALBK), EBS Building Society and Irish Nationwide Building Society after injecting 46.3 billion euros into the industry over two years.

Niall O’Connor, a London-based analyst at Credit Suisse Group AG, expects the government to take a stake of about 60 percent in Bank of Ireland, the country’s biggest lender.
[...]
Even before the latest stress tests, the regulator ordered Bank of Ireland, already 36 percent state-owned, to raise about 1.4 billion euros, more than its market value of 1.3 billion euros today.

Irish Life, the only government-guaranteed lender to avoid a bailout so far, was ordered to raise 243 million euros in November. That’s now equivalent to twice its market value today.

The Dublin-based company may require more than 1 billion euros to allow its banking unit to operate without support from the company’s life and pension operations, Eamonn Hughes, an analyst with Dublin-based securities firm Goodbody Stockbrokers, said in a note to clients yesterday. The stress tests “may drive this base figure higher again,” he said.

Both Bank of Ireland and Irish Life, the country’s largest life assurance and pensions company, will “fight hard” to avoid falling under government control, said James Forbes, director of investment solutions at Dublin-based securities firm Bloxham, which manages about 1 billion euros of assets.
[...]

Irish Life Seeks Share Trading Suspension Before Stress Tests

March 30 (Bloomberg) Irish Life & Permanent Plc, the nation’s only government-guaranteed lender to avoid a bailout so far, sought a temporary suspension in trading in its shares until April 1, after the results of stress tests of the country’s lenders are revealed.

Shares in the Dublin-based lender plunged by 34 euro cent, or 45 percent, to 41 cents yesterday on concern that the state may be forced to take a majority stake in the company after the publication of the test results tomorrow.

Irish Life “notes the recent media comment” on its expected capital requirement after the assessment, the company said in a statement today. The tests “are not completed and the quantum of capital that may be required by the group, and the source of that capital, is not yet finalized,” it said.

The stress tests mark a third attempt in a year by Ireland, which has injected 46.3 billion euros ($65.2 billion) into its unprofitable lenders over the past two years, to assuage investor concern that loans will continue to sour. The main focus of this year’s tests is on home loan portfolios, after lenders were forced to sell 72.3 billion euros of risky commercial real-estate loans to the state last year at an average discount of 58 percent.

Irish Life Said to Weigh Sale of Life, Asset Management Units

March 30 (Bloomberg) Irish Life & Permanent Plc, the nation’s only government-guaranteed financial company to avoid a bailout so far, is weighing the sale of its profitable life assurance and investment management units, according to three people familiar with the situation.

The government in Dublin is pushing for the sale of the two businesses to limit the amount of money it will need to inject into Irish Life’s unprofitable banking arm, said the people, who declined to be identified because a decision has not yet been made. The two units are worth a combined 1.75 billion euros ($2.46 billion), according to Eamonn Hughes, an analyst at Goodbody Stockbrokers in Dublin.
[...]
Shares in Irish Life, which traces its roots back to 1884, when a precursor to its banking arm was formed, have more than halved in value since Ireland applied for an international bailout for its banks and agreed to carry out the stress tests.

The tests examine how banks would manage bad loans and losses from forced asset sales. The results will be published by the central bank at 4:30 p.m. tomorrow.

Irish Life may require more than 1 billion euros to allow its banking unit to operate without support from the company’s life and pension operations, Hughes said in a note to clients yesterday. The stress tests “may drive this base figure higher again,” he said.

Ireland Seeks to Force Losses on Banks’ Senior Bondholders

March 28 (Bloomberg) -- Ireland said it wants to impose losses on banks’ senior bondholders, increasing the pressure on European policy makers to cut the costs of its bailout and provide longer-term financing for the country’s lenders.
[...]
“It’s perhaps a negotiation tactic to try to get a better deal out of Europe,” said Alan McQuaid, economist at Bloxham Stockbrokers. “They aren’t going to trade the corporation tax level, so they don’t have much else to negotiate with.”
[...]
Irish Prime Minister Enda Kenny said on March 25 that talks with the ECB on fixing the banks will resume after the stress tests are published, with the government pushing the ECB to create medium-term funding for Irish banks.

The ECB is considering Kenny’s request, the Irish Times reported on March 26, without citing anyone.

“Such a commitment will remove investors’ perception of a withdrawal of ECB support so that alternative private sector finance is more likely to be found,” Conall MacCoille, an analyst at Davy, the Dublin-based securities firm, wrote in a note today.

