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Ireland Update: Bank Run and Bailout

By Anonymous

First an update on the bank run from the Irish Times: AIB loses ?13bn in deposits due to Irish debt fears

ALLIED IRISH Banks has lost about ?13 billion in deposits since the start of the year due to concerns about the financial difficulties of the Government and the banking system, the bank said in a trading statement yesterday.

Some ?12 billion of the lost deposits were withdrawn, mostly by institutional and corporate depositors, since the end of June.

This is about 17% of deposits.

And on the bailout from Bloomberg: Irish Talks on Aid Plan Intensify as Banks Lose Deposits, Cowen Campaigns

Irish officials and experts from the European Union and International Monetary Fund are working through the weekend in Dublin, racing to finish an aid agreement amid pressure to act before markets tumble.

... IMF Managing Director Dominique Strauss-Kahn said Europe is moving ?too slowly? to resolve the sovereign debt crisis that began in Greece.

The Irish government is planning on releasing a four-year economic plan this coming Tuesday, and the government is expected to formally request aid after releasing the plan. A key question is if the European Commission and IMF will accept the plan or require additional action - such as raising the 12.5 per cent corporation tax.

After Ireland, the bond yields to watch are Portugal and Spain. Many analysts expect Portugal to be next in line for a bailout, and the big question is Spain.

Here are some comments from Nouriel Roubini on CNBC: Roubini Maps Out Nightmare Scenario of Domino Debt Collapse in Europe

"The next one in line is going to be Portugal.' [Roubini said] "Due to the severity of Portuguese debt problems, Portugal is going to lose market access?and that means they are going to require IMF support as well.

But the real nightmare domino is Spain. Roubini refers to the Spanish debt problems as "the elephant in the room".

"You can try to ring fence Spain. And you can essentially try to provide financing officially to Ireland, Portugal, and Greece for three years. Leave them out of the market. Maybe restructure their debt down the line."

"But if Spain falls off the cliff, there is not enough official money in this envelope of European resources to bail out Spain. Spain is too big to fail on one side?and also too big to be bailed out."

Full post as published by Calculated Risk on November 20, 2010 (boomark / email).