Goldman Sachs on Ireland

Kevin Daly’s piece is below:
European Views: Ireland – Old News, New News, and Breaking the ‘Vicious Circle’

September 9, 2010

Irish bond spreads have widened significantly in recent weeks, driven by fears over the cost of bailing out the banking system and the nationalised Anglo Irish Bank in particular. Some of this is old news (the government’s estimate of the cost of bailing out Anglo was first announced six months ago) and the Irish government argues – credibly, in our view – that the costs of bailing out the bank are “infuriating but manageable”. However, the rise in Ireland’s borrowing costs has now created a dangerous dynamic of its own, which needs to be addressed with some urgency. Providing an independent estimate of the bailout costs will be an important first step. In addition, the Irish government should (and, we expect, will) accelerate the speed of its fiscal adjustment.

Background: Rise in Irish Bond Spreads on Costs of Anglo Bailout

The spread between Irish and German 10-year government bonds reached more than 360bp yesterday, up from 230bp at the start of August (Chart 1). With German bond yields exceptionally low, the rise in outright rates has been less than this, but the yield on Irish 10-year government bonds is nevertheless close to 6%. Irish spreads have tightened a little today.

The underperformance of Irish government bonds has been driven, first and foremost, by international concern surrounding the cost of bailing out the Anglo Irish Bank, an institution that was fully nationalised by the Irish government in January 2009. In addition, Anglo also has around EUR7bn in government-backed, medium-term debt that is maturing this month (in the context of heavy refinancing needs across Europe).

The government indicated in March that the total cost of re-capitalising Anglo was likely to be around EUR25bn (or 16% of GDP), some of which has already been disbursed, with the remainder spread out over a number of years. Others, including the ratings agency S&P, have suggested that the final cost is likely to be higher (S&P put the estimate at EUR35bn). Further capital injections (likely to total EUR5bn-EUR10bn) will also probably be required for some of Ireland’s other banks.

Meanwhile, Ireland’s ‘underlying’ budget deficit – i.e. stripping out transactions related to the banking sector – is very high but has been tracking broadly in line with the government’s forecast (11 ½% of GDP in 2010, 10.0% in 2011).

Costs of the Anglo Bailout Are High But Have Been Known For Some Time

Irish policymakers and analysts have been taken by surprise by the recent spread-widening as, while the situation with Anglo is serious, there hasn’t been much important new information on the cost of the Anglo bailout for some time:

·      The estimated cost of the Anglo bailout has been unchanged since March: On March 30, Ireland’s Finance Minister Brian Lenihan announced a further EUR8½bn capital injection into the bank and suggested that the total up-front cost of bailing out the bank was likely to be around EUR25bn. At that stage, some analysts suggested that the final cost was likely to be higher than the government’s estimate. While it remains the case that some analysts think the final cost will be higher than EUR25bn, neither the government’s estimate nor those of other analysts have changed that much since March.

·      Anglo’s H1 results (reported August 31) were poor but this was also widely expected: Anglo reported a EUR8bn loss for H1, the worst loss in Irish corporate history. However, the losses were broadly predictable because, having sold assets to NAMA (Ireland’s bad bank) at a large discount during this period, it had to book these transactions as losses in its H1 accounts. It may be that some of the international ‘surprise’ at this news is because, as a nationalised institution, Anglo is no longer followed by equity analysts.

·      An additional concern – which was genuine news – is that the government appeared to be constrained from implementing the least costly re-structuring option by the European Commission (due to competition concerns). The option preferred by the Anglo’s (new) management was to separate the bank into a ‘good bank’ and ‘bad bank’, slowly winding down the ‘bad bank’ but retaining the ‘good bank’ as a going entity (before floating it or selling it when circumstances allowed). However, this appeared to meet with resistance from the European Commission due to concerns that a government-owned ‘good bank’ would distort competition in the market. If the government was forced into an immediate wind-down of Anglo, this would hugely inflate the cost. At the same time, many feared that the intermediate option – an ‘orderly’ wind-down of the institution over a number of years – would be very difficult to implement in practice.

Breaking the ‘Vicious Circle’

Whatever the cause of the increase in Irish spreads, the development in itself presents a clear danger for Ireland, because the rise in borrowing costs and the loss of investor confidence threaten the government’s financial position. This danger is surely not immediate because the funding position of the Irish government is very strong: the NTMA – Ireland’s debt management agency – has a policy of significantly over-funding its borrowing requirements and it is fully funded right up until 2011Q2 if needs be. However, it will need to continue to access the market if it is to maintain this buffer. So what action has the government taken and what can we expect in the future?

·      The government announced yesterday that Anglo will be split into two entities, a “funding bank” that will take over Anglo’s deposits and an “asset recovery bank”, which will manage the loans that are not transferred to NAMA. This is closer to the “orderly wind-down” option than the management’s preferred good bank/bad bank option but, in separating the deposit base from the part of the bank that is being wound down, the risk of deposit flight should be much lower. We consider this to be a sensible move.

·      In order to provide transparency on the likely cost of the bailout, the government has asked Ireland’s Central Bank to provide an independent estimate of the total cost before the end of this month. The Central Bank is expected to provide a central estimate and a stress estimate.  An announcement will also be made on the likely funding required for Ireland’s other banks. This is also a very sensible decision in our view, even if it means that the uncertainty will remain for a few more weeks.

What else could the Irish government do to reassure investors?

Speed the rate of fiscal adjustment: Ireland won a lot of praise for tightening fiscal policy relatively early (and aggressively) in 2009 but, as other peripheral EU states have tightened their fiscal finances, Ireland’s budgetary projections no longer look that impressive. We expect the government to speed up the rate of fiscal adjustment in the next budget. However, the budget isn’t scheduled until December. An early announcement of the intention to speed up the rate of fiscal adjustment would be helpful and the Pre-Budget Outlook – due for release in mid-October – could provide the vehicle to do so.

What is likely now?

While the announcements made by the Irish government yesterday were welcome, we expect the uncertainty to linger until the Central Bank announces its estimate of the total cost of the bailout later this month. We can only speculate as to what the Central Bank is likely to say. The only point we would make is that the Irish government has a good record in being realistic and transparent on likely costs and projections, which would suggest the Central Bank’s assessment will be closer to its estimate than some of the wilder estimates that have been circulating.

97 replies on “Goldman Sachs on Ireland”

“The only point we would make is that the Irish government has a good record in being realistic and transparent on likely costs and projections, which would suggest the Central Bank’s assessment will be closer to its estimate than some of the wilder estimates that have been circulating.”