Irish-based lenders’ reliance on short-term ECB cash soared 38 percent to 116.9 billion euros in the year through February, while their dependence on the Irish central bank jumped almost fivefold to 70.1 billion euros.
[...]
The state has already injected about 46 billion euros into the financial system after it extended a guarantee in 2008 to cover almost all the liabilities of six of the country’s lenders. The government is winding down both Anglo Irish and Irish Nationwide. It has designated the remaining four -- Bank of Ireland, Allied Irish, Irish Life & Permanent Plc and EBS Building Society -- as viable banks and is stress-testing them.
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“There are many people in Europe who want Ireland to give a guarantee to all of its bank creditors including senior bondholders and everybody else,” Coveney said. “The reality is if that guarantee undermines the very creditworthiness of the Irish state, then our government can’t sign up that.”

Ireland Wants Bondholders to Share Bank Burden, Minister Says

March 28 (Bloomberg) -- Ireland wants to share bank losses with senior bondholders as part of a “final solution” for the country’s debt-laden financial system, Agriculture Minister Simon Coveney said.

Irish Banks May Need 27.5 Billion Euros More Aid, Analysts Say

March 25 (Bloomberg) -- Ireland’s government may have to inject an additional 27.5 billion euros ($39 billion) into the country’s banks after a third round of stress tests next week, according to a survey of analysts and economists.

That will exhaust about 80 percent of the 35 billion-euro fund set up last year in Ireland’s international bailout to shore up the country’s lenders, according to the median estimate of 10 analysts and economists surveyed by Bloomberg News.

Ireland, which has injected 46.3 billion euros into its banks over the past two years, will on March 31 publish the results of the tests, which examine how banks would manage bad loans and losses from forced asset sales. Matthew Elderfield, the country’s top financial regulator, pledged this week the assessment would be more “conservative” and transparent than the last two rounds. Irish banks still are still dependent on emergency central bank funding after their loan losses exceeded the estimates of previous stress tests.

“The numbers from the stress tests, if anything, are going to be too pessimistic, simply because they have to be in order to have any chance of the market believing them,” said Eoin Fahy, chief economist at Kleinwort Benson Investors Dublin Ltd., which has about 4 billion euros of assets under management. He estimates banks will need 22.5 billion euros.

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The Irish government set aside 35 billion euros of the 85 billion-euro international rescue package it received in November to prop up the country’s banks, which are grappling with soaring bad-loan losses following the implosion of a domestic real-estate bubble.

The stress-test figures “need to be credible and an initial recapitalization of up to 20 billion euros allows for a pretty pessimistic loan-loss scenario,” said Michael Cummins, a director at Glas Securities, a Dublin-based fixed-income firm. His estimate excludes losses from forced-asset sales, because he expects the Irish and European Union authorities will find a way to avoid fire sales.

“You are getting into dangerous territory if the total figure is much higher than that,” Cummins said. “The sovereign could be hit by further downgrades.”

Portugal Government Collapses — Irish Readying a Hair Cut on Bond Holders — Euro Euphoria Sill On

I do not like to state the obvious, but...

... It was obvious that asking the people of Portugal whether they wanted an austerity plan after 40 years of borrowing to spend and living beyond their means had absolutely no chance of succeeding. Moreover, the debt is currently so high, that no austerity plan can make these sovereign countries solvent again. So it is just wasted efforts and time to the ineluctable end game: default (partial or complete) on the debt. This is what Ireland is discovering, and what Greece will discover soon, and then the dominos will start falling.

The statement made by Socrates: "This crisis occurs in the worst possible moment" actually made me laugh. Crisis always occur at the worst possible moment, since they were in the making for 20 or more years, but nobody wants to tighten their belt during the "good times" and when money is flowing like someone was actually printing it — or was it actually the case??

And as usual, economists come with their suggestion that these insolvent countries should borrow from the IMF and the EU in order to become solvent. Good lord. One doesn't become solvent by borrowing more and getting more into debt. I think a 5 year old would understand that.

In case you missed this video, it's a fantastic one:

March 23 (Bloomberg) Portuguese Prime Minister Jose Socrates said he presented his resignation to President Anibal Cavaco Silva after parliament rejected the government’s deficit- cutting plan, raising the chance of an international bailout.

Socrates made the announcement tonight in an address to the nation after meeting with Cavaco Silva at the president’s residence in Lisbon. “This crisis occurs in the worst possible moment for Portugal,” Socrates said.
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“If parliament decides on a motion against the stability and growth program, that means the government is not in a condition to make commitments internationally,” Socrates said on March 15. “That would mean a political crisis. In my understanding, the consequence of a political crisis is the worsening of the financing risks of our economy and would lead Portugal to request external intervention.”
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Portugal intends to sell as much as 20 billion euros of bonds this year to finance its budget and cover the cost of maturing debt. Portugal faces bond redemptions in April and June worth about 9 billion euros in total. It also faces bill maturities in July, August, September, October and November.

