Government Statement on Joint EU-IMF Programme

Is this a kick the can down the road action?
Or a genuine solution?

BANKS!

The NAMA Scheme will be extended to remove remaining vulnerable land and development loans from Bank of Ireland and Allied Irish Bank by end-Q1 2011

Does this simply involve the reversal of September’s increase in the threshold from 5mi to 20mi, or does it involve a more radical extension to include other classes of loan facilities?

Interesting debate between Antoin and Begrudginov on RTE. The latter seems very upset that it looks like we have staved off Armageddon at least for a while.

Where and when will the banking details be available?

@Aiman
More uncertainty. 10b between them. anyone hazard a guess on the split.

@Tull.
Sounds like the last solution to the banking crisis. Nothing radical – as predicted.

Noonan: it was a game of poker and we played a very bad hand
Antoin Murphy: we had a pair of 2s
Begrudginov: we have 130Bn from the ECB, we could threaten not to pay them back (this is poker not Russian roulette)
Antoin: defaulting on seniors would have cause unforeseeable contagion
Begrudginov: then why does the proposal to burn seniors post 2013 not cause contagion (up to then I thought he was just a clever begrudger, but this actually shows that he dosen’t understand; the post 2013 regime will be a new regime applying to loans taken out under that regime, contagion does not arise, we are simply changing the rules of the game going forward)

1. Ireland has been instructed to pay all bondholders.
2. Ireland has been instructed to use its last reserves in shoring up the banks and the paying the bondholders.
3. Ireland has been instructed to borrow money at a “composite” rate of 5.8% to bail out the European banking system.
4. In effect Ireland has been instructed to borrow money to destroy itself.

Ireland should refuse this “offer”.
Tell the hard men of the ECB to go **** themselves. The same hard men who oversaw the chaos in the European banking system grow, overwhelm and destroy itself.
To hell with Europe.

BW II

the proposal re 2013 is going to have someinteresting consequences for bank and sovereign funding. Would you buy a bond with a maturity date longer than 3 years. Sure you might take a chance that you would be “grandfathered”

I understand you are an actuary in your spare tiem. Do you think regime shift in 2013 will have any implications for the business written by insurance companies and the way in which the invest to match these liablilities?

@Zhou
‘It is not clear that there will be a convincing resolution of the banking system in the immediate future.’
Agree.
We blew the best opportunity we had to finally resolve the banking mess. More expensive recaps now and nothing about the primary problem of liquidity.

Look at the IMF website. IMF rate is under 4% if I’m reading it right…

@Tull
+1
These idiots don’t realise that they have reacreated the ERM. Instead of attacking exchange rates, the hedgies now have carte blanche to have a go at sovereign and bank debt. This will go on and on.
The euro is toast.

By putting in the NPRF have FF drastically limited the bargaining position of future governments? Have the ECB/EU/IMF ensured that we are now completely disarmed and helpless?

@ Eoin

You were right that there would be no haircut for seniors

Does anyone understand how they have calculated the 5.8% average rate?

They played, they gambled, we lost. It’s extremely frustrating that we have ministers who are over paid and will retire on very healthy pensions are arguing with union officials who are over paid about negotiations with EU/IMF officials who also are overpaid about a deal that will have to be paid by ordinary everyday middle income workers. The top end will evade tax, the bottom end won’t pay any or much tax and the middle tranche will get screwed. Now is the time for the government to resign en masse. Lets take this opportunity to decide who will deal with this shocking deal. Hopefully someone with cahones will have the bottle to tell the EU to get stuffed. Could we come out with a worse deal. I don’t think so. I remember years ago when Roy Keane left our world cup squad thinking that the only people happy were our opponents. If we implement this deal the only people who will be happy will be the the senior bond holders who walk away unscathed. It makes my blood boil.

“As part of the Programme, Ireland will discontinue its financial assistance to the Loan Facility to Greece. This commitment would have amounted to approximately €1 billion up to the period to mid-2013.”

http://www.taoiseach.gov.ie/eng/Government_Press_Office/Government_Press_Releases_2010/Government_Statement_Announcement_of_joint_EU_IMF_Programme_for_Ireland.html

Who said they couldn’t play poker?

BWII
Ah, forgot to mention, Dr G also has and continues to have real world experience in the financial markets, is chair of an exporters association, and commentates on the world on a regular basis. You are an anonymous internet troll. Antoin is an expert in C18 History of Economic Thought. I know the credibility ranking I would put in place. And in all permutations your at the bottom.

The interest rate may not be 5.8%. Many suspicious of another government snow job/Iceland! deception.

Not even a modest trim for senior bondholders and yet Rehn says they will redo some stress test on Euro banks. Uh, I’m not a barber or a banker but if European banks cannot withstand even the most minor haircut on their holdings of Irish assets isn’t that a ‘real world’ stress test and not a very reasssuring one at that.

Couldn’t help but think of Paddy Kavanagh’s lines tonight which seem to reflect our leaders performance:

“You clogged the feet of my boyhood
And I believed that my stumble
Had the poise and stride of Apollo
And his voice my thick-tongued mumble.

You told me the plough was immortal!
O green-life-conquering plough!
Your mandril strained, your coulter blunted
In the smooth lea-field of my brow.

You sang on steaming dunghills
A song of coward’s brood,
You perfumed my clothes with weasel itch,
You fed me on swinish food.”

The country tonight ceased to be a Republic.

Cowen and Lenny have done the opposite of Collins they have gone abroad and handed back 26 counties.

We are screwed and finished.

Next year I will leave this country and never ever return.

@ Gadge

cheers. Please dont mention this to Juicey Lucey, he may go off on a self-back-slapping rant once again. Silver bulletts, magic beans, theory vs reality etc etc etc…If only we could securitize the use of the words ‘troll’, ‘shill’ and “here’s solve the problem!”, then maybe we’d be able to create a bubble big enough to get us out of this mess…

@Oliver Vandt.
re Have the ECB/EU/IMF ensured that we are now completely disarmed and helpless?

Spot on. ALL pockets now empty. We have not been asked to attach a star to our jackets-yet.

All we need now is JtO to crawl out of the culvert. Lads..look around at what the non-financial services part of the world (and Jim Power) are saying. IT.WONT.WORK
back now to the research paper i was working on…

@bw II
@brian lucey

Thought I recognised Antonin. Was he the guy that gave that priceless advice about “calling the bond market’s bluff” by staying out ’till next Spring after that last bond auction?

Public Finances €50bn at 5% and Banks €35bn at 7% makes €85bn at 5.8%

The problem is the aggregate public and private sector debt is too high. Today’s announcement fails to address this. If you don’t tackle the correct problem then you’re unlikely to stumble on the correct solution. The only ‘non-forgiveness’ solution requires the ecb to buy sovereign bonds. If the eu embraces the dark side and jumps a few moves ahead of the market, the crisis could be resolved.

@carolus

There will be pensions for the bank staff 😉

@ Prof Lucey

“You are an anonymous internet troll” Honestly, that’s my name, well maybe the II makes me a bit anonymous.

Begrudgenov was visibly upset. He tried repeatedly to tell us that “I told you so”, but clearly the fact that Armaggedon had at least been postponed was deeply disappointing. Do you think he was right to suggest that we should welch on the 130Bn support being provided by the ECB?

BTW I see in today’s papers a suggestion that the plan is to sell the deposit books of Anglo and INBS. You were right after all, albeit your calculation of the financial consequences of such a sale were a bit left field.

@ Prof Lucey

“And in all permutations your at the bottom.”

That hurt

BWII
“BTW I see in today’s papers a suggestion that the plan is to sell the deposit books of Anglo and INBS. ”
I think the debate was about the technicall ability to do so – now we see it can be done. What can be raised – differnet story, and happy to debate.
Do give Constantin the human deceny of his name. As it is you sound racist. He is dissapointed if he is because with a 4yold and a 8w old he is very very long ireland and wants to see it work. Sniping and sneering from the sidelines and piling debt on debt will not do it. But then, if you really really wanted to make your views known youd get onto a newspaper and say “heres my 1000 words”. Youd be surprised how open they are to comment. Till you do, you remain a troll.

@irishpancake. Thanks. Not one of my better days, but it nearly turned into a bloodier affir, but i suppose enough Irish blood has been spilled today.

DavidC, heads they win, tails they win. It’s so frustrating. The social injustice creates a dangerous political climate.

I would like a political solution that would burn the bondholders and stuff the perceived consequences for Europe. Europe’s head is in the sand. They hope to kick the can down the road. Deal with the issue now – no point delaying the inevitable defaults.

I wish politician’s future pensions were indexed linked to the national recovery. No recovery…. no pension.

Maybe Im wrong here but

85-17=68

if that 68 was to be borrowed at 7.3% and our own money the NPRF, which I am assuming has a rate of 0%, unless they have borrowed the money from themselves, would give a rate of about 5.8%…….

@ Prof Lucey

“Do give Constantin the human deceny of his name. As it is you sound racist” I understand old Constie to be a caucasian like myself. Do you think he was right that we should have refused to pay back the ECB support of 130bn?

I was under the impression that the NPRF was defined by legislation and its funding and investment were restricted see;

http://www.finance.gov.ie/viewdoc.asp?fn=/documents/news/june/mcc655pr.htm&UserLang=GA&StartDate=01+January+2010

Extracts include:
“a statutory obligation on the Government to pay a sum equivalent to 1 per cent of GNP from the Exchequer into the Fund each year until at least 2055. The legislation also provides that the Government may pay additional sums into the Fund from time to time, following approval by Dáil Éireann”

‘the establishment of an independent Commission, the National Pensions Reserve Fund Commission, to control and manage the Fund. The Commission will have discretionary authority to determine and implement an investment strategy for the Fund, consistent with the investment mandate contained in the legislation’

So how was it available for negotiation and will its dissolution require legislation?

@all

I wonder if behind this humiliation is there a German supported ECB strategy of forcing the weaker links out of the euro?

@ John Mchale

And nor should they. The ‘keep seniors whole’ or it’s the EOTWAWKI mantra is plain wrong.

