QNA Release for 2010:Q2

The quarterly national accounts for 2010:Q2 have been released. They show seasonally adjusted GDP declining 1.2% quarter over quarter and seasonally adjusted GNP down 0.3%.  Year over year, real GDP is down 1.8 percent and GNP is down 4.1 percent. Nominal GDP is down 3.6 percent year over year while nominal GNP is down 6.2 percent over the same period.

There were also revisions to the first quarter figures. Seasonally adjusted quarter on quarter growth in GDP was revised down from 2.7 percent to 2.2 percent, while the decline in GNP was revised from 0.5 percent to 1.2 percent.

144 replies on “QNA Release for 2010:Q2”

Government capital expenditure was down €1billion by end Q2 (€600m behind target). If this unspent allocation is used in Q3 and Q4 it should help the full year figures.

The car scrappage scheme subtracts from GDP this year by adding to imports.

Where does government borrowing fit into this? I can see from the note on interest payments that they subtract from GNP when they are going to external lenders; does borrowing simply prop up the government share of expenditure?

Anyway, given that I reckon that current market prices are what we should be using as there is still CPI deflation, I reckon this is the first hopeful QNA in a long time (since Q4 2007) as GNP has rises QoQ by 0.5% (subject to the caveat above on borrowing).

Nothing to do with car scrappage then… phew, for a moment I thought another disastrous bailout of a non-productive sector had taken place.

It’s a good thing the Q1 growth figure isn’t affected by a spike in anything.

It’s also a real shame that seasonal smoothing doesn’t seem to work in Ireland… must be to do with the weather?

The increase in imports was €2,850m. Change in exports was €2,924m. Can’t see how that affected figures in a big way.

@ Celtic

the auctions were 4x and 11x bid-to-cover, so it was the NTMA’s choice not to sell. Unlike the bond auctions which we have almost always done the full allotment, they have previously decided to only issue partial allotment in the tbill auctions.

@ Eoin & hoganmahew

Thanks for that.

Looking forward to JTO finding a few scraps of positives in todays figures. Not looking forward to Dave McWilliams saying we’ll be eating our own children to survive.

@ Celtic

the positive will be the GNP trend, lowest level since Q1 2008. Hopefully, and i stress hopefully, it can reach positive territory in Q3.

I’m not looking to become JTO II, but there are positives in this release. While we shouldn’t read too much from a single quarter, there some hopeful signs of a turnaround in domestic demand. The big rise in imports is the factor dragging GDP down. Hopefully others can clarify how much the royalties explanation holds up.

The last Central Bank forecast of GDP and GNP was at the end of Q2, 2010 and that predicted GDP in 2010 at +0.8% and GNP at -1% (link below)

If I’m reading the figures correctly we need a 6% improvement in GDP in each of the next two quarters and a 10% improvement in GNP (workings below) bith compared with H1,2010. Presumably that’s fantasy?

GDP 2009 – 159 647m
GDP 2009 + 0.8% – 160 924m
GDP Q1, Q2 2010 – 78 119m
GDP Q3,Q4 to reach 160 924m – 82 805m
82 805m v 78 119m – 6%

GNP 2009 – 131 242m
GNP 2009 – 1% – 129 930m
GNP Q1 + Q2 – 61 656m
GNP Q3,Q4 to reach 129 930m – 68 274m
65 656m v 68 274m – 10%


@ hoganmahew

This is another example of the Ciarán O’Hagan/Donal O’Mahoney types in financial services who see the irrationality or need for caveats on the downside but when it’s good news, they all want to cheer.

For example, monthly and quarterly production output, which is dominated by the foreign-owned sector, is very volatile and the seasonally adjusted volume of industrial output fell 3.6% from Q1 having risen 10.7% in Q1.

As Lenihan pointed out, royalty income also was a factor. So lets hope that the future US Treasury secretary Jeffrey Immelt does not propose a big tax amnesty for US firms!

According to the (seasonally adjusted) quarterly data, real GDP (or output) bottomed in Q4’09, and in Q2’10 was 1% above its level at the end of last year (an annualised rate of growth of about 2%). Net exports contributed about 0.7% points of the 1% increase. Final domestic demand (C+I+G) made a small negative contribution to GDP over this period, while stockbuidling made a small positive contribution.


This calculation is sensitive to the numbers you use. Below I use the constant price, seasonally adjusted numbers (Table 1 or Table 4), which seems to me to be the right ones when backing out the required real growth rate.

Just focusing on real GDP:

GDP 2009 – 167 668m
GDP 2009 + 0.8% – 167 668.7m
GDP Q1, Q2 2010 – 82 767m
GDP Q3,Q4 to reach 167 668.7m – 84 903.7m
84 903.7m v 78 119m – 2.9%

The mountain does not seem quite so steep. What am I missing?

Sorry, the 2009H2 number should be 82 501m not 78 119m in my alternative calculation. The required growth rate is correct (based on these numbers).

Everyone has been pushing to cut spending and now we are shocked that the economy is shrinking?

My degree is in computer science so I don’t have all the brilliant knowledge of those who studied economics, but my general reaction to this news is, “What did you think was going to happen there ted?”

GDP down
GNP down
yield on bonds surges
cds rates surge
bank shares through the floor

lets find some positives in this little lot.

The Minister-Mr Lenihan said the only way Ireland could emerge from recession was to continue to drive exports.“The figures for exports are strong and I am encouraged by this – the necessary competitiveness improvements are working. We must export our way out of our current difficulties, there is simply no other way,” he said.


Yes I was using table 2 at current market prices. Though if you use table 1 then

GDP 2009 – 166 346m
GDP + 0.8% – 167 677m
GDP Q1+Q2, 2010 – 82 964m
GDP Q3+Q4,2010 to reach 167 677m – 84 713m
84 713m v 82 964m – 2.1%

2.1% doesn’t seem too bad but it’s not insubstantial either.

GNP 2009 – 138 161m
GNP -1% – 136 779m
GNP Q1+Q2, 2010 – 66 297m
GNP Q3+Q4,2010 to reach 136 779m – 70 482m
66 297m v 70 482m – 6.3%

6.3% must be fantasy, no?

From the FT

“But most analysts were taken by surprise, and predicted the government would have to revise its full year forecasts. The department for finance is currently forecasting positive GDP growth of 1 per cent for 2010.”


