Archive for January, 2012

Unemployment session from Friday

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Tuesday, January 31st, 2012

Below are links to the unemployment session materials so that this thread can be used for thoughts people have on the contents of the session.

Podcast

Chair: Minister Joan Burton T.D.

David Bell (Stirling)
Unemployment in the Great Recession: More Misery for the Young?

Aedin Doris (NUIM)
Employment and Unemployment: What do Sectoral and Demographic Patterns Tell Us?

Philip O’Connell (ESRI)
The Impact of Training Programme Type and Duration on the Employment Chances of the Unemployed in Ireland

Slides and Podcasts from Friday

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Tuesday, January 31st, 2012

Slides and audio podcasts from Friday’s session are available at the following link. Let us know if there are any problems. Some technical glitches with the policy evaluation session but we will put material up later.  We are working on the videos and they will be available at some stage but the audio and slides should be fine in terms of getting complete content. As is the norm, we dont include the Q+A components of the sessions. The hashtag is still ieconf for people commenting on twitter. It would be good if different posters started threads on specific sessions and a couple of people have already committed to do this later. Perhaps use this thread if general comments about the conference or suggestions for future events.

Treaty Agreement: January 30

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Tuesday, January 31st, 2012

Information on the Treaty agreed last night by 25 EU member states is available here. Somewhat remarkably, given that draft texts have been circulating for weeks, there is no version of the agreed text.  Anyone out there have a link?

I’d note that the materials released all point to the need to implement the structural deficit rule at “constitutional or equivalent level” while the Independent reports that “preferably constitutional” is in the final draft.

If indeed it turns out that we need a referendum, this is a pretty bad start.

Update: The EU Council have finally released the text here. Anyway, “preferably constitutional” has been retained, which begs the question as to what van Rompuy and his officials were up to with their statements about “constitutional or equivalent level”.

Incoherent privatisation policy a cause for concern

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Tuesday, January 31st, 2012

Eoin Reeves and Dónal Palcic write in today’s Irish Times on the issue of privatisation, and they don’t pull their punches. From the piece:

Not only is there a lack of clarity about the companies to be sold and the timing of any sales, but it has also emerged that there are significant differences between the Government and the troika on the role privatisation should play in contributing to any economic recovery. These differences do not bode well in terms of making the best decisions about the future ownership of critical infrastructure industries.

At this stage, two key points of difference between the Government and the troika can be discerned. First, the drip-feed of information provided during the latest visit indicates that the troika views privatisation as a structural reform issue that should be implemented to improve the overall competitiveness of the economy. The Government, meanwhile, appears to be focused on privatisation as a means of raising exchequer revenues.

The second point of difference concerns how the proceeds from privatisation should be used. Whereas the Government wants to direct revenues towards job creation, the troika views proceeds as a means of paying down the national debt.

The troika’s view of privatisation as a tool for reducing costs and improving competitiveness is an orthodox proposition that is traditionally associated with multilateral organisations such as the International Monetary Fund but it is one that can be readily challenged.

Palcic and Reeves finish by making an important point about the dangers of short term political thinking applied to long term strategic assets. This problem is rarely discussed, as far as I can see, in Irish public policy. Hopefully we’ll see some more discussion in the comments about this problem.

Quote of the evening

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Tuesday, January 31st, 2012

“Europe would not function any more if it changed course after every election.”

(Angela Merkel, quoted here, poo-pooing the notion that French voters might have any say over whether the next government ratifies this treaty or not.)

