EU fiscal compact treaty and Ireland

Philip R Lane, a professor of international macroeconomics at Trinity College Dublin, wrote in today's Irish Times on the fiscal compact treaty that was agreed by leaders of 25 EU countries last week.

Here is my contribution to a thread on the Irish economy blog.

This is a good article focusing on the big picture of what is the start of a process towards a better designed euro system -- better not perfect and for sometime ahead, in for example China's interest to have a second global reserve currency, currently at 26% of total world reserves.

It's good that pressure from Europe helps to improve Irish water standards, forces some action on septic tanks just as a European Court of Justice deadline is about to kick in and eventually maybe will be a catalyst for a credible waste management system.

Twice in a generation, the Irish economy was wrecked and the underlying culture remains the same despite the crash. More intrusive European intervention is a positive development.

There are 101 or more other issues that can be raised and some regard their particular interest as the main issue. The agreement provides a framework to move forward and with 25 countries involved there will be operational changes as time goes on.

German mercantilism is seen as a problem but where we gain, at least in cash terms from the Common Agricultural Policy as does France -- should radical reform be welcome? Why should American multinational companies be able to pay Ireland corporation tax on the sales that are made in for example the UK (e.g. Google)?

Much of the 'whataboutery' can divert attention from the main priority of policy.

Individual countries have to take the initiative to radically modernise their economies over the next decade or else they will remain in the doldrums for much longer.

No amount of German consumption will make a difference if there is nothing to sell. 

Some talk about transfers as if money should be provided for corrupt systems without question. The US federal union is sometimes cited. However, for example West Virginia produces a lot of black stuff but it has not a black economy like Italy's where the national statistics agency Istat says is worth €255bn and €275bn a year, or 16.3% to 17.5% of GDP.

In 1980, Germany had trade surpluses with Italy, Spain and Greece.

In Jan 2010, George Provopoulos, governor of the Bank of Greece, wrote in the FT:

"During the 1980s, Greece had another twin-deficit problem (large and unsustainable fiscal and external imbalances) and its own national currency, the drachma. It waved the magic wand twice, with large devaluations of the drachma in 1983 and in 1985, but in the absence of long-lasting structural adjustment and sustained fiscal contraction. The devaluations were followed by higher wage growth and inflation, with no sustained improvement in competitiveness. Speculative attacks against the drachma were avoided only because of strict controls on capital flows, an option that is no longer feasible or desirable. The twin-deficit problem remained. So much for the magic wand of currency devaluation.”

Problems predated the euro while credit and property booms masked them in recent times.

Spain and Ireland headed the 1993 unemployment rankings of the member countries of the OECD. Spain's rate was at 22.4% and Ireland's was at 15.8%. In December 2011, Spanish unemployment was at a rate of 22.8%; Ireland's was at 14.3% and in October 2011 Greece's rate was 19.2%. Of the 34 member countries (mainly rich countries) of the OECD in 2011, Spain, Greece and Ireland headed the rankings.

Greece can do much better. Its neighbour Turkey was also regarded a basket case a decade ago.

No economy is Utopia but Turkey's budget deficit is now about 1.5% of GNP, but it runs a primary surplus. A decade ago, Turkey's budget deficit was 12% of GDP. In 2002, government debt was 74% of GNP, now it's 39%. A decade ago, Turkey's per capita income was US $3,300. Now it is about $10,500.

As for Italy, the estimate of tax evasion in 2009 was €119.6bn - - almost four times the value of the Prime Minister Mario Monti's recent austerity budget and 28% of the amount  that was collected in taxes - - according to calculations reported last month by the Rome daily 'La Repubblica.'

Irish 'commercial sensitivity' excuse a relic from Victorian times

Ireland is a very conservative place and the cocktail of inertia and an attitude resistance to change, often powered by vested interests, invariably trumps the public interest. The Irish excuse of 'commercial sensitivity' to keep information on public spending hidden from the public is a durable relic from Victorian times.

Prof Richard Tol, the environmental economist, who recently left the ESRI (Economic and Social Research Institute) and joined the staff of the University of Surrey, has commented on the public consultation on the establishment of Irish Water, the planned state agency.

He has argued that charging for water and waste water is right and proper; and doing so through a state-owned, tightly regulated monopoly is a reasonable solution (although you can argue for a mutual company instead).

A report commissioned from PWC, the Big 4 accounting firm, says:

“For the Public Utility Model a high level assessment was undertaken in relation to what the financial position of the business might be and in particular the likely funding requirements, based upon a number of assumptions made and sensitivities chosen. Given the commercially sensitive nature of aspects of this assessment, some of the specific assumptions and the detailed findings have been redacted from this section of report.”

Prof. Tol in a thread on the Irish Economy website says: "Ireland is an unwilling party to the Aarhus Convention, which grants access to data except 'where such confidentiality [of commercial and industrial information] is protected by law in order to protect a legitimate economic interest'. As Irish Water will be a monopoly, I do not think there is a 'legitimate' economic interest in hiding data.

Unfortunately, state-owned companies have made a habit of hiding behind 'commercial sensitivity' when there is none."

I have added this comment:

The state guarantee of employment for the public service and the secrecy that protects insiders in the €15bn public procurement system dates from the reign of Queen Victoria.

In recent years the Empire Day holiday has been on the agenda of the crew of the slow boat to China.

The conservative instinct is still very strong (note how lawyers on the left and right of the spectrum over the decades never saw reason for reform of the archaic British system.)

I wonder if the problem is more than just conservatism and self-interest.

We appear to have a big share of both dim and timid people in the country.

We have had ideas competitions but it would be strange to find the people who could implement change propose ideas that would gain public attention.

Irish have little interest in reform despite economic crash

The Irish appear to have little interest in reform despite economic crash and any changes in colonial era systems depend on continuing pressure from the European Commission-European Central Bank-International Monetary Fund troika.

Colm McCarthy, UCD economist, opened a thread on the issue on the Irish Economy blog.

The following are 2 post contributions:

Post 1: Put a cross on the mantelpiece! We begin the year on the subject of reform.

For decades, political inertia/the slow boat to China/slow motion, have been the default modes at governance level and there was little evidence of acceleration post the early Aug 2007 onset of the credit crunch and after the issue of the bank guarantee in Sept 2008.

Politicians can be slammed but is there a real public appetite for change/reform?

Eureka above left the cat out of the bag, lamenting why other issues such as German banks are not on the agenda. The truth is that it’s much more exciting feeling outraged about the shortcomings of the likes of Germans than addressing shortcomings at home.

The auld victims’ cross provides a lot of comfort and even in the small number of the population that contributes to this blog, a subject like this can never match the interest evoked by ones on banks and Europe.

This should trigger the question about the chicken and the egg.

There are consequences when we do not accept the principal responsibility for this feast and famine crisis. Forgive us our debts and pray for us!

Conservatism reigns from left to right on the political spectrum and traditional trade unions are as mute about change as their richer counterparts representing the sheltered professions.

It’s always easy to oppose change and we had a bizarre intervention in recent months from 8 former attorney generals who warned about referenda proposals but they are mute about the colonial era legal system that made them all rich and is a burden both directly on the State and citizens.

