Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
What if the Commission decided the Irish guarantee is illegal state aid?

Well, a court challenge would take a long time to wander through the system, by which stage the guarantee would have run out anyway.

Anyway, if a bank actually looks like failing it'll probably be nationalised, which I have reason to suspect is the alternative that was being considered on Monday night for one or more banks.

by Colman (colman at eurotrib.com) on Wed Oct 1st, 2008 at 06:07:33 AM EST
[ Parent ]
The Commission would be smart to get the procedure started right now - it would have no detrimental impact on the bailout, but would set the ground for a serious review of how competition should apply in the banking sector as the dust settles.

Because that WILL be a vital question, and we cannot ignore it even as we deal with today's emergency requirements.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Oct 1st, 2008 at 06:36:15 AM EST
[ Parent ]
That doesn't preclude the Irish state (or the banks themselves) from receiving a hefty fine from the Commission. And as Pierre pointed out yesterday, €400bn is nearly 3 times Ireland's GDP. However the guarantee is nominally "to the tune of €400bn" but at "market prices" for "insurance" (again h/t to Pierre) it would be worth something like $10bn to the banks.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Wed Oct 1st, 2008 at 06:45:29 AM EST
[ Parent ]
Well, the announcement has apparently tightened the CDS spreads on the banks a lot, so it's now not worth 10bn(?).

According to the Irish Times:

THE GOVERNMENT'S emergency legislation to guarantee the Irish banking system will allow the State to take a stake in any financial institution that receives financial support from the exchequer.

The Bill gives the Minister for Finance wide-ranging powers to protect financial institutions and allows for competition law to be set aside to allow bank mergers, if deemed necessary to protect the stability of the financial system.

by Colman (colman at eurotrib.com) on Wed Oct 1st, 2008 at 06:55:17 AM EST
[ Parent ]
It also made their shares go up, and "tightening their CDS spreads" is a competitive advantage at a time when being able to borrow more cheaply (or at all) on the 3-month interbank market is a matter of life and death for banks.

It was worth €10bn when it was given and results in a reduction of the "cost of capital" which only adds to the €10bn, doesn't subtract from it.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Wed Oct 1st, 2008 at 06:59:43 AM EST
[ Parent ]

Display:

Occasional Series