The IMF has just released a new Staff Position Note Lifting Euro Area Growth: Priorities for Structural Reforms and Governance
[One of the co-authors is Ajai Chopra]
Its recommendations for Ireland are:
1. In relation to the labour market:
- Introduce gradual decrease of benefits over time of unemployment spell and stricter job search requirements
- Provide more resources to the unemployment agencies (FÁS) to provide efficient job search assistance to the growing number of unemployed
- Review the level of minimum wage to make it consistent with the general fall in wages
2. In relation to improving competitiveness:
- Reform planning and licensing systems in net work industries, so as to increase competition in sheltered services sectors
- Focus public resources on high-priority projects in the knowledge-based economy
70 replies on “IMF: Structural Reforms in Ireland”
Can anybody measure the effects of the reduction in the minumum wage?
I’d recommend that BL has a quick read of ‘The Spirit Level’ before he enacts amendments to the minumum wage.
To a large extent debt levels reflect poor pay and inequality.
This does seem to line up with a recent discussion about whether the growth opportunities for Ireland would come from us being an open and fast moving market, or from releasing the bonds of sclerotic sectors.
From reading this it seems that Ireland is certainly on the open side compared to many of our European partners, with less opportunity for clearing out sclerotic sectors, the ESB excepted.
I confess that I can’t see that much immediate opportunity for increasing employment whatever the necessity to cut welfare provisions and minimum wages – and the political reality of lowering welfare and minimum wage will be something to see, even though the economic rationale behind it is strong.
Painful years ahead.
“The views expressed herein are those of the author(s) and should
not be attributed to the IMF, its Executive Board, or its management.” And lets hope they remain the “views” of the authors.
Hopefully, the authors confine themselves to this sort of thing for a living, because they would be very unlikely, even with increased help from FAS to ever get a job in the real world.
I hope Jack O’Connor does not see this thread.
“Better innovation and education can fill a substantial part of the productivity gap. On both counts, the euro area lags, with spending on private R&D and the share of graduates completing tertiary education substantially below United States and Japanese levels.”
Why is there a productivity gap? Why is EU industry spending less on R&D – this is a long term trend as shown by Eurostat? Anyhtign to do with the growth of bureaucracies and professional elites?
R knowledge economy. Reads like a poorly reflected upon cut-and-paste. High priority and high-likelihood of commercial success do not necessarily coincide in the worlds of the knowledge economy. The government has spent billions looking for Treasure island and it hasn’t worked.
Next time you buy a filing cabinet check if it is made in Turkey. Last year the Turkish sheet metal industry was turning out around 17,000 per week as far as I recall. Those kind of set ups might be best aimed for by Ireland but how many PhDs want to work the production line?
‘Labour Market Dualism’, addressed here ……… will increase.
IMHO, Social cohesion will decrease; the Underclass will increase in size; the Gangs will take over more Underclass estates; heroin will spread to every city, town and village; those who cannot afford multi-millionaire rows in the US or elsewhere will move to walled estates with heavy electronic and bully-boy security; the Gardai face a very difficult time;
‘» ‘Focus public resources on high-priority projects in the knowledge-based economy’
Human capital is foundation of social welfare/wealth creation: science, technology, business grads will emigrate, are emigrating ……… young entrepreneurs will seriously consider other juristictions …
HOW does this place generate Economic Growth? How low does the interest on Loans[bail-outs] need to be to give Ireland a fighting chance?
On a more optimistic note – Patricia the Sovereign_in_exile is well, and grateful to all our international friends for the support that she has received in recent times.
Personally, I intend to default; but I must emphasise that this is purely a personal decision.
Or better yet, look at some of the sheet metal stuff and the lightly engineered stuff that Lidl sell. Made in Germany…
One advantage of an R&D based economy is that the EU is pushing R&D smarties (not sure about blue ones) around the place at the moment. Funding from the EU is relatively sting-free, new money into the economy and may produce something longer term. Even if it doesn’t, it might increase the attractiveness of science and hard engineering based skills as there will be the possibility of employment in them.
What has to change is the method of accessing those funds. They are parcelled up as political favours through selected channels. They must be open to all to apply for.
Supply side solutions for demand side problems.
There are plenty of studies on the effects of the minimum wage. They is no clear consensus either way on the effect of the minimum wage on employment. I know of no studies that specifically refer to minimum wages in a recession due to a demand shock.