“Gross National Product, which strips the dividend and profit repatriations of foreign owned multinationals in Ireland and is seen by analysts as a better gauge of economic activity”


Thanks Michael, our posts crossed. Difference between Table 3 and Table 4 due to seasonal adjustment. But much the same result if we use Table 3, however.

GDP 2009 – 166 346m
GDP 2009 + 0.8% – 167 676.8m
GDP Q1, Q2 2010 – 82 964m
GDP Q3,Q4 to reach 167 676.8m – 84 712.7m
84 712.7m v 82 278m – 2.96%

The Euro Area recession ended a year ago and the economy shrank 4.4%. On the most favourable measure, this economy has shrunk 11.8% and is still declining. In nominal terms GNP (the portion that is actually taxed) has fallen by 24%.

The scourge of deflation, which raises the real level of all debt including government debt has bizarrely been welcomed in some quarters- as a non-solution to a non-existent problem, as the export level demonstrates. Delfation only increases the real debt burden.

And despite the modest uptick in Q2, the Irish Depression is an investment slump, more than accounting for the entirety of the contraction.

By removing government spending during a dowturn a severe recession has been turned into a Depression, hitting personal consumption, drectly reducing government’s contribution to activity, and withdrawing its own investment preisely what what was required was increasing investment in order to revive private sector investment.

Has anyone noticed that the Spanish domestic economy is humming courtesy of the largest stimulus package in the Euro Area, and its deficit has halved as a result?


And its bond yields have been moving sharply in the opposite direction.

One of the discussion points seems to be something about “blaming a surge in imports” for the negative GDP growth. I think this is not a very useful way to think about GDP growth.

GDP measures the amount produced in an economy over a given period. It’s also the case the GDP = C + I + G + X – M. But an analysis in which you imagine that C or I would be the same but M would somehow be lower doesn’t necessarily make a lot of sense.

Production was what it was. Maybe next quarter Irish people will spend less on foreign goods and more on domestically-produced stuff. Maybe they won’t. For now, I’ll say that blaming high imports for falling GDP represents a fairly dubious use of the famous identity.

@ Jagdip

We are converging (having probably sowed confusion)

Just one remaining difference: I calculated the required growth rate relative to 2009H2; you did it relative to 2010H1. Doesn’t seem to make that much of a difference.

I agree the required GNP growth is a much bigger ask.

if we accept that domestic demand is going to bounce along the bottom for a while longer, whether we reach 0.8% for 2010 will depend on net exports. The latter are very volatile, contributing more than 2.5% points to GDP growth in Q1, but knocking almost 2% off GDP growth in Q2. The growth in exports slowed sharply in Q2, to 1.6%, from 7% in Q1, so we probably need to see a re-acceleration over H2 to achieve the 0.8%…

There was a comment in the FT a while ago that much of the growth of the great moderation years was illusory. And so it most certainly was in Ireland.

Where does Ireland go from here? More cuts will mean more contractions in the economy leading to wider bond spreads in panicky bond markets necessitating more cuts and there will still be a hole in the bucket dear Liza with the banks still banjaxed. What is the strategy ? How does Ireland get out of the hole? Cross the fingers and say a decade of the Rosary ?

@Michael Burke

Maintenance, let alone Stimulus, appears to be the ‘unspeakable’ …. to stimulate demands that an entity first shows some evidence of being alive …. and I’m talking about indigenous wealth creating potential: more pragmatic to keep viable SMEs ticking over than to have to try to start from scratch later ……… linkage between this aspect of industrial policy and the timelines on pragmatic deficit management and future ‘real’ growth is amazingly under_addressed ………..

[off thread: does ECB have power to … devalue the € ?]

at what point statistically does a recession become a depression? economy shrinking by 12% and unemployment close to 15% seems like a lot more than just a recession to me. never mind what it seems like to the 455,000 unemployed.

What do you chaps reckon the full year CPI figures will be? Without these, you won’t know whether you are deflating with an inflation figure or inflation with a deflation figure…


I take your point. But don’t you think it is noteworthy that final domestic demand seemed to bottom out. Final domestic demand grew by 1.5% between Q1 and Q2 (Table 6: constant prices, seasonally adjusted). There won’t be a durable recovery without a recovery in domestic demand.


“My 2c is 0% (GDP)….”

0% would still imply GDP growth of (+) 1.3% y/y in H2’10, after -1.3% y/y in H1’10, and -6.6% in H2’09…


“What is the strategy ? How does Ireland get out of the hole?”

Brenden Keenan writes on this today and some of his comments make for frightening reading.

“The Government may have to call upon the art of the possible. It would lay out its stall on the fiscally possible and set a limit to bank rescue costs so that total public debt remains in the realms of what it is possible to service.

It would even have to say how losses would be shared between depositors, creditors and lenders to the Government itself, should the bank costs prove in the end to be impossible to cover. It would be the ultimate in high-risk strategies to do such a thing.

But should we run into the buffers in the next few months because bond yields do not fall, something like that will happen anyway. Better, surely, to have one last shot at avoiding that. And it might just be possible.”

Very close to the predictions of DMcW

Let me see now. According to the political waffling elite in and around government, Ireland was rising out of recession. Now we learn that the ‘rise’ was only a precursor to a steeper fall. Isn’t this the “W” that other countries might experience but not Ireland because of the brainboxes in government who were ‘taking appropriate action’ and cunningly ‘managing’ financial black holes. The ECB/IMF must be saddling their horses.

Forgot to mention than 10-year bond yields have risen to more than 6.7%. That’s how ‘manageable’ things are.

@ Dreaded Estate

Budget 2010 projected a fall in nominal GNP of 3% this year. In H1, nominal GNP fell by almost 7% from H1 2009. According to the Exchequer returns, tax receipts at end August were down 9% on the same eight months in 2009, though they were only marginally below (E141m, or 0.7%) DoF expectations for this stage of the year…


14%. This is a depression, not a recession. Sorry, I,m talking down the economy again. Oh!, I wish this nasty recession would go away, more or less the words of our President, who keeps telling us to be more positive. I think our Pres is reading too much american liteature on the art of postive thinking. If your banjaxed your banjaxed.

