The Irish Economy

De Volkskrant has a piece on Ireland, transgoogled here.

They start by saying that Ireland was a role model for austerity at the start of the year, but is now a reason for concern. They give two reasons, the first of which is the unknown but large cost of saving the banks. Secondly, they do not believe that the government will deliver in the next budget.

Standard and Poor’s have downgraded Irish sovereign debt from AA to AA- and their outlook for the rating (not the economy) is negative. S&P cite the rising cost of the banking bailout as in their statement and project a debt-GDP ratio of 113% in 2012.

On the banking costs, they state

We have increased our estimate of the cumulative total cost to the government of providing support to the banking sector from about €80 billion (50% of GDP; see “Ireland Rating Lowered To ‘AA’ On Potential Fiscal Cost Of Weakening Banking Sector Asset Quality; Outlook Negative,” published June 8, 2009, on RatingsDirect), to €90 billion (58% of GDP) …

We have increased our estimate of the cost to the Irish government of recapitalizing financial institutions to €45 billion-€50 billion (29%-32% of GDP) from €30 billion-€35 billion (19%-22% of GDP). 

Our estimate includes two main components: the upper end of our estimate of the capital we expect to be provided by the Irish government to improve the solvency of financial institutions, and the liabilities we expect the government to incur in exchange for impaired loans acquired from the banks.

Irish ten year bond yields have risen above 5.5 percent this morning and the spread against their German equivalent, at about 340 basis points, is the highest it has been in recent years. The NTMA have objected to the downgrade, arguing that S&P were using an “extreme estimate” of the cost of the banking bailout.

An interesting little scrap has broken out between An Taisce and the NRA. As reported in the Irish Times yesterday, An Taisce has accused the NRA of using false data, while the Irish Independent reports that the NRA dismisses the criticism.

The criticism by An Taisce refers to traffic projections which are now seven years old, and the fact that traffic volumes have been falling. The NRA counters that roads are build with a longer time horizon in mind. While I agree with the NRA that roads are build with a longer time horizon in mind, it is nevertheless true that the projections are seriously out of date and that the starting position has changed significantly. Furthermore, there are at least some schemes, which are grossly over designed. An Taisce points to  a refusal for planning permission for a dual carriageway between Bohola and Ballina, because the NRA apparently failed to support the project on traffic grounds.

Unfortunately gold-plating of projects is not unusual. In the ESRI Mid-Term Evaluation of NDP 2000-2006 we pointed out that “roads with capacity of 55,500 AADT, or anywhere near it, appear to be a significant overdesign for the numerous lightly-trafficked sections of the N8 and N9″. Such schemes cannot pass a reasonable cost-benefit analysis when compared to more appropriately sized schemes. Unfortunately, the lesson does not seem to have been learned and the tax payer is expected to pay for overdesign again (the fact that some of the schemes are PPPs is irrelevant here as these also have to be paid for by tax payers).

Take the example of the N2, for which there are two proposed schemes in the system. I have already referred to the idiotic scheme to by-pass Slane where the key issue could be simply dealt with via a HGV ban.

The second scheme is in North Monaghan, where a by-pass of Monaghan and Emyvale to dual carriageway standard is being pursued. Interestingly Monaghan has already been by-passed and anyone who knows the road also knows that there is no danger of congestion except through Emyvale (for which a by-pass is likely to be supported by some analysis). Traffic counts bear this out - average total volumes (north and southbound) for 2010 amount to 5,413 AADT. Why then are we building for 35,000 AADT - almost seven times the current volume? Further south, the section between Castleblaney and Clontibret has been upgraded to 2+1, and further south still between the M1 and Castleblaney a wide 2 lane road is perfectly sufficient to achieve the target level of service (80km/h) - both of these sections of road carry a higher level of traffic than that, which is supposed to be upgraded to dual-carriageway standard. 

The construction costs of a dual carriageway are 82% higher (according to the NRA Road Needs Study) than for a wide 2 lane road - can we really afford such goldplated schemes?

In this guest post, Frank Convery responds to the various comments made on this blog over the past few days and the initial post by Richard Tol:

Holbrooke Shields and others re Censorship

‘Is Comhar SDC practicing a form of censorship by not publishing Richard Tol’s comment

Response

Tol’s comment was received on Friday 20th at 11:47, and it was posted Monday 23 at 09:59, as were the comments by Holbrooke and Lucey which were submitted on Saturday 21st . The delay was a product of the fact all comments have to go through an administrator because a huge amount of spam comes through, and the office is not staffed over the week end.

Conclusion

Discussion is appreciated and welcome. Keep paranoia at bay if there is a delay in posting. We’ll check out the management of Irisheconomy.ie to see if turnaround can be improved.

(more…)

Joe McCarthy and Valerie Jennings, regular contributors to the discussion on municipal waste management on this blog, write in the Irish Times. It’s a classic protest, with complaints about the status quo but no serious consideration of the alternatives.

Yesterday’s Sindo had a sensationalist piece on electricity prices. It misrepresents the PSO levy as an ad valorem levy on electricity (it is a connection charge). It confuses a 3% increase in the transmission tariff with a 3% increase in the price of electricity — the former is a small part of the latter. And it omitted that the distribution tariff will fall by 6.5%. See the CER newsletter of August.

Lucey and Larkin offer some thoughts on higher education reform. I either agree (evaluation, performance-related pay, fees) or do not know enough to have an opinion (curriculum*).

UPDATE: The Irish Times (2) has seen the report of the National Strategy Group for Higher Education. Strikes me as less radical than Lucey and Larkin.

* Clarification: I know a few anecdotes about a few courses at a few Irish universities.

The speech by Minister Lenihan is available here.

Patrick Honohan’s Tokyo speech is a wide-ranging essay on different varieties of economic growth and the transition between fundamentals-based growth and unsustainable growth: you can read it here.

Frank Convery dreams of a Silicon Valley of Emerald Green over at Comhar. To get to Silicon Valley, you need to pass through that other valley, where bad ideas face a certain death.

Rigour and scrutiny, however, are not part of Convery’s vision. He claims that Palo Alto “will be submerged if sea levels rise significantly” — ignoring that Palo Alto is 9 metres above sea level (projected sea level rise by 2100 is less than one-tenth of that); that people there know how to build dikes and can pay for it too; and that Palo Alto is special because of its people rather than because of its physical characteristics.

I left a comment to that effect on his blog, but discussion is not appreciated in sustainablalaland.

UPDATE: Comments are up now at Comhar.

UPDATE: Frank Convery responds. I close the discussion here.