IMF Fifth Review

The fifth review of the Extended Arrangement with Ireland can be read here.  The debt sustainability analysis on pages 35-40 shows little changes from that provided in the Fourth Review.

The Baseline Scenario is identical and extends to a projected gross debt ratio of 109% of GDP in 2017 (net debt 101% of GDP).  The growth shock shows that if annual growth is close to zero (0.1% per annum) the debt would be 138% of GDP in 2016 and still rising.

The performance criterion for the end-June 2012 Exchequer Primary Balance remains €9.0 billion.  The outturn to the end-June 2011 was €8.4 billion.

Page 9 shows that we had a €4.3 billion budget last December once the full effect of tax carryover effects are included.

The budget implies a consolidation effort of €4.3 billion (2¾ percent of GDP) in 2012—including the full €1.1 billion carryover from 2011 tax measures—which significantly exceeds the €3.6 billion effort originally programmed.

Box 3 (page 20) on Social Welfare: Scope for Reform is also noteworthy.  The four paragraphs in the section begin:

The Irish state provides significant support to low-income groups.

This protection has come, however, at a high fiscal cost.

Importantly, the current system generates poverty traps for some groups, while providing less targeted support to others.

Potential reform options include moving toward more a means-tested and integrated approach to social welfare payments.

UPDATE: The transcript of the conference call with Craig Beaumont, IMF Mission Chief for Ireland can be read here.  There is also a separate short interview from the IMF Survey Magazine here.

36 replies on “IMF Fifth Review”

And of course the whole prom note….
Coming on the day that the Taoiseach said “paddy won’t be bribed”, and the Irish times suggested people looking for some rebate on this were either naive or politicking….timing eh

The IMF’s timing is simply superb. A complete accident no doubt. It is infinitely better to have the Fund make the argument than to have Irish politicians do so.

Oh my God – Attack of the killer PDs again , ( one of their general characteristics – unhealthy tendency to fawn over any IMF document)

We have a domestic demand crisis caused to a large extent by a bank credit created energy crisis which also effects discretionary spending for our exports in things such as Tourism and the like. – this creates a unemployment crisis as most of the jobs service the internal economy.
This is not rocket science.
Although these unemployed can be very dynamic slaves for the monetory barons I guess but that was generally not the characteristic of advanced post war western economies.

Colm boy – you are simply not dealing with the problem because this crisis is outside your limited terms of reference.
You have lived through a expanding $ bubble all of your life and therefore quite understandably cannot comprehend this crisis.
This is not remotely like the 1970s.
Although the west experienced stagflation during that time it acheived real growth rates because the energy supply increased.
The OECD has experienced a very significant drop in energy supply & even more so energy quality during these past 10 years.
Therefore the medication may perhaps be somewhat different don’t you think ?
You cut the Dole and the bottom will fall out of this kip.
Again look at the import figures…………
This is not rocket science.
You tax waste – i.e energy , in particular oil use that does not add anything to this economy.
Clear real world objectives should be set – not this criminal saving of a banking system that is incapable of serving the economy even during optimum conditions.(under these conditions the Post office and safety deposit boxes would do)
No 1 : getting oil consumption in private cars down to at least pre 1990 levels (-1MTOE) using aggressive tax policey.
No 2 : eliminating oil central heating systems in this country over a decade or so.
No 3 : if public transport is not at max capacity provide public transport free tokens so as to increase the domestic money supply and thus both demand & efficiency.
No 4 : direct all remaining state infrastructure spending away from wasteful road development and into reviving old rail lines / Trolley buses etc.
No5 : consider subsidising rail freight for liquid / heavy goods and the like.

No 6 : set up a serious nuclear advisory council and keep all Nuclear facilities in STATE HANDS (do not repeat the Jap disaster of the commons)

Europe is going through a truely massive energy crisis – do not create a social crisis to add to your failed policey CV.
Your antediluvian anti scientific leech prescriptions will kill the patient as there will be little medium of exchange in this country – facilitating a more general collapse of order.
Is that what you want ?

People need to listen to people who called this crisis for what it is :…/debt-o-nomics-the-untergang

The above CMc like prescriptions will crush innocent people to sustain these grossly unnatural trade relationships – to sustain the “modernity” of the car and other petro relationships
Germany’s “wealth” is based on unsustainable mercantile exports – its what Europe was all about -creating a battery hen economy and guess who were the chickens ?
Not developing the periphery into a sustainable economy but us becoming a vector for core Industrial enterprises with their roots in the world of the 1930s
This is why the growth in credit / oil consumption withen Europe was chiefly withen the periphery – we were being used in a obviously mercantile fashion by European corporations.
When the climate changes they always think they can retreat to their base of operations leaving us with these economic & sociological externalties built up over these last couple of generations.