The excess earnings of the legal and medical professions do also have consequences other than direct costs - - the State spends about €500m annually on legal fees.

We do have a template of an economy that introduced reforms in response to an economic collapse; its net debt as a ratio of GDP is now a negative of more than 50%; it has no private schools and no league tables where playing rugby can give a lift for a job, as there is little variation in the standards of schools; it has no private universities and no tuition fees; teachers are required to have a minimum of a master’s degree and competition for university places are highest for teaching-related degrees not medicine and law; the equivalent of the Leaving Certificate is the only standardised exam; teachers have a lot of autonomy and the level of homework required is low; in the past decade it has been among the countries with the highest achievements in maths, science and literacy.

Finland radically reformed its educational system following the collapse of its economy in the aftermath of the disintegration of the Soviet Union in 1991.

It pays its teachers well as they are comparable with earnings of medics and lawyers - - but still lower than levels in Ireland.

In 2009, the rate for a primary teacher after 15 years was €50k in Finland and €68k in Ireland according to the OECD. It was €61k at upper secondary level and €68k in Ireland.

In Finland in 2009, a Finnish GP’s pay was 1.8 times the average wage and 3.5 times in Ireland; a salaried specialist earned 2.6 times the average wage in Finland and 4.5 times in Ireland.

According to the OECD’s Education at a Glance 2011, Finland spent 5.8% of GDP on education in 2008; Ireland spent 5.6% (Ireland’s GDP is inflated by the profits of foreign multinationals and GNP is about 20% lower. So effectively Ireland spends more on education than Finland). The United States spent 7.2%; South Korea 7.6% and Norway 7.3%.

Oil-rich Norway compares poorly compared with Finland and it has teamed up with Statoil, the state oil company, to recruit maths and science teachers.

Teachers pay in Norway is low compared with that of other graduates.

So Ireland’s university chiefs want more money from the public but fear not that there will be any hint of radicalism at this time of crisis.

The late American historian Daniel Boorstin, wrote in an essay, ‘The Amateur Spirit and its Enemies,’ published in his book ‘Hidden History’: “In the United States today there is hardly an institution or a daily activity where we are not ruled by the bureaucratic frame of mind — caution, concern for regularity of procedures, avoidance of the need for decision” — all of which, Boorstin suggested, was best summed up “on a sign over the desk of a French civil servant: ‘Never do anything for the first time’.”

I did think once that the Irish only responded to a serious problem when it had transmuted into a dire crisis. Now, I’m even having doubts about that.

Post 2: The OECD’s latest education data published last year shows that in respect of 2008, Irish per capita education spending per student exceeded Finland’s in primary, secondary and tertiary (Ex R&D spending).

http://dx.doi.org/10.1787/888932463593 (Excel)

There is little evidence of long-term thinking at policy level. While it’s said that it suited Seán Lemass and Jim Ryan, the finance minister, to have Ken Whitaker publicly associated with the proposals in ‘Economic Development’ in 1958, it’s unlikely that he would have remained as an anonymous adviser. However since he retired, there has been no senior civil servant who has publicly lifted the Victorian veil.

Enterprise agency chiefs in public waffle in bullshit and spin, rarely if ever saying anything of consequence that is not in line with the ministerial position and one can only wonder if that is the only interface that the minister for enterprise and jobs has with the market.

No wonder Bruton and his sidekick Seán Sherlock so resemble the O’Keeffe/Lenihan double act.

China’s recent rise has been remarkable and will continue to be so. However, it is building on a deep base.

According to the late eminent economic historian, Angus Maddison, until 1800, about three fifths of the world’s commerce and production took place in and around China and India. So did much of the world’s scientific and technological progress, including the Chinese invention of paper, explosives, and printing, and medieval India’s launch of modern mathematics. In the early 1830s, when President Andrew Jackson sent the first US envoy across the Pacific to Siam (Thailand), Asia still accounted for over half of global GDP.
China, a vast unified country over a span of two thousand years, overwhelmingly dominated by one ethnic group, the Han, was a pioneer in bureaucratic modes of governance. Maddison says that in the tenth century, it was already recruiting professionally trained public servants on a meritocratic basis. The economic impact of the bureaucracy was very positive for agriculture.

They nurtured it with hydraulic works; printing enabled the distribution of illustrated agricultural handbooks; farmers settled in promising new regions; a public granary system to mitigate famines was established. They fostered innovation by introducing early ripening seeds which  permitted double or triple cropping. New crops were introduced  - - tea in the T’ang dynasty, cotton in the Sung, sorghum in the Yuan, and new world crops such as maize, potatoes, sweet potatoes, peanuts and tobacco in the Ming.

The science of champagne

As the minutes tick toward midnight on Saturday and you are running out of conversation topics, why not bust out some trivia about the science of champagne to impress your friends.

The Discovery Channel says they may already know about French law, which decrees that grapes must be grown in the region of Champagne in order for sparkling wine to qualify as true champagne. But your companions might not know about Henry’s Law, explains a New Year’s themed video produced by the American Chemical Society.

This law of physics states that the pressure of a gas above a solution is proportional to the concentration of the gas within the solution. For champagne, carbon dioxide is the gas that forms those delightful bubbles. And, in an unopened bottle of champagne, there is equilibrium between the CO₂ inside the liquid and the gas in the spaces of the cork.

Some fun from the US...

Democrats go after Mitt Romney with a scathing new ad that suggests the Republican presidential hopeful will say anything to get elected:

Ugly discrimination

Greg Mankiw, a professor of economics at Harvard University says: "Chapter 19 of my favourite textbook has a case study on the economics of beauty, highlighting research by economist Dan Hamermesh.  So I thought some blog readers might enjoy this Daily Show clip featuring Hamermesh and his work on this topic."

The world's most expensive photograph

Mark Twain, the American writer, was reputed to have said that a fool and his money are soon parted!

The Rhine river by German artist Andreas Gursky (b. 1955), titled Rhein II, the chromogenic colour print face-mounted to acrylic glass was sold for $4.3m  at Christie's in New York, setting a record for a photograph sold at auction

Lot Description

ANDREAS GURSKY (B. 1955)
Rhein II  signed 'Andreas Gursky' (on a paper label affixed to the backing board)
chromogenic color print face-mounted to Plexiglas
image: 73 x 143 in. (185.4 x 363.5 cm.)
overall: 81 x 151a x 2 in. (207 x 385.5 x 6.2 cm.)
Executed in 1999. This work is number one from an edition of six.

The Eurozone debt crisis explained!

WorldIrish.com a useful service but €20m annual profit is über-optimistic

WorldIrish.com, a website for the Irish, or anyone who has an affinity with Ireland, "harnessing the power of existing social networks while deepening the relationship of users to the Irish experience, across culture, arts, sports, media, business and science," was launched at the weekend to coincide with the second Global Irish Economic Forum in Dublin Castle.