That is a little odd. We started at €4.5bn and gradually made our way to €25bn. Hardly are great track record on forecasts.

“The only point we would make is that the Irish government has a good record in being realistic and transparent on likely costs and projections”

Hilarious!!!

On the big picture numbers they’re right but EUR25bn was not the estimated cost of Anglo in March. That was Anglo + INBS. 22bn for Anglo and 3bn for INBS. It was when they asked the EC for a EUR24bn ceiling for Anglo that it began to look like they didn’t have a grasp on the cost. +2bn here and +2bn there and pretty soon you’re talking about real money.

Gold in Sacks are not the problem.
They are protected by the USA as too big to fail. They have no problem securing funds for a deficit.

Ireland has. That is not a problem either. Facing the need to balance the books IS THE PROBLEM!

It is a policy failure, reflecting half baked economic BS from their cronies all boiling down to “keep your heads above water, relief is coming soon”.

Except it isn’t! Wishful, magical thinking.

GS has made money out of Ireland and passed it out in the form of pay and bonuses. It is not a long term play. Every thing now is very short term as we all await the final crash. Where will the magic thinking bring Ireland then? There ain’t no rainbow, folks just more BAD NEWS!

Not the fault of GS, they merely saw a bunch of suckers who were trying to finagle their way into the EZ. Lies cost money! Dishonesty costs Ireland. Failing to face up to facts is just the small part of it. I wonder really think? They will come back for more meat later, like sharks.

Economic warfare, people! Wake up.

http://www.shtfplan.com/headline-news/joe-legal-vs-jose-illegal_09082010

This is relevant as the numbers of unemployed increase to the same order of magnitude as the “illegal immigrant” situation in the USA. In fact, it is worse, from the point of view of fiscal cost, as persons in the black and grey economy in Ireland are unlikely to be liable to forced deportation. Taxes will fall and unemplyment assistance will increase as people realize how easy it is to apply those low standards that we see in high places! Of course the whole example is flawed as there is no construction industry left in Ireland, courtesy of GFF policies!

Kevin Daly writes:

This is closer to the “orderly wind-down” option than the management’s preferred good bank/bad bank option but, in separating the deposit base from the part of the bank that is being wound down, the risk of deposit flight should be much lower. We consider this to be a sensible move.

The descriptions of these kinds of financial engineering projects remind me of early broadcasts by NASA in the 1960s, in which they would try to describe to the mass public how the lunar landing module will behave. In fact, the entire banking resolution process in Ireland has become a kind of state-funded trip to the moon and back. A kind of grand project, which is beginning to attract international media attention. The advanced engineering aspects of the project are fascinating I have no doubt, and worthy of debate. But I wonder if the end goal can justify the level of state investment involved.

Earlier in the year, I discussed the option of moving the shareholders of AIB and BOI out of the picture and attaching them to some other entity, orbiting the mini-solar system of Irish banking. Now that would seem to me a project worthy of the effort, and it would restore some confidence that Ireland is a viable country to invest in. Maybe I am incorrect though, as conventional economic theory would indicate, the shareholders are the party to take the first losses.

I have no idea what the assets left in Anglo are worth. But if they are not worth that much, is there any merit in passing them back to the shareholders of Anglo Irish bank? I mean, people such as former Late, Late Show host, Gay Byrne? I understand that the Anglo shareholders do not have any real claim on the institution’s assets, but would it not be a respectful jesture to those who invested in Anglo in good faith? Even if it was only a symbolic jesture. BOH.

Apologies people – a post off topic (moderator – possibly no need to publish). Why is this valuable, informative blog giving comment space to individuals like Pat Donnelly? Surely someone with a blog of their own entitled ‘Arbeit Macht Frei’ (dear God!) does not deserve an additional platform?

@ Enda,

That is the obvious strategy and the most responsible way to deal with the wind-down, or work-out process, I understand.

I wanted to insert the above comment, as a kind of provocation – similar to the way in which Edward De Bono describes in his texts about Lateral Thinking. This whole entire problem, is an example of where De Bono’s teachings could be applied to very good use. It un-locks the brain’s natural tendency to form into patterns, which remain fixed.

I think everyone will agree that our thinking about banking in Ireland has solidified now – to a situation, where no one will want to give up their position. Unless certain provocations are intentionally created. BOH.

@ All,

To further reinforce my assertion that Anglo’s toxic asset aught to be transferred in the name of Gay Byrne and fellow shareholders, I submit the following theory. The Irish taxpayer whom we are all competing to protect, might be better off without that ‘protection’. If we consider the idea of guilt by association, what has happened in recent weeks is the guilt associated with Anglo Irish bank, has been transferred wholesale onto the shoulders of the Irish taxpayer, on foot of the Irish government’s rigid policy of trying to protected the same taxpayer.

Every time that An Taoiseach Brian Cowen utters something about protecting the taxpayer, it serves no purpose from international market perceptions, other than to strengthen the association between Anglo Irish bank and the Irish sovereign. A factor that should have been avoided like the plague from the get-go. In a sub-note of a recent blog of mine, Natural Disasters I wrote about the Piranha fish hunting mentality of modern day credit markets. What we have managed to do in Ireland is hang a nice piece of bait over the side of our leaky craft, which has lost its oars, in the middle of the Amazon river. BOH.

http://designcomment.blogspot.com/2010/09/natural-disaster.html

@ Enda/BOH

just for clarity, the shareholders of Anglo ARE the taxpayers. The issue is over dispersal to bondholders, who, like it or not, are debtors of the bank and are owed money, and ahead of the shareholders in terms of divying up the proceeds of the winddown. The big questions we have been asking ourselves is whether we should meet this obligation or face the consequences of not doing so. We have broadly decided that, as bitter tasting and painful as it is, we should meet this obligation, at least for the most part (not subs, questions over ung’teed seniors).

I think in recent days we have seen a recognition of what our real situation is and what our ultimate options really are (note various market commentaries from the likes of O’Hagan, BNP, GS), with our choices being far more limited than some people had been suggesting up until now. For a wide variety of economic and political reasons, reneging on sovereign guarantees or obligations is not a real option, and inflicting losses down the capital structure is both more difficult than people had understood and would generate less “savings” than had been bandied about in the media. Unfortunately the option of muddling our way through and kicking the can down the road, long derided on here, has always been our most realistic option given the realities of our situation.

I’ll also note a far more restrained response from FG in recent weeks (Michael Noonan especially), which makes me think that they are trying to show they both recognise the situation that we are really in, and that they are capable of being a responsible alternative government option, rather than just a shrieking opposition party.