We’re in dire straits but remember “not everything that counts can be counted and not everything that counts can be counted”.
Nothing new in these figures for anybody plugged into the real world.
No doubt Marquis de lenihan will whip us that bit harder now for being naughty little citizens and wanting to import stuff! “Oooh how dare you!?”
We should be just be glad we have a minister for finance who can speak fluent French!!
Hes the pimp and Ireland is the prostitute that has to pay to get screwed.
Forgive me if I’m angry. Just a little issue of people losing their jobs, older people being abandoned by their emigrating kids to die on trolleys and my kids and grandkids betrothed to Seanie’s debt.

I think the government really do need to start acting on advice from people who actually work in business.
God knows we’ve enough entrepreneurs here who could tell the government what to do given the situation here.

We have a lot of talented industrialists here : Michael O’Leary, Dermot Desmond, J McManus, Jim Flavin, Ray McLoughlin, Tony O’Reilly and others who could advise as to how we get this economy functioning again.

Still, i heard our taoiseach on the radio today and he sounded really sober. that’s got to be a step in the right direction.

@Michael Burke, plus seafoid (who wondered if there was a strategy)

If it makes sense to try some sort of stimulation in Ireland, there are still two issues. One is that the stimulation needs to be targeted at areas that will create some long term value and not at things that just drive imports of cars and such. Second is that we don’t have the money and can’t easily raise it.

At the moment Ireland is borrowing way too much, and this needs to be reduced fairly dramatically or people will practically stop lending us money. Therefore it seems that the only possible strategy for creating a stimulus is to hugely – and I mean hugely – cut current spending and then to spend some of the savings on stimulus measures. (Small cuts would equal a meaningless stimulus)

If we did that we could have a productive stimulus, and the long term cost to the economy of all this borrowing might be reduced, but we’d have to gut public sector pay, pensions, and a whole raft of other current spending. The teacher’s unions would look back on the Croke Park deal as a lost paradise.

The way we’re going – if these numbers continue to decline – we’re likely to have to eviscerate spending anyway eventually. It might be better to control the moment that this happens rather than having it forced upon us.

Unhappy days. Let’s hope GDP and GNP rebound hard. Hope is the strategy that seems to predominate these days and it’s cost free so I’ll indulge too.

Oh, an alternative solution is to raise taxes on the “middle class” until they give up entirely. Of course it’s not a good solution to declining GDP but that won’t stop people advocating it.


This would be a valid objection if the picture painted by the piece of jouranlism were true. But it isn’t.

ECB analysis shows that Spain had the largest stimulus in the Euro Area in 2009, equivalent to 2.3% of GDP. The subsequent austerity measures forced upon them were not enacted until June or later this year, far too late to affect the most recent government accounts, for the first 7 months of this year. The halving of the deficit reflects the upsurge inactivity following the stimulus and the consequent rise in taxation revenues, up 36% year-on-year.


The Boys from the Black Stuff Reloaded say: ‘have a few yourself and enjoy’ (-; good for the health of the deficit!

@ Hugh
“therefore it seems that the only possible strategy for creating a stimulus is to hugely – and I mean hugely – cut current spending and then to spend some of the savings on stimulus measures.”
In any normal economy I’d agree with you. Cuts are good if:
They reduce borrowing for day-to-day spending (lower interest repayments etc)
They allow reinvestment in more productive sectors (as you rightly point out)

Cuts are disastrous if:
They fund the black-hole that is Anglo and the debt obligations that Brian Lenihan unnecessarily foisted upon us. Money is being sucked out of the economy for no productive reason and has a multiplier effect in the wrong direction.

Unfortunately Jarlath was right. We really have only humour left. Remember those sentences from the history books about Ireland after the Act of Union (…and the country languished for 100 years after that etc) this is what it felt like in 1802. I’m sure if there was a blog running then it would have looked alot like this with arguments in both directions but the bottom line was that the situation was simply bad.

This is the same situation. It is simply bad. The guarantee to unsecured bond-holders of Anglo is our equivalent of the Act of Union.

If Anglo could be cut loose I’d smile. Not sure it can. My thoughts are based on Anglo being a burden.

@ Hugh Sheehy

Under what circumstances are GNP and GDP likely to rebound hard assuming a continuation of current policy ? Hope is what has been driving policy for the last 2 years and judging by bond yields it hasn’t been a success.

The next year will more than likely see more declines in the size of the economy and the markets become even more hysterical. It goes round and round in ever worsening circles. What’s the core value that drives the decision making? Does it need to be revised? It does appear that 4.5 million people are living an economics experiment that is failing.

Someone on the guardian posted this

” The country and it’s society are now being systematically wrecked for some abstract moralistic ideal regarding fiscal prudence, that the markets clearly don’t believe any more. ”

Surely growth now is urgent and whatever needs to be done to get the economy growing again is the priority.

@Michael Burke
I presume this is what you are talking about?

For Spain:
1.5% points of the fiscal stimulus was aimed at supporting businesses
0.9% points was aimed at infrastructure (investment)
0.5% points aimed at supporting household expenditure

For Ireland:
1.0% points aimed at supporting household expenditure…
(pdf pages 65-67)

Most of these measures are in the form of tax cuts or tax rebates. They are now, as per the article above, being reversed.

As a small business, I’d love a tax cut, thanks very much. Do I have TASC’s blessing on that?

It comes back to the 25/35/? toone elephant in the room. Anglo Anglo, Anglo.

Its obvious the gaurantee for Anglo was one of, if not the worst decision ever taken on behalf of the Irish people. Surely we have to stop the madness, default on all non gauranteed Anglo debt and wriggle as hard as possible on the rest.

We’ve been good little europeanes, we’ve been great debtors, its time to be great Irish citizens.

How long more can this go on, we have ‘turned a corner’ but only to see Anglo eat Ireland whole and chew on the remains.

How possible/legal is the Idea of imposing a loss cap in tandum with the gaurantee?


The Grauniad is taliking through its rear oriface as usual. the country is not being wrecked on some moralistic ideal…blah blah. The reality is that we could not borrow a red cent unless the ECB was lurking in the wings. Indeed we may soon reach the point where we will not be able to borrow on our own. then we are into the hands of the IMF and their friends. These guys do not do stimulus.

no chance of cutting Anglo loose. E7bn of govt guaranteed paper matures on 30/9/10 or therabouts. The 25-30billion loss is what it is.

Rather dire – we get no growth despite a budget deficit at, say, 19bn euros this year. Compared to our GNP that is 15%. We need to cut that in half, at least, over a couple years. Let’s put a multiplier of 1 on that and we get a major step down – about 3.5% per year negative annual growth from fiscal cuts. Where will the rebound be elsewhere to offset that? Nothing in this data bodes well.

