Oireachtas report on November floods

The Oireachtas Joint Committee on the Environment etc published a report on the November floods while I was on holiday. It is interesting both for what it says and does not say.

The report is clear about responsibilities: There are too many agencies involved, and no one took the lead. The report argues that the Minister of the Environment should take charge.

The committee also laments the role played by the ESB, and underlines that perhaps it should have been involved in Cork’s flood management.

The report has a little gem: “The ESB made the point that they issued two warnings on Thursday, 19th November, which was unique. However, the significance of the two notifications wasn’t appreciated by the general public.” Perhaps that is because the general public did not understand that “higher than 300 m3/s” really meant 535 m3/s. Along the same lines, ESB apparently told the Lee Waterworks at 22:10 that 450 m3/s was being released, while the actual release had reached 546 m3/s by 21:50. The report does not make much of this, but it does call for further investigations.

The report is silent on a number of things. It avoids questions of liability. It calls on the OPW to develop a flood warning system, but omits that crucial data are off-limits to the OPW and that the data exchange between Met Eireann and OPW is not perfect either. The report acknowledges that there too many agencies involved, but it does not name those that should be relieved from their duties.

The list of invitees to the hearings is interesting too: Only insiders were heard. Not at single independent expert was invited.

Competitiveness once more

A while ago, I pointed out on this site that a season ticket to Shamrock Rovers offered remarkably good value for money. Any of you who acted on my advice will now be in the happy position of being able to buy tickets for the Juventus game on Thursday.

Just saying.

Stress Tests

The results for the stress tests on 91 European banks were released yesterday evening.   A reasonably detailed description of the tests and results is available from the Committee of European Banking Supervisors’ (CEBS) website.   The results for AIB and BOI are available from the Irish Central Bank’s website.   As Michael Hennigan points out, the overall passing score was 84-7, and so the release of the results has not quite made the waves expected.   Both Irish banks passed with a bit to spare despite the relatively high Tier 1 target of 6 percent.   However, the results factored in capital raising plans to the end of the year, and the jury is still out on how much of the 7.4 bl. AIB can achieve without additional government help.  

Some analysis here: Irish Times; Irish Independent; Financial Times.

Fiscal Free Lunches

Karl Whelan makes a convincing case against the idea that a fiscal stimulus would lower the deficit (see Unpleasant Fiscal Arithmetic).    But there is another fiscal free lunch idea that I see as even more influential—and probably just as wrong.  This is the idea that discretionary fiscal contractions increase economic growth, which in turn reinforces the improvement in the deficit.   The key mechanisms behind what is sometimes called the “German view” are Ricardian-type expectations effects and a reduced risk premium on borrowing (the latter recently emphasised in ESRI Recovery Scenarios paper).    I doubt that there are many Irish economists who would claim to hold this view if pushed.  However, it seems to me to be implicit in the widely held view that a more front-loaded fiscal adjustment will speed economic recovery. 

Establishment of the Review Group on State Assets

As has been widely reported the Minister for Finance has established a Review Group on State Assets that is chaired by Colm McCarthy.

The terms of reference are:

  • To consider the potential for asset disposals in the public sector, including commercial state bodies, in view of the indebtedness of the State.
  • To draw up a list of possible asset disposals.
  • To assess how the use and disposition of such assets can best help restore growth and contribute to national investment priorities.
  • To review where appropriate, relevant investment and financing plans, commercial practices and regulatory requirements affecting the use of such assets in the national interest.
  • While most comments in the media have interpreted the focus on asset disposals to refer only to privatisation, it is perfectly possible that the various state companies hold assets that might not be essential for the efficient running of these businesses and thus could be disposed of without privatisation.

    In relation to privatisation it will be important not only to consider the short-run gain in funds through the sale of assets, but the longer-run impact on the competitiveness of the economy. Long-run considerations should include the loss of control of national strategic assets that would result from a sale. This might be addressed by keeping the key infrastructures such as networks in public ownership.

    In some cases it might also be useful to consider a long-term lease as an alternative to an outright sale of assets, which will also yield revenue up-front but avoids the ‘selling off of family silver’. Joint ownership is another option.

    Looking through the list of assets to be reviewed it is hard to ignore the differences in ownership patterns with many other countries. Electricity generation, ports and airports are private in many countries.