@Eoin

I agree. I think though that BOH was suggesting that original shareholders should get some value for their shares.
I noticed that about FG as well. The Labour Party are being their usual non-committal selves.

By the way and I know this will annoy people but JPMorgan have a piece out this morning saying senior Anglo bonds look attractive while also praising Brian Lenihan for doing a consistant and transparant job of restructuring the banking sector. Remember JPMorgan wrote it, not me before the abuse starts.

@ Enda

ah, sorry, misread/misunderstood the context there! To be clear, original Anglo shareholders should get zip, nada, nothing.

Most of the major banks have described the restructuring of Anglo this week as sensible or smart from an optical and flexiblity point of view, essentially amounting to a winddown with funding hopefully maintained. The best outcome we could probably hope for.

@Eoin,

“Unfortunately the option of muddling our way through and kicking the can down the road, long derided on here, has always been our most realistic option given the realities of our situation. ”

I also happen to agree – and commented to this effect on The Economist thread. But Ireland is being put on the rack to allow the institutional EU to avoid confronting some fundamental problems. What governments in the core EZ countries fear most of all is their voters turning on them and saying: “When we consented (mind you, not directly) to give up our own currencies and adopt the Euro you promised that there would be proper controls in place – and we trusted you; why did you allow these PIGS to lose the plot and our banks and pension funds to make such stupid investment decisions?”

The institutional EU is kicking a bigger can than the Irish Government, but we have much shorter legs, the can is proportionately heavier and there’s no road without a turning.

@ Enda/Eoin,

Yeah, I specifically meant the original Anglo shareholders, and that includes such characters as Sean Quinn, and people who deemed fit to own part of a venture, which was so poorly conceived – that is, Anglo Irish bank. I think at some stage, we have to get clear in our minds, the difference between owners, creditors and funders. There are different responsibilities and obligations on the part of each. The original shareholders (owners) of Anglo Irish have lost their equity yes. But they have also walked away from a massive problem they have created. What I am talking about, is a transfer of legal ownership back to the original shareholders, and allow the bondholders pursue the legal owners for a percentage of what they are owed. It is time we all got back into perspective, our various roles in the game. I see no problem with Anglo’s foreign creditors, taking control of the Quinn Group, via an equity swap, or whatever else. Heck, it happened with Zoe developments. Why should the Quinn Group be any different, or special? The nationalisation of Anglo Irish bank, is all that is saving the Quinn Group right now from pursuit from Anglo’s debt holders.

I know my idea was only an un-lightly suggestion, to try and enlarge the solution space slightly, which we have to work in. As Eoin has pointed out, the solution space is a lot smaller than many people had cared to admit. I distinctly remember former FG finance spokesman, John Bruton on RTE radio’s News At One, program back on Super Tuesday. I haven’t time to find the relevant link at the moment, but I do remember writing in a blog. Richard Bruton, the Fine Gael deputy and past spokesperson on finance came to the conclusion, that the lines between state debt and private banking debt became blurred. He spoke of this around the time of super Tuesday. Super Tuesday, was the day the scale of re-capitalisation for Anglo, INBS, AIB, BOI and EBS were announced. BOH.

http://designcomment.blogspot.com/2010/06/transfer-of-risk.html

@BOH
“I have no idea what the assets left in Anglo are worth. But if they are not worth that much, is there any merit in passing them back to the shareholders of Anglo Irish bank? I mean, people such as former Late, Late Show host, Gay Byrne?””

pardon me – but is it possible you have taken leave of your senses?

@BOH
Yes I admit I was shocked – but what really shocked me was that you proposed this idea, even though you knew Gay Byrrne was among them! Have you no sense of schadenfreude at all?

This is a timely piece that has a lot in common with Ciaran O’Hagan’s contribution, namely a reminder that while we don’t have much room for manoeuver in banking policy, we have a lot of leeway with fiscal policy.

I have the impression that Lenihan is the only minister in government doing any work. We need to focus more on structural reforms and promoting employment. And structural reform shouldn’t mean simply cutting public sector wages – surely the government can be more imaginative than that e.g. they should focus on improving efficiency in the public sector. They also need to promote other sectors of the economy like manufacturing – all those unemployed construction workers are not going transform themselves into high-flying winners of the “smart economy”.

If we try really, really hard to look after the rest of the economy, the banking mess will indeed become manageable and we will just about muddle through like Japan in the 90s (as Krugman was arguing today).

That is about the best we can hope for.

@Eoin
“The issue is over dispersal to bondholders, who, like it or not, are debtors of the bank and are owed money”
Do you mean they are debtors and creditors simultaneously – or have you just made the basic mistake usually confined to economic ignorami like myself? (Oh and some high profile academics of course)

@ AMcGrath,

It doesn’t bother me that Mr. Byrne is amongst them. What bothers me is that larger players such as Quinn are among them. I know things for an absolute fact in relation to Quinn, which I will refrain from saying here, to obey with Karl Whelan’s recent rules on comments. But all I will say is this: Is there any sense in which Anglo Irish Bank’s bond holders are very impatient at this stage, to get into the bank, and get to work on pursuit of what they can, from debtors. Is that why we are seeing the current turbulence? Because the government is delaying on a proper resolution, through a debt for equity swap? I mean, the Anglo creditors require certainly, and need to draw a line under their accounts more than anyone does, at this stage. As long as Anglo is in Irish state hands, the creditors are unable to offer their creditors a complete picture.

I am positive, that if the Anglo bond holders found themselves as equity holders all of a sudden, they would be more than capable of managing the wind-down, or work-out for themselves. Perhaps in a manner, much more efficient than Mike Aynsley, Alan Dukes and company could do. We hear a lot of refrain from the Irish government, about how they are protecting the taxpayer. But at this stage, I believe that is only a fig-leaf for something else. I believe, it would be a fall from pride for Fianna Fail, if the markets were really allowed to enter into the affairs on St. Stephens Green. A bit like when Japanese were buying real estate in Manhattan in the 1980s. I am not convinced it is the interests of the taxpayer the government in Ireland is concerned about. But I know, it is difficult to go and interview an Anglo bondholder, to see if my assertion hold any shred of validity. More is the pity. We have assumed from the beginning, the bondholders are the bad guys in all of this. At this stage, I am of the opinion, let them have Anglo Irish bank. They couldn’t do a worse job than Dukes & company. BOH.

It must be nice for academics to play economic ping pong using billion dollar balls. But this is not a game or an academic exercise. It is about real people and the destruction of their lives. The reason the bond markets are walking away from Ireland is because every statement from our somnolent “government” is lies: Every statement from our crooked, unfit for purpose, bankers is lies. So fiddle away in your sea of details and irrelevancies lads. You are as purposeless as those you critique.

