Revised EU/IMF MOU Post author By Philip Lane Post date May 3, 2011 The new MOU between the Irish government and the EU/IMF has been released: it is available here. Categories In Bailout 15 Comments on Revised EU/IMF MOU ← IBEC Jobs Submission → Greece Not a Threat to Irish Banks 15 replies on “Revised EU/IMF MOU” I see on page 34 (actions for Q4, 2011) there is to be an introduction of a property tax. That’s new in terms of timing, no. The first subject I look for in such reports are elements that impact planned or potential public borrowing. The most interesting section I found was from p32 onwards with some concrete detail, as Jagdip Singh noted, if the gist already known.. Structural fiscal reforms p31 are laudable of course. There are several institutional initiatives – sections 22-26,. pages 13-14 address some aspects of fiscal issues. The section “Recent Economic Developments and Outlook” avoids all mention of public deficits (p9 in the pdf). It seems that certain courses of action are mapped out by the authorities, with some foreseeable consequences, though they are not mapped here. we can translate it into Portugee also… http://on.ft.com/m79jA1 theres lots of interesting things here. Jagdip : I noticed that we are to have water charges asap but, and heres a nice one, on a household basis not a metered usage basis. Maybe they will call that a property tax. Yip and a further hit on fuel via the Greens wonderful ‘Carbon Tax’. This is a very poor document. The IMF are living up to their reputation. Property taxes, increases in VAT – this kills the domestic economy and prevents any public sector job cuts being aborbed into the private sector. No mention of debt restructuring as far as I can see (though stand to be corrected). I’m not an economist but even I know that this is a load of utter tosh. Will property tax take us onto the streets – you betya!! Haven’t they heard of elasticity? Property tax for a generation in negative equity will be the elastic limit for Irish people. @Eureka, I was wrong on two accounts concerning the Irish elasticity threshold, which should translate into active civil courage once surpassed, I am not holding my breath here either…. The property tax is not new. None of the budgetary measures for 2012 have changed from the previous MoU. The DoF mentioned in its ministerial briefing notes that the property tax was to be set at a flat €100/household in the first year. I am a little puzzled as to why revenue-raising discussions do not include more focus on the possibility of removing or reducing the capital gains tax exemption for the principal private residence. It could raise a great deal of money (according to http://www.tcd.ie/policy-institute/assets/pdf/Collins_Walsh_Presentation.pdf), the money would not be drawn from those who purchased housing in the last few years, and compared to an annual property tax would likely pose fewer administrative and “resistance” type issues in the current climate where many already struggle to pay their mortgage. For data and discussion see: http://www.tcd.ie/policy-institute/assets/pdf/BP25_Tax_Expenditure_Collins.pdf but IMO the brief discussion on p 30 preferring a significant annual property tax is not sufficient or convincing. Property tax is a good joke. Germany manages its property sector carefully and has avoided bubbles over the past ten years with prices kept stable partly by a property tax. We’re contemplating a property tax in a market holding on by its fingers against mortgage default and factored against bubble prices? “iv. The Authorities will complete a comprehensive review of expenditure which will form the basis for the allocation of binding multi-year expenditure ceilings by expenditure vote group with the aggregate expenditure envelope underpinning the governments’s fiscal targets under the EU/IMF financial assistance programme and the Stability and Growth Pact provisions..” Translated from stoogespeak, “we’ll force multi-year interdepartmental budget cuts required of us by the terms of financial assistance programme and the Stability and Growth Pact provisions and we will comply with all similar directives from the Borg Collective” The only way the above can be achieved is by massive redundancies in the Public sector, if wages are to be protected! So economy is on track for stasis, stagnation, and death of the domestic economy, ..hope exports pick up:) On an aside, there is a growing trend internationally to require the State to release information in readable/portable formats. States are voluntarily signing up to laws which require them to publish information and data online in formats that can be imported into spreadsheets and so forth. It is disappointing that this MoU (and its predecessor) were published in a format that (presumably intentionally) precludes word searching. I’ll be running it through the OCR software if I have time myself. However, I wonder and worry at the motivation and reasoning behind publishing this document in a non-searchable format. I echo Zhou’s comment and also wonder at the ‘reasoning and motivations’, but, on the basis that there will be no shortage of interest in the banking/fiscal stuff, I pulled out some of the structural reform stuff: “Actions by Q3 2011 Government will introduce legislative changes to remove restrictions to trade and competition in sheltered sectors including: – the legal profession, establishing an independent regulator for the profession and implementing the recommendations of the Legal Cost Working Group and outstanding Competition Authority recommendations to reduce legal costs. – Medical services, eliminating restrictions on the number of GPs qualifying ad removing restrictions on GPs wishing to treat public patients as well as restrictions on advertising. – The pharmacy profession, ensuring the recent elimination of the 50% mark-up paid for medicines under the State’s Drugs Payments Scheme is enforced. Government shall bring forward legislation