Year: 2010

Wave power, the sequel

I previously argued that wave power would, if anywhere, be commercialised first in Ireland — because our waves are second to none (in the populated world) — but that there is no reason to assume that it would be an Irish company that does the commercialisation.

Indeed, Ocean Power Technologies of Pennington, New Jersey, has kindly offered to accept the generous subsidies for wave power offered by the Irish government (see Irish Times).

As is customary these days, OPT promised to create “ten of thousands” of jobs. The jobs are in construction and therefore temporary.

OPT also called for a streamlined approval process.

Debt Profiles of At Risk Eurozone Countries

Here‘s an interesting set of charts from Spiegel Online describing the debt problems of the countries who make up a certain animal-related acronymn. The graphs on the maturity profiles of the debts for each country provide a useful perspective on the stabilisation deal.

The EU Stabilisation Plan

After the excitement of the weekend’s EU announcement, the question most people will ask is “will it work?” I think the answer to this question depends on what we mean by “work”.

There are obvious parallels here with the banking crisis. As markets began to doubt the solvency of many institutions, including the Irish banks, access to short term liquidity dried up for these institutions. Governments provided various liability guarantees to help these banks regain access to markets (ours being the most extensive) but these guarantees did not change the underlying solvency picture. Ultimately, the problem of insolvent banks had to be dealt with via costly recapitalisation measures, a process that we in Ireland have yet to complete.

The size of the funds announced in the EU deal are large enough to most likely ensure that, for a while, no EU country will fail to roll over its sovereign debt. In that sense it will most likely work. But it doesn’t change the fiscal reality.

Last week’s €110 billion Greek deal wasn’t well received by the markets because it still seemed to imply a Greek default was on the way. Last night’s announcement is being well received but then it doesn’t actually come with a concrete fiscal restructuring plan for Portugal, Spain or Ireland, so the plan can be taken good news without having to question any dubious underlying assumptions about fiscal sustainability. If the time comes when this fund is tapped but the markets don’t buy the stabilisation plan announced, the situation could unravel again.

Most of the thoughtful reaction elsewhere points to it being a long and complicated road ahead. The Baseline Scenario guys give their reaction to the plan here. Arthur Beesley also has a nice piece in the Irish times here.

InterTrade Economic Forum

On the 28th of April InterTrade Ireland held their second Economic Forum entitled Shaping Recovery. Speakers included Barry Eichengreen (Berkley), Linda Yueh (Oxford), Will Hutton (Work Foundation) and Michael O’Sullivan (Credit Suisse). The presentations have now been put on the web and can be found here. As the speakers took a wider perspective the presentations are still relevant.

Barry Eichengreen argued that Zarnowitz’s Law – the deeper the recession the stronger the recovery – would not hold this time. While he argued that the US won’t experience a double dip, he also thinks that current projections are to optimistic. He believes that Europe will underperform relative to the US. He also had a few words on Greece.

Linda Yueh focused on Asia. She was upbeat but also highlighted the issue of global rebalancing. She pointed out that as China has a very poorly developed financial system the exposure to the financial crisis had been minimal. However, internal rebalancing and re-orientation of the economy towards domestic consumption were important challenges. She highlighted that China is becoming a capital exporter particularly in relation to energy, minerals and other raw materials (this has implications for Europe).

Will Hutton focused on innovation. He also commented on the economic problems in the UK and Ireland (he made a few comments that might provoke some debate – unfortunately he had to leave the discussion early). In general he argued that since innovation depends on the cumulative stock of scientific and technological knowledge most innovation will continue to take place in the EU, US and Japan but that it was important to put the appropriate structures in place.

Michael O’Sullivan took a closer look at Ireland, outlining achievements, comparing the latest crash with previous ones and argued for institutional reform He also had a very interesting quote about the Irish by Fridrich Engels that I had not heard before. His graph on the growth of Irish golf clubs also caught attention!

All in all  there was plenty of food for thought including lots of interesting graphs and I suggest you have a look yourself. You can also listen to the presentations.

The ECOFIN and ECB Packages

Here is the press release detailing the funding strategy decided by ECOFIN.

Here is the press release explaining the ECB decision.