@irishmuffin

I agree with you 100%. The current economic situation involves real lives of individuals and families. Several posters here seem to be fixated on the issue of apologising for the line taken by the goverment in the past and they’re doing their best to continue to muddy the waters on this site at present.

Eoin Says:

September 10th, 2010 at 9:44 am
Enda/BOH

just for clarity, the shareholders of Anglo ARE the taxpayers. The issue is over dispersal to bondholders, who, like it or not, are debtors of the bank and are owed money, and ahead of the shareholders in terms of divying up the proceeds of the winddown?

Eoin : Bondholders are surely creditors of the banks (ie they’re owed money by the bank)?

@Eoin
“Unfortunately the option of muddling our way through and kicking the can down the road, long derided on here, has always been our most realistic option given the realities of our situation. ”
Perhaps. But the debate has not been had, other than on these pages and on other esoteric sites. On some mainstream sites, discussion is not encouraged. On others, there is an obvious political bias in many of the contributions (on all sides).

Unfortunately, the government hasn’t been following these policies, which I think is where some of the derision comes from. Muddling through would have involved recognising the zombie banks. It would have involved a SLS rather than NAMA. Crystallising some of the losses through NAMA may make the bond market happy (they are not picking up the bill), but there is no way it can be called muddling through.

@hogan,

Your reference to ‘debate’ suggests that you think there is some sort of evidence-based, democratic decision-making process underpinning this entire exercise. What is at stake here is the survival of the Eurozone as a political project pursued by the major EZ governments and the institutional EU. Having been forced to take Greece into protection, they are going to do their utmost to prevent a repeat with Ireland. The stakes could not be higher and ‘debate’ doesn’t come into it.

And the Irish Government is fully compliant with putting the Irish economy in the firing line as both parties know that they would be political dead meat if they were to succumb to EC/ECB/IMF administration. Every bit of slipperiness and inventiveness will be applied in Irish and EU governing circles to try and pool the wool over the eyes of the sovereign bond market. But how long with the market swallow this fairy-tale?

@Paul Hunt
That may be the case (indeed I agree with you that it probably is), but it is unpalateable at best and undemocratic at worst to not debate where we are, the reasons we are here and the ways, if any, out of it.

As you rightly point out, the sheltered sector (which looks more and more like it is also being sheltered by NAMA) stands to lose in the event that reality takes hold.

The market will swallow as long as there is someone behind us giving us something to spoon-feed them with. It is not our government fantasys that are being swallowed, it is the political project that you identify.

Goldman Sachs’ more optimistic view is borne out by the manufacturing output figures for July, published by the CSO this morning.

Manufacturing output was 12.9pc higher than in July 2009. It was 30pc higher than in December 2009, the low-point of the recession. In the last quarter alone, it rose by 7.5pc. Even allowing for monthly volatility, which I agree happens (so it could quite conceivably fall in August), these are sensational figures for manufacturing output. The double-dip has gone up in smoke.

The normal response of some media economists and commentators to such figures is to claim that it is all due to that viagra factory in Cork, which (they usually claim) has been artifically stiffening up the overall output figure. Not so. I’ve checked the figures, and the growth is across many many sectors. However, so as not to bore readers to death, I will not post the sectoral growth figures, unless provoked.

Re ‘reassuring investors’, “Ireland won a lot of praise for tightening fiscal policy relatively early (and aggressively) in 2009 but, as other peripheral EU states have tightened their fiscal finances, Ireland’s budgetary projections no longer look that impressive.”

But the puprose of the policy and the reason it was praised it not because of a contest in fiscal masochism. The praise, from Goldman amongst others, was because, it was said, the fiscal tightening would work. It hasn’t.

Ex the bank bailouts, the deficit has soared, taking bond yields with it, and the economy slumped, the worst recession in the Euro Area.

@ Simpleton

I see the author worked at a start up Disaster Recovery Firm at Ground Zero. Do you know if it was set up before or after 9/11?

@John the Optimist

Consider yourself provoked (-; I’d like at a scan at the sectoral growth figs pls.

Even though the information is scrappy, based on confidentiality, are major shareholders in Anglo (the taxpayers) not entitled to more information of the profile of indebtedness of ‘their bank’?

Can anybody begin to come up with a simple table of key bondholders, creditors, etc.

Suggestions to date, with no clear idea of the overall proportion of the debt:

Sean Fitzpatrick
Bank of Ireland
AIB
Quinn Group

Are we possible talking here about a house of cards, which could involve many key companies and major employers in the state? And if we were to see the inside story, the threat of massive unemployment could be an outcome?

@hogan,

I suspect I may be accused of it, but I’m not seeking to close down debate. I simply believe that the debate should be couched within the parameters of what’s possible. Much of the ding-dong here – often frenzied – over the last year or more was predicated on erroneous assumptions about the extent of sovereignty that Ireland exercises in these matters. Though they may not have been sufficiently forthright about their underlying rationale the good Eoin and others in the ‘keep the ship afloat and steady’ faction have captured the ‘realpolitik’ more closely than most.

However, we have gone beyond the point where the democratic deficit in all of the EU’s parliamentary democracies and at the heart of the EU institutions themselves may be ignored. Genuine debate occurs when evidence and counter-evidence are contested and scrutinised and informed decisions are made. And we don’t require economically literate public representatives to achieve this (though some would help); we simply require them to make balanced judgements in the public interest on the basis of the evidence presented. At the moment, when a gvernment changes the only things that change immediately are the identities of the Taoiseach and Ministers, of the special advisers, of the whips governing the business of the Oireachtas and of the lobby fodder being whipped to enact the diktats and legislative proposals emerging from the closed conclave of Ministers, special advisers and senior departmental officials. This has got to change at the national level and in the corresponding EU process.

And I agree with your observation that some assurance of spoon-feeding may keep the sovereign bond market amenable. However, at some stage the ECB’s extensive repoing will have to stop and be unwound and the funding requirements will become ‘real’. This is outside the time horizon of the current Government and is of no concern to them. (Indeed I can see them in my mind’s eye on the opposition benches viciously lacerating the new government struggling to deal with the legacy they have been bequeathed.) It’s steady as she goes in the hope that the search-light will swivel on to someone else.

