QNA Release for 2011:Q1

The quarterly national accounts for 2011:Q1 have been released. They show seasonally adjusted real GDP increasing 1.3% quarter over quarter and seasonally adjusted real GNP falling 4.3% over the same period.

Smoothing through the volatile quarterly series, looked at on a year-over-year basis, real GDP was up 0.1 percent and real GNP was down 0.9 percent.

Overall, the picture seems to be one of an economy in which output has stabilised. Given the substantial negative headwinds (fiscal contraction, falling credit, debt overhang and a frozen property market) this is a pretty good performance. Still, it seems too early to say that the economy is about to produce a period of job-producing growth.

58 replies on “QNA Release for 2011:Q1”

Is it just that Christmas is a big quarter? Is it not “seasonally adjusted”?

And worth mentioning in the accompanying Annual Accounts the GDP fall in 2010 was actually only -0.4% (rather than the 1.0% reported last March).

GNP was actually positive in 2010 at 0.3% (and not the -2.1% reported in March).

The series seems to line up with my suspicion about the Q4 results (see http://www.irisheconomy.ie/index.php/2011/03/24/latest-gdpbop-data/#comment-134616)

There looks to be some seasonality in the net factor data where Q1 is a big number and Q4 is a small number, and that seasonality has gotten bigger. The Q1 net factor adjustment is the biggest in the series.

It looks as if the domestic economy is running along the bottom or still declining slightly and that exporters (particularly foreign owned exporters) are having a good time. The winter weather can’t have helped. Retail must have had a dreadful xmas and sales season. It is possible that some Xmas activity leaks into the Q1 reporting?

Whats the total % GNP contraction since the 2007 peak ? , and can it be linked closely to outstanding private credit ?

Surely there is room to finance a sugar beet factory and / or a Luas line in Cork with all this biblical slack in the economy.

Its as if a economic neutron bomb has exploded.

I am glad the exchequer funds do not flow directly into CRH shareholdings with such abandon now but this is getting ridiculous when building & construction is in the 3 figure area for Q1.
A dramatic change in transport policey is called for if we truely want to increase our balance of payments surplus.
A ration book for private petrol / diesel consumption is not out of the question in my opinion now.


I agree these are actually quite positive developments given current circumstances.

IMHO now that most people have realised that the “boom” has really gone away adjusts their mindsets/expectations accordingly and realises that recovery will take three or four years we will start to see steady, but slow, net job creation.

I expect that unemployment figures will stay above 10% for at least two more years not because we are a “basket case” but because (despite media hype that “Shangri La” exists somewhere beyond Dublin airport) net emigration will not be as high as some people like to predict. IMHO only after demand for new construction returns in 2014-15 will we see employment levels start to edge above the 1.9 million mark.

These results have been spun far too fair a wind so far. I think they are appalling figures.
The headline figure is a fall of 4.3% in Qtr 1 GNP. From recollection Greece was about the same.
Minister Noonon was today talking about most spending and profits being in the run up to Christmas!.
So we have to wait for Santa Claus for the economy to improve. If we keep going down at a rate of 4.3% per Qtr, Santa will too scared to come to the Ireland that will exist by Christmas.
All the spoof in the world does not change figures.

Whats the % drop in GNP since 2007 ? , is this number closely linked to outstanding private credit ?
Is there not Biblical slack in the economy to engage in ventures such as rebuilding a ethanol Beet plant and perhaps a Luas for Cork in conjunction with a enlightened fuel tax transport policey that increases our trade surplus ?

Our Industrial policey must be a industrial policey for Ireland , I know its hard for some people to get there head around this concept but I am afraid the global credit farming game is over.

Professor Whelan’s summation of the figures as ‘output has stabilised’ seems reasonable. However, the revisions to previous years’ and quarters’ figures, contained in today’s CSO release, are actually much more significant than the figures for the most recent quarter (Q1 2011), which get all the media headlines. In fact, Ireland’s quarterly national accounts statistics are subject to such high levels of revision that it is often a bit pointless analysing them when first published. It is often necessary to wait a few quarters, until the inevitable revisions are made by the CSO. So, frankly, discussion of the Q1 2011 figures is a bit pointless, as these are almost certain to be revised in coming quarters, especially the GNP figure.