Unsurprisingly the minimum wage does have an effect on equality.
Cutting the minimum wage is fairly short sighted in my view. It won’t create jobs (as min wage jobs are not exactly in export sectors), and will shift income towards rentiers and business owners. This will lead to a general lack of demand, which will hurt…
…precisely the sort of businesses that hire people on the minimum wage. Employment in sectors close to the min wage has stabilised (though there has been a shift from foreign workers to Irish nationals in these jobs).
The government should instead tackle non-wage costs to businesses, such as rent, electricity, insurance. The sort of thing that small businesses have been going on about for years.
“heroin will spread to every city, town and village;”
meh…20 years ago it did that.
You are right, in a way. Perhaps it is a bit of both. Either way, it looks pretty structral. Looking at this table:
Unemployment has risen by 190k since mid 2007, fully 75% of which is accounted for by a fall in construction employment.
Surely a sensible approach would involve both supply and demand side elements? And if there is a binding budget constraint (which I know you don’t accept but it looks pretty tight to me) there can’t be any demand measures. So, as a matter of purely practical policy, its all down to that darned supply side.
Anything about reducing the pay and perks of TDs and ministers?? Are the pay of those at the top end of the public sector?? Or are these sacroscant just like our corporation tax??
I’m in favour of supply measures like training and better matching. I think the ‘incentivising’ is pointless when the jobs aren’t there.
From a strictly labour market point of view (ignoring the budget for the moment) I see not point in adjusting welfare payments until we have job creation. When we have job creation then I’d be in favour of making more of an effort to get people to look for jobs.
As it stands we will just end up with 500 people applying for every job instead of 200 (figuratively, I’ve no idea how many people apply for each job).
If anyone is interested in reading an empirical study of the effects of inequality.
Health, homocides, teen births, social cohesion etc.
The surprising find is that people at all levels of income (yes including the wealthy) do worse on all measures in more unequal countries.
Ah, but the second-guessers at the IMF tell us that: the evidence suggests that reformist governments have the same likelihood of being re-elected as those that favor the status quo and that governments receiving a clear mandate to reform go on to be re-elected.
Sure. What planet do they live on?
From the IMF study you quote:
Ah, but the second-guessers at the IMF know that the ultimate aim of all education systems is to ensure that 100% of school leavers eventually receive PhDs.
My guess: minus 5%
By my standards you’re an optimist.
I don’t mean this to be inflammatory, but to what extent do you think welfare systems ‘subsidise’ unemployment, thereby contributing to long-term unemployment? I do a fair bit of work in one of the poorer regions of the UK where 3 generations of unemployment often exist in the same household. Detailed survey & other empirical work does not reveal, necessarily, a feckless work-shy bunch of people, but more a sociological phenomenon whereby worklessness is regarded, in the family and often the community, as the norm. These households are often, to our genteel eyes at least, pretty bleak places with all of the obvious problems that go with a life on benefits.
I sometimes wonder, in what are typical post-industrial towns where jobs disappeared over a generation ago, would we not have been more kind to simply let those towns and villages die? How much of the structural unemployment is down to well-intentioned policy?
“If anyone is interested in reading an empirical study of the effects of inequality.”
I doubt it. We have spent decades making it a central plank of government policy.
What do you think Croke Park is for? Hint! is is not just used for deciding who gets to own the Liam McCarthy and Sam Maguire cups.
During the boom, when there was plenty of work, there was a fairly poor level of labour force participation. That would have been a good time to deal with those who can, but simply don’t want to work.
We have roughly 13% unemployment. Suppose 3% of the total are just plain lazy. At the moment they can easily hide amongst the other 10%. It will take a lot of resources to find the lazy people, without punishing those who generally do want to work.
I’d rather use those resources on training. Then say in a few years time when we get unemployment down to about 6%, that would be a better time to seriously invest in pushing people into working.
As for allowing villages to die, well I suppose thats part of the spatial strategy. I’ll leave that to geographers.
What Government that the PDs played a part of made reducing inequality a central plank of their policy.
If when Michael McDowell was minister for equality he stated that he belived that inequality was a requirement for a capitalist economy.
Increasing inequality will be no solution to economic crisis.
I thought Croke Park about protecting well paid civil servants?
I may have done you an mis-service. On second reading I think you are agreeing with me.