The European experiment has its roots during the war – not after , afterwards it was executed.
We were always a vector for capital flows , a consumption statistic / vessel
And to think so many belived the euro vision hype – the Bullshit was not even of good quality.
This is the reality of the situation.

“RTE: Nation to Be Spared From Promissory Note Deal”

No comment.

Everybody knows.

@ Dork: I wish that it were possible to have an ‘adult’ conversation about these. Few of the more neurologically challenged shrills would need to be ‘no commented’.

No 1 : getting oil consumption in private cars down to at least pre 1990 levels (-1MTOE) using aggressive tax policey. Yes. Trickey since we drive a lot here.

No 2 : eliminating oil central heating systems in this country over a decade or so. Yes. Austrian and Scandanavian solid fuel stoves are wonderful pieces of houshold fittings.

No 3 : if public transport is not at max capacity provide public transport free tokens so as to increase the domestic money supply and thus both demand & efficiency. Yes. And the first to get them would be those money addicts in Leinster House. If they have to travel on PT – they will make damn sure it works.

No 4 : direct all remaining state infrastructure spending away from wasteful road development and into reviving old rail lines / Trolley buses etc. Yes.

No5 : consider subsidising rail freight for liquid / heavy goods and the like. Maybe, I have this thing about taxes foregone. Tax the road stuff at maintenance cost?

No 6 : set up a serious nuclear advisory council and keep all Nuclear facilities in STATE HANDS (do not repeat the Jap disaster.
of the commons). Yes. Small scale Thorium would do the trick. Council of three, not thirty!

And cut out the borrowing for day-to-day spending. Chances of these being serious topics for conversations?

@Dork and Brian
As for nuclear I believe we have shown that we are not capable of providing something as dangerous as nuclear power. I believe that we should just ask Finland to build it, run it and the electricity price is kept at the midddle European levels and they can keep any money they make on top of that.

This is a bit interesting

Iceland looking to adopt the Canadian currency. This would suit Canada as it would help devalue the Loonie relative to the Dollar. But is it workable? Could Ireland do something similar?
My own belief is that only an entity that raises taxes should issue currency.
Just some thoughts on an alternative to the Euro


Thanks for posting. I must take the time to browse through the report over the weekend.

re: The growth shock.
I think it is worth quoting the report on that piece:
“A negative shock to growth (stemming, for instance from a prolonged recession in trading partner countries) could put debt on an unsustainable path. A permanent decline in growth of around 2¼ percentage points each year (corresponding to half of the historical standard deviation) would proportionally raise the primary budget deficit, and raise the debt-to-GDP ratio to 138 percent by 2016. A recession in 2012–13 (of the magnitude experienced in 2008 and 2010, respectively) would raise the medium-term debt outlook by further five percentage points.”

The projected growth figure as I read them from page 38 are:
2012 0.5%
2013 2.0%
2014 2.7%
2015 2.9%
2016 3.2%.

A wonder what odds Paddy Power would give on achieving those growth rates trading in the fiscally compacted Europe.

The Welfare Shock:
Clearly the pressure is now on the welfare state. But some of the reports language and logic is questionable. [Page 20]

“Welfare spending was 6 percentage points of GDP higher in 2010 than in 2007 (the largest increase in Europe) and now claims over half of government revenue (up from one-third in 2007).”

Yes, but Ireland has been at the receiving end the largest of many negatives in Europe over that period not least the imposition of the ECB’s ‘No senior bondholder can lose a cent’ policy. How to we compare on a European scale on that Trichet chart.

And while it true that welfare rates have increased since 2000, what is the point of insisting on job search conditionality in the absence of jobs.

But it is the ‘unemployment trap’ comment that is disturbing:
“Individuals with low skills and parents with high childcare costs are particularly vulnerable to the resulting unemployment trap.”
‘unemployment trap’ is a disingenuous word.
This essentially means that unemployed parents or low skilled people should be forced to take up low paid jobs or lose their welfare. Some people may say what is wrong with that.
Well here is what is wrong with it.
Why should welfare recipients suffer cuts when State employees at the upper levels are still amongst the best remunerated in Europe. Must the lower classes be impoverished in order to keep the elite living in the manner to which they have become accustomed.
And why should the lower classes have to take up menial and in most cases non existent employment in order to pay for the sweetheart pension deals that have just been given to retiring PS employees, a considerable number of whom are already back working for the same organizations that they have just retired from.

