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Archive for March 4th, 2011

As it’s Friday I leave you with a light post on what is beginning to emerge as a distinct, though oscillating possibility that we won’t have a new government next week. Today Enda jetted off to Helsinki to meet with the leaders of the grouping of parties to which FG affiliates itself in Europe, the European People’s Party, a meeting that should see Enda rub shoulders with Angela Merkel, Nicolas Sarkozy, Silvio Berlusconi and Antonis Samaras (the latter being the leader of the opposition party in Greece that was in power when their fiscal crisis first erupted). Meanwhile Eamon jetted off for beer and sandwiches (or meze) in Athens where he is meeting with the European socialists whose members include Jose Socrates (prime minister of Portugal), George Papandreou (prime minister of Greece) and Jose Zapatero (prime minister of Spain) – all the PIGS together.

This week’s meetings between Labour and FG seem to have broken down as follows: Mon-Tue, fact-finding with briefings given to both parties by state agencies, Wed-Thu, opening negotiations focussing on broad economic matters and the start of the jostling for the Minister for Finance post, Fri- continuing negotiations examining more peripheral policy areas whilst the leaders meet with their counter-parts in Europe until tomorrow evening. Sunday is pencilled in by Labour to allow a special meeting of the party to consider the coalition talks. FG will also hold a meeting amongst deputies to consider the way forward. In the last couple of hours there have been positive noises though it seems the parties are far from a done deal and today there have been dissenting views voiced by Labour party grassroot members in Labour Youth and trade unions.

It’s hard to ignore the fact that although last weekend represented an emphatic defeat of Fianna Fail, it did not represent an emphatic victory for Fine Gael. Although tantalisingly close to overall-majority territory with 76 deputies, they might as well have had 47 because Labour has boosted its body of deputies to 37 and all that’s needed for a majority is 84. As an alternative to Labour, could FG muster eight broadly like-minded Independents? I’m not sure they could for anything like the stable government needed. Sinn Fein was dismissed in principle during the election campaign but even now, when we are down to brass tacks, it is difficult to see how the differences in economic outlook between SF and FG could be squared. Which leaves… ta-daah, Fianna Fail whose economic outlook is identical to FG’s once you dispel the huff of smoke that passes for politics here. Brian Lenihan, however damaged he may be, has lived the economy for the past three years and would be an effective bolster to Michael Noonan. Micheal Martin mightn’t have enough to claim the Tanaiste spot but he could well continue with his portfolio in foreign affairs. It would be difficult for Enda and the country to swallow but what else is left? A minority government attempting to put through further austerity measures and without any great new Big Idea? Or we could have the Belgian scenario…

If you missed it, Belgium is only 30 days away from holding the world record for being a country without a government. And even today it is some 260 days since the last Belgian government was dissolved. There have been beard-growing and sex-abstaining initiatives to try to force the parties to form a government, not to mention marches with placards bearing messages like “Beer, frites and a government please” and “clap your hands if you don’t have a government”. In truth there is a caretaker government not doing a great deal, and certainly not introducing the structural policies needed to combat Belgium’s 97% national debt to GDP. Could it happen here? Probably not, but these are momentous times.

Meanwhile our 10-year bond closed at a record yesterday, 9.408% compared with the previous high close of 9.355% on 30th November, 2010 and today the yield touched a new intra-day record of 9.46%. We have missed the February 28th deadline for recapitalizing the banks and seem to be telling our lenders in the IMF/EU to hold on until we see the results of the stress tests. We have stalled on the legislation needed to allow NAMA to quickly take over sub-€20m exposures at AIB and Bank of Ireland. On Monday last, AIB, Bank of Ireland and EBS were supposed to have produced their deleveraging plans but it seems there is no-one with a mandate to approve those plans. And, according to the February 2011 Exchequer Statement our lenders have given us €15bn so far of the €67.5bn bailout but other than Budget 2011 haven’t seen a lot in return. The bank resolution legislation has been published but God knows when it will be debated and enacted. And Olli Rehn, Jean-Claude Trichet, Manuel Barroso and Dominic Strauss-Kahn are beginning to tap their fingers more loudly. We really do need a strong government like we’ve never needed one before.

As it’s Friday, I leave you with exclusive footage of the first negotiation meeting this week between FG’s health spokesman and deputy party leader, Dr James Reilly and his potential partners in government (EDIT: It’s been pointed out that James appears to be meeting with Eamon Gilmore and Brendan Howlin):

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Today’s Irish Times carries an interview, penned by Simon Carswell, with Steven Seelig, the most recently appointed member of NAMA’s board who took up his position on 26th May 2010. Steven was formerly with the IMF and brings an international, distressed economy perspective to the NAMA board which is otherwise domestically centred. A few interesting nuggets are pick up in the newspaper article today including a possibility of NAMA funding the sale of its properties by offering loans to buyers.

But a couple of sentences caught my eye – “Seelig points to Nama’s approval of €2 billion worth of sales last year. The agency’s target is to sell 25 per cent of assets by the end of the year.” This is news because the only previous mention of a 25% disposal was in the June 2010 NAMA Business Plan which said on page 10 that the agency’s policy was to reduce debt by 25% by (end-, presumably) 2013. A query has winged its way to NAMA asking for an explanation but meantime, the 25% was again mentioned by the self-same Simon Carswell on last night’s Tonight with Vincent Browne (37 minutes in) when he said “I think they are actually going to start selling properties into the UK market which is performing much more strongly than here. There is no market here. So I think the target is to sell a quarter of the assets this year”.

So let’s remind ourselves of NAMA’s involvement in the UK. The latest estimate is that some 26% of NAMA’s assets (a total of €71bn, 26% would equate to €19bn at nominal value and €8bn at the value NAMA paid using NAMA’s average haircut across its entire portfolio). NAMA has already overseen some disposals of course but the total disposals in 2010 amount to less than €2bn across all of NAMA’s portfolio (which includes Ireland, the US, UK, Rest of World). So that would mean that there was up to €5bn more of assets which NAMA will sell in the UK market this year.

As exclusively reported on here a fortnight ago, it is expected that the sale of 20 Grosvenor Square will generate nearly €300m. The sale of Derek Quinlan’s 35% share in the Maybourne hotel group may yield another €300m. Although Paddy McKillen’s loans haven’t yet transferred to NAMA, if his loans on Maybourne are redeemed/refinanced then that may yield another €300m. Now that Battersea has finally received planning permission, there may be several €100m to be redeemed there this year if investors are found. But it is likely that most disposals will be faceless office blocks and retail units. Still though, €5bn (potentially) is a significant sum.

Lastly let’s remember that the IMF wants NAMA to dispose of assets sooner rather than later and FG, the party likely to lead the next government, wants NAMA to sell soon also.

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