In Mother Ireland, all is sacrosanct:
– Croke Park deal
– corporation tax
– minimum wage
At this writing, anyhow. Though the sacred may well have become pretty profane by year’s end. Wait until the ‘troika’ (EC, ECB, IMF) have had their say.
The logical corollary from this premise is that raising the minimum wage won’t destroy jobs.
Another corollary is that reducing the minimum wage to near-zero won’t create jobs either.
Penny-catechism Keynesianism, sorry doesn’t work since Ireland is anything but a closed economy.
Read it. Love it. Vote for it.
The conclusions for me would be that whatever the authors are paid, they are overpaid.
Decrease benefits over time? Yep a given. In Ireland it seems to be the other way around, people will get more benefits when they’ve spent all their savings. Gaming of that system is neither hard to do nor beneficial for the society.
More money for unemplyment agencies? I think an optimum spending exists for that & I’m not sure it would be any good here.
Review minimum wage? Review means nothing but is an interesting point of discussion. Personally I think decreasing it would do more damage than good.
Knowledge economy? Anything said about that is waffle.
Always struck me as stupid that at times of full emplyment increasing the employability of the unemployed has obvious benefits, but nobody really bothers ‘cos it is affordable.
As soon as there are no jobs to be had – and unemployment is a big drain on public finances – the newly unemployed (who are much more employable than those who couldn’t/wouldn’t get a job in full employment) must be upskilled and hounded to get off their arses and compete for those invisible jobs.
No wonder economists and politicians are so reverred.
Snap judgment after browsing thru the New Statesman essay:
TSL is choc-a-bloc full of fascinating empirical data but is based on post hoc ergo propter hoc reasoning.
Typical TSL argumentative style:
Inequality causes ill health
Tentative alternative explanation:
Low cognitive performance causes both inequality and ill health.
In other words, TSL appears to assume that inequality is the one and only independent variable.
Certainly worth reading and includes some fine whacks at low-level ‘market ultra-fundamentalism’.
I enjoyed the inverted commas around ‘ineffective’ in the reference to what economists delightfully call ‘ineffective demand’.
Can’t resist an old joke, hope you haven’t heard it too often before:
The Authors have responed to criticism.
“net work industries” “knowledge-based economy” What do these terms mean?
“net work industries” — probably “network industries”
Whatever they are.
“knowledge-based economy” = an economy where two-thirds of the working population are over-educated. Think: surplus of BA degrees.
Interestingly, I dug up what the IMF said about Ireland in 2006
“The key macro-relevant findings of the FSAP Update are:
• The Irish financial sector has continued to perform well since its participation in the Financial Sector Assessment Program in 2000. Financial soundness and market indicators are generally very strong.
• The outlook for the financial system is positive. That said, there are several macro-risks and challenges facing the authorities. As the housing market has boomed, household debt to GDP ratios have continued to rise, raising some concerns about credit risks. Further, a significant slowdown in economic growth, while seen as highly unlikely in the near term, would have adverse consequences for banks’ non-performing loans.
Stress tests confirm, however, that the major financial institutions have adequate capital buffers to cover a
range of shocks.
• Good progress has been achieved in strengthening the regulatory and supervisory framework, in line with the recommendations of the 2000 FSAP. The strategy of creating a unified approach to risk with common elements across different sectors where appropriate, but differentiated where necessary, is being put into practice well. Improvements could nonetheless be made to enhance some aspects of supervision,
especially as regards supervision of insurance and reinsurance.
The FSAP team comprised Mr. Mark O’Brien (Mission Chief), Mmes. Su Hoong Chang, Elena Duggar,
Srobona Mitra (all MFD), Ms. Marialuz Moreno Badia (EUR), Mr. Jörg Genner (consolidated supervision
expert, German Financial Supervisory Authority (BaFin)), and Ms. Brenda Sylvester (assistant, MFD). The
mission received excellent cooperation and support from the authorities.”
What about the work based economy…
Where people get paid for work….
Of do we get paid for knowing….
I dont know, does that mean I wont get paid???
I think I will stop visiting this site. I thought it would provide useful analysis and insight but it is at risk of being a fleeting/tweating opportunity for smug, self-congratulatory comments.
Guys (and gals), you’re missing a great chance to for this web-site and collection of smart people to make a positive, informed, coherent contribution to Irish society. Don’t miss that opportunity.
the Spirit Level is an easy read but a very serious piece of work. The authors have taken extreme care to control for multiple variables and the their dismissal of the rights last sets of attack on The Spirit Level were tightly argued and amusingly brutal.