Words fail me, but they’re hardly necessary,

Golden Growth: Restoring the Lustre of the European Economic Model

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Monday, January 30th, 2012

This World Bank report was written as part of the first Polish Presidency of the European Union Council. The report was launched on January 24 2012 in Brussels. I feel it is a good approach to take a European View of the Crisis.  We will see solutions, and problems, differently if they wear our EU hat.
The press release says: The report documents the impressive achievements of the European growth model over the last 50 years. Accounting for the stresses it is experiencing and assessing the longer-term challenges that Europe will face, the report then evaluates the six principal components of the model: Trade, Finance, Enterprise, Innovation, Labour, and Government. It finds that the European growth model has been a powerful engine for economic convergence, helping developing countries in Europe catch up to their richer neighbours and become high-income economies. But recent  changes in and outside Europe necessitate change. The report proposes the adjustments needed to make trade and finance work even better, to encourage enterprise and innovation in parts of Europe which have begun to lag, and address shortcomings in the functioning of labour markets and governments. The changes proposed would restart the European convergence machine, make Europe’s enterprises competitive, and help Europeans afford the highest standards of living in the world.
I was a co-author on Chapter 7 (Government), written by Kaspar Richter, Ewa Korczyc, and Paul Walsh.  My personal view:  Clearly the Economist has picked up on the magnitude of the debt problem facing the EU relative to the rest of the World.  It is also important to note that the size and structure of government spending, particularly social spending, while generous compared to the rest of the world, exhibits huge differences across EU member states. The current debate around the fiscal compact is about aggregate fiscal deficits and debt dynamics. Yet the degree to which member states are so different in the level and structure of their social spending is not really appreciated.  Tax harmonisation is one thing but maybe some thought should be given to divergences in social spending.  As EU citizens facing a potential Fiscal Union, a movement to Eurobonds and increased Political Reform, should Education, Health and Social Welfare supports not be the same for all? Depending on where you live in Europe, and your demographic, and now your debt level, your entitlements can be very different. Some states can deliver a high level of public service and economic growth, even in a high taxation environment, others seem to struggle.  Many countries, and the EU as a whole, seem to need a good deal of Political Reform.   All these good ideas around growth, and reform of taxation and spending, are all fine but can only be implemented with a major restructuring of Political Institutions at the National, EU level and Global Level.  The lack and poor quality of Political Institutions at every level can be blamed for our current situation. Reform of Political Institutions needs to happen to get us back on track.  Ireland can contribute at every level in this reform process. 
Report can be found on the below.
http://www.worldbank.org/goldengrowth

Current versus Capital

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Monday, January 30th, 2012

Here are some quick snapshots from my presentation at Friday’s conference in Croke Park.   Some background information can be found in the following:

From 1983 to 2010 capital expenditure averaged nearly 12% of gross voted expenditure.  In 2011, capital expenditure was 8.1% of gross voted expenditure, the lowest since 1992.

For the four years from 2012 to 2015 it is planned that capital expenditure will be 6.4% of gross voted expenditure.  For every €100 of voted expenditure, €93.60 will go to the current budget (transfer payments, public sector pay, and other non-pay expenditure on goods and services) and €6.40 will go to the capital budget.  Would this satisfy the equi-marginal principle?

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Ireland in the European Court again, now over gas

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Monday, January 30th, 2012

In December, I blogged about the gas interconnector, the Shannon LNG terminal, and the need for regulatory reform in the wholesale gas market.

Last week, the European Commission chipped in. It is taking Ireland to court over the lack of competition in the market for gas between Scotland and Northern Ireland, and between Ireland north and south. Intriguingly, the UK is sued as well, although most of this is Irish rules on UK soil.

John Fingleton gave a great presentation at last week’s conference on the Irish economy. Among other things, he argued that competition policy in Ireland exists by virtue of the European Union.

(h/t Paul Hunt)

Fire sale prices versus stagnation prices

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Sunday, January 29th, 2012

The concept of “fire sale prices” is a useful one in many contexts – some examples are the October 19th 1987 US stock market crash, the LTCM crisis of 1998, and the 2007-8 US credit-liquidity crisis. In all three of these cases, security prices crashed in a particular sub-market, policymakers stepped in providing extraordinary credit-liquidity support, and eventually (quickly in the first two cases, slowly in the last) the capital market situation normalized. Unfortunately, “fire sale prices” is a useless or even harmful analytical tool for understanding the current Irish financial predicament. A better term for current conditions in Irish asset markets is stagnation prices rather than fire sale prices. Policymakers should look to Japan circa 1991 and the following two decades, rather than the USA, for a useful historical precedent. The fire sale concept gives the wrong policy guidance in the Irish situation; it is metaphorically like trying to use a fire hose to drain a swamp.