The very good news is that ALL the revisions for previous years’ figures contained in today’s CSO report are UPWARD revisions. The fall in GDP and GNP between 2007 and 2010 has turned out to be significantly less than previously estimated and nominal GDP and GNP values are significantly higher than previously estimated. This is especially the case with GNP. The actual figures are:

for changes in real GDP in 2008, 2009 and 2010:

GDP 2008: previous estimate -3.5% , now revised to -3.0%
GDP 2009: previous estimate -7.6% , now revised to -7.0%
GDP 2010: previous estimate -1.0% , now revised to -0.4%

cumulative change in real GDP between 2007 and 2010:

previous estimate -11.8% , now revised to -10.2%

for changes in real GNP in 2008, 2009 and 2010:

GNP 2008: previous estimate -3.5% , now revised to -2.8%
GNP 2009: previous estimate -10.7% , now revised to -9.8%
GNP 2010: previous estimate -2.1% , now revised to +0.3%

cumulative change in real GNP between 2007 and 2010:

previous estimate -15.6% , now revised to -12.1%

So, real GDP has been revised up by 1.8% and real GNP by 4.1% It turns out that real GNP actually rose in 2010 by 0.3%, instead of falling by 2.1% as previously estimated, which no one had predicted at the start of 2010. There was a thread opened on this site a few months ago by Gregory Connor, highlighting the fact that GNP per capita in Ireland was reported by Eurostat to be 8 per cent below the EU15 average in 2010, and, based on those figures, it was claimed that Ireland was back among the poorest countries in the EU15. Today’s revision cuts that gap from 8% to 4% at a stroke. I think it may be eliminated completely when updated PPS comparative price level figures are published. These are only updated every 2 years and Eurostat are still using 2009 comparative price level figures. When they are updated to take account of the fall in the comparative price level in Ireland since 2009, and combined with today’s CSO revisions, I think that GNP per capita in Ireland will turn out to be still above the EU15 average even in 2010. However, that is a separate issue from today’s CSO revisions.

In today’s release, the CSO have also made significant upward revisions to both nominal GDP and nominal GNP, as compared with previous estimates. These are significant when claculating debt as a percentage of GDP.

GDP has been revised up from 153,939bn euros to 155,992bn euros.

GNP has been revised up from 124,863bn euros to 128,207bn euros.

According to DAVY analysis in Finfacts web site (link below):

“The revisions to nominal GDP mean that the government debt/GDP ratio in 2010 was 94.7% as opposed to 96% prior to today’s national release;
The debt/GDP ratio rose to 100.2% in Q4; the revision means that the ratio is now 95.8%.”


The other big revision in today’s CSO release was for the balance-of-payments. This was previously estimated to be in deficit of 1,113bn euros in 2010, with forecasts that it would move into surplus in 2011. But, it has now been revised by the CSO to a surplus of 761bn euros in 2010, so Ireland INC is allready in surplus. Therefore, the chances of Ireland exiting the euro are even more remote now than before, which is very good news for my investments.

Regarding the outlook for GDP growth in 2011, the government target is 0.75%. In Q1 2011, real GDP was 0.3% above its average 2010 level, so it only requires minuscule growth in the remaining quarters of 2011 to achieve this. It is impossible to be certain that this will occur, but the odds on it occurring must be very good. However, even at this stage, I think we can be confident that Ernst & Young’s much-publicised recent forecast that GDP in Ireland would fall by 2.3% in 2011 is very wide of the mark.

Looking at the individual components of GDP, exports are continuing to perform exceptionally well. The volume of exports rose by 3.8% in this quarter alone, and are now at an all-time high, some 3% above their pre-recession peak, which only a handful of other countries in the EU have achieved. However, the real drag on growth is the collapse in construction output. Real construction output fell by 52.5% between 2007 and 2010. In Q1 2011, it fell by another 19.2% compared with Q1 2010. If it wasn’t for the fall in constriction output, real GDP in Q1 2011 would have been up 1.0% on Q1 2010, rather than the 0.1% that actually occurred. Economic forecasting can be difficult, but one forecast we can make with certainty is that the drag effect on real GDP growth from falling construction output can not continue much longer, for the very simple reason that construction output as a percentage of GDP is now getting close to zero. In Q1 2011, construction output as a percentage of GDP amounted to 2.5%, which is probably the lowest ever recorded in a developed country. Even if the construction industry were to disappear completely, as many want, the further drag effect on real GDP growth from this would be only a small fraction of what has allready occurred. So, we can say with certainly that construction output, as a percentage of GDP, will stabilise in the not-too-distant future, even if it is at zero level, and, when it does, there will be an immediate boost to the real GDP growth rate, as the drag effect of falling construction output will be gone.