But the economy will need future real growth similar to that experienced in the ’90s if it is to reduce the debt/GNP ratio. Which brings me to…

@JtO,

I agree the economy is demonstrating signs of resilience and I’m not surprised. But what we need to make sure is that malfunctions in the state, semi-state and sheltered sectors are addressed to prevent them suppressing or restraining this much needed resilience in the traded sectors. Moidering about bank resolution is totally ineffectual when most of it is out of Ireland’s hands. The composition of fiscal adjustment and reforms of these sectors are very much in our hands.

@ Eoin

Let it be recognised that this family controlled bank since it was founded in 1857, is one of Europe’s most successful and came through a massive housing boom in its own country.

Insistence by the Banco de España on additional provisions for the rainy day was a factor while the Irish central bank stood idly by.

Better risk management was also a big factor.

@Eoin,

This sounds like very good news. As Governor Honohan almost said ‘without Anglo the bank crisis would have been manageable’. It also seems that, pre-crisis and apart from a few cajas, bank regulation was reasonably effective in Spain and has allowed Santander and others to snaffle juicy assets at close to firesale prices throughout the EU.

Also…

“By Louisa Fahy
Sept. 10 (Bloomberg) — Ireland appointed Rob Wright as
chairman of the Independent Review Panel to examine the systems,
structures and processes used by the Department of Finance.
Wright has 35 years of economic, policy and management
experience in the public service of Canada, the Department of
Finance said in an e-mailed statement today. Hans Borstlap and
John Malone were also appointed to the panel.”

Bit by bit, the decisions in recent days hopefully signal at least the beginning of the end of this crisis for us. Once we can get past the crisis part, then we can just focus on the litany of standard problems underlying much of our economy…

@ irishmuffin

“The reason the bond markets are walking away from Ireland is because every statement from our somnolent “government” is lies”

When a government is addicted to spin, at times of peril, people stop listening.

Yesterday, we had an example of what passes as enterprise policy; on Wednesday press and photographers were alerted that Batt O’Keeffe would be making a jobs announcement in Cork on Thursday.

As Batt was announcing plans for 31 jobs at a plastics factory, at about 9 miles from where he lives, at Upton, near Bandon, US-owned pharmaceutical firm Schering-Plough was making its latest downsizing announcement – – this time 160 jobs.

It’s a tough business in our best sector; not too far from Upton is the Eli Lilly plant at Dunderrow, near Kinsale. Lilly expects that patents covering drugs accounting for three-fourths of its current revenue will expire over the next few years.

Sales have been disappointing for the blood thinner Effient, Lilly’s first new product in five years.

@JTO

“The normal response of some media economists and commentators to such figures is to claim that it is all due to that viagra (??) factory in Cork, which (they usually claim) has been artifically stiffening(??) up the overall output figure.”!!!

How do you get away with it?

@Seamus

We know FitzPatrick owes 89million to Anglo and has been declared a bankrupt. He certainly is not a bond holder.

I would doubt very much that Quinn, AIB or BofI are bondholders. Quinn is a very big debtor.

I assume most of the bond holders are foreign (e.g. German pension funds). Brian Lucey thinks that some of the bond holders are property developers as well as being massive debtors. I haven’t seen any evidence of this. I would think it unlikely, but it is theoretically possible.

@David O’Donnel

Thanks, David. I will post them on Saturday morning as I won’t have time tonight. There’s quite a lot in them.

@Paul Hunt

I agree the economy is demonstrating signs of resilience and I’m not surprised. But what we need to make sure is that malfunctions in the state, semi-state and sheltered sectors are addressed to prevent them suppressing or restraining this much needed resilience in the traded sectors.

JTO again:

I totally agree with you, Paul. The fact that I usually don’t comment in threads where you advocate this is simply because it is not my area of expertise. I try to limit myself to the small handful of topics I know something about. You know infinitely know more about reforming the malfunctions of the state than I do. Except, just one point I’d make, and this probably isn’t the best forum for discussing it so I’m not trying to start a debate on it here, many of the malfunctions of the two states in Ireland are the direct and inevitable result of the artificial partition. Any reform of the malfunctions of the state or states in Ireland should contain a large element of integration of their functions (pending their replacement by a single state in a decade or two’s time). As an example, I mentioned waste disposal strategy and building an incinerator in the other thread opened Richard Tol this morning.

Further news this afternoon on the Irish banking sector that should be very much welcomed – IL&P released the results of its voluntary undertaking of the CEBS stress tests. I havent heard of any other bank voluntarily undetaking these (but could’ve missed it?):

“Friday 10th September 2010. 

Kevin Murphy, Group Chief Executive of Irish Life & Permanent Group Holdings plc, has welcomed the results of Prudential Capital Assessment Review [PCAR] at permanent tsb bank by the Central Bank and the application of the CEBS [Committee of European Banking Supervisors] stress test to the bank.

Murphy said that the conclusion of the PCAR and CEBS exercises confirms the robust capital strength of the Group which has avoided any call on the
Government for Capital and which has no exposure to NAMA.

The PCAR review has identified that the bank has sufficient capital to meet
its base case scenario for the next 3 years [2009 – 2012] while it requires
 €145 million in additional capital to meet its stress case scenario for the
same period.  Murphy said that the Group would meet that requirement through its own resources by way of a planned VIF Securitisation and cash flow from other non-banking subsidiaries.

The application of the CEBS test confirms that the bank exceeds the minimum Tier 1 Capital Ratio requirement [of 6%] in all scenarios.

Stress Case – Requirement for €145 million in additional Capital [to be raised from own resources]

Under the  Stress Case [based on assumed losses of €2215 million], the PCAR identifies a requirement for additional capital of €145 million in 2011.  The Group proposes to do this via the €100 million VIF securitisation [already underway] and from cash flow from other non- banking subsidiaries.

Findings of CEBS test

The Central Bank also applied to the bank the stress test as determined by the Committee of European Banking Supervisors (CEBS) in July 2010.  The results of this exercise demonstrate the bank meets the stress requirement of a 6% Tier 1 target capital ratio.

Results of CEBS test:

Benchmark 9.9%
Adverse 8.9%
Adverse + Sovereign Stock 7.6%

The results of the CEBS test do not include the capital requirements of €145m resulting from the PCAR.  Including this additional capital will increase the above ratios by circa 1.3%.

Separation of bank and life company:

The Group also confirmed that if the bank and the life company are separated as has been proposed as part of its current offer for the EBS, the Group estimates that €925 million of capital would be needed to recapitalise the bank [permanent tsb] on a stand alone basis.  The Group envisages that this would be funded from internal resources, a liability buy back programme and an external capital raising exercise.

@John Martin
“I would doubt very much that Quinn, AIB or BofI are bondholders. Quinn is a very big debtor.”
Well aren’t you the Thomas.