In fact so brilliant is the book, both from a scientific and moral viewpoint, that the economic right’s main response has been to ignore it lest it get the oxygen of publicity.
“The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.” – J K Galbraith
Re the labour market – all very well and good if there are jobs there.
Don’t get me started.
Too much doom and gloom out there, my lads. Just look at all the jobs the following two suggestions from our overlords can produce.
» Provide more resources to the unemployment agencies (FÁS) to provide efficient job search assistance to the growing number of unemployed
To carry out this goal, I suggest that for each unemployed person we assign a fellow unemployed person to be his/her job hunting buddy and confidant. This will reduce the current unemployment level in half immediately.
» Focus public resources on high-priority projects in the knowledge-based economy
Now, as any fool knows to have a knowledge based economy you have to have knowledgeable people, right? So, I suggest that all Irish students must obtain the level of PhD before they are allowed to leave school. This will greatly help unemployment because no one will be able to look for a job until they are around 30 years old. This attacks a critical structural problem as a bonus.
The issue here is how to turn around our Ireland
If we get a bail out us suggested to bail out the banks well we will be consuming the money and we will have to suffer for years and years later as bad loans will start coming in also we will still need money to sustain our survival so the vicious circle will get allot vicious
The tiger economy has killed our banks agriculture education and IT and made riche politicians with their friends from the banks even bogus loans were taken this government should not be in government they embezzled money from us to feed their greed
We the people then were happy cause we were working and believed we would be working now but the miss management off money at the banks and the greed of some is having me on the road looking for security
We the Irish people should get a bail out money towards employment to generate income savings and confidence and slowly fix our banks we the people make the economy from our hard work
Else we would be slaughtered by bleeding us slowly
@remnant – “what the IMF said about Ireland in 2006”
Reading that was the best laugh I’ve had all day.
Hmmm….I wondering if the IMF are now reading our posts?
What about the fun-based economy?
Where people get paid for having fun…
Paradise Now and Bouncy Castles
Let the fuddy-duddy workaholics in suits pay the bills.
@remnant – “I wondering if the IMF are now reading our posts?”
The IMF (and others) have always been reading our posts. Get with the conspiracy programme!!
You’ve convinced me. I’ve ordered a copy on Amazon and will perhaps discuss it here when a suitable occasion arises, i.e. after the collapse of the eurozone when we’ll all have time galore to ponder the Big Questions, perhaps in the comforts’ of the debtor’s prison. The fact that the book goes against my knee-jerk right-wing bastard proclivities actually adds to its charm.
Why not use unemployed construction workers to reinforce flood defences?
Why not employ unemployed phd students on researching and building wind turbines and tidal power projects?
Why not get unemployed language students to do tourism expos abroad?
And why not default? The reason used to be that if we did that the markets wouldn’t lend to us – guess what they’re not lending to us!!!
Let’s stop talking theory – let’s start talking unsexy practical interventions.
As a knee jerk leftist I insist you seize the book from someone better off.
It is a tiny bit repetitive but that makes a nice change from the “thesis by anecdote” style.
A loan(bail-out) at MINUS-five percent interest! What a glorious concept – let’s get a trillion, pay off the quarter, put another quarter into a stimulus for the poor serfs, and head off for New England like the rest our financial geni_asses with the other half trillion.
No. Dublin and the Pale in the 80s. …. steady in 90s – huge expansion, continuing, strangely in parallel with the artificial[now horrendously real] boomm and accelerating from 2002 [in line with increase in other indulgences in the more well heeled echelons on more sophisticated’ stuff] – and with present worsening labour market and social welfare conditions will almost certainly experience a further period of acceleration – and the social and psychological devastation that it brings, and further institutional deepening of a fractured society. Such is neither republican nor progressive.
Interesting comparison of the political economy of what’s happening now with the IMF structural adjustment program in Latin America in the 1980s:
Im no economist but will the knowledge based economy lead to new machines with higher production levels that will replace workers thus making them redundant and in the older groups of workers make them practically unemployable forever? Im all for progress but can we call it so when it will push families into poverty and the black market just to barely get by? Are we a society or are we just another nominal entry into the accountants cost of sales book.
Let’s be a bit more ambitious!
Set a real goal!
Become and supercede Norway! Choose Norway, reject Iceland.