The above suggestions are mainly fiscal in nature – it will not work unless you have a independent monetory power as efficiencies cannot be taxed using a static or declining money supply.
The DoF problems with Car VRT & Road tax under the new emissions scheme is a classic example of this.( Question -where does the new surplus savings flow to if it is not monetized)
This is simple stuff really.
Why do we have to continue to project the obvious to trained professionals ?
Cut borrowing for day to day spending ? – no that would reduce the money supply banjaxing the gears of the economy , you must create new Punts to replace the wasteful bank credit.
The Finns don’t build the stuff – but don’t mention the French !! -anyhow thats a long term objective as we discussed earlier , this is a emergency so a complete rethink & execution of tax & monetory policey is needed as the Euro is clearly now a failure for the commons at least.

@ Seamus Coffey

Also thanks for posting.

Interesting little note at the bottom of P.22.

“In relation to fiscal rules, the Council favors a cyclically-adjusted approach to consolidation (accompanied by limits on expenditure growth), using a ceiling on the pace of debt reduction rather than on the primary balance, and a greater focus on ex-post compliance with targets. Key recommendations on the design of the fiscal council include a greater role for the Oireachtas and the Council Chair in the appointment and termination of Council members; requiring a formal response by the Minister for Finance to the Council’s periodic assessments; and instituting adequate funding arrangements for the Council (including buy-outs of time devoted to Council work for Council members employed in the Irish public sector). The report can be accessed at Strengthening Ireland’s Fiscal Institutions (January 2012).”

Separately, item 43 on page 23.

“However, Ireland faces greater challenges than envisaged at the outset of the program, as the effects of the euro area crisis are magnified by domestic debt burdens. The growth outlook has deteriorated as export prospects are dampened by the recession projected for the euro area and by lower growth projections for Ireland’s other trading partners. Moreover, deleveraging by European banks increases the risk of curtailing already
low domestic bank lending and of more costly deposits, undermining prospects for restoring bank viability and for economic recovery. The vulnerability of household and SME balance sheets could increase the impact of such shocks on Ireland’s recovery, and a more lasting period of low growth would further increase the difficulty of the medium-term fiscal
consolidation and threaten debt sustainability.”

It’s all very well to say “greater challenges than envisaged”, but this is not really the case. The deteriorating domestic and European situation was predeictable and predicted.

Does anybody really think that growth will rebound to the extent that the trajectory will work?
I don’t think it will.
A break up of the Euro will be a good thing not just for Ireland but for world trade. It would lead to a stronger Mark and allow US, Canada and UK to compete more efficiently with Germany.
There would be chaos in the shadow FIRE sector as debts get renominated in new currency but that would provide incentives for CBs to buy each others currency to prevent too great devaluations.
The more you look at this the more a Euro break up becomes something that might have unforeseen advantages.
It’s definitely a scenario worth planning for and, if beneficial, provoking

“The Irish state provides significant support to low-income groups….
This protection has come, however, at a high fiscal cost….
Importantly, the current system generates poverty traps…..
Potential reform options include moving toward more a means-tested and integrated approach to social welfare payments……”

I don’t suppose too many recipients of social welfare will read this but it’s pretty obvious – the writing is on the wall. Social welfare is the new ‘low hanging fruit.’

Prices will of course continue to rise and the usual cries of ‘it was the Euro crisis’ and ‘more expensive fuel’ will ring out as we watch 400,000 or more people ground into the dirt. I hope PS workers enjoy those lovely pensions and re-employment on ‘consultancy’ contracts as they walk past people begging in the street.

‘Sharing the pain’ my arse.

@JR: “Must the lower classes be impoverished in order to keep the elite living in the manner to which they have become accustomed.”

Absolutely yes!

@Dork: I actually forgot to mention the Food Miles that are embedded in food. Quite high I believe. As for borrowing for day-to-day spending – I am adamant that it has to stop. If it does not, and there seems to be no recognition about it, then default is a 101% certainty. Not now, not next year, but soon. Economic growth is in reverse. However, if we could produce wholesome food and clean water here in Ireland, and sell them abroad. The surplus might rescue us.

@Eureka: Growth (as we knew it) is over. All we have is the ‘productive growth’ of credit emission and debt growth. Perhaps this awful vista will manifest itself to a few and smash the rest in the face with all the force of a well aimed brick.