If Ireland was a normal country, the quickest way to boost GDP growth and to generate the jobs that Professor Whelan has referred to would be to get construction output as a percentage of GDP back up towards the 6%-7% level, which is the norm for developed countries. Doubling the real volume of construction output from its current collapsed level of 2.5% back up to, say, 5%, which would still leave it well below its 2007 level and still well below the level in other developed countries, would be by far the best way of generating jobs. It is a no-brainer. However, we know that, while market forces will inevitably lead to a resurgence in construction’s share of GDP in the long-term, measures to expedite this process are unlikely in the prevailing political climate. As all politically-correct people know, the construction industry is composed largely of evil people, who committed ghastly crimes, such as accepting the hospitailty of Fianna Fail in their Galway tent, and so must be punished to the point of extinction, regardless of the cost in jobs.

I am off to Iceland for the weekend to see the midnight sun. But, I hope also to see for myself if there is any truth in the claims of some celebrity economists that its economy is resurging as a result of welshing on its debt. However, I won’t be lending anybody any money while I’m there, as given the prevailing mores in that country, I’d have no chance of getting it back.

@Rob S

Whats also interesting is that the Q2 2010 GDP figure has been revised. That was released at a critical point in the debt crisis in September 2010 last year, with the original figure of -1.2% suggesting an economy which was contracting rapidly. This got a lot of coverage internationally at the time, and played a small but not entirely insignificant role in what insued. This figure has now been revised to just -0.1% – revisions are the way of the world, though its a pity nontheless.

I know I’m being pedantic, but can people please stop calling it a ‘balance of payments surplus’.

@ Karl

ah, Irish economic growth data, enough chaos for anyone to see anything they want. The usual suspects, all perfectly correct in what they say, setting out their usual stalls. We’re bouncing along the bottom. We’re probably on an up-bounce right now, but no telling how long or high it will last.

The one thing i’d offer is that given the upward revision to 2010 national accounts, isn’t that a positive from a revenue/tax point of view, in that the denominator starts off in 2011 at a higher aboslute level, and ultimately, thats whats most important from the deficit point of view? Or am i wrong?


Flat Flat_ish … now let me see …. which country was serious, austere, a good girl, had enough of it – copped itself on … and boomed again?

Default on the vichy_banking debt must remain on the table. For Ireland. Certainly for Greece and Portugal. Possibly for more. Citizens have had enough of this Contagion Spin – we are contaiged enough so time to let the politicos, stockholmed syndromed by the financial system, know.


@JTO, Ronnie O’Toole

Very true, perhaps we should just focus on the domestic spending indicators and all too periodic services figures rather than get uppity about GDP fluctuations that are subject to wild variation.

On another note, I notice the CSO is now using 2009 (rather than 2008) prices to calculate its ‘Real GDP’ (GDP at Constant prices). Does this change every two years? i.e. In Q1 2012 will Real GDP use 2010 prices?

@ jTo

‘If Ireland was a normal country, the quickest way to boost GDP growth and to generate the jobs that Professor Whelan has referred to would be to get construction output as a percentage of GDP back up towards the 6%-7% level, which is the norm for developed countries’

Normal is a funny old word. Do you know any other developed countries which depend so heavily on FDI to stop sovereign bondholders from scrambling for the exits ?

I wonder how much of the ‘GDP growth’ is profit transfers being booked in advance of an anticipated rise in corpo tax ? MNC CFOs play poker.

@ DoC
You are an awful man.

@Ronnie O’Toole

Following today’s CSO revision, which now puts the fall in GDP in 2009 at 7.0%, your own forecast in summer 2009 of a 7.1% fall in GDP in 2009 (which I mentioned on a few occasions here at the time) has proved to be spot-on and has turned out to be easily the most accurate forecast for 2009 of all the mainstream forecasters. If you recall, at that time most were predicting a fall in GDP in 2009 of between 9% and 10% and your’s was derided by some as too optimistic. Congratulations!

I cant believe the complacency here.

@Livonian + JTO

You have no idea when or if employment will return. Its seems to me that you believe this crisis to be a standard Keynesian cyclical re-balancing. Nothing to worry about really! Would I be right in thinking that somewhere in this “recovery” we see a nice dollop of inflation and another boom?