It is claimed it will harness the phenomenal advances in Information and Communications Technology allowing the ‘Irish Tribe’ to come together in a gathering with unlimited global potential. Through the WorldIrish initiative Ireland will be the first country to embrace social media to co-invent a platform between a country and its Diaspora - - maybe but it does not appear to be a potential news portal.

It is not exactly original in that there are already several online Irish theme services including US ancestry sites and the Irish Times one.

WorldIrish.com was unveiled by John McColgan (co-founder of Riverdance, and Tyrone Productions):

“Today, around the world, it is evident that the power and potential of the internet and social networking to communicate on an unprecedented scale is influencing change in ways which would have, until recently, been unimaginable. The timing of a project like this is opportune as Dublin is now the leading capital for social media with the presence of giants such as Facebook, Google, LinkedIn and most recently Twitter. You don’t have to be Irish to be WorldIrish  - - anyone with an affinity with Ireland and Irishness from anywhere in the world can join,” said John McColgan, chairman of WorldIrish.

McColgan said he expects a profit of €20m per year in coming years, at the launch at Farmleigh House, in the Phoenix Park on Friday.

Worldirish.com will bring together Irish-centred social media content fromFacebook, Twitter and other websites to create a massive online Irish community. It is seen as a key tool for attracting investment toIreland, serving as a gateway to our culture, business, tourism and sporting sectors.
 
However, there is a limit to what the likes of Facebook will allow in terms of piggy-backing on its content. Twitter has already shutoff services that have depended on using its content.

A global advertising campaign would cost millions and given the economic crash in Ireland, it's only RTÉ, the State broadcaster, that can subsidise from the licence fee (despite what it claims) expensive online content.

Advertising is a not a sustainable model as there will be little from financial services, recruitment or property for many years.

Even with millions of users, e-commerce commissions from for example tourist bookings will also be thin gruel.

Meanwhile, the service will have to provide compelling content for users to regularly use the site.

The promoters said last weekend that in May of 2010 Gateway Ireland hosted a seminar in Dublin Castle.  It was attended by 300 delegates and with a range of guest speakers and panels.  Key members of the advisory board who have also invested to date include Denis O’Brien, Terry Clune and Dermot Desmond. The backers have believed in the project since the initial gathering at Dublin Castle. They are passionate about the opportunity for Ireland and believe the time is right for a site like this that allows people to express their affinity and pride in being Irish and let their creativity contribute to making a difference.

Following on from that seminar the process of building the site began in January of this year.  Working with a core staff and the best young Irish technology and design companies the process began and Gateway Ireland morphed into WorldIrish.com. Initially targeting the wider Irish community across the globe, the comprehensive online and offline marketing campaign will be tailored to target the various geographical and demographical elements that make up that market in the Social media space.

“WorldIrish.com is creating an API (application programming interface) that is an open platform on which it will develop its various online applications. The site is currently in beta and a range of applications and features will be rolled out over the coming months, working hand in hand with the community as part of a co-invention process” said Michael Baraga, newly appointed CEO of WorldIrish

To date €3m has been raised, out of which almost €1m has been spent getting the project to where it is today. Additional investment is now being sought.

Research shows that of the 70m Irish Diaspora, 49m are online today  -- this type of claim has echoes of the dot-com period..

Based in the centre of Dublin in Capel Street in the old Tram Terminus, "the project envisages operating as a thriving technology and media hub and is an opportunity to create a special place where WorldIrish will thrive."

Maybe and we wish these folks luck.

We have been around before Online.ie, an online portal was launched, as an Irish version of Yahoo and a gateway for the Diaspora.

Bruton plan's plan for 200,000 net new Irish jobs

Richard Bruton speaking to a US-Irish conference in Dublin today, said he is working on a plan to create 200,000 net new jobs - -  effectively restoring employment to the 2m level.

His predecessors were great with targets even adding expected indirect jobs and ignoring job attrition.

It brings Yoggi Berra, the famous Amercican baseball player's quip, "It's déjà vu all over again," to mind.

Irish enterprise policy is dominated with spin and vacous superlatives and nothing has changed with the new government.

Bruton told the Americans today that the Irish-US business relationship "is now very much a two-way street, with Irish companies in the US employing almost as many people as US companies in Ireland."

This week, Elan, said it plans to move its main stock exchange listing to the US, as 94% of its shareholders are located outside Ireland.

Its good for bragging that CRH is technically an Irish company and a big employer in the US but most of its 80,000 payroll are not based in Ireland and neither are its shareholders.

The problem with Bruton and Seán Sherlock, his junior minister, is that they have seamlessly taken over from O'Keeffe-Lenihan, as cheerleaders of university research as a potential jobs engine, when it is a failed strategy.

Another fundamental problem is that there is no credible data on firm survival and mortality to support grandiose aspirations.

A non-sugar coated assessment of the challenges would be a good start and a big surprise.

Press statement:

The Minister for Jobs, Enterprise and Innovation Richard Bruton TD today announced that he has begun preparation of a comprehensive Jobs Strategy, at the request of the Taoiseach and Cabinet Committee on Jobs with a target of 200,000 net new jobs. 

The Minister has previously signalled his intention to prepare a jobs plan at a speech at MacGill in July. It is expected that the Strategy will be published in January.

The Minister made the announcement in his address to the US/Ireland Business Conference at Farmleigh, which he is co-hosting.

During his address, the Bruton said: “The relationship with the United States is of vital importance to Ireland and this government is determined to work hard to strengthen and deepen our links to the benefit of both countries. This relationship, which was once based entirely around the great success story of US investment in Ireland, is now very much a two-way street, with Irish companies in the US employing almost as many people as US companies in Ireland.

“Jobs are at the very top of this Government’s agenda, and if we are to achieve the turnaround in employment that we so badly need, we must implement radical reform across every aspect of the economy. I have spoken before about the need for an innovation revolution – a revolution that brings innovation out of the laboratories and into our businesses, our communities, our schools, our public bodies and every aspect of our economy.

“We must broaden our strengths over and above the reliance on the traditional foreign direct investment that has served us so well. Within the multinational sector, we must seek to attract international entrepreneurs to start businesses in Ireland, and must strive continually to encourage the world-leading companies already here to locate the pioneering parts of their businesses here. However we must also recognise that our indigenous companies have the potential to significantly increase their exports, and do what it takes to create a real indigenous engine of growth.

“We must learn from the world-leading companies we are so lucky to have in Ireland and find ways of ensuring that our indigenous companies can lead the world in the vital processes that add value and create employment: productivity, design, management and research and development.

 “If we are to bring about these types of changes, we need a plan, and that is why I have committed to prepare a comprehensive Jobs Strategy. This Strategy will not attempt to compete with the large number of reports already prepared on this subject, but will draw from the volume of material already available, as well as the amazing level of expertise available both in Ireland and abroad. I have already started a rolling process of engagement on the issues and intend to create an action plan that Government can take to address our challenges.

“If we work hard and take tough decisions I don’t see why we should not aspire to:

• Create over 200,000 jobs to have 2 million people at work again
• Be the best country in which to run an enterprise
• Significantly increase the share of our indigenous business in export markets
• Return to and stay in the top five countries for cost competitiveness; and
• Ensure once again that all our children can have a future in Ireland.