Dork: You have data about our imports of liquid hydrocarbon fuel – MTOE is the unit you use. This would be ? many barrels or liters? The global daily production supply would give all earthlings 2 liter each person/day (cert par global production level stays same, and world pop ditto). The UK usage is 4.5 l/p/d, we are about 5l/p/d. Brazil is at 2 l/p/d. China and India are a little above 1 l/p/d – if you can believe the stats. So if ‘we all growth together’ as we are asked to believe. Some critters are going to come up short.

[Saudi is 15 l/p/d: Canada is 11 l/p/d US is 10.5 l/p/d] 😎

The problem with the Irish system is that there is no ‘Just Society’ or fairness in the governance system.

In 2010, the C&AG said the Farm Waste Management Scheme (FWMS), which had no cash limit, initially had a budget estimate of €248m but farmers had been paid €550m in grants for the building of slatted sheds and slurry tanks. The scheme was expected to cost €1.1bn in total.

Shur that’s not a huge amount!

Oireachtas ‘Technical Group’ members complain about ‘austerity’ but insist on trousering a special tax-free gift of €41,000 annually, known as a ‘leader’s allowance’ and the litany of arrogant entitlement to bubble gains could go on and on.

But the fools, the fools .. .

There is no doubt however that the welfare budget rose at a stunning pace during the crazy years:

Minister Joan Burton said last November:

In 2001 spending on social protection stood at €7.84bn; by last year this had grown to almost €21bn – an increase of 266%. Inflation increased by around 30% during the same period.

So while some of the expenditure increase is clearly due to the dramatic rise in unemployment since 2007, the most significant factor is a surge in both rates and the number and size of schemes over a very long period of Fianna Fail government.

Frankly, the increases in social protection payments were often cynically timed to help Fianna Fail win elections. They were funded by tax revenues from the unsustainable property bubble.

As a result, we have inherited a level of social expenditure that is completely out of sync with the funding base of the state. It is clear that we need to put it on a more sustainable footing.

I don’t need to remind such a well-informed audience that the gap between what we as a government spend and what we raise in taxes is huge and that the hole is currently being plugged with money borrowed from our partners in the Troika.

@PR guy
One social welfare scrounging scum here trying desperately to get a grasp on what the hell is going on in this world!!!

@Brian Woods senior
Accurate Energy balance figures can be difficult to calculate and take some time I believe.
The final 2010 figures are interesting though (the preliminary 2011 should be out later this year)
Go to the SEAI website and type in “Energy Balance 2010 (23-12-2011)”
Imports : 8920 KTOE
Exports : 1153 KTOE

Total Primary Energy Supply inc non energy : 7699 KTOE
Be careful with these figures : they do not seem to subtract international aviation from these figures which is IEA practise.
( Irish International aviation figures has had a very considerable drop )

Oil is our most expensive energy import – if you subtract the 20 + year private car use growth , oil central heating for both residential & commercial buildings , & road based heavy goods transport we don’t really have a major energy problem……………(other then Nat Gas for electricity generation) – no need for those capital intensive hybrid cars and the like.

It looks like Irish fossil fuel imports will be the highest ever this year priced in Euros if you look at external trade figures to Oct – despite the mild Winter it will be a record me thinks.

Private car energy use :
Y1990 : 926KTOE
Y1991 : 981KTOE
Y1992 : 1012KTOE
Y1993 : 1054KTOE
Y1994 : 1114KTOE
Y1995 : 1176KTOE
Y1996 : 1259KTOE
Y1997 : 1348KTOE
Y1998 : 1421KTOE
Y1999 : 1504KTOE
Y2000 : 1562KTOE
Y2001 : 1642KTOE
Y2002 : 1697KTOE
Y2003 : 1746KTOE
Y2004 : 1817KTOE
Y2005 : 1891KTOE
Y2006 : 1977KTOE
Y2007 : 2070KTOE (PEAK OIL / CREDIT)
Y2008 : 2062KTOE
Y2009 : 1974KTOE
Y2010 : 1899KTOE

Residential oil use

Y1990 : 389 KTOE
Y2010 : 1288 (Peak ?) KTOE

That may be the case under FF but the fact is it had to increase money growth when credit hyperinflated – otherwise we would have had a even higher leverage !!!!!!
We are essentially dealing with a monetory currency issue using fiscal means – a impossible situation.
When Dole money gets paid in Punts again the problem will be solved but German industry will be knackered if all the periphery goes national tommorow – we are just giving the Hun time to prepare via redirection of their capital inputs – its very nice of us really.

Its really hard to get your head around how far the post 1979 Ireland domestic economy has become distorted by impossible continental integration games.
The experiment is finished – its been tested to destruction.

Sorry imports :8920 KTOE etc. refers to oil only.