@Tull
“BL, most of the people I know in the FS village doubt this will work either. It’s nowt but a bridge to the next crisis.
Massive buying of Spanish debt to narrow spreads might change the calc.”
yes, its a can kicking exercise on a gargantuan scale. But in waiting to solve the real problems we will be rogered. When the spanish flu hits a real solution will emerge but it will not be backdated. We have lost. They will win. Tercios beat wild courageous charges all day. And our lads didnt even charge.

@Winston Smith
Did the guy on Cowans left (I think Kevin Cardiff, head of DoF, who if I am not mistaken was in charge of the Banking section in the DoF before his promotion and therefore asleep on the job while the banks were running amok – what a republic, promoted for being incompetent or does he know too much and therefore cannot be sacrificed – excuse the conspiracy theory) that €17.5 b was coming from Irish resources, €5 b cash reserves and €12.5 b from the NPRF. If you net this off the €35 b, leaving €17.5 b coming from external sources. In order to get to an average rate of 5.8% on the €67.5 b, assuming 5% on €50 b then we will be paying 8% on €18.5%.

@John McHale

I agree with you. The option to play “hardball” would have had to be backed up by popular political will in the country to essentially go onto an economic war footing. Public sector being paid only part of salary, very quick move to budget surplus etc.

I see no evidence public on board for that. Most still think there’s nothing wrong with Croke Park – even another 10% off would be too much. They just seem to want to continue drifting along.

@ all

“But then, if you really really wanted to make your views known youd get onto a newspaper and say “heres my 1000 words”. Youd be surprised how open they are to comment. Till you do, you remain a troll.”

Please note Wiki the new definition of a troll, anybody that is not in the newspapers.

@John McCormack – is it possible the shocking rate is a claw back for permitting 12.5% corpo tax rate to continue. You can have your special tax rate Brian and Kevin but by God you’ll sweat for it.

@Michael O’Donnell

I think some of the arguments that applied to the same idea for sovs will apply. Geography of law, CACs and diffuculties of a 2 tier market.

@Carolus Galviensis

You state that the NPRF is now a misnomer. I believe the NPRF had 24.5 billion in funds as of Q3 2010 – so it will still have 12 billion left when 12.5 is used as part of the bailout. So, I think it would be an exaggeration to say there is no longer an NPRF, or am I missing something.

I am not an expert but I think talk of default and restructuring now is unrealistic while markets are so unstable, in true EU style the problem will be pushed out through consensus and hopefully dealt with on a larger scale when things are calmer. Although I am an Irish citizen I feel very ‘patriotic’ towards the EU and euro project. As a public servant I would like to see public service wage levels, especially at senior levels, reduced dramatically and huge efforts made by government and civil society to protect the most vulnerable and to encourage sustainable growth.

@John MCHale
The media are not calling the “only game in town” cheerleaders either. Theres a diffuse popular anger at bailing out bondholders. Theres a generalised ignorance of the stakes. But theres a hard supermajority that think the present govt are part of the problem not the solution. Its a gordian knot and we know how to deal with same.
If we forced the senior issue now it would be messy. Will it be any less in three years or whenever spain pops?

@Brian Lucey
Just trying to confirm that from the RTE news right now and it looks like the interest calculation is exclusive of the domestic part i.e it is calculated on the 67.5 bn made up of IMF ECB and the Swe/Dan/Brit with 3 different nominal rates all combined into the blended rate. They culd have clarified that a bit better

Given the lack of a punchier response to our situation the hedge funds will short Portugal with all they can muster.Weeks to IMF for them.

I had thought the Euro might muddle through for another 2-3 years but it could be over in months now.Clearly the appetite for the scale of support required is not there in Germany.What will hasten the end is flight of deposits – the risk of break-up has risen beyond the point at which a rational investor will believe it worthwhile to move their money.

@BL
Your attack on BWII out of order.

@Holbrook Fields

I believe the 24bn in the NPRF includes that @€11bn for BOI and AIB.

I am open to correcteion on that but I think that is what they mean by the NPRF is being finished.

@John McHale,

Surely there was a middle road between the Scylla of what we have done and the Charybdis of going nuclear. If we had gone straight to the IMF, and cut out the EU folks with the enormous conflict of interest, there is at least a chance that we could have got a standard IMF deal. You know, funding with a decent interest rate while we got our finances in order, and assistance with restructuring our liabilities enough to restore us to solvency.

@ brian lucey
“If we forced the senior issue now it would be messy. Will it be any less in three years or whenever spain pops?”

Yes, probably. If you had orchestrated that now the 90% who either don’t understand or are not interested in this stuff would simply blame you for total chaos. They wiil now assume it was all a bit of a fuss about a couple of difficult budgets. Give it a while and reality may sink in – sufficiently widely – for there to be public support for a different approach.

@ Brian Lucey

Yes, we are lucky to have Constantin here, even if he still has a touch of the Ayn Rands about him. He has a genuinely global view and he works bloody hard. I’d say he casts a cold eye on all the players in this and maybe he is right.

As Keynes said ‘When the facts change, I change my mind’. BW II is free to do that too. He also has made many interesting contributions, so peace be to you both.

@ Jim Power

Bailing out bank bondholders is not capitalism.

@seafoid That is exactly my point. In a truly capitalist system bank bondholders should not be bailed out.

Just heard Brian Cowen on RTE News arguing that access to this fund will save us from having to borrow at higher rates in the markets. He clearly thinks that what we agreed to today is a great idea, but just over a week ago he told us that we had no need for the fund. I am confused because Ireland’s mees 10 days ago was pretty similar to Ireland’s mess today. Am i missing something?

@John McHale
“Just watched the Minister for Finance on the 9 o’clock news…..I’m inclined to believe him….”
“…why do people jump so quickly to assuming bad faith?”
No comment.

@ Seafoid
I actually do think it will get us back into the market (as well as an election and passing the budget).

Although, getting back into the bond markets doesn’t really solve the problem any more than borrowing from our allies does.

The way I see it, this scheme allows us to use up our remaining funds to try and have a final go at recapitalisation, while maintaining a safety net of funds to access once that money is used.

It’s very expensive, but it might work. I choose mindless optimism over thoughtful hysteria.

@ John McHale

Because their record clearly suggests serial incompetence or bad faith.

Ajman, is Belgium not the obvious short on the basis of it’s politics, debt burden, tight spread and large financial sector

@John McHale

If you are suggesting that this deal is the best that could have been negotiated under the circumstances I would very much have to disagree. The government made a huge blunder in not negotiating the interest rate up front before entering formal negotiations last Monday. (It appears that an agreement not to touch the 12.5% tax rate was made up front). The card the government could have played was “delay”, not “default”. There was no compelling need for Ireland to enter negotiations last Monday, but there was a compelling need for the EU as a whole to stop the markets hammering Portugal even further.

The IMF rate is 3.1% or a bit more depending on maturity. Their philosophy is to take a country out of the markets for a time to allow the country to rebuild. The EU philosophy is different – it is that a country should stay in the markets but that the EU provide a ceiling, hence the interest rate is high by design. The problem with this is that it is just unrealistic, and you end up forcing a high interest rate on a country right at the point when it can least afford it. The government should have taken the position that they would go along with an IMF+ type of approach (where the plus could have been the EFSM and a series of bilateral loans) but that the structure of the EFSF was just not suitable for Ireland and would further harm the country. This would have forced the bailout package to either be done without the EFSF (and there was the money to do this) or to agree to fix the EFSF (i.e. get rid of the over-collateralization overhead) before agreeing to use it. This would have resulted in a considerably lower interest rate.

To me it is yet another example of the extremely weak, inept and amateurish leadership, after years of the same (which is no surprise). As mentioned above by zhou_enlai if there had been a credible plan B that could have held the fort for a few more months, with bank resolution and other legislation in place to enforce it, our negotiating position would have been much stronger. I have no doubt that a combination of this plan B and using the threat of delay for a few weeks would have resulted in a much better outcome. Whether this better outcome would make much difference in the overall scheme of things is another question, however a further demonstration of the weaknesses and failures of the current leadership does not help.

@Tull = you can do bigger size in Italy, and Belgium’s numbers have been overridden constantly by its EU capital status. You’d end up fighting political will, in a way you wouldn’t necessarily with Italy.

Were Germany and France to form the two main players in a new currency, I wouldn’t give it 5 years.

John McHale writes:
But why do people jump so quickly to assuming bad faith?

Exactly. Besides, there seems to be a failure to distinguish between the ethical and the purely pragmatic aspects of the bondholder issue. It may be morally self-evident that the bondholders should be given a haircut — but the question is whether it is in the country’s interests (including those of the taxpayer) to do so at this juncture.
Whatever the government does now there will always be the counterfactualists who will argue that a different option would have been a better solution. Unfortunately one cannot replay history, so we’ll never know for certain.

@ Rob S
Thanks for clearing up my error re what has been taken from the NPRF. Just two weeks ago I told a colleague of mine in the public sector not to rely on the pension they have been promised, with the demise of the NPRF it seems likely to me that current public sector workers may be looking at reductions in the pension they thought they would get.

Hogan, I dispute the contention that he is the less intelligent sibling. I believe a third sibling is the head of legal in the ECB. Agree with you on default. We have 2 – 3 years to shrink the banks and & balance the primary budget. Game on then. A bridge loan to restructure at under 6 pct might not look too bad.

I think Joseph Mary Plunkett has been hitting the bottle!

@John McHale
We went eyeball to eyeball with the EU/ECB – and we blinked.
We had the nuke of Eurozone contagion. They had the nuke of cutting off credit. With the loss of the NPRF it is as if President Kennedy had ended the Cuban missile crisis – by agreeing to unilateral US nuclear disarmament. Not a successful outcome, I’m sure you would agree. We should have stated that we weren’t covering the losses the seniors should have had and kept on repeating this ad infinitum. They would have blinked. We are 1% of the Eurozone.

As regards people acting in good faith, the size of the bank bailout and the deficit, the lack of accountability, the token investigations, the rescue of the developers, the protection of the establishment’s remuneration, of vested interests etc are all indices of how corrupt the country’s establishment is. All say they are very corrupt. Do your supping with a long spoon.

@Hugh Sheehy:

And amid a program of borrowing that will cripple the state, the Croke Park deal apparently still stands…or have I missed its demise in all the fuss?