Norway has own currency. Norway is not in the EU. Norway invests outside Noprway, mainly. Norway was dominated by Sweden and by Denmark. Norway formed statoil from nothing.
Sovereignty begins with the individual. The individual is aware of their friends and enemies. S/he combines with others of like mind. They act together for mutual support. They take care of the weak and restrict those who seek to impose secrecy. They celebrate the strong and seek to identify and support each talent.
November 22nd, 2010 at 11:37 pm
Wages must be cut especially public sector (begin by slashing number of TDs by 50%) and severely cut pension payouts. All fringe benefits of public sector should end on Jan 1. Forced redundancies across the public sector should concentrate first at all managerial roles. There is no need for any management on public sector side, just maintenance of core services.
It’s a while since I waded my way painfully through The Spirit Level, but I personally found it quite unconvincing. Many of the relationships identified appeared weak from the data presented, and at risk of disappearing if a different year’s data were used. A few of the relationships presented looked strong, but against that (if my memory is correct) the authors appeared to have skirted around variables that might have made unequal societies look good, such as unemployment rates.
No significant reform would take place in Ireland without the intervention of the IMF.
On the IMF’s call for more spending in the “knowledge-based economy,” last week when former Intel CEO Craig Barrett said that Ireland’s 3% of GDP target for spending on R&D, is no longer adequate, I said the Irish economy’s tradeable goods and service sectors are overwhelmingly dominated by foreign firms — mainly American – – but this fact can be forgotten by outsiders and conveniently ignored by locals.
Sweden and Finland spend about 3.5% on R&D but these countries have big indigenous sectors with world class companies.
More funds for university research would be a waste and the sector cannot be an engine of growth.
We can increase graduates but Germany shows that increasing apprenticeship can be as important.
Germany has a stronger economy than France but half the percentage of young adults with a college degree. Further, France has increased its percentage of young adults with college degrees by 13 percentage points in the last 10 years whereas Germany’s output of college graduates has hardly budged, yet the economic growth rate of Germany has exceeded that of France over this same period.
France has a problem with labour laws which encourage temporary work because of the difficulty of firing staff while Germany needs to increase domestic demand by reforming its service sector.
Deutsche Bank Research says one of the reasons why some Anglo-Saxon and Asian economies, for instance, boast larger services sectors than Germany is that, in these countries, more people are employed in less productive, low-skilled jobs. Due to Germany’s extensive social-security network there are fewer incentives to take up such jobs. This limits the employment potential in the low-wage segment and hence potential domestic growth. Also, there is little willingness in Germany to pay people for doing simple jobs like packing shopping bags in the supermarket. If such jobs were created, this would lead to higher product prices as companies would pass on higher wage costs to customers to the extent that this is tolerated by the price elasticities in the markets
DBR said earlier this year that Germany could boost employment in labour-intensive services sectors would be to abolish its Zivildienst, community service to be carried out in lieu of compulsory military service. Young men doing community service are crowding out private-sector companies thanks to unmatchably low, government-subsidised wages.
This month, Germany agreed to suspend military conscription.
As regards Irish productivity, when 45,000 workers in the pharmaceutical /medical devices sectors are responsible for 23% of industrial production and the majority of goods exports, then caution is warranted.
As for Irish unemployment, in 2006, the peak year of the property bubble, Ballina in County Mayo had the highest unemployment rate among large Irish towns, with 15.8% of its labour force out of work. Tralee (14.2%) and Dundalk (13.9%) also had high unemployment at the time of the 2006 census while at the other end of the scale Malahide (4.3%) and Leixlip (4.4%) had the lowest rates.
In the meantime, as we fiddle, Ireland burns?
Typical IMF response to a situation. Cut the Heart out of society. Cutting the minimum wage does nothing to get the economy going again. All it does is increase the social divide. If the wage has to be cut then Croke park has to be dumped. the head of HR in the HSE earns 200,00 euro and a 50k bonus and we have to cut the minimum wage. SO UNFAIR. For anyone out there in this f***** up country, read Naomi Klein “Shock Doctrine” and get a feel for chicago school economics and how it destroys society.
I accept reforms are needed in this country but they should be done on a basis of equality.
I say the fiddle players about a week ago. I always wondered what they looked like. There was a whole band of them out there yesterday making a right noise
I realise drafters of specific recommendations for individual countries in reports of this nature are compelled to be cryptic when filling out their tables, but what we have for Ireland is bordering on the gnomic. Can someone please tell me what this might mean?
