Month: November 2010

IMF: Structural Reforms in Ireland

The IMF has just released a new Staff Position Note Lifting Euro Area Growth: Priorities for Structural Reforms and Governance

[One of the co-authors is Ajai Chopra]

Its recommendations for Ireland are:

1. In relation to the labour market:

  • Introduce gradual decrease of benefits over time of unemployment spell and stricter job search requirements
  • Provide more resources to the unemployment agencies (FÁS) to provide efficient job search assistance to the growing number of unemployed
  • Review the level of minimum wage to make it consistent with the general fall in wages

2. In relation to improving competitiveness:

  • Reform planning and licensing systems in net work industries, so as to increase competition in sheltered services sectors
  • Focus public resources on high-priority projects in the knowledge-based economy

Bondholders and Restructuring

The completely nebulous nature of last night’s annoucements in relation to bank restructuring means we are no wiser today than yesterday about what is actually going to happen with our banks. However, the following statement from Michael Noonan (not a man given to reckless speculation, I would venture) is worth discussing:

Fine Gael finance spokesman Michael Noonan said there may be conflict between European officials and the International Monetary Fund the restructuring of Ireland’s banks.

Mr Noonan said the IMF may favour more burden sharing with bank bond holders than European officials as a condition of aiding Ireland.

As is this article by John McManus.

Irish Government Statement on Application for Financial Aid from EU and IMF

The statement is available here.

A Call for a Public Retraction from Garret Fitzgerald

In the last 2 years or more, serious academic economists such as Morgan Kelly, Karl Whelan and other contributors to this blog have been subject to a campaign of anti-intellectual abuse by the ‘leaders’ of public opinion in Ireland.  The ad hominem attacks on Brian Lucey were unforgiveable.  Some of these opinion formers (those who work in the financial services sector) may shortly be unemployed.  Those who remain should be shunned, certainly by academics.

However one name sticks out – former Taoiseach Garret Fitzgerald.  Let me make my personal position clear: I can think of almost no one in Irish public life whom I have admired more. Let us not also forget that he served as a faculty member of the economics department in UCD for part of his career.  Consequently, his “gratuitously condescending comments….. regarding the NAMA dissenters”, to quote Kevin O’Rourke earlier today, were particularly puzzling.

Garret, I know you have the dignity to restore your reputation.  Now do so.

Lenihan Admits Banks Couldn’t Be Saved by the State

On This Week on RTE Radio One, just now, Brian Lenihan has admitted that his banking policies failed in the sense that the banking problem proved too big for the state to solve on its own.

The audio is now available here. Here’s the exchange about the failure of banking policies:

Richard Crowley: Our strategy failed. Could you not admit that now?

Brian Lenihan:  Yes it did in the sense that the banks were too big a problem for the country. I accept that.

Richard Crowley:  And the steps you took were not enough to prevent it.

Brian Lenihan:  The steps could not, given the limited resources a small state has. Yes, I accept all that. But nobody has suggested they were the wrong steps.

The incredibly depressing thing about the banking meltdown is how predictable it all was. Click here for a post from a year ago that links to a presentation I gave to the Labour Party titled “The Banks After NAMA.” A few highlighted phrases:

“government argues that the NAMA loan transfers will fix our banks and get credit flowing. There are good reasons to believe that this is not the case”

“The banks have not developed a sustainable new funding model.”

“more losses to come: The severity of this recession will trigger big losses on mortgages, business loans, credit cards”

“major banks are seriously undercapitalised relative to the size of their balance sheets.”

“the ECB’s unlimited lending policy is likely to come to an end over the next year or so. What then?”

I guess we have an answer now to the last question.