Supply side rabbits (or, the optimists need to decide on a party line)

How do you try to convince markets that an economy is going to grow even in the face of serious budget cuts, at a time of already high unemployment? You produce some supply side structural reforms from a hat, et voila! This is how the IMF envisages getting growth in Greece, for example, and it is now being suggested that structural reforms will be a means of getting growth in Ireland as well:

Together with the structural reforms that will be announced in the strategy, this budgetary adjustment should allow Ireland to return to a strong and sustainable growth path while safeguarding the economic and social position of its citizens.

I am a little confused by this. After all, it just a couple of months since Morgan Stanley provided a completely contrary reason for being bullish about Ireland:

Clearly, Ireland is facing major challenges in the quarters and years ahead.  But, if there is one economy in the euro area that could meet such challenges, it is probably the Irish economy, in our view. Mind you, these strong preconditions are not a guarantee that Ireland will be able to overcome the challenges that lie ahead easily.  But we believe that Ireland is fundamentally different from the other peripheral countries in that it is a fully deregulated, fully liberalised market economy.  Hence, it should be able to adjust to the new environment and work its way out of the current situation more quickly.

The reason for my confusion is that if we are indeed fully deregulated and fully liberalised, it is hard to see where the Irish supply side rabbits are going to come from.

So: are you optimistic because Ireland is a lean green market machine, which will adjust flexibly and push our (practically vertical) aggregate supply curve out to the right at a rate of knots? Or, on the contrary, are you optimistic because we are a eurosclerotic mess, whose rigidities imply a fruitful pro-growth structural reform agenda?

78 replies on “Supply side rabbits (or, the optimists need to decide on a party line)”

Its not designed to work – It is beginning to look obvious that the ECB have done a deal with the Anglos of BOE and the FED.
We will reenter their sphere of influence when they implode our economy by feeding us with more debt like some sort of weird fois gras country.

In a very general way, my impression is that the very wealthiest Irish and European citizens are
a) in control of economic policy in terms of priorities by way of their undemocratic influence as owners of bonds, land, industry and substantial cash reserves
b) now determined that it is essential to remove money/spending from “ordinary” (PAYE) citizens and consumers of services so as they can increase their revenues in a time of generalised recession/contraction.

Do we live in a democracy or a plutocracy? Are the elections merely a thin veneer to disguise a system prioritised, in good times and bad, to benefit the very rich?
Maybe it’s just me….

I think a major problem is that for 30 years the economics profession has been largely focused on supply side issues. This is ok for something like the oil crisis. But this is clearly a demand side crisis.

As seen by many labour market suggestions in the Irish Times a while back, supply side suggestions were offered. Its no wonder government policy is failing. The supply side is too intertwined into the mindset of many economists.

They are pursuing policies for the wrong type of recession.

The IMF historically has argued that the supply side measures take a long time, so even if there were any it would not work to solve a fiscal crisis, hence large cuts must happen and a big recession. However, the IMF took the opposite stance in Greece and argued the supply side measures will save Greece due to so much “low hanging fruit”. The stories are humorous: no new truck licenses granted since the 70s, so those cost 300,000 euros in 2007 and Greeks preferred to truck in fruits from the Netherlands rather than grow them domestically and pay high trucking fees. It all sounds like good story telling rather than “big low haning fruit”. But let’s see – growth there is supposed to recover during 2011 (still negative yoy but trending up quarterly by end 2011). So far there are no signs of that. If people decide that fails, then the deflationary trap model wins, and default is the only choice.

The two perspectives are not that contradictory. Compared with Greece and the rest, our economy is a model of free market rigour. But it is still loaded down with rigidities that can be (I argue have to be) swept out of the way to improve our growth prospects.

The problem for Irish growth is that the Government has shown little interest in doing the latter, and it is not clear that the opposition would do any better.

I don’t see anything in the Lisbon Commitments linked by Frank that will help much relative to current policy. Our costs are too high, and the reforms we most urgently need are ones that will bring costs down rapidly.

I’ll stick my anonymous neck out here and make the heretical suggestion that we do not have a soluble demand side problem. Consumer spending on goods and services as a proportion of after tax income was still close to its historical 2007 high of around 95% in 2008, and insofar as it is possible to pick together numbers from from 2009 it looks as if it remained well above the 91% historical average that year.

Yes, consumer spending on goods and services looks like it has fallen off a cliff, but it is because incomes have fallen off the same cliff, not because they are holding back from spending what they have on goods and services. This is corroborated by rates of employment in retail and consumer service sectors, which have held up well relative to total employment, even if they have fallen badly in absolute terms.

It is also logical, in that people on lower incomes tend to spend a greater proportion of those incomes on goods and services, an effect which could easily be balancing out tendencies towards lower spending due to lack of confidence.

Yes, Irish consumers are deleveraging, but they are doing it by refraining from investing in property, not by holding back on regular consumer spending. Very rationally. And given the overhang in property supply, I don’t think there is a short term policy measure available that will put this money back into construction.

There’s a (hopefully) soluble demand problem internationally, but not in Ireland.

Rory O’Farrell

Correct! Demand inevitably collapses and the bubble bursts making demand impossible, in aggregate, until debts are repaid and economy takes off again, free of credit and debt. That is a point that those who suck deeply on the teat of public funds, and funds that have yet to fail, pretend not to be. It is the inconvenient truth.

