Yes, the plot was certainly lost yesterday. Whatever ‘moral high ground’ vis-a-vis making the poorer people in Greece suffer for the mistakes of the elites, they lost it yesterday when they set fire to that bank.

@Oliver Vandt

I agree with you. The best thing is to get a general election under way now in order to defuse this situation. You can’t help but feel though that Greece (the ordinary people of) is damned if it does and damned if it doesn’t accept these austerity measures. Shades of ‘there is no alternative’ if the EU is going to hang together. I suspect they will still default (’restructure’) though once the key bondholders have been paid off with EU/IMF money.

I’m told that live rounds are being issued to the various Greek forces today. I hope my source is incorrect. There is still a lot of unfinished business between the forces and the public over there, going back to before that boy was shot a couple of years back - going back to the last junta and before.

They’ll still have to implement the austerity package though.

Yes the only way out of the current problem is deflation. When we are locked into a “strong” currency we can proceed via sinorage, basically a tax on some unsuspecting currency members who value some printed euro notes and are willing to give some services or goods in return because of their strong status. I dont think that really applies to us given the lifetime of the euro. I dont think we will make a lot out of sinorage and would be delighted if we did.

Fair enough. I looked back and saw that and reckoned I had left myself open to being accused of having contradicted myself somewhat. You will see from what you have quoted that I did heavily qualify it to clarify that there are justifications for keeping comparatively lower CT rates within reason. I should have said subsequently that I was not suggesting increasing corporation taxes simpliciter. I thought your summarising this as “the policy you advocate of raisng CT tax” ignored that I had accepted there were possible justification for lower CT tax. Maybe, maybe not.

In any event, is it your position that Ireland should its right to determine its own corporation tax rate without regard to any social costs in other countries and without regard to the dangers of untrammeled tax competition?

A few dead in Athens, a bank burning, some real PEOPLE trapped inside.

Karl, it is where the politiics collides with the economics.

It is a bit jesuitical to say that the following does not imply higher CT rates

“I would have thought that CT rates should increase or be harmonised within a band when we get on an even footing in terms of national wealth or that the amount by which we can subsidise business through tax should be limited in some way by reference to the competitive disadvantages which we suffer as an Island.”

@ Ribbit

While Greek children may be ok, the current generation of Greek adults will have a tough time in a default. The Primary Balance is probably in deficit to the tune of 7-8% of GDP. This has to go to zero in short order.

The Greek Banking system would probably collapse due to withdrawal of liquidity as well. Presumably, the ECB would not accept Greek Govvies at the discount window.

Default =nuclear winter for a country without natural resources?

In terms of post-metaphysical morality - you most certainly raise some valid questions here on CT rates, and from a global perspective. Methinks this deserves a full thread ………… as Habermas put in my post above:

“Today, for the first time, the European project has reached an impasse. Imagine the improbable scenario of a co-ordination of the economic policies of the eurozone countries which would also lead to an integration of policies in other sectors.”

Next step is to turn the improbable into probable if European Integration, which I whole-heartedly support, is to progress. As in Ireland, the weakness, lack of courage, and self-interestedness flakiness of the political system stands out as a major impediment to progress which places the interests of the European Citizenry first - next level is to appreciate that all policies [fiscal, monetary, military, social] have to address both European and local [read national] concerns. The Money System links to the Power System which impacts on the Lifeworlds of European Citizens. Too much debate focuses solely, in a one sided-manner, on the Money System. Viable solutions and progress demands that one address all three and the interlinkages between them.

If Europe is worth it - it is certainly worth fighting for - Neutrality is yet another amoral cop-out - yet another thread, yet another shibboleth, yet another sacred cow ……..

@Chris Johns

“… monetary union without political/fiscal union might not work …”

ergo - rapid institutional reform needed now …. Power, Miney, Lifeworld

@ All

Are we European?–Or Are we Not? That is the question.

Roosevelt did this during the Depression, by threats and by some nominal actions; Eventually forcing money hoarders to come out and invest, or else surrender the value of their wealth.

Of course, our Central Banks have been hard wired to fight inflation and this will grate considerably with their institutional structure, but I see this as a good thing. It means we have the tools to fight inflation back down again once the investment cycle has spluttered back to life again.

I am happy to agree to differ but I don’t want to be misrepresented.

I didn’t advocate a policy of raising CT. I suggested that we should act as a socially responsible country by having regard to possible detrimental effects of our policy and that we should factor some moral principles into our long term strategy.

