The announcement of an economic and evaluation capacity for the public sector has the potential to be a transformative venture and should be welcomed in my opinion.
I think this is far more than just filling the public sector with economists as a matter of optics – at least I hope so. It is worth noting that this is just one initiative pointing in the right direction – for example, the D-PER recently convened a working group that brings expertise (academic, commercial etc) into the room to review major policy domains including nitty gritty things like how major capital projects are valued (Disclosure – I was asked to participate in this and was glad to).
Some things I hope will happen:
- I hope the service evolves as an identifiable entity within the public service and not just buried in one Department – from what we can tell so far spreading the economists to wherever demand and skills are matched is the plan.
- I hope to see a ‘Chief Economist’ role evolve – a visible, public facing role who is an advocate for what the service produces and is strong on communication. Someone needs to be seen in public!!
- It is very important to see ‘evaluation’ flagged explicitly and this is again a positive move – it suggests microeconomic policy will evolve as a domain and rightly so.
- We don’t need to reinvent the wheel in a costly fashion with respect to training and ongoing development of the recruited economists – I hope to see routine movement between academic institutions and the service, and between the services and major policy research groups like the ESRI.
What would perhaps be the most exciting thing from this announcement is that it has the ability to empower public administration on issues of economic policy. This is more than just about expertise and answering Dail questions on how many staff have economics degrees For example, one of the less appealing aspects of policy, particularly microeconomic policy, has been the tendency to bury good initiatives in layers of – for want of a better phrase – spin. The initiatives on job creation (which rightly are about halting the drift into LT unemployment) get announced in terms of ‘X numbers of jobs will be created’ which any sensible economist should drive a cart-and-horses through. I hope a government service would push against this sort of instinct within the decision making processes.
Update – a link to the service announcement by D-PER is http://per.gov.ie/2012/03/06/minister-howlin-announces-establishment-of-new-government-economic-and-evaluation-service/
We are debating a tighter comments policy to cut down on irrelevant comments and also offensive comments. Comments?
Let’s try something. We have a lot of information on the fiscal compact between the moderators and the readers of this site. The public at large would like to know more about the fiscal compact-what it is, what is it supposed to do, how it is supposed to work, and its potential ramifications.
So let’s put something together. I volunteer to edit and typeset a booklet (type thing) for free download here on the Irisheconomy blog as an Irisheconomy note. Let’s set ourselves a deadline for perhaps 2 weeks’ time.
What I’m looking for are short pieces of text, links, illustrative examples, and source documents, contributed by commenters.
Obvious links are the treaty itself, and Seamus’ Oireachtas briefing document.
Peter Sutherland and Fintan O’Toole disagree. Peter Sutherland’s FT article is here; Fintan O’Toole’s IT article is here. [Reminder – my own op-ed from a while back is here; while my DEW slides are here.]
Fintan O’Toole argues that the Fiscal Compact is anti-Keynesian. The treaty has to be read in conjunction with the “six pack” regulations, which allows considerable latitude for Keynesian fiscal policy:
The Council and the Commission shall take into account whether a higher adjustment effort is made in economic good times, whereas the effort might be more limited in economic bad times. In particular, revenue windfalls
and shortfalls shall be taken into account.
So long as Keynesian principles are followed in good times (pro-active tightening to guard against overheating), activism during downturns is possible.
Fintan O’Toole (along with others such as Colm McCarthy) criticises the insertion of the structural balance concept in the treaty. Since the intention is to avoid the pro-cyclical dangers of using the overall balance (which would anti-Keynesian for sure), the structural balance concept is preferable. Since there will be inevitably a wide range of plausible estimates for the structural balance in any given situation, the Compact will only rule out extreme fiscal mis-behaviour.
The Fiscal Compact Treaty has been accepted by many social democratic parties across Europe. For example, Sweden was among the early adopters of fiscal rules, since its political system recognised the importance of fiscal sustainability in preserving the government’s ability to manage the economy.
Of course, it is obvious that the Fiscal Compact is only one of the required reforms in Europe, with the European-isation of banking policies, the introduction of risk-sharing mechanisms and the adoption of pro-growth strategies also important. In a sequential process, the Fiscal Compact increases the likelihood of other reforms down the line.
(I am offline the rest of today but will try to respond tonight.)
Barry Eichengreen and I provide an update to our original Vox column here.
Eamon Quinn reports on an interesting interview in this Dow Jones piece.