So why do we listen to these frauds who steal what is left over? Cut these jobs and save money! Allow them to retire and set up a Tea shop or whatever.

@ BeeCeeTee

In most recessions it is investment that fluctuates the most, rather than consumption spending. (Though for a small business, many of the non-labour overheads have remained steady, so even a small change in turnover can have a huge effect on net profit.)

There is a huge fall off in investment. Much of the investment that did happen was fairly useless (ghost estates, zombie hotels and other scary things). I’m not saying we should go back to that, but we can mitigate the effects by bringing forward public investment that has to happen anyway, targeting investment that is labour intensive and provides a financial return to the exchequer.

Actually spending the budgeted capital allocation for school building would be a nice place to start.


I can’t understand your confusion. Look at the NCC’s Annual COmpetitiveness Report to get a clear picture of an economy that is advanced in many areas, though with headroom to improve:

Fig 5.16 Cost of starting a new business/# of procedures: Cost second best in OECD. Procedures, 7th best in OECD. New Zealand is the best, and I would be very surprised if they aren’t looking at how they could do even better.

Fig 5.17: Cost of registering a property: Not good – cost (24th/28), procedures (16th/28)

Fig 5.18: Product market regulation (3rd/28): very good, but room to improve.

Fig 5.19: Barriers to enreprepreneurship (9th/28) well above average, though not in top quadrant.

Fig 5.20; tax administration: (4th/28) – very strong, though consumption tax administration ‘only’ 6th/28.

Fig 5.21: time to settle an invoice: 4th/13 for public administation, 8th for b2b (small plug here for need to reduce cheque usage which is strongly associated with late payments!)

Fig 5.22: labour regulation (6th/20): strong, but room to improve,

Fig 5.23 social cohension as measured by volunteering (7th/28) in time and (2nd/28) in terms of money.

@Kevin O’Rourke,

I think you are teasing us. I would be very surprised if you were not aware of the reality. The tradable sectors are generally in fine fettle – as JtO continuously points out – (even if some workers there are suffering because they got caught up in the property bubble), but they are being weighed down by glorious inefficiencies and deadweight costs in the non-tradable sectors.

The mantra of “more competition and better regulation” spouted continuously by successive governments was simply an optical illusion that concealed precisely the opposite (less competition and worse regulation) in the non-tradable sectors. Because the domestic banks sit between the tradable and non-tradable sectors, we’ve seen the horrible reality there. The equally horrible reality has yet to be revealed in the non-tradable sectors.

It is unfortunate that the Government will be forced to confront this reality under external pressure, when it could have been tackled years ago – as many of us have being pointing out for years and have been villified for our impertinence.

Still, better late than never and the resilience and vibrancy of the tradable sectors will be unshackled to drive a more rapid recovery.

There has been far too much emphasis put on the banking sector. Whilst I appreciate it is a major factor, the bigger picture tells a different story. Ireland have a mobile work force. From 2000 – 2007 they had net immigration …from Eastern Europe, the US/UK (citizens returning to embarce the Celtic Tiger). Now, that trend is in reverse mode…which is positive, as it means less tax on the economy. They also have an export led economy – check out their trade deficit…ops surplus and their main trading partners. It is a massivley different story to Greece,,,and check out shares in Irish Agri business. But we should not forget that yes, they are technically bankrupt…and I put that down to a corupt few.

Greece’s tax collection is a much weaker than Ireland’s. Search ‘Kolonaki’ and ‘doctors’ – some of the impoverished medics claimed to earn as little as €300 in a year. Kolonaki is a akin to the Holland Park or John’s Wood of London.

@David in Cork – “Maybe it’s just me….”

It’s not just you. It was ever thus. The only difference between now and the dark ages is that they don’t now come round killing us to get what they want. They copped on to the fact that they could get more out of us by keeping us alive.

In terms of supply side frictionlessness, it might be worth pointing to new data from the CSO concerning industrial disputes:

Which shows the astoudingly low number of disputes in progress in 2010, despite real wage deflation and continued redundancies.

This is truly an encouraging figure – one in which the believers in Ireland’s future should take heart.

The reason for my confusion is that if we are indeed fully deregulated and fully liberalised

Patients of one GP in Dublin 4 pay €70 for a consultation, twice the lowest fee, which is charged by a doctor in Co Kerry, a survey by the National Consumer Agency reveals.

The cost of a simple tooth extraction varies from €40 to €150 depending on where you live

€800 per hour quoted by an insolvency worker/’expert’ to NAMA.

Medical consultants charging as if they are in Beverly Hills.

Law firms that are among the highest earners in Europe; Trinity College pension fund deficit of €315m bailed out by the taxpayer and the litany could go on and on.

Do we have an answer without the IMF?

This strikes me as a similar discussion to the loan demand Vs loan supply discussion. Are banks too reluctant to lend or is there no demand for credit?

Are you bullish because banks will soon choose to increase the availability of credit? Or that monetary policy, QE for instance in the US, will lower rates and increase the demand for loans?

Afraid probably neither. There is no demand for loans!

The economy simply must get used to having less money going through it. There is only one logical solution.

Deflate and default.

As an open economy I am sure we will adapt quickly, lets hope the rest of the world keeps up with us!


Kevin O’Rourke asks:

So: are you optimistic because Ireland is a lean green market machine, which will adjust flexibly and push our (practically vertical) aggregate supply curve out to the right at a rate of knots? Or, on the contrary, are you optimistic because we are a eurosclerotic mess, whose rigidities imply a fruitful pro-growth structural reform agenda?