Andrei Shleifer and Robert Vishny have a series of papers exploring the use of the fire sale concept in modelling financial markets. There has been a large outpouring of papers by other authors with similar or related models, but the Shleifer and Vishny model is clear and simple and their survey is particularly good. They provide a definition:

“A fire sale is essentially a forced sale of an asset at a dislocated price…. Assets sold in fire sales can trade at prices far below value in best use, causing severe losses to sellers.”

They discuss how fire sales can cause financial and macroeconomic instability via credit and liquidity channels. In a related paper they laud US policymakers for their prompt and correct response in 2007-9 in injecting massive credit and liquidity into the markets for mortgage-related and credit-related securities caught up in the fire sale environment of 2007-9.

Fire sale mitigation policies are unusual as economic policies in that, as a rule, they should result in a net profit for the policymaker. This follows from the theory of the limits to arbitrage. This certainly seems to apply in the US case – the Federal Reserve made a trading profit of $79.3 billion in 2010 and $76.9 billion in 2011. The Fed vastly outperformed the best-performing hedge fund both years, at U.S. civil service pay rates, and without actually trying to make a profit. TARP was also profitable or near profitable, after an adjustment for the expensive but necessary bail-out of the US automobile industry. This is the nature of fire sale mitigation policies – they are about buying securities slightly below fair value and holding them temporarily on government account while injecting liquidity and credit.

The bad news is that this has near-zero relevance for Ireland. Irish asset markets are not suffering from a fire sale problem but rather from a long-horizon stagnation problem. The appropriate comparison case is not from the USA but rather Japan circa 1990. Japanese policymakers and financial institutions worked endlessly to slow the pace of adjustment, leading to an almost twenty year period of stagnation, suppressing growth and business innovation, and leaving a massive overhang of government debt. Irish asset markets need to be forced to adjust quickly and reach their new (much lower) equilibrium values with un-frozen free trading and clear, public pricing. This applies to banks, collateralized pools of debt, commercial leases, and commercial and residential property. Preventing this from happening is not preventing a “fire sale” rather it is guaranteeing a long stagnation. It could even last twenty years, as in Japan.

Another question – what is it about the US environment that gives rise to fire-sale-induced financial crises of typically short duration? Part of the answer lies in the USA lead in financial innovation. New financial innovations were key to all three fire-sale market crashes mentioned in the first paragraph of this post (portfolio insurance, statistical arbitrage, and numerous CDO innovations, respectively). High-frequency trading (the most recent big innovation) will be the likely cause of the next fire-sale-related crash, if one comes in the USA.* Ireland seems to avoid these fire-sale crashes, but is plagued instead by long-lasting periods of stagnation. Let us hope the current one is not dragged out for a decade.

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*A post-script on HFT and the Tobin tax. After my last blogpost, Frank Barry asked me to give more details about Tobin’s use of the term “sand in the wheels” and its application in old-fashioned engineering. I do not know that much about the engineering use of sand in the wheels – I only heard Tobin discussing it in an interview. I now know that historically the sand in the wheels technique was used in the case of a metal (steel or iron) wheel aligned on a track and needing better grip, such as an old-fashioned railway wheel on a wet track. It is used for wheel-type mechanisms and not for gears with teeth. See Wikipedia for some details for those with an interest. I remember Tobin saying he was annoyed that many commentators mistook him as suggesting sabotage, and I remembered that key idea correctly. Sand in the wheels is a technique to improve, not hinder, performance.

Presentation on ELA and Promissory Notes

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Friday, January 27th, 2012

I’m sure all the presentations will be posted here at some point but I had promised readers that I would put up my slides on ELA and promissory notes from today’s conference, so here they are.

Irish Economy Conference Liveblog

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Friday, January 27th, 2012

Hashtag is #ieconf, this liveblog will host tweets and comments from the Croke Park conference.