This isn’t a wholly altruistic approach. There are major benefits to having “right” on your side when you are a member of a political union that acts by consensus and influence.

“Default will bring pain with it”

Okay, default will bring pain. But in terms of the direct effects, it is a zero-sum pain. The loss to the sovereign bondholders is the gain to Greek children’s future earnings.

In terms of secondary effects, the consequences of a default on Greece will be that it can no longer access funds cheaply on international markets. But given that the very problem is one of profligacy, what is wrong with this?

If you have an undisciplined teenage child, the best way to stop their overspending is to cut the funds, not to keep giving them money and get them to sign up to all kinds of austerity pacts.

In this way, a bankrupt Greece can make the decisions on where and how to make the cuts based on the democratic will of its people, as opposed to the arbitrary whims of some IMF guys freshly flown in from DC - or worse, some CSU crony in lederhosen with a heavy Franken accent.

Another secondary effect is that we blown open the myth that sovereigns in eurozone can never default. Sovereign debt gets dearer, but so what? Perhaps that will encourage sovereigns to start living within their means.

I am reminded of a quote from that wonderful movie about the sinking of the Titanic (no, not the one with the Celine Dion noise pollution):

“But this ship can’t sink!”

“She is made of iron, sir. I assure you, she can.”

Bear in mind this is the Aussie equivalent of the BBC…..is there anything that does not scan in it? The msm are under orders.

You claim we require FDI at the moment, yet the policy you advocate of raisng CT tax would reduce our attractiveness. Simple really. The issue of brass plates is something we agree on.

That said, I suspect one of the consequences of mismananaging the economy over the last decaded by the elected and non elected govt will be the loss of some of out tax advantages. Now that we are run from Brussels, I suspect increasing the 12.5% rate will firmly put on the agenda.

@ Dreaded Estate
“actually think a sovereign default now would be exactly what the markets need long term. The idea that any investment is 100% risk free should be completely blown away and markets should price government bonds just like any other investment.”

To wish for a sovereign default now is complete bonkers. It may have escaped your attention but that prior to the crisis, govt bonds had different yields reflecting the fiscal position of each country. It is true to say that spreads were too tight and bore no relation to the fiscal track record. In this latest episode of the rolling global debt crisis, spreads have blown out a risk of default is re-priced.

Default will bring pain with it
*access to markets will be restained for a period of years. If we find vast quantities of oil or gas, it will be short if we do not it will be prolonged. Public servants will be sacked as a result.
*in most cases rates post default will be higher as will the cost of capital and growth and prosperity will be diminished.

Look what happened at the end of the 19th century. Argentina was arguably as wealthy as the USA. Botwere on the cusp of default inthe last decade of that century. The Us did not and Argentina did. It has been some divergence trade since then.

I did say that we needed FDI desperately at the moment. I also said that any policy on arbitrage should be a long term project. Companies you refer to genuinely employ people here and make products here. They don’t come only for the tax though it is important. I can see reasons for differentiating their tax treatment from post-box companies. However, I think it is important to point out that there is no overall social or economic good from tax arbitrage.

Serious economic and social damage can be caused by tax-haven structures. I don’t think it is wrong to point that out. I would have thought that CT rates should increase or be harmonised within a band when we get on an even footing in terms of national wealth or that the amount by which we can subsidise business through tax should be limited in some way by reference to the competitive disadvantages which we suffer as an Island.

This is a big debate that is looming larger. Smart-alec references to comely maidens may play well with an Irish audience but they won’t carry much weight in Brussels. You might rethink which of us is stuck in the past.

With that said, Michael Hennigan is correct that we need to be careful of devils quoting scripture for their purpose. I’m not a french trade unionist by the way.

I am simply making the point that it is fair game to compete for FDI on the basis of an attractive tax regime and competitive labour costs as long as the activities attracted are legal and do not damage our reputation. Intel, Microsoft, Amgen, Wyeth, State Street, Pioneer Asset managment are all good projects. They all provide well paid employment in our country for Irish people and engage in commerce with indigenous Irish operations.

Perhaps you prefer a more idyllic Ireland with comely maidens dancing at the cross roads and young men engaged in handball, pitch and toss and other athletic pursuits.

Brilliant. I’ll ring Davys to get the low down on each item as I pick it off the shelf during the weekly shopping. Stupid me for not thinking of that before. BTW, what did I say that was jesuitical? At least I made a point, unlike you two.