to strengthen competition law enforcement in Ireland by ensuring the availability of effective sanctions for infringements of irish competition law and Articles 101 and 102 of the TFEU as well as ensuring the effective functioning of the Competition Authority. The authorities will agree the European Commission a time-bound action plan to implement the recommendations of the study on the economic impact of eliminating the cap on the size of retail premises with a view to enhancing competition and lowering prices for consumers. An independent assessment of the electricity and gas sectors will commence taking due account of the EU regulatory context for these sectors. Q4 2011 The Government will prepare proposals for implementation of the recommendations of the independent assessment of transfer of responsibility for water service provision from authorities to a water utility in consultation with the European Commission with a view to starting charging during the EU/IMF Programme period. The Government is due to consider a programme for potential asset disposals based on the Programme for Government and the Review Group on State Assets and Liabilities. The Government will discuss its plans with the Commission, the IMF and the ECB when it has finalised its response to the review. Q2 2012 Based on the results of the assessment of the efficiency of the electricity and gas sectors, the authorities will further strengthen the regulatory and market reform programme in consultation with European Commission Services, with a view to increase efficiency, improve governance, strengthen competition and improve these sectors’ ability to contribute towards covering Ireland’s financing needs and improving its growth potential and economic recovery.” As others have noted re other aspects, this is not hugely different from the previous version, but there are subtle nuances and the timing seems to be slipping. The lure of the long grass again? It confirms that lawyers, doctors and pharmacists will get (a bit of) a whack, but they’re not the only culprits in the private sheltered sectors. It’s all very vague about how the powers of the Competition Authority will be enhanced. This might catch some of the other price-gougers, but I wouldn’t hold my breath. The water sector reform will be a long drawn out process, but the desire for revenue from water charges will probably drive it along. So revenue-generating trumping efficient pricing of water? And I see that the UK Competition Commission’s silly recommendation on letting the big retail players loose anywhere they want to play will be replicated. What a perfect opportunity to increase the squeeze on workers, suppliers and consumers (in terms of quality). Originally the assessment of electricity and gas was scheduled to be completed by end 2011, but it looks like it might drift into 2012. (The Review Group on State Assets licked off last July with an expectation that it would report by end 2010, but we finally got the report just before the Easter break – another bit of news management?) It looks like some consideration of state asset disposal will be conducted by end 2011, but electricity and gas will be put on the long finger. Probably a bit difficult and sensitive. The nature of the independent assessment will also be interesting. Will a mini-commission of some of the (retired) ‘great and good’ from abroad be recruited? Not sure if it’ll go out for tender by the usual consulting firm suspects, but it will require a fair bit of analysis that might be beyond a commission of the ‘great and the good’. It will probably need a bit more than the largely verbal stuff produced by Regling, Honohan, Nyberg and Wright on the banks and DoF. Still I expect the ToR will be carefully crafted to ensure more is concealed than is revealed. Bit of a mixed bag with some potential to generate efficiencies that would benefit consumers – but loads of get-out clauses, weasal words, opportunities for legal and other obstruction by the currently pampered and occasions for the failure of politcial nerve Just on the readable/portable format, the doc has a title “draft MOU”. So it doesn’t look like the final version – I would expect that there is a commitment to transparency. Ciarán, thanks for pointing that out. I had misread it as a Daft MoU. I oscillate wildly from abject despair to confident optimism. It seems to me that there are many economic reforms happening in this country under IMF guidance -things which badly needed doing. Many of them are really huge (resolution regime for banks). And yet, one needs only think of the mountain we have to climb to return the banks to normality to realise it’s all for nothing. Increasing our competitiveness/balance of payments will only go towards feeding Seymour for decades to come. All this increased productivity in future years has already been consumed by the winners from the bubble. I dislike this business about large retail premises. These are cheap and efficient, but the transport problems they pose and the retail deserts they open up in city centres is a high price to pay. Also, given our oversupply of retail premises -is this the right time to be encouraging the development of new megaretail outlets? … a minor revision, as distinct from a major revision, let alone a rejection. Blind Biddy is still waiting for the re-write … and quietly organising the blind, the lame, the maimed and the intellectually disabled … who are apparently to ‘pay’ for bailing out the Kore Financial System …. she also has a motion before the Oireachtas that a bazooka should accompany all medical card & disability allowance applications in future … her advisors wish to remain anonymous at the mo … but the offer to Kutz McCarthy to take up the position of quarter-master general in her citizens’ army, apparently, still stands. She is in Beijing at the mo – something to do with outsourcing resource acquisitions ….. & long march training. Comments are closed.