Where is the silver lining? And a bit on NAMA…
There is none. Silver lining that is. See the bit on NAMA at the end.
We have the result of the next election already and it is this: change of government. The only question is: when. Some of my colleagues believe as early as the New Year. I say the end of 2010, at the earliest.
The Government needs to find a run of wins if it has any hope of shoring up some support. Pat Carey was right this morning when he said the next 100 days will be critical. If the government falls by year’s end, a proposition to which Dan Boyle gave a 60:40 possibility (or was that 40:60?), then you could see Fine Gael and Labour having 100 seats or more between them.
The Government needs to win big on all the battles between now and Christmas. That means a decisive win in Lisbon. And a clear majority (and no rowbacks) on NAMA and on the Budget. It can’t allow another medical card fiasco to happen or to allow any measure into the Budget, the consequences of which has not been thought through. It has to keep all its own troops onside including the two former PDs.
That will give Cowen a reprieve of 12 months. From this vantage point, it just looks too difficult to hold the Government together after that, unless there are marked improvements to be seen in the economic and employment figures (a jobless recovery looks the more like).
Now to NAMA… I have noticed that all the commentators who disagree with NAMA (including Sean Barrett of TCD yesterday) have been working on the assumption that the haircut (discount) is going to be very small.
I don’t think it’s going to be enormous but neither do I think it’s going to be small. There will be a lot of politics playing into the valuation that Brian Lenihan makes on the 16th. I am no more privvy than anybody else as to where the thinking is leading but my sense is that the haircut will do more than gouge at the margins.
Sure, it will hardly be 70 per cent. But I have a sense that it could be above 30, and perhaps above 40.
What am I basing that on? Lenihan was quick to intervene after John Mulcahy’s outline of the historical trend at the Finance committee on Monday.
Mulcahy said that commerical property came back to 88 per cent of its values over a seven-year period when recovering from a trough.
Lenihan qualifed that at the next available slot. But what he said was not reported as widely as Mulcahy’s figures. He said the valuation will not as high as 80 or 90 per cent or anything like it and said that the terms of the valuation would be very restrictive.
He has already said that the base book figure he will use for his calculation will be the figure of €80-€90 billion of bank loans; and not the €120 billion which the assets were nominally worth at the height of the boom (the difference between the two figures is the deposit paid on the asset). I think minus 40 may be the figure he arrives at (and of course, given the collapse) that may still be inadequate.