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New IFAC Report: Strengthening Ireland’s Fiscal Institutions

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Thursday, January 26th, 2012

The report is available here.   See also the background paper by Robert Hagemann here.

Garret Fitzgerald Spring School: 10-11 February

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Thursday, January 26th, 2012

Readers may be interested in the Garret FitzGerald Spring Seminar to be held at UCD on 10 and 11 of February. This is the first of an annual series of “Spring Schools” to be named in Garret FitzGerald’s honour focused on topics that were particularly close to his heart.

This year’s theme will ‘Democracy in the 21st. Century’ and the event will include an opening keynote from Mary Robinson on the evening of February 10th.

Further details can be found here. Those wishing to attend are requested to pre-book a space. Contact Mary.Buckley@ucd.ie.

Getting Back in the Bond Market

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Wednesday, January 25th, 2012

Official funding runs out at the end of 2013. Today’s manouvre by the NTMA has converted some two-year debt into three-year debt, at a cost. This is not ‘getting back in the market’ in any sense which confirms debt sustanability. No new debt has been issued. The ability to sell new three- or six-month T-bills is not relevant either.

Think about Belgium. The ten-year bond yields 4%, having been briefly higher during the panic. Belgium has a debt ratio about 100%, GGB deficit about 4% and primary deficit about 1%. Belgium is likely (not certain) to be OK and could probably sell 10-year paper in some size. The 4% interest rate is just about consistent with debt sustainability given 2% inflation and a little bit of economic growth.

Ireland’s exit debt ratio will be higher, there are contingent liabilities we all know about and a deficit down to 4% in 2014 would be doing rather well. Can Ireland expect to sell 10-year bonds, in size, in 2014, at 4% yields?

There is a 2025 bond in issue with a 5.4% coupon. It will be an 11-year bond in 2014. The curve should be flat in this zone. So if you think yields on mediums will be 4% in two years time, you can work out the target price for the 2025 bond in 2014. It is about 111.

The bond has recently been trading about 85. So if you think we will be back in the market in a meaningful sense in 2014, on terms as good as Belgium, you can pick up a nice 5.4% coupon twice, and a 30% capital gain, by taking a flutter.

Alternatively you can insist that Ireland can (sustainably) ‘get back in the market’, and stay there, in size, at higher yields. This is entirely conditional on economic growth resuming quickly and at decent rates. The debt sustainability analysis in the IMF staff report to the executive board should issue in a few weeks and will be a must-read.

Draft Insolvency Bill

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Wednesday, January 25th, 2012

The draft of the new personal insolvency bill is available here.

Final Programme for Irish Economy Conference

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Wednesday, January 25th, 2012

This Friday January 27th in Croke Park we will hold a conference on the Irish Economy. This conference is one of a sequence of Dublin Economic Workshop meetings in collaboration with the Universities (in this case UCD Geary Institute and UL). The conference programme is below. Registration will begin at 8.30 on Friday morning, with the first two sessions beginning at 9am. The final panel session is expected to finish at 6pm.

A few housekeeping issues.

RSVPS. In case there are late RSVPs or cancellations, please email clare.delargy@ucd.ie. If you haven’t received confirmation of attendance, please get in touch with Clare so she can add you to list.

Getting there. The conference will take place in the Croke Park Conference centre. The centre is accessible by public transport, with Dart, Bus and Luas lines within a 15-minute walk -please see here for further details.

There is also complimentary car parking for conference attendees on a first come first served basis. The closest car park to the conference centre is the Canal car park, on St Margaret’s Avenue off the North Circular road.

Location. The conference will take place in the Hogan Mezzanine Suite. Access to the suite is through the Jones’ Street entrance to the Hogan Stand, across from the Croke Park Hotel. There will be signs directing you to the suite upon entering the stadium, and there are lifts available.

Catering. There will be coffee breaks at two stages during the day. Please note that lunch will not be provided, but you will be able to avail of catering facilities at the centre.