Ireland and views of 'austerity'

A recent thread on the Irish Economy blog has been prompted by a comment from Paul Krugman, New York Times columnist, on austerity in Ireland and the Baltic nations. It begs the question as to what is austerity as the many beggars on horseback who in the past decade have had a donnybrook plundering the public purse, would object to reform and an end to their gravy train.

The following is one of my contributions to the thread:

It’s foolish to argue that cuts in public spending against the backdrop of a faltering recovery in developed countries, would boost economic activity in the short-term.

However, what should a country that is dependent on foreigners for most of its borrowing do?

Irish professional economists appear to be as lost for credible answers as the general public, four years after the onset of the global credit crunch.

Is there any research being done in this area?

The ESRI will likely publish material on the issue in years to come but expect nothing in the short term.

The issue of austerity reminds me of Harry Truman’s answer to a question on the difference between a recession and depression.

"It's a recession when your neighbour loses his job; it's a depression when you lose yours."

- - Harry S Truman, in Observer, April 13, 1958; 33rd president of US (1884 - 1972)

Politicians, senior civil servants and academics face personal conflicts of interest on the issue and in this recession, for the first time, trade unions have effectively abandoned advocacy on behalf of individuals in the unprotected private sector who are experiencing most of the pain.

The issue of mortgage debt forgiveness did briefly provide a glimpse of the plight of people who are generally invisible. It was also interesting that BlackRock Solutions, an American fund manager, was seen as providing an ostensibly painless solution.

So what does austerity encompass?

Greece has apparently thousands more teachers than classrooms; the well-off who generally evade taxes pay more in private tuition than the combined primary and secondary school budgets?

Would it be austerity for Ireland, a bankrupt country, to clawback the big payouts for politicians and public sector staff?

Not alone is there an Irish state guarantee of employment in the public sector and surplus staff are today being paid for doing no work, almost four decades after equal pay for women became an issue, it’s planned to have new permanent staff in the civil service on worse conditions than existing staff doing the same work - - all because politicians are afraid of upsetting the existing applecart and there is silence from others who choose less risky topics du jour.

Anglo Bank plans to cut its payroll to 900 but who believes that the defunct bank has work for all of them?; the citizens of a failed entity that becomes a ward of the State have exalted status compared with compatriots who are dumped on the street every week.

So ESRI, time for you folks to get ahead of the curve and try a bit of radicalism.

Finally, when should failed systems be reformed? - - when an economy is showing signs of recovery or flat on its back?

My answer is the latter, if it can happen at all.

Japan, Italy, Greece, Ireland…

Ambulance chaser in search of heart attack victims

The American Tort Reform Association (ATRA) says Palm Beach, Florida-based personal injury lawyer Craig Goldenfarb has taken to trolling for new clients to an arresting new low - - cardiac arrest. His advertisement, appearing on some taxi cabs, suggests that people who have heart attacks in public places should sue others for liability.

ATRA says neither Goldenfarb's ad nor website offers any information about the personal choices that can lead to heart attacks, such as eating or drinking or smoking too much and not getting enough exercise. "Apparently he'd rather we blame someone else for our problems," and that mindset helps make Palm Beach and Miami-Dade counties the collective judicial hellhole they are (see ATRA's Judicial Hellholes® 2006 report which cited South Florida among the nation's worst, most unfair jurisdictions in which to be sued).

In a news release, ATRA director of communications Darren McKinney said he found the ad's "opportunistic, ambulance-chasing mentality" to be "truly sickening" and rhetorically asked: "So who can I sue?" He added that "ATRA intends to keep reminding consumers, taxpayers and voters in judicial hellholes that they ultimately bear the costs for the lawsuit abuse that the Craig Goldenfarbs of the world foment."

Doom and gloom news religiously motivated?

There is no doubt that some people revel in bad news while others thrive on the public attention that messages of gloom bring them. 

This summer there simply was no "silly season" in the media. That's not because so much happened but because of religiously-motivated reporting hysteria, Austria's  left-liberal weekly Der Falter writes: 

"Catastrophes, crises and wars are shown live, and we watch the attacks with bated breath. ... Our religious instinct, a desire for meaning which we all share, longs for clarity and justice, perhaps even punishment. ... It serves us right when the earth quakes - even when it conveniently does it somewhere else.

Catastrophe journalism uses the most modern technology to satisfy atavistic reflexes, because the patterns of thought that lie behind our voracity for doom and gloom news are religious. 

How does it go in the Book of Revelations, that apogee of apocalyptic theories? 'You say, "I am rich; I have acquired wealth and do not need a thing." But you do not realize that you are wretched, pitiful, poor, blind and naked.' Then come the Riders of the Apocalypse live on CNN."

Translation from Euro Topics.

Irish Mortgage Arrears

The suggestion in the Irish Times that the Government may give additional powers to an agency such as MABS, the money and budgeting advice agency,  to handle the issue of ability to pay on a case-by-case basis, merits attention.

The issue of mortgage indebtedness is complex and it is clear that there is no “magic bullet” or “one-size –fits-all” solution, Michael Noonan, Finance minister, said today.

Noonan told the Oireachtas Committee on Finance, Public Expenditure and Reform that while there have been many contributions to the debate including suggestions for the granting of extensive debt forgiveness, "this simply is not a realistic option." He said solutions must be found on a case-by-case basis through open and meaningful engagement between the distressed borrower and the lender. The planned reform of the bankruptcy and debt settlement arrangements are also key elements in any consideration of potential policy options. 

On Monday, the Central Bank published the latest data on mortgage arrears and repossessions for the period ended June 2011. The figures show that 7.2% of private residential mortgage accounts are in arrears for more than 90 days.  At the end of June 2011 there were 777,321 private residential mortgage accounts held in the Republic of Ireland to a value of €115bn. Of these, 55,763 accounts, or 7.2%, were in arrears for more than 90 days. This compares with 49,609 accounts (6.3% of total) that were in arrears for more than 90 days at the end of March 2011. 95,158 accounts were either in arrears greater than 90 days or have been restructured.

Besides the restructured mortgages, there must be large numbers of people who are just about managing to keep up with their bills but the rational reaction to the expectation of some sort of blanket forgiveness would be to not keep up with payments.

I noted last week that we have one of the highest level of owner occupied housing in Western Europe without a mortgage and obviously some housing units were purchased by parents in their children’s names — I would think it’s a substantial number.

There are many other issues; it’s understandable that a person who lost their business or job may not be able to pay a €500,000 or €1m mortgage, absent downsizing, unless most of the balance is cleared. So shouldn’t an agency have power to set reasonable options for a borrower in distress? In some cases a mortgage could be cleared in full by downsizing.

These type of big schemes are ripe for abuse and the application of the law of unintended consequences.

Forty per cent of third level students are in receipt of a public grant; from the time the scheme was introduced fort years ago, it was common to find wealthy farmers, already in receipt of public handouts, having their children on grants motoring to college while struggling middle income families above the income threshold having to fund fees and maintenance.

