Not a new bailout?

Reuters report Minister Noonan as saying:

“There is a commitment that if countries continue to fulfill the conditions of their program the European authorities will continue to supply them with money even when the program is concluded,” Noonan told Irish state broadcaster RTE.

“The commitment is now written in that if we are not back in the markets the European authorities will give us money until we get back in the markets.”

In the event that the State cannot fund itself on the open markets, this statement would seem to imply the Minister readily expects more cash than previously agreed with the EU, IMF, UK, and Sweden. But apparently that’s not a new bailout.

Presumably this statement was intended to reduce uncertainty about Ireland’s post-2013 funding position. But these statements inject more uncertainty.

The Minister expects there will be more cash if we are good boys and girls. Ok, I can accept that. But there are important follow on questions: That’s more cash, for the same terms? On different terms? Cash from whom, using what mechanism (EFSF/EFSM/IMF/Something else)?. When, if not in 2013, will Ireland return to the markets? Is there a Greece-style road map somewhere for Ireland?

Can we see it?

These are just some of the questions raised, on the night at Macgill Summer School we hear the Taoiseach proclaiming Ireland’s intention to repay all of its creditors. which, if we’re Greece 2.0, wouldn’t be correct at all.

By Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

130 replies on “Not a new bailout?”

Weird, it appears that Bank of Ireland is about to become yet another state owned (but not state controlled) bank in the coming days… and yet there’s not a single article discussing that here this weekend.

This is the Irish economy blog, yes?

BTW, why don’t we actually nationalise the banks? Make *all* the bank employees public sector workers, set their compensation accordingly and operate them in the public interest instead of for-profit. Not forever, but for a period. I can see the following objections:

1) Private businesses operate much more efficiently and are better for the economy.
2) While there are areas the public sector runs better, banks are not one of them.
3) The banks are likely much worse off than we can fully understand at the moment and by fully nationalising them we would be exposing the State to far too much risk.

My responses would be…

1) Hahahahhahahahaha.
2) OK, I can kind of agree, but in order to operate in the private sector banks *must* be allowed to fail. How do we end too big to fail?
3) That seems likely. Why are we propping them up then – why can’t we dig enough to find where the bottom is?

Noonan is a disappointment in many respects. His lack of consistency is surprising, he seemed a lot more composed before taking the office. He is a bit all over the place at times.

@Stephen Kinsella
I suspect this is one of Noonan’s regular kites which will be swiftly shot down by the grim gunners on the continent.

I note that Karl Whelan is the subject of what seems to have become an increasingly personalised hostility from some normally reputable commenters (and another commenter). It’s unfair, appears very petty and is having a seriously detrimental effect on the blog discussion. The blog and the country would lose much if he was driven away and if you think differently….you’re wrong and just take my word for it.

@Stephen Kinsella

From my reading of the summt press release Noonan is correct where you have quoted him above. The EFSF will be used on a proactive basis to loan funds to States that tip the forelock. The corollary is that States that don’t tip the forelock will be impoverished as per ECB threats to Greece, Irelan etc.

Point 8 in particular establishes this new role for the EFSF/ESM.

My understaning of point 8 is that it effectively says that no bank will be allowed to fail and that States must borrow the money from the EFSF to make bank investors whole.
Personally I think the comminique is very close to a European version of the Irish bank guarantee, minus a small discount for the Greeks. But I would go a step further.
When the reality of these decisions hit home to the citizens of Europe, there will be a massive adverse reaction to the proposals.
A reaction akin to the Unionist? who commented on the passing Home Rule of 1913/1914?.
‘This bill might pass the House of Commons, but it’ll not pass the bridge at Portadown.’

@ Joseph Ryan

‘This bill might pass the House of Commons, but it’ll not pass the bridge at Portadown.’

Following a trace memory and a bit of googling.

Colonel Edward Saunderson MP: 1893, rejecting Home Rule. (“…it will never pass…”)

There is a fine, if pointed, statue of him in Portadown, where apparently he is dressed in a new sash every year.

@ Oliver Vandt

With regard to you point about Karl Whelan, I very much agree.

Even I agree the Karl thingy was a bit much
Forceful banter yes but………..
Still its probably indicative of increased stress levels as we all enter a Winter of discontent.

@ Oliver

More rubbish from sNooznan, like many in Irish society and apparent on this blogg site a dose of criticism is branded a personal attack. I dont know know or wish to know details personal to him, but I do know that I dont agree with his emphasis nor his stance regarding the budget deficit. I also am cynical about the way many commentators that apparently were unassociated with the act of treason in running the state into ‘the Fourth Reich’ are quick to dissociate themselves with previous responsibilities, and not just Karl. There is a conflict of interest that should be addressed by all commentators, budget funding for professorial and teaching posts is clearly a target in the event of a deficit correction and I have not heard a convincing argument against this necessary reconciliation

Academics are quick to retreat to their ivory towers, I know I completed a PhD

If Karl cant handle that then so be it,

Noonan’s statements at this stage, may be as much to do with the health of Europe, than Ireland. As such this statement seeks to take the focus off Ireland, and especially _our_ causing any new solutions/precedents.

A difference of emphasis.

“… the European authorities will give us money until we get back in the markets.” – Michael Noonan

“…the money that is saved isn’t money that is going to be given to us, it’s money that we thought we would have to spend that we now don’t have to spend,” he [Leo Varadkar] said. ‘Irish Times’.

Michael Noonan’s “give us money” is unfortunate, umm, misleading. Varadkar’s is more accurate – though spend is odd. Pay back in interest rates is more accurate surely.

This place was a old sovergin money backwater.
We were all bounced by the new denationalised Euro structure.
The place is being taken apart bit by bit and I can understand your anger – but the forces laying waste to this bog are so huge no acedemic could hope to stop it – even if he was correct in his judgement.

We are in the eye of the storm here – between the dollar reserve and the Denationalised Euro.
A modern day financial Culloden.

@Oliver Vandt
On second thoughts I think I am underrating Noonan and that kite is the wrong word. He is a hugely experienced politician. They may force him into retreats but he previously put on public record repeatedly that we need to restructure senior bank debt.

He has now put on public record that – even with the most recent concessions – we will need further funds. That will make it harder for the TPTBully to continue to refuse to allow either further restructuring of bank debt or to commit to additional funds if necessary.

I appreciate that his frequent retreats are hard for analysts but they seem to me to be purely tactical. His predecessors approach of flatly denying the inevitable in public didn’t work. Do we have a lot to lose by making sure that reality is the basis of the discussion, even if there is a bit of inconsistency?

Also congratulations to Philip Lane for all his work on getting a fiscal council set up.

Your posts are greatly weakened by your personal hostility to Whelan.

You can expect an entire summer of hazy, ill-defined statements such as these from the Taoiseach and his Ministers as they no longer have to go into the Dail the next day and get hounded by the Sinn Fein and Independent deputies.

They can spend eight whole weeks saying what they like about the Bailout or anything else without having to put up with being accused of deceiving the nation by Gerry Adams, being denounced as putting profit before people by Richard Boyd Barrett, or being lampooned by Joe Higgins.

@Oliver Vandt

+1 on the Karl thing.

I find the constant ‘your a civil servant’ with a ‘vested interest’ thing, way over the top. Personal attacks in general are boring and generally drag down the quality of comment on the blog.

We aren’t all going through this mess callously forming arguments to our own financial benefit. A lot have a strong desire to see a viable society survive this mess.

I’m also sick of hearing about JTO investments in ‘the south’, I do however enjoy his analysis eg population stats.

IMO Karl sometimes overlooks the tone of his posts, focusing instead on his point of view but he is sincere and that deserves some credit.

The post on zero deficits was, frankly, sneering and prematurely triumphalist and he deserves the push back he received. Also, it is easy for all of us that carry sincerely held views, to be sensitive to accusations of “talking your book”.

It seems to me the heart of economics is the principle of “no free lunch” and it would be a good exercise for all posters to discuss the costs of their preferred options, before they discuss the benefits. For instance, to point out the cost of a sudden return to fiscal surplus is easy if you believe that govt should accept bail out money. A post showing the downside of accepting the bailout cash, and especially an explanation of why those disadvantages are outweighed by the advantages. Fir instance, the required future fiscal surplus increases as a result of bailout cash received today. Also, we implicitly assume bank liabilities by accepting bailout money, even though the bank debt NEVER benefited the public interest and was never priced as sovereign dent (before the guarantee). Not accepting bailout cash could mean a sudden cut off from European money and the downside of that is a forced reduction in government spending, but it also means that the overall principal owed (bailout money plus bank debt now not assumed bay government) is less.

Maybe karl should lay out the pros and cons of his approach and allow comments. Hopefully that would bring out a more constructive discussion.

BTW agreed his absence would be missed

The job of the political leader is not easy and we can observe in Washington DC, it’s even harder when leaders are dealing with a party within a party, comprising in some cases extremists who have effectively said that a downgrade and interest hike is not a problem if they can meet the desires of the founding fathers.

We are all quick to dish out the criticism but taking it is another story. The public editor of The New York Times has even made that point about Krugman.

Every area of life is bedivilled by the problem from the boardroom or whatever, where dissent is perceived by the many thin-skinned as a personal attack. So people with inconvenient views often opt for the quiet life.