My guess is we collapse if we don’t do the cuts due to the bond market fears causing high interest rates and credit contraction, and we collapse if we do the cuts due to austerity and bond market fears about austerity….so nothing is pretty in these numbers at all.

@Michael Burke

Yeah, but Spain seems to be truly sovereign. We are not it seems..
Who runs this country? I heard the “Bailey Brothers” run it at the moment?
Clean out this government NOW, before we all get screwed.

@ Tull
“The reality is that we could not borrow a red cent unless the ECB was lurking in the wings”
Agree, but borrwoing in a deflating economy merely means that there’s more you can’t pay back.
I think that the presence of ECB may be distorting the situation so as to prevent a natural work-out of our problem and is instead saddling us with more and more debt.
I can almost hear you scoff but European benevolence is not an infinite thing. The ECB will call an end to this at some stage (possibly March/April 2011 by forcing the government to avail of the bailout fund instead of going to the markets). The later they leave it the more we will owe.

@ Tull

An IMF intervention would be a game changer but what are the implications for the wider Euro area if Ireland falls into the IMF zone ? Ireland is a frontline sandcastle behind which are are a number of far more structurally important sandcastles in the form of large banks and insurance companies, many on potentially shaky scraws, who hold a lot of debt that may or may not turn out to be worth book value. So if the tide comes in over the Irish sandcastle how likely to do you think that the IMF stormtroopers will be let loose ? Because there seems to be a lot more riding on this than just one little country.


No, if I was on about about an EU Commission Report published in mid-2009, I would have said that. I was refering to a more up-to-date ECB analysis published in April this year, which can be referenced via this piece.


As previously, Spain’s austerity measures did not begn until June this year and beyond, so cannot possbly be the determining factor behind the sharp improvement in governmenn finances (indeed, my bet would be that, as here, they will send that improvement into reverse).

The data confirm this. Of a €21.3bn improvement in government finances in the first 7 months of this year €18.5 bn comes from higher taxation revenues.


This is because the domestic economy rebounded sharply in H1, courtesy of the increase in government spending.

The contrast with the effects of policy here are clear.

@ Mick

Yes there are loads of Entrepreneurs who could suggest how to get the economy moving BUT the Government only listens to Alan Aherne their economic adviser who believes in bookeeping our way out of this situation. Ergo we have stagnation and depression. There are Academics here with the same mantra – no stimulus and then they wonder why the economy is stagnating. This is not double dip recession but the continuation of a distressed depressed local economy because people are scared witless to spend. Did any Politician or Academic ever hear of the word CONFIDENCE ? It is very nice to have these views when your job or should I say “tenure” is guaranteed for life at good salaries and perks. The SME sector is being destroyed and with it the Middle Classes (the engine of every economy) and they wonder why the country is performing so badly.

Last day tomorrow for input into the Dep’t of Social Protection pre-budget process. Do any of you write to the MOSP on social welfare policy? Most NGOs that are in receipt of government funding do. Dan O’Brien wrote earlier this week about how there is no forum for economists to make their ideas known to policy makers. Writing directly to relevant ministers at this time might be more likely to encourage uptake of ideas (don’t necessarily expect credit) or invitations to participate in other ways.

@DOD can’t the ECB quantitatively ease?

@ Eureka

“The guarantee to unsecured bond-holders of Anglo is our equivalent of the Act of Union.”

This is calamity howling on a grand scale.

Whether there has to be an IMF/EU rescue or not, we have to:

1) find an engine of growth

2) narrow the gap between taxes and spending with regard to domestic demand; the leakage across the border has fallen and UK VAT will rise to 20% in Jan; 2014 doesn’t have to be sacrosanct but if there is no serious reform then IMF intervention will implement it as like it or not, we and Greece are more dependent on foreign lenders to fund the debt than any other of the EU countries.

There are no simple panaceas and within the Eurozone, sovereign default is currently not an option; as to exiting the euro, no proponent has credibly said how it could be done without collapsing the economy.

If it’s an easy panacea, why is the UK not experiencing an export boom after a 25% devaluation?

The IMF option would probably be a good one as:

1) no effective reform has taken place since the crash in the public service or the protected private sector

2) fundamental change will not likely happen without external intervention

As to a growth engine, I have said many times, that the FDI sector has peaked despite a rise in output.

Despite what the IDA says, there have been very few new projects this year.

The US has got more competitive and the Pacific freight rates on the Westward route (lots of empty ships returning after shipping exports to North America) are low; the fastest growing markets are far from Ireland and its main FDI sector, pharmaceuticals, is also facing change.

What is clear is that:

1) a clapped-out government will never promote hope

2) policy makers are so addicted to spin, there is no serious discussion of the challenges facing the country to produce huge new job numbers

3) The ‘smart economy’ fantasy is not the answer.

@Michael Hennigan
nice summation in your post, very well put. as a public sector worker, but non-union member, i feel the time has got to come to address reform. today there was a meeting about the croke park agreement. It’s a pity the unions weren’t faced down earlier in the year. But that is just looking back. I don’t think the smart economy is complete fantasy though, i hope it could be part of the solution but the bigger, more fundamental issues are taking precedence. Data centres, creative content, editing, online games, educational software, we could have a shot at encouraging these industries but the government has no incentives to throw at them, or does it, i don’t know enough about it.


I see the Barclays chap cited in the NYT article forecasts 2% growth next year (cf 2-3.5% recent forecasts here).

On a more constructive note what is holding up the schools building programme, it’s in the programme for this year, CIF are crying out for it to maintain employment, the DoE are trying to attract international students and building land and labour is relatively cheap (oh and we need actually need schools). What’s the hold-up?

@Jagdip Singh

The ‘hold-up’, in behavioural_economic/psychological terms, is that The Executive is presently running on what is termed the reptilian component of its emotional brain – and is ‘frozen with fear in situ’ , hence incapable of addressing the right side of its cognitive brain wherein pragmatic solutions may be, and almost certainly are to be, found: the metaphor of the rabbit frozen in the headlights of the oncoming juggernaut comes to mind …….

That €600 mil (or some of it) in the capital budget could provide ‘hope’ to the thousands of young apprentices who cannot complete their skills training – and who are forced to emigrate without any recognisable qualifications.

“calamity howling” – not sure I like that.
There are parallels – i.e. both borne out of a need for stability on the part of the larger party, both jeopardizing sovereignty, and both leading to a net export of wealth from the country.