A glance at the Heritage Institute’s ‘Index of Economic Freedom’ for 2010 answers your question:

Ireland – 5th place (after Hong Kong, Singapore, Australia and New Zealand)

Greece – 93rd place

If anybody feels the urge to be optimistic about Ireland, it will clearly have to be founded on the ‘lean green’ argument rather than the ‘eurosclerotic mess’ one. But since the Eurozone’s two leading basket cases are at the top and bottom of the class (barring Italy, in 94th place), it would appear that economic freedom as such just isn’t a particularly relevant factor.

Which I gather is the point you wish to make. And proves that congenital optimists work their way back from their conclusions to their premises, rather than the other way round.

Agree with Michael Hennigan .. not sure if we are so fully liberalised.

A “small” example (I know sample of one and all that) … in the last 18 months a EU Framework Programme project that I and a colleague were partners on concluded and we had to get an audit certificate … standard procedure.

The amount my employers (a State organisation) paid to a leading accountancy firm to get the audit completed was EUR 5,000. The cost a partner from the UK incurred for the same service was GBP 500. The audit costs incurred by other partners from EU15 countries of getting their audits done were even lower than those in the UK.

Pork barrel stuff or supply side inefficiency?

@Michael H,

It is reported that the IMF will be in town tomorrow, but, according to the MoF, they won’t be looking at budgetary matters. So I can only conclude that they will be looking at the structural reforms mentioned in the Eurogroup press statement which Kevin O’R has highlighted.

But it’s not in their nature – or consistent with the Fund’s mission – just to make recommendations with which the Government could play silly buggers; these would be requirements under the conditions attached to any baliout package.

I wonder is Mr. Bond around? It would be good to get an insight as to how the markets are reacting to all this face-saving brinkmanship.

@ Kevin

You straw man artist, you.

As you probably know Morgan Stanley has been so woefully bad in their economics / bond strategy research over the last year that they have apologised for it. They were the ones telling clients to dump US Treasuries early in 2010 because hyperinflation had begun. PK has had a field day with them.

You ask

“So: are you optimistic because Ireland is a lean green market machine, which will adjust flexibly and push our (practically vertical) aggregate supply curve out to the right at a rate of knots? Or, on the contrary, are you optimistic because we are a eurosclerotic mess, whose rigidities imply a fruitful pro-growth structural reform agenda?”

Reality is both. Its an economically polarised country. Most of the professions are a eurosclerotic mess with, as another commenter noted, Beverly Hills level fees – largely sustained as a tax on the rest o economy or actually directly from work paid for by the State. The Public sector is a classic example of a eurosclerotic mess.


Thank you. Got an indication that the yield on 10-yr Irish sovs was drifting out to 8.5. The doubling in the margin is interesting, but, presumably, technically driven. Perhaps the markets will keep the pressure on, but not force the pace, confident that a baliout is inevitable and that some politcally face-saving gloss will have to be put on it to allow the Government to climb down.

Does it really matter what some politico/academic thinks or what Guardian bloggers think? These people are of no importance.

It is what business leaders think that counts.


A survey of CEOs of multi-nationals in Ireland reports that 47 per cent expect growth in 2011 (on top of 2010 growth) and only 11 per cent expect contraction. No doubt that nice lady academic from UCD will be back on posting that they are out of touch with reality.


As Ludwig Heinrich Edler noted above, in Q3 Ireland was virtually strike-free. Contrast that with elsewhere.


Paddy Power announce 500 new jobs in Dublin for international HQ.

Here is an idea: invite Paddy Power to post on here on whether or not he thinks Ireland is competitive. It would be informative. I’m fed up reading the opinions of politically-motivated academics, none of whom have ever created a job, run a business, or sold anything. At the end of the day, Paddy Power’s opinion on whether or not Ireland is competitive is worth more than that of all the academics in Ireland put together. I say that even though he has taken a fair chunk of my hard-earney money over the years.

You write:
The Public sector is a classic example of a eurosclerotic mess.

Don’t forget the Theory of Relativity! In the real existing world, it’s more a matter of comparing the Irish public sector with the real existing public sectors in other EU/eurozone countries. Of course, from a minimum state perspective ALL EU public sectors are ‘classic’ examples of sclerosis.

I’m still wondering how Ireland won 1st place in EU-27 (5th place worldwide) in the Heritage Foundation’s Index of Economic Freedom 2010.

@ Paul Hunt

German 10 yr bund yield at 2.60%; Irish bonds at 8.28%.

The main clearing house raised the cash margin to 30% for Irish bond trading today.

Hopefully, the IMF will go through the shebang like a dose of salts.

The Dutch Fin. Minster said that there would be no approval without the IMF.

So take all the blarney about supporting the banks as that.

At least the real outsiders i.e ex rich professionals and the public sector, may have a chance of getting a square deal at last.

The neoliberals have already picked most of the “low hanging fruit”. Followed the instructions from their neoliberal hahdbook- reducing interest rates to record low levels and liberalising whatever was soft and weak like Dublin taxis. (There was no liberalisation for hospital consultants.)

Now the cupboard is bare and there doesn’t seem to be much that is doable without a serious assault on what up to now has been protected for whatever reason.