“Reform planning and licensing systems in net work industries, so as to increase competition in sheltered services sectors”
Planning and licensing are certainly important for network industries, but we have
1. comprehensive, if entirely dysfunctional and economy-damaging, regulation based on licensing for the electricity and gas networks,
2. 30+ local authorities doing their own thing, badly, for the water and waste water networks,
3. inefficient competition in the market for refuse collection,
4. a Government Minister undermining government policy on waste disposal,
5. a wide and inefficient variety of arrangements for the national road network,
6. an over-geared, under-capitalised entity responsible for the fixed-line telecomms network,
7. a total lack of joined up thinking (and gloriously inefficient investment) for the rail, light-rail and tram networks,
8. Government sponsored preference for the state-owned incumbent providing bus services,
9. a state-owned broadcaster relying on both commercial advertising revenue and a mandatory licence fee on all TV owners/users, and
10. the costs of surplus airport terminal capacity being imposed on outgoing and incoming travellers.
Given this catalogue of dysfunction and inefficiency (which is placing a serious burden on the tradable sectors of the economy) I don’t think the IMF has looked very closely. Something a bit more forceful than tinkering with planning and licensing is required.
@ Jack OShea
we must be careful about overdoing the role of public sector job cuts.
For every job cut it’s another mortgage in jeopardy, another set of discretionary purchases cancelled, and a dent in the quality of state services.
As the Guardian says our politicians have shipwrecked the country, they have destroyed the lifeboats (save the ones for their cronies and are rowing off into the sunset as they leave the private sector beats up the public sector onthedeck of the ship)
“Divide and rule” has gone on too long.
Our big issue is debt. We have got to get default back on the agenda.
Re apprentices: UK Business Secretary Vince Cable (and Ed Sec Micheal Gove) has expressed similar concerns about a conflict between boosted graduate output and a requirement to grow manufacturing. The UK Coalition aims to increase the number of apprenticeships – it was a Tory policy in the last election. A few months back the UK media carried stories on young people who were making a success of their lives by not going to college, but entering into apprenticeships. Can’t imaging the Irish media being bothered to chase up similar. Runs against authorized myths.
Many European countries have very good technical education streams aimed at the ‘trades’. It varies from country to country but the branch point for secondary students in general is when they are around 15 years old. A student can enter into either a technical or academic stream. Unlike Ireland, training in the technical streams is taken seriously. A good student emerges not only with a strong foundation in a trade, and ready for further training in a workforce, but also with a sense of craft.
The authors are wrong in their generalisation about the tax burden on second income earners in Ireland. They take the worst case scenario rather than the typical picture. Many double-income couples do not have children, they are increasingly delaying having children (www.irishexaminer.com/home/experts-call-for-fertility-warning-drive-136610.html) or deciding not to have children at all. Most families with children do not use childcare services- only 9% of children 12 and under are with a paid childminder and another 9% in creche/childcare institution. The vast majority are cared for by a parent or other relative. (2007 figures, from http://www.cso.ie/releasespublications/documents/labour_market/2007/childcareq42007.pdf) Those most likely to use childcare services are single-parent families and so are not second-income earners; in fact they are the only category of parents who benefit from child tax credits.
There is also no assessment of the impact tax individualisation has had on inflation, especially on the property bubble (cf. Richard Tol’s posting of EUVox article).
Despite our ‘baby boom’ we are still not at replacement rate. This will be one of the big economic issues for the next generation, not having a sufficient ratio of productive earners to retired/requiring care.
Seem’s like the IMF are the EU’s bad cop in the drive to greater integration and loss of sovereignty:
“Strong impetus for reforms will benefit from strengthened coordination. In the past, reforms
have succeeded when the agenda was driven by European institutions and a common sense of
destiny, but largely failed when reliant on peer pressure. Recent steps and proposals to
strengthen governance over both fiscal and structural policies at the euro area level go in the
right direction. More reform authority should be vested at the euro area level and countries
should be willing to adjust national policies to secure an effective functioning of the economic
and monetary union. In particular, key structural reforms need to be embedded in a stronger
surveillance mechanism over fiscal and structural policies; EU transfer rules revised to better
reward reformers and punish laggards; and compliance enforced more decisively than in the
past. Launching a new common project for labor market reform would be beneficial.” page 4
I have to agree with “Nobody”.