I suppose I just wanted to point out that certain acts have long reaching consequences and do not right themselves easily. Just as independence was the solution to one, there are solutions to the other too.

Some ideas:
Don’t bring in the IMF (they’re procyclical unless they’re part of a greater bailout). Use the 5% fund that Greece has accessed and don’t go to the market for 5 years. Use the fund to start paying down debt – i.e. offer creditors a guaranteed 65% of their loans now or tell them to carry the risk of no repayment when the bailout money runs out.

Raise the interest rate on the patriot bond (you know the one they expect Irish citizens to buy) to the same rate (or slightly less than) the international bond. That way you unlock Irish personal savings to invest in the economy and the returns will come back to that economy.

(this is the dodgies one!)Extend every mortgage term in the country by 15% with no increase in amount owed (i.e. decrease repayments by 15%) and at the same time reduce social welfare and wages by the same amount (this is probably wrong but it boils down to the fact that you cannot decouple debt from wages – it all has to go down together).

We will get through this but there have been too many mistakes from our current minister. There is a touch of the grandiose in his current approach- a mix of denial and a defence against reality – but .. he has alot of other things to deal with too…

The paucity of economic analysis is breathtaking. The obsession with forecasting is as disappointing as it is pointless. We should focus on the incremental knowledge we have gained.
First, we now know by how much the irish economy willl contract during a severe global recession. Second, we now know by how much it will grow when the world, particularly trade, rapidly rebounds AND we simultaneously embark on fiscal austerity. We know, with reasonable precision, the elasticity of our growth rate relative to the rest of the world (clue: it’s quite high) and by how much our growth will be retarded by fiscal contraction(clue: by the amount of that fiscal contraction, if not slightly more. I think it’s called a fiscal multiplier of at least 1).
Conclusion 1: we are as dependent on global growth as we ever were. That’s it really.
But if you economists want a second conclusion, I’d say we are pretty convincing piece of evidence for those who beleive we are just proving keynes was right after all.

This all makes for sad reading. What really is depressing is when I hear the latest opinion poll showing Labour as the biggest party. Are we all just waiting for Labour/FG to get their noses in the trough and take their turn as the highest/second highest cost representatives in Europe? They have not come forward with any specific proposals to fix our problems. My sad conclusion is that our current political system for a small country of 4.5 million people cannot cope with an economic catastrophe on this scale without outside intervention.

If this is my only choice as an Irish voter then lets get the IMF in asap and sort out our fiscal problems before we throw even more billions down the drain. We are being bled dry by the present government with the connivance of other EU countries,their banks and the ECB. As John Healy said many years ago in Death of an Irish Village “No one shouted stop” – only this time we are looking at the death of the Irish Republic through economic stagnation for generations to come.
There is a solution to our problems. Lets get the people into power who can fix our problems without recourse to even more borrowing.


‘Conclusion 1: we are as dependent on global growth as we ever were. That’s it really.’

Not exactly: (assuming that growth is somehow ‘good’)

We are in an INTER_dependent relationship with global growth.

Theoretically, we maintain influence over our own destiny.

(don’t have the energy to address ‘practically at the mo!)

If by interdependent you mean that global growth somehow depends on us I suggest you join the Green Party

Export led recovery then? I don’t think so. I quote from Conor McCabe’s forthcoming book:

Since the 1970s the majority of exports emanating from Ireland have been produced by multinationals; in 2008 they accounted for 88 per cent of all merchandise export sales. Yet the amount of people employed by IDA-supported companies in 2008 is only around 7 per cent of total employment. These companies paid €2.8 billion in corporation tax in 2009, and direct expenditure in the Irish economy via payroll costs, Irish materials and services amounted to €19.149 billion. However, total sales amounted to €109.64 billion. Around 80 per cent of the money generated by IDA-supported companies completely by-passes the Irish economy. The profits are repatriated to the country of origin. In 2009 chemical products made up 51 per cent of all merchandise exports from Ireland, the bulk of which were made with imported materials. The chemicals come in via containers, and go out via containers. Irish economic policy has developed exporters, but not exports.


Yes – I assume it can. As we are heading towards deeper European Federalism ‘spose we need to identify and map out the power structures that influence these decisions.

Blind Biddy says: Hi Aine – Message for de Ministers: Gimme back me bag o coal and don’t mess with me disability pension again ……… [remainder deleted to the known sensitivities around here (-;]


That is precisely what I mean.

Pardon me if I ignore your suggestion re political affiliation.

As Mary Coughlan would say – ‘The Taoiseach has to give his ‘alma mater'(sic) to the IMF coming in! and that’s unlikely – at this moment in time!’

worrying numbers indeed but would not bet the ranch on one set of numbers in an economy like ireland. more interesting point of debate is the december budget. is there any threads on this website debating the likely or ideal quantum of cuts required? 4bn seems to be the new 3bn.

…and given the number of references to ”bringing in the IMF in” – what would an IMF programme for Ireland look like? say a 2-3 year funding blanket which would give full policy flexibilty to the next govt. Easter 2011 kick off. i’m thinking a universal property tax, 2% additional minimum spending cuts, attack on the structural inefficiencies of the non traded private sector and higher paid parts of the public sector and the public sector. now that would be an debate worth having on any ”economy” blog.

I’ve set up a wiki called


I thought it might be a useful place to keep key statistics and ideas that come up on this blog and other places. If you have the inclination to check it out you’ll find that i have only done very very basic work on it to give a flavour of what is possible (with a freeware account that I’m not sure about the terms of use of). I think of it as an experiment to see what happens.

I intend to add bits and bobs to it over the days and weeks. A wiki is essentially a website that allows for collaboration and that can work as a kind of onilne workspace. If people would like to contribute they are welcome to do so.

@Michael Burke
Big on saying the number, but short on details of what it is. I put it to you that the 2.3% in 2009 is a continuation of the previous business friendly and income tax rebate policies with a small bit of infrastructure.

You don’t think the fact that the Spanish government published a detailed plan of exactly how they were going to balance the budget had anything to do with their bond spread coming in?

Or buying of white goods items before the new rate of VAT comes in? Or a cash-for-clunkers program? (At least Spain has a car industry).

Indeed, the report I originally pointed you to points out that increased VAT receipts, due to hiked rates, are one of the reasons the deficit narrowed.