No, you haven’t. It beggars belief that it remains unaltered — despite the fact that there are absolutely no formal-juristic grounds for leaving it untouched. Here I go again, for the umpteenth time:

Article 28 of CP agreement:

“The implementation of this Agreement is subject to no currently unforeseen budgetary deterioration”

Shhhh …

@AMcGrath – “I hope I am mistaken but that reads very like that the domestic and NPRF funds are include in the 5.8 per cent calculation. Surely not?”

It does sound like it doesn’t it. But it’s not at all clear from the usual lack of detail that’s been put out. A typical ploy to ensure that the papers in the morning don’t have the detail and it doesn’t come out until later in the week when people have absorbed the headlines (lost interest).

Whatever, looks like they’ve ensured we will use the NPRF etc. (what’s in our pockets at the moment) first so that we are without any means of our own by the time we start drawing down …. and that puts one in a really weak position – especially if we do end up at a point down the road when we might find ourselves re-negotiating as we will be in an even weaker state that we are today. A bit like being neutered/castrated.

Don’t forget that it’s not just the NPRF in terms of our ‘own stuff’ that we will be using first in that total of 85bn. There’s also the money the NTMA already borrowed (we are funded up to the middle of next year stuff!) which was borrowed at a rate that I can’t remember…. was it less than 5.83% ??

AS FAR AS I CAN SEE, FF have pi55ed the NPRF up against the wall and EU kicked the can down the road to a sovereign default in what? 2-3 years tops?

Who’s up next to bat? Belgium or Portugal – or will it go straight to Spain now?

@Eoin

Out of interest, can ‘the markets’ discern from how the EU/ECB have handled this situation what positions the various dealers should adopt over the coming weaks i.e. have they shown too much of their hand and you guys are ready to leap all over it?

Probably better to secure a funding deal now, as it probably won’t be on the table later on in the year if Spain and/or Italy slide further into trouble. I think Spain is particularly at risk.

@BL – “Good god…its getting worse the troll infestation here…”

Mr Moran sure has made some unusal posts in various threads in the last few days but that’s one of his more unusual !

I’ll see if I can draw his fire 😉

Well… just a simple question…. if Cowen signed this deal on behalf of the Irish Nation….

Dare I ask…. where is the contract? Word by word please!

@John McHale

re bad faith..

here’s the problem.

There have been many times when I have said in the column and on programmes that I trust BL and believe he is doing the right thing. I’ve attended briefings where they (BL + aides) have looked me in the eye and sworn that There Is No Alternative.

And then every time you have to face the fact that what you’ve been told is wrong – just completely wrong. Sometimes I think its because they are mistaken; sometimes because they are incompetent, sometimes its because I think they hope, and sometimes they tell barefaced lies because they think we can’t handle the truth. Just this week Peter Bacon let the cat out of the bag about the losses (he told them 150 – BL told the Dail 80). There’s also been total tosh talked about legal problems and this pari passu rubbish BL trots out like clockwork.

But for me the final straw this week was that BS plan. They knew the day it was published it was BS. Didn’t touch the public sector. Didn’t touch the pensions. Fictional cuts in other places.

Always they have one eye on the politics – they will leave it to the next government to do the real cutting and bank on getting back in 5 years.

So look, I think your post is super reasonable and I’d be happy to talk to you this week and perhaps reflect it in a column – but you have to understand – the Brians have NO credibility left. They used up any good faith they had – certainly with someone like me who was prepared to give them a chance.

I said on the Late Late last year I trusted BL. Today, I can’t say that anymore. I think he’ll say anything to get him through the next week.

From Politics.ie, Krugman comments:

“The Irish Non-bailout

So, a credit line at 5.8 percent interest. Considering that Ireland was able to borrow at that rate as recently as mid-September, and was falling off a cliff then, why is this supposed to solve the problem?

What’s the Gaelic for “You’ve gotta be kidding”?”

Please, I beg of you, do not suggest a translation.

@Joseph Ryan
“Not correct. There were other options, surely.
1. Refuse the deal. This would meand emergency legislation to burn bondholders. It would also mean emergency restrictions on deposit flows.
2 Agree to leave euro.
3. Set up new currency at devaluation of 30% linked to stg.

Within six months the worst would be over.”
As grumpy says, only if you are prepared to slash public spending to the tune of some 20-25 bn. If you are prepared to do that, then we don need no stinkin’ bailout… and that’s before the real economy fallout from no longer being in the euro (it is not trivial).

Hogan
So…if i read you right. Not now but later? What about signals? (note to Paul the madder above : this is a secret nazi code….)

@bl. Did RBS really predict a 12-20% loss rate on residential mortgages? Do you know when they said that because that those levels of losses are completely unheard of in any previous crash that I can think of. Be interested to read their report.

@Sarah Carey:
For the sake of new readers, it might be well to make it clear that your BL = BLTD (MinFin), not the more famous BL who posts here.

bjg

Thanks Sarah,

I actually agree with a lot of what you just wrote.

Leaving the Croke Park agreement and pensions completely out of the plan is indefensible. It was clearly a political judgement based on the fact that the unions and pensioners are the only ones organised enough to bring the plan down. The unions then went ahead and cynically organised a march on the part of those it had pushed the burden on.

I also agree that Brian Lenihan sometimes really lets himself down, none more so when he says that a guarantee was necessary in September 2008 — something that all serious observers agree — when the problem was the blanket nature of that guarantee.

I did not expect to be providing a defense of the minister when this thread started. My basic point is that many critics get off too easy in terms of the outlining the alternative. I am not saying that alternatives should not be debated, nor claiming that there is not a better path. I have some serious disagreements with government policy. But we have to recognise how difficult a corner we are in — not least our unfortunate dependence on the ECB.

From The Guardian http://www.guardian.co.uk/business/2010/nov/28/ireland-bailout-contribution-pensions:

“EU ministers tonight spelt out the terms of Ireland’s €85bn international financial rescue package, and revealed the Dublin government will have to raid its national pension fund and other cash reserves for €17.5bn as a condition of the deal to bail out its banks and debt-laden economy.

The unexpected contribution from Ireland was demanded at a hastily arranged meeting of the eurozone’s finance ministers, who were desperate to secure a deal before the markets open tomorrow.”

@ Brian Lucey

I don’t think FF cunning had anything to do with it. FF are too knackered for cuteness now.
The great game is being played on the Continent.
FF are ffed anyway.

Pat Carey talking about “Our Partners” on rte,,,
Where did i put the gimp mask…

The rate of interest on the bailout

(1) NPRF €17.5bn @ 0.00%, current opportunity cost 4.90%

http://www.nprf.ie/Publications/2010…erformance.pdf

(2) IMF €22.5bn @ 3.12% for first 3 years and 3.99% thereafter upto 10 years.

Press Release: IMF Reaches Staff-level Agreement with Ireland on €22.5 Billion Extended Fund Facility Arrangement

This gives a blended rate of 3.73% over 10 years,

Mr Chopra said on RTE news that it could rise to 4.5% after initial period.

We know that the EFSF has a lower rate than the EFSM,

(3) If we assume that the EFSF €22.5bn is @ 6.50% and

(4) We assume that the EFSM €22.5bn is 7.25%

This gives a blended rate of 5.83% for the €67.5bn

and implies a penal borrowing rate of 6.875% from Europe equivalent to ECB + 587.5bps.
(similar to the 6.9% that has been speculated)

This assumes the worst case scenario and the full €85 bn is drawn down and highlights the penalties that incentivise Ireland not to do so.

@John McHale
‘The additional year on the fiscal adjustment is also to be welcomed. It reflects more conserative (and credible) growth assumptions and a higher starting debt value to reflect the immediate additional recapitalisation cost. ‘

This additional time simply reflects the fact that the four year plan in not credible.

As for the ECB silence is it not the case they they precipitated the crisis by withdrawing liquidity or signaling their intention to do so. (along with the Merkel problem)

Recaps without guaranteed liquidity is not going to work given the views of the ECB on withdrawal and the time span required to shrink the balance sheets of the banks.

I welcome your balanced view but some of the major issues appear to be glossed over. The markets should tell us tomorrow.

Oh, one final point on BLTD and co.. I still hope I’m wrong and there’s some other explanation.

5ry + that is.

@BL: If FF were a sentient organism, it would have fought to lose the 2007 election. But no political party is, does, or will. The next opinion poll/bye-election/local elections/ GE are, in order of temporal occurrence, often the sole focus of policy decisions.

With doom imminent for them, a scorched earth policy now is understandable. That they had no clue they’ve been doomed for a long time, and might as well have behaved responsibly in that knowledge, is unforgivable.

It was nice to have shared the journey with you all. A great bunch of people. Even though people have often disagreed the patriotism and decency of all on this blog has never been in doubt.
Pity about Lenihan and Cowen. Heroes – not

@Garreth
no and no. This is a long war. And it is now a war. Capitalism v cronyism. I guess, and this is despite having read a lot of c19 history what palmerston said
“therefore I say that it is a narrow policy to suppose that this country or that is to be marked out as the eternal ally or the perpetual enemy of England. We have no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow”
And its not now in the interests of the franco-german axis to be too nice to us. Right…what now. Irish geopolitics are not well developed. Last week i wrote “This is geopolitical hardball: Brian Lenihan from Castleknock versus the heirs of Bismarck and Cardinal Richelieu”
We now know who won.

Garretth
“At what point exactly does the reality kick in that borrowing money at half the market rate ”
errr…when did the 3/7/well get back to you on the maturity go to 11.6%?

oops – manual labourer’s 40k…

@ Carolus Galviensis
“Article 28 of CP agreement:
“The implementation of this Agreement is subject to no currently unforeseen budgetary deterioration””
Do you not see what they are at? FF normally receive the votes of the Public Sector, years and years of bribery at election time and of course the notorious Benchmarking. I see Mary Harney now admits it was a mistake. How much has that cost over the intervening years since implemention? Surely Article 28 of CP should be invoked and Benchmarking reversed. However, that will no happen. This vote has now shifted to the Labour Party in the opinion polls. FF know that this election is lost but they are planning ahead for 2016 and so are leaving the incoming Government to deal with the problem of the over paid Civil and Public Sectors.

@Tull
Interesting point. As new money always takes precedence over old then it would appear that existing long term sovereign bonds are more risky. I think this is one of the reasons that the Greek bonds are still through the roof despite their bailout. Perhaps Eoin might enlighten us.