Academics in theory should be more open to contrary views or criticism but personality often trumps that.

In Ireland, we are all anti-bubbleists now.

Despite the crash, an individual can still develop a media profile without generally fearing being challenged about previous positions or the lack of them, in the broadcast media.

Shane Ross wrote a book on nefarious bankers and it’s only in recent times that Alan Shatter and Enda Kenny have highlighted that he is on record as praising the most reckless of them.

Usually broadcast interviews are 5 to 10 minute snippets but last May, Pat Kenny gave David McWilliams 30 minutes of airtime in a one to one interview where proposals were made — in my opinion most of them were crazy ones.

Was he asked about one past one – – the bank guarantee – – that was actually implemented? Of course not.

By allowing people to claim that what should be viewed as legitimate questions are personal attacks, shows servility to those with a public megaphone sitting on their high horses.

Finally, Charles De Gaulle said some wise words many years ago: ”The graveyards are full of indispensable men.”

@ Michael Hennigan,


Give up the moral high ground, you are apparently already intellectually superior and of course the festering budget deficit does suit your own needs if not those of the many.”

I think he was perfectly entitled to feel insulted by that post. I wouldn’t agree with Karl Whelan on everything, but having read the bulk of the threads on this site, I think he’s proved a considerate, consciencious, and highly informative commentator whose opinions are thought over and above all honest. I have learnt a lot. Inconvenient views or not, respect goes a long way. He’s most definitely earned it.

@ disgruntled observer

Harry Truman’s apparent expression “If you don’t like the heat, get out of the kitchen,” comes to mind.

I didn’t make the cited comment above but to me as a response to a person who promotes their views in various public media, I would not see it as a personal insult.

Public servants accuse myself of bashing the public service, with which I disagree but c’est la vie.

As for ‘respect,’ the days of doffing the cap to priest, doctor, bank clerk or professor, is thankfully over for some of us and “What’s sauce for the goose should be sauce for the gander.”

In June, Professor Whelan commented: “Mr. Hennigan’s somewhat distant view of events in Ireland today strikes me as sour and prejudiced, with a heavier emphasis on settling scores with imagined foes than on fairly reflecting the true reality.

I didn’t respond with a personal attack:

Whelan doesn’t know me and likely doesn’t know anyone who knows me but if he was characterised as ‘sour and prejudiced’ and ‘settling scores,’ would he be insulted?

Anyone who believes my question on the nominally independent Central Bank during the bubble, was out of order, needs to look in the mirror.

Please tell me, who I should having been giving respect to in the period 1997-2008?

I was outside the tent.

@ Michael Hennigan

Ah ok! Just a question. Did you ever read Hard Times?

There’s a lack of moderation here, in all terms, about individuals. Alll too often we see frankly defamatory statements about named individuals, from a small coterie of ,holier than thou, people. There’s implications of statements for personal gain, calls for sackings for statements, implications of past perceived sins making someone’s views irrevocably compromised, a sneering and a willingness to deride that makes this blog much much less than it could be.
The danger with the web is that one can end up shouting in a wel of ones own prejudices. We need contrarians, t every position that is not physical fact , and we dont attract them to this blog. Indeed, the semi pen nature is itself a problem. It’s to Philip lane,s enormous credit that he runs this, but he does so with invited contributors. Hs for example micahel Taft been invited ? Or indeed McWilliams? Or Gurdgiv? Perhaps they have and declined, but IMHO as was stressed earlier in another thread, time to decide how it flows moderators and owners
In the meantime, let’s dial back the sneer meter and let’s coldly and dispassionately dissect arguments. Those , like micheal hennigan, who think that the academics can’t take heat should read some reviews or reveres reports of papers when they are rejected. Most of the sneer leaders would crawl under a rock, but people like Kinsella, Whelan and so on take these dispassionate critiques on board , restructure the argument, sometimes change tak 180. (that’s called intellectual honesty, not u-turn or recanting when one is proven wrong), and the debate gets stronger. Kitchen? Heat….come off it Michael.

@Stephen Kinsella

Did the census results come up for discussion at the MacGill summer school? I can’t see any reference to them in the Irish Times reports today, although that could be due to lousy reporting or bad eyesight on my part. Certainly, Enda Kenny doesn’t appear (if IT report is anything to go by) to have mentioned them in his speech. Frankly, I find that amazing and sinister, but I can understand his embarassment. One would think that, in a county that was laid waste by depopulation and emigration when it was part of the U. Kingdom, and then frequently afterwards by various FG/Labour governments, he might have mentioned that, in the 15 years from 1996 to 2011, which roughly coincides with the period when he was out of office, the population of Donegal rose by 23.8 per cent. Just for the record, the figures are:

population of Donegal:

1841 296,448
1851 256,158 -13.6%
1861 237,395 -7.3%
1871 218,334 -8.0%
1881 206,035 -5.6%
1891 185,635 -9.9%
1901 173,722 -6.4%
1911 168,537 -3.0%
1926 152,508 -9.5%
1936 142,310 -6.7%
1946 136,317 -4.2%
1951 131,530 -3.5%
1956 122,059 -7.2%
1961 113,842 -6.7%
1966 108,549 -4.6%
1971 108,344 -0.2%
1979 121,941 +12.5%
1981 125,112 +2.6%
1986 129,664 +3.6%
1991 128,117 -1.2%
1996 129,994 +1.5%
2002 137,575 +5.8%
2006 147,264 +7.0%
2011 160,927 +9.3%

increase 1996 to 2011: 23.8 per cent

The turnaround from well over a century of depopulation to one of booming population growth in Donegal is one of Fianna Fail’s great achievements. And, still, the Dublin 4 establishment scatches its head in amazement that Donegal remains loyal to Fianna Fail. These figures show why. I think that the chances of such population growth in Donegal continuing under an FG/Stickie government are about the same as those of Enda Kenny being given a Papal Knighthood.

OK lads lets not get too sensitive.
The place is falling apart don’t you know.
I was walking around Tralee the other other day and the size of the disaster was apparent.
I could be wrong but I think the tourist train to Blennerville was stopped IN JULY (perhaps for technical reasons) and the pub at its terminus that services these Tourists was closed.
Shops & pubs were closed on main street and various immigrants were wasting their time outside what appeared half empty apartment blocs.
Other modern apartments were being advertised for 60 euros a week.
Although farmer / shareholders of Kerry group seemed to be pretty happy with themselves outside maybe a AGM or EGM.
Get a grip.


you are informative on the population stats and your judgement as an FX trader is “san pareil.” However, your skill does not extend to the analysis of election counts. I would give you an E for this. Look at and you will see the electorate of Donegal deserted Dev’s party in droves. The FPV fell from 40k to 16k at the recent election. SF is now the largest party in Donegal and given the quality and youth of the two TDs up there, that domination is set to remain for a long time.

Good luck with the defence of the previous govt.

I agree with Michael Hennigan on this one. Questioning someones motivations is a fairly normal part of discourse.

When John McHale was advocating that there was a moral obligation for Ireland to repay its debt and that default should be advocated at all costs I asked him if he thought that perhaps even at a subconscious level that maintaining his salary for as long as possible may have been influencing his stance. He didn’t close the thread.

I agree that the comment that seemed to annoy Professor Whelan was rude but I think his reaction showed a thin skin.
In all forms of public discourse there will be people that we fundamentally disagree with or people we think are just plain idiots.
But as democrats we should have the confidence to ignore or rebut without silencing.

In the thread referred to above (zero-deficit) Prof. Whelan supplies the figure of 25.5% of public expenditure being public pay and pensions.

In the thread referred to above (zero-deficit) Prof. Whelan supplies the figure of 25.5% of public expenditure being public pay and pensions.

It is hardly unreasonable to assume that those affected by cuts to such a significant proportion of expenditure would be reluctant to advocate a policy leading to those very cuts being implemented?

This does not make them bad people, self interest and preservation is an understandable human foible, hardly deserving of vitriol!

Sorry for the double post, can the incomplete first version be removed, please? (and this one too, obviously?)

@ Oliver Vandt

+ 1

I get the feeling that nihilistic backstabbing and bitching have been a feature of the Irish response to crisis going back at least to 1169.

@ Highway61

KW as been a big backer of large budget cuts to spending, he just thinks there’s limits to how fast you do it and thinks that zero deficits in the short term are fantasy. More level headed people would agree with him.

Saying zero deficit by 2015 is agressive and overly optimistic, but reasonable and rational. Saying zero deficit this year, without acknowledging the effect this would have on the economy (ie put a metric on it and explain how that would help an economy still unable to grow at all/significantly) makes you out to be a kook.

@ Highway 61

All of the professors referred to agree that the deficit should be closed. None of them advocate economic stimulus or even less austerity ( as far as i’m aware). The argument is based upon the time frame as to which the budget deficit should be closed. Given the fact that closing the deficit immediately would as a mere accounting exercise cause a depression ( ignoring debatable economics eg. negative feedback loops, ricardian equivalence, crowding out) it is perfectly sensible to argue that this would be a poor policy.

We are being forced into austerity but that does not mean the the deficit reduction has to be more pro-cyclical than it needs to be. I think it is the height of arrogance to argue that people with a perfectly sensible rational apposition to your view must be acting upon their own self interest.