And as to the negative effects? Well, GDP barely grew. Business and industry PMIs stayed negative. Unemployment rose. The deficit reached 11.2% of GDP. The trade imbalance worsened as imports increased. I’ll bet the Germans were happy…

And, of course, debt-to-GDP worsened from 39.7% to 53.2%

And structural reform?

@ Thomas Paine

I hope you are right, but the IMF connives with the EU/ECB and our government too. I worry they will just keep the whole dance going even longer. Look at the nonsense with Greece, where a triumvariate of the EU, IMF and Greek officials are marching around explaining why that small nation can sensibly build 150% of GDP in debt, then service that external debt (meaning the current account will turn from -8% GDP to +7% GDP?) in a smooth five year transition! All pretty hopeless. We need to find our own leadership at home.

I see on RTE they are debating whether this is a double dip.

How silly.

This is a very long single dip. You need to recover before you have a double dip, and according to GNP we haven’t yet.

@simpleton: +1. You are very often a beacon of common sense, in a land where lots of people apparently hope that cutting more will…help the economy (as in, GDP and employment..) recover!

“a land where lots of people apparently hope that cutting more will…help the economy (as in, GDP and employment..) recover!”
There’s a wider group of people who don’t think it will help, but who believe that the choice was between the economy and the banks. The banks were chosen and the economy will hang as a result. Mind you, these are probably the same loons that think that the bubble economy needs to unwind, that it is inevitable that it does and that standing in the way of falling elephants is a poor idea.

2002 here we come. Fast or slow? You choose.

@Yoga: yes, like we were saying the other day, one of the big costs of the bank guarantees that people often overlook is the way it largely forced the government’s hand on fiscal policy, with all the attendant impact on GDP, employment and ordinary peoples’ lives.

On unwinding the bubble economy: if you are narrowly focussed on property, then why stop at 2002? (And I would choose ‘fast’.) And I don’t think anyone should get in the way of those particular elephants, so I guess we agree there. But, if you think of this as a problem of reallocation (of shifting people from the wrong sectors into the right sectors) then having the demand there that will support employment in the right sectors has got to be helpful.

@ hogan

‘the choice was between the economy and the banks. The banks were chosen and the economy will hang as a result’

Surely the critical choice was to protect the bank bondholders from the consequences of their own investment decisions ?
Risks are reserved for little people (and little states) it seems.

None of which is to deny the points made repeatedly by @ Michael Hennigan. We can’t s stop at 2002 on the way down, I’m afraid. No growth engine.

@Kevin O’Rourke
I think most of us that advocate cuts and increased taxes know they will not be good for GNP/GDP growth in the short term. We are worried about having to extract over 10billion a year from 2015 onwards with high debt repayments for a generation.
If we force all costs and pay down (costs down will mitigate the lower pay to some extent) then we will be more competitive and possibly companies will be able to afford to employ some of the currently unemployed (admittedly on lower pay).
Trying to maintain bubble prices and wages when business simply cannot compete as a result is putting all the burden on those in insecure employment.
If we cut more in PS wages and raise taxes more, we might be able to avoid cutting social welfare, those who really do spend all their money in the domestic economy.

Sorry, bit of a pre-budget rant

@ Celtic Phoenix

The WSJ will not be eager to highlight that story. They got spun like a top by DoF. Note the growth hype one day before the numbers that got this thread started.

@ Holbrook Fields

The country should fund research but – – not put all the eggs in one basket — I would guess that Brian Cowen and Batt O’Keeffe haven’t been given the hard facts that most high tech firms produce few jobs; the Innovation Taskforce report extrapolates from Silicon Valley and shamefully does not provide any credible data to support the fantasy that university research can produce in the range 117,000-235,000 jobs in 10 years – – more than the whole FDI sector after 50 years.

On Thursday, O’Keefe made the announcement for calls for investment for the €500m Innovation Ireland Fund which Cowen announced in New York last July.

It appears that there has been little interest from US venture capital.

O’Keeffe noted: “Top global players such as Google and Facebook initially relied on venture financing to scale and become multinational firms..”

It’s really a pathetic argument as very few succeed like that and these 2 weren’t pioneers but offered improvements on models which had created the markets.

There is always an argument to support a case, often tailored to ignore the true facts.

For example the Israeli Yozma investment fund is cited as one to emulate in Ireland. That was launched when 1m people, 20% of Israel’s population, arrived from the former Soviet Union in the early 1990s. About 40% had university degrees and there were many brilliant scientists among them — possibly the greatest one-off movement in intellectual capital in history. There was already a strong defence oriented R&D sector as a base to develop from.

@ Pope Epopt

Nothing new here about the role of multinationals in the economy.

However, it’s well to keep in mind that without them, Ireland would resemble Albania.

Ireland doesn’t have a strong trading tradition.

Guinness had 5,000 employees in Dublin at its peak.

Since the founding of the State, American-owned companies, Henry Ford’s personally-owned company which had 7,000 employed in Cork in 1930 and Intel in the past decade with over 5,000 employed in Leixlip, have been the leading enterprises.

Danish economist, Jacob Funk Kirkegaard, looks at bailout scenarios for Ireland.

The Slovakian government infamously refused to participate in the Greek bailout, comparing it to a “reverse Robin Hood transaction,” in which the poor Slovakians would be subsidizing the richer Greeks.

Kirkegaard says imagine, however, the uproar across the Eurozone if voters in these countries were asked to help Ireland, which in 2009 had the second highest GDP per capita in the European Union.

Irish Economy: Some unpleasant dynamics and the prospect of poorer European countries being asked to help ‘rich’ Ireland

Just look at that headline in today’s Irish Times

‘Tougher budget in prospect as economy shrinks’. Who would have thought that the paper of reord was staffed by freshwater economists?

If we called in the IMF, would they have written that headline?

Just on the shock and startlement caused by yesterday’s announcement, would the statistics have been assembled just in the last day or two? Couldn’t the CSO have given an earlier steer that things had dropped back from Q1 so that officialdom might have primed the various markets so we didn’t shock them yesterday? And when the market was expecting +0.5% growth and got 1.3% of a decline that was shocking- can’t that be better managed in future?

I must say that the way the CSO operate sometimes puzzle me. For example ask any adult in Ireland today what the unemployment rate is and they’ll tell you 13-15%. Ask them how many people are unemployed and they’ll say 450-500,000. When of course “only” 290,000 are unemployed but the deep confusion comes about because the CSO publish a live register each month and unemployment rates each quarter. That’s a stunning anomaly with other countries and makes the CSO to blame for most people not knowing the true number of unemployed. Are reforms needed?