Actually, I am sick of Keynes and all his apologists. When will you get it? The end game here is the conflagration of the global fiat currency system. Within three years.

Emigration? Think “Boat People”. Ireland is totally unprepared.

The construction industry accounting for 0% of output = no drag on future figures. Jesus?

Of course it must be remembered these figures include a level of QE similar in size to that being rolled out in the US, the continuing funding of the budget deficit will not last, a further down leg on this bottom picking will happen

@ Robert Glynn

Are you suggesting people will be emigrating in cobbled together boats because we have too many houses and don’t need to build more? Think about that for a minute.

Why was my post removed ?
Was it because I was incorrect in my calculation that Ireland’s GNP contracted 26% from Q1 2007 – Q1 2011 or was is because I suggested that Hibernia was the worlds premier corporate bitch ?

@Karl Wheelan

Bit worried about your calculations for real GNP. Real GNP is down 4% over the two quarters.

@Jake Watts

Glib statistics – what planet are you on.

I have an even better one for you – a particular Irish ‘New Entrant’ on the latest Sunday Times Rich List (that bastian of economic knowledege) made it in with a valuation of €28m no less – ‘because of their ability to see the impending construction downturn and leverage up their skills developed over the past decade’.. yadi yadi etc etc.

The same business less than 3 months following the publication of this nonsense is in Liquidation with all manner of subcontrators left in serious holes.

So wise up. Paper simply does not refuse ink. The sort of stuff that I heard from Sinn Fein and Labour last year about a wealth tax melted away like snow on ditch. Why? Because its utter nonsense as both parties realised that most of this stuff is Gross estimates i.e. without debt/leverage considered.

Recently noted a house in Sandymount sold in 2006 for €9.5m and buyer now forced to resell it for €1.95m that’s a loss of 79%. These studies would suggest that original buyer was millionaire whereas in fact the purchase was financed with a loan estimated at c€3m at the time with a sale of another property financing the balance. Now let me see €1.95m – €3m would suggest this individual is in the hole for €1.05m – but these studies/surveys would have them listed as millionaires i.e. the exact opposite to whats being peddled as ‘fact’.

Sinn Fein and Labour have now realised this and calls for wealth taxes are no more because the annoyingly important fact of debt getting in the way alters emotional cries such as yours.

@Jake Watts: I know that income and nwealth distribution are a bit off-topic, but on looking at the eapn link in your post, I came across this gem (the last sentence in the piece):

“In terms of income inequality, the Gini coefficient measurement reveals that in 2008 the top 20% of people had incomes 4.4% greater than that of the lowest 20%. This is just below the EU average”.

If the numbers citred are correct then that makes Ireland about the least unequal place on earth. And if you know what a Gini Coefficient is, it’s a single number whihc tells you nothing about the income share of the top and bottom quintiles. I think the eapn should be a bit more careful in what they write.

@ Jake

that link is confusing. An entire page devoted to how inequal we are, but the last two lines stating: “In terms of income inequality, the Gini coefficient measurement reveals that in 2008 the top 20% of people had incomes 4.4% greater than that of the lowest 20%. This is just below the EU average”.

Also, per the “total wealth exceeded €1 trillion in 2006”, what do you reckon it is now, post housing collapse? I love the blasé “prior to the recession…” reference in it…

@Ronnie O’Toole

This might be more relevant to the other thread on competitiveness that you are currently posting in, and which is one of your specialities. The NCC report is excellent. But, the figures in it for productivity growth and unit wage cost falls across the whole economy will now have to be revised in line with yesterday’s CSO revisions to GDP and GNP.

If measured on the basis of GDP, then the rise in productivity between 2007 and 2010 will now be 1.8% greater than estimated prior to yesterday, and the fall in unit wage costs across the whole economy will also now be 1.8% greater.

If measured on the basis of GNP, then the rise in productivity between 2007 and 2010 will now be 4.1% greater than estimated prior to yesterday, and the fall in unit wage costs across the whole economy will also now be 4.1% greater.

Based on the revised GNP figures, it looks as though productivity rose by almost 5% in 2010, and unit wage costs fell by almost 7% in 2010, which helps explain why the balance-of-payments went from a deficit of 5.6% of GDP in 2008 to a surplus of 0.5% of GDP in 2010, a turnaround of 6.1% in two years, a performance which has few precedents. Clearly, the idea that Ireland will have to exit the euro and make a massive devaluation (circa 50%) to compete, which the likes of McWilliams repeatedly claim, is quite ludicrous.