@bill hobbs
I don’t believe that collective delusional disorder could explain how the world’s cheapest bank bailout has become such a catastrophe unless it’s you and I that are having the delusions.

As for Ernie having a go at Sarah Carey, while Colm Mc is not always correct about everything, one of his quotes seems appropriate.

“A small reality is this country is bust. There is no shortage of compassion; there is a shortage of money. We are borrowing €400 million per week and a big component is the public sector payroll.”

The impact of the 5.8% rate on variable mortgage rates may not be very healthy. Hard to see how variable rates can be retained at their artificial rates now that a long term rate has been fixed. Acceleration of mortgage difficulties unavoidable.

@pleite
Point taken. I was not in favour of the lower paid Public Sector workers being hit previously. But we have the highest paid political leaders and representatives and also the upper levels of the Civil Service who have been totally incompetent in carrying out their duties. They get hugely rewarded and yet did not do the job they should have done over the past 10 years.
The pensions of the Public and Civil Service are a huge burden that private sector workers are paying for and many of these private sector workers are not in a position to provided pensions for themselves.

The Public Sector do themselves no favours. They receive a 1/2 hour off to cash cheques that do not exist, as they are paid by electronic transfer and this item is only up for discussion. What a ridiculous situation. Let’s get real here the country is going down the toilet and this will be part of the improved efficiency in the Public Sector through the Croke park Agreement if we are lucky.
What a joke.

BL on the EU and IMF view of threat of Mass Mortgage defaults in Ireland:

“The international authorities did not accept some of the literature that was written in Ireland in recent times about this. They believe it was exaggerated.”

That’s told you Morgan.

http://www.irishtimes.com/newspaper/breaking/2010/1128/breaking35.html

Slight variation on the olde BL mantra “I don’t accept that”

Cowens comment that the EU wouldn’t allow us to touch the bondholders is something else! The culmination of easy politics that was ‘the cheapest bailout in the world’ has brought the country to the edge of the abyss. Does he recognise this? does he resign? does he apologise? no he uses this crisis to lay the blame for the whole mess at the foot of the ECB. What neck he has, it’s abosutely incredicle.

Queue the media to follow suit with a frenzy of anti-eu comment, replacing public anger at FF with public anger at the EU, just in time for a spring election.

This crisis is the fault of Irelands cronyism, her imature politics and her peoples willingness to hold the ‘cute whore’ in such high esteem. As a country we have to recognise this. It is more than unfortunate that we’re paying such a high price for our inept politics, but it should be recognised for what it is.

Even now, we are still looking for the easy option, the magic lever that’ll make it all go away. It’s time for us to grow up.

When will the blog be renamed to recognise the new reality?

http://www.IMFeconomy.ie

NPRF = National Pension RIP-OFF (not retirement) Fund……….

Antoin says we had a pair of ducks.
[…]
Antoin: defaulting on seniors would have cause unforeseeable contagion

One really has to hope that astronomers don’t discover an asteroid headed directly towards Earth in the near future. Because if they do then Barack Obama will be on to us for the full cost of the €50b program to destroy it, which he will generously finance with a 6% loan. Then our leaders and economists will be on telly to tell us how weak our negotiating position was.

@hoganmahew, @grumpy

So basically, what you’re saying is “ICELAND!”? Works for me?

However, while anger that the burden on taxpayers has not been reduced, given the fears of destabilisation in other fragile markets, the expectations were unrealistic.

This is why I keep coming back to the question of grants, despite the fact that I would rather have senior debt haircuts myself. (I regard a bit of Eurozone financial contagion as a positive good right now.) If Ireland is performing a vital service to the EU and the Eurozone by not permitting banks elsewhere in Europe to take a loss on their bad investments – and both Lenihan and Cowen are now explicitly claiming this – why is this vital EU program not being paid for on a pro rata basis by the EU (or even Eurogroup) members?

Minister Lenihan,

Have you seen this?

http://whistleblowerirl.blogspot.com/

Again we’re seeing the subtlety of the spin.

First, Minister Lenihan is saying that the interest rate in the deal is very good compared to today’s 9% …….whereas a month ago today’s rate was irrelevant since we didn’t need to go to the markets until next year.

Then there is the continued reference to the NPRF as a “rainy day fund”. It wasn’t a rainy day fund. It was a pension reserve fund that was supposed to pay people’s pension for many years, not merely one day.

@Alan

Fair point on the 30k salaried PS workers.

But the unions hide behind those while the head of the DAA stil gets 400k.

On pensions I meant PS pensions and not the state pension.

But I think we will reach a point where the contrib pension will have to be means tested.

But the big big issue is the public sector pension bill and the way they were benchmarked.

Oh and a 15% cut – “savage” !!!!!!!! lol.

If you think 15% is savage that just shows the different realities for private and public sector workers.

@anonym
“So basically, what you’re saying is “ICELAND!”? Works for me?”
Perhaps it does, it might even work for me and for a few others who didn’t sup at the tiger and who do not depend on the Irish economy for income. The vast majority, however, would experience harder times. So going with the flow, not looking at 2013 (oh, sure it’s ages away) is much easier.

@All
On the NPRF. We have been means tested. We have been found to have means. We must use our means before we get more…

Michael Somers said something interesting last night on The Week in Politics. He described a previous occasion when we were stuck for money and had to borrow expensive US money but once we did – then we could go back to cheaper sources who were willing to deal with us once we had cash. i.e. its easier to get money when you have money.

So call this a grasping at straws query – but is this the basis for the stabilisation argument –

1. Now that deal is done maybe we can go to the Chinese or something and get cheaper money.
and
2. Default will come but in 2013.

?

Here’s a comment on the Krugman blog –

“It’s worse than 5.8% when you unpick it. Ireland itself is contributing €17.5bn, or 20%, to this fund. That money comes from the its pension fund, so it’s not money it should be monkeying around with. The IMF is contributing about 26%, at a rate of 3.1% so I’ve heard. That means the 54% that comes from Europe has a 9.4% interest rate attached! So much for helping out friends in the Eurozone. This is a rate at which Ireland is guaranteed to default, and therefore certain to lose (much of) the €17.5bn from its pension fund. Misery.”

Chopra didn’t want to get into the nitty gritty of the interest this morning on RTE maybe this is why, we stump up the first tranche and if it looks like its going south the ECB/EU and IMF minimise their losses.

Is this Europe slapping us on the face for our incompetence and should we be worried by the serious anti euro sentiment that will emerge from this debacle.

@seamus – “should we be worried by the serious anti euro sentiment that will emerge from this debacle”

I’m not expecting to see any EU-related referendums coming our way over the next few years.

An atavistic infatuation with perpetual victim-hood has bred in the Irish a strong sense of entitlement to special treatment at every turn in the road, especially when caught out. Amongst the reams of denial and whinging there is scant acceptance that official Ireland and its large oligarchy of vested interests – from academics promising a new economy every other day, to trade unionists promising reforms and efficiency, and the rest of the cash hungry alphabet in between – collectively contributed in their own measure to this nadir. Rather than accept that responsibility may lie within, even unequally, the trend is denial followed by blame. Both are very primitive defense mechanisms leading to the projection of ‘responsibility’ onto others, in this case, the ECB, the EU Commission, the IMF, the bondholders, some bloke with a beard, without a beard, whatever. Why should Ireland receive special treatment, a special dispensation, rather than Greece, or another eurozone nation? Wasn’t the nation after all closer to Boston than Berlin?

The bank guarantee was an egregious act of stupidity on a par with approaching a Zeppelin with a blowtorch to repair a leak. It antagonized the other European capitals. The offices of the Irish Central Bank and Financial Regulator, plus Governments, broadcast for international consumption a wizard’s tale of Ireland. They filed regular health reports to the ECB. Banks were fine, solid, the best capitalized in Europe and other shrill guff.

And despite the arguably villainous roles played by bankers, the citizenry are still waiting for indictments. Notional professionals can contribute to bankrupting huge sections of the population with the reassurance that a race amongst stone tortoises will move faster than any official investigation. No need for alacrity when politicians are tangled up in the wash.

If the government had any money sense, and actually fished in its own seas of economic propaganda, would immediately scrap Croke Park and ensure the compulsory redundancy of at least 10% of the public sector. But it won’t of course. Better keep the deal intact. It’s a good target for blame after all.

@Zhou:
“I think we should all be a bit more sensitive as to how others in the economy are faring.”

You might be interested in this, from the Ireland after NAMA blog:

“[…] “fat pharma going lean”. […] Pharma companies paid little attention to production efficiencies. […] In response, following the example of the electronics industry, most pharmaceutical companies are now introducing more efficient processes. As a result, Irish plants are starting to produce significantly more output, while at the same time reducing their head count. In some Irish plants, staff numbers have been reduced by over 10 per cent, completely under the radar of the media.”

http://irelandafternama.wordpress.com/2010/11/29/ireland’s-four-year-economic-recovery-plan-and-“job-shedding”-growth-in-pharma/

My point is not based on the coincidence that IAN mentions the pharmaceutical industry while the bailout plan mentions pharmacists. It is rather that the public sector and the licensed sectors have been protected from the sort of never-ending pressure for improvements in quality and output and reductions in cost that characterise much of the exporting manufacturing sector. What new processes have been introduced into the legal, drug-dispensing, school, policing and medical sectors in recent years? How have the costs of local authority and central government sectors been reduced? These sectors should be forced to become better and cheaper, and that may mean removing many operatives from the sectors. But they shouldn’t get any more protection than anyone else.

And nor should pensioners.

bjg

@BJG

I know of plenty of “operatives” who have been let go and costs that have been cut. Everybody is getting leaner and that is good.

@Paul Hunt

+1
You can’t reform without the data.

In simple terms Ireland Inc (ignoring politics and who the designated negotiators were) had to make a choice between 2 alternatives, framed as follows:

1st. Accept imposed bailout conditions with some modifications – ATM’s will operate on Monday morning

2nd. Hardball and end up with a default on senior bonds – ATM’s will not work on Monday

Each outcome would have consequences which were uncertain to different degrees

The framing effect in the Asian disease problem of Amos Tversky and Daniel Kahneman (2002 joint Nobel Prize winner in Economics), helps to inform a properly grounded analysis of Ireland’s dilemma and why B was never likely to happen:

Imagine that the United States is preparing for the outbreak of an unusual Asian disease, which is expected to kill 600 people. Two alternative programmes to combat the disease have been proposed. Assume that the exact scientific estimates of the consequences of the programmes are as follows:

If Programme A is adopted, 200 people will be saved
If Programme B is adopted, there is a one-third probability that 600 people will be saved and a two-thirds probability that no people will be saved

Which of the two programmes would you favour?