Also a extra 92 KTOE burned in private cars was biofuel of which 71KTOE was imported which is just plain stupid……….

You missed an important clue there. It is the “Labour Party” not the welfare party. I dont find anything objectionable in that speech. Just the facts ma’am. What I do find objectionable is the failure over CP and the criminal pension giveaways.

@ Dork

‘We were always a vector for capital flows , a consumption statistic / vessel’

+ 1 You are in fine fettle this evening. If you are not careful you will become scrutable.

Any respectable analysis of the Irish economy begins from the fact that it is, and always has been, an emerging economy.

And yes, Steve from Virginia is well worth listening to. So is Michael Pettis.

@ Dork
As a dole scrounger I have no problem in getting it in Punts, also all civil service pay as well!

@ Paul Quigley

“Any respectable analysis of the Irish economy begins from the fact that it is, and always has been, an emerging economy. ”

Aogan O Rathaille – 300th anniversary imminent

Tír gan eaglais chneasta ná cléirigh!
Tír le mioscais, noch d’itheadar faolchoin!
Tír do cuireadh go tubaisteach, traochta
Fá smacht namhad is amhas is méirleach!

A land without a decent church or clergy!
A land which wolves have spitefully devoured!
A land placed in misfortune and subjection
Beneath the tyranny of enemies and mercenaries and robbers!


Really neat piece from O Rathaille ….

Blind Biddy is a fan … no sign of her though since the 29th … nor is there any sign of the One-Eyed Shiia Sheik! Must check out AlJazeera re Springtime in Manama …

@Mr Beaumont

Fond memories of Bill in Thomond Park – drop in anytime.

“The projected growth figure as I read them from page 38 are:
2012 0.5%
2013 2.0%
2014 2.7%
2015 2.9%
2016 3.2%.”

These are real growth targets correct? We should get 1%-2% inflation over the period so 0% nominal growth over the next 5 years is quite unlikely I think (and hope!).

@shaun byrne

“I don’t suppose too many recipients of social welfare will read this ”


“One social welfare scrounging scum here ”

Hope there wasn’t a misunderstanding there. No offence intended. I’ve had periods on the dole myself in my life and as you will garner from my other comments on this blog I am not overly impressed with how the unemployment situation is being dealt with and how I’ve described recipients of social welfare being regarded by government as the new ‘low hanging fruit’. Why tackle problems in the public sector when the unemployed can be made to suffer far more easily and they can’t go on strike either.

If I had to guess, the aim is to get it down to at least British levels of unemployment benefit, which are quite a bit lower than here and has created an even bigger underclass over there. I recall when I lived in Luxembourg, it used to be 80% of your salary for the first year when you lost your job. Times have changed.

This report is grim.
The reaction on this blog is grim too. It takes so little to set us against each other.
Fact is any cuts to pay down debt (no matter where they come from will cause further economic contractIon

@PR Guy
No offence. It wasn’t aimed at you, I understood the point you were making. But some out there seem to think everybody on the dole is having a great time, the main problem seems to be one of them is the Minister who seems to think single mothers caused the deficit.
I and my family are ok on the dole, but if we had a mortgage or car loan etc. we would be sunk, those are the real poor now, no money and no chance to move on.

Is it not time to have a bit of a reality check about the growth projections (Table 2, p26) underpinning all this debt sutainability guff? It looks like the projected GDP growth-impacting change in experts will feed ‘one-for-one’ into GDP growth with about 70% of the projected growth in final domestic demand feeding in. Given the projected percentage changes in the components of domestic demand (all three looking a bit whiffy and iffy), it seems there are some magic multiplier effects assumed to generate the growth in the total.

I have a horrible feeling that there is an awful lot of arm-waving and ‘wet fingers in the air’ when these projections are pushed out even a couple of years. I hope these projections work out. Indeed I hope they transpire to be even better. But more than that I hope they are based on some sensible assessment of the potential and restraints in the various underlying microeconomic sectors.

I have an even more horrible feeling that they aren’t.

Minister Joan Burton on Catch-22 Reality

Ireland is presently borrowing €50m a day.

Blind Biddy is still waiting for that half bag of coal that X-Minster Hanafin pilferred from her …. how much of that 50 million is being used to keep X-Minister Hanafin and her bevvy of failed X-minister colleagues and upper-echelon banker/developer fellow-travellers in the comfort zone to which they have become accustomed at the expense of the disabled, unemployed, underclass, sick children, emigrants, and other sundry serfs?


At the working abroad EXPO. Queue out of it about 300m long. We are in trouble

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