But then again those followers of the gospel according to Morgan Kelly will probably argue that I just don’t want college fees or something. ( Which I support btw)

@Tull McAdoo

You shouldn’t extrapolate too far ahead on the basis of one abysmal election performance. Moreover, as we now know, that performance was against the background of a supposed mass exodus and resumption of mass emigration in counties like Donegal, that has turned out to be a hoax. That is why I asked if Enda Kenny or any of the economists at the MacGill summer school had mentioned the census results. It appears that they haven’t, which is both inexplicable and unprecedented. Has there ever been a census in Ireland whose results were so little discussed in the media and by politicians and economists afterwards? I think not. The only explanation is that, were the census results to be discussed in any depth at events such as the MacGill summer school, the nature of the hoax would become obvious.

Even if posters had self-interested motivations, arguments should still be made and debated on their own merits.

@ seafoid
i think it goes back futher than that!!
But it seems to be a feature of this crisis all over europe. All the peripherals are standing on each others heads trying to show how great they are while the core sticks together and holds firm, so maybe it is not just irish people.

I think the accusation of self-interest in Karl’s case is unfounded.

But I do think there is a consistent refusal to acknowledge the public discourse requirements of government.

So when Stephen says “These are just some of the questions raised, on the night at Macgill Summer School we hear the Taoiseach proclaiming Ireland’s intention to repay all of its creditors. which, if we’re Greece 2.0, wouldn’t be correct at all.”.

The Taoiseach and no member of the government can be expected to predict default, even if they hope and are planning for a future deal. I think the more rational academics really need to start acknowledging that some things cannot be said.

@ sarah
Tell us exactly why they cannot say it. The markets are saying it, pretty much every independent economist is saying it and the dogs in the street are saying it.
What would be so wrong for the government to come out and say we are planning to stay the course with the troika deal and pay all debts but we must prepare for the worst.

john the optimist
‘hoax’… tell us the way rhis hoax was perpetrated,
and by whom. were all the enumerators in on it or was it just the ststisticians and suppor tstaff in the cso or maybe it was a rogue computer programmer? i think the world or ateast eurostat need to know . finally in your day job as a gis prson will you use these data you claim now are hoax an fradulnt or will you substitute your own data?

Every independent economist is not saying it. And remember, there are plenty of respected economists who choose not to debate their views with anonymous commenters on the internet so this site is not a catch-all. I speak to others privately who have trenchant views but save them for international institutions and the government.

And the reason you can’t say it is obvious – it would spark a panic. Sure you saw what happened when Merkel suggested that a deal might be done on bonds from 2013 – we ended up in a bailout. (And yes I know that day was always coming, I said so in various columns, but it was Merkel’s big mouth and not the numbers which did it in the end).
I know there is an argument that the default is priced in but you must recognise that thinking something will happen and being told officially by a sovereign it will happen are very different things.
It’s the difference between the comfort of commenting on the sidelines and having the responsibility of governance.

The analogy I’ve used before is the peace process. In that case we all understood the subtleties of public statements for certain constituencies vs the political reality that would emerge in time. This really is quite similar. Expecting the Taoiseach to announce at a summer school that the sovereign won’t honour its debts is a simplistic approach.
We’ve got step one of an improvement in conditions. There will be more steps, (part of that is CUTTING the deficit. (Still waiting on anyone to tell me if we’ve actually cut anything yet).
The voluntary-private-sector-burden-sharing will come. And no doubt will be greeted with just more criticism on this site anyway……

@JTO, (others – off topic)

I think your analysis of Donegal is seriously misguided. As Tull points out, FF have crashed spectacularly in Donegal. Indeed one of the seminal moments of the recent election was the elimination of then Tánaiste Mary Coughlan. I grew up in her constituency, and to see her rejected was a watershed in Donegal electoral politics.

Fianna Fáil deserves some credit in producing policies which saw the population of Donegal rise significantly during the boom. But I would argue that the main factor that enabled young people to take employment in Donegal and avoid leaving was the housing boom. I know that all around South Donegal the following facts pertain: even during the boom unemployment rates were twice the national average; those who gained employment and avoided leaving were in large part those who exited education early and took employment that was in one way or another feeding off the housing boom; early school leaving in Donegal is a particular problem. All of this contributed to a situation where social welfare dependence in the county is unusually high.

In general Donegal throughout the boom saw the continued decline of its historic industries – fishing and manufacturing. (Magee of Donegal now employs a handful of hand-weavers with the major production offshored to North Africa. Fruit of the Loom we all know disappeared).

I think Donegal – like other rural areas such as Leitrim, or Roscommon – has been the victim of what amounts to utter absence of a sensible and sustainable development plan for rural Ireland. One off houses continued in Donegal unabated. They bloomed up all around the countryside where I come from like mushrooms. There was – and is – no spatial strategy nor genuiine attempt to build a sustainable framework for rural areas with low population density. The conquence of all of this is that the increase in population is scattered in areas where they will now somehow have to rationalise services – and adjust to the reality that in a modern, complex society, high quality services such as transport, health, and education have to be concentrated in larger centres. Hence the beginnings of the discontent over closing regional airports, hospitals, rural schools, and the increasing costs of these services, such as school bus runs, being passed on to users. Fianna Fáil’s chief error in this area was to give no direction at all, and allow people to believe that this kind of development pattern would be unsustainable.

This is why I believe that long after urban Ireland has returned to modest growth, rural Ireland will continue to be wrenched by painful adjustments and declininng standards of living.

@ All

It seems to me that the statement by Noonan was rather clumsy but it is not inaccurate. My own reading of it would be was that he was attempting to give a message to market speculators.

He will certainly be heartened by the confidence being demonstrated by outside investors in BOI. Hibernia is not going to sink beneath the waves (despite the best efforts of those that govern). And the fact remains that if confidence is to be maintained, there is no alternative to closing the budgetary gap and the only way to do is to either (i) increase taxes or (ii) make cuts in the major areas of expenditure or (iii) a combination of both.

As Colm McCarthy pointed out in the Sindo yesterday 2 + 2 = 4, not 6. If Merkel (and the other triple AAA bean counters) have mastered arithmetic, it is not too much to ask commentators on this blog to do the same.

P.S. Is there not a simple solution to the problem of who is insulting whom? Leave such comments out! Do not respond to them! And stay on topic! (I have no expectation that this homily will be listened to).

@Philip II

You have completely misunderstood the nature of the issue, which may well explain why you lost the Spanish throne and are now reduced to posting here.

The CSO or their enumerators had nothing to do with the hoax. Based on past experience, the census results are completely accurate. The hoax was the pre-census claims by numerous politicians, economists and commentators, repeated ad nauseum in the election campaign, that there was a mass exodus from Ireland, to the tune of net 70,000 annually. It was the accurate census carried out by the CSO that disproved these nonsensical claims.

I don’t blame you for misunderstanging it all. There has been so little coverage of the census results in the media, or discussion of them my politicians, economists and commentators since they were published, that it is very easy to forget what it is all about.


One off houses continued in Donegal unabated.

JTO again:

Wonderful. I part inherited one of the one-off houses in Donegal that you refer to. Lovely it is, but it is a little on the small side. So, when I retire in a few years, I will certainly have a brand new, very large, and extremely garish one-off house built in Inishowen, of the type that will have An Taisce and Frank McDonald branding me a criminal. I will be delighted to invite you to the house-warming.

To be honest, if you are one of the guardians of this blog and if the argument is not going in your favour you simply don,t shut down the thread and walk away. KW did this twice since friday.

Regarding this thread. I mentioned last sat on this blog that all roads are leading to a Fourth Reich in the long term once the germans get over the shock of one trillion. Germany is pumping to compete with China as a world super power. America is finished. Iran will dominate the Middle East and even more so if Israel attacks the country in sept. So no surprises with Noonan,s comment and whatever Inda says, just ignore it. If anyone is hanging on what an Irish minister is saying is 6months behind the curve. Just to read Stephen Collins last sat in the borgouise Irish Times is enough to drive anyone to drink and then down below the windbag of windbags Dan O Brien. the man has got it wrong so many times and he still blows on.

@david Burke

Germany is pumping to compete with China as a world super power. America is finished.

JTO again:

This is left-wing fantasy stuff.

Look at the demographics. Germany’s population is in freefall. They’ve stopped having children. Their average age is increasing at a faster rate than in virtually any other developed country. Because it hasn’t been secularised as much, US women continue to have children and, along with immigration, the US population continues to soar.

When Germany declared war on the US in 1941, Hitler actually fancied his chances, because Germany had almost the same population as the US then, just over 100 million.

In 2011, it is US 320m and rising fast v Germany 80m and falling.

In 50 years, it will be US 500m v Germany 50m.

@ JtO

i mentioned the demographics issue the other day re the whole “Germany is the next global superpower”, but he wouldn’t listen!


P.S. Is there not a simple solution to the problem of who is insulting whom? Leave such comments out! Do not respond to them!


there is no alternative to closing the budgetary gap and the only way to do is to either (i) increase taxes or (ii) make cuts in the major areas of expenditure or (iii) a combination of both.


I do however that the focus is never on tax increases. It should be.

As somebody who favours closing the budget deficit quickly (who doesn’t), it is incumbent on those who propose that route to spell out where the ‘great axe falls’. The most interesting piece was Karl Whelan’s expenditure analysis at the end of that uncivil and unjustifiable thread in its ad hominem attacks on Karl Whelan.

