This FT article reports on two letters it publishes today (the article provides links to the letters) which argue against a more aggressive approach to fiscal consolidation.
Year: 2010
As many of you may have heard, Fine Gael’s Senator Eugene Regan (who’s been having a busy few weeks) submitted a formal complaint about NAMA to the European Commission in January. Last week, Regan followed this up by submitting a detailed discussion of how the NAMA legislation is inconsistent with the EU’s guidelines on impaired asset schemes. The detailed document is here and the summary is here.
The European Commission continues to instruct Bank of Ireland to stop paying coupon payments on lower tiered bonds unless the payments are legally binding. Which brings us back again to the €280 million that is due to the Irish state from Bank of Ireland this Saturday.
The Commission’s request that the bond coupons not be paid triggers a “dividend stopper” clause for the government’s preference shares: These bonds have a claim that is senior to the preference shares, so this clause ensures that the holders of preference shares can’t get paid before them. This means we won’t be getting €280 million in cash from BoI this weekend.
The Economist website features an interesting graph that shows the correlation of a father’s educational status on the probability that a son will obtain a university degree – together with Luxembourg, this correlation is strongest for Ireland.
Not wanting to be outdone by Martin Feldstein, Laurence Kotlikoff (recently based known for his Limited Purpose Banking proposals) is the latest US-based economist to bring his analytical skills to bear on the Greece’s problems to diagnose an instant solution:
Is there some way that Greece can devalue without devaluing?
There is, indeed. The government can implement wage and price controls for, say, the next three months, with these controls covering not just the growth in wages and prices over the next three months, but also their initial levels. Specifically, the Greek government would decree that all firms must lower their nominal wages and prices by 30 per cent, effective immediately, and not change them for three months. After three months, everyone would be free to put prices and wages back up.
This is an interesting proposal. Indeed, if this decree-based approach proves to be successful, it could then be applied to other areas. For instance, in the sphere of justice, the Greek government could decree that people should obey the ten commandments. And, if it works in Greece, we should try the decree approach here. After all, we’re all in favour of evidence-based policy formulation.