In this version of the problem, a substantial majority of respondents favoured programme A, indicating risk aversion. Other respondents, selected at random, received a question in which the same cover story is followed by a different description of the options:

If Programme A’ is adopted, 400 people will die
If Programme B’ is adopted, there is a one-third probability that nobody will die and a two-thirds probability that 600 people will die

A clear majority of respondents now favoured programme B’, the risk-seeking option.

Although there is no substantive difference between the versions, they evidently evoke different associations and evaluations. This is easiest to see in the certain option, because outcomes that are certain are over-weighted relative to outcomes of high or intermediate probability. Thus, the certainty of saving people is disproportionately attractive, and the certainty of deaths is disproportionately aversive. These immediate affective responses respectively favour A over B and B’ over A’.

George Lowenstein helped to explain why this is so as far back as 1996 with his 7 propositions concerning the Actual, Desired, Predicted, and Recollected influence of visceral factors on behaviour:

1. The discrepancy between the actual and desired value placed on a particular good or activity increases with the intensity of the immediate good-relevant visceral factor.
2. Future visceral factors produce little discrepancy between the value we plan to place on goods in the future and the value we view as desirable.
3. Increasing the level of an immediate and delayed visceral factor simultaneously enhances the actual valuation of immediate relative to delayed consumption of the associated good.
4. Currently experienced visceral factors have a mild effect on decisions for the future, even when those factors will not be operative in the future.
5. People underestimate the impact of visceral factors on their own future behaviour.
6. As time passes, people forget the degree of influence that visceral factors had on their own past behaviour. As a result, past behaviour that occurred under the influence of visceral factors will increasingly be forgotten, or will seem perplexing to the individual.
7. The first six propositions apply to interpersonal as well as intrapersonal comparisons, where other people play the same role vis a vis the self as the delayed self plays relative to the current self:

i. We tend to become less altruistic than we would like to be when visceral factors intensify.
ii. When making decisions for another person, we tend to ignore or give little weight to visceral factors they are experiencing
iii. Increasing the intensity of a visceral factor for ourselves and another person in parallel leads to a decline in altruism.
iv. When we experience a particular visceral factor, we tend to imagine others experiencing it as well, regardless of whether they actually are.
v. People underestimate the impact of visceral factors on other people’s behaviour.

The question of whether the ‘ATM’s would have continued to work’ if the second alternative, listed at the start, was selected by Ireland Inc was never answered and will continue to feed the political debate. However, the visceral impact of the consequences of the second alternative would have made the negotiators for Ireland Inc. risk aversive and Prospect Theory explains why they did what they did. They may well have made the wrong decision but that’s another matter. I’m only trying to explain why the first alternative was chosen using Prospect Theory to help my analysis.

@Zhou,

Thank you. But the absence of data and research is generally used to avoid consideration of difficult issues. And, in reality, there is some research, though not as comprehensive or as focused as it could or should be, but it has, consistently, been ignored or dismissed. The Competition Authority has produced numerous reports and all gather dust as it is neither empowered nor resourced to take the appropriate action. Very late in the day – and only when the Government was running out of road, Colm McCarthy and his colleagues have been charged to review state assets and liabilities. One has to doubt the ability of this government to respond sensibly to the report that will emerge next month. For the last 7 years I have focused on the policy and regulatory dysfunction in the energy sector that has imposed huge deadweight costs on consumers and the economy. I have been pilloried here and elsewhere as an ‘obsessive’. But it merely stregthens my resolve as I know the truth will out – as it has following the banking debacle.

We are all fiscal and banking experts now, even though the key decisions in these areas have been out of Ireland’s hands for the last 2 years (and now finally confirmed), but there is no interest in the required reforms in areas where Ireland retains sovereignty.

Lets look on the bright side, we were intelligent enough to join the EU. We have enjoyed over thirty years of prosperity as a result. Prior to joining the EU we had bad government with long dole queues in every little town and a very high emigration rate. Now we still have bad gov’t but we became prosperous enough to afford a “bank crisis”. We have also acquired fame as the country that followed the neo liberal leadership of Ronald Regan, the Bushes’ and crackpot right wing economists like Phillips, Laffer, Greenspan and others. We failed as a country and as a people but we have done this many times in the past. Now, let us stop whining and complaining helplessly and start voting for honest politicians. We are lucky that the ECB kept us afloat the past two years and are still willing to add buoyancy to our economy. The IMF will impose some discipline on the errant sons and daughters of Eireann sitting in the Dail. The rest of us will just muddle along at a higher level of prosperity than we ever dreamed of.

And the NPRF.

€25bn it had at the end of Sept I believe.

But does that include the €3.5bn for BOI, the €7.2bn for AIB (€3.5bn PLUS €3.7bn) co,,itted to AIB already?

So thats not €25bn but €14.3bn. Which will actually be €4.3bn once the €10bn is taken out for the Gov’s contribution to the bailout?

@Paul Hunt

Competition has increased hugely in the legal sector. I am not sure about pharmacies but I think they can be owned by non-pharmacists.

@Eoin,

Imposing on your good offices again, but do you have news to impart on how the market is responding? Are they going for Portugal – or is it straight for Belgium?

@Rob S
See here for de banks:
http://www.financialregulator.ie/press-area/press-releases/Pages/Technical.aspx

Thanks hogan.

Still though, I was under the impression they had still had to raise €7bn before this announcement so an additional €5.265 would have brought the new amount they still have to raise to €12bn+.

Ah well – it will be clear soon.

@Vincent Byrne
It is essentially too late for an Irish Tea Party, although one might still serve some useful purposes.

An Irish Tea Party would have been particularly useful before Michael Hennigan had to write articles like this one.

http://www.finfacts.ie/irelandbusinessnews/publish/article_10006397.shtml

@Vincent Byrne

Attacking Sarah for non contributions to public discourse is a non sequiter.

She contributes and offers her neck on many issues.

That you choose to disagree is your privilege, but not a reason for ad hominen attacks.

And anyway, I dont think Sarah can see Alaska from her kitchen window, so that option you suggest is a non runner!

@ zhou_enlai

The idea that pharmacists and lawyers are cosseted is ridiculous.

It is also ridiculous that in most professions, the people who run them are usually the biggest and most powerful and arguing that there are small operators who are exposed to competition, is beside the point.

To argue that small solicitors firms are going out of business means that there is a competitive market in the legal business is risible; read what the Competition Authority has to say about it.

How ridiculous is it that in a small country lawyers on the public payroll investigating corruption can become multimillionaires – – rather confusing surely?

The Government announced in June 2009 plans to cut to €133 million in payments to pharmacists over the coming year.

The Irish Pharmacy Union (IPU), which represents about 1,900 pharmacists, said up to 5,000 pharmacy jobs could be lost as a result of the cuts and that frontline health services would be seriously damaged.

The cost to the State of providing drugs has doubled since 2002 to over €1.68 billion in 2008 — up from €332 million in 1997 – -and it costs €640 million to provide €1.04 billion of drugs at ex-factory prices, to patients.

The middlemen collected €640 million and that was only from State purchases.

Ingredient costs €1,240 million (ex-factory price of €1,040 million plus wholesale mark-up of €200 million);

Dispensing fees and mark-up, including over 70s fee: €440 million;

Total €1,680 million.

@Sarah Carey

You wrote: It’s not about being anti-public sector – its about fairly spreading the burden. The recovery plan protected two sectors based not on right, but on politics. That’s the worrying bit.

Did someone say “fairly spreading the burden”? Did you think the burden was “fairly spread” in the last 3-4 budget adjusting exercises when PS workers were cut by 15%, and had to pay the same derisory levies of 5% that everyone else did?

The mechanism for fairly spreading the burden is the income tax system. It hasn’t been used, despite the fact that income tax rates were imprudently lowered (in order to buy elections) throughout the last decade.

What infuriates those in the public sector is having to listen to blinkered morons in the press go on about “fairly spreading the burden” while ignoring entirely the way the burden has been spread thus far.

As for this non-sequitur: Oh and a 15% cut – “savage” !!!!!!!! lol. If you think 15% is savage that just shows the different realities for private and public sector workers.

Is this what passes for thinking in your circles? The utterly juvenile “lol” and exclamation marks, which would not be out of place in a 12-year-old’s love letter to a boyband betokens a complete lack of compassion. You’re talking about people’s lives here, Marie Antoinette. The question at hand, the one you seem to be missing perpetually, is “what is a fair way of distributing the burden of bridging the deficit gap.” In this context, blabbering on endlessly in newspapers, the radio and TV about how “redundancy is a 100% pay cut” (5 years ago you would no doubt have been spouting another idiotic cliché like “rent is dead money”) is to confuse the problem with the solution. The question is: who should pay for the solution? Now, all evidence suggests that the vast majority of private sector workers have experienced neither redundancy nor pay cuts. You apparently think that this group should still be spared any sacrifice to solve the nation’s problems because somebody else took a pay cut or lost their job. You think unions “hide behind” the low paid in the PS (who, by the way, make up the majority of PS workers). Well, what you’re doing is more reprehensible: hiding behind the unemployed, among whose number you are not. Because those who have not suffered or paid much at all have, in your view, suffered by proxy (since someone else lost his job), it is only right and just that the society repeatedly go after the 20% of workers who happen to work in the public sector. What could be more popular than 80% of population repeatedly pinning the entire burden on 20%? It’s a grave injustice when the EU does it to Ireland. When Ireland does it to its PS? Not so much, apparently.

Already raised by a few people but not answered:

According to the Government, the “combined annual average interest rate” will be of the order of 5.8% per annum. If we exclude the State’s contribution of €17.5 billion which is “interest-free” then the average interest rate on the borrowed €67.5 billion rises to 7.3%.

If correct, this rate assumes an even chance of Ireland defaulting on the loans. When is the point of the bale out if there is such a high risk of failure?