Even though I would disagree with the direction, it is clear that the Social Payments’ group at 37.5% of the total will be hit severly not only in Ireland but throughout Europe.

Thank you for the link you posted. It is a rather large tome and I have not got to it. The abstract is certainly interesting. Not quite Frederick Forsyth but there are shades of views in there.

@Rich, Phd, it would be easier, though still not easy, to take you seriously if you avoided using the phrase “Fourth Reich” in your postings.

When did things get so spittle flecked around here anyway?

Where are you getting such figures ?
You do realise the Anschluss is over , the protectorate of Bohemia & Moravia is no more and Danzig & Konigsberg is part of Poland & Russia now.


It’s the way it always goes. In fairness, this site is very well moderated compared to some. And if Karl thinks a thread is getting out of hand he’s entitled to shut it down. It’s HIS thread – not ours. I’ve often quoted the blog expert Dana Boyd (did her PhD at Berkely now with Microsoft I think). She said a blog is like your home. You can invite people in for a party, but they have to respect your rules – and they can be any rules they want. If they misbehave – you can throw ’em out. It’s not quite a public sphere – it’s an extension of yourself.

A big factor is anonymity, though I totally understand why some have to protect themselves (e.g. I guess Eoin Bond whose comments are invaluable would get the door if his employers knew he was – so a cloak is necessary for protection of those who need it).

But I had to abandon my blog years ago because community policing became overwhelming.

More here…

@ Sarah Carey

“(Still waiting on anyone to tell me if we’ve actually cut anything yet).”

Department of Public Expenditure and Reform Databank here:

‘voted public expenditure.’

Click on summary on the menu and the little + signs for more breakdowns.

Say, 2007 – 2011 (est.): from the point when the government starting trying to get the finances in control.

Finance Group
Justice Group
Environment Group
Community, Equality and Gaeltacht Affairs Group
Foreign Affairs Group
Communications, Energy and Natural Resources Group
Transport Group
Enterprise Group
Tourism, Culture and Sport Group
Defence Group
Health Group

All cut: as in spending is lower now in these areas than it was, by anything from a few % to over 50% (Enterprise).

Total spend over that period is fractionally up, but approx 5 billion down from the 2008 peak.

Social Welfare is up for obvious reasons, which is why employment and a jobs initiative is so key to people and to the figures.

Roll on the structural funds.


You reinforce my point about the one off houses. When you retire presumably you won’t have a young family to raise nor will you be concerned about finding a job.

@ All

Why can’t we all comment under our real names. Personal attacks are one thing but when they’re performed under cover it just seems unfair.

After a brief look at articles here since the beginning of the blog I think one could say that Dr. Whelan has been the best contributor on Irish for calling things correctly. I stand to be corrected.
He has ‘outpredicted’ Dr. McHale, Dr. Ahearne, and Dr. Honahan and should be part of for example the new fiscal council.
Dr. Whelans correct views and predicitons, like those of say Dr.Gurgenduv, Dr. Kelly or say George Lee do not sit well with the more conservative and could I venture less educated in international finance and economics among us.
George Lee being ignored and leaving Fine Gael kind of sums up that point.
On there are only 2 Irish people in their top category, Dr. Honahan and Dr.Kelly. Only one of them seems to be involved in forming public policy at home.

It is hard to know what Noonan is up to. One would have thought that we would want to have a solution where we would not need a second bail-out and would prefer to be involved in a priocess that will get us back on our own two feet. I have not heard the IMF’s take on the latest plan. Thier view will of course be critical.

On the other hand, a lot of Irish people are probably holding Irish bonds and therefore there is a benefit to saying that they will likely be protected through the provision of funding beyond 2013.


Is that General Zhu?

@ Highway 61

Public pay and pensions is more usefully looked at as a ratio of current spending, which puts it at over 30%.

But that doesn’t tell the full story.

Travel, IT and rental are also personnel costs and the cash cost of pensions (as distinct from the expected or accrued cost) has more than doubled in 5 years.

@ Sarah Carey

David Burke summed up the issue well and in an nutshell.

Your rationalisation isn’t convincing no matter what PhD thesis is cited.

This is not a personal blog and the suggestion that it’s OK for contributors to cut off a discussion, not because of abuse but in response to a legitimate question, is ridiculous.


Some people do need the protection if they have sensitive jobs. In fact they can be the most valuable commenters. Others are just cowards.


Thanks buut I think this is where endless debates about which numbers to use open up.

The Stability Programme Updates document linked from that page, appear to summarise the income/expenditure more accurately and the numbers there seem much more marginal. (see page 17 onwards) It makes mention of an expenditure reduction of…1.7%? The main thing keeping us going are the taxation increases, which are “behind profile”.
Perhaps though small % are all we can do without a shock to the system? But it seems modest to me…

I left out Kevin O’Rourke from this list, again Dr. O’Rourke has been a great predicitor and again I am not really sue how much of an impact he has on public policy.
My point is that the Economist and Academics who have been calling things correctly do not seem to have as much as an impact on public policy as those who have been calling things incorrectly. My reason for this can only be that those who have been calling things less correctly have more conservative and confortable views. This should be changed.


Oh dear – I don’t want to fall out with you because you are so sensible. But that idea of “this is not a public square it’s a moderated debate” I really think is sound.

Look at it this way. Maybe he just a bad day. It is hard keeping an eye on comments all day and it is insulting if you are being accused of arguing a point in order to preserve you’re own salary. Overall, Karl does a great job and perhaps we should indulge him on those days when he’s feeling a bit sore. The Zero Deficits thread was too much.

Can’t we all be friends or do we need a time-out? 🙂

xxx Mammy.

Relevant questions on what Mr. Noonan has said. What M. Noonan is saying has some holes in it. Isn’t he counting his eggs before they hatch? Let me raise one. What if in soon to come German and French elections their goverments are changed, and they have a strong mandate from their electorate not to continue bailouts?

On another point Mr. Noonan should have made sure that the debt/bond swap applied to Greece was also applied to Irish banks.

Presumably [Noonan’s] statement was intended to reduce uncertainty about Ireland’s post-2013 funding position. But these statements inject more uncertainty.

This claim doesn’t make sense to me. Is there some reason why a holder of Irish government bonds should be more nervous in the light of Noonan’s statement?

@Michael Henningan: you think it’s legitimate to ask why KW didn’t resign from a job he actually left years ago? Really? What next, a query as to why Kevin O’Rourke neglects the study of economic history?

If we cut our defecit we just give the surplus consumption to other people in the Eurozone.
The interest rates on Euro sov debt are sky high because of a wall of world reserve dollars created in the US and a subsequent refusal by the ECB to expand their base ,and no they don’t have to buy Goverment debt – they can print non government Euros.
Goverment defecits are misunderstood really – under a more convential nation state / central bank arrangement its a form of money printing when the CB creates new goverment debt although perhaps not the same as injecting raw currency into the economic medium.
As far as I am aware most of the debt is shared withen the eurozone – so there would be no net loss in wealth under a printing regeime – except perhaps for major increases in non eurozone import costs (think oil & gas)
If you consider the Eurozone as a single entity this is not hyperinflationary Germany where most of the debt was external.
Its seems Germany is suffering from another bout of one of its deep psychosis episodes.
See :

Italy vs US: playing a different game – (short view)

PS we either go Greek – (maintain defecits) if we are not given a proper break on our external debt or pull out of the currency union.
Self emasculation via fiscal reduction on a even grander scale would be a form of modern state art worthy of mention but only interesting for the audience and not the actors.

@Zhou Zong Li

Unfortunately I am closer to a nongming than a princeling. Though even a humble 中国农民 with an obscure interest in Irish economics can hope for clean debate.

I’ve lived in Ireland for 10 years. People in countries not in an IMF program ask me why Ireland has such a large budget-deficit. I tell them what an average Irish family pay in taxes -> I get interrupted and asked: So the reason the Irish government doesn’t have money to spend on public services is because the Irish people don’t pay low to no taxes? I’ve yet to find another answer to that question than a simple ‘Yes’.

The high wages of the people at the top in Ireland are relevant. The people on this kind of wages are (supposedly) leaders. People emulate their leaders and if the leaders believe that there are enough money to waste on their own high wages then the people below believe they are also entitled to high wages. The argument that cutting those wages won’t make a significant saving is a very, very bad argument. That kind of argument will be applied to everything and no saving will be made.

Economy is also about prioritising. By prioritising above eu average wages over renovating schools, building roads, more Gardai, more nurses or more teachers the delivery of public services will suffer.

It will be interesting to see which direction the Irish government will take. Will taxes rise to pay for current level of public services or will be the current level of public services be lowered?

I have a solution to the personal abuse conundrum.

If the moderators make the abusers’ real names available to me I will, following a bit of cyber stalking in order to ascertain their professions, regularly post disparaging comments along the lines of how they are just another vested interest working in banking/ protected sector/ recipient of corporate welfare/ recipient of actual welfare/all of the above, who post self interested comments in order to protect their low tax/tax subsidy/taxpayer funded bailout/lone parent’s allowance/whatever.