“With bond yields stubbornly high and heavy debt redemptions due over the next few months, it appears all but inevitable that Portugal will be forced to follow Greece and Ireland in accepting financial support,” economists Emilie Gay, Roger Bootle and Jonathan Loynes of Capital Economics Ltd. wrote in a note yesterday.

March 17 (Bloomberg) -- Irish Prime Minister Enda Kenny said it’s “grossly unfair” that taxpayers alone should carry the cost of bailing out the country’s banks as he pushed for lower rates on a European-led rescue loan.

Kenny, on a visit to Washington where he says he’s trying to repair Ireland’s “damaged” reputation, called for changes to the aid package by the European Union and the International Monetary Fund to avoid a situation where Ireland struggles to pay back its loan and can’t generate economic growth.

“It is grossly unfair to expect the taxpayer to have to pay 100 percent for the reckless lending practices of banks which caused this in the first instance,” Kenny said yesterday in an interview with Bloomberg Television’s “InBusiness With Margaret Brennan” broadcast today. The 5.8 percent average rate Ireland pays for its loans is “too severe,” he said.

Kenny’s Fine Gael party took power last week after pledging to seek a European agreement on sharing the cost of rescuing the financial system with senior bank bondholders. His government is counting on ongoing stress tests to reveal the full extent of potential losses at the country’s lenders, after injecting 46.3 billion euros ($64.4 billion) into the financial system over the past two years.

Kenny stopped short of saying who should pay along with taxpayers. Asked about the treatment of senior bondholders, Kenny said that his government will put no additional cash into banks “until you see the scale of what the liability is, until there is an understanding of what might be here.”

Kenny met with Treasury Secretary Timothy F. Geithner yesterday as part of his U.S. visit. He will hold talks with President Barack Obama today and attend the annual White House reception for St. Patrick’s Day, Ireland’s national holiday.

The Irish prime minister vowed to keep the nation’s corporate tax rate “intact” to attract foreign investors, adding that his country is “open for business.”

Less than a week after failing to obtain a discount on the rate charged by the EU because of Ireland’s refusal to increase the country’s 12.5 percent company tax, Kenny repeated he is not willing to negotiate it.

“It’s not correct to equate a conditionality of a reduction in interest rates with the condition that a corporate tax is increased,” he said. “I am not prepared to compromise on something that is the individual competence of each country in respect of our corporate tax rates.”

The premium investors charge to hold Irish 10-year debt over the equivalent German bunds, Europe’s benchmark, was little changed today at 641 basis points. It reached a record of 680 on November 30, two days after the bailout.

Citigroup Inc. Chief Economist Willem Buiter said EU leaders are “playing with fire” by not acceding to Ireland’s request as it may force the country to restructure its debt unilaterally.

“They have to come up with something for Ireland,” Buiter said. “They’re going to have to make concession or Ireland will have no option but to go it alone.”

French President Nicolas Sarkozy and German Chancellor Angela Merkel at a March 11 euro-area leaders summit refused to extend a cut of Greece’s borrowing costs to Ireland as Kenny pushed back on taxes. Ireland has used the rate, which is about half the EU average, to lure companies such as Hewlett-Packard Co. and Pfizer Inc.

Ireland pays an average 5.8 percent interest rate on the 67.5 billion euros of aid from the IMF and the EU. Kenny said he expects to obtain “some flexibility” from Europe.

Feb. 28 (Bloomberg) -- Enda Kenny will push for the quick formation of an Irish government and the re-negotiation of an international bailout after what he called a “democratic revolution” reshaped the nation’s political landscape.
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He’s seeking to lower the 5.8 percent interest rate on the bailout loans and end the protection of senior bank bondholders.

“We can count on a good match forthcoming with Germany and France in one corner and Ireland in the other as a Battle Royale gets played out in front of a worldwide audience,” Mark Grant, managing director at Southwest Securities Inc. in Fort Lauderdale, Florida, said in an e-mail yesterday.
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Kenny said the bailout cost is “too much” and he’ll seek agreement to ease the terms, including the existing protection of senior bank bondholders. EU Economic and Monetary Affairs Commissioner Olli Rehn said on Feb. 15 there is “no appetite” for imposing losses on senior bondholders at Irish banks.
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