Finally, it’s interesting how the BlackRock extreme scenario provision, produced by the US firm in the March 2011 Irish bank stress tests, appears to give the illusion of a cost-free solution, as the monies have been already set-aside. Contrast that with a situation where one issue in the debate would be the amount of a special mortgage income tax levy that should be introduced in Budget 2012, to cover the cost.

Irish Economy blog thread

Ireland and the Eurozone Crisis

Prof. Morgan Kelly delivered the Hubert Butler Annual lecture on Saturday in Kilkenny as part of their Arts Festival.

This is a contribution to a thread on the Irish Economy Blog.

Radical solutions are needed to respond to a changing global economy but the radicalism should begin within our own direct spheres of influence.

The Sunday Independent quotes Ray Kinsella of UCD today, proposing leaving the euro — a hugely consequential move - - and Morgan Kelly referred to improving the education system.

However, in Ireland, four years this weekend after the onset of the credit crunch, the default mode remains to leave the tough issues and choices to the politicians.

The people who know best how to get an improved education system on limited resources are likely insiders who keep their heads down to avoid upsetting sacred cows.

The performance of the university presidents in particular, has simply been shameful.

It’s the same with the €2.5bn science budget, as referred to above.

Like motherhood and apple pie, education and innovation get universal plaudits.

The minister for education, an intelligent architect, should not be expected to produce miracles; In Enterprise, Bruton/Sherlock have replaced O’Keeffe/Lenihan and their soundbites on innovation are interchangeable.

‘Ecosystem’ and other jargon surely papers over a lot.

As for radicalism, while the 2008 state bank guarantee is now generally discredited, could someone enlighten me as to what is the current rationale for providing a state guarantee to workers who have the best pay and perks in the workforce?

*****

The number of taxis for hire in central Dublin at midnight at weekends is striking.

The High Court had mandated deregulation in 2000 and recently the joint labour committee system was declared illegal.

Strange or not in a system of strong vested interests, where the political system failed, the courts have only been asked to rule or have chosen only to see the need for remedy at the bottom of the economic pyramid.

@ Brian Mercer

The primary system doesn't resemble Saudi Arabia and teaching a number of languages is not an impediment to a successful educational system.
In fact our aspiration to restore usage of the native language, while not being willing to put up with the hassle, speaks for itself.

Ireland's debt downgraded to junk

Last week, Moody's, the credit ratings agency, downgraded Ireland's sovereign debt to below investment grade or 'junk' status.

Investments funds generally specify the minimum rated debt that they can buy.

The following are 2 of a number of contributions to an Irish Economy thread on the development.

Samuel Johnson said that “when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully.” The prospect of losing a job in today’s money economy, which for some would be permanent unemployment, can have a similar impact.

Hugely consequential proposals can be made by people who are protected from the storm but for example introducing capital controls would likely trigger speculation about leaving the euro. The battered private sector would again be in the eye of the storm while public sector job guarantees would remain in place.

By the end of this year, from the start of 2008, about 5,300 Irish companies will have collapsed; many of the surviving ones have incurred bad debts from the bust companies while dealing with big falls in business during the recession.

There are tens of thousands of jobs in the SME sector in peril; while exceptions would likely be made for foreign payments for supplies where capital controls were in place, who overseas would provide credit?

How many here know what it’s like to arrange cash-flow each month for the payroll, where bank credit is restricted and customers have to be hounded to pay?

IFSC companies also use the domestic banking system as do the other FDI companies.

http://www.finfacts.ie/irishfinancenews/article_1022725.shtml

@ Aidan R 

Ireland has engaged in a fiscal adjustment equivalent to 14 percent of GDP. This is the LARGEST budgetary adjustment seen anywhere in the Western world.
It beggars belief that some still think more cuts in spending are required to fix Ireland’s economic woes (or that we did not cut more).

This argument has been made from 2008, usually by individuals from the public sector. In terms of income adjustments, most of the pain has been felt in the private sector. Self employed pension coverage was down to 36% in 2009 and is likely much lower now.

With about 75% of sovereign borrowings dependent on foreign lenders, what should we have done when a big global recession suggested that a recovery would take years?

There was no growth in jobs numbers in the internationally tradeable goods and services sectors in 1998-2008 as the workforce expanded by 25%; exports increased in nominal terms by 50% in 2000-2008 as the CPI rose 35%. However, additional output from the MNC sector is not permanent wealth.

In 2000-2008, GNP increased 74%; welfare spending +160%; health +186%; education +128%.

In 2010, current public spending was €61bn - - it was €52.5bn in 2007; In 2010, gross gov revenue was at €47bn - - it was €61bn in 2007.

The rise of unemployment and the legacy of the boom with possibly over 200,000 foreign nationals on welfare (78,000 adults are on the Live Register) are factors but the inconvenient truth is that there remain significant bubble gains in the system.

Just take one example: In Sweden, one of Europe’s best economies, MPs are paid 28% less than the standard pay of TDs and the Swedish expense system would certainly not enable an MP to have a second home paid by the taxpayer over the term of a mortgage. In Ireland today, independent TDs get an annual €41K tax free gift - - no audit, no need to say what it’s spent on - - called a ‘leader’s allowance’ in addition to normal lavish expenses. This payment amounts to 57% of a Swedish MP’s annual salary.

This litany could go on and on.

It’s interesting that the politicians and civil servants are the ones who have responsibility of rounding the circle. They also have been the big gainers from the bubble, despite some cuts, and will all be beneficiaries of an exclusive pension scheme.

Add in the ESRI, the Central Bank, the universities - - with the exception of Colm McCarthy who has had the experience of fighting for a living in the private sector - - and the trade unions who now mainly fight for public sector interests, is it any wonder that 4 years after the onset of the credit crunch, apart from short-term fire fighting, baby steps have only been taken in response to the bursting of the bubble?

German and Irish competitiveness

The following is a post to a thread on German and Irish competitiveness in recent years.

Standard & Poor’s reported in 2009 that in 2007, the average age of cars registered in EU-15 countries was 8.2 years, up from 5.8 years a decade earlier. This increase was in part because of the improved overall quality of cars. In Ireland in 2007, a driver of an 8-year old ‘banger’ would have been viewed as a loser.

Cars were the biggest export sector for Germany at 16% in 2010; the majority of German cars were built outside Germany in 2010 — which was a boost for the German car parts industry.

Of the €10.9bn goods surplus in April, €1.5bn related to the Eurozone. In 2010, imports from the then other 15 EZ countries grew 4% faster than exports.

Germany became a net exporter of food and drink in 2008 for the first time since the Federal republic was founded; the arrival of Aldi and Lidl in Ireland has been a gain as Tesco now faces serious competition.

Common claims that exports have risen because of competitiveness should not be taken at face value in Germany or Ireland.

German companies were best placed to respond to demands from rapidly expanding emerging economies; the output of both big firms such as Siemens, Volkswagen and BASF and smaller family-run firms with a tradition of making quality machine tools, was in demand.

For several years, the Irish business economy total labour cost per hour has been a few percent below the German level and 30% below Denmark’s. Irish employer social security costs are low as there has been no obligation to provide pension cover.