I had to laugh at Dick Roche yesterday saying “but Miriam, if we hadn’t brought in the bank guarantee we’d be in an awful situation now”

@Michael H,

I agree, but the blarney about the banks is likely to be developed as a face-saving formula to cover the Government’s climb-down. It also keeps some focus on the breath-taking hypocrisy of the German and French govts, sitting on large, but unrevealed, losses in their banking systems, using Ireland as the sacrificial lamb to appease the markets. Greed, stupidity and duplicity did for Greece; greed and stupidity has rendered ireland up for sacrifice. But that doesn’t mean that those advocating the sacrifice are paragons of virtue.

In any event, one hopes the IMF will get a free hand; Ireland will be the better for it.


I live in Norway. Dick Roche and FF come across as economically and socio-politically autistic – Cowen’s ‘here’s an important speech but I’m not going to tel you anything’ to the Dail was not taken well and simply gave the impression that Ireland Inc – if we must use that term – is being run by the same sort of blaggers and clowns that ran Anglo.

Which of course it is. People abroad can’t understand why FF keep trying to trot out the same nonsensical mantras of bluff and bluster – they haven’t acted quickly enough, or in the right way, and their track record is more eloquent about their the likelihood of their future actions than their spokesmen are.

(And this is not a party political stance – FG and Labour don’t inspire much confidence either.)

No one doubts that we are capable of turning ourselves around but not with the current elite (and that includes the elites that were been in FG and Labour during the boom) in charge.


“Does it really matter what some politico/academic thinks or what Guardian bloggers think? These people are of no importance.”

Unfortunately, yes it does matter. The European media do not tend to go to the source for facts – their view of Ireland is typically defined by English-language media OUTSIDE Ireland. NRK (the Norwegian RTE) here, for example, liberally quotes from the BBC and the Guardian – rarely (if ever) from the Irish Times, the Irish Independent or even And the bond markets react to the prevailing mood in the wider region so it’s a vicious circle.

In Ireland we are awful at understanding the nuances of how we’re seen internationally (for better and for worse). When things are going well we think everyone loves us and that sure it’s grand isn’t it and when things are going badly we think everyone hates us and that it’s time to circle the wagons. The reality is a constantly changing mixture.

But what is not in dispute is that the predominant media interpretation in European news sources (regardless of the truth of the situation) is a) Ireland is GOING to get a bailout whether it wants to or not; b) Ireland will be the case study to nip ‘contagion’ in the bud; and c) Ireland’s political leadership is in denial.

If more of us knew languages other than English we would have a better idea of how we’re really perceived in Europe and the world.

@ seafoid Yes. As a neoliberal I am personally committed to keeping tight regulation on all sectors that run by South Side blue bloods. Also I’m committed to government-central-bank fiat money interest rates that are designed to make money cheap and politicians popular. If you read Hayek or Friedman you will see that expensive state healthcare monopolies dominated by highly paid consultants was at the core of their value system.

Afterall with many years of neoliberal policy in place we now have an economy where the private sector accounts for nearly half of all economic activity. That is simply unacceptable. Unless the government nationalises Tesco now then we are in danger of starving.

Dick Roche, Hayek, Friedman. That is our holy trinity.

Loads of reforms could be made.

Deregulating the pubs -this is a simple market stitch up disguised as an anti-alcohol measure

Liberalise the training of barristers -the current situation places a cap on practitioners (despite excess demand and highly inflated wages), while giving a monopoly to the Bar Council.

Allow Barristers to form partnerships.

Use trained non-practitioners to perform repetitive controlled tasks. For instance conveyancing doesn’t need to be done by solicitors, slaughterhouses shouldn’t need a vet to certify their meat,

Reform our byzantine planning laws. All alterations in this area in recent years, have been to pile new requirements, strategies and other complications to the planning process, with the result that we are now achieving some good planning outcomes, but at the expense of having a truly frightening system of needless expense and bureaucracy. The whole thing needs to be rationalised to provide better outcomes simpler.

We have already made great strides in reforming the medical profession, and there are now many more doctors being trained. But it will take some time for this to take effect.

Improved transparency of the prices of the regulated professions. I generally find they are insulted if you even ask for the price of their services before committing.

Split up the ESB into multiple competing power creation companies.

Allow private operators to compete as equals with Bus Eireann and Dublin bus in the awarding of PSO licences.

There really are dozens of things to do. Any suggestion that Ireland has no scope for economic reform is fanciful.

@Carolus Galviensis these indices of Economic Freedom (the Open Republic has done one with Cato and Fraser) rely on GDP as a base figure to work from which for Ireland is not helpful. Then they add things like rule of law, freedom to contract, move money out of the country and even freedom from being drafted into the military or right to a fair trial. Ireland is so small it doesn’t mean much. I have to confess that in the past I argued that Ireland’s economic success was at least partly a result of this ‘freedom’ – which in some ways it was. But I did not suspect the worldwide bubble as being that big a part of the story.

The argument for economic freedom is an extrapolation of the basic concept of division of labour in Adam Smith. Specialisation and trade will lead to higher production – ergo – more overall wealth. But bubbles will contaminate the science.

The Heritage Foundation is filled with the worst sort of partisan hacks. Anyone wishing to judge the quality of its ‘research’ (scare quotes are a must here) need only spend 10 mins on its website.

@ Paul Hunt

‘Still, better late than never and the resilience and vibrancy of the tradable sectors will be unshackled to drive a more rapid recovery’

As @ Michael H never tires of pointing out, the tradable sector may push up GDP, corporate taxes, and other good things, but cannot be expected to produce employment. I doubt there will be much assistance on that score in the IMF handbook.

