The Irish Economy
Commentary, information, and intelligent discourse about the Irish economy
His IIEA lunchtime speech today is available here.
Pretty predictable stuff, right down to completing the single market, boiler plate stuff, straight out of the EU/ECB phrase book.
However, there are a couple of items –
“[ireland has]…a flexible labour market, moderate taxation and a business-friendly regulatory environment. ……None of these advantages have been lost as a result of the global financial crisis. But crucially for Ireland, this unprecedented international shock has come at the same time as the economy has been undergoing a necessary rebalancing in the composition of its growth, intensifying the challenges it faces. In particular the construction and the banking sectors need to adjust.
Seems a bit of a non sequitor, the ‘friendly regualtory environment’ needs adjustment…..
“Many euro area countries, despite some progress, still exhibit structural impediments triggered by a rigid legal and regulatory environment.”
So, we need to make these ‘friendly’?? Isn’t this where we came in??
Overall, it seems to my untutored eye that you cannot have a ‘financial centre’ and any form of serious regulation. The only reason a bank will shuffle in is if the taxman and others shuffle off. The House of Commons interrogation of the FSA boss was illustrative.
I note the couched criticism of Ireland having allowed a structural deficit to accrue.
“Some euro area countries have witnessed a long period of strong growth in domestic demand. These demand pressures were related to expectations of consumers or firms about future income and profit prospects, which, it is now clear, were overly optimistic.  This situation was often accompanied or intensified by an insufficiently tight fiscal stance, even if headline fiscal numbers (such as the deficit and the debt ratio) still suggested a healthy fiscal situation.”
This is a very fair comment, and the Irish government should take it as a firm slap on the wrist coming from the ECB president. My fear is that they will not listen to this subtlely delivered message.
Certainly, to judge by the Tanaiste’s comments on Morning Ireland yesterday, certain members of the goverment either have no sense of urgency, or else are doing a good job of playing a straight poker face.
The Irish governing class has been ignoring other similar subtlely delivered messages from the IMF, OECD and EU for over 10 years. It takes a crisis for reality to break through. Given the do-minimum fire-brigade type actions, can we any confidence that they have understood the message and anything else will be done, in a serious and determined way?
What we also need to focus on is designing sets of mutually-reinforcing policies and means to implement those policies which will limit the scope for similar excesses in the future.
IMO, many are just waiting for credit to flow so that they can get back to development ie. property and house building, as soon as possible.
I disagree wth the criticism of our structural deficit.
We have had a short period of enormous growth from a relatively low level of wealth and we have a small national debt. In those circunstances government borrowing to build up infrastructure is reasonable.
(This is based on my understanding that there would have been no borrowing if the government’s capital programme had not been so large).
On the ‘citicism’ of the deficit (structural) ….
Was he not criticising the “fiscal stance” ?? i.e. the policy of using things like stamp duty to create the ‘wealth’ used to do the infrastructure or to back the loans. If so then he was right, as has been subsquently proven.
Apart from that I stand by my original comments, bland, routine stuff… not what we should expect from the “5th most poweful man in the world” at this particular time. Since our pols cannot seem to see the issues clearly enough to come up with a plan to solve them we need even lightweights like Trichet to tell us what to do…..
For those of you who speak/understand French his name speaks volumes….. As it is pronounced, it means tricky…..or trickster….Hardly an appropriate name for a banker…..
Jean – Claud Trichet is a man that says a lot of things that the market does not believe and for very good reasons. He is famous for his over-the-top remarks on the Euro. Usually, he waxes on about how “robust” the Euro is, how the “fundamentals” are so strong, how, the Euro zone is “de-coupled” from the U.S. Economy and how Europe’s damaged export prospects to the U.S. would be off-set by exports to Asia.
Of course the rest of us know that we are very much linked to the U.S. economy. That, if it sneezes, the rest of us are likely to get influenza. If the U.S. does not buy goods they simply pile high in China and India.
Last July, he was raising interest rates, when the US were already aggressively cutting theirs. Then recently, we had his Europe has “no weak links” speech. Now, he thinks Ireland is doing a very good job of handling our economic crisis.
I don’t know about anyone else but I see a pattern here. The pattern is one of delusion and unreality. I am worried that the man is seriously out of his depth and in denial about the true extent of the problems facing Ireland, the rest of the Euro Zone and the rest of the EU economies.
Ireland, created a lot of its own problems. Refused to save for the rainy day. Created property tax incentives like there was no tomorrow. When the crisis became, more than obvious, we refused, to act speedily, judiciously or aggressively enough. The government and trade unions have yet to admit the extent that we have overpaid ourselves right across the board. We refuse to acknowledge that many of us try to retire too soon, with pensions that are index linked to unreality and which must be paid for by further borrowing.
Mr. Trichet may think that the Irish government are doing a great job. However, he is looking increasingly like the emperor without his clothes.
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