The influx of migrants kept labour costs lower than they would otherwise have been during the boom and also enabled companies like Google to centralise localisation services in Ireland.

There is no evidence that overall competitiveness has impacted exports from the FDI sector. The closure of Dell’s Limerick plant was a special case as the PC manufacturing sector travelled the same road as the TV set industry.

Big electricity users have got low rates and while the indigenous food sector was hit by the fall in sterling, it is now benefiting from the resumption of a food commodity boom.

Excessive costs in the non-tradeable sector do of course impact the potential for economic development.

Stephen asked:

Now think about the competitiveness challenge Ireland has. Ireland must (and will) return to the Eurozone average at least, by accepting lower wages and deflating the economy. But will it ever really get close to Germany’s level of competitiveness?

In 1991, when Ireland’s interest on the national debt took 28% of tax revenues, German financed structural grants more than offset that burden and typical building site costs were 10% of the cost of a house. Site costs jumped to as much as 50% and the land rezoning system remains unreformed.

Public staff pension costs jumped 14% in the year to March and the litany could go on…legal costs have risen 12% since 2006 despite the crash and deflation.

A speech by the ECB’s Jürgen Stark on Mar 17, 2008 has a table of unit labour costs total economy - - (not to be confused with labour costs per hour in the business economy) for EZ economies 1999-2007.

It shows a rise of 33.3% for Ireland compared with 2.9% for Germany.

http://www.ecb.int/press/key/date/2008/html/sp080317.en.html

German labour reforms, including flexibility during downturns in collective agreements, proved their worth in the recession.

Prof. Hans-Werner Sinn had a book published in 2003:Ist Deutschland noch zu retten? (Can Germany Be Saved?) - - Its blurb read:“Taxes keep rising, the pension and health insurance systems are ailing. More and more companies are going bankrupt or are leaving the country. Unemployment has reached alarming levels. Germany is outperformed by its neighbours. Its growth rates are in the cellar, and it can’t keep up with Austria, the Netherlands, Britain or France. Germany has become the sick man of Europe.“

The Greek and European debt crisis

The following is from an Irish Economy Blog thread on an article in The Wall Street Journal:

It’s odd that two academics could produce such a fact-less op-ed article.

The banks in Spain, Portugal and Italy are not ‘chock full of their government’s debt’ as clliamed - - the figures for 2010 were €200bn, €13.7bn and €145bn respectively.

The earnings of most of Europe’s big banks are at risk from restructuring rather than capitalsiations.

Italy’s UniCredit had a sovereign exposure of 2.8% of 2010 total book value while Spain’s Banco Santander was at 11.8%. Spain’s second biggest bank BBVA was at 3.7% - - 43% of BS profit in Q1 was from Latin America.

How realistic is it to include Italy when the private sector has the highest savings rate in Europe and half the sovereign debt is financed locally?

The main risk from Greek debt is the exposure of its banking system and a related collapse of its economy; the direct exposure of German and French banks is relatively low at €34bn and €55bn (2 Greek banks are majority owned by French banks) respectively. There are other distributed exposures to insurance companies etc and the ECB.

A Greek default would unlikely bring down a big European finance firm.

An editorial in Friday’s FT titled ‘The evaporating reform of Greece,’ says “The international financial rescue of Greece in May 2010 was, first and foremost, an emergency operation to avert a sovereign debt default, save Europe’s banks and prevent the collapse of the euro. But the crisis also represented a once-in-a-generation opportunity for Greek politicians, business leaders, trade unionists and the general public to join together in cleaning the putrid Augean stables of the modern Greek state…Thirteen months on..myopic politicians, in government and opposition, trade accusations over trivialities and pay lip service to the cause of reform. The public, suffering its third successive year of economic recession, is by turns angry, desperate and drained of hope.”

Greece had a debt to GDP ratio of 25% in 1981 when it joined the then EEC. Turkey’s was 42% in 2010.

I made similar arguments to the FT’s in respect of Ireland in the article in the Dublin Review of Books - - only to have them dismissed by UCD economist Karl Whelan as ‘nonsense.’

I also argued that the socialisation of bank debt had been pioneered by Ireland when as Commissioner Almunia confirmed this week, there was no EU policy on protecting senior bondholders. It’s a pertinent issue as Anglo was nationalised just 15 weeks after the issue of the bank guarantee.

On reform of Europe’s governance system, it’s reported that it’s the directly elected European Parliament, that is pushing for a system with credible sanctions against the resistance of member governments.

Dr. Stephen Roach of Yale and Morgan Stanley, wrote this week of zombie consumers and the gridlock on fiscal reform in Washington DC.

The chattering class may not view reform as important but in the real world of jobs and business at a time of uncertainty, agreement on long-term reforms must surely have some positive current impact on consumers and business investment.

Dublin Review of Books: Article on Irish economic crisis

Finnish ice hockey team heroes return home drunk

After winning the Ice Hockey World Championships, many players of the Finnish ice hockey team returned home drunk this month.

The Finns and Irish share a love of the bottle and Lahti’s Etelä-Suomen Sanomat newspaper reported that tens of thousands of cheering fans were in Helsinki to greet the heroes who had just returned from humiliating archrivals Sweden 6-1, in the finals in Slovakia.

The state of stupor of the team was evident when team captain Mikko Koivu, his gold medal hanging on his chest, held up the trophy.

The trophy had been damaged by a drunken assistant coach who did a faceplant as he descended the steps of the airplane. Apart from him, almost all the team on the platform were “staggering around in a drunken stupor.”

The newspaper said that in Finland “people have nothing against getting a little tipsy.” But that level of drunkenness was just embarrassing - - particularly for young men who are supposed to be “heroes and role models.” Those responsible for the team should have “made sure that nobody was drunk on the plane ride home.” As it is, the hockey association “has an apology to make” to the Finnish people.

World alcohol country rankings

Jon Stewart: La Cage Aux Fools and Dominique Strauss-Kahn

Jon Stewart on The Daily Show responded to supporters of Dominique Strauss-Kahn such as Ben Stein, who is lawyer, actor, newspaper columnist and Nixon speechwriter who opined earlier last week: "The prosecutors say that Mr. Strauss-Kahn 'forced' the complainant to have oral and other sex with him.

How? Did he have a gun? Did he have a knife? He's a short fat old man," and "Can anyone tell me any economists who have been convicted of violent sex crimes?"

Bloomberg article, May 24, 2011: Strauss-Kahn Case May Curb Libertine Ways

Irish Men without Work

Brendan Walsh, emeritus professor of economics at UCD, writes in the Irish Economy Blog that the rise in the Irish unemployment rate reveals a grim picture of the impact of the recession. The overall unemployment rate has risen from 4.4% at the beginning of 2007 to 14.6% today. Male unemployment is now 17.3%, while unemployment among men aged 20-24 is 32.3%.

Concentrating on the situation of males in some key age groups, unemployment rose dramatically in all fours age groups, but younger men were most severely affected.

Irish Economy thread

I wrote: This is an impressive presentation and there are interesting parallels with the US.

