Sunday 17 December 2017

We are doomed unless we stand up for ourselves

If we were treated fairly by Europe, we would not shirk our financial responsibilities, writes James Fitzsimons

A government that cannot see the wood for the trees is leading us to financial ruin. Soon we will be no better off than the Greeks and we will still be treated like a pariah. Having paid €713m to the unsecured bondholders at Anglo Irish Bank last week, the figure will rise to nearly €2bn in January when we fork out another €1.25bn. Meanwhile, Michael Noonan has outlined his ideas on how to balance the books at the Department of Finance.

The EU banking model removed any risk for speculators who bought up the controversial bonds. It was like betting on a one-horse race. Unless someone shoots the horse, it will win. These bonds could be bought for 50 per cent of their face value. So the potential gains were huge.

As an investment, bonds come somewhere between bank deposits and equities. Like deposits, what you invest you get back at the end of the term. This is the face value of the bond. Unlike deposits, bonds can be traded in the open market until they reach maturity. While the annual income from the bond is fixed, the market value moves up and down relative to interest rates and financial risk. The benefit for the bondholder is that they get back what was invested at the redemption date. The only thing that would prevent repayment is insolvency.

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