After a couple of weeks of this the standard of debate on this forum will degenerate to that available on that of many of the other anonymous, abuse swapping fora available on cyberspace. We can then integrate Irish with for instance and Karl can take a break from moderating you all and come and spend more time with the rest of his colleagues drinking gin and indulging in petty academic politics in the Common Room every afternoon.


Spot on. I agree completely with your view and in many ways it backs up what JtO has been suggesting in realtion to the ESRI et al on the census numbers.

In most of the big calls on economic issues over the past 3/4 years the safe consensus view has been proven to be wide of the mark and invariably wrong. And sadly this matters.

Govts take their lead from the ESRI and ‘middle of the road’ view points and it goes a long way in explaining why the so called extreme views are rarely viewed as ‘sensible’ only then to be revisited after the event and considered in fact quite ‘reasonable’. I find this very very frustrating and more to the point it normally costs significantly more money to implement the correct policy after an avoidbale time frame has elapsed.

In the meantime all manner of Politicans, spin doctors and the like have come out defending an undefendable original policy and this happens time in time out but yet the reliance on so called experts pervades.

One particular issue comes to mind – the Vat increase to 21.5% from 21% a couple of years ago to prevent the loss of VAT revenue as a result of increased ‘cross border trade’.

The comfy view would have been that this was a sensible move with merit to ensure VAT yields held up and yet all manner of so called ‘whackos’ were scratching their heads and suggesting the complete opposite. In time of course the ‘whackos’ were proven competely correct and the decision was reversed about a year later when it became clear what was going on at the ground level.

The current reliance by NAMA on industry experts who virtually all mis read the property market for the best part of a decade is along the same lines today.

@ Sarah Carey

Ok, I think I see where you’re coming from.

For my own sake I’ll take it in stages.

(1) Has the government (the last one really) done any cutting?

Yes: see the list above. I got it a bit wrong, 2009 is the peak, and the cut is approx 5.5 billion.

Whilst there is an overall cut, it is very uneven and some department spending has gone up. More cloth scissors than a scalpel.

(2) Has the deficit been cut?

Not by much. But as you know, as the Keynsians keep hammering, what do you expect if you try to reduce government spend and raise taxes during a recession?

It would be better to cut the deficit through growth (with a cautionary nod towards Brian Woods Snr.).

I think the danger is that if the general tone is, ‘oh we haven’t really done any cutting yet [with an ambiguity on what cutting is], let’s get on with it,’ then it might oversimplify the situation.

” Zhu and Zhou_Enlai

Ah here now – I thought Zhu was Zhou_Enlai in a hurry. Sort it out lads.

Taxes do not pay for goverment services – goverments depend on paper only to service their citizens.
We have a large defecit chiefly because collective interest rates are above optimal.
Imagine a simplified world where high wage earners saved the majority of their income in Goverment bonds – a cut in wages or a rise in tax would reduce the ability of a currency using goverment to raise money. (currency issuers are different beasts).
Irish people simply saved in the wrong assets for this present environment – it has really nothing to do with wages – we have a huge export surplus.

@ Michelle

“regularly post disparaging comments along the lines of how they are just another vested interest working in banking/ protected sector/ recipient of corporate welfare/ recipient of actual welfare/all of the above, who post self interested comments in order to protect their low tax/tax subsidy/taxpayer funded bailout/lone parent’s allowance/whatever.”

eh, that already happens…Karl said that he wouldn’t protect anonymous posters from just such disparaging remarks on the basis that, well, they’re anonymous so there’s less harm to be had….

@ Jesper

you ask the question/make the observation “the reason the Irish government doesn’t have money to spend on public services is because the Irish people don’t pay low to no taxes”. But then you start complaining about high wages? And then you finish off with the taxes issue again? Confusing.

@ The Dork

“If you consider the Eurozone as a single entity this is not hyperinflationary Germany where most of the debt was external.”

Hang on, so my image of a mother going to buy a loaf of bread with a pram stuffed full of DM is wrong?

Cripes its like reading a blog about Big Brother or something. Quick, to the Diary room…..!!

’nuff navel gazing surely?

If anyone”s interested in the financial markets:

You never know about this sort of thing, and I am probably wrong, but have to say I had similar sense that the trading wasn’t “right” on the day Kervial’s positions were secretly being dumped by SocGen. Has looked odd for a while – dug these out for reference. Anyone any ideas?

24th June:

“Off topic:

Italian banks suspended, Unicredit off 9%. Very wierd.”

11th July:

“Something might have leaked about Italian banks a couple of Fridays ago. The equity trading didn’t smell right then and the bond guys have been piling in on Italy recently. Meanwhile the ECB and France are discovering that banks have boards accountable to shareholders not sovereigns – again hardly surprising.”

If people loose their fate in the currency all bets are off.
But because of the ECBs denationalisation of money dogma they have not created a island of stability that would resist speculative forces (think of the Japanese Post office which funds something like 50% of that countries debt – which although has very low interest rates the Jap Yen has done very well over the last decade of stagnation)

In a rational world the printing of lets say 3 trillion notes and a post office system of goverment financing in the periphery would not destroy the currency – it would however because of the Eurosystems accounting mechanism push up the price of Gold dramatically.
Ask yourself why the ECB always obsesses about its inflation targets of 2 % but values gold upwards pretty much every quarter until it constrained its base last year.
(in my opinion Golds rise is directly as a result of the Euros creation – they want dollar reserves flowing into their coffers)
There are mechanisms for controlling consumer price inflation while insuring the base can expand – the ECB have been doing it since the beginning.

I dont think this is off topic but apologies to anyone who may think so.

I was just reading the “NTMA NOTE” which was kindly posted by Karl on July 18 and the accompanying comments expressing concern about 11.8BN matring in January 2014.

Since then there has been a reduction in the “bail out” (stitch up ?) interest rate and Bank recapitalisation will now be lower because of BOI`overnight good news.

Consequently I would like to draw attention to a number of points.

1)The amount of 11.8 Bn in 2014 can obviously now be addressed.
2) I have seen very little mention of the fact that the Irish electorate may not be in a hurry to “rush” back into the international bond market in 2014.
3)The domestic private pension sector is “beating down the door” to get a share of the sovereign bond market.
4)At some stage over the next three years the Government are going to start shedding some of their shares in the banks where they hold majority ownership and it is quite possible the Government/NRPF share of BOI will dtop from 32% to 25 % by January 2014.
5)While the NRPF is actually achieving(I believe) 8% return on itś investments every fund needs secure investments and a “few billion” Irish sovereign bonds at 3.75% will probably suit this requirement by 2013/2014

Perhaps it is time for the NTMA to issue another note and in fact I think it would be a good idea if they issued one on a regular basis so that forecast can be revised and debated sensibly.

Of course there will always be a few people trying to find evidence of the “sky falling down”in Ireland (it may be falling down in many parts of Europe but our problems are more like a seriously leaking roof) or mocking forecast but that should not distract those of us who take these Political Economic matters seriously.

By way of illustration 2 examples:
1) Some weeks ago Karl expressed some doubt about BOI raising capital while I expressed the view that we would only know how BOI would fail or suceed when we reached the end of July. Nevertheless Karl is still a much more superior economist than I will ever hope to be and was basing his presumptions on very sound and well thought through information whereas I was just being cautious.
I am delighted to benefit from Karlś opinions and anlyses. I did not read the comments on the “Zero deficit thread” but if they were as unacceptable as they apper to be then I am glad Sarah Carey has made the comment she made.

2)Twenty years ago (if I remember correctly) Connor Cruise O`Brien believed the Kremlin coup would suceed when it was announced wheareas I was immediately certain it could not. Again I could never hope to be a better Political Scientist/Diplomat/etc than Conor Cruise O`Brien ever was. I did not always agree with Mr O`Brien but I always learned something whenever I read opinions and analyses by him as did ,I am sure, the rest of Ireland.

@Stephen and Karl

Keep up the good work:)


I missed a ‘don’t’ when editing. “the reason the Irish government doesn’t have money to spend on public services is because the Irish people pay low to no taxes” is the correct.

As for the high wages, I wrote a full paragraph about why perceived high wages matter. Keeping the high wages for some might not cost much in monetary terms, in credibility terms it is likely to cost more. Are these leaders credible in saying they are working for the good of the many when they are at the same time seen as overpaying themselves? Credibility is important for people who don’t accept all from authority as gospel when trying to implement something unpopular. This is a matter of opinion so I wouldn’t expect all to agree.

The finishing paragraph was about taxes AND spending. So while your comment that it was about taxes is true, I don’t understand your point.


Very well said. I am a Political Scientist but I rely on this site instead of some of the other sites for invaluable insight behind the headlines.

However I have also become concerned about the level of behaviour on this site recently. Some of us have other reasons to preserve their anonymity but to hide behind anonymity in order to attack contributors and commentators or spread “disconscerting spin” is completely unacceptable.

You express my feelings and concerns accurately and thank you for offering to provide a solution.

@ Jesper

my point is you said “this is the reason” (low taxes), and that it was so simple and obvious to many people you had met, but then you went on to spend a good bit of time referencing another reason. So maybe its not as simple and obvious as you suggest.

You might be right…the euphoria has worn off very quick.
Spanish 10 year now at 6.03% and Italian yield up by 4.73% today.
Our own 2 year going the wrong direction again so it looks like Mr Market does not buy the continuing bailout line of MN.


true, I do believe the taxes in Ireland has to be raised. Revenues have collapsed. Spending has not.