Thanks for the informative post outlining the over pessimistic previous GDP GNP figures.

However I have a problem with your proposed solution. The “No brainer”.
There is no private construction demand.
We hava a massive oversupply of commercial and domestic dwellings. We now have a fine motorway system (the best lasting legacy of the celtic tiger).
The only place we can manufacture demand for construction is in the public arena. But the state does not have any cash (we are not going to spend the NPRF again are we) and I don’t see any private investors beating down the minister of finances door wanting to get involved in PPP’s

The reason that construction is only at 2.5% of GDP is because it was way ahead of the norms of an industrialised country of 6-7% ( I thought it was 5%) for so long. We have huge oversupply in most areas.
Perhaps you have ideas for new construction projects that would be profitable and attract private investment but I cant think of enough to start bringing us back to 6-7% of GDP any time soon.

I love the notion that TASC in an independent think tank. It is a celeb socialist tank if anything populated by people in the failed “Democracy as Soon as We back from the Riviera” movement.

There should be penalty points for anybody quoting from the infamous Bank of Ireland Report from 2006. Assets on average might have been 200k on average but as we subsequently found out Assets do not equal Net assets. Many of the putative 1-3% are no longer solvent.


@ Karl

crack out the IE.ie celebratory bunting or whatever….

@ Yields or Bust

“Recently noted a house in Sandymount sold in 2006 for €9.5m and buyer now forced to resell it for €1.95m that’s a loss of 79%. These studies would suggest that original buyer was millionaire whereas in fact the purchase was financed with a loan estimated at c€3m at the time with a sale of another property financing the balance. Now let me see €1.95m – €3m would suggest this individual is in the hole for €1.05m – but these studies/surveys would have them listed as millionaires i.e. the exact opposite to whats being peddled as ‘fact’.”

Yes, but don’t forget the vendor in 2006 who walked away with €9.5m tax-free in cash. For every developer who splurged borrowed money on speculative ventures, there exists a canny landowner who cashed in at the top of the market.

@jake, eoin

Contrary to what the likes of Vincent Browne and Fintan O’Toole write every week, inequality has fallen dramatically in Ireland since 2001. The relative poverty rate (percentage below 60% median line) rose between 1994 and 2001 when it peaked, but has fallen every year since 2001. Naturally, this got very little publicity in the media compared with the increase between 1994 and 2001. The relative poverty rate (percentage below 60% median line) went below the EU average for the first time in 2009. Other measures of inequality, like Gini coefficient, have followed a similar pattern. In contrast, relative poverty in the UK hasn’t fallen at all. Back in 2001, Ireland was at one extreme of inequality in the EU, along with the UK, with the Nordic countries at the other extreme. Since 2001, Ireland has moved in the opposite direction and is now slightly better than the EU average and much better than the UK for inequality and relative poverty. All the information is in the annual SILC reports. The main reason for it is the very large increases in social welfare benefits that the Fianna Fail government brought in. These are now much higher than north of the border. Whether one considers these increases in social welfare benefits economically sensible or not, the fact is that they did happen and the sharp fall in inequality and relative poverty since 2001 is the result.


@Eamonn Moran

I am not dofging your question, but am heading for airport in 5 minutes. Maybe I will find time to post a reply from Iceland.

@ Eamonn Moran: “There is no private … demand.”

Spot on! I deleted the ‘construction’ so as to make your quote more ‘quotable’.

Folks that can, are either paying down debt (de-leveraging) or saving. That’s demand in the toilet. Commercial firms are attempting to salvage what they can (deleveraging also or scaling down work to lower limits). That’s also demand in the toilet. So, who’s left? Good olde Gobermint!

What we need is a massive fiscal stimulus – NOT money printing! Like the repair and upgrading of domestic water network. Like extension and upgrading of main-line and light rail lines. Keep the private sector contractors on VERY tight time-lines. “You finish on time and on budget – or you never get another gov contract – ever!”

Likely return on these ‘investments’? That’s not the issue. The issue is to prevent the state from imploding. Which it will, if we contine with the ‘austerity’ nonsense.

Where’s the money to come from? We simply pay back xx% of what we owe. Keep the rest at home and use some of the savings being accumulated.