Social Media. There is complimentary wi-fi access at the conference centre, and for those of you on twitter, we will be using the hashtag #ieconf throughout the day. We’ll aggregate the tweets on the Irish Economy liveblog.

Irish Economy Conference Programme, Croke Park, Dublin – January 27th 2012

0830-0900

Registration and Opening

0900-1030

Economic Policy and Evaluation

Property Market

Chair: Donal DeButleir (IFPRC)

Tom Healy (CERU) – “Researching Alternative Economic Policies.”

Frank Convery (UCD & IFPRC) – “Doing more good than harm – economists in the public service.”

Frances Ruane (ESRI) – “Evaluation – Contextual  and Methodological Challenges.”

Robert Watt (Department PER) – “Improving Policy-Making Capacity.”

Chair: Stephen Kinsella (UL)

Ronan Lyons (Oxford) – “Residential Site Value Tax in Ireland: Land Values, Implementation & Revenues.”

Michelle Norris (UCD) – “Borrowers’ Pathways through Mortgage Arrears.”

Rob Kitchin (NUIM) – “Prospects for the Irish Property Market.”

1030-1100

Coffee

1100-1230

Unemployment

Demography

Chair: Minister Joan Burton T.D.

David Bell (Stirling) – “Unemployment in the Great Recession: More Misery for the Young?”

Aedin Doris (NUI Maynooth) – “Employment and Unemployment: What do Sectoral and Demographic Patterns Tell Us?”

Philip O’Connell (ESRI) – “The Impact of Training Programme Type and Duration on the Employment Chances of the Unemployed in Ireland.”

Chair: Kevin Denny (UCD)

Orla Doyle (UCD) – “Early Educational Investment as an Economic Recovery Strategy.”

Alan Barrett/Irene Mosca (ESRI) – “The Costs of Emigration to the Individual: Evidence from Ireland’s Older Adults.”

Brendan Walsh (UCD) –“Well Being and Economic Conditions in Ireland.”

1230-1330

Lunch

1330-1500

Banking and Euro

Economic Recovery – Can Competition, Regulation and Privatisation Help?

Chair: Constantin Gurdgiev (TCD)

Brian Lucey (TCD) – “Banking in Ireland – Back to the Future.”

Frank Barry (TCD) – “Rectifying Design Flaws in the Euro Project”

Karl Whelan (UCD) – The IBRC, ELA, Promissory Notes and All That …

Chair: Cathal Guiomard (CAR)

Richard Tol (Sussex) – “Energy Regulation in Ireland – Some Current Weaknesses and Lessons for Recovery.”

John Fingleton (UK Office of Fair Trading) – “Economic Growth – How Can Competition Policy Help?”

Doug Andrew (former London Airport regulator) – “Governance, Ownership and Reform.”

1500-1530

Coffee

1530-1700

Fiscal Policy

Chair: Dan O’Brien (Irish Times)

Philip Lane (TCD) – “Ireland and The Fiscal Compact.”

John McHale (NUIG) – “Strengthening Ireland’s Fiscal Institutions.”

Seamus Coffey (UCC) – “Current and Capital Expenditure: Getting the Balance Right.”

Colm McCarthy (UCD) – “Public Capital Investment and Fiscal Stabilization.”

1700-1800

Panel Session on Irish Economy

2015 Government Bond

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Wednesday, January 25th, 2012

The NTMA offering circular for the 4.5% 2015 government bond can be read here.

Update: NTMA release on the results can be accessed here.

Interest Rates on Promissory Notes Not the Key Issue

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Tuesday, January 24th, 2012

I am now planning to talk at Friday’s conference about promissory notes, ELA and all that. I will post a link to a detailed presentation when it’s finished, so I don’t want to spend a lot of time on this now.

However, I do want make a brief comment on the recent media commentary on the promissory note issue. Most of this commentary has motivated the issue in the same terms as this article in today’s Irish Times by Arthur Beesley:

State support for the bank is being financed with expensive promissory notes which carry a comparatively high interest rate of some 8.6 per cent.