PTSB revealed in its interim results that it has nearly 900 mn of ELG-guaranteed Anglo bonds. The others haven’t released their results yet, but when they do, look in “related party transactions”. I would be astonished if the green jersey didn’t show holdings by at least AIB and BofI and we will probably never know the life company figures – in the case of Quinn, they are probably firewalled in a customer fund anyway, so no netting could occur.

@tull,

I doubt if you’ll get them to rise to the bait 🙂

Anyway, they all have important day jobs.

…and, though the immediate panic may have passed, a huge mountain of real debt – as opposed to all these NAMA bonds and promissory notes – will surface down the road beyond the lifetime of this Government.

@tull

Isn’t Brian Lucey going head to head with Brendan McDonagh from NAMA down in Tralee at some economics get together?

@ Tull

listen, today’s one of the last Friday’s they have off before the colleges start back – they’re all getting smashed in the Pav as we speak…

@JtO,

I don’t you’ll find anyone arguing with you about the disbenefits of partition. However, in the areas about which I know a bit, electricity and natural gas, there is evidence that the creation of a single electricity market and the steps to develop something similar for natural gas are, respectively, exporting and have the potential to export serious dysfunctionality from the South to the North.

Though this might annoy the Green Jersey wearers, there is potential to further integrate the gas market on both islands and this would generate benefits for all consumers and businesses. The same potential should exist for electricity, but, unfortunately, due to inept privatisation and application of competition the British electricity market is almost as dysfunctional as that in the South.

However, I am sure that there are ample opportunities for all-island integration in other sectors, but one would need to be very careful that the inevitable southern dysfunctionalities don’t infect something that might be working quite well in the North.

Aaaaaaaaaaaaaaand we’re done…

*AIB AGREES TO SELL ITS POLISH INTERESTS FOR EU3.1 BILLION
*AIB SALE TO GENERATE C. EU2.5BN EQUIVALENT EQUITY TIER 1 CAP.

Santander & Apax the buyer

Seafoid,

will there be a video of that on the NAMA website.
BTW, I see NAMA is on the cusp of selling 500m worth of properties. Anybody question the value of buying & selling properties at depressed valuations. It hardly creates value for the taxpayer…unless of course you are a “debt deflationist.”

Given that we appear to have got a lend of the ECB printing press is the debt deflation argument a little less strong. I realise this is heresy in these parts.

@Hogan,

a very long letter, perhaps 3 pages & written in longhand?

@JtO:
“many of the malfunctions of the two states in Ireland are the direct and inevitable result of the artificial partition.”

Absolutely. We must rejoin the United Kingdom immediately.

bjg

@Brian J Goggin

Absolutely. We must rejoin the United Kingdom immediately.

JTO again:

We’d need to hurry up to do what you suggest, as the United Kingdom isn’t going to be around very much longer. The Scots are revolting (in the nicest possible way, of course).

@All

Eid Mubarak

@JtO

… maith agat!

@Eoin

.. and Spanish ale provides some hope … O me dark Rosaleen (-;

any estimate on how much [%] Joe and Joan will own of AIB when nationaaaaaaaaaallllllllllllllllllllllllizzzzzzzzzed ?

@ Hogan,

Interesting comments. The fact that PTSB (a company not dependent on the State) has bonds in Anglo is in no way proof that AIB and BofI, who are dependent on the State, have. AIB and BofI might have a deposit holding, but I would be surprised if such cash strapped institutions invested in bonds in Anglo. I’ve just glanced at AIB’s accounts (p/e 30/6/10). There is no reference to Anglo bonds. I’d imagine a declaration would have had to have been made since AIB is a related party to Anglo? (the State has a substantial shareholding in AIB and owns Anglo 100%). But I don’t claim to be certain of this.

As I’ve said it is theorectically possible, but in my opinion unlikely. It’s all very well wearing the Green jersey, but if AIB/BofI didn’t have the cash I would be surprised if they invested in bonds in Anglo.

I remain sceptical of Quinn (or a Quinn company) owning any bonds in Anglo. But as you say he might very well be a participant in an Anglo managed customer fund.

But if anyone can dispel my scepticism I would be very interested to hear from them.

I would imagine all the Irish financial institutions own some of each others debt. Nothing shocking in that. Can’t imagine why Quinn or property developers would have bought bank debt. Sounds like a conspiracy theory to me.

@John Martin
BoI has a related party transaction section in its accounts and doesn’t mention Anglo, AIB appears not to have this section? (The six-monthly appears less than fulsome unless I am looking at the wrong one?).

Rather than thinking that Sean Quinn himself has bonds in Anglo, think about Quinn Life or Quinn Insurance; likewise AIBIM and BIAM. Life and insurance companies have an ongoing requirement for interest bearing assets. If ELG guaranteed debt pays more than government bonds of equivalent duration, they’d be mad not to take it in preference to Irish government bonds.

@Enda f
“Can’t imagine why Quinn or property developers would have bought bank debt. Sounds like a conspiracy theory to me.”
The reasoning would be the same as behind the loans for shares that Anglo seemed to specialise in. Loaning money at less than the coupon on the bonds would be a win-win for all involved…

@Enda f
“Come on hog, you are better than that!”
Hey, as I say, it would be win-win all round. It is one of the problems with interbank funding costs being lower than long-term capital (even pegged capital) costs. The optics of a balance sheet look better with long-term funding in place. But long-term funding is expensive and short-term is cheap.

There are rules in place to limit buying of shares with loans. As far as I am aware, there are no rules in place to limit bond buying with loans. So it is not as if I am suggesting malfeasance. Just, eh, gaming…

All …
great website guys…
good to have access to such diverse opinions on the most important stuff happening in the country at the moment.
The additional bonus is that i dont have to watch RTE news anymore…
Ron (IT worker addicted to this site!)

As things get more serious, could this site not consider banning anonymous contributors, they are all so optimistic in contrast to those who put their names up, does it not distort the conversation?

It disturbs me that most contrbitors seem to treat anonymous and named contributors with the same respect, which seems to me to be undeserved.

@ Tim

you’re right, that Hoganmahew lad has become far too much of a shrieking pollyanna for my liking.

@David O’Donnell

These are the manufacturing output figures I promised.

In July 2010 (figures published yesterday) the volume of manufacturing output was up 12.4% compared with July 2009. However, the manufacturing output figures are volatile from month to month. July was exceptionally good. It wouldn’t surprise me if the figure for August turns out to be lower when its published in a month’s time. So, as per normal practice with economists, I’ve calculated the average figures for the past 3 months and compared them with the average figures for the same 3 months of 2009.