As @ JtO notes, we are getting 500 more jobs in the gambling/entertainment sector. Trouble is, that sector unfortunately seems to include banking, property development, and house prices. We gambled the economy away.

I suspect we have had our own version of deregulation. The domestic and foreign vested interests colluded to ‘regulate’ things to suit themselves. The subsequent bankruptcy proceedings, in and out of court, are taking on a bit of a Father Ted quality.

@ Adrian Kelleher. You’re right. Listen to this rubbish: ‘Federal spending is on an unsustainable path that risks disaster for America. Runaway spending has increased annual federal budget deficits to unprecedented levels, adding $2.7 trillion to the national debt in the past two years alone. Each year’s huge federal deficit increases the mountain of national debt borrowed from future generations of Americans. Congress needs to cut federal spending sharply and quickly.’

That is irresponsible, appalling nonsense.

A survey of CEOs of multi-nationals in Ireland reports that 47 per cent expect growth in 2011 (on top of 2010 growth) and only 11 per cent expect contraction.

As Ludwig Heinrich Edler noted above, in Q3 Ireland was virtually strike-free. Contrast that with elsewhere.

Paddy Power announce 500 new jobs in Dublin for international HQ.

Great. Our proud national industries of (re)selling Viagra tablets and MS Office CDs continues apace. The workers are too cowed and broken to rebel. And what little money they have left is set to be siphoned off by a superpredator of the desperate.

But you’re right you know. All this supply side rubbish does please owners, managers and investors. If we keep this up, we can turn into a nice place altogether for foreign direct investment and can look forward to a bright future alongside our fellows in Mexico, Guatamala and Foxconn.

@ Paul Hunt

pretty quiet so far. Imagine a lot of guys are running exposure numbers on what they have out to Ireland, in terms of retail, corporate, bank and sovereign, just so when whatever gets announced over the next few days they know exactly where they stand. Basically just wait and see mode now. Nervous but not panicing.

Rehn on again here…


Anyone got any idea on what he means/suggests? Between NAMA, Anglo and INBS wind-downs, AIB/BOI asset sales and EBS sale process, haven’t we already done as much as can be done there? I still do not see any possibility of burden sharing including seniors or deposits, there is simply too much at risk in terms of contagion into Spanish banking sector, as it’d be a prcedent setter.

@Paul MacDonnell

Ta for your most informative comments.

@Adrian Kelleher

The Heritage Foundation is filled with the worst sort of partisan hacks.

‘the worst sort of partisan hacks’ = ‘partisan hacks who do not share my prejudices’

Off topic but I don’t know where else to put it:

Live reactions today from the SPD and Green-voting commentariat at the left-of-centre weekly Der Spiegel:

Let’s not fund this ruined monetary policy with our hard-earned money … if the euro remains, there will be no Europe: the chronically financially irresponsible countries cannot devaluate and so they will go bankrupt and drag all the donor countries down with them … The Irish — such thugs and fanatics of ‘free competition’… I’ve been an almost fervent pro-European for decades but now I am simply fed up. And spare me the crap that Germany benefits most from the EU. …. I’m looking forward to the death of the EU dictatorship! … The euro has fomented unrest in Europe under the guise of securing peace – what madness …. Now our next tax billions are about to be sunk in Ireland … The EU will ultimately become no more than a European Economic Community, a common market. … The people will remember the names of these European-loving treacherous politicians and then hang them on the lanterns as they deserve … Why do we have to save the Irish banks again with our tax money? ….etc. etc.

Speaking of alternative solutions, here’s an interview from Sinn Fein’s economic adviser.

It’s a refreshing different take on the crisis. They propose higher taxes rather than cuts, and getting rid of the excessive remunerations in the public service and the subsidisations given to the private health sector, nationalising the BoI and AIB and creating an explicitly national bank.

It’s radical stuff, but at least it sounds like they’d actually _do_ something, rather than sit on their thumbs like the current government.

If this stuff gets airtime, Sinn Fein could make a lot of gains in the election. I imagine some people might be worried/offended by all this. I expect the Irish media will characteristically freak out.


you see Vincenzo’s piece in the IT today? Double OAP and social welfare, whack 30k public servants and get rid of public sector pensions completely. Not thats radical from someone on the left…


Thanks for that. Seems to suggest they’re expecting some form of bailout and assessing things on that basis. As to Olli and the banks, would he be doing a warm-up routine for a quick sale of AIB, say?

Keep in mind that if the country gets bailed out, the people currently retiring will get to keep their pensions, e.g. Jim McDaid. At least proposals from SF and Vincent Browne would attempt to tackle that kind of egregious remuneration.

The vultures are circling: here’s the Daily Telegraph’s Ben Brogan:

“If the Germans and the EU make Ireland raise its 12pc CT rate, will Tory MPs press Mr Osborne to make the UK Europe’s low CT destination? We should be doing what we can to save Ireland from disaster. But charity should have a purpose. If Ireland is about to lose its place as a magnet for inward investment, we should take its place. Taking advantage of Ireland’s weakness should be Mr Osborne’s task.”


I completely agree. One of the things that regularly comes up in foreign media reports about Ireland is the way in which the political elite are looking after themselves at the expense of the country at large. It’s seen as being morally if not outright economically and politically corrupt.