Economists at the Hamilton Project of the Brookings Institution, say that up until the early 1970s, virtually all prime-aged men were gainfully employed - - regardless of whether they had a high school diploma or a college degree. Over the last 40 years, however, the United States has witnessed a dramatic change in the employment situation for men, particularly for less-educated workers who have faced greater challenges finding jobs and have increasingly dropped out of the labour force.

Separately, Prof. Michael Spence and a colleague have produced research which shows that in the period 1990-2008, almost all the additional increase in US employment was in the non-tradeable sector led by government and health care.

Almost all US jobs added in 1990-2008 were in non-tradeable sector led by government and health care

In the last decade of the Irish boom, almost all the new jobs were in the non-tradeable sector.

To me one of the enduring problems at policy level in the jobs area is that spin invariably trumps an unvarished assessment of the challenges.

In the FDI area, because we already host most of the top firms in high-tech, health/pharmaceuticals and financial services, it's evident in recent years that new projects tend to be small and while only 10,000 jobs were added in the tradeable sector in the period 1998/2007, recent job losses have reduced employment in the tradeable goods and services sectors (FDI + local) to about 268,000 - - back to 1997 when the workforce was 25% smaller.

The number of Irish firms involved in exporting is much lower than comparable firms in other small economies. Irish SMEs do not grow to a size that is considered essential for developing overseas markets.

There is very little useful data on firms. Stephen Kinsella has done some work on firm mortality but there is no useful data on startups, survival rates and no longitudinal studies tracking growing firms.

According to Forfás, science related public spending across 39 government departments and agencies rose from €1.2bn in 1999 to €2.5b in 2009. €500m could likely be chopped off this sector without impacting outcomes.

The so-called smart economy has got the lion's share of Irish enterprise public funding in recent years with research and development spending in higher education almost trebling from €322m in 2002.

While research can have several benefits, direct commercialisation is an insignificant one. For example, in the US the income from intellectual property is 4% of university research spending and in England in 2009, only £73m was earned.

The officially policy is a muddle but the goal to create a jobs engine from research is a delusion.

A UCD study shows that in 2009, firms supported by venture capital companies, employed 9,700 people; according to Enterprise Ireland, 100 spinouts from research created 1,000 in 10 years.

Given the growing world population, there should be focus on food and commercial research should prioritise this area.

In the EU in 2006, manufacturing as a percentage of total employment was 18.2%, 13.3% in Ireland and 22% in Germany.

Despite the recession, the costs of doing business in Ireland are still excessive.

Irish Economy 2011: The Jobs Initiative and a promised ambitious long-term strategy

Ireland's anti-banker chameleons: Shane Ross and David McWilliams

Time magazine reported in April 1973 that the Nixon Administration had
developed a new language—a kind of Nix-speak. Government officials were entitled to make flat statements one day, and the next day reverse field with the simple phrase, "I misspoke myself." White House Press Secretary Ronald Ziegler enlarged the vocabulary in that month, declaring that all of Nixon's previous statements on Watergate were "inoperative." Not incorrect, not misinformed, not untrue —simply inoperative, like batteries gone dead.

Time said euphemisms notwithstanding, the Nixon Administration's verbal record on Watergate was enough to turn ardent believers into skeptics.

In Ireland's small insider elite, flip-flops may take longer than a week but a brass neck can work wonders because other insiders are afraid to challenge hypocrisy directly. Who knows when one may need a back scratch some time? After all, it's a country where resigning on principle is viewed as bizarre; the concept of conflict of interest hardly exists; local councillors with commercial property interests can vote on land rezoning decisions and the State broadcaster, RTÉ, has publicly declared that there was no problem with its highest paid staff getting free luxury cars from private companies.

Tammany Hall here we come in the land where for some, the buck stops nowhere!

In the recent Irish general election campaign, Alan Shatter, now Minister for Justice, challenged rival candidate Senator Shane Ross over the claims in the latter's election literature that he had ‘‘a 15-year record of challenging bankers.’’

Ross has been both a politician and business editor of the Sunday Independent and has delivered a book, 'The Bankers,' to the angry mob looking for a tooth for a tooth.

The floatation of the Irish State-owned telco, Eircom, was the first big manifestation of tulip mania in the Celtic Tiger period and in September 2000, the then Sunday Business Business Post journalist Emily O'Reilly lambasted the then Senator Shane Ross for what she termed the former stockbroker's pitching of the shares in the public floatation and later heading a public crusade against the company.

O'Reilly wrote: "Ross has made a virtual third career out of board bashing. As business editor of the Sunday Independent and part-time commentator on Today FM's Last Word programme, he and presenter Eamon Dunphy have developed a neat double-act. Outrage is the theme as the two handsomely paid media buddies rail against the handsomely paid business buddies on various company boards."

Alan Shatter challenged Ross about his praise of the two most notorious
bankers of the bubble: Seán FitzPatrick of Anglo Irish Bank and Michael
Fingleton of the Irish Nationwide Building Society.

Ross took the prudent course and ignored Shatter's bait as this non-response as usual worked wonders in conservative Ireland. The anti-banker Ross headed the poll. All his previous statements had become "inoperative."

As a newly elected TD for South Dublin, Ross is a scourge of nefarious
bankers and is advocating Irish default.

Vying for populist appeal where inconvenient truths do not have to be told, is celebrity economist David McWilliams.

McWilliams has claimed to be an architect of the September 2008 calamitous blanket bank guarantee that ranks as one of the most inept but consequential decisions made in the history of the Irish State. He too has reinvented himself as a spokesperson for the economically illiterate and now distances himself from the guarantee that he once termed a 'masterstroke.'

Dr. Conor McCabe, a historian, has published a devastating critique of the populist chameleon.

McCabe challenges apparently made up 'facts' in the book 'Follow the Money' and he adds: "The footnotes, though, pale into insignificance when compared with the attitude, analysis and conclusions which are presented to the reader. ‘Out in our new suburbs, a new generation - the Juggling Generation - is sinking under the weight of huge debts, negative equity and the trauma of failure’ writes McWilliams.

This is a mere four years since McWilliams opened up The Pope’s Children with the line: ‘Ireland has arrived.’

In that book he talked of little else but the new generations and the profound changes Ireland had undergone in the previous 25 years. Now, 48 months later we have a new generation. Not even The Borg could regenerate that quickly."

Bankers are not the only ones who are running away from their past.