Averaged over May, June and July 2010, the volume of manufacturing output was up 9.4% compared with May, June and July 2009. Manufacturing output in that 3-month period was 3.3% higher than its pre-recession peak in 2007 Q4. As far as I know, Ireland is the first EU country to achieve this. So, whatever about other sectors of the economy like construction, we can say that the recession in manufacturing industry in Ireland is well and truly over.

Next is to look at how this 9.4% increase in output is spread over the various sectors of manufacturing. The media invariably report it as being all due to pharmaceuticals. But, it isn’t. The CSO has divided manufacturing into 27 sectors, some large, some small, and gives separate output figures for each sector. Again, rather than just using the July figures, which might paint too rosy a picture, I’ve calculated the increases/decreases in output in each sector in May, June and July 2010 compared with May, June and July 2009. Here they are – I have ranked them in order from best to worst-performing:

[ 1] basic metals: +36.1%
[ 2] pharmaceuticals: +21.2%
[ 3] optical products: +17.7%
[ 4] other chemicals: +13.1%
[ 5] other manufacturing: +10.7%
[ 6] metal products: +8.3%
[ 7] transport equipment: +8.0%
[ 8] other foods: +5.8%
[ 9] dairy products: +5.7%
[10] machinery and equipment: +5.7%
[11] rubber and plastic products: +5.6%
[12] wood products: 4.9%
[13] bakery products: +1.6%
[14] repair/installation of machinery: +0.7%
[15] textiles: +0.2%
[16] beverages: 0.0%
[17] grain products: -1.1%
[18] meat products: -2.4%
[19] electrical equipment: -5.1%
[20] paper products: -6.1%
[21] printing: -7.3%
[22] petroleum products: -7.8%
[23] non-metallic minerals: -14.7%
[24] leather products: -18.5%
[25] clothing: -19.6%
[26] electronic components: -28.9%
[27] computers: -39.6%

So, of the 27 sectors, 15 recorded increases in output between May, June and July 2009 and May, June and July 2010, 11 recorded decreases, one 1 (beverages) showed no change. The two worst-performing sectors were electronic components and computers, both MNC-dominated. This reflects the Dell closure. In the past quarter, both these have levelled off compared with the previous quarter (although still well down on a year ago) as the effect of the Dell closure works its way out of the figures.

Returning to the theme of the thread, namely the fact that Goldman Sachs are taking a more optimistic view of the Irish economy than some people, I’d say that, if this manufacturing trend continues (and I have no more idea than anyone else as to whether or not it will), this is bound to have an effect on other analysts’ outlook on the prospects for the Irish economy. Goldman Sachs may simply be ahead of the pack.

Enda F,

When the government embarked on this experiment the general government borrowing as a proportion of GDP was 7.2% in 2008. It is now double that.

In the 2009 Exchequer returns the Deficit was €24.6bn an increase of €11.9bn in the year, of which €4bn was payment to Anglo. The remainder is the underlying deterioration in government finances.

The 2010 data maintain this trend. As of August the year-to-date exchequer deficit is €6.6bn lower than in the same period of 2009. But this is a result of the combined €6.8bn in not makng payments to either Anglo or the NPRF. The underlying budget position continues to deteriorate.

Tim
Sorry, but we need to know what the shills are thinking! There is just a chance that they can solve the whole problem!

To be fair, and frankly, the corruption in the state prevents that, but this site is open, some optimism is a good thing if the sheep really have no options. It is less cruel to allow them to think that things will go well.

On the other hand if they are able to think for themselves they should be able to see through the poor arguments put up here by the shills. Our case is so strong that the shills should only help us to covince the undecided, so that they can save some of their capital?

Some of the anon contributors may also be sincere and in need of protection from a corrupt state!

Seamus Grimes

That would explain why anyone with capital would lend to Ireland at the height of a bubble! They would expect to make profit by such a “bond” and thereby create extra credit, as the great Steve, from Australia, has determined: the lending creates the reserves, despite all rhetoric to the contrary.

Veeery Interesting!!!!!!

The balance sheet would be just fine and allow maniac lending. But what were the actual mechanics of the business? Not merely debit (window side) and credit but actual “cash inflows” acknowledging that electronic transfers would have been used.

Great nom de Guerre too!

@Tim O’Halloran

As things get more serious, could this site not consider banning anonymous contributors, they are all so optimistic in contrast to those who put their names up, does it not distort the conversation?

It disturbs me that most contrbitors seem to treat anonymous and named contributors with the same respect, which seems to me to be undeserved.

JTO again:

How exactly would the moderators check that the names given were the posters’ real names, even if they sounded genuine? Posters could call themselves Eric Dunne, Peter Baxter, Fiona O’Reilly, Barry Murphy, or whatever, all of which sound genuine, but how would the moderators know if these were the posters’ real names? How do we know that you are really called Tim O’Halloran? I’m not saying that you aren’t, simply that we have no way of knowing. Unless it is a person who is on the media a lot, the real names of posters would mean nothing to other posters.

And how would such a rule be enforced? Would you be requiring the moderators to do like the security services or credit card companies and ask posters to give privately to them their passport numbers, ppsn numbers, national insurance numbers (if from UK), addresses, dates-of-birth, mother’s maiden names, names of favourite pet, and so on and so on, so that they could check them out, and maybe ask the Gardai to pay a visit to their homes to confirm their identity, or in the case of posters living outside the state, perhaps get Interpol to perform that task. Posters on here are simply giving their views, not applying for a million euros credit. Their real identities are unimportant.

I think the reason that anonymous posters are on balance more optimistic is because they mostly work in businesses in the private sector and know more about what is going on in the real world. That is also why they wish to remain anonymous, so that their employers don’t know they are spending time posting here. Academics and students don’t have that problem.

@Michael Burke,

You seem to think that Ireland retains some sovereignty in these matters. It is trapped between the arse-covering imperatives of the institutional EU and the governments of the major EZ economies which live in abject fear of imposing Irish-generated losses on their banks and voters’ savings pots and the genuine concerns of the international sovereign bond market which, on some estimates, finances 80% of Ireland’s sovereign debt – and probably close to 100% of additional borrowing.

It’s no good railing at the Government. You’d be better off trying to persuade German workers to take a hit on their pension funds to help lil, ole Ireland.

Paul Hunt

Agreed the larger picture is important, having made precisely that point months ago, it does bear repeating, but the precise steps taken and by whom, may if exposed, prevent the same jockeys from riding the horse further into the ditch?