Many people in Ireland don’t realise that in other EEA member states – as a rule – politicians do not reward themselves handsomely and shamelessly. Given the operation of social solidarity and the social market in other EU countries most commentators abroad are simply aghast at the craven mismanagement of Ireland by its make-it-up-as-you-go-along and get-away-with-it leaders.

As I said earlier if people in Ireland were exposed to foreign media other than those of Britain and US (and in languages other than English), and perhaps if the European media went straight to the source in Ireland (rather than via the BBC), this whole dynamic would be playing itself out completely differently.




sorry – re mortgages



And at least the Yanks are still rooting for us (for their own reasons im sure!)


WSJ – Ireland will win this game of bluff

The Irish are a nation of gamblers. … it would be dangerous to bet against Dublin winning its high-stakes game of poker with the European Union over a possible bailout.

Ireland’s aim is to secure a deal on the most favorable terms, including crucially the retention of its ultralow corporate-tax rate, a potent symbol of economic sovereignty that the minority Fianna Fail government is determined to protect at all costs ahead of next year’s likely elections.

Dublin still has the strongest hand. The first thing in its favor is that no one can force it to accept a bailout; Ireland has to ask the European Union for help. And given the Irish government is fully funded until the middle of next year, it can in theory drag this situation out for months. If it did that, of course, contagion would likely spread quickly across the euro zone, as Tuesday’s stock and bond selloffs showed, threatening the survival of the common currency. In that sense, Ireland is armed with a nuclear weapon.

In response, the EU is armed only with bows and arrows. There is very little it can do to force Dublin to seek an early bailout. The one pressure point is Ireland’s banks, now only able to survive thanks to European Central Bank funding. But so long as the banks are still able to post eligible collateral, the ECB has little option but to continue accepting it, even though its lending to Ireland now totals €130 billion, equivalent to 80% of Irish GDP …


None of the vested interests are remotely committed to reform.

I mentioned some time back that after the Single Farm Payment was introduced as an EU ‘reform’ of CAP, Area Aid forms were (and are) still sent out for completion every year. The enormous dronocracy that is the department of Agriculture didn’t seize the opportunity to shed a single job in the ‘old’ Area Aid section.The ratio of Agricultural staff to farmers (if my memory of IFA figures is correct) is about one departmental ‘officer’ for every seven registered farmers. Sure it’s gas, isn’t it.

The major reform of the past twenty years in the public service is the citizen’s entitlement to be given the name of the public servant at the other end of the phone or across the counter.

I spoke with a medical consultant yesterday on a public contract in a public clinic who was managing without a secretary – nurses and other front-line staff were manning the hones, seating patients and opening the door. The admin god in charge had declined to shift a secretary from the pool to provide cover.

Do we need all the local authorities, county enterprise boards, and 3rd level institutions that currently hoover the public purse? Of course, we need a sufficient number but who bothers to parametrize that?

@Irsk i Norge What a truly marvellous post. The reason why the Irish are not subject to the same scrutiny is because they are very good at pretending to be stupid but lovable. So good that foreigners – even many Brits – and, it seems until now, most Germans and other Continental Europeans, believe them. People look at Brian Lenihan and, despite what’s said at home about his ‘brilliance’ and ‘Oxford’-educated background, they see someone who is a sort lovable, if retarded, rogue. The sheer and manifest intellectual and moral inferiority of the Irish governing classes (‘educated’ people in Ireland actually think, for example, that the Irish Times – with its ‘vested-interest driven ‘health’ supplements, its letters pages full of the mutterings of toothless geriatric simpletons wittering on about the Irish language or Patrick Pearse or advancing whiney arguments for subsidy with phrases like words like ‘social’ and ‘solidarity’ or this: ‘Madam, – Perhaps it is time to drop the síneadh fada from Fianna “Fáil” and more accurately refer to it as Fianna Fail. – Yours, etc, Brain Dead O’Redneck – is a real newspaper.).

The entire Irish independence project has had an over-riding objective: to avoid scrutiny, to promote – and even in the awful ‘native’ culture project to – re revere obscurantism, and using this for cover, to reward political constituencies.

@Carolus Galviensis

They’re nutcases. “Exceptionalism is back in with them — i.e. why other countries should be subject to laws but not the USA, or not its Republican presidents anyway. More self-congratulatory crap justifying unilateralism.

L Paul Bremer’s Iraq administration was stuffed with Heritage Foundation and AEI staffers btw. They really did believe they’d create a paradise on the Euphrates with a little of their “unique understanding of statecraft”, to quote the second article.

HF, AEI etc. don’t know where to stop; the ideological genie is out of the bottle and whatever they think it’s beyond their control. They’re the most serious existential threat to the USA since the Soviet Union.


Der Spiegel hasn’t been “left-leaning” for a long time.

Also, having checked your quotes from Der Zeit, I didn’t find them in any way representative. They’re selected quotes, not miscellaneous ones

@Bond. Eoin Bond – “Anyone got any idea on what he means/suggests?”

I often think we need the equivalent of a Rosetta Stone when trying to decipher what Eurocrats are actually saying.

@Paul MacDonnell

Thanks for your encouragement. While I don’t agree with your assessment of our “awful native culture” – personally I think we should get some national self-esteem as we’re probably the European nation with the greatest proportion of self-haters and certainly the only one with abject, inveterate cultural cringers to the former colonial power – I do agree that our leaders and media present a grotesque caricature of Irishness both in good times and bad.

