We have an economy to save, not just banks
Some remain convinced we are doomed and that we will, sooner or later, have to be rescued by our European partners or the IMF.
Michael Somers, the well-respected head of the NTMA, said that our credit status had improved with international lenders less worried about our ability to pay back what we borrow.
With the state preparing to take on €90 billion in toxic and other bank property loans under the proposed bad bank, NAMA, those reassurances may not add up to much in the long run. Nonetheless they are welcome.
Mr Somers said that by June, it was able to raise €6bn in a 10-year bond when the best it could do in the first quarter was to raise money over a three-year term. The cost of money is just 1.81% against German Bunds as against 3% before this, demonstrating we are now regarded as less of a risk by international lenders.
Just recently, significant other amounts were raised by NTMA at interest rates of just 0.5%, reflecting a “huge positive change” by lenders, Mr Somers said.
That’s the positive bit, and is one in the eye for the sceptics who see in Ireland is heading for a black hole and economic oblivion.
As a nation on our knees, which we are, given that we are borrowing €400 million a week to run the country, the change in our status is seriously welcome.
The other bit of good news from the NTMA was that it had set aside €25bn of our money as a fighting fund, a reassurance to those lending to us that we have a sizeable stash if the worst comes to the worst.
All of this is good housekeeping and further endorses the decision many years ago to set up the NTMA to manage our debt. If governments had been as diligent in managing their budgets the country would be in a lot less trouble than it is.
Sadly, the NTMA is just one part of the story.
Finance Minster Brian Lenihan, who launched the report, faced questions about the toxic bank including concerns that the legal profession would have a field day over NAMA, if desperate developers decide to take on the state.
The actions of ACC Bank in the courts against two developers in the past week should be making the minister and the Irish-owned banks very edgy.
In one case, a valuer told the High Court that the assets of one developer in Sandyford, valued in the books at €22m, were probably worth €500,000.
Outside Dublin, most land and property values are reckoned to be down by about 80%. Our problem is that virtually no market exists and the sceptics are saying it’s not a case of the wheels falling off the wagon – there were no wheels on it in the first instance.
What the Government does to protect the taxpayer in the case of NAMA, is becoming fraught with difficulties. The deeply sceptical believe even if banks get further billions of our money this crisis is so deep it will take more than favourable borrowing terms to get us out of this massive crater.
The banks remain “nervous” about lending and evidence to date strongly suggests they have used the Government’s €7bn to shore up their seriously depleted balance sheets.
They still need substantial funds to shore up their books and while the minister insisted nationalisation was not “inevitable”, his choice of words left that door wide open.
It is not inevitable, but the huge concerns among businesses of all sizes over lack of credit brings that day closer unless banks start lending.
Somewhere in Government, the penny must drop that we have an economy to save, not just a banking sector scuttled by greed.
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