Did you see the daft suggestion by Noonan in the Indo? “Go out and spend!”. Either he has no understanding of the real situation with respect to private demand or he is attempting to mislead the majority of folk, who genuinely have no idea of the calamitous situation the country is in and rely on others for their info.

Brian Snr.

@ KW
‘Still, it seems too early to say that the economy is about to produce a period of job-producing growth’

It’s not too early to say this though, and it’s Satyajit Das who is saying it:

‘The bailout plan did not lower the nation’s interest costs or their access to markets. Interest rates on borrowing for Greece and Ireland are higher now than at the time of their bailouts. Despite the likelihood of EU support, Portugal’s cost of funds is unsustainably high. Spain and other countries, such Italy and Belgium, seen as vulnerable by investors have seen their borrowing costs rise inexorably.

The bailouts have made its less not more likely that these countries will regain access to markets in the near future. As existing debts mature, the funding provided official sources, the EU, ECB and IMF, is increasing. As these countries need additional financing, the absence of private financing will increase this proportion even further, leaving them to bear the bulk of losses in any restructuring.

The lack of confidence reflects the failure of the rehabilitation plans and the continued unsustainability of the debt levels of these countries. The lack of economic growth and deteriorating public finances is not likely to reversed soon’


also off topic

“Kenny reassured Ireland will avoid Greece debt fallout”


not according to bond yields which are now almost 12% FFS. How is that NTMA roadshow? I think the truck may have a flat tyre.


Greek CDS hit a fresh record on Friday of 1,545 basis points, meaning it costs €1.545m annually to insure €10m of Greek bonds. For investors, policymakers’ word games might cause headaches. But their response to these games is fairly straightforward: avoid peripheral bonds. Mr Nangle sums up the situation for many by saying: “It looks quite a mess. It is difficult to gauge what will happen, which means it could be wise to stay out of the eurozone peripheral markets altogether.”

@ Eamonn Moran

We have a spanking new motorway system but it is not joined up. If a tourist arrives in Rosslare and wants to go by motorway to Galway they have to take a N route to Waterford and then the motorway to Dublin to join the Galway motorway. Only the Thick Public Servants in the NRA would leave you in that situation. Loads of construction there which will pay for itself….

@Brian Woods Snr

I would have to disagree with you.
They are saving in a diminished money supply

You have got the process back to front – money creation comes first.
I believe private sector credit peaked at 400+ billion in the autumn of 2008 , I think its roughly down 76 Billion since then and falling…..

If risk deposits cannot be destroyed we need printing rather then fiscal stimulus as for the most part we do not own Irish Fiscal debt and so the money supply will be externalised even further.

If we had our own currency the only mechanism to save the value of the currency would be to convert all credit deposits into goverment money which would revalue all credit dependent assets to their true cash value.
Our masters both inside the Pale and outside will not allow this to happen.
Sadly they want the private extraction mechanism to continue.


Fair enough – unfortunately many (read ‘most’ in the case of farmer development land sellers) of these cash millionaires went into their local bank and lodged the money and then got a call from the banks own ‘wealth advisor’ suggesting that bank shares represented a very safe investment paying c3%- 4% dividend yield with likely capital upside to booth.

Eh…need I say more.

Might I suggest a call to John Paulson & Associates to levy a tax on the gains because that’s where a huge chunk of them now sit. The best of luck with that.

In relation to talk about “spending our way out of recession” and “people are saving too much”
Does this “saving” also include people paying down debts?
Are there any figures about the relative difference between the two? It seems to me that paying down debts should not be classified as saving.

I wonder who reassured Kenny. Whoever it was is sprouting innane rubbish with the German Irish spread now at 9.13%. When we got the bailout it was about 4%. If Greece blows we are next in line.
Even if the Greeks get the austerity package through Parliament next week I’m betting that the relief will be short lived. The new Finance minister is quoted today in a Greek paper as saying the measures are not the correct one for Greece.
The headline you quote reminds me of turning corners, cheapest bailout ever etc.etc. Does Enda think everyone in Ireland is thick.

