@Karl
You’re right, Identifying that minimum amount is indeed easier said than done. I think it is fair to say that the mainstream view is to puruse a fairly substantial consolidation in the reaonably near term. I certainly see the arguments: reduced uncertainly might lead to increased spending (expansionary fiscal contraction); a reduced deficit now could avoid an even more draconian forced adjustment later on; more pain now will lead to a more rapid restoration of competitiveness, among others. Compared to others, I probably put more weight on the risk of a vicious circle on collapsing demand and a worseing fiscal/credit picture. Weighing the bad options, I lean to trying to run the largest deficit the country can get away with. I believe those CDS numbers are mainly a response to the guarantee. The problem is less the flow of new debt than it is the risks associated with rolling over the massive stock of existing liabilities (notably the guaranteed bank debt). That is why I emphasised issues such as transparency on bad debts, maintaining liquidity to reduce the risk of a rush for the exits (even worse than a “sudden stop”), and limiting fiscal contraction to lessen the extent of bad debts outside the property sector. I am well aware this is extremely risky. But I still think better than the alternative.

On your regulation point, lax regulation to attract certain segments of the financial services industy strikes me as too high a price, both reputationally and in risking balance sheet vulnerabilities in the furture.

On the point of regulation, I have my doubts, Ireland is competing with Luxembourg and other countries for financial companies headquarters, if we regulate beyond our competition it will drive jobs out of this jurisdiction and into others.

Deborah Fuhr (Managing Director with Barclays Global Investors) gave a talk on ETF’s today to CFA Ireland and one of the questions asked was about how Ireland is working hard to bring in ETF Market Makers, aiming to do so on the back of our ‘financially friendly environment’, and what else could we do to attract companies. My fear would be that we remove motives for coming here. Stiff regulation is not generally in the list of ‘reasons for doing business with countryX’

Regulation will probably go beyond the level required in the same way that it failed to be at the level required for the last ten years. And of course there will be other countries more than willing to relax rules for jobs, the majority of the hedgefund industry is proof of that.

in a nutshell, root and branch regulation - to work correctly- will likely have to be inhibitive and process/reporting oriented, innovation may have to be the price of stability if that’s the case.

I would say, “the reliance on asset-transfer taxes” aka stamp duty and developers contributions. A residential property tax would have dampened the property boom while ensuring greater fiscal stability (receipts are less procyclical than income or sales tax).

What is important from a fiscal point of view is not really the size of the budget deficit over the next few years, but the putting in place of a credible plan to restore budgetary equilibrium over the medium term.

This should include a phasing in of residential property tax, a diversification of the tax base, increased carbon tax and sensible spending cuts.

Sensible spending cuts doesn’t have to mean war with the public sector unions. Personally, I question the wisdom of the current capital budget commitments within this context. Most of the CBAs done to support roads and metros were (insofar as we can penetrate the veil of opacity behind which dubious commercial confidentiality clauses hid them) done on ‘benefits’ estimates that are now badly out of date.

Some projects, such as CIE’s grandiose Interconnector, never seemed to make sense. Others, such as the Metro North, were marginal at best. And the entire roads programme should be parked (pardon!) until someone sees the first 09 registered car (late April, I’m guessing).