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International Business Presentations and Negotiations

Irish Bailout


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Bailout = act of loaning or giving capital to an entity that is in danger of failing,in an attempt to save it from bankruptcy, insolvency, or total liquidation and ruin;or to allow a failing entity to fail gracefully without spreading

International Business Presentations and Negotiations

Irish Bailout


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Agenda

18.03.2011 Page 3

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1 European economic development in 2010

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2 Recent economic history of Ireland

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3 Current sitation bail out

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4 Summary


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Spring 2010: Financial melt-down in Greece

European economic development in 2010

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Euro devalues massively

Danger of Greece becominginsolvent

Rescueing help from the EU

No existing aidplan

Refinanceproblems inGreece


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EU emergency fund

European economic development in 2010

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EFSFEuropean Financial Stability Facility

500 bn from the European Union

250 bn from the IMF

(International Monetary Fund)

Objectives: stabilze the currency, stop destructive speculation,aid endagerd countries


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Situation until 2007

Recent economic history of Ireland

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Celtic Tiger years

Low taxes for companies

(Ireland: 12,5%, Germany 30%)

Low financial regulation

High foreign investments

Booming real estate sector

Strong and growingeconomy


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Financial Crisis


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Financial crisis

Vast decrease of foreigninvestments

Real estate bubble popped

Ireland as one of thefirst entering a heavy

recession


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Irish banks


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Low financial regulation

Irish banks went megalomanic Irish banks invested in the real

estate sector in a big way

Bn. , data from 2009


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Irish banks in trouble


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Went in danger of bankruptcy

One of the biggest (AIB) had to benationalised

Still making massive losses

Ireland is forced to spend moneythey dont have!

Strongly affected by theinternational crisis and the popping

real estate bubble

Finding a long-term solution forAnglo Irish Bank is by far the biggestchallenge in resolving the bankingcrisis. The sheer size of the bankmeans there are no easy or low cost

options. (Minister ofFinance, 30March 2010)


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Ireland in trouble

Current Situation bail out

18.03.2011 Seite 10

Ireland has problems to refinance

its bonds

Ireland in risk of bankruptcy

Euro gets in trouble

Bad development for otherendagered countries

EU offers help

Ireland accepts thebailout


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The bail out - details


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Interest rate: 5.8 %

Below market rate of interest (8,5 %)

Above Greek interest rate (5.2 %)

Works way faster

Application of funds

10 bn. - Instant supportfor Irish banks

25 bn. - reserve forIrish banks

50 bn. - nationalbudget of Ireland


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Irish government is forced to save money


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Conditions for the credit

Cutting expensens in general &

Cuts in the welfare system -10 bn.

Raise of taxes 5 bn.

(not coroparte taxes!)

Get back to Maastrichtrules until 2015

Budget deficit 2010: 32%

-> 2015: 3%


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Effect of the bail out


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Protest against bailout-plan

Affects every Irish person

Everybody has to pay more or gets less support

People feel like if they have to pay for thee bankers andthe governments mistaktes

People dont want the EU to have control over their country

Strong sense of idependence

Bailout plan extremely unpopular

Heavy protests against it


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Summary

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rapidly growing economy for a long time

Heavyly affected by the financial crisis

Had to save its biggest banks from bankruptcy Became endagered itself

Had to be saved by the EU and the IMF

Got very strict conditions for that, which are very unpopular

Effectiveness of the bail out is uncertain

Ireland


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18.03.2011 Page 15

Questions

Thank you for your attention

irish bailout without pictures

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