Whilst I would agree with you if you’re suggesting that our ruling classes play up to certain stereotypes internationally I think it’s also a Pavlovian response based in European condescension. In Norway most people think Ireland is a place of magical, affable leprachauns and we certainly don’t do much to dispell that stereotype – indeed, our own tourist board encourages it and implies that such prejudices can be confirmed by a nice wee trip to ‘the Emerald Isle’.

I wish we had the national self-confidence of other small and neutral European nations like Finland, Denmark, Norway, Austria et al rather than constantly looking over our shoulder for approval from Britain and the British media. It has to stop – it’s no good for our mental health.

If we had some self-esteem maybe we wouldn’t be so unfettered in our enthusiasm for ‘shiney hings’ like houses and cars that we never needed and couldn’t afford.

So actually the answer is to get a better understanding of who we are as people and where we came from, rather than simply copying the latest legislative or economic fad from the neighbour who colonised us and has an economy ten times larger than ours and ten times different.

But we won’t learn because our ruling classes cherish that umbilical. That’s one thing they and the IT readership can effuse over together.

What the Wall Street Journal says is correct. Ireland should stand its ground and emerge triumphant. The strategy should be as follows:

(1) Drag things out as long as possible until statistics from the real economy come to the rescue, which they are doing allready. The current panic is as much about future economic growth as about anything. A handful of economists have sold the line that the Irish economy can not/will not grow in coming years. They repeat this ad nauseum. They have world-wide attention. They are interviewed endlessly by the foreign media. But, as I never tire of pointing out, they are about to be torpedoed.
The export-oriented wealth-producing sectors of the economy are surging ahead. We could quite easily be recording real increases of near 20% in both manufacturing output and exports by Q4, miles ahead of any other EU15 country. We may well be back at the top of the league table for year-on-year increase in GDP by Q4. The GDP/manufacturing/export figures for Q3 and Q4 will be the equivalent of a large stick of gelignite under the doom industy.

(2) Invite FG to join the government in coalition with FF, thus restoring the alliance that saw off the Black and Tans. It can see off their successors equally well. Once that happens it matters little what smaller parties do. Stable government until June 2012.

(3) Request the population to work one extra hour for free each week. I am certainly willing. In fact, I usually work about 20 hours unpaid overtime each week. The figures on industrial disputes published yesterday show the contrast between Ireland and most other EU countries. Ireland has been virtually strike-free all year, while other countries have had strike after strike. That is one of the reasons that the export-oriented wealth-producing sectors in Ireland are doing so well. We should make the most of it.

@Adrian, you write:

Der Spiegel hasn’t been “left-leaning” for a long time.
Also, having checked your quotes from Der Zeit, I didn’t find them in any way representative. They’re selected quotes, not miscellaneous ones.


Your definition of ‘left-leaning’ is clearly as ‘partisan’ as your definition of ‘partisan hacks’. As to the representativeness of my ‘sample’, it’s possible you were consulting a different article in Die Zeit, but let me assure you I was myself completely surprised at the fury expressed in both weeklies.
I occasionally browse thru the readers’ comments in the right of centre Die Welt and the FAZ, where exasperation with the EU and all its works and pomps is to be expected.
But that commenters on the left seem to have much the same stance — at least when it comes to bailing out the basket cases — is, I think, a pretty recent phenomenon.


“Invite FG to join the government in coalition with FF, thus restoring the alliance that saw off the Black and Tans. It can see off their successors equally well. Once that happens it matters little what smaller parties do.”

Let me get this straight – everyone agrees that FF have wrecked the economy over the past thirteen years, and you’re suggesting that they continue in government? While I admire that you’re trying to come up with imaginative solutions, a least three-quarters of the population want shut of FF completely.

Anyone who believes that FG are some sort of antidote is deluding themselves too, by the way. FG would not represent any great departure either in policy, practice or proposals. People just hope that – as the largest incumbent opposition – they somehow represent an alternative, in-keeping with our party system tradition of switching one set of Civil War traditions for the other every few years.

I wish we could have some more imagination than this. Considering even the Labour party are effectively centrist, I don’t see why we don’t put in a Lab-SF-Greens-independents coalition after the next election, maybe with Joe Higgins if he’s elected. We must break the banjaxed monopoly FF and FG have on the socio-economic and political processes in Ireland otherwise we’ll never get meaningfully anywhere.

Innovation not stagnation – that’s the buzzword these days, isn’t it?


I do concede that a national coalition of all parties would make sense in this emergency climate, however.

@ The Alchemist
agreed. But then, the EU/IMF won’t be similarly hampered by vested interests. They will have little truck with bleating barristers and judges.

@ Irsk i Norge True. But note I said the awful native culture PROJECT. It is the project that is awful. The rest is a hobby, pastime, just like opera or Shakespeare. The national self-confidence you wish Ireland had can only be – as it is in those other places you mention – a product of hard work and honesty – including cultural honesty. There’s plenty about the culture of this island to be proud of. An awful lot of it’s regarded as ‘British’. Best to consider us to have a sort of pooled cultural sovereignty with the UK. That’s not a position of inferiority or superiority. Just a fact.

@Paul MacDonnell

Thanks for the clarification. Whilst I sense that we come from different viewpoints, you are of course completely correct when you state that we have a “sort of pooled cultural sovereignty” with Britain. It goes further than that – we share a migration zone with them.

