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  • irishtimes.com - Posted: September 3, 2009 @ 4:34 pm

    Where is the silver lining? And a bit on NAMA…

    Harry McGee

    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.

    • Harry Leech says:

      I have to respectfully disagree with you Harry, and agree with your colleagues. I can’t see this shower lasting the more than 6 months (hopefully sooner.) You said:

      “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.”

      With Mary Coughlan as Tanaiste, Willie O’Dea in Defence, Noel Dempsey doing whatever it is that Noel Dempsey is supposed to do, can you honestly see that happening?

      Sweary Mary will put her foot in it soon, you can almost hear her fuming already that Micheal Martin is hogging all the coverage over the ‘global summit’ that David McWIlliams came up with (not Martin or his department as they would like to convince us.)

      The typical arrogance being shown by FF in the face of this poll is not in the least surprising, but their denial cannot paper over the cracks forever. The Greens will shatter before too long.

      And has anyone spotted John Gormley recently? Dan Boyle is getting trotted out to drone on the radio every now and then, Eamonn Ryan is turning into FF’s greatest cheerleader, but where is Gormley?

      If there is light at the end of the tunnel it’s that 12 years of mortgaging the countries future so that a tiny cadre could make a lot of money is coming to an end. Unfortunately, now we (the taxpayer) have to pay the bill.

    • Harry says:

      Karl Whelan from UCD was on Morning Ireland this morning and was very impressive as usual. On the wonderful irisheconomy.ie, he justified the 46 economists against two of Dr Garret FitzGerald’s main criticisms, its prediction of a €30 billion deficit and his claim that they failed to distinguish between senior and subordinated debt when saying that bondholders should be asked to bear part of the burden.
      The comment threads on the site are fascinating. Especially on those two issues. What does close to €30b mean? Should the 46 have referrred to an Exchequer Deficit rather than to a Government deficit? The sums don’t add up to €30b when it’s done on the basis of a General Government Deficit, for techical reason.
      But the interesting thing is that nobody’s backing down or softening their positions!
      Karl Whelan and others are convinced that the ‘haircut’ is going to be way too small.
      But all the evidence and the political body language is not suggesting that: to me, it looks like it’s going to be a 40 per cent discount, using the €80-€90 million base figure. It could still be argued that it’s not enough. But it’s more than most are predicting.


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