@Brian Flanagan
Mr. Kevin Cardiff stated at the press conference last night that the 5.8% was on the borrowed money, excluding the NPRF funds.

Haven’t heard much discussion about this notion..but I like it.

http://gonzalolira.blogspot.com/2010/11/if-ireland-doesnt-take-bailout.html#more

Can Eoin have initiation rights?

I know he’s pseudonymous but I think everyone here accepts he has good reasons for that and has lots of credibility.

Having JtO withdrawal symptoms….sniff.

Oh, and I’m truly touched to see that someone still believes this old saw:

“Private sector workers, particularly in the tradeable sector, have pay that is internationally benchmarked on a regular basis. If the pay is too high it either comes down or the company goes elsewhere.”

I wonder if Michael Fingleton knows about this?

From ‘About’ at Ernie Ball’s blog:

Ernie Ball is the nom de guerre of a UCD lecturer in a humanities subject.

Cristicising Sarah Carey, Ernie Ball writes:

You apparently think that this group [private sector workers – CG ] should still be spared any sacrifice to solve the nation’s problems because somebody else took a pay cut or lost their job. You think unions “hide behind” the low paid in the Public Sector ..

Ernie,

Let me put it like this: many public sector workers are dispensable, including yourself. You are a lecturer in humanities (Media Studies?). I can get all the humanities I want in any language I choose free of charge on the Net.

But the private-sector plumbers or bakers – the workers who pay the taxes that pay your salary – are not dispensable. They produce added value. You (quite possibly) do not. Perhaps you produce subtracted value (Media Studies?). You might be overpriced even if you worked for free. Think about it.

@ Eamonn

Paul Hunt is the man for the political game-theory! But i think the market has decided that this whole Eurozone concept is flawed and needs fixing asap. So like the good vigilantes that they are, they press on the easy pressure points, ie the worst or the smallest of the countries involved. So thats us, Greece and Portugal. Potentially Belgium as some have suggested. Going big game hunting for Spain may prove too difficult and dangerous, but they’re certainly gonna take a shot at it if they are given the opportunity. With 15 floating rate currencies gone from the markets with the adoption of the Euro, there’s less markets for these guys to play relative value currency and interest rates trades with on Europe, ie Irish Punt vs French France, Spainish Peseta vs Italian Lira. Until now that is…

@ Eamonn Moran

Well said. I think the rate of interest is a message that there is wealth in Ireland, there are inefficiencies and before you put on the béal bocht you need to pony up.

Specifically there is an urgent need to destroy the tax avoidance industry. I don’t think the political class has the balls to go after the many nice respectable people who suck from the national teat and are far more damaging to the budget than the average PS wallah. .

@Carolus

What’s the matter, don’t you believe in markets? Unlike the market for plumbers, there actually is an international market for humanities lecturers. It determines the going wage rates. If you want to second guess the market in this case and pay below the going wage rates (relative to the cost of living, of course), that is your prerogative but you will pay a price one way or another.

The view that humanities lecturers are somehow “dispensable” while plumbers and bakers are not is as apt an expression of philistinism as one is likely to come across. The fact of the matter is, if we had had a bit more of the broad historical perspective that those in the humanities provide and a bit less of the benighted assumption that economics is the Master Science as well as the Ultimate Tribunal before which all must bow, we mightn’t be in the mess we are in currently. I don’t expect you’ve learned that lesson. Maybe you can go find it out on the internet…

Also I must quibble with the claim that plumbers and bakers “pay the taxes that pay my salary.” We all pay taxes to the state, myself included. Your view implies either that I’m paying my own salary or that I’m only earning what I’m paid net of tax, in which case you’re getting a real bargain.

@Al

Mr Fingleton still has a very nice pension. But if you like, substitute for his the name of any of the top personnel at the banks who were there before the collapse and are still there on enormous salaries.

@Ernie Ball
That’s right, we’re all bankers in the private sector.

@Ernie Ball

The market for humanities lecturers is to a large extent a public sector artefact. And I am not denying the “broad historical perspective that those in the humanities provide”, just saying that I don’t have to pay for it. For example, try the Arts and Letters Daily website and tell me what you can provide that I can’t find there.

I said nothing whatsoever about economics being a Master Science ‘before which all must bow’ (in fact tend to agree with you on that point).

@Comrade Ball:
“… there actually is an international market for humanities lecturers. It determines the going wage rates.”

That being so, I hope that you won’t be expected to sacrifice yourself unduly in your noble efforts to save the proletariat. When your wages are cut here, you should certainly seek employment abroad, in places where humanities lecturers are properly appreciated and rewarded.

bjg

Ernie Ball is the nom de guerre of a UCD lecturer in a humanities subject

If Fingleton is your reference point for private sector pensions, one can only wonder about the tripe you feed to your students.

In real terms 3, 5, and 10 year managed pension fund returns are in the red and that is only for the minority in the private sector with pensions who face limited payouts because of fund deficits.

You can have the ‘legitimate expectation’ of added years as if they are not a cost and you get paid irrespective of a deficit.

You say you have faced a 15% pay cut.

I have yet to see a justification for the so-called average 9% benchmarking award and almost a decade later, baby-steps are being
taken to achieve ‘transformational’ change.

Your hero should be Bertie Ahern for that award.

As for the rest of the 15%, a pensions levy, the net pension cost (after the levy) of a new entrant to the public sector is 20%.

How unfair it all is!; you are one of the privileged in an unfair/corrupt society.

I suppose it’s some private sector vigilante who has reported that sick pay in the public service has DOUBLED since the 1980’s and the average public servant took more than 11 days sick in 2007 — more than 2 work weeks.

It was Comptroller and Auditor-General who reported this in 2009.

@Sarah Carey

Your at it again, kicking the public service. this is a society we live in and the public service provide a platform for society to function. I know your beef is benchmarking and I agree with you on this. PLease be specific before throwing anymore knives.
Just look to the failed State of America and see how dsfunctional public service is there. Is that your wish.

Can you believe it, someone out there is making billions right now on our misery. Upside down capitialism. Right now some meathead is going short through a CDF on Ireland going bust. Its hard to believe.

@Ernie Ball

If bin men and Media Studies lecturers decide not to show up at work tomorrow will be noticed by society first?

By definition Humanites, and even fundamental science (pointing at me) are luxuries. While there is a possibility we may add value to the economy, tradesmen and support staff keep this country going. Without people to fix your plumbing and wiring, put food on your table, or keep the streets clean you or I cannot do our jobs.

You also need to get some perspective and not take things so personally; people discussing wage cuts here are not talking about the lowest paid, they are targetting the inefficient, overpaid and useless jobs at the top. I have no vested interest in seeing our near mythical ‘evil’ bankers get away scot free, nor to see them demonised. Generalisations like that are idiotic and nonsensical, allowing the real culprits to hide behind the smokescreen of greed and incompetence that rule the roost.

Before you take a swipe at me, I’m paid out of the public purse, and I’ve spent the last five years working 60-80 hour weeks (on average) starting at EUR250 per week, reaching the glossy heights of EUR380 p/w, and now back down to EUR350 p/w. In relative terms I will be hammered worse in the next budget than you.

I know that some of what I’m working on is of use in industry, just not in our industry. Thus my job is not important or useful in any sense to the economic recovery of our country; do you have the honesty to admit that about your job?

All you public v private people are unwilling to face the cold hard facts.

If you are earning above 40K the gross likelyhood is that we are all being paid too much and taxed too little.

marginal rate, smarginal rate. What counts is our take home pay and through a mixture of very low tax bands and all the other tax avoidance measures people on average earnings are paying a tiny % in tax. Cuts need to start hard at he top and middle.

The increases in the pay in the private sector was based on an unsustainable credit/property bubble and increases in the public sector were based on keeping up with this.

Both increases wrong.
6 years ago Irish nurses went on Strike in order to get a 20% increase in pay the gov was offering 14% At the same time in the UK Nurses were going on strike cos they wanted a 2% increase and were only offered 1%

Something they don’t tell you about being a dynamic open economy.
The peaks and troughs are massive.

@Sarah Carey

Time to move to a new post lads …

Sarah Carey again reinforces the tired old stereotype that most commenters on this blog are male.

@ CG

Your obviously not from the country.
Lads can mean males or females or both.

@ Sarah

Someone just emailed you his name????

Cya privacy!

@ Eammon

As a PS’er, I see Croke Park as an endangered entity, and rightly so.
Is it much more different than the fudge deal that the Govt did with the Church?

But, before we swing the knife, I would like to know what happens with the mortgage debt. I dont say this in the sense of ‘who’s going to do something for me’ but more in the sense has this all been taught through?

I can reschedule payments and extend the term, although it already is hitting the retirement age. I am not the only PS’er so I presume others, 000’s possible will be in this position. Is there macro consequences here?

I can cancel the payments, and come what may with the banks, leave the house or country and get on with life. Again macro consequences?

This isnt a claim for special treatment, just clarity but this is a clarity that may reveal how fecked the whole situation has been all along. Now if 000’s are faced with this situation, is it best dealt with ad hoc, or managed?
I dont mind whatever outcome, but lets not not! think this through.
Enough of that going around!

Perhaps Sarkozy would be happy to see the ECB being forced into a little QE seeing as Trichet takes the hump if anyone dares to mention it to him.

@Ernie
I couldn’t read your “self congratulatory Social Darwinist myth” line without thinking of this website;

http://www.elsewhere.org/pomo/ Hit refresh on that page a few times.

Excuse me in advance for my momentary sarcasm as I express confidence that you’re better placed working in humanities than in a science.

@Zhou,

It’s fun, but probably futile, to speculate about the kind of horse-trading that goes on behind behind closed doors when the big shakers and movers get together.

At Deauville, Merkel conceded on the ‘automaticity’ of fiscal sanctions to get French support for her re-opening (how ever limited) of the Lisbon Treaty to get a Karlsruhe-proof permanent EFSF in place. Both Merkel and Sarkozy know that the salting away of their bank’s exposures to the periheral sovereigns and banks they have facilitated can’t be sustained forever. Sarkozy might like a bit of QE to lubricate the unwinding, but what would he be able to offer Merkel to overcome the existential German dread of same?