Or course it’s equally completely correct to say that in this set-up (which we have acceded or acquiesced to; it is by no means necessary or natural or unavoidable) it’s Britain who calls the shots. The Common Travel Area, for example, does not mean that we have to follow British migration policy but we must follow Britain’s lead but we invariably and unquestioningly do so. If Britain had introduced ID cards, for example, we would have had to follow suit.

While we have a paper independence that for a long time due to anabolic balance sheets looked like economic independence, we are considerably less independent of Britain in nearly all areas than, say, Australia, Canada, NZ are.

But I digress considerably here. The point is that the system we have is the system we have, for good or ill, and we have shown miminal will to change it, whatever the motivation. Inertia is our national past-time. Living in Norway where foresight is a government policy and things get done immediately I was shocked to see how stuff like Bord Snip, the Commission on Taxation etc were shelved.

I don’t necessarily agree with Bord Snip or the Commission on Taxation but only in Ireland would a serious state commission’s findings be considered to be merely an expensive “what if”. It’s unprofessional and would be unheard of in other European countries.

We are a European country and we have to start acting like one.

@Irsk i Norge You say: ‘It’s unprofessional and would be unheard of in other European countries.’ True. The trouble here isn’t that politics are too right wing or too left wing or even too nationalist. It’s that the European Enlightenment never happened here. We don’t do scrutiny. We don’t do consequences. We don’t do transparency. We don’t do reason. The approach to the ‘native culture’ project is not what you have in Norway – which also celebrates a national culture’. What you have in Norway is a very fine artistic heritage which you know is part of a wider pooled European Enlightenment / Romantic traditions. The purpose of Ireland’s ‘native culture’ project is to promote a spurious ‘uniqueness’ about Ireland. Hence at every point of history when Ireland had a binary choice between the right and wrong decisions Ireland has always gone for the ‘Irish solution’ to the ‘Irish problem’. The population are quite literally educated to believe that this is valid – even when they accept it’s not correct.

So. We do vested interests. We do avoidance of conflict (any conflict). Until people are willing to confront the government – and I mean morally and firmly confront them – then nothing will change.

@Irsk i Norge. One more vital point.

But before the Irish confront the government. They have to confront themselves and the morally and culturally disordered fetishised idiocy of their ‘special’ and ‘unique’ ‘culture’ and ‘way of doing things’.

@Paul McDonnell
Particularly the second post. It is no longer “someone else” we are stealing from, indeed, it hasn’t been for a long time. We are stealing from each other or our children.

Responding much later to Rory O’Farrell:
There’s demand side boosts and there’s demand side boosts. The claim from a lot of macro guys who I respect greatly is that consumer spending on goods and services is depressed because of a lack of confidence, and that this is holding the economy back. My claim is that they are flat out wrong, that this sort of consumer spending has probably not fallen below the historical average as a share of after tax income.

Investing or not investing the odd billion here or there on the public capital programme will have at most a pretty marginal macro impact, although it will have a big impact on the sustainability of the public finances.

I agree with the assessment from BeeCeeTee.

It is not lack of confidence that is causing the low consumer spending. It is as simple as that the unemployed do not have the money to spend and the ones re-entering employment are getting lower salaries than when they left employment.

The ‘rents’ extracted from the FDI mainly comes from two parts:
Property related and wage related. Neither will be extracting at the same level as before.

When number in employment increases, then and only then will there be a sustainable recovery.

@ BeeCeeTee

Well, I wouldn’t directly target consumer spending as it could lead to imports. Any consumer spending stimulus would have to be very targetted to have much effect. I’d much rather promote private investment, such as insulating homes.

I heard that €1bn capital spending creates between 10,000 and 40,000 jobs. A fairly broad range of figures, but I’ve nothing more precise.

Suppose it creates 20,000 jobs for a year. At least it would keep people ticking over until the export cavalry comes over the hill. Regarding the effects on the exchequer, there is definitely an immediate negative effect, but that is offset by the return the asset would provide. We have to build schools anyway, as prefabs are expensive. Why not do the job now when prices are cheap and people are available.

Rory, at least there’s something we agree on. Approximately €100,000 will keep a construction worker going for a year, between pay, materials and other costs, and its not a bad estimate to assume that the spending will generate another job, so 20,000 job-years is a pretty decent estimate of the short run impact of spending €1bn on construction.

I’m not going to rehash all the reasons why its a bad idea to do this, and probably impossible, as they have been given much more eloquently than I can manage by others posting here in the recent past.

The estimate that €1bn can support 40,000 job years is off the wall, unless you assume that almost all the money goes on pay – maybe something pointless like digging and refilling holesl!!!

@Carolus Galviensis

I read the same article and even saw the comments you quoted. I also saw the comments you didn’t quote, many of which had a different tone.

40,000 isn’t my figure, I just heard it somewhere.

Suppose your figure of €100,000 per year is true. The government would get back about €11,000 in not paying dole, and maybe more from other benefits. Then tax and various contributions would go back to the government in terms of VAT, PRSI. Suppose €20,000. So the net cost is €70,000. If one other person is employed in a spin off, so we save €11,000 dole, and say get €5,000 back in taxes. So the net cost for two jobs is €55,000

So if €1bn gross spending creates 20,000 jobs (including spin-off), €1bn net would create about 35,000.

These figures are completely off the top of my head, but maybe they explain the wide variation between 10,000 and 40,000?

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