This is considerably in excess of the prevailing rates for stability facility loans, leading the Government to explore whether it is feasible to draw down additional stability fund aid to replace the promissory note scheme.

Arthur is a fine journalist but I’m afraid this is not a good way to think about this issue. The interest on the promissory notes is going from one part of the state (central exchequer funds) to another (the IBRC). Since the interest rate on these notes is higher than the average interest rate on IBRC’s liabilities, the additional margin can be retained inside IBRC and handed back to the state at a later date. 

So the key issue in relation to the burden on the taxpayer of the IBRC is the amount of liabilities that need to be paid out to bondholders and central banks, and the timing of these repayments, not the interest rate on the promissory note.

I’d note that Arthur’s colleague, John McManus, correctly explains this aspect of the promissory note issue in this article (though other parts of the article are not correct, such as the claim that the Central Bank of Ireland had to borrow the ELA funds from the ECB and that the ELA needs to be collateralised by marketable assets.) The true interest cost of the promissory notes is the interest on the €3.1 billion a year being borrowed from the EU and IMF to hand over to the IBRC, not the notional interest rate on the promissory notes.

Silicon Docks

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Tuesday, January 24th, 2012

Jamie Smyth profiles the high-tech cluster in this FT article.

Review of the Universal Social Charge

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Monday, January 23rd, 2012

The review document is here.

Debt and Deleveraging

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Monday, January 23rd, 2012

Paul Krugman links to the latest McKinsey report on debt and deleveraging. There’s a lot of useful data in there, but this chart struck me as worth posting on this blog, with little comment required.

McKinsey Report Exhibit 3

Prospects for the agri-food sector in 2012

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Sunday, January 22nd, 2012

Teagasc economists have just released their Situation and Outlook Report for the Irish primary agriculture sector for 2012 (proceedings here and presentations here). In 2011 there was a significant and welcome recovery in farm incomes (up 33% over 2010) although this was entirely due to higher prices and higher subsidies – the volume of agricultural output (at basic prices) remained unchanged despite slightly higher volume consumption of intermediate inputs.

The Teagasc view is that the value of gross output in agriculture will fall back slightly in 2012, due to a combination of lower production in some sectors and lower prices in others. There will be some savings on input costs, but lower subsidies in 2012 (due to a carryover of payments in 2011) means that operating surplus in agriculture is expected to fall by 12%.

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Job Opportunity – PublicPolicy.ie

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Saturday, January 21st, 2012

PublicPolicy.ie

Job Description -  Senior Researcher

PublicPolicy.ie is a new independent Centre supported by Atlantic Philanthropies.  Its purpose is to carry out and support independent research to inform fiscal policy choices in the Republic of Ireland, communicate the results effectively and stimulate constructive discussion amongst policy-makers, civil society and the general public.   We currently have an exciting opportunity for a Senior Researcher to join the organisation at this early stage and to play a pivotal research role within the organisation.

Role Purpose : The Senior Researcher will be responsible for ensuring that ‘PublicPolicy.ie’, its staff and its various working groups and initiatives are provided with the research and information required to carry out their work effectively.

Key responsibilities

· Carry out research on designated subjects

· Produce policy briefs, conference and seminar papers on research carried out

· Keep abreast of research findings and key developments in the area of fiscal policy

· Support working groups and members’ access to information on aspects of fiscal policy

· Provide support to interns on allocated projects

· Provide support on other assigned tasks as required

Role Requirements

We seek applications from people of talent and commitment to help lead the research function. The ideal candidate will have the following qualifications, skills, abilities and experience;

· A post-graduate qualification in a relevant discipline (e.g. economics)

· A proven track record in leading public policy research & analysis

· A deep understanding of how the public policy process functions

· Excellent oral and written communications skills

· An ability to communicate to a variety of audiences using a variety of media

· An ability to work independently and as part of a team

· IT Skills

This is a fixed term contract to October 2013, which may be extended for a further period. To apply for this role, please email your Curriculum Vitae and covering letter to Donal de Buitleir (ddebuitleir at eircom.net) by 1st February 2012. For further information see this article.