Hi Al

In a comment above I did outline that debt forgiveness for those in negative equity should accompany the Burning of Seniors.
And massive fiscal adjustment in the double quick time available to avoid taking the “bail out”
Its the Iceland solution.
Not very pleasant but deffo the least worst option for the republic.
BTW Iceland have recently announced debt forgiveness for negative equity people in Iceland.

“Bond investors are the antithesis of hedge fund managers; they just seek a small return on the expectation of getting a return of their investments.”

If you are suggesting the unwinding of the hedge fund industry you will get no complaints from me. But even though it needs to happen I don’t want to be around to clean up that car crash.

Oh, for goodness sake. We have the continuing Bond. Eoin Bond-Brian Lucey spat; now we have the Sarah Carey-Ernie Ball tiff.
Economically, we are neck-deep in the unmentionable stuff – the big EU players having shat forcefully on us with the connivance of the IMF to protect their own interests. Misgovernance, greed and stupidity positioned us between them and the bowel evacuation facilities.

No one will willingly concedes a thing in terms of pay, profits or privilege unless all concede and are seen to concede. That’s why we elect governments. But we need one with a bit more authority, credibility and legitimacy than this one. And we certainly don’t need a new one that is comprised of two factions that are on opposite sides of the political divide in all mature developed economies. Continuing conflict, half-baked compromises and just a slightly different set of vested interests being pandered to.

It seems we’re scuppered whichever way we turn.

It seems Prof Honohan has given another straight talking interview on RTE today. It appears a timeline for agreeing the plan for resolving Anglo has been agreed with the Commission.

Is there a decent blog anywhere on Irish economics?

Suggest a new thread on the fact that, as predicted, the bailout was a yawn to the bond and currency markets. Has anyone noticed Portugal and Spain today?

What does that say about the assumptions of the bailout of Ireland / EU banks prop desks / Munich RE / civil servants…. or whatever suits your view?

@zhou_enlai

I think we did only have a pair of twos in our hand and talk of playing “hardball” is specious.

How do you justify this belief?

@Eamon Moran
Not sure where you are coming from Eamon. I feel no guilt. I was ejected from the banking industry in October 2000.

@All
Interestingly, the Forfas report – referenced on another thread – addresses Ernie’s concerns quite well.

Summarizing
(i) Public Sector wages in Ireland are too high
(ii) Wages in Ireland’s sheltered sectors are too high
(iii) Wages in the internationally traded sectors are broadly in line

Of course, we could tax the people working in the internationally competitive sector…particularly if they’re actually able to bring some money into the country, particularly money that comes in without already being owed to someone else. Bastards. Give them some more of the burden. That’ll teach them.

@Zhou,

Just listened to Governor Honohan’s interview. Highlights provided earlier on this board by Enda F. Did a credible job, given “No bondholder left behind” and ” No bank shall fail”. Disbelief cannot be suspended indefinitely, but he realises it’s not his – or Ireland’s – place to rock the boat. Misgovernance, greed and stupidity brought to this pass; and we must grin and bear it. But the markets will force some process to deal with – or an explicit recogntion of the continegent liability imposed on the relevant states by – the salting away by the big governments of the EZ banks’ loss exposures to the peripheral sovs and banks. There may be some limited relief for us then.

Live, horse, and you’ll get grass.

@ Hugh Sheehy,

I don’t know Hugh, I don’t want to get into a disagreement about public vrs private sectors, however I would say its not fair to paint either side with the same colour etc. I’m sure you would agree with that.

There are examples on both sides where huge salaries are paid. I think in this recession the private sector has come off worse than the public sector. The 450K unemployed is mostly made up of private sector workers, not public sector.

However the public sector have taken a hit as well. A secondary school teacher with 19 years experience is taking home less than 3K per month, maybe even around 2800 after taxes and levies. This is going to drop even more as more cuts and tax rises are implemented. Considering a secondary school teacher is highly qualified, sometimes with two or more degrees or even a masters / doctorate this is poor money. In addition teachers do a difficult job (subject to violence at times) but it is still a very noble one. It does not involve spin, useless spreadsheets or false accounting practices. It involves giving young people a start in life.

I accept that there is the consideration of the pension (described as gold plated by some), but I would not be too sure about that. Not much point in boasting about your public sector pension if the state is insolvent. Money does not come from nowhere. It could very well be that public sector pensions go the way of the private sector, simply dissappear. Personally my private pension has been decimated.

If we are going to pay less, or expect people to work for less and or we know pensions are not going to cut the grade in the future, then how about the establishment which runs this country bringing down the crazy cost of living.

@SportHog
I’ve said in various places….I’m not anti public sector.

I am anti overpaying the public sector because the money comes from “someone else”, and while the example of nurses, teachers and guards is still the one that always gets used, the Forfas report is pretty clear on the topic. Here’s a sample quote.

“Forfás research for the NCC highlights that pay levels for a range of public sector professions (teachers, nurses, hospital consultants) are high in Ireland relative to other developed countries.”

I have no desire to victimise teachers or nurses or anyone, but Ireland’t public service has to be affordable in today’s context. Meantime, I completely agree on your point on cost of living, but we can’t bring down the cost of living in Ireland unless we do something to bring down the cost of living in Ireland. Public sector costs are too high. Sheltered sector costs are too high. Too much is sheltered. Housing is (still) too expensive. Where would you like to start? None of the adjustments will be pretty.

Meantime, I completely recognize the social value of good teachers (if you knew me you’d know why), guards, etc., but the idea should be for the surplus value of what they do to accrue to their customers and not just to the public sector union members themselves.

Finally, the establishment is only the establishment because we elect them. Would you be prepared to have people like me, with no connection to any vested interest, become the establishment and to try to sort things out? The only thing I can initially promise is that I’m numerate and I have no connection with any vested interest.

If yes, then I’ll run for election. I hear there may be an election soon.

@Sarah Carey confusing post.

Yes, a 10-15% cut on someone at the lower end is savage. I support Fintan O’Toole’s proposal to cap PS pay at €100,000.

Trick is, do we think Pat Honohan will work for less than 6 figures in the “national interest” ?

If the banks have lost between E50bn and E90bn, where exactly has the money gone? It hasn’t just disappeared. Presumably it was largely lent to developers who used it to fund real estate development in Ireland and abroad. To whom did the developers (many now bankrupt) pay the money? Ignoring the foreign developments, the answer is the Irish landowners and the Irish building industry including principal contractors and sub-contractors and the builders suppliers (I’m not talking here about ordinary labourers). These are the people who creamed it during the 10 years of the Celtic Tiger and who are now keeping the head down in the hope that a new Government will not introduce a wealth tax a la that which applied in the 1970’s. A lot of the money also remains with those developers who managed to liquidate their real estate portfolios at a profit before the crash. Some of this wealth will have been transferred abroad and or to spouses or to other family members.

I think an annual wealth tax would be reasonable in the circumstances and would hit those landowners/builders/contractors/developers/builders suppliers and their families in respect of the wealth created by the property bubble. Such a tax should apply to the worldwide assets of all individuals/companies/other entities who are resident or domiciled in Ireland, with the usual exceptions for business and agri assets which are creating jobs and exports.

The 4 year Plan talks about a property tax (real estate only) and about reforming capital gains tax and capital acquisitions tax. CGT and CAT are only relevant where property passes on a sale, a gift or on a death. What we need is an annual tax on all wealth, whether it passes or not, and not just wealth in the form of real property. That way, the people who creamed it during the Celtic Tiger will be the ones who shoulder a big chunk of the tax burden over the coming years.

IMHO, a wealth tax should apply in addition to hikes in income taxation mainly for the higher paid in both public and private sector.

“If apple earn a billion a year and decide to give it all to steve jobs, i dont see a proble with that. they might have no staff left after a while, but as long as the price of their products is right for me ill continue to buy.”

That is the neoliberal model and you end up with Lehman Bros. Followed by a debt crisis.

@All
Stop the petty squabbling – the big issue is that we have been tricked into paying off bonholders in the banks by a combination of borrowing and breaking open our piggy bank.
This is just beyond luducrous – and you are arguing over relative triviliaties – you especially Sarah Carey – focus on the big issues here – you have a column to write.

@ Brian J. Goggin,

In general the more skilled a person is the more value they can add to the environment in which they work. Hence it is possible to command a higher salary. Does not work that way always, but it is a general truth for most situations.

In this particular example, teachers not only are they qualified, but they put their qualification into practice on a daily basis.

In addition there are other atributes, such as empathy for students, care and consideration, patience and a general ability to try and bring out the best in a young immature person.

So I have two questions for your short question.

1) Do you think 2900E/month is a good salary in this example?
2) How else do you determine a persons earnings?

Are you suggesting teachers should be paid on the results of the number of students who pass the LC, or stay in school, or if no student goes to prison within 5 years of having left the school?

@Sporthog:
The answer to your final, unnumbered, question is yes … assuming that those achievements are what their customers want teachers to achieve. If the customers want some other results, then measurement of success, and thus payment, should be based on those results instead.

If such a direct link is too difficult, then customers can pay the employing enterprise (a company employing several teaching operatives and appropriate numbers of managers) whatever it charges and the company can decide what to pay its employees. Different companies might market different offerings.

bjg

@Ernie
Funny, they talk about the public sector pay cuts several times.

On the other topic, of what salary someone “deserves”, it’s not a very meaningful question. In the 1980s we had Masters graduates working in McD’s. What salary did they “deserve”?

What pay needs to be provided to get suitable people to do the job? That IS a meaningful question. I’d put it a bit less bluntly than Carolus did earlier on the thread, but his question is still valid. On all the data and comparable’s I’ve seen, and I’m ignoring Marc Coleman tonight, Irish public sector pay is still too high.

@grumpy

The extension of Greece’s repayment dates is probably quite noteworthy too.

@Tony:
“[…] by the time a teacher gets to 15-20yrs experience I suspect that in many cases we are into serious diminishing marginal product to the extent that this may be negative – I’m thinking in terms of computer literacy and decreased motivation to teach the same subject for a 10th consecutive year.”

I agree, but there is more to it than that. I suspect that operatives with twenty years of experience will by that stage know little about market demands for skills or about the range of jobs available. Furthermore, they will have little feel for the demands in the working life of, say, an engineer, technician or production operative in a multinational manufacturing company: four-cycle shifts, monitoring and measurement, annual appraisals, expectations about punctuality and sick leave ….