If you’d like me to supply me with a different reason for the deficit then I’d be happy to hear it.

@CP Spanish 10 year now at 6.03% and Italian yield up by 4.73% today.

I know Bloomberg does it, but quoting a % change in a % confuses things. So the Italian 10-year is up to 5.66%. Scary enough, though there seems to be a convention that officials only panic at 6%.


Fianna Fáil deserves some credit in producing policies which saw the population of Donegal rise significantly during the boom. But I would argue that the main factor that enabled young people to take employment in Donegal and avoid leaving was the housing boom.

JTO again:

So, where would all these extra people live, if it wasn’t in houses?

Furthermore, it wasn’t just Donegal.

The whole of rural Ireland experienced a population boom between 1996 and
2011, that is unparallelled since pre-famine. Counties that had had over a century of population falls, followed by small rises, like Leitrim, Longford, Westmeath, Cavan, and others, suddenly saw their populations grow at an unprecedented rate, as below. Having been denied their fare share and been discriminated against for so long, these counties at long last got a slice of the cake. That, of course, was one of the reasons the Dublin 4 media demonised FF.


1996 52,944
2002 56,546
2006 64,003
2011 72,874


1996 94,006
2002 103,277
2006 110,950
2011 116,885


1996 129,994
2002 137,575
2006 147,264
2011 160,927


1996 188,854
2002 209,077
2006 231,670
2011 250,541


1996 126,130
2002 132,527
2006 139,835
2011 145,048


1996 52,945
2002 58,774
2006 67,059
2011 80,458


1996 25,057
2002 25,799
2006 28,950
2011 31,778


1996 30,166
2002 31,068
2006 34,391
2011 38,970


1996 92,166
2002 101,821
2006 111,267
2011 122,808


1996 111,524
2002 117,446
2006 123,839
2011 130,552


1996 51,313
2002 52,593
2006 55,997
2011 60,495


1996 59,117
2002 63,663
2006 70,868
2011 76,806


1996 51,975
2002 53,774
2006 58,768
2011 63,898


1996 55,821
2002 58,200
2006 60,894
2011 65,270

S. Tipperary:

1996 58,021
2002 61,010
2006 66,023
2011 70,219

N. Iipperary

1996 75,514
2002 79,121
2006 83,221
2011 88,433


1996 63,314
2002 71,858
2006 79,346
2011 85,961


1996 104,371
2002 116,596
2006 131,749
2011 145,273

I can see no possibility of this continuing ungder the FG/Stickie government. No matter how successful the overall economy turns out, they will ensure that development is concentrated in Dublin and a couple of other large urban areas. The FG/Stickie government is totally dominated by the Dublin 4 mindset and shares its prejudices. Let’s be honest, the Dublin 4 establishment has always wished for the depopulation of rural Ireland, not for any good economic reason, but as part of Ireland’s culture war. Now that FF are down and out, whether temporary or not, there is nothing to stop them pushing that agenda.


Some weeks ago Karl expressed some doubt about BOI raising capital while I expressed the view that we would only know how BOI would fail or suceed when we reached the end of July.

JTO again:

Well done. It is a nice feeling to make a correct forecast, when others get it wrong.


Again I could never hope to be a better Political Scientist/Diplomat/etc than Conor Cruise O`Brien ever was.

JTO again:

I really think that you do yourself a great disservice.

A pit bull terrier would be a better Political Scientist/Diplomat/etc than Conor Cruise O`Brien ever was. The purpose of diplomacy is to end wars. O’Brien tried his damnest to prolong the war in the north. The day after the PIRA first ceasefire in July 1994, when there was universal rejoicing throughout the north, he ranted and raved against it in an article in the the London Times, in which he beseeched the UK government to ignore the ceasefire and to carry on the war against the nationalists as if nothing had happened (to their credit, the UK government ignored him), and he predicted that the ceasefire would lead to Civil War, 10,000 dead and a military coup in the south within a year. What a tosser! A typical product of Dublin 4 academia, totally divorced from what the mass of the population in Ireland think.

@Tull McAdoo

Look at and you will see the electorate of Donegal deserted Dev’s party in droves. The FPV fell from 40k to 16k at the recent election. SF is now the largest party in Donegal and given the quality and youth of the two TDs up there, that domination is set to remain for a long time.

JTO again:

Yes, I totally agree that the last election result was disastrous for Fianna Fail. However, what goes around comes around. The MRBI poll last week seems to indicate that FG, Stickies, and SF have all peaked, and FF have started to tick upwards. Very slight movements, of course, indeed hardly worth mentioning, but it is early days and the climbback has to start somewhere. I would expect Donegal to be the first county in which FF regains its position as the largest party. They are not too far off that in last week’s MRBI poll. Then, I would expect this trend to establish itself very gradually over most of rural Ireland in the coming years, although I see no hope for FF in Dublin. Kenny’s assumption of leadership of the anti-Catholic mob in Ireland will probably result in greater urban/rural polarisation, with FF gradually becoming the dominant party again in rural Ireland, but facing a complete wipe-out in Dublin, where FG will reign supreme in the middle-class areas. The question is: can FF regain power at any time in the future on the basis of their votes in rural Ireland, while being more or less permanently wiped out in Dublin? The answer is that, while it is unlikely in a 26-county state, it is highly feasible in a 32-county state. Dublin is less than 20 per cent of the 32-county population.


Ah yes, deficit cuts vs spending cuts.

I guess this is the nub. Spending cuts are announced and look impressive – yet the deficit cuts seem small in comparison. Therefore I often wonder if the spending cuts announced are just book-keeping re-arrangements – and the deficit exposes how small those cuts really are. Perhaps Colm McCarthy could give us a column on exactly what the deficit cut is. My understanding is we aren’t going to make progress till we cut the deficit. (Keynesian/Krugman objections taken as read..)


I think your argument may have timed out. It’s certainly true that we HAD comparatively low income taxes. (My beef with the trade union movement always was that despite talking left they acted right by cutting wage deals that lowered income taxes which of course is regressive since revenues are then funded by indirect taxes but it makes people feel good to have more money in their pocket with which they can subsidise the resulting lack of public services)..but I digress….

I think Brian Flanagan, if he’s still nosing around the site, might be able to tell us how progressive income taxes are now, post recent increases…


Thanks for your link to ‘Portadown’ comment. I was wrong on the dates, but interesting. I had quasi memorised the original remark.


I agree with your views on deficit reduction. It does not seem to be very much at all.

Remember that salary increments have continues to be paid each year (and still continue) at an estimated cost of €440m plus pension component so close to €500 million pa.
If these had been discontinued in 2008, the public sector pay bill woul be €2billion less in 2012. The minister will be looking for cuts of €4 billion.

The biggest benificieries as always (public or private sector) are those on the higher levels of remuneration.

There is still an undetermined but substantial annual pension tax breaks, with estimated varying from €1 billion to 3 billion. I am a very small beer benificiary of the pension tax break which can allow a 60+ individuals (not there yet) to shelter up to 40% of their income. The tax saving is therefore 41% of 40% = 16% of income up to a limit of €115,000.
A potential annual saving therefore of €18860 per relevant individual. It is safe to assume that virtually all people in that income bracket avail of that saving.

That said, Karl Whelan has a very relevant point, regarding the rate of cutting. The devastation in both human terms (particularly) and financial terms can be very gruesome. Young people, as a group, have been very badly let down by the previous generation.

@Kevin D

Yes 6% is the headline. Thing is though, Italy is different because of its low potential gdp gains and the inconvenient fact that it has the world’s third biggest government bond market.

6% for other countries may be significantly lower for Italy.

Then there is the question of how long Italy can credibly finance itself on the market at rates significantly higher than the bailout three.

The politicians have succeeded in undermining the CDS market in a way that means big holders of Italian and other bonds cannot use them any more to hedge cash positions – but It seems like there might be something more to what is going on with the Italian banks.

Karl referenced Italy on his white flag post, and I think it was probably the prospect of the unbailoutable country sinking that led to last week’s agreement. They just don’t seem to be capable of getting ahead of events, possibly because they believe what they tell each other.


Indeed a tosser as you say. Conor Cruise o’Brien was such a tosser that he showed total disregard for the law via the heavy squad* and for democracy via his repression of media.

Future generations will look back at Cruise o’Brien and thank god the highest he ever reached was not Taoiseach.

* by actually encouraging assault

Has anyone looked at the BOI proposed deal with Wilbur Ross. It seems that the wily Wilbur has succeeded in getting control of the bank for an initial 241m (dollars?) and a promise.
Not bad going after all the cash the Irish taxpayer has thrown at the bank.

“The investors will initially purchase on an unconditional basis €241m of the State’s shareholding, with a commitment to purchase up to another €882m worth. “….INdo

I see elsewhere that AIB are issuing 500 billion shares to the State. Now that is some amount of paper. Maybe Smurfit should take them over…

Aaah -the increments! I keep forgetting about those. And of course, all those 55year olds retiring on great pensions means we are paying for no work, as opposed to paying slightly more but getting work in return.

Also I’ve heard of quangos being abolished but staff being “reabsorbed” so the headline looks good but the bill hasn’t reduced much.