“economy is going to stagnate over the next couple of years”
and that’s only because they can see ahead for a couple years.
Calamity howling again no doubt!

@ Michael

i’ve made that point on here a number of times (and Tomc alludes to it above as well) – there is no way we can expect any sovereign creditor to accept a default or restructure while we have so much wealth and such a high general standard of living still present in this country. EU/IMF would have to chop public sector pay and pensions by a further 25% and raise the general level of taxation by 10% before you’d be able to convince them to lend us money. And they wouldn’t inflict bank bondholders with a single additional loss either.

The GDP and GNP figures are getting extensive coverage in the three main Italian dailies. While praising the NTMA for managing the get away €400 million in short term bonds, their consensus leans towards EU/IMF intervention soon. (possibly to include Portugal and at a pinch Italy).

@Kevin O’Rourke
“why stop at 2002?”
Because that’s where the government’s income has stopped at. Austerity isn’t to make the country or the economy better*, it is to make the government finances better. The state has taken a loan of future money, gone to Vegas, blown the lot on hookers and booze and wasted the rest. Even if it is not payback time, it is stop borrowing time.

*the one benefit there would be would be the clarity as to what damage is to come. If you know that taxes are going to ‘x’ rate, you can plan for it. This doesn’t matter to most people, but most people live within two paychecks of the poor house. It does, however, matter if you are going to set up a business and employ people.

@paul quigley
“Surely the critical choice was to protect the bank bondholders from the consequences of their own investment decisions ?”
Well, yes and no. The only mechanism to impose losses on the bondholders was to liquidate the banks. Now some of us would argue that is what should have been done (and argued so at the time), but it wasn’t a popular opinion. Guaranteeing the bondholders was a consequence of saving the banks.

@ Jagdip Singh

The CSO is a unit of the public service that is generally taken for granted. I have always found the staff very helpful and friendly.
It cannot get involved in pre-announcements or hints. It would likely be breaking the law if it did so.

@ Eureka

A bit of pessimism is no harm when warranted!

JM Keynes visited Washington DC in 1932 and he was asked how long did he expect the Depression to last?

“The last one was the Dark Ages and it lasted 400 years,” he said.
Incidentally, Hoover supported use of the word ‘depression’ as it was less alarmist than ‘panic.’

Never shout fire in a crowded theatre!

@Eoin There is no way we can expect any sovereign creditor to accept a default or restructure while we have so much wealth and such a high general standard of living still present in this country.

I really dont see how the populations of Germany, France and indeed the creditors would even consider allowing a restructure of debt in Ireland without drastic reductions in wages/fees/benefits here.

The German people are rightly angry about bailing out Greece where people can retire earlier than in Germany.
“The Slovakian government infamously refused … because the Greeks were richer than them ” ….. so the precedent has been set for member nations to tell someone who is taking the mickey to f*** off. And Paddy is taking the mickey.

You simply cant have a report one week saying the Paddies are second richest in Europe and the next week, that they are thinking of defaulting on anything. And the week after looking to borrow more money.

I am inclined to agree. They are not noted for being the best neighbours. Are they still looking for liebesraum these days? We might sell them some


It’s Lebensraum – room to live. Liebesraum would be room to love .

“They moved too far, too fast,” says Karl Whelan. I wonder was he thinking about the whole of the moon.

@ Garry

It was some racket while it lasted!

Over €40bn collected in foreign aid from the EU since 1973 and during the last crazy few years of the boom we began buying property in our paymaster’s front yard.

The Irish became the second biggest investors in commercial property across Europe.

CMC Capital a unit of a firm of chartered accountants from the West Cork town of Clonakilty, purchases one of Germany’s busiest shopping centres.

Eddie Hobbs fronts a German property investment vehicle.

Kerry farmers on CAP welfare, acquire a €12.2m shopping centre in Saarbrücken, in south- west Germany.

In Cork where the pharma industry has provided a modern life for a lot of people, busybodies object to an incinerator for hazardous waste; it is of course OK to ship the waste to India.

Meanwhile, in West Mayo, farmers fill their car tanks with fuel from a distant foreign land with risks to life along the supply chain and again CAP money gives them a modern lifestyle but they object to a local gas pipeline.

The litany can go on and on…

In Sept 2007, German ambassador Christian Pauls was given ‘a firm diplomatic reprimand’ over the remarks which ‘talked down’ Ireland to an 80-strong group of potential investors.

In his 15-minute speech the ambassador said:

1) Ireland was a ‘coarse place.’
2) Junior ministers earned more than the German Chancellor. He didn’t mention university presidents!!
3) Some 20% of the population were public servants.
4) Our ‘chaotic’ hospital waiting lists would not be tolerated anywhere else.
5) Wage demands were too high.
6) Our immigration policy was wrong and we had learned nothing from Germany or the Nordic countries.

He also cited the doctors’ rejection of €200,000 a year posts on the basis that this sum was ‘Mickey Mouse’ money and referred to the former dominant position of the Catholic Church within the country.


the original piece you refer to is a shoddy piece of journalism, which does not accord with the facts.

Spain didn’t raise the VAT rate until July, so cannot possibly have impacted the receipts up to that point. The tax data, where receipts have risen 35.6% year-on-year, relate to the first 7 months of this year, as the data already cited show.

Following the stimulus measures, Spain’s domestic economy sprang into life, final consumptin expenditures up 1.9% in H1.


And this in turn is responsible for the rise in tax revenues.

But why let the facts get in the way of your argument?

@Michael Burke
“Spain didn’t raise the VAT rate until July, so cannot possibly have impacted the receipts up to that point.”
So there was no buying of items that would attract a higher VAT rate before the well-flagged deadline? And the same thing didn’t happen in Germany or the UK either?

Many here doubt Ricardian Equivalence, but consumers are not stupid. If I plan to buy a fridge at some stage this year, am I going to do it before the new higher VAT rate or after?

What it does show, to me at least, is that fiddling with VAT rates and pre-announcing a rise of them distorts final consumption. In the absence of a sustainable rise in incomes, this is robbing Juan to pay ANother.

@ Cillian

Maybe JTO is working on a rationalisation to explain past statements!

He has some options.