The Sunday Business Post published an opinion piece of mine on the eurozone crisis yesterday under this title. As its content seems to have disappeared behind a paywall, I attach the piece here.
Angela Merkel’s recent reflections on the future of Europe to which I refer are here.
Here are some comments on the reported letter of the Bundesbank president to Mario Draghi. The blog software is objecting to posts longer than a couple of paragraphs, so for now I’ll just post links to files hosted on my own website.
Update: Here is a short piece on Target2 balances written by two Bundesbank staff that I’m guessing are not too thrilled with Mr. Weidmann’s intervention.
The WSJ carries an interesting report on how multi-country banking groups are using LTRO to ring fence affiliates in troubled economies (including Ireland), in order to limit the exposure of parent banks.
Some of the Central Bank’s main contributors to Friday’s SME conference report on how debt overhang is constraining bank lending to SMEs in this VOX article.
Colm takes a realpolitik look at the fiscal treaty in the Sindo today, and takes aim at the ECB and EU Commission towards the end. He argues that despite the treaty’s many flaws we should vote for it. From the piece:
Opposition parties appear to be limbering up for a referendum on austerity. There can be no referendum on austerity. The Irish budget deficit is far too big and will have to be reduced sharply, and soon, in any plausible scenario. That means more expenditure cuts and more tax increases.
Many voters will see the referendum as an opportunity to register a verdict on the behaviour of the ECB and EU Commission towards Ireland. They have done abysmally, culminating in the insistence by the ECB that a bust Exchequer should pay unguaranteed bondholders in a bank that has already closed.
No central bank has ever imposed such a burden on a bust sovereign anywhere in the world, to my knowledge. Fortunately, this negative verdict is shared by the International Monetary Fund, which called on Friday for a straightforward reversal of this extraordinary ECB policy.
The referendum should be supported. There will be later and better opportunities to reconsider the terms of engagement with the new Europe.
Here is the European Commission’s report.
A reader recommends this briefing paper.
Financial Regulator, Matthew Elderfield made a speech yesterday to the Harvard Business School Alumni Club of Ireland. The speech dealt with several aspects of the ongoing mortgage crisis and can be read here (pdf here).
Two extracts worth considering are below the fold but there are lots of interesting elements to the speech.
Continue reading “Matthew Elderfield on Mortgages”
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.
Here‘s a link to an interesting report by Karl Deeter and Frank Quinn on the current state of the Irish residential property market, using data from MyHome.ie and the Allsop\Space auctions.
According to an Irish Times story by Dick Ahlstrom and Fiona Reddan the government has approved the report of the Research Prioritisation Steering Group in identifying 14 priority areas for state-funded research. The report itself is here.
One might hope (though probably in vain) that this would prompt some wider debate. For example, might at least some policy makers be even slightly concerned to question:
- the merits or otherwise of an increasingly centralised model of state planning for innovation,
- the continued privileging of scientific and technological knowledge which current policy advances,
- the extent to which the relentless shift towards commercialisable state-funded research is in conflict with a core original rationale for this policy: namely the provision of public goods—those which are by definition not commercialisable (current policy can look a lot like socialising the costs, while privatising the benefits), and:
- the further opportunities for rent-seeking, by both industry and academics, this sort of exercise creates and embeds, and relatedly, the high political value thereby assigned to demonstrating (by innovators, no less!) compliance with hierarchy, obedience to instructions and the uncritical acceptance of a consensus policy, aka ‘groupthink’?
RTE’s Nine O’Clock news are reporting Enda Kenny as explaining that promissory note negotiations are totally separate from the question of will the Irish people vote for the Fiscal Compact Treaty and that the Irish people will not bribed to vote for the Treaty.
RTE also noted that the latest Council meeting was “dominated by jobs and growth” which sounds like great news. And, best of all, reporter Tony Connelly helpfully explained that it was now felt that asking for a better deal on promissory notes was actually a bad idea because it would send a bad signal to financial markets that we were not able to cope with our debt burden and that there was no way this issue would be dealt with any time before the summer.
Ok, so be it. But I suspect that “the Irish people won’t be bribed” may prove to be the worst referendum slogan in history.
This blog has recurrently featured the role of fiscal devaluations inside a currency union – a good summary of the argument is here. (HT Desmond Brennan). There are traces of this in the Irish case (the increase in VAT and the reduction in employer PRSI for low-paid workers) but more could be done.