The root of the problem is defining people by what they “are” (teachers) rather than by what they “do” (teaching). I suggest that lifetime jobs for teachers should be abolished; we should instead encourage people to do some teaching for, say, five years, then go off and do something different and, perhaps, do another five-year stint later in life.

Such flexible employment patterns (teaching is not the only economic activity to which they might be applied) might also enable the state to get more of a grip on the cost of the activity and to cut it when economic circumstances required.

bjg

@Hugh

You quoted this sentence in the report: “Forfás research for the NCC highlights that pay levels for a range of public sector professions (teachers, nurses, hospital consultants) are high in Ireland relative to other developed countries.” There follows a footnote (47) that cites the source of this information as being this report: “National Competitiveness Council, Costs of Doing Business in Ireland 2010 Volume 1, July 2010”

So we look at that report. It’s an extraordinarily sloppy piece of work. To take only one example, on p. 48 it says this: “The starting salary for primary teachers in Ireland in 2010 is 15 per cent above the OECD-25 average, while the top salary scale for primary school teachers in Ireland is 33 per cent above the OECD average (Fig. 7.4.1).” You look at figure 7.4.1 and it has nothing to do with this claim. The relevant figure is Figure 7.4.4 and there the reference is to the OECD-24, not the OECD-25. These clowns can’t even get the basics right: I have no confidence that they can handle the tricky bits.

Then there’s this little gem, which you must have missed: “While these salary levels reflect the impact of recent public sector pay cuts, they do not capture the impact of the public sector pension levy.”

That pensions levy is the gift that keeps on giving, isn’t it? It allows you to cut pay and, all the while, insist that you haven’t cut pay in order to justify further cutting pay. Orwell’s imagination couldn’t have done better.

But on to the matter at hand (limiting myself to teachers’ pay). On p. 402 of OECD Education at a Glance 2010, you have a table that shows teacher pay in the OECD countries in 2008 (i.e., before both the pensions levy and the recent pay cuts). Using the terms of the Forfas chart 7.4.4 let’s look at starting Primary Teacher pay, after 15 years and at the top of the scale. Forfas claims that “The starting salary for primary teachers in Ireland in 2010 is 15 per cent above the 2007 OECD-24 average. The remuneration for teachers in Ireland with 15 years experience and for those on the top scale salary is the second highest (after Luxembourg) of the benchmarked group.”

What does the 2010 OECD report say? First, the starting salary for primary teachers is not 15% higher than the OECD average, it’s 12.8% higher, again, not taking into account the pay cut or the pensions levy. The remuneration for teachers with 15 years experience and at the top of the scale is not “second highest.” For those with 15 years experience, the salary is exceeded by those in Germany, Korea, Luxembourg and Switzerland. Pay at the top of the scale is exceeded by pay in Japan, Korea, Luxembourg and Switzerland. Again, this is all before the pensions levy and the pay cut took an average of 15% off these scales. But the claim in the Forfas report is clearly false.

There’s still more to be said about this, however. One has to wonder why the report only chooses to look at primary school teachers rather than other kinds of teachers. Why not look at, say, Upper Secondary teachers? Why indeed.

Pay in 2008 for starting Upper Secondary teachers in Ireland was 2/10 of a percentage point above the OECD average (and remember that the OECD includes the likes of Poland and the Czech Republic which pay their teachers buttons). It is exceeded by the pay in: Australia, Belgium (both parts), Denmark, Finland, Germany, Luxembourg, Netherlands, Spain, Switzerland, USA. This is, at the risk of belabouring the point, before the two rounds of pay cuts here. At the top of the scale, Irish pay was 12% above the OECD average but exceeded by the pay in Austria, Flanders, Germany, Japan, Korea, Luxembourg, Netherlands, Switzerland.

Given that none of this includes the two rounds of pay cuts, I conclude that there is no evidence to support the claim that teacher pay (again, taking only that) is “high” relative to other countries. This is still less the case when one considers three other facts: 1. Irish teachers teach more hours per year than those of most other OECD countries; 2. Irish teachers teach larger classes than those in most other countries; 3. Irish students perform very well on standardised tests.

Facts 1 and 2 have enormous impacts on the amount of work done. I would expect those posting on an economics website to have the minimal sophistication to know that, when evaluating a salary, it won’t do simply to compare numbers without comparing the amount of work done for the salary. Alas, that sophistication is apparently not even in evidence at Forfas.

@Ernie
Unfortunately for your argument the pension levy isn’t a pay cut. It feels like one, but it isn’t.

As for the fact that the Competitiveness report refers to chart 7.4.1 to show where teachers’ salaries rank in the OECD and the data is actually in chart 7.4.4, well, so what?

https://docs.google.com/a/google.com/viewer?url=http://www.competitiveness.ie/media/NCC100722-costs_of_doing_business_in_ireland_2010.pdf

While you’re at it look at charts 7.4.1 through 7.4.6. Whatever about teachers’ salaries having adjusted from truly amazing down towards merely generous, doctors and nurses still rank towards the top of the scale. It’s not in those specific reports, but aren’t guards still getting paid allowances for not being able to receive other allowances.

On “international benchmarks”, I’m sure we could benchmark with Finland. Would that be OK? Based on PISA numbers their teachers seem to perform better and get paid a lot less. Also, as a minor point, the IMF isn’t running Finland.

Again, there’s no need to engage in blame games. Public sector workers didn’t cause the crash. They probably did benefit from the boom more than they should have, less than others but more than many.

The question for the future still remains. Why should Irish public sector pay be higher than it needs to be?

@Hugh

Which report?

I think there’s nothing wrong with the deal itself. A lot of the complaints against it are basically misdirected from the guarantee to the present deal.

Yes, Ideally we could go back and reverse the disastrous guarantee. But we can’t, and this deal makes the best of a bad situation.

It will take us years to pay it back and I think there is a feeling that we are back where we were 20 years ago despite all the work that has gone in in the meantime. But frankly that’s all beside the point. We are on the hook for a lot of debt, and we have to quench our deficit and start to pay it back.

@Ernie
What – are you telling me that these public sector agencies are not fulfilling their mandate? Not doing what they’re paid so well to do?

In any case, they say they took the 2010 pay cut into account. They say it very specifically. They called out the fact that they were taking it into account when describing the pay in these areas as high. I see no reason to disbelieve them.

If you do then get in touch with them and ask. In the interim it appears – to my layperson’s eye – as if you’ve got a very fixed idea of the truth in this area and you won’t accept any countervailing evidence.

@ Brian J.Goggin, Tony and hoganmahew,

Sorry I am currently overloaded with work, and as such I have been unable to keep up with your posts.

Brian you have mentioned this dropping in and out of education before, guest teachers from industry doing a few years in the secondary school system. I believe it has some merit. I’ll give you that.

However it might not be so easy for somebody in the private sector to spend 3 -5 years on a secondary school teachers wages, i.e. 2900/month, which of course will be even less next year.

I do not fully agree with your comment that teachers are insulated from the world, and that after some years teaching they are out of touch with the working environment. This is not true.

Firstly secondary education is mostly involved in basic education. Take the French language, does it change every 10 years?

Take Physics, many of the basic fundamentals such as Ohms law, Snells law are decades old. The constant for the speed of light has not changed. In a thousand years time they will still be teaching these laws. They are the basic foundation blocks of the particular science. Granted some other things might have changed, ie our understanding of nano technology or how the universe works etc.

So if the basics of many subjects do not change, ie river formation, U shaped valleys then it is not true that after 5 or 10 years teaching one is out of touch with the profession and or the real world. At the basic level change is incremental if not at all.

In addition Tony’s comment about “repeated experience”, i.e. a teacher is at their best after 5 years on the job, but performance dropping off at 15 to 20 years. This comment may be true, but it could also be true for most professions, not just teachers, but engineers, accountants and so on.

In addition I am concerned about the attention or focus on results. We are talking about young immature people here. Not every child started life from the same starting blocks.

Some children will due to certain circumstances go on to achieve great things. But what about the children who had it not been for the intervention of the school would have ended up in prison, or never completed the L.Cert?

Some children unfortunately will never be able to achieve 3rd level. But due to massive efforts by school staff the child made it to L.Cert. Does that mean because the child never got A’s all round the staff should have their salaries clipped, or they should be laid off?

There are “different definitions of success”.

@Sporthog:
“So if the basics of many subjects do not change, ie river formation, U shaped valleys then it is not true that after 5 or 10 years teaching one is out of touch with the profession and or the real world. At the basic level change is incremental if not at all.”

You’re assuming that the same stuff has to be taught, irrespective of what the markets might want, and that stuff is best taught without context, which I suggest is not so.

“There are “different definitions of success”.”

Sure. The question is who gets to choose. At present the teachers, and their servants in the Dept of Ed, seem to do the deciding. I suggest that the customers of the service-providers should make the decisions.

bjg

@Sporthog:
I’d let a thousand flowers bloom. In other words, I’d abolish the Department of Education, remove the standard rules, pay and conditions for teaching operatives, abolish the minimum school leaving age and let lots of different organisations offer lots of different things.

bjg

@ Brian J. Goggin,

With respect I cannot agree that a broad base of education which is currently offered should be broken up and left to the markets as you have suggested.

What if the markets decided that they wanted lots of COBOL programmers, so adjustments were made to the education system, resulting in thousands of students qualified in COBOL within a few years.

But then the Govt decides to raise Corporation tax and these companies leave Ireland and we are left with thousands of COBOL programmers unemployed.

Because they specialised in a particular subject at an early age, they do not have a broad enough foundation to jump quickly into another area of education.

We have to realise that education is not just about producing a end product for the employer, its also about producing a person who has the skills to be employable in various areas. This is good for society, for the person and for the employer.

A recent example would be, lots of young students left 2nd level after Junior cert to work on building sites.

That was what the market demanded.

Now we have lots of unemployed construction workers who have no jobs, the market is gone and the state + tax payer picks up the tab.

In addition these workers who have made a decision early on in their life to specialise in the construction trade cannot now change to 3rd level education, as their educational standard is too low.

Changing the Irish education system to suit the markets is not a good idea, considering no one can control the market.