This blogg is loosing all appeal. I’ve been coming here for since it was set up and rarely felt any need to make comment (I’m here to read) but I can’t help but notice the volume of content posted is way up and quality has become questionable on threads like this.
It’s become difficult to seperate economic commentary/insight from politics, but there are more appropriate places for blowing steam.
At this rate you may as well introduce the ability to give a comment a “thumbs up” – at least then remarks can be ordered by relevance and integrity. ..then again this adds to the bias so often seen of late.
Have you nothing to lose if the economy is mismanaged then!
You can’t divorce economics from politics or politics from emotion. They are all linked.
I appreciate your point but an emotional outburst can get in the way of constructive thought (what we come here for). Also, indulging in a rant has an isolating effect – which just wastes everybodies time.
My point is that the blogg has seen an increase in fluffy posts lately, and “nobody” agrees ;o)
I think you’re seeing people desperately scrambling for solutions.
I would love to see exploration of options.
Here’s how I see it:
Step 1: Trial of bank guarantee and austerity – made situation worse
Step 2: Trial of more austerity and a EFSF bailout at too high interest for too short a time – Not working as we are still shut out from markets
So we have learnt that what didn’t work in 1929 doesn’t work now. So let’s try the next trials:
Step 3: Grouping with our fellow peripherals to introduce the Oink – a separate Euro(peripheral) currency
and allow debt to be monetized using it.
I see the advantages of monetizing debt, increasing competetiveness, and avoiding German hyperinflation fears.L (for the core). I see disadvantages of hyperinflation in the periphery (but think that this could be tempered by the strong core Euro)
I would love to know what would need to be done to make this work as a solution.
If this is not a runner it’s onto step 4
The suggestions for solving the problems of the Irish Labour market are mostly supply side – decrease unemployment by increasing the job-search skills of the unemployed and reducing the benefits of unsucessful job seekers.
This ignores the fact the increase in unemployment has been demand driven – to use Christy Moore’s phrase, there is ‘Not enough work to go around’. I would have been perfectly happy to see benefits reduced for long duration unemployed when our rate was below 5%, but not now that it is in double-digits.
Blaming the unemployed for the unemployment problem is not helpful!
@Aine Ui Ghiollagain
Societal restructuring on a choice of form of society remains our democratic choice. We could default, restructure a financial system in parallel with some of our European colleagues, and place interests of Irish citizen serfs ahead of global international markets.
We are in a global game – no point in just sitting there watching one’s stake waste away – one has gotta play!
It was a critique of the close to 100% tax burden on second incomes assertion by the authors on p.19, not a prescription. But since you mention it perhaps society should be consulted!
1) IMF/EU allow us to apply haircut…part of the different used to reduce negative equity issues,
2) QE in Eurozone buy Irish Debt (and write it off)….benifits increased liquidity and inflation….economy recovers.
3) If EU wont agree to either of the above then we need to consider ouright default and reconsider our position in single currency.
@ Nobody and Peter
The contents of these posts reflect the fact that the crisis is longer a debate for purely acedemic elites. Everybody is involved and therefore everybody has the right to have a say.
I’ve raised the Spirt level above because the current economic system is broken…the solutions to Ireland problems are greater than rebuilding the banks; reducing the deficit and returning to economic growth. The full weaknesses of the free market capitalism need to understood, debated and redrawn.
Sorry last line should read
The full weakness of Free Market Capitalism needs to be understood, debated and the system needs to be redrawn.
I think the ECB should take some hit for their part in all of this – ten years of poor regulatory oversight, and a monetary policy (from day one) that was not in the interests of Portugal, Spain, Greece and Ireland.
They misjudged the health of the system they paid into and they want the money back in lieu of these bailout funds – making the Irish taxpayer the greatest fool.
Taxpayer liability could be minimised by restructuring the debt of the Irish banks and letting the ECB and the markets take the hit. David McWilliams suggested this yesterday and it’s surely worth exploring. It’s a radical suggestion, and it “carries the “reputational risk” that keeps the current flock up at night but the price might be right.
I would vote any government willing to try this. The gross inefficiencies in the civil service are second to this (“Penny-wise, pound-foolish”).
That makes a better step 3 alright. How would it look? Would restructure mean paying it all back over an extended (e.g. 100 year) timeframe, or just paying back, say 60%, over the next 10 (or more) years?