It is a good question, following this article in the independent, indicating that the Irish banks, including AIB are about to burn the junior bondholders, asking for 10c to 20c in the euro.
After all, the Irish state is a majority owner of AIB, and as such, and up until now, having guaranteed all the debts by the major banks, but now, seems to default on their promises to the lenders, by defaulting and demanding a 80-90% haircut, which is according to finance minister Michael Noonan, was the minimum burden-sharing acceptable by the government.
This simply means that the banks does not have the capital needed to repay the bondholders in full, that the banks remain troubled, and that the state are not able to back their obligations in relation to the lenders to the banks, as they need new capital to cover losses and repayments to more senior bondholders.
If the market were skeptical about Ireland before, this certainly won’t help the Irish, and the recent talk by government ministers about the need for a second Irish bailout, has made the open market even more jittery about Ireland.
It is a truly sad story, and a big mess, for everyone involved – especially for the already hard-pressed Irish people, because little or nothing good can come out of this.