John Martin

Yes. I agree it is worth trying to find out. Banking enables laundering and movement of funds. The bondholders may be nominees for the beneficial owners. It is likely impenetrable, except by “following the money”.

BCCI was so valuable to all manner of persons.

@tull
“Given that we appear to have got a lend of the ECB printing press is the debt deflation argument a little less strong. I realise this is heresy in these parts.”
Unfortunately, I don’t think so. If we could generate wage inflation with the printing press, that would help. But we can’t.

If we could generate asset inflation that would also help, but given that we can’t generate salary inflation, that’s not going to happen either.

So we are left with unchanged principal, it is just the interest rate that has become a little easier. This is an improvement over calamity, but it does little to reduce the bulk of the debt. For the moment, the mantra is “pay it back”; we are just getting easier terms than the market is willing to provide.

@hogan,

Agreed. The ECB liquidity is simply temporarily plugging the holes where hard cash should be – and at a discount to the market cost. Sooner or later hard cash will be required. The major EZ countries have parked a large volume of dodgy/toxic debt in the vaults of bad banks (or equivalent). Our only hope is that, when they eventually come to sort these out, they will show us some mercy.

@Paul Hunt
We had better hope it is later. In fact, short of bust, later is the only option for us and likely for other banking systems that haven’t yet recognised their difficulties. To impose market prices sooner risks the eurozone economy. While I agree with you that the EU/ECB are pulling the strings, there is an obligation on them to have soft landings all round. If there is to be no debt restructuring, there has to also be a method to prevent abrupt default.

@ all

Johntheoptimist above says
“I think the reason that anonymous posters are on balance more optimistic is because they mostly work in businesses in the private sector and know more about what is going on in the real world”

ive seen this point made a few times on different threads, but i dont understand the point.
Why is it suggested that academics etc who are in state employment are less positive?

surely someone in employed by the state should be optimistic to spread the notion that the state will stay afloat financially? i mean…their wages cant be paid if this fiscal crisis gets nasty?

i also have assumed (forgive my naivety) that those spreading very positive messages are likely to be working for FF or the DoF or some kind of inside interest. I dont really consider it a conspiracy theory…but just a case of talking up ones own book. no harm in it…

so basically…im challenging the logic that says the public sector academic posters should be negative, and private sector posters should be positive…

THanks for indulging me…

Ron

http://www.abc.net.au/news/stories/2010/09/10/3008788.htm

This is an example of what happens in a mildly corrupt but productive society where homogeneity still holds sway and xenophobia is very strong. Ireland is likely to be worse?

Ron
Yes, that is my thinking too. I am a little more savvy than most “private” sector types. But not the board of CRH! As an ex-public servant, I had to have a degree and be IQ tested. I had 23 years of looking at the lies told by those minimizing their tax liability (or occasionally increasing it!) so I tend to suspect shill activity on the part of many who post anonymously. Reading a post, or series of posts, use the search function, will enable the astute to gauge the sincerity and accuracy of the poster!

Freedom is earned and suspicion is but a small price to pay for that pearl! Eoin and one or two other optimists are sincere, but stuck to their last and talking up their book.

I am a desperate character intent on destroying the world, according to some, because my blog has German in it, that was placed by NAZI authorities, duly elected by democratic vote, onto the gates into Auschwitz!

I also believe a coherent view of history involves economic study. “Those who have the gold make the rules” is the Golden Rule! Hence the success of the English, often with Irish and Scots at their side. The largest empire the world has seen in history anyway. Prehistory? Read my blog. I am dangerous as I challenge their blind, or cynical, optimism.

Read up on John Law and the causes of the French Revolution. Likewise the Russian revolt, started by menshevicks but taken over by the bolshevicks. That is the danger of revolution!

@Ron

I also have assumed (forgive my naivety) that those spreading very positive messages are likely to be working for FF

JTO again:

Ron, are you saying that those ‘spreading very positive messages are likely to be working for FF’ but that those doing the opposite are impartial and independent of any political interest?

As it happens, I don’t work for FF. But, I don’t take the least offence if you think I do. In fact, I take it as a compliment if someone thinks my posts here are of such quality (which they certainly are not) that the main government party may be paying for them. I wish they were.

A few separate points in the debate have got a bit muddled up, including by me.

It was Tim O’Halloran who said that anonymous posters tended to be rather optimistic on here compared with those who gave their names. I then attempted a possible explanation, without really checking if Tim’s basic point was correct, although it might be (are the anonymous posters actually more optimistic?). My explanation was that anonymous posters are more likely to work in businesses in the private sector. I think this is true. Stands to reason, surely. If you work for a business in the private sector, your employer might not want you to (a) express controversial views on a public site (b) spend company time posting on here. Academics and students don’t have that problem.

As to whether or not the latter groups are more pessimistic or not, I’d say that academics and students are likely to be more left-wing than those who work in businesses in the private sector and less likely to have ever voted FF or PD. So, both sides may be biased by their political views. Include me in that if you like.

@ jto

“As to whether or not the latter groups are more pessimistic or not, I’d say that academics and students are likely to be more left-wing than those who work in businesses in the private sector and less likely to have ever voted FF or PD. So, both sides may be biased by their political views. Include me in that if you like.”

–yeah..that seems rational. id like to hear the opinion of someone we know is from academia / state employment on this.

@JtheO
Got any stats for that?

I love stats me. It appeals to the private sector communist in me…

Quite frankly, I find most academics appallingly right-winged establishment supporters…

@Ron

Having discussed your very good question with friends down in the pub just now, one or two of them came up with the suggestion that people who set up their own businesses tended to have more optimistic types of personalities. I think there might be something in that. If you perpetually believe that the economy is going to crash, that all is doom and gloom, that the outlook is bleak, that things will never pick up, then that is likely to act as a deterrent to setting up your own business. Of course, that theory would only apply to people who set up their own business, not to people like me who are merely employed in the private sector.

@hoganmahew

I find most academics appallingly right-winged establishment supporter.

JTO again:

That would explain why Morgan Kelly and Brian Lucey are such staunch FF supporters. I think that the only stats would be recent election results.

Paul Hunt

This is a variant of ‘the big boys made me do it’. But these are choices made by the government here.

More importantly, the choices made have not resulted in any narrowing of the deficit, but the opposite. Therefore, in order to narrow the deficit, other policy options are required, not more of the same.

@Michael Burke,

I agree. But the Government has laid its bets and wagered the economic future of this benighted polity on doing what it believes is required to appease the bond markets and to secure the continuing and expansive support of the institutional EU.

It is tragic and brutal, but it can’t change course now. Alea jacta est.

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