Are you Fr Sean in disguise!!!
I think you should find a nice mission station somewhere in darkest Africa.
At one level you are concerned by our engaging in tax arbitrage and at the same time being arbed by cheaper labour. I can’t figure out whether we are sinned against or sinning.

I hope you are right about the calamity howling being over-done.

As for punishing the reckless politicians, I was going to mention that the same people who impute all kind of foul deeds and intentions to our politicians do not even think twice about the possible negative implications of our tax policy. We can’t vote out the public.

@simpleton

I am concerned about arbitrage of wages and of workers rigths. I am particularly concerned because we are allowing those who engage in it to sell their products here and to undercut Irish workers wages and conditions. I don’t think you can enforce morals but I would be happy to see labour costs, labour conditions, actual profit margins and costs of raw materials paid to the primary producer lebelled on all goods sold in the EU.

@tull mcadoo

Very good. Was it bad manners of Dunnes workers to strike over handling South African produce because people liked their cheap satsumas??

I don’t mind people wanting to keep our low taxes. I simply think we should be honest with ourselves as to what we are engaged in.

When company structures are set up to avoid any profits being accrued and therefore any tax being paid in the countries that desperately need tax revenue, whose people are doing the work and providing the natural resources, then we need to admit that there could be a problem. We might decide that we want to show more solidarity with those countries without colonial or imperial pasts.

This problem is not specific to Ireland and others are probably more culpable than us. It may be that we can say we think all countries should charge lower corporation tax. If we do not have a good argument then the rest of the EU will be able to pressure us into giving it up.

I suggest you go down to Leixlip and out to Sandyford and hand out leaflets outside the carpark calling for higher CT rates.

@ zhou_enlai

Is your warning against Mellon’s attitude a warning against the dangers of contagion in the EU/US financial system?

The weakest economies including Ireland are in need of reform but it would be foolish to expect change if debt forgiveness came first.

In the past few decades, there was double-digit inflation, double-digit interest rates, high debt and unstable currencies.

Today, the debt of most countries is not at historic highs and there is the ECB which in the past has given funds of almost €500bn in one day to banks.

The global economy is expected to grow over 4% this year; the recovery is accelerating in Asia and the US.

The calamity howling is overdone.

I know we desperately need FDI in the medium term but surely we our long term goal must have reference to some moral principles.

In the long run…maybe we will be dead. The Swiss have thrived by reconciling John Calvin and Mammon.

Remember that line from the Merchant of Venice: The devil can cite Scripture for his purpose.

As for morals, maybe we should start with reckless politicians destroying the lives of tens of thousands of their people.

http://www.spiegel.de/international/europe/0,1518,692666,00.html

A sovereign debt crisis of the dimension of Greece can really only be solved by inflating away the problem by printing money, default or a massive transfer of funds from other nations.
The 100 bn bailout is just putting off the evil day. I suppose as they are bound to default in the future the bailout could be seen as a long term transfer of funds which will never, or only partially, be repaid.

Cut-backs are demanded from Greece but because the sum is so big extra interest payments and the recessionary effects of the cutbacks will probably more than eliminate any possible gains. In any event how can they “invest” the cash to get a gain greater than the interest - Another olympics games maybe?.

One of the biggest problems of the current pigs governments is in essence we have have left them loose with the national credit card. Olympic Games, Yep I’d like one of them - Dublin Port tunnel, sounds great. Idle green fields with no development potential that cost billions - no problem get the NAMA card and the banks can run off to the ECB to get the cash with the NAMA bonds, More luxury hotel rooms than NYC, great idea - why don’t we give them a tax break. Problem bank Anglo- NO problem heres a 20 bn investment to burn.

Instead I read in todays Irish times the government is reducing support to SMEs by 20 million. Real jobs real cash.

Anyhow I ramble a bit as I have been accused of in the past

In essence a single currency only works effectively when you have a strong economic consistency in terms of fiscal and monetary policy. The Euro has not achieved this and hence the whole project looks problematic.

Ireland is to small to have its own currency. One solution would be to rejoin sterling - they seem to be getting a good dose of well needed inflation at the moment by printing Sterling bills - Also higher interest rates in the Naughties would have killed a lot of the NAMA follies before they were built and chocked back our explosive false growth rates which the government used as an excuse to double the cost of our public services.

Also just because the Euro was good for us in the past it may not be good for us in the future - My biggest worry is the Germans will demand we get rid of advantageous corporate tax rate next year when we will probably have to go for our Euro-IMF pill as the price to pay for staying in their club.