So, am I right to be skeptical about these “croke park is a success” press releases? What HAS actually been cut?

question for you? What is the policy response to Italy widening. There is insufficient ammo in the EFSF to cope. So what do the Germans do- wring hands and accept the collapse of the project or instruct the ECB to unleash the dogs of war.

On that BOI deal from IT…

“The investment will take place later this week in a share sale of 4.2bn ordinary shares with a potential that they would buy up more. ”

The numbers don’t appear to add up…4.2b@10c does not equate to the reported 241b that the investors is allegedly investing.

It seems they are getting them for 5.7c if the reported numbers are correct.
Any ideas EOIN BOND.

I see 145 million shares traded in BOI today. is this a record?

@Michael Hennigan
“In June, Professor Whelan commented: “Mr. Hennigan’s somewhat distant view of events in Ireland today strikes me as sour and prejudiced, with a heavier emphasis on settling scores with imagined foes than on fairly reflecting the true reality.”

I suspect that he may have been reacting to some of your previous comments. Your style of writing is forceful and I have no problem with that. It appears to me though that you sometimes seemed to be demanding answers from him on issues which had nothing to do with the relevant blog entry or him personally.

You are entirely free to raise issues. My suggestion would be that you just avoid making relevant comments or putting relevant questions to him directly and put them to the blog readers instead.

Also saying that he was for a time in the Central Bank is not really relevant. I think it unlikely that he was telling them that house prices were due for a soft landing and all the fundamentals were solid. I think if you stood back from things you would agree with me on that at least.

I was expecting something a little more authoritative than a press release from the Montrose Cumann.
However, if the ECB has decided all is well and they can pack up the SMP then they are deluded This issue will have to be undecided probably this week. In addition the EFSF is going to have to be upsized PDQ. The elites cannot head off to the beachand leave these issues to fester.


I don’t know – its a bit like that joke about being asked for directions and coming up with “Oooh, I wouldn’t have started from here.” What are we supposed to expect of bund yields – you have to factor in the possibility the Germans are persuaded to go for broke (no pun intended) next time there is a summit if Italy is on the brink.

There was a lot of attention paid to Spain last year, but Italy really does have the potential to split the Euro up properly. You wonder what might turn up if Berlusconi is ousted and some rocks are turned over.

The Efsf is too small, the politics of increasing it – I thought 1.5trnl might be the figure, but 2trln is being discussed – are far from trivial, plus what happens to Italy and Spain’s contributions.

You wonder whether Germany is going to be told “you have broken it, so you have to buy it” wrt to the EZ! Then there is the stuff going on over the debt ceiling in the US with what could turn out to be some binary policy decisions there as the economy rolls over into an election.

Surely the problem with manipulating the Italian bond market is how big it is – even though a lot is domestically held. What will Lozza BS do?

My guess is they print as soon as it looks like any chance of generalised recession.

@ ceterisparibus

The New York Times has the full story.

I said on this blog some days ago that the ECB would have to hold the fort while Merkel continued to pussyfoot with her parliamentary opposition (most of whom are members of her own party or the junior party in the coalition, the FDP).

A case of the big bad wolf of the ECB once more rescuing Little Red Riding Hood, contrary to the perceived wisdom on this blog.

yet another version from the Telegraph…

“Depending on the results of the rights issue, Ireland will end up with between 15pc and 32pc of the bank. Existing shareholders will hold between 31 and 71pc and the new investors will hold between 14pc and 37pc.

The sale will reduce the size of a state capital injection into the lender required under a IMF/EU bailout deal by €1.1bn to a total of €2.4bn.”

I’m confused.

Ireland…15 to 32% cost..additional 2.4b
Wilbur …14 to 37% cost…initial 241million
Existing..31 to 71% cost…????????

So is the State getting a good deal?

@ Jesper

Your point on wage levels is something I’ve experienced in the past. People tend not to think ‘what’s a fair wage for the type of work I do in the sector I work in compared with other countries in the EU’, they think in terms of fairness ‘Well if your man is earning that, I should be earning at least that’.

So a few earning high wages pushes up wage expectations generally and if people don’t/won’t earn what they think they deserve, they don’t tend to work too hard. This is particularly problematic in the public service where not working hard isn’t really punished, it’s just worked around.


“So is the State getting a good deal?”.

I doubt it very much. At book value my estimation is that the State book valuation in the bank is being given away at a 60% haircut. The numbers from the press release are virtually useless in determining the loss on the existing shareholding.
I also think that a loss of this magnitude in book value terms has huge implications for the proposed €19 billion recapitalization on the potential book loss of all the banks.
For instance, will the State ‘buy’ as much with its recap of BOI as the new investors are going to get.

I would pursue your line of investigation above.

I did post elsewhere on this. My theory was vigourly contested but not with actual numbers.

“”Basing my humble calculations on the Bank of Ireland 2010 report, this is definitely not a good deal for the State.
The total book equity at the end of 2010 was 7.4 billion thereby valuing the 37% stake being sold at 2.7 billion. That €2.7 billion is being bought for €1.123 or 41% of the book value.
This means that the State loses 59% of its piece of its existing 36% equity in BOI (7.4 * 36% * 59%= 1.57 billion loss).
Now for the real crunch.

The State is just about to put in 19 billion into the State banks. Is the State in line to lose 59% of this €19 billion = €11.1 billion even before the money goes in?

Of course the numbers may have changed slighlty since BOI produced its 2010 annual report in April this year. But Annual report are still supposed to mean something. Even bank annual reports.

So on face value this looks like a terrible deal.

A 59% haircut on the State’s BOI existing holding, with possibly the same implications for the pending €19 billion recapitalization.
Disaster is too kind a word.””

@ All,

Good points on the Noonan quote when things stayed roughly on topic.

@Sarah Carey,

Of course some things can’t be said, I do accept that, as do most people. However, if we are on a course like that, saying everything is fine is misdirection, and damaging to reputations in the long run.

@JtO, I promise, there will be a post on the census stuff soon, no need to return to it!

@All, I’m new to the site, and while I’m being careful about deleting comments that are clearly defamatory (DR X is corrupt, for example, obvious Nazi references, and so forth), I’m hesitant to delete comments on individuals that *seem* to be genuine queries, rather than trolling. Of course if I get a complaint, I’ll take a comment down in reasonable time, but generally, I think things are running on a pretty good track. I’d welcome your thoughts on this.

HI Stephen

If you are knew to moderation then you might want to check out Godwin’s Law. Soon as the Nazis get mentioned you’re supposed to shut the thread down. 🙂 One of us should’ve called it the minute the Fourth Reich was mentioned…

On “everything is fine” I think there is a line.

“There will be no bailout” while the IMF team waits an airport is stupid/damaging.
“We will pay our debts” (until the situation changes and we can cut a deal) recognises practical realities…..

I don’t think anyone called anyone else a supporter of an actual ‘Fourth Reich’? Godwin’s Law does not apply, yet.

But it is true that there are fundamental questions about future (aswell as current) sovereignty, because of the stupidity of supposed elites in Ireland – and as Kevin O’Rourke pointed out in the past, both FG ‘professionals’ aswell as FF supporters, were heavily represented in the property ‘investment’/greed.

@Stephen Kinsella

Would it be an idea to start a dedicated thread on the BOI deal as it looks like a very poor deal for the taxpayer?

@DOCM, Joseph Ryan


It’s a very interesting paper with lots of background and historical insights, though I think the author overstates the case a bit that it’s all a hidden agenda by the EU Commission to promote supply-side economic reforms.

The structure of the EZ does mean there are very few policy instruments available to national governments to compensate for economic shocks. Governments can deflate, reduce wages, introduce austerity and that’s about it. No interest rate or exchange rate mechanisms can be used of course. The point is made that what the PIGS are now doing is an extreme form of what occurred in Germany itself in 2000-2005, when the government reduced wages to restore competitiveness in an environment of high real interest rates. However the structure of German industrial relations with strong centralized trade unions, made this more feasible than in other countries.

In many ways it seems to me that the EZ has turned the clock back to the 1920s and the Gold Standard. The adjustment mechanisms back then meant that after a bout of irrational exuberance the money supply shrank and prices and wages fell – i.e. the Gold Standard was inherently deflationary. That whole era didn’t work out too well.

The paper argues that a real devaluation is a fairer mechanism than deflation/internal devaluation, which hits workers harder than owners of capital. I’d take a slightly different view in Ireland’s case which is that with the policy options available it is open season for every lobby group/protected sector to ensure that it is somebody else that suffers and not them in a zero-sum game. This results in such ludicrous behaviour as the judiciary trying to get out of a pay cut e.g.

Judges said the constitutional clause banning any pay cuts for judges was “designed to protect judicial independence”, a principle which had been “cherished” around the world and which would be under attack if pay cuts were permitted.

There are also a few interesting charts at the end. In Ireland real compensation per employee has levelled off but has not fallen, and remains at a very high level compared to year 2000. In contrast In Germany real compensation per employee has never broken through the year 2000 level since then.

Also although the gap has narrowed, Ireland is still wealthier than Germany, on a GDP per capita basis. Yet the employment rate has fallen dramatically. I think this proves the point – the only policy mechanisms available to national governments in the EZ (assuming the ECB remain as intransigent as ever and refuse to follow the path of the US and UK central banks) tend to produce a country of winners and losers, and widen inequality.