Job growth will only follow a resolution of the crisis, now in its 4th year

Here is Merv on the lie of the land


“Sir Mervyn King, governor of the Bank of England, warned on Friday that stopgap measures to extend new loans to countries such as Greece, Portugal and Ireland would not solve the eurozone debt crisis.
Presenting the Bank’s first analysis of financial stability in the UK banking system after the formation of the new financial policy committee, he said the eurozone debt crisis was a crisis of solvency that would not be resolved by extending new loans.
“Right through this crisis from the very beginning … an awful lot of people wanted to believe that it was a crisis of liquidity,” Sir Mervyn said. “It wasn’t, it isn’t. And until we accept that, we will never find an answer to it. It was a crisis based on solvency … initially financial institutions and now sovereigns.””

@ seafóid

Thanks for the link.

“after the formation of the new financial policy committee”

The starting gun for all this was pretty much the same for everyone. How come the UK has got its shiny new financial policy committee in place while Ireland is still wondering if it would be a good idea?

@ DoC: Thanks for comment.

My assumption (cert par and all that jazz!) is that our dear olde Permagrowth econ thrives on consumption. Its like a shark, stop moving forward and you zink!

The private consumer and most of of the commercials are tuckered out and have closed their wallets and torn up (I hope) their credit cards. That leaves Gov as the only spender in town.

That money creation bit has me foxed. Except you mean virtual credit-money, rather than real cash sort of money – then OK. But if all-money supply is contracting (is it?) and velocity is slowing!!!!

Seems like we are well and truly shafted.

Brian Snr.

@Yields or Bust

But your example of someone investing in bank shares is exactly the same as your example of someone investing in property. In all cases there was someone on the other side of the transaction that gained. I think you are mixing up money creation/destruction (which is performed by banks extending and extinguishing credit) with money transfer between two parties in a transaction.

In Ireland approx €100bn was lent to people/companies that were supposed to pay it back but who will not pay it back. This money was transferred to other people/companies (in return for assets/goods/services) that don’t have to pay the money back to anyone. This money is still there, somewhere in the global economy. Some of this money will have been transferred to people that make cars in Germany, to resorts in Dubai etc. Some will remain in bank accounts and investment funds held by the people/companies that received the money. None of this €100bn disappeared or was destroyed.

Noonan’s latest “Shop for Ireland” campaign is a misguided response to this situation. Noonan should focus on taking the steps needed to increase productivity in Ireland such that goods and services are better value for money (e.g. taking on vested interests/cartels that keep prices high and protect insiders at the expense of customers). Once this is done the spending will take care of itself. People will spend their money on what they see to be a good deal, not due to “encouragement” by a Finance Minister.

Next Round in the TARGET-2 debate :
“Target Loans, Current Account Balances and Capital Flows: The ECB’s Rescue Facility”
CESifo Working Paper No. 3500 by Hans-Werner Sinn and Timo Wollmershäuser
with an appendix named”Reply to the critics” (One is Karl Whelan)

As the endonoist said to his patient, I think I hit a nerve. I was attempting to make two points. One, Ireland has a very high level of wealth concentrated among the few. Second, Iceland, where JtO is visiting, is a more equitable society and has arguably come out better by defaulting. I would venture to predict that as time goes by (maybe as soon as this coming Tuesday), Iceland’s choice will be seen more and more as the correct action. I have furnished a more “reputable” source on wealth in Ireland. However, I could only find an edition for 2007. I imagine the publisher has had other fish to fry since that time.


Merv has been pretty clear about what happened from quite early on. I remember him saying to a Parliamentary committee that it was entirely rational for depositors at Northern Rock to panic.

Compare and contrast with here. Has anyone actually come out and said that *all* the banks were insolvent?

@Brian Woods Snr
Well yes, in the final analysis what does it matter what the mechanism is – our supply of money is being drained to pay external interest.
They just need to keep us alive long enough so that they can get Euros back rather then punts.
Hence the ECBs effort to keep the values of non productive assets high by loaning cheap money to bust banks and expensive money to the state to prevent real organic recovery.
Just finished listening to a extraordinary bit of propoganda about Greece on BBC radio 4 Saturday Today programme (last 10 minutes or so) and can’t help thinking what sad little fools the Irish are.
Its not that we are “Good Europeans” – we are just deeply insecure and childlike, this need to be loved is a deep weakness withen our character.

I can’t help thinking that “Operation Green” would have been a success – despite their flaws it seems the Greeks are made of sterner stuff.
The Irish State is a creature of the banks and despite the endless pointless rhetoric I suspect always was.
I wish the Greeks good luck against resistance to tyranny once again – they may be Europes only hope.

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