Month: November 2010

Austerity and the IMF

In his recent Richard H. Sabot Lecture, Ken Rogoff addresses the question of whether the IMF is guilty of imposing excessive austerity as part of a bailout.  The paper is here.  A summary quote:

I will argue that the simplest and perhaps most cutting version of the IMF austerity charges is simply confused. IMF loans typically relieve austerity; they do not make it worse. IMF support helps a country engage in less procyclical budget contraction than it might have been forced to do otherwise. That said, the IMF’s judgments in calibrating programs involve a huge range of subjective decisions about politics, psychology, and economics, judgments that are difficult to get “right” consistently. Toward the end of my remarks, I will argue that in many respects, the greatest problem with IMF programs is not excessive austerity with debtors but excessive generosity toward creditors.

More on Corporation Tax

The FT carries an article which highlights that some (unnamed) officials elsewhere in Europe think that raising the corporate tax rate should be part of the deal. One quote

“They need lots of money and we note they have a corporation tax rate that is very low,” the official said. “Supply must follow demand.”

It may be helpful to reproduce the table I posted last week: the range of variation in  corporate tax revenues to GDP is not that large across the OECD (except for oil-rich Norway). Given the importance of a pro-growth plan and the downside risks to the export sector of varying this tax rate, it does not seem wise for the international debate to focus on this topic.

Corp Tax

Threadbare

The new issue of The Economist has a long analysis piece on Ireland: you can read it here.

Nama Bonds at the ECB

Was it a mistake for the Irish government to use a clever ploy to “park” Nama bonds at the ECB?  Was it the non-standard use of the ECB’s temporary liquidity facility as a source of long-term bank sector funding that led the ECB this week to demand an Irish debt restructuring?  Or should the ECB have accepted that they needed to provide long-term risk capital to the Irish banking sector in this non-standard way, as part of their role as euro-area lender of last resort?

 

Continue reading “Nama Bonds at the ECB”

Honohan Interview on IMF\EU Loans to Ireland

Patrick Honohan has given an interview to Morning Ireland (audio available here) that provides some more clarity as to what is going on in relation to Ireland borrowing from the IMF and EU.

Update: For those without access to audio, here‘s an almost-accurate transcript from the Guardian’s new Irish business blog (I doubt somehow if Ireland will be borrowing in the form of FDRs. Different kinds of dead presidents are likely to be involved.)