Classic MMT interview with Yves Smith – I especially like the treasuary issued 1 trillion $ platinum coin as discussed on the Pragmatic capitalism blog recently.( I vant to be alone with that coin)
This would make it very plain that the US does not go into real debt when Congress sanctions spending and so is unlikely to happen.
The Euro system is a very different monetory system in many ways but given that most debt is internal they could also come with very simple solutions to the debt crsis.

@Sarah, I’ve had a personal blog since 2005, but this is a different kettle of fish. I thought about closing the thread after the 4rth Reich thing, but chose to let it go.

@Cet par, not a bad idea.


The obligation was ours to call it 🙂

Anyway, I made “for you Herr Cowen, ze var is over” jokes in columns, so I really shouldn’t judge….

I post anonymously because I work in the public sector and I believe we are all overpaid FOR WHAT WE DO and for the terms and conditions we enjoy. I worked in the private sector and got 20 days leave per year. At the moment I can get up to 48 days per year (32 days annual leave, 3 concession days, and up to 13 days flexi leave per year if I work over 34:45hrs per week). Increments are still being paid, mileage is still generous (99cents a mile) and you can get subsistence if absent from the office for a number of hours.

I haven’t seen any cuts where I work except for hospital bed closures which do not save anything on wages but result in highly-paid and highly-trained staff twiddling their thumbs. Of course the public suffer as waiting lists increase. Saying this at the morning coffee break wouldn’t make me popular with my colleagues. Where I work I see enormous scope for cutting waste and fat without reducing services. I have a vested interest in not seeing my wages cut further but yet I can’t ignore the waste and inefficiency I see around me.

With respect to public sector pensions, the generation currently retired are absolutely ‘rolling in it’. That is, they are earning generous pensions which they didn’t pay for. Many are earning almost as much as they were when working when you take into account all the levies/taxes they don’t pay once they retire. In my view there is huge untaxed wealth in the 60+ generation yet they are untouchable politically. Maybe it is because the policy-makers and senior civil servants are all in their 50’s at least and are looking after their own interests? Widespread means testing of benefits would save a lot of money while not reducing the quality of life of retirees by one jot.

This may be ‘off thread’ but it does relate to some of the other posts.


Your noble austerity will be for nothing because the private sector is incapable of creating wealth at the moment.
Once more vultures get control of BOI they will use credit to blow more bubbles.
The entire financial / physical economy interface is dysfunctional.

@ Bunbury

The old order fights on and the last government removed the provision on pensions reform in the Croke Park slow boat to China process, to sweeten the arrangement.

Most people work in boring jobs, if not from the start eventually, and where there is little accountability or motivation at management level, those with the interest in change understandably give up eventually.

For senior people, the collateral damage of poor policy is generally unseen and the world of the shafted small supplier to Superquinn would be very distant.

Since the days of Whitaker, the prospect of a public official, other than the current Central Bank governor, floating even an original idea, would be a shock.

As in Japan, the system extends to retirement, where there are little earners such as membership of boards, taskforces etc to keep people quiet.

One former civil servant in 2007 got a 36% hike in his pension after 18 months of retirement and now sits on about 20 quango boards and review bodies.

This all comes at more than a direct cost when for example, enterprise agency heads appear to be mainly PR men and no insider breaks ranks on the so-called ‘smart economy’ spending.

@Yeilds or Bust
I just read an article where priests were saying exactly the same thing about who was directing policy in the Irish Catholic Church during the last 20 or so years. Their argument was that any priest who was raising then what turned out to be completly correct questions were kept away from policy formation. In their view those ‘promoted’ were those who stuck to the conservative toe the line type behaviour and views. In my view in the Irish Catholic church any guy that was sticking his hand up and asking questions about how the church were dealing with accusations should be put to the top of the queue when it comes to ploicy formation. Is this happening?
Is this happening in economic policy formation? Thank you for pointing out NAMA. Does Ireland have a cultural problem in this area?

@MH & Bunbury
This is why it’s so unhelpful to talk about “civil service pensions” or “public service pay” as if they were a homogeneous group.

If all pensions & pay were posted transparently then we’d know where to focus. (Same thing would be healthy for private sector.)

If the gov’t runs out of money, and can’t pay existing workers, wouldn’t they also not pay pensions?

Are there NO circumstance in which golden parachutes can be modified due to changes in the state’s resources?

“The best news relates to the decision on private sector participation. It is good that the eurozone has come to closure in this tedious debate. The terms of the various debt exchange offers are still bank-friendly, but not nearly as cynical as some of the earlier proposals. Contrary to what the European Council said, the private sector participation will be a blueprint for bail-outs that are yet to come. Second Irish and Portuguese programmes are likely. The northern Europeans will once again demand private sector participation. Now they know how it can be done, they will want to apply the same rules in the future. ”
Wolfgang Münchau

The looming ratings downgrade:

“We have two main concerns. The first is the preferred creditor status of the ESM … and second is the conditionality the ESM can impose to restructure debt. If both materialise, S&P would consider downgrading Greece. The same goes for Portugal,”

“today’s (7/26/2011) European auction results indicate that the time to expand the EFSF to the €1.5 trillion threshold may be approaching faster than anyone expected. In Spain, the Treasury sold 750 million euros of 3-month bills at an average yield of 1.899 percent compared to 1.568 percent at the previous auction and at a bid-to-cover ratio of 6.3 after 9.5 in June. Spain also sold 2.14 billion euros of 6-month bills, with the average yield rising to 2.519 percent, the highest since Dec. 2010, from 1.776 percent in June, while the offer was 2.2 times subscribed after 3.8 times at the last auction. In other words: far higher interest and far lower demand than the last such sale in June. As Reuters cites, “The most important point again is the fact that relative to the last auction yields are much, much higher … It’s not a good situation to be in,” strategist at Monument Securities Marc Ostwald said. “It shows we may have had some relief last week but that relief has proven to be rather short-lived.” We wonder just how much of these auctions were allocated to the EFSF monetization mechanism and/or Asian proxies that know they can promptly use it for precisely such purposes. Elsewhere Italy sold €10 billion in 6 month Bills and 2 year notes, and just like in Spain, both saw their respective yields rising and investor demand falling: 6-mo auc avg yld 2.269% vs 1.988%, bid/cover 1.56 vs 1.72, 2-yr auc avg yld 4.038% vs 3.219%, bid/cover 1.66 vs 1.87. End result of today’s auctions: both Spanish and Italian Bund spreads jump to day wides as the IBEX is now underperforming on concerns Europe’s second bailout bought less than a week of calm.”


wow – that was sanctimonious – if you would like to keep your blog elitist perhaps you should exclude non academic IP addresses

Really polite society – tea and crumpets anybody? or pistols at dawn – depressing

Just because Whelan doesn’t want to reduce the deficit from 10% of national income to zero in one year – something which I have never heard of any country doing – does not mean that he is motivated by personal gain. Almost everyone in Ireland is completely against it – and I am writing as one of the very small number who is prepared if there is no other option to consider it. Incidentally I am also not connected to the public sector or the academic world.

As a long time blog reader I have seen no evidence that Whelan would ever take any policy position on anything because of the effect on his salary. It is quite offensive to suggest otherwise. As it happens he has taken many policy positions that have had a very negative effect on his salary and that of his academic colleagues. You are entirely free to raise any issues you want but please avoid attacking his integrity or him personally.

Continual references to ivory towers distract from your arguments but that’s for you to consider.

I have scant regard for the furore driven by the delicate disposition so pervasive on this site
My point is simple, I do not believe tough decisions are optional as you imply, I work 48 out of 52 Monday’s given a choice I would decline.
The idea if budget correction as quickly as possible (not reasonable) is my position, in a year is preferable, the benefit will be immediate, uncertainty sidelined and a new Dawn of economic resurgence will begin.
The direct nature of my posts should not be used by the polite chattering classes to ignore the fact that tough action is the best medicine
Your condescending remarks as those of others smack of the elitist incompetence that prescribes a never never land of easy solutions and populism that won’t work

Unemployment is at 15% and you propose to reduce national income by 10% in one year. If you want to persuade people to do that you will need a stronger case than personal attack and very, very optimistic forecast.


I am not certain how much more proof you need that immediate and drastic action is required or should I tickle your belly as I direct your attention to the facts?
Whether you like or not we will be balancing our budgets earlier than planned, our credit rating and thus our autonomy depends on it. Further debt will not cure a problem caused by excessive debt – this is obvious.
You may feel a sense of entitlement for yourself or this bankrupt country but then you wouldn’t be the only victim of hubris on this site

Why cant Kahzakstan have Irish wages? they have a better credit rating?

Its irrelevant the effect on unemployment this will come to pass anyway, the cuurent malaise is causing huge PR problems for my work with international colleagues, everyone knows the decisions are tough but no body believes we are focused enough to take them. Few blue chip investors private or public will consider us without closure on these issues.

Reduced wages/public expenditure will cause prices to fall, the mediocre nature of our state services (including education and health) will be more competitive in a low cost environment and will essentially see Ireland vie with Poland and eatern Europe on price – this is our final destination, the retrun of the call centre!, maybe 30yrs from now we will rise again but not because you have a sense of entitlement

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