Manifesto Memories

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Saturday, January 21st, 2012

The Irish Times reports

NEARLY 50 hospital consultants and almost 1,000 nurses of different grades are set to leave the health service before new pension changes come into effect at the end of February, the first official figures show.

and

In other parts of the public service about 1,130 staff in the education sector are understood to have applied to leave

This brings back memories (misty water-coloured memories) of pre-election promises

Additional Reduction in Back-Office Public Sector Numbers: As set out in our Reinventing Government plan, Fine Gael will reduce the size of the public service by 10% – just over 30,000 – without undermining key front-line services in health, policing and education, through over 105 reforms to cut back-office bureaucracy and delivery improved value for money. This means that Fine Gael will reduce back-office administrative positions in the public service by an additional 18,000 over and above the 12,000 reduction partners to seek further efficiencies in work practices

I guess these are back-office consultants, nurses and teachers.

Whelan: Time for a deal with Super Mario

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Thursday, January 19th, 2012

Today’s developments that Minister Noonan hopes to see parts of the Anglo debt reduced are most welcome. From an Irish Times report:

On the Anglo debts, Mr Noonan said troika officials were preparing a joint technical paper, drawing on Irish suggestions, to reduce the overall burden involved in repaying the principal of the €31 billion promissory note.

This loan arrangement predates the EU-IMF programme and was agreed to fund an effectively insolvent Anglo Irish Bank but is seen by the Government as too expensive.

“We think there’s a less expensive way of doing it by financial engineering, and we’re not talking about private-sector involvement or restructuring,” said Mr Noonan in Berlin.

Writing in the latest issue of Business and Finance, Karl makes a similar point. Read the entire piece, especially a precise description of what promissory notes are and how they work, but this quote struck me as important.

It is true that the Irish taxpayer has taken on far too big a burden in ensuring that bondholders at Anglo and INBS were repaid. But quibbling about bondholders misses the elephant in the room. It is the huge burden of repaying ELA, not bondholders, that is going to bleed the taxpayer dry for the next twenty years.

It is time for the Irish government to declare that it has no intention of putting €3.1 billion towards repaying ELA in March and that it has arranged an agreement in principle with the Central Bank of Ireland that the state will repay this debt when it has fully recovered from its current crisis.

If my understanding of the legal situation is correct, then Patrick Honohan would only require the support of seven other members of the ECB Governing Council to proceed with this plan. This could easily be achieved with the support of Mario Draghi. Ireland has borne a heavy burden in the name of European financial stability. It’s time for a quid pro quo from super Mario.

Statements on the Troika Review Mission to Ireland

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Thursday, January 19th, 2012

The Troika statement is here.

The Department of Finance’s statement is here.

Commercial sensitivity

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Thursday, January 19th, 2012

In the comments on my piece on Irish Water, Paul Hunt reports back from his attempt to get the costings for water metering etc from the PWC report. This request was refused as it would be “commercially sensitive”.

To cite Paul, this is balderdash.

Irish Water will be 100% state-owned. Citizens of Ireland (of two of which I am the legal guardian) have the right to know what is going on in a company they (will) own.

Ireland is an unwilling party to the Aarhus Convention, which grants access to data except “where such confidentiality [of commercial and industrial information] is protected by law in order to protect a legitimate economic interest”. As Irish Water will be a monopoly, I do not think there is a “legitimate” economic interest in hiding data.

Unfortunately, state-owned companies have made a habit of hiding behind “commercial sensitivity” when there is none.

The Flag Theory of Credit Ratings

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Thursday, January 19th, 2012

Courtesy of Broadsheet.ie, this looks convincing.

Job Opportunity at IIEA

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Wednesday, January 18th, 2012

Some readers may be interested in this job opportunity at the IIEA. The deadline for applications is this Friday.

Michael Mussa Obituary

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Wednesday, January 18th, 2012

Michael Mussa, chief economist of the IMF during the various crises of 1991-2001, died this week.  This WaPo obituary provides a brief but interesting account of his tenure.