Conor McCabe: David McWilliams: Merchant of Guesses

Sunday Business Post: Shatter critical of Ross election claims

Irish Times: Shane Ross, Alan Shatter, Dublin South and the banks

The median across 12 advanced countries of government-guaranteed debt issued by banks is about 6% of GDP. Ireland was the outlier in 2009  with a sovereign exposure of 55% of GDP. The issue of ECB President Jean-Claude Trichet and the Irish State bank guarantee of Sept 2008,is reminiscent of arguments about London-Dublin cable traffic during the Treaty negotiations in 1921. The main story of course was why the head of the revolutionary government had decided to stay in Dublin not communication problems. There was no official ECB policy in Sept 2008 on issuing blanket guarantees and neither had EU finance ministers promoted it. Ireland was the ONLY Eurozone country to issue a blanket guarantee and a week later Denmark made a similar move. According to the IMF, the median across 12 advanced countries of government-guaranteed debt issued by banks during the crisis or in the case of Denmark/Ireland including existing debt, was about 6% of GDP. In ascending order, US (2.5% of GDP), Germany (3%), Portugal, Spain, France, Austria, Sweden, Netherlands, UK, Australia, Denmark and Ireland. Denmark’s exposure was 20% of GDP and Ireland was the outlier with an exposure of 55% of GDP — all the others had an exposure below 10%. The news on the Irish guarantee was presented as a fait accompli to the ECB, Ecofin and Eurogroup heads on the morning of Sept 30, 2008, coinciding with the issue of the news to the markets. Once the announcement was made, it would have been very difficult to reverse it. As regards the Lenihan-Trichet phone conversation a week before the guarantee was issued, I doubt if Trichet gave the go-ahead on a blanket bailout. Unlike his gaffe-prone predecessor, he is always measured when speaking on policy issues. This story is akin to a unit of a multinational making a major decision without any consultation with headquarters but assuming that everything would be grand because of a conversation a week before with the CEO.! Decisions made in a panic situation seldom turn out right. The banks had access to the ECB’s emergency liquidity program which was in place since Aug 2007. The unlimited deposit guarantee could have been issued and the issue of guaranteeing debt could have been discussed with the ECB in a calmer atmosphere. If the blanket guarantee was issued to save Anglo, it was an absolutely reckless move to make in the absence of detailed information on the state of the bank. Remember the context - - yes the crisis had intensified in the previous 2 weeks after the collapse of Lehman - - but it had been 13 months since the onset of the credit crunch; the world’s biggest insurer had to be rescued by the US government and the prospects of an Irish soft landing had evaporated and what did the Department of Finance have? A Sept 18th PowerPoint presentaion prepared by Anglo and the financial regulator both chimed with the mantra on ‘resilient’ banks.

Getting paid for creative work: US Video; F*ck You. Pay Me

Speaker at the March 2011 San Francisco, CreativeMornings (creativemornings.com) was Mike Monteiro, Design Director, and co-founder of Mule Design Studio (muledesign.com).

Ireland's unfair society of insiders and outsiders

Ireland is no longer a society mainly marked by the division between rich and poor but it is an unjust society of insiders and outsiders.

The insiders can be multimillionaire lawyers and public staff with premium pay, pensions and job security, while the outsiders, without the support of powerful vested interests, are on their own.

In Ireland today, the vested interests are part of the machine politics system; from traditional trade unions on the Left to their counterparts on the Right representing wealthy medical consultants and lawyers, they make common conservative cause in opposing reform and change.

The main culprits of the cataclysmic dénouement have got gilt-edged meal-tickets for life and David Begg, the general secretary of the Irish Congress of Trade Unions, who was a director of the Central Bank from 1995 to 2010, like the bankers, rejects any personal responsibility for the banking crash.

As for the employers' body IBEC, we said last February that it may seem strange that given the ostensibly pious aspirations for reform of both the "the country and the economy," that IBEC director general, Danny McCoy, would avoid the issues of reform of the protected private sector which imposes more cost burdens on business than for example commercial rates.

What is striking is that some people are outraged by perceived unfairness when it's seen from afar but not so when it's close by.

In the Financial Times today, Lorenzo Bini Smaghi, executive board member of the European Central Bank argues that Ireland should share the pain of the banking crash.

This has prompted a thread on the Irish Economy blog, which I have responded to.

I would agree that Bini Smaghi's general tone is akin to a red rag to a bull but I return to an old refrain on we seeing what suits us.

The Irish Examiner in an editorial today hits out at the Allied Irish Banks' signal that it would be “reasonably generous” on severance packages. The newspaper says figures based on up to eight weeks pay per year’s service, plus statutory redundancy, were bandied about yesterday:

“One of the most provocative things about our economic collapse is the inequity of it all. Some people seem unaffected yet others struggle to survive.

Figures like those suggested at AIB are unheard of in most of the economy. They are even more bizarre when you consider that the bank depends on taxpayer bailouts for funding. Payments on this level would add to the sense of injustice simmering right across this society as they are the exception rather that the rule. A similar argument can be made about semi-state staff expecting windfalls if those companies are privatised.

AIB staff from the boardroom to the cash counter may not like to hear it but sooner or later the Government is going to have to take a stand on creating a more equitable society and this is as good an issue as any. It is not about punishing bank employees but about redressing some of the terrible wrongs in this country.”

In contrast with the United States, the largely invisible unemployed in conservative Ireland  and the issue of the development of a credible jobs strategy, evoke tepid reaction compared with the heat generated on burning bondholders.

Facts, Ireland and the Euro

Aengus Fanning, the editor, has an article in today’s Sunday Independent: ‘We need leaders who will ignore the eurobabble and just say no’

“In my (no doubt ignorant) opinion, we should be threatening to kick the table over and leave the eurozone while remaining in the EU, joining Britain in an Atlantic alliance that will still have the clout to maintain access to the single market.

There’s no hope of that happening — we’re too inherently Anglophobic for that. It is 38 years since I listened to government officials in Brussels telling me that our future lay with the deutschmark, and that our curse was the link with sterling.

It is surely strange that, after all these years, the perfidious Brits are still our biggest trading partners.”

Interesting argument expect for the strange fact: exports to the Eurozone in 2010 at 38% of total exports (goods + services) are double the level to the UK.

In the Irish Independent in Sept 2010, celebrity economist David McWilliams, used false export data to also argue against the euro.

He wrote:

"The most damning statistic of our entire euro venture is that from 1990-2000 when we had our own currency and we devalued in 1993 to get competitive, Irish exports grew by 360%. Between 2000 and 2009 with our overvalued new euro currency, Irish exports grew by 0.3%. That says it all really and yes, that figure is 0.3%, not 30%!"

Absolutely wrong!!

We at Finfacts take facts seriously and it's very important when commenting on economic trends and policy.

There is the simple support for an argument by citing relevant facts. There is alternatively the selective use of facts to support a position and there was a classic example of both in the Irish Independent.

In 2000, tradeable goods and services exports were €102bn; in 2009 they were valued at €144bn - yes, an increase of 41%! McWilliams said 0.3%!

There was a 10% devaluation in 1993. So that is a fact but it is not credible to claim that an export boom depended on a small scale currency revaluation while ignoring a key fact that with 1% of Europe's population, we were attracting 25% of US greenfield investment. Besides, a paper published by the Central Bank in 2005 shows that the trend of exports from Irish-owned firms in the period 1990-2002, hardly changed. Have a look at a chart here which shows the true facts.

Intel, Dell, Hewlett-Packard, Microsoft and a raft of world-class pharmaceutical companies triggered the export boom not the Minister for Finance Bertie Ahern who was left with no choice but to agree to a market-forced devaluation in 1993.

We need leaders who will ignore the eurobabble and just say no

Ireland and leaving the Euro: 10 questions for pub-stool economists