This is from Time Magazine, April 30, 1973:

The Nixon Administration has developed a new language—a kind of Nix-speak. Government officials are entitled to make flat statements one day, and the next day reverse field with the simple phrase, “I misspoke myself.”

White House Press Secretary Ronald Ziegler enlarged the vocabulary last week, declaring that all of Nixon’s previous statements on Watergate were “inoperative.” Not incorrect, not misinformed, not untrue—simply inoperative, like batteries gone dead. Euphemisms notwithstanding, the Nixon Administration’s verbal record on Watergate is enough to turn ardent believers into skeptics.

@ Hogan

‘The only mechanism to impose losses on the bondholders was to liquidate the banks. Now some of us would argue that is what should have been done (and argued so at the time), but it wasn’t a popular opinion. Guaranteeing the bondholders was a consequence of saving the banks’

The (never to be called upon) guarantee was issued in order to address a problem of liquidity. A bluff which didn’t reeally work, when it became obvious that most of our banks were insolvent.

Recapitalisation and NAMA, notwithstanding, our remaining ‘champions’ are looking increasingly wobbly, and are well liable to bring down the state finances with them. Austerity may simply lead to further loan losses, deflation and emigration.

What exactly are we ‘saving’ here ?

@paul quigley
“What exactly are we ’saving’ here ?”
As I say, some of us argued to liquidate the banks. Of course, that would have led to non-performing debt sold to the highest bidder. Who would have pursued such debt. So, cui bono? Big borrowers…

The depression is a world wide affair. It is baked into the economy by the money machine, international version.

Ireland was duped into borrowing to buy assets at low interest rates. It duly did so. Thus the extra problems facing the taxpayer!

The pretend money made by the money machine was in the form of loans, which must be paid back ….. (or must they?) which distorted the great moderation growth figures. So much of future spending and growth was sucked into the moderation by low interest rates that even if all debts were cancelled, a Jubilee, then the economy would still be shrinking! It has to shrink because all the fake money is going to be missing for decades, as in Japan.

We now need very clear sighted economists and frankly, I see very few with any idea of what has actually happened willing to say it, still fewer, none, saying that we can get out of this mess without large losses in day to day wealth and well being. Think back to the thirties? We have many more goods and houses, and China et al are replacing all manufacturing.

What do you think is going to happen?

Liebesraum – not a bad concept, sorry I didn’t submit it for the ideas campaign. It’s not like we’re averse to being screwed anyway!


Keynes is used as an excuse for pushing the idea that government is a panacea. They are in fact, how we got into this mess!

Please think of reading Steve Keen, it is coincidental that he is Australian. He actually predicted the Depression we are in and better, has an economically literate and numerate explanation of how it occurred and therefopre, how to revers it in future. That actually suits very few people. Too many make money off of using the credit cycle. While they can buy governments, they can make even more while economies contract!


[off thread: does ECB have power to … devalue the € ?]

You haven’t been reading my posts, eh! The whole debt business, PIIGS etc is their way of devaluing. Every fiat currency is devaluing except the Aussie$. That is why there will be increases of commodity prices etc!


You continue to demonstrate an ability to digest superficialities and recite what is happening, but no understanding of why they happen. The world must seem like a scary place now and for the next decades?

Things will get worse and there is NOTHING anyone can do except to have foreseen this and reacted accordingly. I have been trying to tell you and others who have more awareness, that this is baked into the economy and cannot be avoided. Things are just getting started and will get far worse for Ireland. Japan at least has a massive manufacturing base, albeit abroad in most cases. These things all happened before in the thirties. Remember? Rhetorical, of course as if you did you would be aware. Consider that the average income will be half that of 2007, in real terms in 17 more years. Now plan for the changes you must make for your loved ones. Bugging out for the Sounth Seas was my answer.

What’s yours?


Sorry for messy link.
The indignity of poverty always made me angry. The lack of thought when doling out basic help is appalling. We need to address this in a big way if we are not to further damage people. We will address it eventually, after a few tragedies, but just for once, can we do it before the blood is spilt?

@Pat Donnelly

The country was led into, and indeed willingly in a major part, a very deep fog which blocked out all the traditional concerns about the underdevelopment of indigenous industry. No need for all tool-and-die stuff. Monkey work to be scoffed at. Instead, Ireland would have a new economy based on new business models where tradeable services and multinationals would figure largely (and property). Ireland was post-industrial and dirty grimy factory buildings with lots of welding equipment lying around were for the Chinese. The knowledge economy with its complement of educated geniuses would be so novel and innovative that one could make money in it without ever meeting a real customer – high-level business-2-business stuff you understand. Ah yes…

@ Hogan

Exactly. NAMA is so much more civil. Respect for the gentry. Personal guarantees will be pursued ‘insofar as it is feasible’ to do so. Viper Debt Collection is for small folk.

@ The Alchemist

+ 1
The Celtic symphony was very lucrative for the FDI companies, the bank bondholders, and our local elite. Our property assets are already gone off, and and our claims on the state are beginning to smell a bit dodgy.
Raking over the ashes is going to be a rough job.

”there is no way we can expect any sovereign creditor to accept a default or restructure while we have so much wealth and such a high general standard of living still present in this country. EU/IMF would have to chop public sector pay and pensions by a further 25% and raise the general level of taxation by 10% before you’d be able to convince them to lend us money. And they wouldn’t inflict bank bondholders with a single additional loss either”.
Surely you are not suggesting we cut the pay of hard pressed nurses, teachers, and gardai, on ‘relatively modest incomes’?

@ Sam

“modest” is a relative term. Relative to the rest of Europe, our public sector workers are not paid “modestly”. Thats fine if we are doing that off our own decision making, but if we’re going to ask a bunch of European pensioners to take losses on their Irish govt debt, then you can assume the quid-pro-quo will be a rather significant haircut to the standard of living of many people being paid off the public sector payroll.


All very interesting, I’m sure.

But the rise in IVA receipts was taking place before the June announcement of a hike in the rate.

And the improvement there is just €3.3bn of a total rise of €21.3bn, which is mainly income taxes.

Well done.
I’m afraid BB will have to make her own submission. But at least our MoSP has an open forum. At EU level there is no parallel.

I agree. I was trying to be provocative by regergetating an insane union mantra in the hope that those with more time and know good sources would look into the figures for me.

A salary more than twice the median, without even factoring in pensions, is obviously not at all ‘modest’.

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